Thursday, 11 January 2018

The Act of Union 1707: An Economic Union

Because of some fairly ridiculous arguments about whether or not the UK is a single market, I've found myself reading the Union with England Act 1707 - the "Act Ratifying and Approving the Treaty of Union of the Two Kingdoms of SCOTLAND and ENGLAND".

Given the absence of any punctuation, the introduction is pretty hard going  - but when you read the specific provisions they're actually pretty easy to understand.

Originally there were 25 clauses of which 15 were economic in nature. A number of the provisions have since been repealed - reading just those still in force we can see very clearly that the Act of Union explicitly provides for the UK being (in the language of  Brexit) a Single Market and a Customs Union.

Quoting directly from the Act (highlighting mine):

  • "IV.  That all the Subjects of the United Kingdom of Great Britain shall from and after the Union have full Freedom and Intercourse of Trade and Navigation to and from any port or place within the said United Kingdom […]  And that there be a Communication of all other Rights Privileges and Advantages which do or may belong to the Subjects of either Kingdom"

    So that's Free Trade and Free Movement

  • "VI. That all parts of the United Kingdom for ever from and after the Union shall have the same Allowances Encouragements and Drawbacks and be under the same Prohibitions Restrictions and Regulations of Trade and lyable to the same Customs and Duties on Import and Export …"

    So that's a Customs Union

  • "XVIII. That the Laws concerning Regulation of Trade, Customs and such Excises to which Scotland is by virtue of this Treaty to be lyable be the same in Scotland from and after the Union as in England …"

    So that's Single Market Regulation

  • "XVI. That from and after the Union the Coin shall be of the same standard and value throughout the United Kingdom as now in England …"

    So that's your Single Currency

There can be no doubt that the Act of Union was explicitly and in large part an act of Economic Union - and the provisions that make it so are still in place, so we're not getting distracted by an historical curiosity here.

It's not surprising therefore that those arguing for separation from the Union have been stymied by the economic arguments and appear breath-takingly hypocritical when they argue the economic case for remaining in the EU while dismissing the economic case against Scotland leaving the UK.

That the economic arguments for remaining in the UK trump those for remaining in the EU is relatively clear when we remember that the UK market, according to the Scottish Government's own figures, is currently four times more important to Scotland than the EU.

This is a fact that the SNP actively obfuscate and mislead about. Take this press release from December 2017 which boldly states:
"The single market is made up of almost 500 million consumers – over eight times the size of the UK market. It is the destination for 42 per cent of our exports, contains eight of our top 12 export destinations and contributed £11.6 billion to the economy in 2014."
This is staggeringly misleading. We know from the Scottish Government's own figures above that 16% of "our" exports go to the EU, so where do they get the 42% from?  If you exclude the UK as an export market then (per the figures above) the EU represents 43% of Scotland's trade outside the UK. There's no doubt that the "our" in this press release is referring to "us Scotland", so the 42% figure is - not to put too fine a point on it - flat wrong.

It took me a while to work out where the figures quoted come from - they're close to but don't match figures in the latest ESS data (published a year ago) and that bugged me. The clue is in the fact that they quote a "worth to Scotland" figure from 2014 - and sure enough in a press release dated 07/12/2017 they quote stats from ESS 2014, despite the fact that their own  ESS 2015 data had been available for nearly a year when that press release was written. They don't gain anything from using out-of-date statistics - it's just shoddy work that makes a fact-checker's job harder. So the £11.6bn figure is needlessly out of date, the latest available figure is £12.3bn

As for "contributed £11.6 billion to the economy", the equivalent (and up-to-date) statement would be that "exports to the rest of the UK contributed £49.8bn to the economy in 2015".

They go on to say
"According to the Centre for Economic and Business Research an estimated 300,000 jobs in Scotland rely on our trade with the rest of the EU."
I'm guessing this is the source for this stat, an analysis which unfortunately doesn't show how many Scottish jobs "rely on our trade with the rest of the UK" if we were to use comparable assumptions.

Fortunately Fraser of Allander have done such an exercise and their findings are clear and unsurprising: more than four times as many jobs in Scotland are supported by trade with rest of the UK than are supported by trade with the rest of the EU.

We know - because Blair McDougall submitted a Freedom of Information request asking the question - that the Scottish Government hasn't carried out any analysis on "the economic impact of an independent Scotland being outside of a customs union with the rest of the UK (assuming for example the rest of the UK had left the European customs union and Scotland voted to become independent)". 

I'm not surprised.


Sam Duncan said...

“whether or not the UK is a single market”

Seriously? That demonstrates as well as anything the world of unreality some people have fallen into over the last decade or so. Normally I'm pretty good at seeing the other guy's point of view, even if I disagree, but the nationalists have really put that ability to the test. I'm at a complete loss to even begin to imagine how anyone could think that it isn't.

Alastair McIntyre said...

