Scotland's role in the development of future UK trade arrangements

Chapter Five - Scotland's Future Role in UK International Trade Policy and Trade Agreements

134. This chapter considers international models for future engagement and sets out specific proposals for Scotland's future role in the development of international trade policy and international trade agreements, recognising the unique circumstances facing Scotland and the UK today. In doing so, it focusses on the decision making processes which should underpin the development of future UK trade arrangements. More detail on the Scottish Government's policy in relation to trade and an updated export promotion strategy will be set out in the next few months.

135. Leaving the EU, Single Market and Customs Union would fundamentally and profoundly alter the nature of Scotland and the UK's relationship with the EU and the world. The UK Government and devolved administrations will have to work together to ensure that the best interests of all parts of the UK are represented in the development and agreement of future trading policy and international trade agreements. Alterations to the Scottish Parliament's powers mean that the tax revenue devolved under Scotland Act 2016 will make up approximately 50% of the Government's funding once fully implemented. Growing our economy and in turn increasing tax revenues for Scotland is key to supporting and enhancing the range of public services that we provide.

136. The Scottish Government's position on membership of the Single Market and Customs Union has been set out extensively in Scotland's Place in Europe ^[62] and Scotland's Place in Europe: People, Jobs and Investment ^[63] . The Scottish Government's legislative consent memorandums on what was then the EU (Withdrawal) Bill and the subsequent Trade Bill set out its views on how 'devolution issues' arising from the UK's exit from the EU should be dealt with, as does the UK Withdrawal from the European Union (Legal Continuity) (Scotland) Bill, passed by the Scottish Parliament on 21 March 2018.

137. The conduct and content of future trade policy, negotiations and agreements will have very important implications for Scotland. The broad and increasing scope of modern trade agreements means that they often deal with and merge a range of reserved and devolved policy areas, and touch on many areas of life. In addition, the Scottish Parliament and Scottish Ministers are responsible for observing and implementing international obligations, and would be responsible for the payment of any compensation costs arising from, for example, claims under investor state dispute settlement, present in many modern trade deals. Given these responsibilities, it is important that Scottish Ministers have full, early and formal involvement in policy formulation and opportunities to influence the development and agreement of international negotiations, including in formulating and negotiating mandates. The UK Government must involve the devolved authorities at each step to ensure any future agreements deliver for the whole of the UK.

138. Involving the devolved administrations from an early stage in trade negotiations will deliver many tangible benefits. It will ensure that decisions about trade agreements and negotiating lines are made closer to the people affected by those decisions, and that their views are incorporated from an early stage, increasing public understanding of trade deals and providing an early warning of public concerns. This view is shared by many stakeholders. Members of the Trade Justice Scotland Coalition ^[64] argue that there is currently a 'democratic deficit' in the way that trade deals are dealt with in the UK, with no requirement for consultation with the public and stakeholder groups. This must change. Engaging the wider community will ensure that there is greater transparency around trade deals, and can help to ensure that the wishes and concerns of the wider community are well understood and used to inform negotiations. The benefits of such consultation were highlighted by Dr Liam Fox ^[65] , when he committed to producing proposals for consultation on future trade deals:

" I am keen not to get to the position we got to in, for example, the Transatlantic Trade and Investment Partnership, where a whole negotiation was undertaken only to find there was insufficient public support. It is much better to seek support for a trade agreement mandate by having as wide a consultation as possible across the country with various ranges of stakeholders before we enter such negotiations. That is more democratic, and the process is more efficient. Consumers will in future take a greater interest in trade agreements than they have perhaps taken in the past, so consultation is also politically prudent."

139. Involving the devolved administrations at an early stage of developing a trade deal will mean that Ministers will be able to agree and present a negotiation mandate to the EU and third countries based on a proper domestic understanding of the issues at stake. It will help build consensus across the UK for difficult and lengthy trade negotiations. It will also provide reassurance to our trading partners that any agreement reached will endure.

