Category Archives: Brexit

Scottish independence can still happen before Brexit

Scottish euro coin
Scottish euro coin.

During the first independence referendum campaign, the Scottish Government announced that Scotland would become independent 553 days after the referendum (on 24th March 2016). This was widely criticised at the time for leaving too little time for all the negotiations.

Most people seem to assume that would be the case this time as well. For instance, in an article by STV News about fast-tracking Scotland’s EU membership application, they suggested the following possible EU membership timeline:

  • Autumn 2018 – Scotland votes Yes to independence
  • March 2019 – Scotland, along with the rest of the UK, leaves the European Union
  • 2020 – Scotland becomes an independent nation
  • 2020 – Scotland applies to join the EU
  • 2021 – The European Commission and the Council give the green light and negotiations begin
  • 2023 or 2024 – Majority of MEPs, all EU member states and Scotland ratify the treaty of ascension and the country joins the EU

And yet, if we look at other countries that have gained their independence recently, they have invariably become independent much more rapidly. As Alister Rutherford has pointed out, “Slovenia held a referendum on 23rd December 1990 and declared independence on 25th June 1991. Montenegro needed even less time. The referendum was held on 21st May 2006 and independence was declared on 3rd June of the same year. Some countries moved to independence without a referendum. Slovakia for example passed an act of independence in their parliament on 17th July 1992. There followed five months of negotiations which ended with the dissolution of Czechoslovakia on 31st December 1992. Slovakia then became formally independent on 1st January 1993.” The longest delay I’ve found so far was the 260 days it took Georgia to gain independence from the Soviet Union.

Of course it’s impossible to sort out very much during such a small amount of time. Lots of questions would remain unresolved for a while and would get settled later. The time before independence would be spent putting in place sensible transitional arrangements. For instance, Scotland and the rUK might decide that Scotland will continue to use the Pound Sterling for two years after independence day, and the EU might agree that we’ll remain within the EU’s Customs Union until EU membership has been agreed on (or rejected).

It actually makes sense if you think about it. Why should Scotland be dragged out of the EU for a year only to join immediately afterwards? Potentially this would involve setting up a new customs regime only to revert to the previous on as soon as it’s been implemented. It’s much more straightforward to become independent sooner rather than later and then sort out the details afterwards. It’s just like a divorce: People normally separate first and then sort out the details of the divorce afterwards, rather than staying together until they’ve divorced.

I therefore imagine a more sensible and realistic timescale would be as follows:

31 March 2017 Theresa May triggers Article 50
30 August 2018 Second independence referendum
28 February 2019 Scottish independence day
4 March 2019 Scotland sends a membership application to the EU and asks to remain within the Internal Market and the Customs Union in the interim.
4 March 2019 Scotland sends a letter to the Secretary General of the United Nations expressing the intent to remain a party to all treaties signed and ratified by the United Kingdom.
14 March 2019 The European Commission and the European Council agree that Scotland can remain within the Internal Market and the Customs Union without voting rights while the membership application is processed.
31 March 2019 Brexit takes place – the rUK leaves the EU. Scotland is not yet a member state but remains within the Internal Market and the Customs Union.
26 September 2019 Formal EU membership negotiations begin.
28 February 2021 The new Scottish currency is launched, linked to a basket of Euro and Pound Sterling.
9 May 2021 (Europe Day) A majority of MEPs, all EU member states and Scotland ratify the treaty of ascension and the country joins the EU. Alex Salmond becomes Scotland’s first ever EU Commissioner, and 13 Scots are elected to the European Parliament (not 6 as before independence, but the same as Denmark).
28 February 2024 The rUK leaves Faslane, taking their nuclear weapons with them.
28 February 2034 The last of many independence treaties between Scotland and the rUK is signed (this one finalising the maritime border).

The Scottish export conundrum

It’s becoming abundantly clear that the Unionists’ main argument in the next independence referendum will be that if Scotland has to choose between being in the UK’s and the EU’s Internal Markets, the former wins hands down. Here’s for instance David Mundell’s take on it:

Our own domestic market in the UK is far and away the most important market for Scotland’s businesses.

The Scottish Government’s own figures show our trade with the rest of the UK is worth four times our exports to the EU.

