This report explores the modeled impact of several free trade agreements on the Scottish economy, in particular the trade and cooperation agreement of the United Kingdom and the EU. It considers the impact on the economy as a whole, as well as at the sectoral level, using the modeling of gravity and the generally calculable balance.
Introduction
After the departure of the European Union, the United Kingdom resumed powers to conduct an independent international trade policy, in particular the negotiation of free trade agreements (ALF) with partners from around the world. The United Kingdom is currently updating some of these agreements inherited from its time as a member of the EU, merchanting completely new trade agreements with several countries and has already obtained agreements with others .
This report explores the modeled impact of several free trade agreements (Alf) on the Scottish economy. The trade agreements covered in this analysis include Australia, India, Switzerland, Türkiye and the UK’s commercial and cooperation agreement (TCA). These were chosen to represent the diversity of British trade agreements after the United Kingdom’s decision to leave the EU and provide information to guide Scottish government and commitment with British trade negotiators:
- The UE TCA – TADE and cooperation was established as a result of the EU’s UK.
- United Kingdom – Australia FTA – A new ALE, signed in 2021 and entering into force in May 2023.
- United Kingdom – Ale de l’Ale – a new Ale, which remains under negotiation at the time of this analysis.
- United Kingdom – Türkiye FTA – An improvement in an existing ALE, which remains under negotiation at the time of this analysis.
- Ale Kingdom – Switzerland – An improvement in an existing ALE, which remains in negotiations at the time of this analysis.
Following the general elections in July 2024, the new British ministers inherited the current negotiations of the ALE which were launched by the previous government. At the end of July 2024, the Secretary of State for Affairs and Trade Jonathan Reynolds confirmed the continuation of negotiations through a certain number of agreements, including those analyzed here.
The British government has already provided impact / scope assessments for non-EU FTAs, considering the impacts on the United Kingdom as a whole with limited regional breakdowns. Although an estimate is provided with the impact on the Scottish economy as a whole in these evaluations, the impacts on sectors, regions and specific groups in Scotland are not taken into account. This work aims to fill this gap in the evidence for Scotland.
This report provides an economic assessment of the impact of the above-mentioned commercial policy scenarios on the Scottish economy, considering the impacts on aggregated variables such as GDP, employment and trade, as well as at sectoral level.
It is generally accepted that international trade can lead to greater economic prosperity for countries, thanks to better specialization, higher productivity and higher levels of economic activity. In turn, it can also generate advantages for consumers and workers thanks to lower prices, better quality and a greater variety of goods and services available, and thanks to higher income.
At the same time, changes in commercial policy cause a restructuring of the economy, through which certain areas gain and others lose with associated implications for workers and businesses. It is proven that the opportunities of international trade are often not distributed uniformly and that any negative impact tends to be concentrated among industries, regions or particular societal groups. For this reason, the report also explores the differential impacts of trade changes by sex and geography. This objective is aligned with commitments to the commercial policy of the Scottish government, the vision of trade, to better understand the role and the impact of trade in the economy of Scotland.
Finally, this analysis is based on improved investments in the strengthening of the commercial modeling of the Scottish government – within the head of the chief economist – which required new models and sets of internal data. This means that the Scottish government can now undertake a more rigorous assessment of how trade policy changes can affect the economy.
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