Labour Warns Of 'Border Effect'

17 July 2014, 06:18 | Updated: 17 July 2014, 06:20

Independence will result in a "border effect'', reducing the flow of trade, labour and capital between the rest of the UK and the new Scottish state, shadow Scottish secretary Margaret Curran has warned.

A Yes vote will also make it more difficult for those who live on one side of the border and work on the other, Ms Curran said.

The so-called border effect is the subject of a new Scottish Labour briefing paper.

The paper highlights that 65% of Scottish exports are sent to the rest of the UK, and states that in the event of independence, exports from Scotland to the rest of the UK are estimated to be 83% lower after 30 years than if Scotland were to remain part of the UK.

The paper says: "The effect of an international border on trade has been studied internationally and has become known as the 'border effect'.

"It reduces flows of trade, labour and capital between states.

"This occurs even between countries where free trade agreements are in place and where there is no physical boundary between states.

"Even where states work together to implement free trade agreements, or the close integration and harmonisation between states found within the EU, the border effect can still be shown to exist.

"The amount of Ireland's trade going to the UK has fallen from just under 90% immediately after the establishment of the Irish Free State in the 1920s to between 20-30% in the 2000s.

"This decline continued in spite of free trade agreements and membership of the European Union.''

A weakening of social ties and the emergence of different financial and legal systems between the UK and Republic of Ireland also contributed to a decline in trade, the paper says.

"The effect would likely be drawn out. As a separate Scotland's regulation, welfare, employment and taxation policies diverged, the reduction in trade would become more pronounced.''

Ms Curran said: "As part of the UK, Scotland gets the best of both worlds.

"We've got thriving companies across Scotland that are able to sell their goods and services to the 60 million people in other parts of the UK without any barriers to trade. That means more jobs and opportunities for the five million people who live in Scotland.

"The research we are publishing today provides clear evidence that an international border would lead to a 'border effect' that would damage Scotland's economic prospects. This is real evidence that if you want to protect Scottish jobs you should vote No in September.''

Paul Fletcher, a member of the pro-independence group Business for Scotland, said: "The border effect that Scottish businesses are worried about isn't the border between Scotland and England, it's the border that the UK parties seem determined to put up between Scotland and the EU.

"With both Cameron and Miliband talking about having a referendum on staying in or leaving the EU, there's a real danger that Scotland will be separated from a single market of some 500 million people and that's a threat to business.''

Mr Fletcher said that no research had yet looked at how big the current border effect between Scotland and England is, so therefore there is no baseline for the figures quoted in the paper.

He added: "What is clear is that Scotland needs to be part of the EU to take full advantage of the biggest single market in the world and the current direction of travel of the UK is towards the exit.

"Scotland needs independence to maintain our EU membership and our business advantages in it.''

SNP MSP Kenneth Gibson said Labour's analysis used data on trade between the US and Canada to support its arguments which was "out of date''.

Mr Gibson said: "This is laughable stuff from Margaret Curran, who is truly scraping the bottom of the barrel with these silly claims.

"The data she is relying on is so out of date it isn't even relevant to the US and Canada any more, let alone the debate on Scotland's future.

"Margaret Curran should have the good grace to pulp this paper before it ever sees the light of day.''