Dissertation - Readable

What would be the primary impacts and consequences in terms of Scotlands position in the world in the event of a change
in Scotlands constitutional situation?

Author: Andrew Emmerson Supervisor: Nick Randall Submitted in partial fulfilment of the requirements for the degree of Master of Arts in International Studies School of Geography, Politics and Sociology, University of Newcastle upon Tyne August 2012
Andrew Emmerson
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POL8099: Dissertation
Abstract This dissertation seeks to analyse Scotlands place in the world in relation to differing constitutional settlements. It first seeks to define and measure Scotlands current position in the world. This analysis shows that Scotland has sought to promote itself through both direct and indirect diplomacy, and a significant use of soft power, it also shows the limits of its current constitutional status. This dissertation then seeks to review further constitutional changes, and concludes that the midpoint between the current situation and independence would be full fiscal autonomy; it then seeks to analyse in what ways this would have an effect on Scotlands position in the world. This shows that full fiscal autonomy would be a high stakes gamble, bringing both high risks and potential for high rewards, all of which can be achieved through tax competition and other measures. Finally it discusses the effects that full independence would have on Scotlands position in the world, looking at what is meant by independence, and reviewing some of the key effects, concluding that Scotland would be at a significant risk of its position in the world declining, but that it has the tools and resources to improve its situation.
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Acknowledgements Nick Randall For guiding me through the process Humza Yousaf MSP, Alan Smyth MEP and all other politicians who contributed to my knowledge and understanding of Scottish politics Tristan Pithers and Helen Duffett For proof reading and ensuring clarity of thought To my collective of Twitter followers for always having an answer, a report or the knowledge I needed when I was stuck.
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Contents Abstract Acknowledgements Glossary Introduction Chapter One Chapter Two Figure 1 Figure 2 Chapter Three Figure 3 Conclusion Bibliography -
Page 2 Page 3 Page 5 Page 6 Page 10 Page 23 Page 24 Page 32 Page 35 Page 38 Page 47 Page 50
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Glossary CRI - Fombrun-RI Country Reputation Index EU The European Union GDP Gross Domestic Product IMF - International Monetary Fund MEP Member of the European Parliament MSP Member of the Scottish Parliament NATO The North Atlantic Treaty Organisation NBI - The Anholt-GfK Roper Nation Brands Index SNP The Scottish National Party UK The United Kingdom UKREP - UK Permanent Representation to the EU UN The United Nations VAT Value Added Tax
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Introduction Scottish independence is now a very real prospect for the first time since England and Scotland came together in an act of union in 1707. Alex Salmond has masterminded a political coup to take the SNP from protest party, to majority party of devolved Scottish government. The SNPs core objective is Scotland becoming an independent nation-state within the EU1 and they are now championing a yes vote in a 2014 referendum on Scottish independence. This dissertation aims to investigate how different constitutional settlements may affect Scotlands position in the world. This introductory chapter will set the context of this topic and review the existing literature. These will combine to highlight to introduce the primary impacts and consequences in terms of Scotlands position in the world in the event of a change in its constitutional status. When the SNP achieved a majority in the Scottish Parliament, it established independence as a serious prospect and saw unionist parties propose a number of alternative constitutional settlements that would give Scotland more powers but stop short of full independence. The potential impact of these constitutional changes deserves further study. The majority of research has concentrated upon the localised and domestic effects of such changes, and the effect on the rest of the UK2, whilst ignoring international consequences. Those who have written on the international outcomes have consigned their work to a process-led analysis of memberships of international institutions, which is particularly seen in Scottish Independence: A Practical Guide which limits itself to discussion around treaties and the formal processes that Scotland may follow upon independence. This means that there is a lack of academic work in this field in which to refer to and therefore it will be important to draw upon comparative examples where there is a wider body of literature. As the 2014 referendum draws closer, and the battle lines for each side become drawn, it is increasingly important to provide a clear assessment of how further constitutional change will affect Scotlands place in the world. In the consideration of the primary consequences and effects of constitutional change it is important to review the literature that will help provide the answers to the question set. Whilst papers on the international effects have been sparse there has been a body of literature about how regional sub-state diplomacy can take place, and how small nations survive. This body of literature shows us that many Substate regions practice their own diplomacy and present us with vital lessons in how Scotland may do the same. There has also been a tranche of secondary sources around the SNP and their plans for independence including MacLeods Grasping the Thistle (2006) which shows
1
Murray Stewart Leith, Martin Steven, Party over Policy? Scottish Nationalism and the Politics of independence, The Political Quarterly 81 (2010): 263
2
This is seen in such texts as Gerry Hassan (ed.), The Modern SNP: From Protest to Power, (Edinburgh: Edinburgh University Press, 2009) and Jo Murkens, Scottish Independence: A Practical Guide, (Edinburgh: Edinburgh University Press, 2002) which both concentrate on the domestic changes that Scotland will see in the event of a constitutional change.
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the breadth of opinion within the SNP and highlights more economically right wing arguments that Scotland can follow upon independence, it also provides a view from an experienced Scottish statesman these two factors combine to provide a helpful analysis of Scotlands position in the world, and how it may alter with constitutional change. On the same subject there is Hassans The Modern SNP (2009) and Lynchs The History of the Scottish National Party (2002) which provides an understanding of just how the SNP see Scotlands position in the world and provides a valuable insight into both the status quo and independence. Important within this is how both authors cite the SNP as placing Scotland within arc of prosperity and in the same mould as a small Scandinavian country, both of which provide valuable insights into what Scotlands position in the world may be, and what it may model itself on in the future. Whilst documents such as Internationalising Scotland: Making Scotland Global and International in its outlook (2006), provides a strategy in transforming Scotland internationally and changing its position in the world, listing categories such as Using existing international resources better3 and A more active role by the Scottish media on international affairs4 to highlight ways Scotland may improve its position in the world. Finally Creikmans Regional Substate Diplomacy Today (2010), which highlights how other Substate regions have used diplomacy to improve their international reputation, particularly highlighting the Walloon region of Belgium which has with more powers established a regime of diplomacy to meet their own political objectives. These provide information in order that we can understand how devolution has affected other nations in the world and how these lessons can be transferred into understanding Scotlands position in the world. Whilst there is a wealth of polemical works which have been used towards authors political aims in terms of autonomy for Scotland, we must be careful to temper use and understand bias in these. We must also use primary sources which include government documents which detail changes and research completed by the Scottish government. The dissertation will be split into three chapters; the first will be setting out Scotlands current constitutional situation and how it currently projects itself into the world. This will allow us to set a base level in order to understand how further changes will affect Scotlands position in the world. The second chapter will be a review of proposed new powers that do not extend to independence. This is important to consider, because of current political pressures for a second question on more devolution. In looking towards more devolution it is important to look at differing campaigns such as Devo Plus and devo max, the changes they propose and how these will affect Scotlands position in the world. The third chapter will seek to question the primary impacts and consequences of independence for Scotland, and claims around the effects the changes will have.
Colin Imrie, Internationalising Scotland: Making Scotland Global and International in its outlook, Scottish Affairs 54 (2006): 84
4
Imrie, Internationalising Scotland: Making Scotland Global and International in its outlook: 88
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The main argument of this dissertation will be to show that at present Scotland succeeds in terms of promoting itself in the world holding a global brand under its current constitutional situation. It will then go on to show that under further devolution Scotland will incur high risks, which may produce high rewards if the right course of action is taken, but this could also lead to significant problems. The same argument will run through the chapter on independence, that Scotland would lose status by leaving the UK but that it would be adequately equipped to build an international profile.
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Chapter One - Scotlands position in the world as a member of the United Kingdom When Scotland signed the Act of Union with England, it formed the United Kingdom, a body that went onto dominate 19th and early 20th century world politics. As part of the union Scotland has sought to influence the United Kingdom through Westminster based politics, to gain the best possible outcomes for itself, as well as, more recently, through its own parliament with devolved powers. To understand Scotlands current position in the world, this chapter seeks to define how to define a states position in the world and juxtapose this alongside criteria to which it can be measured. It will outline Scotlands current constitutional status, before looking towards how Scotland currently projects itself globally. These will allow us to see Scotlands current position in the world. To consider what position Scotland holds in the world we must first understand what is meant by the phrase place in the world. In looking at the context of the phrase in the wider literature on the subject, there are several areas in which it is widely used; the first is that of international reputation. This is seen in works such as Country Reputation From measurement to management: The Case of Lichtenstein. The term reputation has been defined in a number of different ways, one example is National reputation is all about having a good name in the world of nations. It refers to collective judgments of a foreign countrys image and characterIt is, simply put, others summary construct of one nations culture, policy, and conduct 5 This definition of international reputation can be measured. The process of defining international reputation has seen a number of different metrics trialled; one of which is the The Anholt-GfK Roper Nation Brands Index (hereinafter the NBI), currently in use by the Scottish Government6. The NBI measures a number of important things including; exports, governance, culture and heritage, people, tourism, investment and immigration to measure a nations reputation.7 These metrics cover a wide area and looking at these allow us to see how a country does over a broad spectrum of issues; its also important as its used by some fifty countries8 suggesting that the findings of such hold weight within the international community. Whilst this is used by fifty other countries, there is however, an alternative that has been used the Fombrun-RI Country Reputation Index (hereinafter referred to as CRI) which defines a nations reputation in terms of appeal. The CRI lists: emotional, physical, financial, leadership, social and cultural
