Can Scotland have frictionless borders with everyone?

by | 27 Oct 2021

As the SNP prepares to debate a resolution on borders and customs, is the resolution competent and if not, what is the competent solution to an independent Scotland's border and trade arrangements?

At its upcoming Annual Conference the SNP will debate a resolution that commits an independent Scotland to maintaining ‘frictionless’ borders with pretty well all of Scotland’s trading partners. The conference is to be held online again, substantially reducing the effectiveness of debate about the resolution. This makes it important it is competent in the first place.

So is it? To understand the answer to this its important to dig down a little into the key concepts around borders and trade. Borders are not entirely what they seem to be to a lay person.

(Note that EU membership for an independent Scotland is irrelevant to this discussion because not only will there be an extended period prior to any possibility of Scotland joining the EU but even after that the issues all remain the same – Scotland wants to trade with more than one trading entity so must deal with the border implications, just like every other nation.)

To begin, what is ‘frictionless’ and how does that relate to ‘hard’ and ‘soft’ borders? This is the first key concept – by definition there is always some degree of ‘friction’ at a border. Borders are places where the rules change and so even in two highly-aligned economies some conditions are going to change. It might just mean being aware of different traffic regulations, but it at the very least it requires that awareness.

From there everything is a matter of degree. The concepts of ‘hard’ and ‘soft’ borders was almost entirely manufactured for the purpose of political argument during Brexit and certainly bear no relationship to the language and laws of borders and customs practice. ‘Hard’ simply means a high degree of friction and ‘soft’ a low degree.

The first problem is that borders do not have consistent levels of ‘friction’ – it very much depends what is crossing them. The degree of friction experience by a Somali refugee crossing an EU national border will be markedly different from a Frankfurt-based investment banker making the same crossing.

A kilo of heroin faces more friction crossing a border than a kilo of medicine and a kilo of medicine less than a kilo of apples – and so on. It entirely depends on the interaction between laws, trade quotas and tariffs, product regulations and right-to-travel restrictions and the person or object crossing the border. There is almost always some friction.

The trend across Europe has been to reduce both the friction and the experience of friction of people and goods crossing borders – but even that must be caveated. It only applies to people and goods whose journey begins and ends inside the EU block. There is no pretence of ‘open borders’ of ‘free trade’ once you reach the boundaries of the EU. In fact the EU is arguably the world’s most protectionist block in terms of trade and immigration.

Another key consideration is the policing of borders and the enforcement of rules at the borders. It is perfectly possible to reduce the friction experienced at a border if you don’t actually seek to enforce the rules at the border – witness that on exiting an airport you can choose a ‘nothing to declare’ channel through which you will find no enforcement officers. Of course it will be frictionless if no-one checks your bag to make sure you’re not breaking the law.

A kilo of heroin faces more friction crossing a border than a kilo of medicine and a kilo of medicine less than a kilo of apples – and so on

Finally (for the purposes of this analysis) there is the really sticky question; the regulation of goods and services. Humans are comparatively easy to deal with at borders but goods and the services provided by people who have crossed borders are much more complex.

If a product has moved from one ‘regulatory area’ to another then what is entirely legal in one may not be legal in another. While a customs union is usually taken to mean tariff and quota alignment, it generally requires regulatory alignment as well.

A simple example; if the regulation of country X says that a given material is safe but country Y’s regulations say it isn’t, a product could contain that material and be routinely and regularly used in country X but if it crosses the border into country Y it would become illegal.

This is where border policy becomes tricky; you can do whatever you like about aligning tariffs but unless you either achieve full regulatory alignment or simply do not police your own regulations, some kind of border controls are inevitable. (Not policing your own regulations would really mean lawlessness in manufacture.)

It is therefore possible to maintain close to frictionless travel and trade on condition that it is between two nations in a regulatory and customs union. That is what the EU is, but it is markedly not where an independent Scotland will find itself.

We would have a land border with the UK and a sea border with the EU, an EFTA country and the rest of the world. It is patently not possible to make all those borders frictionless because it is patently impossible to achieve regulatory or customs alignment with all of them at the same time.

(This has not even raised the issue of financial transactions which clearly can’t be entirely frictionless if between nations using different currencies which is again inevitable.)

So no, the SNP can pass a resolution claiming frictionless trade in all directions, but it can pass a resolution opposing gravity if it really wants to. It just doesn’t mean anything.

What would be a much better use of its time is to look properly at how borders are managed in the real world in the 21st century. The trick isn’t to pretend there isn’t friction but to take sensible steps to reduce the experience of that friction to a minimum.

The easiest example of this is ‘smart borders’ on the land border. As everyone in the UK will either be a citizen or already have passed through a regulated international border, a system of cameras and numberplate recognition monitors who comes to Scotland and when they leave. There are also issues like ensuring the right to live and work, but those are fairly easy to manage.

Likewise, while customs alignment in all directions isn’t possible, customs are actually easier to collect than many other taxes. No-one does this at the border; it is generally handled via engagement with and random inspection of the importing company.

The SNP resolution on borders is neither rooted in any sensible knowledge of borders or customs nor does it tally with even a cursory consideration of the reality of international relations and should never have been permitted on the agenda in its current form

The trickiest part to manage is regulatory enforcement – ensuring that goods are not made out of materials that were illegal in Scotland and so on. Here the usual approach is either to work directly with the import/export business (every whisky distillery in Scotland used to have a customs officer based at the distillery and that was where enforcement and administration took place) or to undertake random checks on goods vehicles on the small proportion not covered by the former arrangements.

Yet again, this is never done at the border because that is patently unwise logistically. What would usually happen is that a site perhaps ten miles in-country would be where a random selection of vehicles were diverted for checks. It does not involve clogged traffic at the border.

And finally, the cost to business of all of this in terms of both time and money is greatly exaggerated. While there may be transaction costs if trade takes place across currencies, these are tiny and automated and the bulk of the burden of the ‘friction’ of borers lies with the state. If it invests in high-quality borders and customs infrastructure and staff, the burden on business is small.

The biggest issue is knowledge and understanding – helping businesses understand the regulatory barriers they will face if they do not properly interpret the regulatory frameworks of countries they are exporting to. But that is already the case for anyone involved in exports and can be minimised through effective advice and support services.

The SNP resolution on borders is neither rooted in any sensible knowledge of borders or customs nor does it tally with even a cursory consideration of the reality of international relations. It should never have been permitted on the agenda in its current form.

The corollary of this is not, however, that this problem is big, difficult or onerous as opponents of independence suggest. This is the absolutely bog-standard business of being a nation state and it is dealt with all round the world every minute of the day in a routine and effortless manner.

The choice of the UK to leave the European Union complicates the picture for Scotland somewhat, but it does not fundamentally change how Scotland would manage its borders. It just isn’t as difficult as opponents claim.

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