Meeting date: Thursday, May 30, 2019
Meeting of the Parliament 30 May 2019
Agenda: General Question Time, First Minister’s Question Time, Edinburgh Festivals (Effect of Immigration Policy), Portfolio Question Time, Medium-term Financial Strategy, A Trading Nation, Point of Order, Decision Time
- General Question Time
- First Minister’s Question Time
- Edinburgh Festivals (Effect of Immigration Policy)
- Portfolio Question Time
- Medium-term Financial Strategy
- A Trading Nation
- Point of Order
- Decision Time
A Trading Nation
The next item of business is a debate on motion S5M-17436, in the name of Ivan McKee, on a trading nation. I call Ivan McKee to speak to and move the motion.15:19
The Scottish Government recognises the critical importance of internationalisation to our economic strategy and to driving sustainable economic growth—inclusive growth—as defined through our economic action plan. We understand the importance of exports to that internationalisation strategy; we also understand that increasing exports drives further innovation in our economy and drives up productivity and the tax revenues that we need as a society to invest in our public services. Increasing exports also creates wider internationalisation and the exchange of ideas and people, and it cements Scotland’s place in the world as a good global citizen promoting sustainable development.
For all those reasons, the export performance of Scotland’s economy is of critical importance. Looking back over the past 10 years, we see that Scotland’s exports have grown by an annual rate of 4.7 per cent. We recognise that that performance is better than that of the United Kingdom over the same period, at 4.3 per cent. However, we also recognise that Scotland can do substantially better. Looking back over the past 20 years, we recognise that Scotland’s exports, as a percentage of gross domestic product—the internationally recognised measure—has been flat at around 20 per cent.
On 1 May, we published “A Trading Nation—a plan for growing Scotland’s exports”, which addresses those issues and looks at what Scotland’s economy can do to increase the proportion of our exports as a percentage of GDP. The plan drills down to understand the hard choices that we have to make. It is important to recognise that it is businesses that export; the Government’s role in that process is to help those businesses realise their full international potential. One of the main purposes of “A Trading Nation” is to help us decide where to focus Government support in that process.
I am looking forward to the debate. I hope that it is consensual and that members will input suggestions about what more we can do to grow Scotland’s exports. It is important to recognise that “A Trading Nation” reflects where we are now and that it will continue to develop and grow—we will add more actions and direction to the plan as more information becomes available.
Will the minister take an intervention?
I will just finish this point first.
I encourage members to engage with businesses in their constituencies to ensure that they are aware of what “A Trading Nation” outlines. There are online tools to help businesses, and support is available from Scottish Enterprise, Scottish Development International and others. I am available to visit businesses that are keen to export more in order to help them along that journey as best I can.
Does the minister agree that, as well as the need to grow our export market, there is also a home public procurement market—in food, information technology and construction, for example—that we have a poor record of supporting? Does he further agree that if we properly managed that, it would be crucial in helping to grow the Scottish economy?
Is Brian Whittle talking about public procurement?
That is an issue, but it is not an issue for this debate. I thank Brian Whittle for raising it, but this debate is focused on what we can do to grow exports from Scotland’s businesses.
The work on the exports plan has been a hugely analytical piece of work that has looked into a significant number of data sets over a period of time and at international comparisons to understand what is happening elsewhere. That information is now available online on a sectoral and market basis for businesses to take advantage of.
The work was characterised by a significant amount of co-production. Engagement took place with more than 50 business and sectoral organisations to inform the advice and recommendations that form part of the exports plan. I take this opportunity to thank the business organisations that took part in the process and the team who worked hard over the past seven or eight months to put “A Trading Nation” together. The output of that work is a set of actions and directions that help us understand what Government, its agencies and others need to do to boost Scotland’s export performance to become best in class globally.
“A Trading Nation” looked at a number of strategic choices, and it did not duck the analysis of those when coming to some hard conclusions. The choices involved four different aspects.
First, we looked at the countries that we should export to in order to understand their growth trajectory. We looked at a total of 15 different indicators to analyse and understand not only what the markets of today look like but—this is an important point—what the emerging markets of tomorrow will look like. That led us to a strategy that focuses on a top tier of 15 countries where we will focus our activity and significantly increase our presence. We also have a list of 11 countries where, as part of our tomorrow strategy, we will have a presence in order to understand and monitor what happens there as those economies develop.
Secondly, in order to understand how we can build on Scotland’s great strengths, we looked at sectors such as our food and drink sector, our energy and renewables sector, which is making the transition to low-carbon energy, our fintech and financial services sector, our life sciences sector and our quantum mechanics and space sector. Those are just some of the many sectors in which Scotland has globally recognised strengths. The analysis looked at which of those sectors were truly world class and which markets and countries they should focus on to realise the best opportunities, as well as how Scotland compares with other nations of comparable size with comparable economies, where we do better than they do, where we do less well and what opportunities exist for us to improve.
Thirdly, “A Trading Nation” looked at the profile of businesses in Scotland to understand, through a smart segmentation strategy, which sectors of our business community we should target our efforts on. It identified that, largely, the focus should be on small and medium-sized Scottish businesses that export and have the capacity to do more, as well as Scottish businesses with that capacity that are not yet exporting. Our focus will be on helping those sectors of our business community to realise their full potential. It is worth noting that 74 per cent of the businesses that we are providing with targeted support are small and medium-sized enterprises and that less than half of them are internationally owned.
The fourth strategic choice that we looked at was to do with how we can join the dots in market and make sure that we can take advantage of Scotland’s reputation, our very wide diaspora, the other networks that we enjoy and the good will that exists towards Scotland. We want to engage those processes, organisations and others so that we can pull together a strategy in each market that helps Scottish businesses to understand the market situation when they land in country, and to be able to access customers and make the most of the opportunities that exist for them.
The minister talked about increasing exports. What advice would he give to Scottish companies that are looking to increase their exports with regard to the planning for the future that they should do in relation to the currency, given his party’s uncertainty over what the future currency of Scotland might be?
We have time in hand for interventions, minister, so you need not fret—if you take interventions, I will make up your time.
Thank you very much, Presiding Officer.
Businesses that export deal with the currencies that their customers and suppliers work with. As Mr Lockhart should know, any business that exports significantly could deal in four, five or six different currencies at any point in time, as I have done in my past business career.
I think that Mr Lockhart was trying to ask me about the Scottish Government’s position on our currency in the future. If he had been paying attention, he would know that, the day before independence and the day after independence, Scotland’s currency will be the pound.
When it comes to joining up the dots in market, Scotland enjoys significant assets and we will work hard through a series of actions to make sure that our globalscot network, our trade envoys, the wider diaspora, our universities and our cities, with their twinning arrangements, are joined up to ensure that Scottish businesses benefit in country from those assets.
Over the coming months, we will work through the more than 100 actions that have been identified in “A Trading Nation”. Through a series of mechanisms, we will build up those actions to deliver the ambitious overarching targets that we have to grow Scotland’s exports as a percentage of GDP. Those actions include the First Minister’s export challenge, which involves joining businesses through peer-to-peer relationships, driving mentorships and marrying up businesses that have significant export experience with businesses that are starting out on that journey to support them through that process. We are working with the Scottish Chambers of Commerce on the international trade partnership, which allows businesses that are new to exporting to take part in trade missions. The Government is working to support the SCC to facilitate such missions to identified target markets.
We are working to expand our globalscot network by a factor of more than three over the coming years and beyond to ensure that we get the best from all the assets that we have. As well as re-energising the globalscot network by working with Scots abroad who have significant experience, we are putting in place more trade envoys, who have proved to be an invaluable resource in the countries in which they are currently present by supporting trade by Scottish businesses that want to export internationally.
The minister said that the principles are geared towards his target of increasing exports as a percentage of GDP. He knows very well that I am very sceptical that there is such a thing as sustainable economic growth, but that is the Government rhetoric and that is what it is going for, so why is the target not based on sustainability, rather than on the narrow, myopic metric of GDP only?
I think that, if Patrick Harvie had read the report or listened to what I have said so far, he would know that sustainable economic growth is about driving innovation, productivity, wider internationalisation and the exchange of ideas and people, cementing Scotland’s place in the world as a good global citizen and promoting sustainable development.
We have put in place a hard measure because it is an internationally recognised measure. As we develop the process, if Patrick Harvie has a hard measure on sustainable development to put in place alongside the other measures, I would be quite happy to consider that. However, if all that he has is a lot of words because he does not like the concept of GDP, frankly, he needs to go and have a wee think about it. The reality is that the targets in “A Trading Nation” will deliver an extra £500 million to the Scottish Government through the tax take, which we can use to invest in public services. Sustainable economic growth creates higher-value jobs, and more jobs, in the economy. Patrick Harvie is welcome to laugh about those things if he wants to, but we have a serious job to do to grow Scotland’s economy by increasing our exports.
I mentioned our target to increase overseas exports from 20 to 25 per cent of GDP, which we believe is achievable over the coming 10-year period. That would increase the tax revenue by half a billion pounds, which is money that we could then spend on public services.
The key message is that Scotland is open for business. We are a trading nation; we are outward looking; and we are an international nation. We want to further increase our internationalisation, despite the UK Government’s efforts and Brexit. We have ambition to grow Scotland’s economy and our exports, and to support Scotland’s businesses on that journey.