Businesses in Scotland sold £37.5bn more in goods and services to their own market in the UK than they did to all 27 EU countries put together.

Today’s figures show the UK is the vital union for Scotland and highlight the importance of maintaining the UK market and preventing any new barriers to doing business across the UK as we leave the EU.

We must therefore find a convincing answer to this question. Wings over Scotland has provided one, but it’s making certain assumptions about the deal Westminster will achieve.

I therefore think it might be useful to examine the various scenarios systematically:

The (r-)UK remains with the EEA and the EU’s Customs Union

This scenario could happen either because Brexit never happens due to a second referendum, or because a new government decides to apply for continued membership of both the EEA and Customs Union (which basically would be membership without voting rights).

Would Scottish independence be good or bad for different types of businesses in this scenario?

  • Exporters to the rUK: Not a huge difference. Some companies might decide to set up a separate Scottish HQ if we are independent, which will increase employment and domestic demand, but that’s about it – the EU will ensure that the rUK doesn’t discriminate against Scottish businesses.
  • Exporters to the EU: Very little difference, but independence will be preferable, because there might still be small bits and pieces that Westminster will not take part in.
  • Exporters to the rest of the World: Very little difference, because participating in the Customs Union means that Westminster can’t make their own trade deals.
  • Other businesses: Very little difference — the main difference will be that independence will lead to a rise in the number of Scottish HQs and government agencies, which is likely to lead to a general rise in economic activity in Scotland.

Verdict: Under this scenario, independence is economically the best option, but the difference isn’t great.

The (r-)UK gets a really good trade with the EU

In this scenario, the (r-)UK does leave the EEA and the Customs Union, but manages to negotiate a really good trade deal. There will be some restrictions on the free movement of people, and there will be customs checks at the borders. The (r-)UK will make separate trade deals with the countries of the world (but because the EU is a much bigger trade block, these deals will typically the worse than the one they replace).

Would Scottish independence be good or bad for different types of businesses in this scenario?

  • Exporters to the rUK: Independence won’t make much of a difference with regard to trade, but the customs checks will make it a bit of a hassle, so some of these companies will relocate to the rUK.
  • Exporters to the EU: Independence is much better because of the lack of customs checks, and because companies can send key personal back and forwards between Scotland and the rest of the EU freely.
  • Exporters to the rest of the World: Independence is preferable, because the EU’s trade deals will be better.
  • Other businesses: My guess is that more companies will move from the rUK to Scotland to remain within the EU than the other way, so it’s likely the overall effect will be positive. It’s really an unknown at this stage, though.

Verdict: Mixed, with independence being better for some companies and worse for others. On average, I think independence will be somewhat better for the Scottish economy.

The (r-)UK gets a limited trade deal

This scenario is of course rather vague – a limited trade deal would necessarily prioritise some products or sectors over others, and there are infinite possibilities. What is certain, however, is that it will be somewhere between the preceding scenario and the following one. This scenario is likely to be accompanied by a recession (but a smaller one than in the next scenario).

Would Scottish independence be good or bad for different types of businesses in this scenario?

  • Exporters to the rUK: If Scotland is independent, some companies will not feel much of a difference, while others will struggle badly, depending on whether they’re included in the trade deal. If Scotland remains within the UK, things won’t change much at first for these companies, but any supply chains depending on EU links could break, and the general recession is likely to affect them.
  • Exporters to the EU: If Scotland is independent, nothing will change (and companies from the rUK will move to Scotland to remain within the EU). Without independence, some sectors will struggle while others are OK, but worse than they would have been.
  • Exporters to the rest of the World: Scottish independence is a lot better, because Scotland then keeps the EU’s great trade deals.
  • Other businesses: Independence is likely to be better, because of the increased economic activity caused by companies and people moving north; furthermore, the rUK recession can hopefully be avoided.

Verdict: Independence is better on average, even though a few companies who focus solely on exporting to the rUK in sectors not covered by the trade deal will struggle.

WTO terms

In this scenario, the (r-)UK leaves the EU without any agreement and has to trade on WTO terms, which means there will be tariffs on lots of exports, and no free movement of people. There will also necessarily be a hard border in Ireland. In this case, there is broad agreement that the economy will take a severe hit, with many companies and people fleeing the country. Things might improve eventually, but the economy will first experience a severe recession for several years.

