4.2 Choosing the countries
Using a suite of 15 economic and other indicators, a ranking of future export growth potential has been compiled. This work takes into account current export performance, future growth potential, the performance of comparable exporting nations and the specific features of Scotland’s key exporting sectors to derive a list of priority markets for Scotland’s future export growth potential.
This analysis rated and weighted each indicator to calculate an overall ranking for each country. Sensitivity analysis was then used to check the impact of the weighting for those indicators. Adjusting these weightings did not have a significant impact on the country rankings which suggests we have confidence that our choice of countries is robust. More detail on the methodology used can be found in the analytical methodology paper accompanying this release.
Based on this analysis we have divided global markets into 3 categories. Each category will benefit from a different support model most appropriate for the scale and type of opportunity available. This approach allows us to sustain both a ‘today’ strategy – focusing on key high value markets to drive the top line of export value, and a ‘tomorrow’ strategy – which allows us to build connections and capacity in markets which do not yet have the scale to shift the dial on our export ambitions but do have growth potential in future.
4.2.1 Priority 1 markets which offer immediate opportunities
Our analysis identified a priority list of countries where we expect the bulk of future growth to come from. These are mostly, though not exclusively, in mature markets and most are in close to home markets, with some notable exceptions. They account for 66% of current exports and 69% of ‘export value gap’(10) potential. Our resources will be focused mainly on these countries to increase exports in the fastest and most resource efficient manner.
The table below shows the market where there are immediate opportunities. For information, 2 of the 15 indicators used in this categorisation are also shown – the % share of Scotland’s current exports and the % share of Scotland’s total export value gap. It should be noted that this isn’t necessarily a target for Scotland’s future export share, but an indication of where opportunities exist based on the trading data of comparator nations. More information on this approach is given in the methodology section.
| Export Priority Rank |
Country |
Share of Current Exports |
Share of export value gap |
| 1 |
USA |
17.1% |
10.7% |
| 2 |
Germany |
7.2% |
13.7% |
| 3 |
France |
7.5% |
6.5% |
| 4 |
Netherlands |
7.6% |
7.8% |
| 5 |
Switzerland |
2.3% |
3.1% |
| 6 |
Norway |
3.1% |
3.4% |
| 7 |
Poland |
1.2% |
3.8% |
| 8 |
Belgium |
3.1% |
3.2% |
| 9 |
China |
1.9% |
2.7% |
| 10 |
Ireland |
4.5% |
1.9% |
| 11 |
Denmark |
2.7% |
1.9% |
| 12 |
Sweden |
1.8% |
3.0% |
| 13 |
Italy |
2.3% |
3.5% |
| 14 |
Canada |
1.8% |
1.2% |
| 15 |
Spain |
2.6% |
2.2% |
|
|
Total |
66.8% |
68.6% |
Source: Export Statistics Scotland and OCEA calculations
Priority markets will benefit from the following focused support:
- SDI in-market presence.
- Trade Envoys, often with a focus on specific sectors.
- GlobalScot expansion.
- Priority for in-market sector specialists.
- Priority for trade missions and ministerial visits.
4.2.2 Priority 2 markets which offer mid to longer term, sector specific opportunities
The second group of markets of interest for Scotland identified by our analysis consisted of key emerging markets, some mature yet distant markets and some markets where there are strong opportunities but in specific sectors.
These markets account for 14% of current Scottish exports and 11% of the export value gap model potential for Scottish exporters.
These markets are shown in the table below, together with their current share of Scottish exports and their % of Scotland’s total identified export value gap.
| Export Priority Rank |
Country |
Share of Current Exports |
Share of export value gap |
| 16 |
Japan |
1.6% |
2.2% |
| 17 |
Australia |
2.2% |
1.6% |
| 18 |
Turkey |
0.5% |
0.8% |
| 19 |
Mexico |
0.5% |
1.0% |
| 20 |
India |
0.7% |
1.7% |
| 21 |
Singapore |
2.0% |
0.5% |
| 22 |
UAE |
2.0% |
0.1% |
| 23 |
Nigeria |
1.0% |
0.2% |
| 24 |
South Korea |
1.0% |
2.0% |
| 25 |
Brazil |
2.2% |
0.5% |
| 26 |
Indonesia |
0.2% |
0.2% |
|
|
Total |
14.0% |
11.0% |
Source: Export Statistics Scotland and OCEA calculations
These markets will benefit from the following support:
- Possible SDI in-market presence, otherwise FIFO (fly in fly out) SDI support.
- Trade Envoys, often with a focus on specific sectors.
- GlobalScot expansion.
- Close working relationship with UK DIT to maximise leverage of their in-market presence.
4.2.3 Priority 3 markets in the rest of the world
These are markets where, while there may be specific opportunities for certain businesses, they are unlikely to deliver significant additional exports to shift the dial on our export ambitions. As a consequence, these markets will not be prioritised for Scottish Government funded support. These markets will be supported through:
- Close working relationship with UK DIT to maximise leverage of their in-market presence.
- Possible GlobalScot or wider diaspora presence in-market to support Scottish businesses in those markets.
It is important to note that through a process of regular review and updating of this plan, changes to our prioritisation of markets will occur where the evidence is clear that this is needed.
Impacts of Brexit on market focus
The bulk of the markets our analysis has identified as priorities for current and future export opportunities are in Europe. Any form of Brexit will negatively impact our ambitions to increase exports to those markets and to other countries that currently enjoy trade deals with the EU. Our analysis shows that the relative scale of export opportunities to EU markets is such that any strategy to refocus on emerging markets would come nowhere close to replacing even a fraction of the trade that is at risk as a consequence of Brexit. The most effective strategy in that context is to redouble our focus on maintaining and expanding our trade with our European neighbours.
The number one priority market is the USA and the UK government has indicated that a comprehensive free trade agreement with the USA is a priority. While this is likely to offer opportunities for Scottish businesses, these need to be set against the fact that any trade deal with the USA will involve reciprocal measures to open up domestic markets to suppliers from the USA, which may involve some adjustment costs for Scottish firms. There is also the risk that any trade deal with the USA could be contingent on the lowering of environmental, food quality or other standards, or access by USA companies to the Scottish public sector which would not be in Scotland’s wider interests.
In addition, Canada and Japan have recently agreed their own comprehensive free trade agreements with the EU. While the UK is keen to sign its own agreements with these countries to maintain the benefits of the EU deals, agreement has not yet been reached with Canada and the Japan agreement looks unlikely to be extended to the UK in the short term. This will make Scottish exporters to these countries less competitive relative to EU exporters and importers may be reluctant to choose products and services from the UK over those from EU as a result of uncertainty over future trading arrangements.
As noted previously, A Trading Nation was not devised as a direct response to Brexit. The analysis in the plan gives us the most complete picture of Scotland’s export performance and international demand for our products and services as well as the breakdown of the businesses responsible for the majority of that performance as things are today. We will continue to revisit the analysis in this plan in light of changing global circumstances, including the challenge posed by Brexit.
We will:
1. Focus Scottish Government resources to prioritise key growth markets.
2. Shift the balance of our trade related effort and resource to pursuing opportunities in the first 15 priority markets while maintaining sufficient trade resources to develop our understanding of opportunities in the next 11 markets where there are sector specific opportunities in the mid to longer term.
3. Work with sectoral groups and agencies to identify the best approach to sector specific support given the characteristics of each priority sector.
4. Continue to review our priority markets in light of changing global circumstances, including the challenge posed by Brexit.
References:
(10) The export value gap is defined as the difference in value between Scotland’s exports to a certain market and the exports of similar competitors to that same market.