That the Parliament recognises the pressing need to boost Scotland’s export performance to build greater resilience in the economy, grow GDP, create jobs and increase the tax collected by the Scottish Government, allowing public services to be further improved as well as enhancing the innovation, productivity and profitability of individual exporting businesses; welcomes the recent publication of A Trading Nation, backed by an additional £20 million investment over three years, and agrees that the plan sets out the evidence and the key actions needed to put Scotland on a path to grow its exports in real terms, and recognises that achieving the target of 25% of Scotland’s GDP from international exports will not be easy and will require continued assessment of the effectiveness of actions in the plan, as well as regular refreshes to remain responsive to changes in patterns of global trade and feedback from Scottish-based businesses.15:32
The Scottish Conservatives will support all proposals to increase Scottish exports, because our performance is trailing behind the rest of the UK and competitor countries. International exports represent only 20 per cent of our GDP, compared with 30 per cent for the UK economy and higher for competitor countries.
Our export performance in the past decade has failed to meet all the targets set by the Scottish Government—on the scale of £22 billion. If Scottish exports were to reach the levels of the rest of the UK, our economy would be boosted by £16 billion a year. Those figures show that, after 12 years of Scottish National Party Government, Scotland has not realised its potential to become a first-tier trading nation.
To realise that potential, we need a new approach to increasing exports. There are many aspects of the trading nation strategy that have merit and which, if implemented properly, could have a positive impact on the economy. We also recognise the important role that the Confederation of British Industry Scotland has played in helping to formulate the trading nation strategy, particularly its recommendations endorsing efforts to
“simplify the exporting landscape”,
“focus on existing exporters with high potential”
to grow their international trade, and commitments to increase digital resources.
However, whatever the merits of the trading nation strategy, the fundamental flaw in the SNP’s approach to international trade is the currency. At the same time—in fact, in the very same week—as announcing a new policy to increase Scotland’s trade, the SNP also announced plans to introduce a new currency for Scotland. Ivan McKee said that we would know the answer to the currency question on the day after independence. The SNP conference passed a motion that it wants to introduce a new currency as soon as practicable. How does the fundamental uncertainty about the future trading currency of Scotland help business to plan?
If Dean Lockhart had understood what is in the sustainable growth commission or what was passed at the SNP conference, he would know that the future currency is based on six tests. As he will be aware, one test is ensuring that trade cycles are aligned, which would allow us to move forward to a different currency solution.
The whole point about the currency solution is to have a currency that suits us at the time. If the member reads the six tests, he will see that the currency option would be considered when trade cycles are in alignment, Scotland further internationalises, it is in a position to change currency and it makes sense to do so.
Having the SNP decide when Scotland gets a new currency will not provide comfort to business. Some of the minister’s colleagues have said that they are currency agnostic. One of the SNP’s leading members of the European Parliament said that he did not really care what the currency is in the future and that he is currency agnostic. Whatever that ridiculous phrase means, the fundamental point is that business needs certainty.
Will the member take another intervention?
I will give way in a minute.
Will the new currency be the euro, which was the previous SNP position? No, because it has changed its position on that. Will it be the pound? Perhaps, but we do not know how long for. Instead, the SNP has announced plans to create a new currency that is untested, the value of which is uncertain and with an exchange rate that is unknown to our international trading partners. How can businesses in Scotland plan to increase trading relationships across the world and build a long-term global customer network or plan their currency hedging arrangements? The minister said that businesses have to deal in different currencies. Absolutely, but if a business does not know what its home currency will be and the value is uncertain, how can it enter into those hedging arrangements? The SNP is creating a level of uncertainty that is damaging Scotland’s business domestically and internationally.
Will the member take an intervention?
I am happy to give way if the minister will explain how that fundamental uncertainty over currency is helping business.
We are debating a serious piece of work that tries to understand how we will grow Scotland’s exports. Frankly, if all that the Conservatives can talk about in the debate is the currency issue, that shows how disconnected they are from the reality of businesses’ experience and the reality that business organisations have told us about. Nobody has raised that currency issue with me. People talk about the practicalities of how they get orders, how they ship products and how Scottish Government agencies support them in market.
In light of what the Conservative Party is doing to Scotland at the moment, it is frankly ridiculous for somebody from that party to talk about uncertainty.
It is interesting that the minister says that no one is talking about independence. Was he in the chamber yesterday for Mike Russell’s statement on the introduction of legislation for a referendum?
Will the member give way?
No. We have many policies, which I will come on to. However, before I do so, I point out that we are again seeing the SNP prioritising its political agenda over Scotland’s economic interests.
I will set out what the key priorities should be for any Scottish Government, rather than creating uncertainty. One should be increasing trade with our single biggest market, which is the rest of the UK, which accounts for 60 per cent of our trade. Since 2002, Scotland’s trade with the rest of the UK has increased by 71 per cent, compared to an increase of 29 per cent in trade with the EU. However, the trading nation strategy largely ignores the opportunities for Scotland to increase our trade with our single largest market.
Will the member give way on that point?
No. I need to make progress.
The Scottish Government has set up more than 30 trade offices across the world, many of which are in countries that account for less than 1 per cent of our trade, but how many trade offices do we have in the rest of the UK?
Will the member take an intervention?
I will in a second.
We have one trade office in the rest of the UK. Having one trade office to service a market that accounts for over 60 per cent of our trade makes no sense. That is why we—this is our policy proposal—have announced plans to set up a series of trade hubs in key regions across the rest of the UK to help Scottish businesses to become embedded in the significant supply chains of the UK’s major economic regions. We would not have just one trade hub in the rest of the UK; we would have a series of trade hubs.
Since 2002, our exports to non-EU markets have increased by 95 per cent and now represent 23 per cent of our trade, compared to a figure of 17 per cent for the EU. In the next 10 years, 90 per cent of the world’s economic growth will take place outside Europe.
Will the member take an intervention?
I will make this point and then give way.
It is therefore vital that we help Scottish businesses to gain more access to those fast-growing markets. However, there is nothing in the trading nation strategy that explains how that will be done; there is just an aspiration to increase our trade. We need specific actions to support business in accessing those growing markets. Last year, I was on a trade mission to Hong Kong, China and Japan. Those countries are moving their global trade on to e-commerce and other technology platforms. Advances in technology mean that the old models of exporting and importing are being replaced, and Scotland needs to keep pace with those developments.
Evidence from Nora Senior, the chair of the Enterprise and Skills Strategic Board, to the Economy, Energy and Fair Work Committee highlighted that only 9 per cent of Scottish businesses embed digital in their operations, compared to 43 per cent in competitor countries. We need to do more to encourage Scottish businesses to embed digital in their operations.
Will the member take an intervention?
I will in a second, after I announce another one of our policy proposals, which is to create an institute of technology and e-commerce. That would be a specialised agency that would help businesses across Scotland to take advantage of new global technology platforms and create an e-commerce platform to expand their business across the world.
I see none of that referred to in the trading nation strategy. In fact, when I asked Kate Forbes whether the Scottish Government had a plan to introduce a specialised e-commerce and technology institute, the answer was no, as it was dealt with by the existing agencies. Clearly, that is not the case if only 9 per cent of Scottish businesses embed digital in their operations. Again, perhaps the minister can explain why digital use by Scottish businesses is so low under the SNP.
He cannot explain now because you are closing. The minister can deal with that in his winding-up speech.
Okay, Presiding Officer. I thought that I had a bit of time in hand.
You have had an extra minute and I am giving you another 30 seconds.
Thank you. As I said before, we will support any efforts to increase Scotland’s trade. We have announced—and, over the months ahead, we will continue to announce—concrete policy proposals to help Scottish businesses to expand into key international markets. We will work with the Government to support any increase in Scotland’s international trade but, as I said at the start, we will resist any and all efforts to remove the pound as Scotland’s currency of trade.
I move amendment S5M-17436.2, to leave out from “the plan sets out” to end and insert:
“a new direction in economic policy is required to realise Scotland’s export potential; recognises the importance of Scotland’s trade with the rest of the UK, which amounts to 60% of Scotland’s total trade; calls on the Scottish Government to ensure that no financial, political or economic barriers should exist within this vital internal market; expresses its concern that any proposal to establish a new Scottish currency and Central Bank would create uncertainty for business, trade and international trading partners, and calls on any such future plan to be scrapped.”15:41
I welcome the publication of “A Trading Nation” and the additional investment that goes with it. It is a comprehensive document, tracking where we are and the opportunities that we must try to seize. That it is to be a regularly refreshed working document will help us to track progress and allow changes to the strategy. It will also help us to build on the information that has been provided; although the information in it is better than what has been provided in the past, there are still gaps that need to be filled.
Our amendment notes that the Scottish Government missed its previous target to increase exports by 50 per cent between 2010 and 2017, with growth of 35 per cent over the period rather than the 50 per cent that was hoped for. Exports as a percentage of GDP reduced over the same period, which is disappointing. Although the rest of the UK remains our biggest market, its share of our exports reduced from 65 per cent to 60 per cent.