140. The need for greater scrutiny and involvement enjoyed wide support among those who have given evidence to the Finance and Constitution Committee's inquiry into the Trade Bill and associated Legislative Consent Memorandum. The Committee concluded that " The main common theme to the responses received was the need for transparency, accountability and parliamentary scrutiny of trade negotiations including a role for the UK Parliament and devolved administrations in influencing and signing off trade deals." ^[66]

141. A range of mechanisms were proposed to enable that greater scrutiny, which many witnesses felt should incorporate a greater role for wider civic society and public consultation. For example, the Scotch Whisky Association's written evidence noted that:

" We believe that consultation with stakeholders will lead to more successful trade policies. We are therefore calling for systematic engagement with a wide range of relevant parties – business, devolved administrations, parliamentarians and NGOs – in developing and implementing policy related to trade. It is essential that a structured stakeholder engagement mechanism must fully involve the devolved administrations." ^[67]

In their oral evidence, they suggested that such a mechanism should have a statutory basis, and should involve the devolved institutions " from the outset and throughout the process", pointing out that " When it comes to trade negotiations, the obvious time for consent is at the outset, when the mandate is being defined". ^[68]

142. More recently, in its evidence to two ongoing UK Parliamentary Committee Inquiries ^[69] , the Law Society for Scotland highlighted an "…. opportunity to review the procedures in place for negotiation of international trade agreements and consider how these might best be modernised to take account of changes in the UK's political landscape, particularly those brought about by devolution and also in recognition of the increased public interest in and engagement with trade negotiations in recent years." Emphasising the advantages of wide consultation, transparency and formal processes, and setting out a range of possible options for greater involvement of the devolved administrations, Law Society for Scotland's evidence called for a ' whole of government approach' to determining the UK's position on international trade, saying that

"…. rather than seek to engage with devolved administrations on an ad hoc basis, to enable the smoothest possible design and operation of trade policy (and to minimise uncertainty for industry and trade partners), it would be advisable for formal structures to be established to facilitate trade-related confidence-building and good-faith collaboration across devolved and Westminster administrations."

143. The greater involvement of 'sub-states' in general in trade deals enjoys support both within the EU and internationally. While not directly comparable to Scottish circumstances, because of its focus on the role of regional and local authorities, the European Parliament's International Trade Committee's support for calls from the European Committee of the Regions for greater consultation and engagement with a wider range of stakeholders in trade negotiations and more detailed impact assessments to show regional and sectorial impacts demonstrates the value the EU places on creating a broad base of support for trade deals. A report ^[70] considered by the Committee stated that:

" The pivotal role of the LRAs (Local and Regional Authorities) in terms of bridging the legitimacy gap between citizens, national and European authorities is central to this study. Indeed, bringing up citizens' concerns and underlining the territorial specificities of regions impacted by EU trade negotiations is of utmost importance to ensure the comprehensiveness, coherence and acceptance of trade agreements, notably when ratified following a mixed-agreement procedure."

144. The EU and Canada have recently demonstrated the value they place on such an approach by ensuring that representatives from the Canadian provinces were fully involved in the CETA negotiations. As Dr Melo Araujo (School of Law, Queens University Belfast) said in his evidence to the Finance and Constitution Committee "… the evidence suggests that the involvement of representatives of devolved administrations would add a layer of legitimacy to the negotiation process and improve the chances of successful outcome". ^[71]

145. Chris Southworth, the Secretary General of the International Chambers of Commerce UK, supported greater transparency generally, saying that

" In a rare display of unity, business groups, NGOs, unions and consumer groups all agree that to move forward on trade, the UK needs a more transparent, inclusive and democratic framework to handle trade policy if there is any chance of ensuring trade benefits everyone……If the government wants to deliver new trade deals at the pace and scale required, fresh thinking and reinvented processes are required – those who generate trade will need to be consulted on what works, not only because it is necessary, but because it is democratic. To deliver a trade model that works for everyone means giving stakeholders a say in the decisions." ^[72]

146. Working with the devolved administrations to ensure greater legitimacy and transparency must begin with making the necessary amendments to the Trade Bill and other legislation to ensure that the principles of devolution are respected, that the agreement of the devolved administrations is required for any legislation to implement trade deals in devolved areas, and that there is adequate scrutiny of any significant adjustments to existing trade deals. Amendments must also ensure that the interests of the devolved administrations are fully represented on the new Trade Remedies Authority, which will be a key institution in UK future trade defence policy, providing a safety net to domestic industries against injury caused by unfair trading practices, after the UK has left the EU.