In the period 1790-1820 a staggering 130 Scots were MPs representing seats in England and Wales. Also in 2014 is has been recorded "There are more Scots in England than any city in Scotland. It might sound surprising, but according to the latest census figures, there are about 750,000 people born in Scotland who live south of the border. That's more than the population of Edinburgh or Glasgow. I hope by lifting the veil in this way it will encourage others to do more research.

Also it might be interesting to note that The Commonwealth is due to become the largest trading block in the world.

Unknown said...

There is a fundamental assumption here, that's without substance, that being there is no evidence to support the premise that the SNP do not want to trade with rUK. Take that assumption out of the debate and you're left with an opinion, and an opinion only

Kevin Hague said...

Piers - no there isn't, anymore than that isn't a "fundamental assumption" being made by the SNP that rUK won't want to trade with the EU. The desire for trade exists between all parties, the extent to which being on one side or another of a UK/EU border is whats at issue here (and if the SNP argue to leave the UK because there will be trade friction caused by that border, choosing to be on the EU side of it exposes Scotland to trade friction with rUK (a market 4 times as important to us.

The meat of this blog isn't about opinion, it's about fairly presenting the facts which - demonstrably - the SNP are not doing. I mean ... "42% of our exports go to the EU" ... are you seriously defending that as anything other than a blatant attempt to deceive the people of Scotland?

John Silver said...

As things stand, the United Kingdom is one country.and as such one part can not be in a customs union with another - any more than Yorkshire can be in a customs Unions with Kent.
If a customs union means anything,it means independent countries setting aside the normal customs rules in a mutually advantageous relationship.
People on both sides of the argument fling percentages about as if all that trade would be lost if we leave the EU/UK.
This is clearly nonsense and you do your argument no favours by buying into that.
If and when we leave the EU/UK we will continue to trade with both.
It seems to me that no one has analysed how much of the trade with each is genuinely at risk if and when we leave the respective unions.
Until someone does that and backs it up with evidence,no one can claim to be "fairly presenting the facts"

Unknown said...

So you're argument now is that the risk to Scotland is rUK may impose trade friction? So you'd have me believe £62.7bn in goods and services to Scotland sold by rUK woiuld be frustrated out of spite?????.

Unknown said...

Understand independence gives UK companies an advantage, if you import from Scotland you will have to pay in a foreign currency and charged by the bank for a foreign transfer.

Anonymous said...

The reason the Acts of Union has this data is due to England blocking trade from Scotland around Europe. This is why the Darien scheme happened to try make new trade via another areas/source.
To say Scotland went into the union for trade is historically wrong. As both countries shared a monarch all acts from the Scottish parliament were at the mercy of London. At times basic acts for the economy took many months to be signed.
Scotland has been on other unions with other countries that had way more links with trade than this act. Even before this act the Tender of Union provided the same sort of deal but Scotland could sign it's own acts (And did so till England ripped it up and refused to join).
The Act of Union was to give Scotland more freedom in trade but the cost of this never made it worth it to Scotland as any money made went into the wars England waged in the Grand Alliance. The reason Scotland has done so well is with trade outwith the empire, the navigation acts pretty much dissolved any profit from trade in the empire and Scotland went on it's own outside the empire. near the whole industrial revolution in Scotland was to sell outside the empire. This the the deal for the Acts of Union were a rip off. Also add in the settlement to Scotland was paid many decades after the Union as England was in such a bad way.

Kevin Hague said...

Oh Piers - you really can't grasp this can you?

Three simple steps, come on - I know you can do it;

1. You're arguing Brexit causes EU/UK trade friction and that will hurt us
2. You argue for indy as a result, so that Scotland can be in the EU
3. But then Scotland's trade with rUK will be impacted by that *same* trade friction, because it will now be EU/rUK trade

It's symmetrical, an iScotland in the EU can't have a different trading relationship with rUK than other EU countries, that's not how the EU works!

Kevin Hague said...

John Silver - I implore you to read the Act of Union (or at least the extracts quoted) - it was motivated as an economic union, it explicitly creates a customs union ... and if we leave, the effect is the same v the UK single market as Brexit is v EU

Anonymous said...

Alien Act. Was not motivated as an economic union. It was to protect the English Backside from invasion from the likes of Spain and France with Scottish help. You neglect to mention the vast majority of Scots against Union, Daniel Dafoe talked all about it.

Anonymous said...

England as a market is 10X larger than Scotland as a market. It seems self-evident to me that if there was ever Scottish independence it would inevitably lead to friction on the border. In response, firms would leave Scotland for England. Obviously the whisky, windmills and golf courses have to stay...but for anything that isn't nailed down, what is the argument for staying in the smaller market? And that is BEFORE you think about the higher taxes...
Furthermore, there is no way that Scotland would be permitted to join either the EEA or the EU if England is not part of the same bloc unless Scotland imposes border controls. People forget just how big the English economy is - it is larger than that of 2/3s of the EU nations combined. If there is no border control, then anything made in or imported into England can go straight into the EU via the unmonitored Scottish border.
It is inconceivable to me that the EU would permit that state of affairs to exist. So these same Scots who get LIVID when someone hints at the rUK monitoring the border have to accept that if they ever get their way they themselves will be the ones who someday install the checkpoints.