Those are challenges that we must meet in order to grow the economy and create jobs, which must be secure and well paid. Too much of our economy is based on low-paid, insecure work, which leaves people one pay cheque away from a food bank. That is not satisfactory; indeed, it is something that we must all unite against.
Our amendment speaks about small businesses. The report shows that by far the largest number of businesses in Scotland are those that have zero to 49 employees, but they are less likely to export than larger organisations. It is also well known that businesses of that size that seek to export are much more likely to be bought out by larger organisations. Often, those are multinational companies and they are seldom based here, in Scotland.
The report does not highlight that most of our exporters are not Scottish owned, such as businesses in the Scotch whisky and oil and gas industries. Foreign ownership means that we stand to lose taxation—
I want to clarify some data points before we get completely off track. As I mentioned in my opening remarks, 74 per cent of the businesses that we will be supporting are SMEs. That is where the vast majority of our support will go, as 96 per cent of export businesses are SMEs and only 4 per cent are large businesses. Those are some useful data points.
Over 70 per cent of export businesses in Scotland are Scottish owned. It is important to bear that in mind. My question for the member is: does she think that foreign direct investment is always a bad idea?
No, of course I do not think that foreign investment is a bad idea, but we need to get the balance right and make sure that where we have expertise and knowledge in Scotland, we try to retain that. I would have thought that a nationalist would at least be willing to stand beside that proposal, because we lose out on—
Will the member give way?
I want to make some progress.
We lose out on corporation tax if the owner is a multinational, because it can choose where to pay its corporation tax, and that is often not in the UK. We also lose intellectual property to those companies. How often have we seen something that has been designed and developed in Scotland being manufactured abroad, losing not only the revenue but the jobs?
We know that small businesses tend to be more resilient. They do not have shareholders to answer to and they do not cut and run when times get tough, so they are much more likely to weather economic storms. The Scottish Government needs to support them to grow and prepare for exporting. That support must be direct, to give them the confidence to export and get the knowledge of the systems in place, but it must also help to mitigate the risk.
Many companies on the cusp of exporting are concerned about the risk of expanding into unknown markets. If they are approached with an attractive buyout offer at that time, the temptation to accept is great. They need to see that the rewards that they can accrue from exporting are greater than those of a quick sale. In addition, they need to be persuaded that the risks are manageable.
One example is the number of independent distilleries that are opening up in Scotland. Most are producing gin for the home market while waiting for their whisky to mature. The Government needs a strategy to help those companies to export while retaining their ownership in Scotland.
An industrial strategy is also missing. What are we looking to export? There are targets for food and drink exports, but the export strategy needs to sit on stronger foundations.
Will the member take an intervention?
I am going to make some progress.
What parts of our industry are we going to grow, and where is the export potential? An industrial strategy is essential for the export plan to work.
Of course, Brexit increases that uncertainty, and it is possibly delaying companies from pursuing foreign markets. As we approached 29 March, we heard of companies sending consignments abroad with no idea of the tariffs that they might face when they arrived. That was a worrying time for those companies, and it put off many others from taking that step.
That is not only the case with Brexit. Talk of indyref 2 has the same impact. Given that the UK is our biggest market, such talk puts Scottish businesses at risk. The Scottish Government talks endlessly about the problems of Brexit, but it fails to acknowledge that those of Scotexit would be much greater in magnitude. Not only is our trade with the UK four times greater than our trade with the EU, but our institutions are deeply embedded in the UK. Borders and tariffs would damage trade with our biggest market. Adding trading in a different currency to the mix would be a disaster that would exceed the damage of Brexit by some magnitude.
If the Scottish Government really wants to build trade, and with it the Scottish economy, it must end all talk of indyref 2. I understand the need to play to the gallery, but when that is damaging our country, the Government has to put our country before its party. Therefore, we will support the Conservative amendment.
I turn quickly to the Green Party amendment, of which we are mostly supportive, and surely a Government facing a climate emergency would take many of its points as read. However, we have concerns about how it would be possible to have trade agreements that differ between the countries of the UK. Our current membership of the EU, and the associated trade agreements, is through the UK—
I am afraid that you must conclude and move your amendment.
Therefore, we cannot support the Green amendment.
I move amendment S5M-17436.1, to insert at end:
“; notes that previous export targets have been missed and urges the Scottish Government to work more closely with Scottish businesses to achieve and exceed their new export targets for the benefit of Scotland’s economy; recognises that small businesses are likely to face takeover when ready to export and believes that this leads to a loss of revenue and intellectual property, and urges the Scottish Government to put in place comprehensive support for businesses in this position in order to retain ownership in Scotland.”15:48
At one level, it is important and welcome that we are having this debate, because the one kind of growth that I am always enthusiastic about is growth in the competence of this Parliament to continually try to go beyond the narrow constraints of devolved powers and engage itself in the wider issues about our place in the world.
Trade policy is reserved, but that does not mean that we should not be debating it here, and debating not just how much trade we should be doing, but what kind of trade and what impact it has. I hope that the minister recognises the long-standing Green critique of narrow metrics like GDP growth. To put it simply, GDP measures all of the good stuff and all of the bad stuff that is happening in our economy and just calls it stuff. Growth ideology says that we must always have more stuff. Programme for government after programme for government, medium-term financial strategy—as we had today—after medium-term financial strategy, budget after budget, and strategy after strategy focus on that narrow metric.
The minister was quite right, honest and revealing in his response to me. We focus on GDP because it is there and is a nice, simple, easy number to count. As a result of decade after decade of its undue primacy in economic debate, it is being used in ways that it was never designed to be used for. I am pleased to say that a group called enough! that launches in Glasgow today recognises that the world needs to have an important and urgent debate on degrowth. We live in a time when we know that we are killing the living world around us. We are creating an existential crisis, not just in climate change but in loss of biodiversity, pollution and the extraction of finite resources.
The everlasting growth in our economy is not only causing those problems but is unsustainable. I regret that the Government’s trade policy is based on a target framed purely in terms of percentage of GDP growth. If we do not challenge that, the consequences will be manifest in things such as environmental costs of the growth of salmon farming. We want to export ever more salmon to ever more countries, although we know that the environmental and animal welfare costs of that are rising.
It is important to recognise that the target is based on exports as a percentage of GDP, so it is a measure of how international the economy is. That is what is driving the export plan. Does the member have another proposal for how we should measure it in numerical terms?
In four minutes, I do not have time to cover the ways in which we need to change the narrow metrics.
As I have said, Mr Harvie, you will get your time made up for taking interventions.
There are no simple narrow metrics that will be superior to the existing simple narrow metrics. We need to move beyond that set of ideas.
The harm of chasing after growth will be found in low wages in the hospitality sector and in tax avoidance by the successful, who will unfairly compete with others looking to become more successful. We can have an alternative approach that is rooted in trade justice principles, such as those created by the trade justice Scotland coalition, which have already been endorsed by the Parliament in a motion passed by 80 votes to 30. Only the Conservatives opposed the idea that trade justice should be at the heart of our approach.
I close with a brief sentence or two on the Trade Bill, which is referenced in my amendment. We need to challenge the notions of the right-wing free-market ideologues in the UK Government, such as Liam Fox and Liz Truss, who would quite happily rip up the social and environmental protections that have been hard won over decades. They need to be challenged over the threat of their free-trade deals, even in devolved policy areas such as environmental protection and the protection of our public services. The democratic scrutiny of the Trade Bill that is required is not there at present, and I hope that the UK Parliament will reject the bill when the time comes.
I move amendment S5M-17436.3, to leave out from the first “recognises” to end and insert:
“notes the positive opportunities for increasing Scotland’s exports as part of a fair and sustainable approach to global trade; recognises that there can be unintended consequences from a narrow focus on increasing GDP as the sole purpose of trade policy, such as poor environmental standards and the use of other unethical practices such as labour exploitation and tax avoidance; believes that these risks need to be proactively addressed by government intervention both domestically and through international cooperation; restates the importance of trade justice principles, as opposed to free trade ideology, underpinning the Scottish Government’s approach to these issues; is concerned that the UK Government’s intended approach to trade policy in the event that the UK leaves the EU is not consistent with trade justice principles, and that the Trade Bill 2017-19 fails to offer adequate opportunities for democratic scrutiny and challenge, including by the devolved legislatures, and resolves to use all means possible to oppose any legislation or trade agreement that restricts the ability of any future Scottish Parliament to act freely in devolved areas.”15:53
I am trying to be in a good mood this afternoon. We will support the motion and all the amendments.
“A Trading Nation” is a detailed plan that draws on the expertise that has been developed in Scotland through overseas specialists, the trade advisers and the global Scots. It draws on the experience of the Scottish Chambers of Commerce, making sure that we target the right sectors—not just the ones that already have the expertise within their businesses but those that can make the biggest impact and contribution to our export capacity. We need to look at the potential for drawing out the best from the sleeping giants.
We also welcome the desire to improve measurement and monitoring to ensure that we make the biggest impact we can. The food and drink sector is important to my constituency and I particularly welcome that element of the report. I want to see further growth for that sector as it tries to achieve its ambition of doubling its value by 2030. That is why we will support the Government’s motion this afternoon.