5
Jian Wang, Managing national reputation and international relations in the global era: Public diplomacy revisited, Public Relations Review 32 (2006): 91
6
'The Anholt GFK-Ropers Nations Brand Index: Summary Report for Scotland 2010, (http://www.scotland.gov.uk/Publications/2010/12/14124930/0, 13 August 2012)
7
The Anholt-GfK Roper Nation Brands Index, GfK Custom Research North America (http://www.gfkamerica.com/practice_areas/roper_pam/nbi_index/index.en.html, 22 July 2012)
8
The Anholt-GfK Roper Nation Brands Index
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appeals as defining a nations reputation.9 These metrics are used by fewer countries than the NBI, and therefore has less weight in the international arena, but it does measure other important issues such as financial and emotional appeals which crucially the NBI neglects. As we can see both provide important measures of reputation and metrics that should be used to define a nations reputation. The second criterion that appears regularly in terms of measuring a countries place in the world is economic strength. This is closely linked to economic appeal10 that the CRI lists as improving international reputation. The idea that economic strength can improve a countrys position in the world is seen widely through International relations literature. It is importantly noted by Nye who compares its value to that of military strength The world of traditional power politics is typically about whose military or economy wins11 and that Americas soft power was even larger than its economic and military assets.12 In terms of dominating the world, this point to an important understanding that economic powers absolutely determine a nations place in the world. This again is seen laid out in a list of suggestions by Russell and MacLeod who say that Scotland could only move its international reputation forward from a strong economic base13 and this foundation would also transform Scotland in the eyes of the world.14 From this we can understand that a strong economic foundation would encourage others to look more positively towards Scotland for investment, trade, and relations. Thus, this must form part of our understanding of a countrys position in the world. The last criterion that appears regularly in the literature is diplomacy.15 Diplomacy is concerned with the management of 16 relations between states and between states and other actors these relations do not
9
Tanja Passow, Rolf Fehlmann, Heike Grahlow, Country Reputation From measurement to management: The Case of Lichtenstein, Corporate Reputation Review 7 (2005): 313
10
Passow, Fehlmann, Grahlow, Country Reputation From measurement to management: The Case of Lichtenstein, 313
11
Joseph S Nye, Public Diplomacy and Soft Power, The ANNALS of the American Academy of Political and Social Science, 618 (2008): 100
12
Joseph S Nye, Public Diplomacy and Soft Power, 96 Dennis Macleod, Michael Russell, Grasping the Thistle (Argyll: Argyll Publishing 2006):164 Macleod, Russell, Grasping the Thistle, 164
13
14
15
This is seen in important pieces such as: Jian Wang, Localising public diplomacy: The role of subnational actors in nation branding, Place Branding 2 (2006) and Tanja Passow, Rolf Fehlmann, Heike Grahlow, Country Reputation From measurement to management: The Case of Lichtenstein, Corporate Reputation Review 7 (2005)
16
Eytan Gilboa, Media Diplomacy Conceptual Divergence and Applications, The Harvard International Journal of Press/Politics 3 (1998): 56
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always have a straightforward positive or negative effect; this is best seen in Scotlands relations with Libya. When Scotland released the Lockerbie bomber Abdelbaset alMegrahi from prison, relations with Libya vastly improved. Conversely, this caused a backlash from America; President Obama said releasing the Lockerbie bomber, a mass murderer of 270 people, the largest act of terrorism ever committed in the United Kingdom, was completely wrong.17 Whilst Scotlands position improved with some nations, there was not an overall benefit to its position in the world. This nuance of relations is seen again within the Scottish Governments document Scotlands strategy for stronger engagement with China, which states that involvement with the Chinese, will raise the profile and understanding of Scotland.18 However, this could be tempered by the negative reputation that China holds with many nations in the world. As we can see any definition around a nations place in the world is complicated, and that improving relations with one nation is not necessarily a guarantee of improving reputation across the world, but it is a step in improving a nations place in the world. The three criteria listed - international reputation, economic strength, and diplomacy will be used in understanding a nations, and thus Scotlands place in the world. Having defined what is meant by the phrase place in the world it is also important to define Scotlands constitutional status. This will provide a point to understand future constitutional changes. Since the Act of Union, the powers and settlement of Scotland remained relatively untouched until 1997. Facing political pressures and the rise of the SNP, Tony Blair promised new devolution to Scotland. Blair intended that Scotland would receive a new parliament, and limited powers to rule over its own affairs. In order achieve this, the Labour government held a two question referendum. The referendum approved a devolved Scottish Parliament with tax varying powers. The introduction of the Scotland Act 1998 by the Labour government, as a result of the referendum, set down a major change in Scotlands constitutional status. The Act worked by setting out a list of reserved powers.19 Anything on the list would remain in the remit of Westminster; anything not on the list would now fall into the domain of
17
Barack Obama, Remarks by President Obama and Prime Minister Cameron of the United Kingdom in Joint Press Availability, Embassy of the United States (http://london.usembassy.gov/gb118.html 14 August 2012)
18
The Scottish Executive, Scotlands strategy for stronger engagement with China, (Edinburgh: Scottish Executive: 2004)
19
The reserved areas are: The constitution, Foreign affairs and The EU, The Civil Service, Defence, Fiscal, economic and monetary policy, The currency, Elections, immigration and nationality, national security, emergency powers, extradition, competition and import and export control, Telecommunications and the post office, the bulk of energy policy, essentials of the transport policy, the bulk of social security policy, employment, industrial relations and health and safety, abortion, Broadcasting This list comes from:, Vernon Bogdanor, Devolution in the United Kingdom (Oxford: Oxford University Press, 2006): 204
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Holyrood. Powers not included on the reserve list gave Scotland power over a broad range of Scottish domestic affairs, and in particular over home affairs, the legal system, local government, housing, agriculture, health, social, education and environmental policy20 These powers form part of the character of Scottish devolution, something characterised by the principles of the Act itself: It rejects both separatism, under which the Parliament of the United Kingdom would no longer have power to legislation for Scotland at all; and federalism under which the Parliament of the United Kingdom would have power to legislate for Scotland only in certain defined areas21 This combination of powers has ensured that Scotlands constitutional situation is clearly laid out, that it is a devolved, but not independent or federalised nation. The heralding of the Act and the new powers were summarised by the first Presiding Officer of the parliament who said we can be ambitious for Scotland. Where we face the challenge of building a country comfortable with itself in Britain, Europe, and the wider world22 showing the importance of Scotlands current constitutional situation its place in the world. In 2012, there was a further change to Scotlands constitutional situation; the UK coalition government introduced The Scotland Act 2012 which allowed for new powers including: A new Scottish rate of income tax and borrowing powers worth 5bn, the Scotland Act (2012) will hand powers over air guns, drink-driving and speeding limits to Holyrood. It will also devolve stamp duty, land tax, and landfill tax, and give the Scottish Parliament a role in appointments in broadcasting and the Crown Estate. In addition, there will be new procedures for Scottish criminal cases that go to the UK Supreme Court.23 These new powers will not come into force until 2016 and may not be used if the 2014 referendum produces a vote for independence. However, they do provisionally enhance the position and power of the Scottish Parliament, without changing its fundamental relationship with the United Kingdom. These new powers could potentially have a wider effect on Scotlands position in the world, specifically those which include tax raising powers. For example, Macleod and Russell claim that a foundation of low taxes would transform Scotland in the eyes of the world24 increasing direct investment into
20 21
Vernon Bogdanor, Devolution in the United Kingdom (Oxford: Oxford University Press, 2006): 204 Bogdanor, Devolution in the United Kingdom , 202 Imrie, Internationalising Scotland: Making Scotland Global and International in its outlook: 68-90
22
23
Scotland Bill becomes Scotland Act (2012) after Royal Assent, BBC News (http://www.bbc.co.uk/news/uk-scotland-17903145, 28 May 2012)
24
Macleod, Russell, Grasping the Thistle, 164
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the country, making Scotland a viable partner for trade and relations. Having defined what is meant by a countrys place in the world and criteria to measure it, as well as setting out Scotlands current constitutional status, we can consider how those criteria are met. As a diplomatic force, Scotland as a devolved nation has little de Foreign affairs and dealings with the EU are reserved to Westminster in Act of 1998. But despite the constitutional restrictions placed upon it, government has sought representation through diplomatic means within institutions such as the EU, in line with powers it has available. facto power. the Scotland the Scottish international
Scotland has a number of methods that it can use to seek representation within the EU both as a region and as part of the United Kingdom. The UK Government was responsible for a memorandum of understanding that granted the devolved regions of Scotland the right to set up independent representations in Brussels and be represented in the committee of the regions.25 The Committee of Regions is an assembly of local and regional representatives that provides sub-national authorities with a direct voice within the EU's institutional framework. Secondly, from the Scottish Government Office in the EU, responsible for day-to-day engagement with the EU and other European nations. Finally, Scotland Europa, a membership-based organisation that promotes Scotland's interests across the institutions of the European Union.26 Whilst Scotland is unable to make binding decisions it is able to influence policy and discussion within European circles. One such example, which I will refer to later in more detail is Scotlands stance on fishing discard policy; Scotland has been at the forefront of pushing alternatives to the culture of discards imposed by Europe's flawed fisheries policy.2728 So says the campaign against fishing discards in Europe. This allows Scotland to continue to enhance its reputation upon the European level without the full responsibility of membership. As previously mentioned Scotland is a member of the Committee of Regions, it is important to understand the role of the committee. The Committees mission statement describes it as:
25
Joachim Blatter, Matthias Kreuzter, Michaela Rentl and Jan Thiele, The Foreign Relations of European Regions: Competences and Strategies, West European Politics, 31 (2008): 472
26
Scotland Europa promoting Scotlands interests in Europe, Scotland Europa (http://www.scotlandeuropa.com/About%20us.aspx, 22 June 2012)
27
Government and industry, Hughs Fish Fight, (http://www.fishfight.net/government-and-industrysupporters/, 14 August 2012)

