Scotland's Trade

OCH: Trade

Robin McAlpine – 14 July 2022

Trembling slightly, we approached the writing of the Trade section of the Common Home Plan with real trepidation. This one was going to be really hard, too radical, not popular (we thought). The problem is too big (we thought) and there has been no political preparation. People aren’t ready for this.

And yet, only about a year or so later 95 out of 100 people selected at random to form a Citizens’ Assembly who were given the information and time to think it through basically backed our policy,

So what’s the problem that made this all so difficult? You have probably seen the latest work from the Climate Change Committee about how no administration in the UK is coming close to doing enough to meet its climate obligations. The slightly depressing thing is how limited these obligations are in the first place.

Because Scotland’s climate targets are all about Scotland’s domestic emissions – they only cover things that we do here, in Scotland. And that is less than half of Scotland’s real emissions. A full 52 per cent of our emissions occur outside Scotland.

How can that be? It’s because we buy and consume products whose emissions are largely a result of how they’re made and how they’re transported here. When you bite into an avocado you’re only able to do it because that avocado has left a long, long trail of carbon emissions behind it. If you put sticky tape on your parcel the tape has already belched our most of its carbon – somewhere else.

And there is a pattern of where the belching takes place compared to where the consuming takes place. Globalisation has moved production to where wages are lowest and has had a devastating impact on the social and economic development of the places where the raw materials for our products come from. The damage is done in the poorest countries.

Of course they don’t do so much of the consuming – that’s us in the rich world. We expect impoverished nations to provide cheap materials, workers and finished products by crushing down their social development and then we take absolutely zero responsibility for the environmental damage we leave behind.

At the outset of the Our Common Home project we made clear that by ‘our’ we mean us in our houses, us in our communities, us in our nations, us in the world. We all share this place, so we tried to be honest and fair. If we’re making a mess, damaging the planet, it’s our responsibility, not the person who makes our disposable plastic cutlery or the person who mines the cobalt for our batteries.

So how can Scotland take responsibility for the mess we create which is left behind in other countries? This is where it gets difficult. In theory there are three ways we could do that. First, we could directly mitigate the mess we make by going to the places we make it and fixing it. This is entirely impossible.

Secondly, we could only buy ‘the good stuff’, things made ethically and imported here only on green hydrogen-powered ships. The problem is that that is next to impossible. Even if those ships existed, even if there were enough ethical producers in the world to supply Scotland’s needs, even then it is virtually impossible to identify who is really producing things ethically, never mind the supply chains.

So what’s the third option? This involves two things. First, just stop importing bad stuff and make it properly yourself instead. A couple of weeks ago we looked at how we could grow our own avocados in Scotland using new technology. Last week we looked at how Scotland’s natural resources could drive a green industrial revolution to make us a centre of green manufacturing.

And before that we looked at how circular economics means we can buy less and have more anyway – keep repairing it and you don’t have to import it. If we used public procurement properly and took circular economics seriously we could make a fast start on much of this.

This approach has a name, though it’s terrible. It’s known as ‘green import substitution industrialisation’ (tell your friends…). It means relying less on imports, more on your own manufacturing base and then making sure that your own industrial base is doing things the right way.

But we can’t make everything here and inevitably (it is daft to imagine that Scotland will be anything other than a trading nation) and some cheap imports will undercut better quality domestic production. So what do we do about the residual imports?

We could regulate them out and simply ban them, but it would leave us unable to access entire kinds of products altogether (there are no ‘environmentally ethical’ games consoles or Real Madrid replica jerseys). So we need to rely on market methods to deal with this.

What we have to do is to introduce an Externalities Tax (though this too could do with a better name). An externality is an economics term for any real-world consequence a product has which is not included in its price, like paying for mitigating the carbon emitted during its transporting or the cost of disposal at the end of life.

An Externalities Tax is about identifying these externalities and then taxing the product so that its price more accurately reflects its real lifecycle price to the planet. This means that high-quality ethically-produced products become much more competitive than (possibly even cheaper than) poor-quality environmentally harmful ones.

This is a great boost to quality Scottish producers who become more competitive overnight. It gives everyone the incentive to have nicer, better-quality things rather than ‘buy cheap, buy twice’. And over time it will push more poor-quality, environmentally-harmful products out of the market because they become undesirable.

Yes this would put the cost of most things in the shops up, but that isn’t difficult to deal with. The revenue earned from this tax can just be given straight back to people via a Universal Basic Income so prices will go up but so would their spending power. 

But we shouldn’t be afraid to say this because fundamentally the reason we’ve got this petrifyingly big global bill to save the planet precisely because we’re now having to pay for all the things we didn’t pay for when we bought all that stuff and threw it away again. Prices for many things are just too low to be sustainable for the planet.

And that is why we were nervous about writing this section. If there is one thing that has been driven into our minds relentlessly for 40 years now it’s that lower prices is the only ultimate goal of economics and the only route there is unhindered free trade. That’s really what we mean by ‘globalisation’.

So we thought the idea of this pair of measures – import substitution and an externalities tax – would be very difficult to get people to look at and think about, never mind agree to. And yet both are crucial to our future. We can’t keep doing the damage we’re doing outside our own country and we can’t keep paying low prices which are only low at the cost of major social and economic damage.

And yet that randomised cross-section of ‘ordinary’ Scotland which was invited to form the Climate Assembly overwhelmingly backed the proposal for Green Import Substitution (the Externalities Tax really requires powers Scotland doesn’t have so couldn’t be considered).

It was an uplifting moment for us all. Perhaps people are not quite as addicted to cheap plastic imports as we thought. Perhaps all we need is a political movement to make these arguments, to make this case. I always thought it could be very popular if explained to the public properly so it is great to see some evidence that this might be true.

Sadly the Scottish Government outright rejected this proposal from the Climate Assembly (as it did with so many of the proposals from both its Citizens’ Assemblies) so it remains wedded to ignoring the damage Scottish consumption is doing to poor countries and has an economic growth model which wants us to keep increasing the damage we do to these countries.

It’s not good enough. Scotland must stop about talking about leading and start leading and this is an area where, for all the reasons we’ve explained about natural resources, energy availability and scientific and engineering know-how, Scotland really could lead.

And if it creates an enormous high-quality jobs boom and greatly improves the quality of what we eat and what we own, it might well turn out that our trepidation at proposing radical solutions may have been misplaced.

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