However, two big shadows hang over our potential to tackle an increase in exports. There is Brexit, which, despite what Dean Lockhart said, is a massive restriction and could have a massive impact on our trade. The report shows that our major exporting countries are in Europe and we need to recognise that Brexit will damage potential relations with those countries. That is the first big shadow.
The second big shadow relates to independence, and that is where Dean Lockhart is right. There is considerable uncertainty about the currency that we would use if we were independent. What would it be? How and when would it come in? How can companies plan for the future if they do not even know what currency they will be using?
Those two big shadows are why we must recognise that we need to be an open, internationalist country that breaks down barriers rather than builds them up. For that reason, we will support Dean Lockhart’s amendment.
Rhoda Grant made a good case for ensuring that we meet the targets that the Government has set, and she helpfully highlighted that we have not managed to achieve them previously. She also expressed concern about how we keep businesses growing in this country and how we keep them owned locally. We want to ensure that we receive foreign direct investment, which can create a healthy environment and improve the efficiency and effectiveness of businesses. However, we also want to ensure that we anchor businesses in this country. The best anchor for businesses in Scotland is the quality of our workforce. That is why good businesses come to this country to continue to grow.
We will support Patrick Harvie’s amendment, too. I am regularly briefed by the trade justice group in St Andrews. It keeps me well informed and it consists of the most polite and persistent group of campaigners. The group highlights tax avoidance, labour exploitation, environmental standards and democratic scrutiny. In fact, we worked with Jeremy Purvis to table amendments to the Trade Bill in the House of Lords. We also recognise that considerable effort needs to go into ensuring that people are not left behind, that there is no labour exploitation and that everyone gets the benefits of increased exports and global trade. For that reason, we will support Patrick Harvie’s amendment.15:57
I am pleased to have the opportunity to speak in this important debate, and I support the Scottish Government’s motion and welcome the significant investment of £20 million in the trading nation strategy.
At the outset, I put on record again the fact that Scotland has the most fantastic goods—particularly food and drink—which are produced by our hard-working farmers, producers and small and medium-sized enterprises. Indeed, our world-class goods and produce—I say “world-class” because it is important to be bold and to be proud of what our country can achieve—are sought after around the globe. They are known for their provenance, their quality and—in relation to our food and drink—their delicious taste. The food and drink sector is worth more than £2.5 million per day to Scotland’s economy—that is £912.5 million each year—so imagine what we could do with the money if it stayed here in Scotland.
As well as our food and drink sector, we have an equally important engineering and manufacturing sector. I am pleased about the recent creation of the Dumfries and Galloway manufacturing and engineering forum, which brings together local businesses, such as Jas P Wilson, DuPont and BSW Timber, to share best practice, experience and knowledge. The forum supports trade with, and access to, wider EU and international markets. I hope that the minister will accept the invite, which I have sent to him, to meet members of the forum to see what support the Scottish Government might be able to offer.
However, our goods in Scotland are under threat due to the national uncertainty around Brexit. From previous contributions that I have made in the chamber, members will know that I have been carrying out a great deal of work on protected geographical indicators. PGIs are awarded by the EU to Scottish goods to ensure that they are not open to cheap and inferior imitation by other countries and businesses around the world. The indicators protect Scotch whisky—which is worth almost £5 billion to the UK economy each year—Scotch beef, Scotch lamb, Arbroath smokies, Ayrshire Dunlop cheese and even Ayrshire tatties from my South Scotland region. Such protection could be negotiated away by a UK Government that is in pursuit of cheap trade deals with America. Not only might our farmers, producers and small and medium-sized enterprises suffer from such trade deals, but we could end up with lower-quality food being brought into Scotland, as well as the rest of the UK.
Food with low animal welfare standards, poor provenance and that is treated, such as chlorinated chicken, may present health risks. I am sure that members will agree that we do not want to include chlorinated chicken or hormone-injected beef in our trade deals or see Scotch whisky from Tennessee on our supermarket shelves. I absolutely oppose changing the PGI status of any of our fantastic produce and I ask the Scottish Government to continue to do all that it can to prevent such an occurrence.
In the face of the current EU exit uncertainty, I am pleased that the Scottish Government’s “A Trading Nation” publication gives a clear signal of Scotland’s ambition to remain an open and progressive nation where our businesses trade in global markets. Dean Lockhart mentioned the lack of information about digital support, but page 70 of “A Trading Nation”, in section 6.4, which is titled “Digital support”, talks about
“Working with ... partners ... to seize the ... opportunities via trading digitally.”
Will the minister take an intervention?
She is just closing, even though you have just promoted her.
I am about to close, but I will be happy to send Dean Lockhart page 70 if he thinks that it might help.
Achieving our ambition to see international exports almost double from their current value of £32 billion by 2029 is what we are seeking. I ask the Scottish Government and, perhaps, the Tories to lobby the UK Government to prevent our goods—particularly our food and drink—from being traded away in the current Brexit chaos.16:01
I, too, am pleased to take part in the debate and I congratulate the minister on his work on Scotland as a trading nation and on the new export action plan. It is important at any time, but even more so at this time of such UK domestic uncertainty and global trade disruption, not least from Brexit and the US president. Apparently, it is now termed “slowbalisation”.
It is encouraging that the Fraser of Allander institute welcomes the level of analysis that has gone into the decisions taken by the minister in the action plan, saying:
“everyone should welcome the new analysis and evidence provided. It marks a significant step forward in our understanding of the challenges and opportunities that Scotland faces in its efforts to boost international trade.”
It is true that Scotland’s exports are lower than those of any other comparable country and that our export base is concentrated in a small number of sectors and firms. It is not unusual for small countries to base their exports in a small number of firms and sectors or markets, but it seems that we have a particular challenge with that here in Scotland.
With the relatively limited resources available for business support through our enterprise agencies, it is important that the focus of “A Trading Nation” is on what export strengths the Scottish Government should promote, where we should promote those strengths, when we should step up our presence in those markets, who we should work with most intensively to boost our export performance and how we best configure Government and wider support to deliver our export goals.
It is interesting that the work has profiled the 26 countries that account for 80 per cent of our current exports, the export value gap and where the bulk of future growth may come from. Those countries include the USA, China, Germany, France, Italy, Canada, Spain, the Netherlands, Switzerland, Sweden, Poland, Belgium, Ireland, Norway and Denmark. It will not have escaped the notice of anyone in the chamber that 10 out of the 15 countries that I mentioned are in the EU. It is wrong to say that substantial growth cannot still be had in EU countries and so it is absolute folly that the UK Government is preparing to upset those trading links by pursuing Brexit, even countenancing a hard Brexit.
Food and drink is one of the key sectors for exports to our European neighbours, not least of the fresh fish products from the processors in my Aberdeen South and North Kincardine constituency. Not only are those markets in jeopardy, but even if they continue, the UK Secretary of State for Environment, Food and Rural Affairs refuses to guarantee priority access for those perishables on ferries crossing the channel.
Similarly, the said secretary of state is resigned to seeing the lamb export, and thus, our sheep sector, go to the wall as a victim of Brexit. I cannot work out how he squares our having to import lamb from New Zealand in polluting ships and aircraft with his declared concern for climate change.
Although the food and drink sector is undoubtedly a Scottish success story and there is still much growth to be had in it, there is also worldwide growth to be had in the energy sector, including renewables. I highlight Aberdeen-based Global Pipe Components, which specialises in manufacturing and supplying pipes and valves to the oil, gas and petrochemical industries. Currently, more than 80 per cent of its products go overseas and the company praises the globalscot network for helping it to identify markets. I hope that the minister already has Offshore Europe 2019 firmly fixed in his diary.16:05
As the Scottish Conservative spokesman on trade and investment, I am pleased to speak in this debate about how Scotland can seize the opportunities that await us in future trading relationships.
The trading plan that the First Minister announced earlier this month in Edinburgh is a welcome step in the right direction, with plans for 17,500 extra jobs as a result of boosting exports. However, it is set against a background of failure by the SNP over recent years. At that launch, the First Minister talked of boosting Scotland’s exports so that, in the next decade, they will account for a quarter of Scotland’s GDP. My colleague, Dean Lockhart, spoke about that. In contrast to the Scottish situation, exports at UK level already account for 30 per cent of GDP.
The plan from the Scottish Government is long overdue. It not only needs to boost exports as a percentage of GDP, because there has been a massive failure to increase the value of our exports. The 2011 economic strategy, which has been referred to, outlined plans to increase the value of Scotland’s exports by 50 per cent between 2010 and 2017, but the Scottish Government missed that target by billions of pounds.
I appreciate Gordon Lindhurst’s comments on the trading plan. In relation to the data points, he is right. We recognise that the target was missed and that there is more work to do. However, as I mentioned in my opening speech, it is also important to recognise that, over the past 10 years, Scotland’s exports grew at 4.7 per cent per year compared to 4.3 per cent growth in the UK as a whole. We are growing faster than the UK average.
I welcome any positive growth, such as the growth to which the minister refers, but we must look at the overall picture and recognise where we are missing the mark and missing a step.
The SNP Government recently announced a dramatic U-turn on the plans to cut air departure tax. As a representative of the capital and the Lothian region, I am acutely aware of that and of Edinburgh Airport Ltd’s response to the Government’s position. The response rightly questioned the reactionary—perhaps populist—move to scrap the plans, considering that the Government had made a promise and that that promise had just been repeated.