Would Scottish independence be good or bad for different types of businesses in this scenario?

  • Exporters to the rUK: If Scotland is independent, these businesses will suffer, but people will still want their whisky to forget their worries, and they’ll still need energy produced in Scotland, so the exports won’t collapse. If Scotland remain within the UK, these exporters will still suffer because of the UK recession.
  • Exporters to the EU: Scottish independence is a hundred times better for obvious reasons.
  • Exporters to the rest of the World: Scottish independence is a lot better, because Scotland then keeps the EU’s great trade deals.
  • Other businesses: If Scotland isn’t independent, they’ll suffer because of the recession. If Scotland is independent, it’s likely the rUK recession will be felt north of the border, so things will still be bad, but much better than it would have been without independence.

Verdict: Companies focused on exports to the rUK will struggle after independence, but they’d struggle anyway because of the severe recession. For other companies, independence is much better.

Conclusion

Interestingly, independence seems to be better in all scenarios, but in some of them, the difference is much bigger than in others.

The Unionists going on about the amount of Scottish exports to the rUK compared with the rest of the World seem to be overlooking two big issues: (1) The more the UK cuts itself off from the EU, the more the economy will suffer, and that will hurt also those companies exporting to the rest of the UK; (2) the UK is likely to get trade deals that are much worse than what the EU has already negotiated, and that will be bad for lots of companies if we remain within the UK.

It’s really misleading to look at the size of the exports without looking at what will happen to them in the future, especially if Theresa May manages to shoot the UK in the foot. The more the rUK cuts itself off from the EU, the more we’ll need Scottish independence.

Retailers and the customs union

Stillorgan Shopping Centre - South Dublin (Ireland)
Stillorgan Shopping Centre - South Dublin (Ireland).
There was an interesting article in The Irish Times today about the consequences for Ireland when the (r-)UK leaves the EU’s customs union:

Even if there were a free-trade agreement, allowing free movement of goods between the UK and the EU, this will not apply to imports from countries outside the EU. Thus border controls will be essential to ensure that imports from third countries, such as China or India, comply with EU regulations.

This will have huge implications for the retail sector, much of which currently operates on a British Isles basis. Goods travel from warehouses in the UK to the Republic without problem. After Brexit, this will require new bureaucracy and customs duties, entailing a major increase in cost.

That could raise prices significantly for Irish consumers, posing serious competitiveness problems for the wider economy. Because of the small size of the Irish retail market, going it alone is a high-cost option.

Although they don't mention it, this is likely to be a much bigger problem than most people realise because of the way modern businesses depend on just-in-time manufacturing and low stock levels. What this means is that shops tend to get new deliveries all the time instead of having a lot of stock, and this will lead to huge problems if the over-night deliveries sometimes get disrupted by customs checks.

It's possible some companies will start treating Ireland as part of their French operation rather their British one (for instance, Kellogg's might prefer to sell the products made for the French market in Ireland instead of the British ones to avoid the customs checks). That would definitely make Ireland feel less British over time.

From a Scottish perspective, it means that if we leave the UK at the same time as Brexit in order to remain in the EU, and if the rUK proceeds with the harmful policy of leaving the EU's Customs Union, retailers are likely to start treating Scotland and Ireland as one market (which again might been seen as a subdivision of the Scandinavian or the French one), whereas the rUK will be seen as a rather distinct one. It would make the products in Scottish and Irish shops more similar over time, and less similar to the ones found in England and Wales.

It's worth bearing in mind that the EU's Customs Union is almost ten times as big as the rUK's one, so although it will be annoying to lose some of the English and Welsh products in the supermarkets, the consequences for Scotland will be much worse if we leave the EU together with the rUK.

I'd much rather Westminster decided to remain in the EU's Customs Union, but if they really are hell-bent on leaving it, it's yet another argument why Scotland should become independent within the EU.

People and companies are starting to leave the UK – we need Indyref2 soon!

