Would a ‘Yes Vote’ deny Scotland EU membership?

Would a ‘Yes Vote’ deny Scotland EU membership?
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EU member states with their own separatist movements may balk at allowing an independent Scotland to join the EU, which would have major implications for trade and universities.

EU Commission President José Manuel Barroso injected yet another wrinkle into Scotland’s independence debate in February when he said it was unlikely that an independent Scotland would be admitted to the European Union. His reasoning? It would be “extremely difficult to get the approval of all the other member states.” The statement, quickly disputed by the Yes Scotland campaign, raises the question: what stands in the way of Scotland joining the EU if it votes for independence? After all, as Scottish National Party Leader Alex Salmond says, Scotland has been in the EU for nearly 40 years.

EU members with separatist movements

Since a candidate for EU membership must be approved unanimously by current member states, even just one country’s dissent could leave Scotland outside of the single market. The most likely spoiler for Scotland is Spain.

This is not because of domestic fears. Home to multiple secessionist movements over the course of its history, the most pressing worry is Catalonia. Over recent months Catalonian nationalists have intensified their efforts to gain independence from Spain, which has simmered in Spanish politics for decades. The Spanish government in Madrid has long opposed such a move, contending that it would be unconstitutional. On a more practical level, Spain would lose Barcelona if Catalonia secedes, leaving the country without one of its biggest economic centers.

Publicly, the Spanish government has not commented on how it would vote if Scotland were to seek admission to the EU. Instead, the Spanish Foreign Minister has made efforts to distinguish the Scottish and Catalan situations, as well as make clear that Scotland will not be given a streamlined path to EU membership. It will have to endure the full bureaucratic rigor of joining the EU, which could take some time. For its part, pro-independence Yes Scotland contends it will be able to avoid the long application process by utilizing Article 48 of the Lisbon Treaty, which allows for a simple majority to make changes to existing EU treaties.

Just to the north, the Basque autonomous region has pushed both Spain and France for independence for decades, sometimes violently. Recent rumblings of moving borders for ethnic Hungarians in Romania has caused further uncomfortable politics on the EU’s eastern edge. Scottish independence may also stir nationalist tendencies in Ireland and Northern Ireland.

Leaving the single market

If Barroso’s comments are accurate, Scottish businesses will suddenly be outside looking in on the European single market, the destination of 46 percent of Scotland’s exports. When combined with exports to the rest of the UK, EU exports total over £55 billion annually. Although the ultimate effect on these exports may be minimal, the negotiations required to normalize trade relations will take time. Questions about regulation coming from the EU may be awkward to address, since Scotland has already adopted all EU trade rules as a part of the UK. Answering these questions would come down to a matter of navigating bureaucracy.

The agricultural and fishing industries make up about 10 percent of Scottish exports, and would likely be affected in more substantive ways. The EU’s Common Agricultural Policy places a tariff of 12.8 percent on beef and veal products, 2-8 percent on fresh fish, and €93 per tonne of barley. These are all costs that the Scottish agriculture and fishing industries are currently exempt from as a member of the single market.

Not only would the Scottish agricultural industry be subject to EU tariffs in lieu of any further trade agreements, but it would also lose out on UK direct support payments made by the EU. For Scotland, these payments are projected to amount to £400 million each year.

Universities and the Scottish budget could also be affected if Scotland does join the EU. Currently, Scotland’s universities charge the same fees for Scottish and non-British EU residents, but English, Welsh, and Northern Irish students must pay up to £9,000 per year. EU anti-discrimination laws prevent the universities from charging foreign EU students different tuition fees than Scottish students, but the law does not apply to non-Scottish Britons as long as Scotland remains part of the UK.

If it is admitted to the EU, Scotland’s budget would have to absorb a loss of £150 million in tuition from British students, as British students would be charged the same fees as other EU students. If Scotland remains outside of the EU, it would avoid adding to its deficit in this way, but that would likely be outweighed by new costs of leaving the single market.

A close union nonetheless?

Even if Scotland is not rapidly admitted to the EU, either through the Lisbon Treaty or the traditional process, many of the costs associated with the separation may be mitigated through bilateral trade agreements. The basis for such agreements is solid, though. Norway, Iceland, Liechtenstein, and Switzerland all having wide-ranging trade agreements with the EU despite not being members (many other countries do as well, but are not as far-ranging). These countries are considered part of the single market and the Schengen Area, the latter of which the UK is not currently a part.

If Scotland votes for independence in September and EU membership does not appear immediately likely, there is little doubt that the EU and Scotland will quickly begin work on a similar agreement.

Categories: Economics, Europe

About Author

Alex Christensen

Alex is an Editor at Global Risk Insights, who also currently works in investment research. His work on political risk and economic policy has appeared in many forums, including Business Insider, Seeking Alpha, Oilprice.com & The Emerging Market Investors Association. He holds a Master’s in Economics from the London School of Economics and BA from Washington University in St. Louis.