Last week, I questioned the minister on that. I highlighted page 73 in “A Trading Nation”, which stresses the importance of connecting Scotland to international markets through long-haul flights, including via Edinburgh airport. As other members do, I recognise the necessity and importance of tackling climate change. That is one of the reasons why I question that move by the Government, because it will result in an increase in passengers on polluting short-haul flights to Scotland from hubs including London, Amsterdam, Dublin and other places to which the long-haul flights go instead of coming directly to Scotland. Not having those direct international links will dampen growth prospects for Scotland and cut us out of opportunities.
We wish in the coming years to seize opportunities for many sectors and to boost exports, so it is disappointing that we are having this debate within 24 hours of the SNP Government yet again announcing plans to drag us back into another divisive referendum—in this case, an independence referendum. That will create a further difficulty and an air of uncertainty for businesses, when we need to embrace the opportunities that are opening up for the country. The minister needs to answer the question whether the Government will focus on those opportunities for Scotland and see how we can move things forward, or focus on what some people would call the indyref obsession.
We must tighten up timings, please. I ask for speeches of no more than four minutes.16:10
I welcome the publication of “A Trading Nation”. It is not only a well-researched, evidence-based and extremely ambitious plan—it is also backed by an additional £20 million of investment over three years. That sum is significant, but the prize is worth much more. A leap in exports from 20 per cent to 25 per cent of Scotland’s GDP over 10 years would add £3.5 billion to our national wealth and provide 17,500 new jobs.
The publication has attracted compliments from third parties. The Fraser of Allander institute said:
“What is refreshing about this Action Plan is the level of analysis that has clearly gone in to informing the decisions that Mr McKee has taken.”
I understand that more than 20 data sets were interrogated in order to build an understanding of current and future export growth opportunities, and that analysis was conducted of current and future global import demand in 100 countries across 66 industrial sectors and 19 service sectors.
As a result of all that work, we have a clear path to progress. I welcome the decision, on the basis of that evidence, to play to Scotland’s strengths by focusing efforts on activity that will create the greatest impact on the economy.
We know that Scotland’s best-performing sectors account for 84 per cent of our export value, so it makes sense for “A Trading Nation” to focus on support for those supersectors, which make for an impressive list—food and drink; engineering and advanced manufacturing; life and chemical sciences; technology, digital and media; financial and business services; and energy.
I represent the rural South Scotland region, so I am pleased that the food and drink sector is at the top of the list, but I am not surprised, given its success and huge potential. In Dumfries and Galloway, it employs 9,000 people, which is a significant figure in relation to the region’s population. “A Trading Nation” certainly does a good job of highlighting the sector’s strengths. Food and drink account for 20 per cent—£6 billion—of Scotland’s international exports. Between 2013 and 2018, the value of Scotland’s food and drink international exports increased from £5.4 billion to £6.3 billion.
After food and drink comes the engineering and advanced manufacturing sector, which is another Scottish success story. In 2017, that sector made up 17.6 per cent of Scotland’s international exports and was worth £5.7 billion. Engineering and advanced manufacturing covers things such as metal manufacturing, machinery and equipment, transport equipment, architectural activities and engineering services including design and consultancy.
We tend to think of advanced manufacturing as involving export of goods. That is often the case, which explains why the customs union is so important, because sophisticated machines can contain parts from all over the world. Rules of origin in the customs union would present huge logistical challenges if we were outside it. We should not forget that even countries such as Norway that have agreements with the EU through the European Free Trade Association and the European Economic Area do not have agreements that cover services. No free trade agreement in the world covers services; the EU single market is by far the most important single market in the world for free movement of services.
I welcome the focus that “A Trading Nation” brings to sectors to achieve export growth, but l also welcome the parallel focus on where we should export to. The Scottish Government has profiled the 26 countries that account for more than 80 per cent of current exports, and has identified those countries’ share of the export value gap. The gap is calculated by comparing Scotland’s current exports with those of similar competitors. The top 15 countries are “priority 1 markets”, from which the Government expects the bulk of future growth to come, and they include the United States of America, China, Germany, France, Italy, Canada, Spain, the Netherlands—
Come to a close, please.
The markets also include Switzerland, Sweden, Poland and Belgium.
It is an ambitious plan, but it is backed by sound evidence and research. I congratulate the minister and all those who worked on “A Trading Nation”. At a time when Brexit risks shutting off Scotland and the UK from trading partners, it is an important statement that Scotland is open for global business.
I re-emphasis that we are short of time in the debate, so I will have to cut some members’ times if others do not stick to theirs.16:15
I will try to go as fast as I can.
In the short time that I have, I will highlight three areas that are of particular interest as we take forward the strategy in “A Trading Nation”. Those areas are the digital technologies and services, opportunities for Ayrshire to grow its share in a number of markets, and the experience of the Irish as an independent trading nation.
“A Trading Nation” must be one of the most comprehensive documents that I have seen in my 12 years in Parliament. It is more than 200 pages of detailed analysis that shows not only Scotland’s strengths, but where we can make significant improvements. It has a useful country-by-country analysis to help us to target where we might best look to increase our exports, and the sectoral analysis lets us see where the greatest opportunities to grow particular parts of our economy lie.
One of the target areas is technology, digital and media services. Scotland already has a thriving technology sector—more than 11,000 technology enterprises operate here, and about 8,000 of them are directly related to digital industries. The sector accounts for about £3 billion of export value internationally, and about the same in relation to the rest of the UK. Therefore, the technology sector is crucial for us.
In my view, there are two key issues that we need to deal with if we are to make further progress in the sector. The first is to tackle the skills gap that we already know about. We need more people in software and web development, and in sales and marketing, to complement the great work that is going on in cloud computing, in developing apps for a number of digital services and, of course, in our amazing gaming industry. According to ScotlandIS, we need about 12,500 people each year, but are producing only about 5,000 from our universities, colleges and apprenticeships. More needs to be done to bring new talent into the sector and to reach out and invite people to retrain and join that fantastic industry.
The second issue is how we continue to be part of the European Union’s digital single market. If we are pulled out of it, as the inept UK Tory Government has stated is its intention, that would really damage Scotland’s economy. That market is worth about €400 billion per year to economic growth, and it boosts jobs and innovation. It is probably worth about €5 billion to the Scottish economy, but only if we are part of that market and not merely watching from the outside, where the UK Government seems determined to take us.
The Ayrshire picture is already a success story with regard to quality exports. Grant’s Foods Ltd, of Galston in my constituency, specialises in high-quality traditional Scottish recipes and exports 40 haggis products to 50 countries worldwide. It relies on its reputation for high quality and standards, as does our famous Dunlop cheese, which was mentioned earlier by my colleague Emma Harper.
The continuing Brexit uncertainty must not be allowed to undermine the reputation that Ayrshire and Scottish exporters have worked for years to preserve. Despite what some people say, manufacturing in Ayrshire still accounts for a high proportion of jobs and gross value added in the county.
On the Irish experience, if we look at the section in “A Trading Nation” on Ireland and how it developed its international export performance, we can see that in the 1970s it exported about 60 per cent of its goods to the UK, which—as one member said—is similar to Scotland’s current position. By using all the powers and levers that it has at its disposal, Ireland’s international exports to other countries now account for nearly 90 per cent of its entire output because of the incredible growth in those markets. The value of its UK market is still rising year on year, but the international dimension of its growth has been a stunning success, which I know that the Scottish Government aspires to replicate.
“A Trading Nation” offers Scotland and Ayrshire a new focus to increase and develop our key markets in the coming years. It allows us to learn from the successes of others and allows Scotland to develop our key industries in a uniquely challenging and competitive global market.16:19
When the Scottish Government’s previous export strategy was announced, John Swinney was the finance secretary. Back in those halcyon days, the target was to increase exports by 50 per cent. At the time, I said that that was ambitious, but I was told that I was being too negative and that the target was achievable. There is nothing wrong with ambition, but if the Government wants a target to be anything more than a fantasy, it needs to know what it is doing and to back that action with resources.
It is disappointing to note that the Scottish Government failed to reach that 50 per cent target by 2017 and instead achieved a 35 per cent increase. Exports as a percentage of GDP did not rise and the Fraser of Allander institute observed that export performance has, at best, flatlined since devolution. Does the minister understand why the Government failed to meet the target? I am keen that he should know that, because if he knows why the Government fails, we can be confident that he understands what needs to be done in the future.
Will the member take an intervention?
I am happy to take an intervention if the minister will stand up.
On that point, if the member reads the document, she will see that we are very clear on understanding what sectors, markets and types of businesses we need to focus on. The reason why we have not delivered over the past few years is that we have not grasped those challenges and moved them forward as fast as we can, bearing in mind the fact that our exports have been growing faster than those of the rest of the UK over the past 10 years.
I welcome the speech from the minister, but I have heard so many excuses before. I have heard that it is because of Brexit and that Brexit is causing less export activity. The minister and I do not like Brexit at all—we agree on that. However, the uncertainty of Brexit applies to the whole of the UK, and the UK export rate increased by more than Scotland’s, which means that we can do better.