147. There must also be a thorough re-examination and revision of the current apparatus governing Scotland's input into trade policy and international agreements to improve governance mechanisms and to ensure formal arrangements for an effective dispute resolution mechanism is in place. This is particularly important, given the profoundly different context if the UK, including Scotland, leaves the EU, Single Market and Customs Union.

Future Inter-governmental relations

148. The existing MoU and Concordats were devised to support the UK in the EU, where the EU was responsible for negotiating and making international trade deals. If the UK, including Scotland, leaves the Customs Union, that responsibility will shift to the UK Government. As recognised by all administrations at the JMC Plenary of 14 March 2018, the principles and arrangements set out in the MoU must be fundamentally reviewed, renewed and strengthened to address existing inadequacies, reflect the magnitude of change caused by Brexit and the loss of an important layer of scrutiny and expertise, and to recognise the impact on Scotland, Wales and Northern Ireland. Those revised arrangements must begin by setting out formal mechanisms – underpinned by legislation - for representing Scotland's interests, and those of the other devolved administrations, in future UK trade arrangements.

149. The Welsh Government set out its priorities for future trade discussions in its paper Trade Policy: the issues for Wales ^[73] . It said that, as a minimum, a revised MoU should include a formal method for engaging with devolved governments; principles of engagement to ensure adequate and timely consultation on UK trade policy and any agreements; and the development of overarching principles that should underpin any trade policy. It also proposed the establishment of a new Joint Ministerial Committee on International Trade to agree joint approaches on trade.

150. The Scottish Government agrees with this analysis, but believes a more fundamental rethink about the level of engagement across all aspects of trade policy and trade agreements - including implementation, monitoring, ongoing information exchange and dispute settlement - is required. As an illustration of the required levels of engagement, Annex A sets out the typical stages in negotiating an EU trade deal. The Scottish Government believes that formal arrangements should be put in place to ensure that the devolved administrations, the full range of stakeholders and the public are involved at all key stages.

151. As discussed earlier, the content of trade agreements often does not align neatly with the boundaries of devolution settlements. An individual agreement may include a mix of fully reserved areas, reserved areas that touch on devolved areas, as well as devolved areas. The interest and role of the Scottish Government and Scottish Parliament in individual areas of the agreement may therefore vary between and within agreements. However, the presumption should be that agreement and the direct participation of the Scottish Government will be required.

152. The Scottish Government proposes a statutory requirement that the agreement and participation of the Scottish Government and Scottish Parliament should be required where new UK trade agreements would have devolved content, or touch on devolved issues. Given the scope of modern trade agreements, in practice this would almost certainly mean all such agreements. This should apply to any significant changes to existing trade agreements, as a result of the 'grandfathering' process, in addition to any new trade agreements. Using the description of the process for agreeing trade deals set out in Annex A as a template, that would entail a process up until the point of implementation along the following lines (summarised in Annex B):

Preparation

• Assessing the desirability of new trade deals, determining target countries or blocs for new agreements;
• Assessing the likely impact of new deals, on a sectoral and geographic basis;
• Consulting stakeholder groups and the public;
• Identifying offensive and defensive priorities;
• Agreeing a negotiation mandate - areas to be covered by the new agreement, negotiating aims, social and environmental protections. Agreement should be required from the devolved administrations for the mandate in its entirety.