BREXIT
BREXIT.
The UK government seems to be moving towards a hard Brexit, perhaps even a chaotic one. Of course it might well be that they'll change their minds after a few meetings in Brussels, but people and companies are already starting to act to protect themselves in case worst comes to worst. It's clear from the Facebook forum for EU citizens in the UK that a large number of people are already starting to leave the country, and in this article the Financial Times warns that companies will leave soon if there isn't a transitional deal to prevent Brexit from kicking in as soon as 2019:

The uncertainty over losing rights has made UK-based businesses call for early transition guarantees. Without those, big banks in London say they will take decisions assuming there will be no transition.

If there is no agreement by March 2018 — basically one year before Britain’s formal exit in 2019 — the value of the interim deal diminishes dramatically for the UK. Companies would already have taken action to protect their own interests. The Treasury is alive to the risk of a City exodus if transition terms are not clear at an early stage.

[...]

That leverage is strengthened by another cold calculation in Paris, Brussels and Berlin: the longer Britain waits for a transition deal to be discussed and agreed, the more likely businesses will decide to move or shift investment away from the UK. For the EU-27, late agreement on transition would maximise relocation while still avoiding a “cliff edge” — sudden and disruptive change for businesses stemming from a sudden exit.

So people have started leaving already, and companies will follow soon, and unfortunately they'll leave Scotland, too, unless it's clear that we're likely to remain within the EU. If we don't hold Indyref2 till Brexit is done and dusted, they will all have left and found permanent new homes elsewhere, and they'll be extremely difficult to tempt back to Scotland.

I'm not saying that we need to hold Indyref2 very soon – but just announcing that it definitely will be held in 2018 will make people and companies delay a move away from Scotland, and it might make companies in the rUK explore whether a move to Scotland would be cheaper and easier than relocating to Dubling, Paris, Amsterdam or Berlin.

Indeed, just announcing Indyref2 is likely to have a beneficial effect on the Scottish economy, so I reckon Kenny MacAskill is worrying needlessly when he thinks the economy is doing too badly to allow us to win a new independence referendum now.

If companies are leaving the rUK (but not Scotland) in great numbers during the Indyref2 campaign, surely that will be a great reason for many people to vote Yes.

However, we can't afford to wait till they've all left before we call the referendum. Nicola Sturgeon has been saying exactly the right things recently, reassuring people and companies in Scotland that we won't be leaving the Internal Market because she'll call the referendum if the Brexit isn't soft.

I expect the exodus away from the UK will speed up drastically once Article 50 gets triggered, so that would probably be the best time to announce the date for Indyref2 to ensure that Scotland doesn't get completely flattened by the Brexit train crash.

An extra referendum to cheer up the unhappy ones?

They Call Me Mellow Yellow
They Call Me Mellow Yellow.
Wings over Scotland is asking how we can prevent Yes-Leave voters from becoming No voters and suggests that the SNP should promise a referendum on EU membership post-independence:

We’re increasingly coming to the view that the answer is for the SNP to commit to a second EU referendum in the event of Scotland becoming independent.

Now, we can hear a lot of people sighing already. FOUR national referendums in the space of about five years (we’re not including the AV one, which nobody cared about) would be an awful lot of democracy and an awful lot of campaigning.

But we can see no other way to cut the Gordian knot of the electorate coming to decisions that contradict each other.

I fully understand the reasoning, and it's an argument that has crossed my mind, too. However, I think it would be a bad idea.

Firstly, I fear it will put off many No-Remain voters, which is the very group we need to convince to obtain a Yes vote next time. We'll need to argue till we're blue in the face that the extra referendum of course is a formality that will of course be won by the pro-EU side, and that'll turn off the exact voters that the referendum was designed for.

Secondly, as I've argued in another blog post, there simply aren't that many Yes-Leave voters left in the Yes camp. There are many, many more No-Remain voters that could be convinced by a Scotland-in-the-EU campaign than there are Yes-Leave voters who might vote No because they hate the EU so much.

Thirdly, all signs are that the negative consequences of Brexit will become much more visible over the next year. It would be foolish to have committed to a Scottish EU referendum if Brexit turns toxic.