Of course I want Scotland to export more. The more we export, the more GDP is generated and the stronger our economy is, and the return to the public purse in taxation is very welcome indeed. Let us be honest—
Will the member take an intervention on a point of fact?
No. I have already had a mini-speech from the minister in the middle of my speech, so I will not take any more interventions. There is huge untapped potential, but I am not convinced that the Scottish Government understands what it needs to do to stimulate an increase in exporting. I fear that the strategy, like its predecessor, is a high-level strategy with a set of targets, but the outcome will be disappointing.
Of course I welcome the expansion of trade envoys, the better use of the global Scot network and better working with the Department for International Trade. Taking a more specific sectoral approach is good, but we need to recognise that exporting is concentrated in a small number of sectors and businesses. We trade to a small number of markets and Scotland’s exports are much lower than those of comparable countries in the EU.
The majority of Scotland’s exports go to the rest of the UK—that is not a surprise, as countries across the world tend to trade with their nearest neighbours more than they do with anyone else. Sixty per cent of our exports go to the rest of the UK and 40 per cent to the rest of the world, so members might wonder what specific measures the Scottish Government is taking to boost trade to the rest of the UK.
Let me give the chamber a flavour of what is to come. It all starts and ends with the SNP’s obsession with independence. Pursuing an economically illiterate policy of independence will create huge uncertainty for business and the economy. Breaking up the UK single market and putting up barriers to trade will create huge obstacles for exports. Let us not forget the plans to change the currency. I remind the minister that the SNP conference said that that should happen “immediately” rather than some time later. We have the funny spectacle of Derek Mackay and now Ivan McKee falling over themselves to say how much they still want to use the pound, in effect ceding control to the Bank of England and the UK Government. They want independence, but not really, because they would have no control over their currency.
In concluding, I say to the minister, as gently as I can, that I agree with him about the uncertainty that Brexit causes businesses in Scotland but that the arguments that he and his party use about Brexit are the very ones that emphasise the uncertainty for businesses of independence. The message from business is simple: keep the focus on exports, not the constitution—that is what the economy and the country need.
I remind members that they have absolutely no more than four minutes for speeches.16:24
I refer the public to my entry in the register of interests.
“A Trading Nation” is a substantial piece of work in a comprehensive format that is easily understood and which points the way forward for Scotland to improve its economic future through increased exports. The document contains everything from comparisons with the export portfolios of similar-sized countries and recent improvements to their export performance, to in-depth analysis of Scotland’s exports, current market shares and trading partner details.
This comprehensive and well-informed approach will undoubtedly lead to better decisions by both the Government and the wider business community in Scotland, and it can only result in a more expansive and inclusive attitude towards increasing our export base and economic growth. Compare this positive Scottish business approach to the disaster of Brexit and what it is already doing to business confidence throughout the UK—that is before there has been any final resolution, and it will certainly get worse while there remains the potential of a no-deal exit.
The Government’s proposal to facilitate and encourage an increased number of new and smaller businesses to become involved in export markets is particularly encouraging. When we realise that only 11,000 of the 340,000 businesses in Scotland export, and that 500 of those account for 80 per cent of Scotland’s exports, we further realise the huge potential that is as yet untapped. However, it should be noted that a considerable number of Scottish businesses, such as mine, are involved in the supply chain for both manufacturing and exporting. Products from my business find their way to almost every single country in the world, and I can assure the chamber that we ain’t a giant business.
It is encouraging that, with the right plan and economic policy, Scotland can emulate the export performance of similar-sized countries. Currently, Scotland exports 20 per cent of its GDP. In Norway, the figure is 35 per cent; in Finland, it is 39 per cent; and in Denmark, it is 55 per cent. Of course, those are all independent countries. As a first step, the target of exporting 25 per cent of Scottish GDP by 2029 should be achievable with the initiatives that are contained in “A Trading Nation” and successive commitments from future Scottish Governments. The potential improvement from exporting 25 per cent of GDP by 2029 is enormous—it would secure an additional £3.5 billion for GDP annually and generate 17,500 jobs in the Scottish business community.
The diversity of our export range and business expertise is also to Scotland’s advantage in areas from engineering and advanced manufacturing to food and drink, technology, digital and media, energy, financial and business services, chemical sciences, life sciences—an enormous sector—and lots more. That is all before we consider the knock-on economic effects of tourism and education, both of which are in the ascendancy.
The expansion of the global Scot network from 600 to 2,000 worldwide is pleasing, with 500 in Europe by 2020 to promote Scotland the brand—a brand that already has traction throughout the world. Like similar countries, Scotland exported its people all over the world in past centuries and the proposal to energise business through the Scottish diaspora is an exciting initiative
You must close, please.
I welcome the plan and will certainly support the motion.16:29
I welcome today’s debate on a complex set of issues, and the Scottish Government’s recent paper; it is not perfect, but it is a start.
Of course, the striking of future trade deals is a reserved matter, so it is important that we frame our discussions on trade through existing structures. The report is right to focus on expanding exports among businesses that would make the greatest impact on our economy. The more holistic approach involving Government, enterprise agencies and the wider business community is certainly worth while.
Our export figures have diverged from those in the rest of the UK over the past two decades. Having been roughly equivalent in 1998, they are now more than 10 per cent apart as a share of GDP, at 20.1 per cent in Scotland compared with 30.2 per cent across the UK.
We also have the problem that simply not enough businesses are exporting, despite having the capacity to do so. The 8 per cent of businesses that have the right profile for exporting but are yet to try must be given the chance to do so. That highlights that there is an important role for export skills training, which is a key element that was not considered in depth in the paper. Our business culture has become more risk averse than it was in previous generations. Helping businesses to export more would go a long way to correcting that.
Training in languages could be improved, particularly in German, given that Germany is one of the main target markets that are identified in the report. Given that the Government’s target to increase exports by 50 per cent since 2010 has been missed by some margin, at a cost of £3.7 billion to the economy, there is considerable ground to make up, so it is important that we all engage with this issue and try to provide some solutions.
For our part, the Scottish Conservatives have set out a variety of proposals that seek to improve how we go about exporting, through our independent report “A New Scottish Model.” Chief among the main proposals is the creation of a Scottish exporting institute to gather experts in the field and use their experience to help with export training and certification. That is a serious suggestion and I ask ministers to consider it in the strongest possible terms. It could be of use not just across the country but across different sectors, too.
In my region, North East Scotland, one of the most important sectors is of course energy. As we emerge from a downturn in the oil price and explore new sources of energy, it is important to try to help organisations in the sector expand their reach in all manner of business activities. Scotland has a surplus of natural resources, so we should work to make the most of any opportunity to use them. I understand that the minister will be speaking at the energy exports conference in Aberdeen next month. That is the exactly the kind of event that ministers should attend.
The plan and our discussion today are steps in the right direction. We need to improve our exporting performance and consider ideas on their merits, no matter where they come from. I hope that we will be able to scrutinise concrete proposals in due course and, where necessary, make changes to advance the economic potential of our exports.16:32
For centuries, Scotland has reached overseas for commerce and culture. Contacts through the years were particularly strong with the low countries, France, the Hanseatic league, the German nations and so many more. Sadly, most of those relationships came to an end following the treaty of union in 1707, with the consequent narrowing of our horizons to focus on the rest of the UK and its empire.
In more modern times, we have again taken up our natural instinct to reach out, to our neighbours and further afield, to establish new and revitalised trading links around the globe, particularly with Europe. In the face of a seemingly inevitable Brexit, which will seriously damage the strong links that have been established with Europe, I welcome the Scottish Government focusing on growing our exports and seeking to maintain and nurture our businesses as a trading nation.
Boosting Scotland’s export performance is important. It is important to Scotland’s economy, encouraging jobs to be created and growing GDP, both of which will lead to increased resources so that public services can be improved and we can make Scotland an even more attractive place to live in and trade with.
It has been a decade since the beginning of the financial crash and the subsequent great recession. It has also been a decade since the introduction of the Scottish Government’s national performance framework, which measures performance and progress on the Scottish Government’s economic priorities.
The time is right to review and refresh. It is vital that Scotland remains a good place in which to do business and I welcome the Scottish Government initiative to ensure that the Scottish business environment enables businesses to achieve their potential. It is an unfortunate reality that in Scotland businesses are more often being acquired than scaled up. If the money is reinvested back into the Scottish economy, that can be beneficial, but it can also result in the loss of entrepreneurial role models and experienced people to manage larger-scale businesses based in Scotland.
Targeted employee-ownership policies and incentives might help to keep business ownership in Scotland. Other policies could provide the anchoring effect that is needed to embed businesses in Scotland, including ensuring that there is adequate investment from not just the Government but other sources. We need more large businesses based in Scotland to support those coming through the pipeline.
I welcome the Scottish Government’s economic action plan, which states that, to improve the ability of Scotland’s businesses to export, we will build on the recommendations of the enterprise and skills strategic board to set out a range of detailed actions in “A Trading Nation”. The 10-year plan for growing Scotland’s exports to achieve 25 per cent of GDP is ambitious, as all Scottish Government plans should be. I welcome the £20 million of new investment over the next three years to achieve that. I welcome investing £2 million over three years in intensive support for 50 high-export-growth businesses per year to ramp up overseas ambitions activity; creating 100 new business-to-business peer mentorships per year for new exporters; expanding the network of in-market sector specialists working in overseas markets to identify untapped potential and connect Scottish businesses to exploit that; and increasing export finance support for Scottish companies looking to enter new markets.