Negotiation

There should be a formal role for the devolved administrations in the negotiations that impact on devolved areas, as UK representatives currently have in agreements proposed by the EU. That role would involve:

• Initial engagement with third countries;
• Participation in negotiation rounds;
• Monitoring role for the Scottish Government and Scottish Parliament on the progress of negotiations, with a vote on any significant changes to the agreed negotiating mandate.

Finalisation/Decision Making

• Finalisation of text;
• Creation of new Parliamentary committees, both within the UK and in devolved administrations, to scrutinise agreements and their implementation;
• A role for both the UK Parliament and Scottish Parliament in the ratification and implementation of international trade agreements (including a requirement for consent), to ensure that the interests of all nations of the UK are reflected in any trade agreements;
• Any new deals to be signed by all the countries of the UK;
• Implementation by relevant legislature

The same principles should apply to the Scottish Government's and Scottish Parliament's role in governance and dispute resolution arrangements applying to any future agreements.

153. In order to establish these new arrangements and ensure they work well, a new statutory intergovernmental international trade committee should be established as soon as possible to consider all aspects of international trade, agree priority regions and sectors for international trade agreements, agree negotiating positions in relation to those agreements and consider trade issues and disputes. That new committee would play a similar role to Canada's ' C-Trade' Committee, and could provide advice directly to the relevant legislatures which would in turn improve the effectiveness of their consideration of trade matters. Working groups should also be established to support the work of Committee and focus on specific issues. Informed involvement from the beginning of the process, continuing through the various key stages, with time to consider the implications of developments and influence the direction of travel will be key to ensuring that the proposed wider involvement in this area is effective and adds value.

154. With greater involvement in the development and agreement of future trade deals, will of course come greater responsibility, and the Scottish Government recognises the need to ensure that it makes the necessary investment in expertise and resource in order to contribute effectively to any future arrangements. That process has already begun with the establishment of a new Directorate for International Trade and Investment within the Scottish Government, responsible for all trade and investment matters and playing an important role in the Scottish Government's response to the economic impact of Brexit.

International Models for Future Engagement

155. There are many different models for involving 'sub-states' in the negotiation, making and ratification of international agreements. Those models are based on a range of factors including, but not wholly dependent on, wider constitutional arrangements, for example competence within the state and relationship to central state government. Whether a sub-national entity has international legal personality, and thus the authority to enter into binding international agreements, depends on whether it has relevant devolved competence within domestic law, and the extent to which that is recognised by the state and the international community.

156. The role of a sub-state which cannot make binding international agreements, and the existing mechanisms for its participation in international trade matters, depends on a number of factors and can change, depending on the nature of the agreement. For example, while the Canadian provinces have no direct competence in foreign policy, they took on an enhanced role during the development of the Comprehensive Economic and Trade Agreement with the EU, reflecting the likely impact of elements of the agreement on areas within their jurisdiction and a desire on the part of EU negotiators to ensure effective and enduring implementation of the agreement.

157. There are broadly four models for the involvement of 'sub-states' in the development, negotiation and ratification of treaties, including international trade agreements:

• powers exclusively assigned to federal government, e.g. Australia, the United States of America and Spain;
• powers assigned to federal government, but requiring implementation or consent where they impinge on constituent units, e.g. Canada and Austria;
• powers assigned to federal government, requiring consultation but not consent where they impinge on constituent units e.g. India, Malaysia and Pakistan; and
• powers assigned, in areas within their competence, to constituent units, e.g. Germany, Belgium, Denmark (the Faroes) and Bosnia and Herzegovina.

158. The Wales Centre for Public Policy's evidence review of Sub-national government involvement in international trade negotiations ^[74] concluded that

"… the involvement of sub-national governments in international relations, especially around trade……is an emerging global norm….Globalised supply chains mean that "the substantive focus of trade agreements is evolving from the removal of tariffs and related border measures to non-tariff, behind-the-border measures, including regulatory harmonization" – areas often the responsibility of sub-national governments. As a result, the classic distinction between international and domestic policy spheres can no longer be upheld and new multi-level governance approaches that involve sub-national governments are essential".

