Trade: our vision

Executive Summary

"Trade is not separate from the values and the reputation that a country wants to project internationally. Trade, in many respects, should reflect our values. There should be ethics attached to any country's trading profile."

First Minister, September 2020.

Scotland's Vision for Trade

Scotland wants to trade based on our principles of inclusive growth, wellbeing, sustainability, a just transition to net zero and good governance.

This Vision for Trade sets out how those principles underpin the trading and investment relationships we want Scotland to have now and in the future, including how we implement our three cornerstone international economy plans on exports, investment, and capital. It articulates the approach that the Scottish Government wants to take in developing future trading arrangements.

Businesses trade. Governments create the terms of trade and affect the market dynamics. Our Vision for Trade sets out how, in partnership with businesses, we can together create the right trading environment for a wellbeing economy.

This document articulates our key principles and how these relate to Scotland's distinct interests and priorities and our place in the global trading environment. The Scottish Government has consistently made the case for a more effective role in the development of future UK trade policy and this position is reiterated here. The document concludes with a commitment to engage with individuals, businesses, academics and other organisations in Scotland and globally on our approach to trade and how this will shape future trade-related decisions.

We cannot know exactly what decisions will need to be taken, now or in the future, in the complex world of international trade relationships. What we can do is set out the guiding principles that we will use to weigh up decisions on trade, some of which may create tensions between our economic, social and environmental aims. Finding the right path through this complexity, particularly at a time when the nature of the UK's trading relationships is uncertain and changing, will not be easy, but we will always be guided by our principles and will consistently use these principles to hold ourselves to account.

Our five trade principles

• Inclusive Growth
• Wellbeing
• Sustainability
• Net Zero
• Good Governance

...are applied to today's eleven biggest trade challenges for...

Scotland's Economy

1. Influencing the trading environment – goods, services and investment

2. Digital trade

3. Cooperation on regulation while regulating in the public interest

4. Global Value Chains

Scotland's People

5. Fair work and the winners and losers from international trade

6. Supporting public services through trade

7. Balancing cost, value and protections for consumers

The planet

8. Climate, nature and trade

9. Coherence of trade with international development outcomes

10. Multilateral trading system and dispute settlement

11. Scotland's role as a trading partner

Trade profoundly impacts the lives of all of Scotland's citizens – our food, our jobs, our environment. In turn, the way that Scotland and Scottish businesses trade with partners around the world has implications that reach beyond our borders. In developing our Vision for Trade, the Scottish Government recognises the need to take a principled approach to navigate the complexity of the trading environment.

Scotland's five trade principles

This Vision for Trade sets out how, in partnership with businesses, the Scottish Government can create the right trading environment for a wellbeing economy for Scotland. The Vision sets out the five trade principles that will underpin the trading and investment relationships we want Scotland to have now and in the future, including how we implement our three cornerstone international economy plans on exports, investment and capital:

1. Inclusive Growth: Trade should drive economic development, provide good quality jobs, improve quality of life and reduce inequality.

2. Wellbeing: Increased wellbeing is the core purpose of our National Performance Framework and trade has a role to play in delivering on this.

3. Sustainability: Trade decisions must be guided by economic, social and environmental sustainability and the interdependencies between these.

4. Net Zero: Trade policy should increase progress towards our target to reduce Scotland's emissions of all greenhouse gases to net zero by 2045.

5. Good Governance: In our decisions on trade we will respect good governance and the international rules-based system at all times.

Our Vision for Trade applies these principles to the major trade issues currently facing our economy, people, and the planet. Governments have a range of levers available to direct, manage, and shape international trade flows and their impacts. A range of trade and non-trade-related levers can advance Scotland's interests and our wider economic, social and environmental governmental aims.

Economy: Our aim is for Scotland's economy to grow and to be globally competitive, entrepreneurial, inclusive and sustainable.

The Scottish Government will work to change the terms of trade, using our five principles to drive our priorities. We will work to improve market access for Scottish businesses, considering how we can reduce the barriers they face to international trade and to maximise our competitive advantages in goods and services. Given its increasing significance, we have placed a particular emphasis on how we can take advantage of digital trade, balancing the risks and opportunities it presents for our citizens. We will take action to grow our high-wage, high value-added, productive economy. Our focus on our principles underpins our regulation and endeavours to get the most out of the globalised economy for Scotland.

Our available levers include:

• Driving a coherent and strategic approach to addressing market access barriers beyond Free Trade Agreements – to open up the trading environment for business, alongside improving Free Trade Agreement utilisation.
• Taking steps to improve the trading environment in support of Scotland's Export Growth, Inward Investment and Capital Investment plans, such as supporting regulator-to-regulator agreements.
• Ensuring decisions relating to the Digital Strategy for Scotland are inclusive of digital trade priorities, such as developments on the tech ecosystem, AI strategy for Scotland and Digital Boost.

People: Our aim for Scotland's people is to increase wellbeing and opportunity, while reducing inequality.

We are committed to taking advantage of the benefits that trade liberalisation can bring for people, but we recognise that globalisation and trade bring challenges that must be managed and addressed. The Scottish Government will gather evidence to better understand the differential impacts of trade across our society and our economy. We will use our analysis of the effects of trade on the lives of our citizens to take forward our fair work agenda. We will work to ensure that trade policy benefits public service delivery and that our public services are protected, especially the provision of healthcare.