28
I have chosen to use a quote from Hugh Fearnley Whittingstall to illustrate this point whilst it is not an academic source, journals such as Current Biology cite the importance of the campaign by Fearnley Whittingstall to ending discard policy, showing the importance of his voice within the debate; This can be seen at: Nigel Williams, European Fisheries Policy Protest, Current Biology 21 (2001): R3
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A political assembly of holders of a regional or local electoral mandate serving the cause of European integration. Through our political legitimacy, we provide institutional representation for all the European Union's territorial areas, regions, cities and municipalities29 This grouping provides in theory an important voice for regions within Europe. Scotlands voice can be heard through the representations its MEPs and government make within the committee, in deciding both opinions of the committee and contributing significantly to its final reports. This grouping provides Scotland with a forum for expressing opinion that it would not ordinarily have within the parliament. This is important to ensure that is heard within the international arena. However, unlike some European nations Scotland is at a distinct disadvantage within the wider EU, according to Alyn Smith MEP, because it does not have A Spanish style constitution which is specific about what the rights of the autonomous communities are30 this means we have an absolute prohibition on the Scottish government representing its own views within the Council of Ministers31 This perfectly highlights the quandary Scotland faces as a devolved nation in building relationships to improve its position in the world. It is restricted by constitutional status, but with opinions and a need to fight for the best settlement for the nation. Scotlands voice in Europe is also seen within its influence on the EU Common Fisheries policy. Fishing for Cod is important to the industry32 of Scotland because of this importance Scotland has set one of its key priorities as reforming the Common Fisheries policy. One of which is to tackle the wasteful practice of discarding fish.33 As a region within the UK, Scotland is unable to directly express this opinion to the EU, but has sought to work with the UK government to represent its views in this area34. It has also sought to influence policy as a region It was the first country to establish an observer programme to gather such data35 about discards. By gathering data, Scotland is set up to provide a stronger and more positive case for a change in policy, and as quoted earlier has been at the forefront of demanding a change in policy. However, the nuance of diplomacy is seen through negative responses that Scottish scientists and fishermen
29
Mission Statement, Committee of Regions (http://cor.europa.eu/en/about/Documents/Mission%20statement/EN.pdf, 29 May 2012)

30
Alyn Smith MEP, Telephone Interview, 31 May 2012 Alyn Smith MEP, Telephone Interview, 31 May 2012
31
32
Vera Schwach et al., Policy and knowledge in fisheries management: a policy brief, ICES Journal of Marine Science 64 (2007): 802
33
Common fisheries policy, The Scottish Government, (http://www.scotland.gov.uk/Topics/marine/SeaFisheries/common-fisheries-policy, 31 July 2012)