159. As Professor Andrew Lang, Chair of International Law and Governance, Edinburgh School of Law, said in his evidence to the Finance and Constitution Committee, " there is an increasing recognition that, even where there is no formal role for sub-national Parliaments or authorities and they have no veto powers, it is in the interest of the national Government to have full consultation and consent" ^[75] .

160. Both the Wales Centre for Public Policy paper, and SPICE's paper, Negotiation of Trade Agreements in Federal Countries ^[76] , consider a number of very different examples of where sub-national governments have had a strong role in the negotiation of recent trade agreements, focussing in particular on the role of the Canadian provinces and Belgian regions in recent EU Negotiations with Canada. Their findings are summarised in the following case studies.

161. Despite the very different constitutional arrangements between the UK, Canada and Belgium, they offer useful models for what an enhanced role for the devolved administrations in UK trade policy and the agreement of future trade deals could look like. In particular, the level of influence of the Canadian provinces in the development of the CETA trade deal provides a useful starting point for considering the sort of role Scotland could have at all stages of developing trade deals in the future. These international examples, and others such as the USA and Germany, while helpful, while helpful in informing our consideration of future models for the UK, should not constrain our options or ambition. The circumstances currently facing the UK are unique, and the response must be too. If the UK leaves the EU and Customs Union, the Scottish Government wants a system that works for the four nations of the UK in the context of the political and constitutional circumstances of the UK, and for the EU and other future trading partners. We have therefore refrained from basing our argument - for a much increased involvement in the development of future UK trading arrangements - on any one model. Others may wish to consider examples from other jurisdictions in greater detail as part of the continuing debate in this area.

Case Study 1 – Canada

Powers are distributed between federal and provincial governments in Canada, with the former responsible for foreign policy and international trade. The provinces are responsible for policy areas such as health, education and agriculture. The federal government can negotiate and ratify free trade agreements without involving the provinces, but does not do so, and looks to provincial governments for information on regional and sectoral interests. Provincial governments are responsible for compliance with international obligations within their jurisdiction, but not accountable if they fail to comply. The Canadian Free Trade Agreement, signed in 2017, is aimed at reducing trade barriers between Canadian provinces.

The Federal-Provincial-Territorial Committee on Trade, ' C-Trade', provides a forum for federal and provincial officials to discuss trade matters. Generally, it meets up to 4 times a year, and " Subjects of discussion include updates on negotiating issues, on trade disputes, and higher level analysis of trade patterns and issues. These meetings provide provinces and territories direct access to federal technical experts and/or lead negotiators." ^[77]

In evidence to the Finance and Constitution Committee, Dr Melo Araujo described the Canadian system as being seen as the ' most effective and successful form of intergovernmental co-operation in terms of trade'. ^[78]

Role in developing CETA

• Canadian negotiators supported the involvement of representatives of provincial government in CETA negotiations, given that negotiations would include policy areas under provincial jurisdiction.
• Mandate for negotiations in areas of provincial jurisdiction was drafted with provincial input, with provincial governments consulted on areas of interest and expertise. Agreement to share information, including draft negotiating texts, as freely as possible.
• Provinces nominated own representatives, who took part in Canadian delegation.
• Provincial officials attended meetings of C-Trade to discuss priorities and develop common Canadian positions, ahead of each negotiation round.
• Provincial representatives sometimes participated in negotiations in areas under their jurisdiction (in the room but not at the table), but often acted more in a consultative role. Some provinces, most notably, Quebec, met informally with the EU on specific areas of interest during the course of the negotiations.
• Trade deals are ratified by the federal Parliament, which was the sole signatory from the Canadian side. Quebec is the only province requiring regional parliamentary approval to agree to the adoption of a free trade agreement. This occurs only after the federal government has ratified the agreement, so the Quebec assembly cannot veto its adoption nation-wide. It can however refuse to adopt the provisions in its jurisdiction, within Quebec.
• Provinces are responsible for implementing provisions falling within their jurisdiction, through executive order of parliamentary legislation.

