A Trading Nation - Updating Scotland's Country and Sector Prioritisation

2. Methodology for Updated Analysis

A Trading Nation’s priority lists are based on a data-driven methodology, which considers Scotland’s current and past export performance, as well as forward looking qualitative indicators used to identify Scotland’s potential opportunities for increasing exports. Underpinning this analysis are two analytical tools: Scotland’s Export Performance Monitor and the Export Value Gap Model. These are both described in full in the analytical methodology note signposted above (see footnote 1).

The analytical update uses international trade data available for Scotland and individual partner countries. Scottish Data is sourced from the latest available Export Statistics Scotland^[2] publication. This provides coverage of export destination countries for each sector and sub-sector for Scotland, for both goods and services.

However, the current ESS methodology means that destination country data should be treated as indicative only, particularly for smaller sectors and sub-sectors. In addition to data collected for Export Statistics Scotland, the analysis draws on His Majesty’s Revenue and Customs Regional Trade Statistics (HMRC RTS)^[3]. HMRC RTS use customs data to apportion goods trade to various parts of the UK, including Scotland. This is based on the location of the trading company with employment shares used if the company has multiple sites in various parts of the UK.

International trade data for other countries’ imports and exports is extracted from UN Comtrade. UN Comtrade is a comprehensive repository of trade data managed by the United Nations Statistics Division. It takes self-reported data from over 170 countries and processes it to make it as consistent and comparable as possible.

Topical Box 1: Human Rights and Vision for Trade

The Scottish Government published its Vision for Trade in 2021. This vision outlined Scotland’s principles and values for the trading relationships of the future. The vision underpins the implementation of A Trading Nation and is used to influence the approach the UK Government takes in developing trade agreements with other countries and blocs.

Historically, the principles outlined in the Vision for Trade were used to influence key decisions on the prioritisation of Scotland’s trading partners, following the quantitative analysis. These qualitative consultations with delivery partners and domestic business teams across Scottish government led to an agreed list of trading partners the government are now actively supporting. The approach taken in this update has built on this approach, by introducing an additional variable that can serve as a further quantitative ranking factor for trading partners. Freedom House^[4] scores function as a further consideration of human and political rights in potential trading partners, allowing government to rank countries on a comparable scale. Using freedom house scores will increase the number of prioritising variables to sixteen.

This analytical update includes the following revisions to the initial methodology:

1. The inclusion of an additional variable – Freedom House scores – to increase the significance of human and civil rights considerations when prioritising potential trading partner countries for Scotland.

2. An assessment of the level of priority given to certain “hub” type economies, such as the Netherlands and Singapore, which function as re-exporting destinations.

3. The inclusion of an additional “recent trade” variable – using three-year averages for 2017 to 2019 as well as 2019 to 2021 – to help mitigate for the unprecedented effects of COVID-19 on trade data in 2020 and 2021.