34
The Scottish Government, Reform of the Common Fisheries Policy, Parliament.co.uk, (http://www.publications.parliament.uk/pa/cm201012/cmselect/cmenvfru/writev/fisheries/cfp21.htm 14 August 2012)
35
Schwach et al., Policy and knowledge in fisheries management: a policy brief, 800
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received, they felt that the data they were helping to provide were being used against them36 and Scottish fisheries officers were kept from sampling landings through threats of violence.37 This negative reaction shows that whilst Scotland can lead for a social change within Europe, thus improving their reputation with some countries, diplomacy will always be a trade-off of relationships and does not always yield straight forward effects. By matching the governance and leadership criteria that appear in the CRI and NBI indexes as measurements of world position, and by playing such a role in stopping a European policy, the Scottish government has shown it can improve its position in the world through positive actions. Other regions within Europe demonstrate the potential of sub-state diplomacy. One example is the Walloon region of Belgium which has been allowed by the Belgian state to conclude international agreements in those policy fields in which they possessed exclusive competence.38 Indeed, the Walloon CGRI-DRIhas established a vast number of contacts and agreements with French-speaking countries and territories in Africa and the rest of the world39 The Walloon region however remains ultimately responsible to the Belgian state. Whilst it is not plausible to make a direct comparison because of the relative levels of powers of Wallonia and Scotland, it does show the power of sub-state diplomacy. This highlights Scotlands potential to improve its position in the world under devolution, but also how this is limited by its membership of the United Kingdom. Whilst Scotland is able to commit to various representations in the EU, as a region of the UK, it is also able to directly influence the wider UK Government and its relations with the EU. As a part of UK representation to the EU in Brussels, There are also three teams within the wider UKREP organisation who are responsible for representing the specific interests of Scotland40 this shows that the UK has specifically set up a body to incorporate the views of Scotland into its own. Whilst the views of the UK take precedence over those of Scotland, Scottish views are still included within the framework of decision making. This shows that Scotland is limited by being part of the UK, but is not completely barred from influencing policy, and its position in the world. This idea is also replicated by the idea that Scotland is able to play a role in the negotiations with European partners41 where in the Scottish government is at times able to represent the UK at European negotiations.
36
Schwach et al., Policy and knowledge in fisheries management: a policy brief, 800 Schwach et al., Policy and knowledge in fisheries management: a policy brief, 801
37
38
John McCarthy, David Newlands (Eds), Governing Scotland: Problems and Prospects The economic impact of the Scottish Parliament (Aldershot: Ashgate 1999): 27
39
David Criekmans, Regional Substate-Diplomacy Today (The Netherlands: Martinus Nijhoff Publishers 2010): 41
40
About us, UK Representation To the EU, (http://ukeu.fco.gov.uk/en/about-us/, 26 June 2012)
41
McCarthy, Newlands (Eds), Governing Scotland: Problems and Prospects The economic impact of the Scottish Parliament, 41
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As we have seen, Scotland has projected itself into the world by making limited inroads into international organisations and through various committees and representations. However, it is also important to explore just how Scotland has also projected a place in the world through soft power. Soft power is a concept that originated with the academic Joseph Nye, who characterised it as the ability to attract rather than coerce in order to achieve desired outcomes in international affairs.42 Something that ties in strongly to the notion of reputation, it is only through building a strong reputation that a country may obtain the outcomes it wants in world politics because other countries want to follow it.43 This means within the international arena soft power for Scotland represents getting people to want what Scotland wants. There are several strong examples of soft power available such as Chinas use of Confucius institutes. These institutes are non-profit publically owned organisations that promote Chinese language and culture.44 These institutes form a part of a broader soft power projection in which China is attempting to win hearts and minds for political purposes45 whilst these institutes are very specific to China. There are international versions such as the British Council and the Spanish Instituto Cervantes. This is something Scotland could hope to replicate in the future to enhance its soft power ability. Strong Scottish soft power has been seen through Scotlands tourism and film industries. The two are inextricably linked, for one in five overseas visitors to Scotland travel after being inspired by images on screen46 with the value to the Scottish economy being put at 1 billion.47 This is conscious promoting as we see with an upsurge in popular movies with a Scottish theme48 which has transformed the selling of heritage attractions in many parts of Scotland as they repatriate and recycle the images and stories from these global media forms49 This is best seen with the film Braveheart, a film made in 1995, before the devolved Scottish Parliament, but nonetheless an example of the effective mobilisation of Scottish soft power. A
42
Nye, Public Diplomacy and Soft Power, 95 Nye, Public Diplomacy and Soft Power, 94
43
44
James F. Paradise, China and international harmony, The Role of Confucius Institutes in Bolstering Beijings Soft Power, Asian Survey 49 (2009): 648
45
Paradise, China and international harmony, The Role of Confucius Institutes in Bolstering Beijings Soft Power, 649
46
Georgina Reid, 1 in 5 tourists visit for our movie sets!, The Scottish Sun, (http://www.thescottishsun.co.uk/scotsol/homepage/news/3040674/1-in-5-tourists-visit-Scotland-to-seemovie-locations.html, 31 July 2012)
47
Georgina Reid, 1 in 5 tourists visit for our movie sets!
48
Tim Edensor, Reading Braveheart: Representing and contesting Scottish identity, Scottish Affairs 21 (2007): 145
49
Edensor, Reading Braveheart: Representing and contesting Scottish identity, 145
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monument to William Wallace in Stirling, in 1994, two years before the film was released, saw 55,000 paying visitors. In 1996, the year after the film, the monument received 150,000 paying visitors. This was aided by the national government [who] gave 100,000 to the tourist board to boost their foreign advertising budget in France and Germany.50 This shows that a government can and has boosted tourism to Scotland through a conscious promotion of the film Braveheart and thus the film industry. This fits perfectly into the cultural aspects of improving a nations reputation and its soft power position. Something that Scotland may see again with the upcoming release of a new animated film, Brave, which Alex Salmond says will give [a] massive boost to Scots tourism industry51 Scotland is now a devolved nation with limited powers over its own future. This constitutional status has allowed Scotland to project itself into the world in certain ways, including through international diplomacy, representation within the EU, and through soft power encompassing the conscious promotion of the film industry to boost tourism. This chapter has shown that, going forward it has room to both improve its reputation through positive actions, such as improving its soft power skills and strong promotion of the media industry within Scotland. Conversely, if care is not taken it may stall its reputation thorough mistakes depending on the constitutional settlement it receives, seen particularly through Scotlands poor position within Europe. Within this chapter I have set out Scotlands current world position, in the following chapters I will demonstrate the primary impacts and consequences of any future change in Scotlands constitutional position.
50
Edensor, Reading Braveheart: Representing and contesting Scottish identity, 146
51
Alex Salmond says Brave will give massive boost to Scots tourism industry, DailyRecord.co.uk, (http://www.dailyrecord.co.uk/news/scottish-news/2012/07/25/alex-salmond-says-brave-will-givemassive-boost-to-scots-tourism-industry-86908-23912238/, 31 July 2012)
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Chapter Two - Scotlands position in the world with further Devolution Nearly all political visions for the future of the Scottish Parliament in Holyrood now envisage more powers for the parliament itself. The champions of Scottish devolution now look to transfer powers beyond those granted in The Scotland Acts of 1998 and 2012. The mix and match approach that this brings has led to many proposals with many different names entering into the debate: Devo-Max, Devo Plus, and Home Rule are just some of the names and ideas put forward. All are badly defined. These settlements in theory would offer differing levels of constitutional change to Scotland. It is therefore important not to become too mired in the technicalities of names but instead focus on the level of powers these offer. I will proceed by describing the settlements and then set out the powers Scotland may receive; I will then highlight how the primary impacts and consequences of such changes would affect Scotlands position in the world. The table sets out the relative powers of the most common plans to change the constitutional status of Scotland. Figure 1 - Plans for the constitutional status of Scotland52
52
What is Devo-Plus?, Devo-Plus, (http://www.Devoplus.com/what-is-Devo-plus/, 26 June 2012)
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It is important to recognise that the graphic is produced by the campaign for Devo Plus and thus biased towards their political aims. However, it does show that the Devo Plus campaign considers itself to be towards the more conservative end of change that Scotland could achieve. By only advocating tax powers in the area of income and corporation tax and a geographic share of Scotlands oil revenue, whilst powers over National Insurance and VAT would still be reserved to the UK government, the Devo Plus campaign set out the narrowest of devolution campaigns. This is set against devo max, which is defined by the Chair of the think tank Reform Scotland, Ben Thomson who offers the explanation that devo max would: Work in that the same way that Westminster reserves certain powers and devolves the rest to Scotland, Westminster would reserve certain taxes and the rest would be passed down to Scotland. The obvious taxes for Westminster to reserve are VAT and National Insurance. That means all the other taxes would be passed to Scotland and broadly speaking that would cover the expenditure of both levels of government. The real advantage of that is that Scotland can create its own package of taxes most suited for the Scottish economy53 This is the widest set of devolved powers that could be achieved through devolution. This would be the fullest fiscal autonomy that the UK could, with its international obligations towards the EU achieve. These obligations prohibit EU nations from varying sales taxes with the state itself, meaning that the UK could not grant Scotland the ability to vary VAT. There is however some clash between the campaigns for Devo Plus and devo max, the difference being control over minor taxes such as television licenses. Whilst coming under different names both settlements seek greater fiscal autonomy for Scotland. However; both would be limited by the constraints of EU regulations. This leads us to identify the common denominator of the settlements; the tax measure which would have the most effect on Scotlands position in the world, corporation tax. With power over corporation tax, Scotland would be free to tailor tax rates to compete for foreign direct investment; entering into tax competition. Tax competition has been defined by the OECD as the strategic interaction of tax policy between jurisdictions with the objective to attract and retain mobile tax bases.54 This concept could form a larger part of a Scottish strategy of employing both hard and soft power to improve Scotlands position within the world, indeed this has been confirmed by Humza Yousaf MSP who said it is the Scottish Governments policy to lower
53
Michael Buchanan, Scottish Independence Referendum: what is devolution max?, BBC News (http://www.bbc.co.uk/news/uk-scotland-scotland-politics-17094333, 26 June 2012)
54
Hansjrg Blchliger, Jos Maria Pinero Campos, Tax Competition Between Sub-Central Governments, OECD Economics Department Working Papers 872 (2011): 2
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corporation tax by about 3% to get increasing foreign investment. 55 There are, however, caveats as to the likelihood of Scotland reducing corporation tax rates too far. The first is the political culture of Scotland; the two main parties, the SNP and Labour each favour larger welfare states which require higher tax receipts. Whilst this could be achieved through lower tax bills as per the Laffer curve, it is politically unlikely that both parties would want to be seen to reduce tax levels too far. Scotland could also fall foul of the EU by radically lowering taxes. There is a general agreement against harmful tax competition between EU members which is defined as tax measures which provide for a significantly lower level of effective taxationthan those levels which generally apply in the Member State56 that is cutting corporation tax to a lower point than income taxes. Whilst this means that Scotland may not want to engage in harmful competition, it does not exclude the possibility of competing with neighbouring territories completely. It would be wise to compete as lower tax rate typically increases the incentive to invest57 and this also creates a message to the wider world that Scotland is a viable place to invest. This is a strong message that has the potential to increase Scotlands position in the world for being economically sound. If Scotland were to follow through with policy, it can learn lessons from another nation in the British Isles, Ireland. Ireland has already radically lowered corporation taxes. As it stands, in line with the British Government Scotlands corporation tax is 24%.58 This is contrasted against Ireland which has had a 10% tax rate on manufacturing activity since the early 1980s.59 The authors of one tax competition study looking at Ireland say that one consequence has been a dramatic increase in inward investment: this in turn has boosted corporate income tax receipts as a share of GDP, despite the continuing low tax rate.60 In this period the Irish economy expanded at an average rate of 9.4%61 between 1995 and 2000, something Devereux et al. explicitly link to the growth in tax receipts. This growth specifically made Ireland a world renowned economy, and increased its standing in the world. This is highlighted by The Economist who called Ireland Europe's shining light62 Whilst this model of continuous high growth has been attributed to low tax rates, it should also be noted that low taxes were not the only driver of growth, but that Ireland also benefited from EU aid and demographic change. This model is also not without risks; when financial
55 56
Humza Yousaf MSP, Telephone Interview, 11 June 2012 Council of Economics and Finance Ministers (ECOFIN), CONCLUSIONS OF THE ECOFIN COUNCIL MEETING on 1 December 1997 concerning taxation policy, Official Journal of the European Communities (1997): 4
57 Michael Devereux, Rachel Griffith, Alexander Klemm, Marcel Thumm, Marco Ottaviani,
Corporate income tax reforms and international tax competition, 452