Last week, the cross-party group in the Scottish Parliament on Germany had Dr Ulrich Hoppe, director general of the German-British Chamber of Industry and Commerce, as a guest speaker. He spoke about the importance of imports and exports between the UK and Germany and the specific importance of trade relationships with Scotland. During his presentation, Dr Hoppe quoted national statistics and said that 10 per cent of Scottish exports are sent to Germany, which represents our third highest non-UK exports; the only countries above Germany in that regard are the Netherlands, with 15 per cent, and the USA, with 12 per cent. Dr Hoppe was clear that Scotland is highly valued in Germany and across Europe as a great place to trade with and said that, despite the never-ending Brexit debacle, Scotland continues to be valued across those countries. We should welcome and build on that.
The Scottish Government needs to do all that it can to boost the Scottish economy, and exports are very much key to that. Again, I welcome the Scottish Government’s initiative.
We now move to the closing speeches. The first speaker is Patrick Harvie—for four minutes, please.16:37
Rhoda Grant said kindly that she sympathised with almost all of the Green amendment. I reciprocate that, because that is how I feel about the Labour amendment. It raises some important issues, such as the threat of takeover, which can increase the risk of tax avoidance, and the loss of intellectual property. Those are important concerns to raise. However, such challenges can be addressed successfully only through international co-operation, such as EU membership. I hope that the Labour Party would agree with that view. The Labour amendment also endorses, however, the Scottish Government’s targets, with which I continue to have a problem.
As for the Tory amendment, the Conservative Party continues to raise the currency issue with its own particular kind of constitutional obsession. Mr Lockhart reminded me of the meme of the little dog with the coffee cup. He finds uncertainty from pursuing independence intolerable, but as the flames of Brexit uncertainty lick around him, he says, “This is fine.” What is implicit in what Mr Lockhart says and in his amendment is that he thinks that it is impossible to have easy trading arrangements and open borders between, for example, Sweden and Norway or Ireland and Northern Ireland—which would be inside and outside the European Union in a post-Brexit scenario—with different currencies. However, countries around the world, including those in the continent of Europe, solve those problems on a daily basis. The status quo proves that the problems that Mr Lockhart is concerned about are not real.
An independent currency would require a new Scottish central bank with reserves of up to, say, £50 billion. How would Mr Harvie fund that? Would it be from public funding?
When we have a full debate on independence, I will have plenty of time to address that, but I will stick just now with the debate that we are having today.
The pro-independence movement is explicitly internationalist. Brexit supporters—and, increasingly, the Tory party—are clearly economic nationalists. They should abandon their Brexit obsession and engage positively with ideas about how to modernise and change the UK, if they want to save it.
The Labour and Conservative amendments and the Scottish Government’s strategy do not engage with the existential threats that humanity is facing, which are threats that we have brought about by the way in which we run the global economy. Government action needs to be taken in response to those threats, domestically and multilaterally through international co-operation, not through free markets. In short, whatever people see as the benefits from trade and from increasing GDP, there will be no jobs on a dead planet. The debate must engage with that.
There is an alternative. I emphasise that the Green approach is not anti-trade; it is possible to have a fair, just and sustainable approach to trade. Such an approach would involve protecting our high-quality food and drink from the free-market race to the bottom on standards; supporting renewable energy instead of the lethal fossil fuel industry that is still too dominant in our economy; and making best use of the digital and creative industries and, indeed, our education system. However, if we are to achieve that fair, sustainable and just alternative, we must be focused not just on “How much?”, but on “How?”, “What?”, “Who?” and the impact on people’s lives. In short, we must commit in a way that, I am sorry to say, the Scottish Government’s trade strategy does not to the principles of trade justice that the Parliament has previously endorsed. I am afraid that those principles are missing from the Government’s strategy.16:41
It has been quite an interesting debate, in which we have had a number of good contributions from across the chamber. Although there has not been consensus in some areas, some stimulating points have been made.
It is right that the Government has developed “A Trading Nation” in an attempt to meet the export challenges that exist. As Jackie Baillie pointed out, the 50 per cent target that the Government set, which was based on 2010 figures, has not been reached; the figure is only 35 per cent. Therefore, the Government needs to look at how to address the shortcomings in its current export strategy. Maureen Watt made the good point that a lot of the strategy is based on a small number of firms. If we are to improve performance, a wider range of firms needs to export.
We also need to be wary of the type of arrangements that we get into. Patrick Harvie made many relevant points about trade justice, and Rhoda Grant pointed out that a lot of jobs in the economy are still woefully underpaid—nearly 500,000 people are not paid the living wage. The strategy needs to take account of those issues.
Digital issues were discussed by Dean Lockhart, Emma Harper and Willie Coffey. That is an important area. Dean Lockhart was right to point out how important it is to embed digital in businesses that are looking to export.
Could you clarify Labour’s position on the digital single market? Is Labour in favour of staying in the digital single market, which is worth €400 billion, or is it in favour of coming out of it, as the Tories propose?
Members should not have private conversations; they should always conduct exchanges through me. I also ask that full names be used.
Sure, Presiding Officer.
The points that Willie Coffey made about the digital single market are valid and should be taken on board by all parties in the Parliament. In addressing the issue of the skills gap, he mentioned that 12,500 IT places require to be filled and that we are producing enough skilled people to fill only 5,000 of those. That is an astonishing figure. I did some research on the issue ahead of the debate. The problem goes back to the take-up of computing science in schools. Between 2007 and 2017, the number of pupils who studied computing science dropped from 4,496 to 4,091, at a time when technology continued to expand. That correlates with a reduction in the number of teachers of the subject from 766 to 595.
I am sure that when he winds up the debate, the minister will talk up what the Scottish Government is doing on digital, but it faces a big challenge that runs all the way through schools, colleges and universities into industry.
A number of members have covered the dangers of Brexit, and Willie Rennie and Joan McAlpine made very good points about the customs union. However, we frequently hear speeches warning about the dangers of Brexit, the collapse of trading arrangements and the impact that that will have on the economy; we also heard earlier from the finance secretary that there will be £1 billion black hole in the Scottish budget up to 2023, and he attributed a lot of that to Brexit. People cannot make all those statements and submit all that evidence then propose having a second independence referendum while ignoring the fact that 60 per cent of our trade is with the rest of the UK. That is almost turning a blind eye to reality.
At a time when we need to deal with export issues, the wider issues in the economy and the crisis in public services, the Government wants to embark on the vanity project of the Referendums (Scotland) Bill and waste Parliament’s time and public money on a diversion, rather than focus on those real issues that affect people in local communities and businesses. Let us deal with the issues that we were sent to the Parliament to address.
I call Jamie Halcro Johnston. You have six minutes.16:46
Trade is a vital component of any globalised economy. Our future economic success will depend in some considerable measure on our ability to export; it will also depend on our ability to import and attract foreign direct investment to Scotland.
Scotland’s volume of trade has unfortunately lagged behind as a proportion of our GDP. Although there has been growth in recent years, the picture has not been uniformly positive—our export figures fell backwards in 2014 and 2016. When looked at in real terms, even our positive export growth begins to look a little anaemic. It is important that growth not only continues consistently but accelerates.
We have many success stories. Many Scottish exports are well known in every corner of the world. In my region, we have some of the finest food and drink producers in the world: Baxters, Walkers Shortbread and enough distilleries to keep the world in drams in Moray. We also have meat from Orkney and seafood from Shetland.
Although trade in goods is perhaps the most obvious form of exporting, in recent decades, we have seen a huge shift in the types of exports that we trade in, with growth in the services sector racing ahead of goods and manufacturing. A successful strategy must look towards emerging markets for both. Getting the basics right is essential.
In our island communities, such as Orkney, Shetland and the Western Isles in my region, there is a clear need for comprehensive future planning for freight. Overseas trade will seem a distant hope if fish that is landed on islands, or other produce, is left waiting on the quayside at local ports because of a lack of capacity to get it even to the Scottish mainland.
Our road connections are, in many places, poor. After far too many years of campaigning, the A9 dualling is taking place, but at a slow pace, while the dualling of the A96 remains in its planning phase. Problems remain with our air links both to other parts of the UK and to the wider world. Even from a passenger perspective, they are expensive and can be unreliable, whether that is because of weather, technical issues or industrial disputes.
In addition to the necessary infrastructure, the foundations must be in place to operate in a global market for services. Despite the future economy being powered by digital connectivity, the Highlands and Islands continue to be left behind on broadband roll-out, with some of the worst services in Scotland.
Unless exporting becomes a reality for all Scotland’s regions, we will be held back. It is not for want of promises or ambitious targets that we find ourselves in that position. In 2011, “The Government Economic Strategy” was published. Its headline target was missed by a wide margin. “A Trading Nation” reasonably identifies a number of sectors where we can make gains and prioritise target markets. It would be useful to understand from the minister whether the Government’s trade resources are being focused appropriately on those areas.
Particular priority should be given to high-value exports and productivity gains should be considered. Government, working with business, can and should make a real difference. One measure that we can take is to ensure close alignment on trade policy with the UK Government, which has unrivalled international networks and reach.