• Developing an evidence base on the differential impacts of trade; policies on mitigation of differential impacts; and taking steps to consider impacts of trade decisions, shocks and trends on people and options to mitigate them.
• Taking steps to consider trade's impacts within labour market, education, skills and regional development policies and applying trade principles in trade-related funding for business, particularly related to fair work.
• Taking forward consumer consultation and research (e.g. through engaging universities) and ways to better inform consumers about trade.
• Maintaining the right to regulate on public health, regulating in accordance with the precautionary principle to meet key priorities outcomes on health and social care and the protection of public health.

Planet: Our aim for the planet is to contribute to addressing global challenges, such as tackling the climate and nature crises, reducing global inequalities and building international cooperation.

In the context of the global climate crisis, the Scottish Government will use trade as a lever to achieve climate targets and improve our international environmental impact. We will seek to align our position on trade with that of the EU and to strengthen the multilateral, rules-based trading system. By operating as a good global citizen and trading partner, we will respect international law, support human rights and seek to build international relationships on trade that support developing nations and address global inequality.

• Engaging with the UK Government and international partners on the issue of Fossil Fuel Subsidy Reform and ending all Scottish Government overseas trade support and promotion activities solely focused on fossil fuel goods and services.
• Proactively promoting our trade principles internationally and playing an active and visible role on the global stage on issues that matter to Scotland, for example through engagement with World Trade Organization (WTO) committees.
• Building global trade relationships with like-minded countries, organisations and businesses based on our trade principles.

Our Vision for Trade also sets out the Scottish Government's asks of the UK Government and reiterates the case for Scotland's role in UK Trade Policy

The UK's approach to trade has pushed the Scottish Government out of key decisions, despite our expertise in Scotland's areas of interest. In current circumstances, and now that the direction of travel of the UK Government is clear, the Scottish Government's call for a comprehensive, formal role for devolved administrations and legislatures is even more important. Our top 11 asks for the UK Government are:

Top 11 asks for UK Government

Economy

1. Market access: Create an open trading landscape for Scottish businesses; engage more regularly with the Scottish Government and its agencies to ensure a coordinated approach to market access work.

2. Goods and services: Prioritise building on the Trade and Cooperation Agreement with the EU. Seek tariff liberalisation but take a reasoned and nuanced approach. Reduce Technical Barriers to Trade for business. Focus on improving market access for services beyond Free Trade Agreements (FTAs) and on smaller, more specific deals.

3. Digital trade: Prioritise building on the UK's Trade and Cooperation Agreement with the EU. Balance economic and social priorities in trade deal positions on data flows, emerging tech, Intellectual Property (IP), online consumer protection and e-commerce.

4. Regulation: Commit to regulating in line with the precautionary principle to prevent environmental harm and maintain high regulatory standards in areas such as food safety, energy, animal welfare, and climate.

People

5. Differential impacts and fair work: Collect detailed disaggregated data on impacts of trade policy on different groups, share with the Scottish Government, and mitigate any undesired effects of FTAs or other trade decisions through increased funding to support affected sectors or localities. Publish full sustainability impact assessments of trade and labour, with binding commitments on mitigating impacts at home and abroad. Labour standards should be included or preserved in FTAs.

6. NHS: Shield the NHS in Scotland from any risk of enforced privatisation, competition or fragmentation in trade agreements, either by design or due to a failure to identify unintended consequences, recognising that it is organised on different principles from those in operation in England.

7. Consumers: Recognise the voice and interests of consumers in the UK's Trade Policy, with consumers consulted. Consumer interests should have a specific chapter in every Free Trade Agreement. Impact Assessments of Free Trade Agreements should systematically consider consumers, taking into account regionality, socio-economic status, gender and ethnicity amongst other factors.

Planet

8. Climate: Join ACCTS negotiations and ensure all FTAs link trade and climate change through the following actions:

• Compliance with the Paris Agreement should be a 'red line'.
• Net zero and environmental commitments should be at the forefront of ex-ante impact assessment, including emissions and indirect land-use change, for instance deforestation, and this text should be subject to formal dispute resolution.
• Innovative and robust text on the environment should be included in FTAs.
• Liberalisation of trade in environmental goods and services should be a key offensive interest.
• Flexibilities should be provided to Least Developed Countries in line with the Paris Agreement.

9. Developing countries: When the UK Government liberalises tariffs, unilaterally or through an FTA, the impact on developing countries must be assessed and published. Degradation of developing country preferences and margins should be avoided. Use its position in multilateral fora to advance the interests of developing countries, and protect against moves to restrict or limit their preferential rights.

10. World Trade Organization: Involve the Scottish Government in UK WTO delegations (e.g. where matters falling in devolved policy areas are in question); engage with the Scottish Government on any specific trade concerns raised at the WTO that relate to, impact on, or are otherwise relevant to Scotland. Ensure the Scottish Government is given a meaningful and substantive role in the preparation and conduct of disputes to which the UK is a party, where the matters in dispute are ones that engage with or impact on or threaten Scottish interests (or are otherwise relevant to Scotland).

11. Human rights: Compliance with fundamental human rights and international law should be a red line for the initiation of FTA negotiations with any partner and human rights should be embedded in all aspects of trade policy.

What next?

Listening to the voices of individuals, businesses, academics and other organisations in Scotland and globally on trade policy is a priority for the Scottish Government and this Vision for Trade acts as our call for an ongoing and open dialogue on trade policy.

The progress of the Vision for Trade will be monitored through:

• a set of indicators used to test future trade-related policy and decisions, including those of the UK Government, based on the five trade principles.
• a set of indicators to track outcomes for the interests of particular sectors of the Scottish economy, businesses, consumers and individuals. These will be refined over time through stakeholder and public engagement.

This progress will be reported in an Annual Trade Policy Review produced by the Scottish Government.