Finally, we mustn't forget – as I've said before – that we cannot win a referendum by appealing only to Yes-Remain and Yes-Leave voters. Those two groups together add up to about 45% of voters, as Indyref1 showed. We have to win over a sizeable chunk of the No-Remain voters. As the Brexit referendum demonstrated, Yes-Remain plus No-Remain add up to 62% of the Scottish electorate. That's the way to win Indyref2. Chasing Yes-Leave voters is a dead end, and especially so if doing so means turning away No-Remain voters.

Brexit: The book

I often feel that the vast majority of people in the UK (including Scotland) know very little about the EU, believing it is basically a glorified free-trade area.

This lack of understanding has made it very easy for the right-wing media to portray the EU as being out of control, when most of the time it is doing exactly what it was supposed to do.

Ian Dunt's wee book about Brexit is thus very much needed. A lot of it is basically teaching the reader about the EU and the associated countries (with chapter headings such as "What is the European project?", "What is the single market?", "Norway" and "Switzerland"), and only then does it proceed to look at the details of Brexit, cataloguing the hurdles ahead (e.g., "How can we keep the UK together?", "How talented are the Brexit ministers?" and "Making a new country").

In general it's a fine book. Many people have described it as really scary, but I actually found it too positive and optimistic about Brexit in places. There are many interesting details in it – for instance this bit about vets was entirely new to me:

Industry estimates suggest that 95% of vets in meat hygiene graduated elsewhere in the EU. British vets simply do not like the work. The problem is not only it is more poorly paid, though it is. The trouble is that someone willing to go through the extensive training requirements of veterinary medicine generally does not do so in order to spend their working life watching animals being killd and the washing of their carcasses by former convicts.

I didn't like the chapter about Scotland much, though. I think the author has spent too much time speaking to Unionists or Yellow Tribe members like Alex Neil, because he seems to think that getting more powers devolved to Scotland (e.g., with regard to agriculture and fishing) would satisfy pro-independence voters, when of course it wouldn't. Those powers would be pointless because they'd need to be handed back to the EU post-independence, and they wouldn't allow us to build a more compassionate and socially just society, which is what motivates most of us.

In the concluding chapter, Ian Dunt suggests that the outcome of Brexit will be a European Hongkong:

Britain is about to experience a toxic mix of weak law and strong lobbying. It is tantamount to switching a country off and on again. Except that it will not revert to its original state. It will revert, in all likelihood, to a low-tax, low-regulation laissez faire economy, more akin to that of Singapore or Hong Kong than the countries on the Continent. [p.161]

As I've explained in another article, I agree this would seem like the likely result, and if we can't prevent a hard Brexit from happening, we need to get out before it's too late.

If you aren't a major EU policy wonk, you'll probably learn a lot of useful stuff from reading this book, and if you are, it's still a useful list of all the options and obstacles in one place. Everybody should read it before it's too late.

Stands Scotland where it did?

MovementsIf we take the Panelbase poll from September (which divided the Scottish electorate into four groups, Yes-Leave, Yes-Remain, No-Leave and No-Remain) and combine it with the findings from the recent YouGov poll that found that 15% of the voters who voted Yes in 2014 would now vote No and that 10% of former No voters have moved to Yes, we can draw an interesting graph.

I'm assuming that the two groups losing voters are Yes-Leave and No-Remain because they're both desperately unhappy with what's happening. So in the pie chart above I've split Yes-Leave into Yes-Leave-Yes (bluish yellow) and Yes-Leave-No (bright yellow), and No-Remain into No-Remain-No (green) and No-Remain-Yes (turquoise). Of the two groups changing their Indyref stance, Yes-Leave-No is slightly bigger than No-Remain-Yes (7% vs. 5%). This is consistent with the fact that YouGov found a tiny drop in the support for Yes.

So basically the polls are practically static because we're losing slightly more voters to No than we're converting to Yes.

We should be optimistic, however. We're unlikely to lose many more Yes-Leave-Yes voters to Yes-Leave-No – surely most of the remaining ones are so strongly pro-independence that nothing can convert them to No – and the Yes-Remain voters are unlikely to go anywhere so long as the Scottish Government remains pro-EU. At the same time, 24% of voters are still to be found in the No-Remain-No camp, and one would expect more of them to drift towards a Yes when it becomes a certainty that the UK is heading for a hard and messy Brexit with no special status for Scotland.

In other words, I expect the polls will start shifting towards Yes soon.