I welcome some of the intergovernmental activity that has taken place, but it must bring results. In March this year, the House of Commons Scottish Affairs Committee published its report “Scotland, Trade and Brexit”, which welcomed the moves towards a truly UK-wide trade policy, recognised the need for formalised trade discussion through the joint ministerial committee and outlined how future trade agreements could involve the devolved Administrations. A team UK approach, with the devolved Governments working with the UK Government rather than separately, would be a significant positive for Scottish business. However, as the Scottish Affairs Committee said, that will require good will and trust from both sides. Complementing rather than duplicating must be the way forward in the international arena.
Those points are extremely important, but none of them should blind us to the fact that, as Jackie Baillie highlighted, Scotland’s biggest trading partner, with which it trades more than with the rest of the world put together, is the rest of the United Kingdom. That is unsurprising. The closeness of our internal domestic market makes the sale of goods and services straightforward. Our common legal structures and political institutions drive frictionless trade across these islands.
The end result is an arrangement that supports hundreds of thousands of jobs here in Scotland. Although bodies such as Scottish Development International focus their efforts internationally, we can do much more to build up markets for Scottish goods and services in the rest of the UK, as Dean Lockhart highlighted. However, the SNP’s position on another independence referendum, which we heard about yesterday, puts those vital links at risks.
We should recognise that only a small minority of businesses export, with the CBI identifying the figure at around 8 per cent. That has been acknowledged for some time. The Economy, Jobs and Fair Work Committee’s report on internationalisation of Scotland’s businesses was released several years ago, yet little progress has been made to expand that base. Given our increased reliance on small and medium-sized businesses, where appropriate, we should actively support even our smallest firms to export and to find and harness opportunities across the globe.
I do not have time to talk about all the positive contributions that have been made across the chamber. My colleague Dean Lockhart started by noting some stark facts, among them that half of Scotland’s exports come from a small number of businesses. He pointed out that, given the major growth potential of economies outside Europe, we need to seize trading opportunities in fast-growing markets. He outlined a number of sensible proposals that are aimed at boosting trade and building on the partnerships and links that we have as part of the UK to give Scotland a modern global reach. He also talked about the SNP’s recent push to break up the United Kingdom and how the uncertainty that that creates over currency would have a devastating impact on Scotland’s position globally, which Willie Rennie and others also highlighted.
Gordon Lindhurst noted—
You must close, please.
Sorry. I thought that I had seven minutes to speak.
Trade is an important component of our future economic development, and there is a real imperative to grow and to create an environment in which our trade links with the world can flourish. We have to start by looking locally and considering what the barriers are for businesses in expanding and what prevents them from reaching other markets.
You must close, please.
Both of Scotland’s Governments must work together and they both must deliver for Scotland’s businesses.16:53
It has been an interesting debate with a few positive contributions and some from members who clearly have not read the report or understood what it says. I will touch on some of the speeches before I go into more detail on the Opposition amendments.
Willie Coffey raised the issue of digital services and skills, which is hugely important and is recognised in the report. He also pushed Ayrshire, as well he should.
Emma Harper invited me to visit local businesses in her area. I would be delighted to take up that offer, as I would any other member’s similar offer about businesses that they want me to meet and engage with.
Tom Mason gave constructive input on the importance of the energy sector and talked about some ideas that we can perhaps engage on.
I turn to the Opposition amendments. To be fair, there is much to agree with in the Green amendment, but the problem that we have with it is that it would delete everything in the motion and say that the work that has been done on the report is not worth anything, which is absolutely not the case, because the report gives a substantial foundation for our actions.
On the point about going beyond GDP, Patrick Harvie is or should be aware that the Scottish Government is very much engaged in wellbeing economy discussions with other countries—[Interruption.]
Excuse me, minister. There are an awful lot of conversations going on, which I am sure are very interesting, but I ask members to keep them until after decision time, please.
Those other countries include Iceland, New Zealand, Slovenia and Korea. We are engaged in considering what other measures there are beyond GDP. That is on the radar, but the problem is that my request to the member to propose an alternative measure revealed that there are none. I will make one offer. Patrick Harvie will understand, if he has read the report, that there is a section about evaluation frameworks. We are putting in some significant work on that and I am quite happy to engage with the member if he can come forward with some hard measures that we can include in addition to those that we have already proposed.
I am a bit disappointed that the member did not engage on the subject of sectors during the debate, because Scotland has a significant advantage in relation to developing low-carbon and renewables technologies and exporting them internationally. That is a key part of our export strategy.
The member is right that the Parliament voted for fair trade principles and being a Fair Trade nation. Our programme for government covers that. Scotland is a Fair Trade nation and we can all be proud of that.
The Labour amendment mainly focused on foreign direct investment and I should let Rhoda Grant know that, in the next few months, a piece of work on FDI will come along that will go into a lot more detail about our strategy. However, it is fair to say that it is important to recognise that FDI is not just about investment; it is also about bringing in talent, people and technology, and access to international markets. I know of several examples of businesses in Scotland, including some from my constituency, that have been bought internationally, which has allowed them to thrive and prosper. It is very much a mixed picture.
Willie Rennie’s point about anchoring businesses is hugely important. We need to have those businesses and sectors anchored here and our strategy is increasingly focused on building on the expertise that we have in our academic institutions, the skills and technology and the natural resources that we enjoy in Scotland to ensure that we have sectors that have stickability within our economy.
The Labour amendment calls for us to talk to businesses; I can let Rhoda Grant know that I have spoken to more than 100 businesses in Scotland in the past 11 months about export and I will continue to do so. We have engaged with more than 50 sector and other organisations in putting together the export plan, so I have not been slacking on that front.
I want to cover a few of the points that Dean Lockhart raised. I am a bit disappointed; Dean Lockhart should have a better understanding of what this is all about and should have read through the analysis that is in the paper. He talked about priority countries in a reflex reaction of Europe bad and emerging good, without understanding or acknowledging the huge amount of work that has gone into the evidence base to analyse the 15 drivers of where economic growth will come from in terms of Scotland’s exports. I recommend that Dean Lockhart reads the methodology paper and if he has any comments on how those 15 indicators are balanced or anything about the maths that is in there, he must please come and talk to us. Otherwise, he must please stop just throwing up soundbites about Europe bad, emerging good.
The minister talks about the new export strategy as if he is part of a new, incoming Administration. In reality, his Government has been in power for 12 years and has missed every one of its own economic targets, including on exports. Can he explain what has gone wrong over the past 12 years?
I refer to the point that I made earlier. We understand that we have challenges and that we did not hit the 50 per cent target. We should also recognise—as I have told the member three times already this afternoon—that Scotland’s exports over the past 10 years have grown by an annual rate of 4.7 per cent, which is higher than the UK average of 4.3 per cent over that time. We have work to do, but we are doing better than any other part of the UK.
Emma Harper has already put Dean Lockhart right on the point about digital support, which is thoroughly covered in section 6.4 of the plan. He talks about us not having any actions, but there are more than 100 individual actions in this export plan that I will be tracking in the weeks and months ahead to make sure that we hit those targets, so please do not accuse us of not having a clear action plan on this—it is very clear and thorough in what it covers.
I will quickly touch on a few business quotes. The CBI says:
“the data-driven approach to identifying priority sectors and markets is hugely welcome and we also endorse efforts to simplify the exporting landscape”.
The Fraser of Allander institute says that it is
“an excellent piece of evidence based policy making”.
“We very much welcome this ambitious plan to grow Scotland’s exports.”
and the Chambers of Commerce says:
“We welcome the Scottish Government’s export growth plan. It is a key enabler in boosting Scotland’s export potential and enhancing Scotland’s profile on the international stage.”
All those organisations recognise the work that has gone into this plan and its importance in driving forward Scotland’s export performance.
I do not have time to touch on all our wonderful sectors. Several have been mentioned already, including food and drink. We have our world-beating whisky sector and our food sector is going from strength to strength. There are key strengths in the energy sector, particularly around the transition to low carbon, and in our renewables sector we are genuinely world class. With life sciences and drug discovery, precision medicine and others we are again genuinely world class. Fintech, digital tech and media have already been mentioned.
There is a fabulous space sector that is looking forward to taking a big slice of that world market. In other areas such as quantum technology and nanotechnology, Scotland is genuinely world class, and has huge export opportunities in those markets.
Through the course of my job, I have the pleasure of visiting international markets on Scotland’s behalf. I have made 11 such trips over the last 11 months, and in every market that I go to, Scotland is held in high regard for our skills, technology and products. Countries recognise those and want to trade with us. Almost all those countries in Europe are doing better than we are, however. They are countries of a similar size, with fewer resources and with academic institutions that are not as developed as ours. As Willie Coffey pointed out earlier when he talked about the Irish experience, it is about our ambition. It is about Scotland being strong enough to stand on our own two feet and take full control of our economy, because the difference between us and those countries that are doing so much better is one thing and one thing only: they are independent. They are normal, independent countries that have full control over their economies and economic levers. That is where Scotland is going and that is what will drive our economy forward in the long term.
Thank you very much. That concludes this afternoon’s debate on a trading nation.