Case Study 2 – Belgium ^[79]

Belgium is a Federal Parliamentary Constitutional Monarchy. The constitutional arrangements in Belgium are complex and non-hierarchical, with the three tiers of governance – federal government and parliament, regional parliaments and governments and community governments and parliaments – each responsible for their own area of competence, although there are some overlaps. Article 35 of the Belgian Constitution determines that the federal, regional and community governments are responsible for the policies that are assigned to them by the Constitution. In the Special Law on the Reform of the Institutions, a few general policies relating to foreign policy are assigned to the federal level but, in general, the principle ' in foro interno in foro externo' applies. This means Regions and Communities have authority in international affairs related to their respective competences inside the Belgian Constitutional arrangements and affecting the areas under their jurisdiction. The Directorate General for Coordination and European Affairs meets informally at least once a week, and formally once a month and brings together federal, regional and community representatives to discuss and agree a common position and mandate for trade negotiations. The agreed Belgian position is communicated to the Council of the European Union by the Federal Minister of Foreign Affairs.

Where trade agreements are 'mixed', and deal with issues within the jurisdiction of the different tiers of governance, the competent levels of power must give their consent to the agreement before the federal government can. Regional parliaments must also ratify such agreements. Implementation of mixed trade agreements is carried out by all three tiers of government, according to their competence. In the event of disagreement, the Belgian system has a comprehensive and escalating system of dispute resolution, designed to deliver an agreed position.

Specific Further Powers

162. The proposals in this document are intended to encourage debate about how we can improve and enhance arrangements within the UK to ensure that the UK trade policy and subsequent trade agreements genuinely reflect the interests of all parts of the UK. Alongside the overarching improvements that are necessary to the way in which the UK Government works with the devolved administrations, legislatures and others, the Scottish Government will continue to develop its own measures to support the Scottish economy and boost trade.

163. Exporters are amongst our most productive and innovative businesses. Scotland's Trade and Investment Strategy, Global Scotland ^[80] , sets out the key actions and commitments the Scottish Government and its partners are taking to boost export performance and attract inward, capital and risk investment. Since 2007, Scotland's international exports have increased by 45%, but more needs to be done to identify and exploit international market opportunities using existing powers. We have already:

• Established a Trade Board to provide advice on practical ways to improve Scotland's exporting performance;
• Appointed a number of Trade Envoys to champion export market opportunities, representing Scotland both at home and overseas;
• Established offices in Dublin, London, Brussels, Berlin, Toronto, Beijing and Washington. Further offices in Paris and Ottawa will be opened later this year, as Scotland's External Network continues to provide a platform for collaborative activity to increase trade, attract investment and boost innovation and inter-governmental relations;
• Provided funding to double the number of Scottish Development International staff working in Europe;
• Funded the establishment of a number of pilot local/regional Export Partnerships across Scotland, to support SMEs with little or no previous exporting experience;
• Launched Scotland is Now, a new international marketing collaboration to promote Scotland across the world.

164. Despite these achievements, more needs to be done and so, in addition to the step change in inter-governmental relations set out earlier in this paper there are a number of other specific areas where greater influence over UK policy and systems or the devolution of further powers could help protect and promote Scotland's interests in the event of the UK leaving the EU, Single Market and Customs Union.

Trade Remedies Authority

165. At present, the European Commission is responsible for investigating and monitoring claims of unfair trade practices, such as dumping and subsidising, and for enforcing remedial measures, in compliance with WTO law. They will no longer be able to do so if the UK leaves the EU. The Trade Bill therefore establishes a new non-departmental public body, the Trade Remedies Authority, to deliver the new UK trade remedies framework following withdrawal from the EU. The Taxation (Cross-border Trade) Bill ^[81] creates a new UK trade remedies framework and gives the Trade Remedies Authority additional functions.