@Paul13Walnut5 said...

Nice to see Piers Shouty-Down chip in, the denizens of Shettleston are michty glad he chased that bad Maggie Curran awa fae their doors, speaking of fair targets for community justice, when's the McGarry trial?

Nice also to see folk quote Darien. What one fails to learn from history one is doomed to repeat. I mean what have the Romans ever done for us?

Anonymous said...

Hi Kevin, many independence supporters are keen to draw a distinction between a unitary market and a single market, with an internal unitary market been that of a unitary state eg France, and an internal single market been that of a federal state eg Germany. Several prominent SNP politicians (eg Michael Russell, Joanne Cherry) state the UK is a unitary market. Personally I struggle to see the difference, but do you have a view?

Kenny said...

Except that the current UK government is actively damaging our ability to trade with the EU and by extension, all the countries with which the EU currently has trade deals. ALL our trade will be damaged by Brexit. Only our trade with rUK would be harmed by independence. You could always argue that proximity and existing supply chains mean trade with rUK will suffer less than with anywhere else anyway. Norway is outside the EU but Sweden trades more with Norway than with, say, Greece.

Anonymous said...

Now you have done it LOL , Twitter is ablaze with indignant Scots Nationalists. Well done.

Dave said...

Peirs: Kevin’s argument clearly isn’t that the UK would impose trade friction, it is that if trade friction or negative impact were to exist between UK and the EU (as the SNP and nationalists have argued as a case for why Brexit justifies Scottish independence) then that same friction/impact would apply to rUK and Scotland trade if the latter were to leave the UK and join the EU. That much is blindingly obvious. It is why some of the nationalist arguments against leaving the EU are contradicted by their stance on leaving the UK. There is no consistency, it also explains why so many are so keen to claim that the UK isn’t a single market, however at the end of the day it doesn’t matter if it is or isn’t because for trade purposes it functions as one with the same net result (I.e. frictionless trade within UK).

To address your other point about the impact on £62.7bn in goods in services sold by rUK to Scotland, the problem with this for Scotland is that the rUK economy is more than ten times the size of the Scottish economy in GDP but the value of their exports to us is not anywhere near ten times larger than the equivalent of Scottish goods and services going to rUK (£49.8bn).

A quick Google for GDP* figures for 2016 suggests UK is around £1.912 trillion, and Scotland £158 billion. Subtraction suggests rUK GDP would be approx £1.754 trillion .
Therefore rUK exports of £62.7 billion to Scotland are roughly 3.6% of rUK GDP . Contrast this with Scottish exports to the rUK of £49.8bn which are by the same calculation equivalent to 31.5% of Scottish GDP, quite a difference in scale.
That implies that Scotland/rUK trade could be around nine times as important to the Scottish economy than it is to rUK. Thus any ‘friction’ whether incidental or deliberate could potentially have much more impact on Scotland than it does on the rUK.

One might argue that the rUK would hardly notice significant reduction in exports but Scotland would a 10 or 20% reduction of export value on both sides could be equivalent to between 3 and 6% of Scottish GDP while still being less than 1% of rUK GDP.

Similar points about loss of EU trade are used by some brexit supporters who insist that because the EU sells more to the UK than we sell to them they will be hit worse by any decline in trade. The UK as a whole makes up around 16% of EU GDP thus the rEU is over five times as large economically as UK. However their exports to us are only about 1.3 times the size of ours to them (£320bn vs £240bn) thus it is clear that if trade was equally reduced between EU and UK as result of brexit then the UK would likely feel the impact considerably more. Interestingly the disparity is much less than it is for Scotland and rUK , suggesting that if the potential impact on trade is bad for UK under brexit, it could be considerably worse for Scotland under independence. Personally I agree that brexit has the potential to be worse for the UK, where I differ with pro-EU nationalists is that I think the same applies to Scottish independence as that seems the most logically consistent analysis of the figures.

As for why anything that restricts trade would be imposed by one side over another, well that’s politics. But in both examples it’s likely to be the will of the other countries in the EU that ultimately dictate how smoothly the UK can trade with the EU and how smoothly rUK could trade with Scotland should it become independent and join the EU. And the brexit process so far suggests it isn’t going to just decide that on the basis of least impact on existing trade. No matter how much rUK outside the EU and an independent Scotland in the EU want to have frictionless trade it will be down to 26 other countries to allow it…. Good luck with that!

* feel free to provide more precise figures, they won’t change the main outcome.


Kevin Hague said...

kenny - we trade 4x as much with rUK than we do (after decades of unfettered access) with the EU