58
Corporation Tax Rates, HMRC, (http://www.hmrc.gov.uk/rates/corp.htm 01 July 2012) Devereux et al, Corporate income tax reforms and international tax competition, 472 Devereux et al, Corporate income tax reforms and international tax competition, 472 Devereux et al, Corporate income tax reforms and international tax competition, 472 The luck of the Irish, The Economist, (http://www.economist.com/node/3261071, 23 July 2012)
59
60
61
62
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services crashed in 2008, Ireland suffered an economic contraction of around 14%, something from which it has yet to recover, such a heavy shock to the economy has real potential to enormous damage, and that, if reflected in Scotland, could also cause long term damage. This model of high growth and low taxes lays a path to which a devolved Scotland could follow, it is a model not without danger, but it is capable of high rewards. As detailed above, more tax powers would allow Scotland the advantages of increasing its reputation in the world by increasing its reputation as a place to invest. But responsibility for its own budget may have a negative impact on Scotlands perceived reliability, and incentives as a place to do business, and decreasing its influence within trading circles. If Scotland were to become fiscally autonomous by the very nature of its population, size and, resources, it would have a smaller resource base to draw upon than being fully integrated into the economy of the UK. This should be noted by Scotland as the United Nations Trade and Development conference says that there is a close relationship between smallness and vulnerability to external shocks.63 The idea of a shock that could hurt the Scottish economy is a vague concept, it therefore important to show how this could affect Scotland. The Economist gives us an example of such a failure, the Royal Bank of Scotland saying that RBSs balance sheet was 13 times Scottish GDP.64 A Scotland responsible for its own spending and borrowing would almost certainly be unable to independently bailout the bank, without seeking further help from international institutions such as the IMF. It must also be questioned as to what extent the UK may play a wider role in the support of recapitalising banks, as it is unlikely to want to see an economy so closely interlinked decline rapidly. When Irish banks needed financial assistance British Chancellor of the Exchequer, George Osborne, argued that it was in "Britain's national interest"65 to help the economic health of a nation with which "we share a land border."66 It is not inconceivable that similar arguments would be used if Scotland found itself in a comparable situation. However, as much as a British government may seek to help a Scottish government in financial trouble, however, it would still send a negative message out to the rest of the world, that Scotland is a nation that could not pay its own way. This could also cause friction with English voters too; the IPPR suggested that English taxpayers would become increasingly aware and resentful of the fact that per capita levels of public spending are higher in the devolved territories than
63
Structurally weak, vulnerable small economies Who are they? What can UNCTAD Do for them?, The United Nations Conference on Trade and Development (11th October 2007): 4
64
Itll cost you, The Economist (14th April 2012): 13
65
Faisal Islam, Ireland Debt: Osborne Ponders Aid Options, Channel 4 News, (http://www.channel4.com/news/ireland-debt-osborne-ponders-aid-options, 23 July 2012)
66
Islam, Ireland Debt: Osborne Ponders Aid Options
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in England itself.67 A bank bailout would almost certainly on these lines increase resentment towards Scotland that would ensure that Scotland lost status not only within the UK, but within the rest of the world too. There are also lessons to be learned for Scotland from Iceland. Whilst Iceland is an independent nation, and thus not directly comparable to a devolved Scotland, its experiences and the relative sizes of both economies present broad lessons for a fiscally autonomous Scotland. The crisis in Iceland saw nationalisation of the countrys three largest banks68 and forced the country to secure help from the IMF69 resulting in Icelands banking collapse [which] is the biggest, relative to the size of an economy, that any country has ever suffered.70 This collapse saw almost all credit rating agencies reduce Icelands status in the aftermath of 2008. One such example of this is Standard & Poor who rated Iceland as A+ in early 2008 but by 2011 they had downgraded Iceland to BBBConsidered lowest investment grade by market participants.71 This downgrade highlights how with a faltering economy a reputation in the world can decline. Whilst there will be steps taken to avoid such financial crashes again the idea can never be fully dismissed. As shown a financially devolved Scotland, responsible for raising and borrowing a majority of its own budget could face tough economic times. Scotland as a fiscally autonomous nation would be internationally rated by agencies on the strength of its bonds and its economy, something highlighted by the ratings of other autonomous regions such as Catalonia and Quebec. This means that if such a dire financial situation were to arise, Scotland would almost certainly suffer a downgrade. Such a downgrade would damage Scotlands economic reputation. Whilst it is easy to characterise Scotland simply as a small economy vulnerable to economic shocks, it does not tell the full story of the economy. In 2012 the Scottish economy was diverse in its exports; The top 5 exporting industries in 2010 are food & beverages (4.0 billion), chemicals (including refined petroleum products) (3.0 billion), business services (2.5 billion), electrical and instrument engineering (1.9 billion)
67
Richard Wyn Jones, Guy Lodge, Ailsa Henderson, Daniel Wincott, The dog that finally barked England as an emerging political community, The IPPR, (2012): 4
68
Cracks in the crust, The Economist, (http://www.economist.com/node/12762027?story_id=12762027, 03 July 2012)

69
Cracks in the crust Cracks in the crust
70
71
Credit Rating Definitions & FAQs, Standard and Poors, (http://www.standardandpoors.com/ratings/definitions-and-faqs/en/us/, 03 June 2012)
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and the mechanical engineering sector (1.6 billion). Together these industries accounted for around 60 per cent of total international exports from Scotland72 But not necessarily as diverse in where it exported: Figure 2: Top Ten Export zones for Scotland73
These figures show that whilst Scotland has a diverse economy, succeeding in exporting a wide variety of goods and services, its exports are highly concentrated within Europe, as the top 10 export destinations accounted for 58 per cent of total exports.74 Whilst this may be symptomatic of the UKs membership of the EU, it does highlight the potential gains and losses a concentrated trade may bring. It is likely that if EU economies were doing well Scotland as a whole would benefit through higher trade, the alternative negative affect could happen if the EU was doing poorly. There are many things Scotland under devolution could do to improve the narrow range of export zones, one of which is improving relations with big developing markets. Something evidenced through Scotlands growing whisky exportation to China. China is a key emerging market for Scotch whisky with exports to China worth 57 million in the 12 months to June 2011.75 This was boosted by a new and whisky business opening in China to which Scottish Development International chief executive Anne MacColl said The decision by a global company such as Xiamen Spirit Empire to further its trade with Scotland is testament to the reputation our country continues to have as the ideal place to do business76 this shows that Scotland recognises the concentrated trade within the EU, and is seeking to diversify. Whilst China is currently a small part of Scotlands total exports, it is also one of the worlds largest economies, and thus it makes sense for Scotland to improve trade with China. This shows that Scotland is in a vulnerable position, at the behest of other European economies, and further fiscal devolution would increase these risks, but also allows Scotland to dramatically increase its economy and
72
Scotlands Global Connection Survey 2010, The Scottish Government, (25 January 2012): 4 Scotlands Global Connection Survey 2010, 5 Scotlands Global Connection Survey 2010, 5
73
74
75
Scotch Whisky in China, The Scottish Government (http://www.scotland.gov.uk/News/Releases/2011/12/04160905, 24 July 2012)