166. Although the functions of the Trade Remedies Authority will be reserved, it will undertake trade remedies investigations across the UK, which inevitably affect devolved interests. It is therefore important that the devolved administrations should have a role in the Trade Remedies Authority. The Scottish and Welsh Governments have already proposed an amendment to the Trade Bill requiring UK Ministers to secure the consent of the Scottish Ministers and Welsh Ministers to one non-executive member of the Trade Remedies Authority. That amendment has been rejected by the UK Government, along with other amendments intended to identify and protect Scottish interests in this area.

167. We regret that UK Government has rejected these amendments and would urge them to think again about how best to ensure that the new Trade Remedies Authority reflects and represents the interests of all producers and consumers throughout the UK, perhaps through the establishment of offices throughout the UK.

Migration

168. Migration is crucial to the development of Scotland as an inclusive, fair, prosperous and innovative country. The Scottish Government's discussion paper Scotland's population needs and migration policy: Discussion paper on evidence, policy and powers for the Scottish Parliament ^[82] examined in detail the importance to Scotland's economic prospects and demographic sustainability of Scotland continuing to attract the level and nature of migration it needs.

169. The paper demonstrates how migrants contribute to economic growth, bringing new skills, expertise and perspectives to the labour market. Migrants also make a positive fiscal contribution: for example, each EU citizen working in Scotland contributes on average £10,400 to government revenue and £34,400 to Gross Domestic Product. As importantly, migrants also make a positive contribution to Scottish society, helping sustain communities and ensure that Scotland is an open, modern European nation.

170. That is particularly important because population projections from the National Records of Scotland and Office for National Statistics estimate that the number of deaths in Scotland will be greater than the number of births over the next 25 years, and therefore all of Scotland's population growth will come through migration. The age profile of the population will also change, with people aged 75 and over projected to be the fastest growing age group in Scotland, increasing by 79% over the next 25 years, while the working age population will grow by only 1%. Migration is essential to sustaining and growing the working age population in Scotland.

171. The Scottish Government wants to see continued free movement of people from Europe, through the UK as a whole remaining in the European Single Market and Customs Union. However, even with current free movement maintained, it is clear that UK migration policy and systems do not meet Scotland's distinctive challenges and needs and that a tailored approach for Scotland in relation to international migration is required. However, powers over immigration are reserved to the UK Government. The paper therefore calls for greater involvement in UK migration policy in support of Scotland's needs, alongside options for new powers for the Scottish Parliament to allow Scottish Ministers to set rules and criteria for a new route to enable long-term migration to Scotland.

Scotland's representation overseas

172. The Foreign & Commonwealth Office ( FCO) has a worldwide network of embassies and consulates, employing over 14,000 people in nearly 270 diplomatic offices. In addition to aiding UK citizens overseas, their primary role is to represent the UK's interests in a wide range of matters, including in relation to trade. Staff from the Department for International Trade ( DIT), based in British Embassies, High Commissions and Consulates have a primary role in helping overseas companies to locate or invest in the UK. According to the DIT website, this international network:

• Identifies market opportunities in the UK and Europe
• Provides advice on setting up in the UK (providing advice on tax, employment, marketing and visas)
• Identifies events and networking opportunities for British suppliers
• Provides specialist help for entrepreneurs and ongoing support to help companies grow their business after setting up in the UK.

173. The UK Government has recently appointed the last of 9 Trade Commissioners to represent the UK in key markets across the world, after the UK leaves the EU. Their role will be to head DIT's global operations, leading on export promotion, inward and outward direct investment and trade policy overseas, on behalf of the UK Government. They are expected to coordinate closely with Ambassadors and High Commissioners, and the wider diplomatic network, in doing so.

174. It is vital that embassies, consulates and other offices overseas represent the interests of the whole of the UK. The Scottish Government and Scottish Parliament - and other devolved administrations - must therefore be involved in setting their priorities, and in business planning, to ensure that Scotland's interests are fully represented and promoted. UK agencies and overseas operations should be accountable to the Scottish Parliament for their pursuit of these interests.