76
Scotch Whisky in China
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thus its position in the world by building new relations both fiscal and diplomatic with a wider market than the UK currently enjoys.
As a devolved nation without a codified constitution Scotland has always had the potential to demand and achieve more powers from Westminster, something it did with The Scotland Act 2012. Scotland now finds itself in a position where differing interests are now arguing for more powers for the Scottish Parliament. All of the proposed settlements include more financial powers for Scotland, something that would give the Scottish Parliament more responsibility for spending and borrowing whilst taking on responsibility for raising a larger percentage of the Scottish budget. The main financial power that would concern Scotlands position in the world would be its ability to lower corporation taxes which would allow it to follow an Irish model in which it would become a world beacon for foreign direct investment. Such a status would improve Scotlands position in the world, by making it one of the most viable places in which to invest. However, this also comes with significant risks as I have also demonstrated that a devolved Scotland with much more control over its own fiscal affairs would be at significant risks from large financial shocks. It would not have been in the financial position to bail out the RBS by itself, undoubtedly having put itself in a humiliating situation of asking for money from other institutions. If Scotland were to opt for more devolution in the referendum in 2014, it would bring significant chances and risks to the nation, something it should consider carefully before voting.
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Chapter 3 Independent Scotland If in 2014, Scotland votes for independence, then it will separate from the United Kingdom, and become an independent state. The primary impact would be a very lengthy and difficult negotiation between the government of whats left of the UK and the Scottish government over everything.77 The magnitude of such a result would be felt in many European countries with secessionist movements. It would also give Scotland a greater potential to change its own position in the world. Having been a part of the United Kingdom for over three hundred years, becoming an independent state in a modern world would give rise to many risks and opportunities within the international arena. In this chapter the meaning of Scottish independence will be defined, and the primary impacts and consequences that will affect Scotlands place in the world will be highlighted. To frame the debate, it is important to define what is meant by independence for Scotland and the initial practicalities of independence. If Scotland were to vote for independence, it would enter into a period of political uncertainty. This would arise because of the need for Westminster to legislate upon the result. Whilst democratic principles suggest that Westminster should legislate without dispute, difficulties may arise if the referendum passes with a small majority and a small turnout. A yes vote in the referendum is not a guarantor for independence. However, if this does happen it would mean that all legislative, legal and financial powers would be returned to the Scottish parliament. Independence would also mean that Scotland would have full control over its relations with other sovereign states. Thus meaning Scotland as the successor nation would have to apply for membership of all international institutions it wished to be a part of again78; including the UN, the EU, and NATO if it were so inclined. These would be the realistic effects that independence would bring to Scotland and its position in the world. With so much scope for change in Scotlands position in the world following independence this chapter will focus upon areas which will have the biggest impact. Therefore it will concentrate upon Scotlands relations within the international field, including the UN and the EU. It will then move onto the effects an independent Scottish military would have on its position in the world. These will all be employed to show how a change towards independence will dictate Scotlands position in the world. In an independent Scotland responsible for which international organisations it held membership of, its position and status within these organisation would have a huge impact on its place in the world. The UK as a former military power has been able to secure great influence within The UN, if Scotland were to leave the UK; it would not retain the same positions or authority within these organisations. This is a subject that
77
Tavish Scott MSP, Telephone Interview, 24 May 2012
78
This idea is discussed throughout this chapter, it lays out that a state succession to international organisations is not possible - James Mitchell and Lynne Bennie and Rob Johns, Scottish National Party: Transition to Power, (Oxford: Oxford University Press, 2012): 158-175
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Prime Minister David Cameron has lectured Scotland about, he said: Were stronger, because together we count for more in the world, with a permanent seat on the United Nations Security Council, real clout in NATO and Europe79 An independent Scotland would not have a permanent seat on the UN security council, nor would it have input into UK representations to the council. An independent Scotland would therefore miss out on enormous formal powers80 and the high social status of the Council [that] signals a deep pool of "social capital" that it can draw on.81 This would set Scotland at the bottom of the ladder in the worlds biggest international forum; it would likewise damage its standing in the world. However, whilst an independent Scotland would lose its influence through the permanent membership of the UN Security Council, it is without doubt that an independent Scotland would seek to join and become a member of the UN, entitling it to a rotated place on the Security Council, the most important body within the UN. The place however, would be rotated amongst the Western European group and others; something which may only see Scotland on the council for one year in every twenty five. Whilst some would argue that this was better than no distinct Scottish voice at all, it is far less direct input into the Security Council than Scotland currently has. Such a status drop is a major obstacle for Scotland improving its position in the world if it were to seek to become independent. An independent Scotland would find itself in a position of choice over which if any European institutions it would join. The diagram below highlights the number of different institutions and the versatility and combinations of membership that other European nations currently hold: Figure 3 Supranational Organisations within Europe82
79
Chris Wimpress, Scottish Independence: Cameron warns on UN security place, The Huffington Post (http://www.huffingtonpost.co.uk/2012/02/15/scottish-independence-cameron-un-securitycouncil_n_1279408.html, 04 July 2012)
80 Ian Hurd, Legitimacy, Power, and the symbolic
life of the UN security council, Global Governance
8 (2002): 35
81
Hurd, Legitimacy, Power, and the symbolic life of the UN security council, 35
82
Template: Supranational European bodies, (http://en.wikipedia.org/wiki/Template:Supranational_European_Bodies 12 July 2012)
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This shows that with the right negotiations Scotland could have access to all of the combinations available. This to an extent would be the basis for Scotland to build its international relations, and thus helping increase its position in the world. It is important to note that the two main parties in Scotland, Labour, and the SNP, are both EU friendly, and would pursue EU membership. Whilst there is debate about whether an independent Scotland would have the automatic right to join the EU, something that would only be decided upon by the willingness of EU members and the public of Scotland, it is certain that the main political parties in Scotland would apply for EU membership. Matthew Happold says that there is no reason to think that Scotlands application would be refused83 although this is not straightforward as many EU member states who have secessionist movements of their own which their central governments are not keen to encourage would veto Scottish membership.84 This means that Scotland may have to improve its relations with other nations before it can join, but that there are no rules which would stop it from doing so. As we have noted in previous chapters, Scottish influence within the EU is varied, but also limited by its membership of the UK. If Scotland were to become independent it would have all the advantages of being a member state. One such advantage is that it would see is that the smaller member States have disproportionate influence within the EU85 something Happold attributes to relative population sizes and the number of votes they receive on the Council of Ministers. Scotland with a population of just 5 million could expect to receive an overbalanced number of votes within the council. Another advantage can be seen in comparison to Ireland; membership changed [Ireland's] relationship with the UK overnight.86 They became constitutional equals87, this means that an independent Scotland would allow Scotland equal influence over EU decision-making with other small member states.88 This will allow a stronger position for Scotland in negotiating for its own needs within Europe. However, whilst Scotland may achieve equality, a warning comes from Vladimir Bilcik, who says there are clear limits to voice and power. Larger countries,
83
Matthew Happold, Independence: In or Out of Europe? An independent Scotland and the European Union, International and Comparative Law Quarterly 49 (2000): 34
84
James Mitchell, Lynne Bennie, Rob Johns, Scottish National Party: Transition to Power, (Oxford: Oxford University Press, 2012): 123
85
Happold, Independence: In or Out of Europe? An independent Scotland and the European Union, 15
86
Kirsty Hughes, Breakaway Scotland could form new EU alliances, BBC News (http://www.bbc.co.uk/news/world-europe-16553642, 12 July 2012)
87
Hughes, Breakaway Scotland could form new EU alliances
88
Eve Hepburn and P.J. McLoughlin, Celtic Nationalism and Supranationalism: Comparing Scottish and Northern Ireland Party Responses to Europe, The British Journal of Politics and International Relations, 13 (2011): 388
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like France, Germany, and the UK, have more power and more votes.89 While Scotland may have more clout as a smaller country than it perhaps should, it will always face being too small to challenge the established powers of the EU. This leaves Scotland in a position wherein it has the potential to build alliances and thus improve its position in Europe, and therefore by proxy the world, but also leaves it vulnerable to perpetually being overshadowed by larger countries, something Happold sums up as an independent Scotland would have considerably less political clout in Brussels than the UK has to date.90 This would limit any potential Scotland has for building a world reputation upon the European stage. A further important issue for post-independence Scotland is the question over currency. There has been much debate over whether Scotland should seek a monetary union with the UK where Scotland continues to use sterling, or join the Euro, or floating an entirely new and independent currency. As suggested by the CRI, financial appeal is a major factor in deciding reputation, this means the currency that Scotland chooses and the relative stability that it produces will also play a large role in Scotlands influence within the world. It has been a long held position of the SNP that Scotland upon independence should join the EU, if Scotland were to do so; it would also be obligated to join the Euro. At the time of writing this dissertation, the Euro is currently undergoing a financial and political crisis which presents it with an existential threat. It would be extremely foolish for Scotland to adopt such a currency, as its failure looms in newspaper headlines. It must be noted that by the time Scotland may wish to join the Euro, it may no longer exist, thus, many are predicting that The euro's inevitable failure will be horrendous for all of us91 again something the politically expedient would not wish to do, as it would cause ruination of Scotlands finances if they were directly involved within the Eurozone. As the referendum campaign has been launched we have seen a move by the SNP and its leader Alex Salmond to move away from the long held commitment, Mr. Salmond has been forced to shift his position and now advocates continued currency union with the rest of Britain, at least initially92. This leaves Scotland in a position somewhat reminiscent to many other nations that have broken away from the UK such as Australia and Ireland, which both kept sterling for a short period after.93 Parallels can
89
Hughes, Breakaway Scotland could form new EU alliances
90
Happold, Independence: In or Out of Europe? An independent Scotland and the European Union, 49 (2000): 34
91
Charles Moore, The euro's inevitable failure will be horrendous for all of us, The Daily Telegraph, (http://www.telegraph.co.uk/comment/columnists/charlesmoore/7839188/The-euros-inevitable-failurewill-be-horrendous-for-all-of-us.html, 24 July 2012)
92
Jeremy Warner, Scotlands sterling issue makes independence highly problematic, The Daily Telegraph (http://blogs.telegraph.co.uk/finance/jeremywarner/100014229/scotlands-sterling-issue-makesindependence-highly-problematic/, 24 July 2012)
93
Humza Yousaf MEP, Telephone interview, 11 June 2012
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also be drawn with the breakup of Czechoslovakia and the subsequent currency union between the Czech Republic and Slovakia. In the wake of the split of Czechoslovakia, to mitigate the economic effects of the split, the Czech Republic and Slovakia retained a common currencythe monetary union was conceived as a temporary measure94 this measure was designed to ensure the best possible fiscal outcomes for both the Czech Republic and Slovakia. As part of the deal many concerns were raised such as how and when to separate the currencies, fixing of their exchange rates, developing some clearing arrangements, and whether interest rates should be set one to one.95 These are the same issues that Scotland will face if it were to seek to join a temporary currency union with the UK. The initial union between the Czechs and the Slovaks was mooted to last for 6 months, but built into the deal were get out clauses that were used after just 5 weeks. However, the benefits and problems of this approach do provide important lessons for Scotland going forward. Firstly, a temporary currency union can provide some form of stability, despite its problems, for Scotland whilst it transitions out of the UK. The stability will form an important part of projecting Scotland into the world as a sound place to do business. However the break up between the Czech Republic and Slovakia also provided negative consequences for both countries for example Mutual trade fell by some 25% in 1993.96 Similarly, the break-up of Czechoslovakia contributed to economic decline in 1993 GDP declined by one percent in the Czech Republic and four percent in Slovakia.97 If Scotland were to enter into a period of uncertainty and economic decline because of a currency union and then its subsequent break up it would ensure the decline in Scotlands place in the world. As we can see the relative paths that Scotland could feasibly take upon currency issues, be that joining the Euro or a currency union with the UK, both would come with both advantages and disadvantages both could have a major effect on Scotlands position in the world.
94
Iain McLean, The Referendum on Separation for Scotland, Parliament, (http://www.publications.parliament.uk/pa/cm201012/cmselect/cmscotaf/writev/referendum/rs19.htm, 24 July 2012)
95
Ales Capek, Gerald W. Samaza, Czech and Slovak Economic Relations, Europe-Asia Studies 45 (1993): 229
96
Jan Fidrmuc, Jlius Horvth, Stability of Monetary Unions: Lessons from the Break-up of Czechoslovakia, Journal of Comparative Economics 27 (1999): 769
97
Fidrmuc, Horvth, Stability of Monetary Unions: Lessons from the Break-up of Czechoslovakia, 769
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Another important aspect of Scottish independence is the question of what the Scottish military would look like. This includes its shape, size, character, and role all of which would shape Scotlands position in the world. Alex Salmond is on record - as saying he believes a military force in Scotland would have one naval base, one aircraft base and a mobile armed brigade.98 The Scottish Government has stated that a military would have four key objectives upon independence.99 These suggest a less interventionist policy than the UK going forward, one that seeks to work in partnership with other nations100 to complete what it sees as its international duties, but does not seek to invade or dispose leaders of disagreeable countries. This idea is reinforced by a transcript on the Scottish Governments website which says: Scotland could focus primarily on securing its territory, compared to the United Kingdom approach of also having the capacity to conduct overseas wars. It could support United Nations peace keeping operations and international disaster relief It could continue to contribute to peace enforcement operations, like those in the Balkans, and actively participate in the European Security and Defence Policy of the European Union.101 If Scotland were to restrict the size of its military and actively avoid overseas wars, it would have a serious effect on Scotlands place in the world. Scotland would not be able to get involved in wars which would be unpopular within the international community. An example of such is the Iraq war, which negatively affected involved countries, this is seen as Americas global reputation hadnt just slipped in the period following the invasion of Iraq, it had plummeted.102 Alex Salmond has repeatedly stated that theres no way on Earth that Scotland would ever have participated as an independent country in the illegal war in Iraq.103 This may have caused a decline in the relationship between Scotland and the countries going war. This would cause a
98
Severin Carrell, How would an independent Scotland defend itself?, The Guardian, (http://www.guardian.co.uk/news/reality-check-with-polly-curtis/2012/mar/01/how-would-anindependent-scotland-defend-itself, 02 August 2012)
99
1) To uphold national sovereignty and secure the territorial integrity of the country 2) to secure internal security in the face of threats and risks 3) in partnership with other nations, to help to prevent and resolve conflicts and war anywhere in the world 4) in partnership with other nations, to further peaceful development in the world with due respect for human rights This list comes from Your Scotland, Your Voice, The Scottish Government (2009): 118
100
Your Scotland, Your Voice, The Scottish Government (2009): 118
101
Your Scotland, Your Voice: A National Conversation, The Scottish Government, (http://www.scotland.gov.uk/Publications/2009/11/26155932/10, 04 August 2012)
102
Dick Martin, Rebuilding Brand America, (USA: Amacom, 2007): 53
103
Brian Currie, Salmond: Scotland would have said no to the Iraq war, The Herald, (http://www.heraldscotland.com/politics/political-news/salmond-scotland-would-have-said-no-to-iraqwar.13693817, 04 August 2012)
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decline in Scotlands place in the world. This would also limit Scottish companies abilities to become involved in the reconstruction efforts that war brings, something heavily seen by the influx of American companies into Iraq, a case of to the victor go the spoils. However, this is contrasted against the commitment to work towards peacekeeping operations and disaster relief and fulfil its humanitarian instinct104. If Scotland were able to fully project a defence force into stabilising regions and humanitarian work, it is likely that Scotland will be seen positively because of these actions, and thus changes its image and military doctrine. As Scotland is currently part of the UK, and undoubted military power, with a long history of international military action, it is tempting to judge Scotland upon that paradigm. However, what Scotland proposes is a complete change in the role of its military in the world. This is particularly seen with the SNPs insistence that Scotland withdraws from NATO and that Scotland is rid of nuclear weapons, a sign that Scotland is seeking to change its role. This change in the military doctrine of Scotland from interventionism to humanitarian action is not something that a major international power has gone through and thus leaves Scotland with the potential to succeed spectacularly in improving its position in the world or to fail miserably, left behind by increasing interventionism. As we can see turning towards independence would and could have massive implications for Scotlands position in the world, be that through international organisations, where Scotland would lose its influence on the UN security council by withdrawing from the rest of the UK, or through the EU, where it could seek to form a more constructive relationship with the Europe than it currently enjoys as part of the UK. This leads to a very uncertain future for Scotland its international legacy. We can also see that this will play a major part in which currency Scotland chooses to use postindependence. Whilst the sensible option that the SNP seem to be currently pursuing is a currency union with the UK, which itself is not without problems due to the hostility towards the idea from the current Conservative chancellor, its long term plans of holding a referendum and championing joining the Euro may have to be put on the back burner, perhaps forever. We can also see the creation of a Scottish defence force which will affect Scotlands position; the debate tends towards the isolation within Europe, through the design of a very small military. This will severely restrict Scotlands ability to project itself military hurting its position, but also leaves less space to cause problems within the international sphere. Scotlands political culture will lend itself towards humanitarian rather than interventions. One thing is for sure in all discussions, the future of Scotland is not certain in independence, but it is not impossible for a small determined country to improve its position in the world, and Scotland should not forget that.
104
Malcolm Chalmers, The End of Auld Sang Defence in an Independent Scotland, Royal United Services Institute for Defence and Security Studies (April 2012): 9
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Conclusion
This dissertation has shown that further powers for Scotland would be a high risk strategy that is capable of bringing high risks and possible high rewards. This is contrasted against the partisan approach from the SNP, arguing that independence will bring no risks, only rewards; this has been matched in the public domain by unionists who argue in the same polemic fashion for exactly the opposite idea that independence is risk without rewards. This dissertation has sought to add the ideas and bring a forward a more nuanced argument. Having assessed Scotlands current constitutional position within the first chapter it can be concluded that under a devolved system that Scotland has done well in promoting its position in the world through both its strong arts tradition and its tourism industry, but also through representation in Europe. It should also be noted that in many areas Scotland would like to further itself in are specifically reserved to the UK government, limiting its ability at times to project itself into the world. The building blocks for this position have been laid over a long period, and brought sharply into focus in the aftermath of the 1997 referendum, all designed to enhance the Scottish brand around the world. Whilst the second chapter has sought to identify what possible changes could be made to Scotlands constitutional situation, without moving towards full independence. This brought together an analysis of both the Devo Plus campaign and the devo max ideas. This analysis showed there is much overlap, but the common denominator between the two is the increase in tax powers and more responsibility for raising the budget for Holyrood to spend. Through identifying these, it was then possible to look at how more control of tax policy will affect Scotland's position in the world, picking out corporation tax, and how Scotland may engage in tax competition. This provides a chance for Scotland to compete for global footloose capital, but also provides Scotland with danger of getting into unhealthy competition with both the UK and the wider world. The second chapter also allowed the analysis of the dangers that a smaller economy could face including lessons from Iceland, Ireland and banking collapse caused, and some of the more mundane concerns around concentration of trade. All of these combine to highlight the risks and rewards of further fiscal devolution for Scotland Finally, the third chapter moved onto look towards what Scottish independence may look like, and what effects this would have on its position in the world. Through looking towards roles in international organisations; firstly the UN where Scotland would lose its representation through the UKs permanent place on the UN Security Council, something guaranteed to diminish Scotlands place in the world. This analysis was continued through looking towards Scotlands position in the EU, and the authority it could have, concluding that whilst it may be over represented, it would still be overshadowed by the biggest nations, finally the chapter. The chapter looked towards currency problems to highlight the quandary that Scotland faces upon independence and how it will effect Scotlands position in the world, concluding that a currency union Andrew Emmerson Page 32 of 43 POL8099: Dissertation
with rest of the UK was the most sensible option, but even that came with great risks. Lastly, it looked towards the potential of Scotlands military in independence, concluding that Scotland would only seek a small military that was less engaged in interventionism, something itself which would bring rewards and failures. It was also noted that Scotland would likely trend towards humanitarian interventions, something which would improve its reputation and position in the world. This paper has shown that changing Scotlands constitutional status is a highly risky activity that would bring forward either great risks or rewards for the Scottish nation. In reviewing all of the arguments as to whether Scotland could improve its position in the world, we see they are finely balanced. Whilst we can see that Scotland clearly has the potential to improve its position through good tax competition, a strong basis for soft power and through a good military regime. Whilst Scotland is full of potential that is not to say it will fulfil this. Considering all of the arguments and evidence presented within this dissertation I believe that Scotland can move forward and significantly improve its position in the world. From this point on there are several distinctive future strands of research that could be done to enhance and further this topic of discussion. The first is to answer the primary consequences of constitutional change on Scotland itself. How Scotlands internal politics, economic situation, and social situation would change with further devolution or independence. I believe that independent research would add to the quality of the debate that will precede the independence referendum in 2014, and would highlight issues that are simply not expedient for political parties to discuss. The second important strand of research could be an analysis of how further devolution or independence would affect Scotlands relationship with the rest of the UK. This also I believe would be important to add into the debate around independence. Whilst many Scots are still undecided, I believe the continuing relationship or not, with a body they have been a part of for three hundred years, would help ordinary voters to decide which way they vote. This paper has ultimately attempted to discuss Scotland's place in the world, in regards to its constitutional status, attempting to highlight the advantages of further constitutional freedom.
Andrew Emmerson
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What would be the primary impacts and consequences in terms of Scotlands position in the world in the event of a change

in Scotlands constitutional situation?

The Anholt-GfK Roper Nation Brands Index

Macleod, Russell, Grasping the Thistle, 164

Government and industry, Hughs Fish Fight, (http://www.fishfight.net/government-and-industrysupporters/, 14 August 2012)

Mission Statement, Committee of Regions (http://cor.europa.eu/en/about/Documents/Mission%20statement/EN.pdf, 29 May 2012)

Common fisheries policy, The Scottish Government, (http://www.scotland.gov.uk/Topics/marine/SeaFisheries/common-fisheries-policy, 31 July 2012)

About us, UK Representation To the EU, (http://ukeu.fco.gov.uk/en/about-us/, 26 June 2012)

Georgina Reid, 1 in 5 tourists visit for our movie sets!

Edensor, Reading Braveheart: Representing and contesting Scottish identity, 145

Edensor, Reading Braveheart: Representing and contesting Scottish identity, 146

What is Devo-Plus?, Devo-Plus, (http://www.Devoplus.com/what-is-Devo-plus/, 26 June 2012)

Corporate income tax reforms and international tax competition, 452

Itll cost you, The Economist (14th April 2012): 13

Islam, Ireland Debt: Osborne Ponders Aid Options

Cracks in the crust, The Economist, (http://www.economist.com/node/12762027?story_id=12762027, 03 July 2012)

Cracks in the crust Cracks in the crust

Scotch Whisky in China, The Scottish Government (http://www.scotland.gov.uk/News/Releases/2011/12/04160905, 24 July 2012)

Scotch Whisky in China

Tavish Scott MSP, Telephone Interview, 24 May 2012

life of the UN security council, Global Governance

Template: Supranational European bodies, (http://en.wikipedia.org/wiki/Template:Supranational_European_Bodies 12 July 2012)

Hughes, Breakaway Scotland could form new EU alliances

Hughes, Breakaway Scotland could form new EU alliances

Humza Yousaf MEP, Telephone interview, 11 June 2012

Your Scotland, Your Voice, The Scottish Government (2009): 118

Dick Martin, Rebuilding Brand America, (USA: Amacom, 2007): 53

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