The document summarizes the impact of COVID-19 and Brexit on international trade in Scotland. It discusses how COVID-19 has disrupted global supply chains and trade flows. While trade has declined, globalization is still expected to continue. The document then examines Scotland's export profile and industries, noting its exports are concentrated in key sectors like food/drink and oil/gas. Brexit has also introduced uncertainties that have negatively impacted UK trade. Looking ahead, both challenges and opportunities for trade beyond COVID and Brexit are discussed, including adapting to new market conditions and technologies.

1. Trade in Scotland
Jun Du
Aston Business School
Lloyds Banking Group Centre for Business Prosperity
27 October 2020
ERC Scottish Enterprise Autumn Lunchtime Seminars

2. Today’s topic
• 01 | The Coronaviral-Shock 2020 and trade
• 02 | International trade in Scotland
• 03 | Look beyond COVID and Brexit
• 04 | Summary

3. 01| The Coronaviral-Shock 2020 and trade

4. Impact on the Economy
• A Crisis Like No Other, An
Uncertain Recovery” (Imf,
June 2020).
• The Global Outlook Is Highly
Uncertain (OECD, July, 2020).
• Uk Set For Record-breaking
Economic Growth In Third
Quarter (Ft, August 2020).
• Us: Expecting Double Dip
Economic Recession
(Stephen Roach, August
2020).
01 | The Coronaviral-Shock 2020 and trade
01.1 COVID and the economy

5. Down but not out
Source: OECD Trade Statistics.
01 | The Coronaviral-Shock 2020 and trade
01.2 COVID and trade
China

6. 01 | The Coronaviral-Shock 2020 and trade
01.3 Globalisation before COVID
The long-term trend of international production
Source: UNCTAD, 2020
The evolution of the GVC network
Source: Cappariello et al 2020

7. • Changing motivations of MNEs.
• Developing countries moved up the value chains.
• More regionalized concentrated supply chain networks.
• More services go with goods, hence proximity to customers
• Geopolitical factors
01 | The Coronaviral-Shock 2020 and trade
01.4 Evolving global value chains

8. 01 | The Coronaviral-Shock 2020 and trade
01.5 Perspective: Will globalisation end?
Global supply chains will not be the same in the post-COVID-19
world (Beata Javorcik, 2020).
• COVID-19 and Trade Policy: Why Turning Inward Won’t Work (Baldwin and Evenett, 2020).
• ‘Trade is not the problem; it is part of the solution.’
• Globalization will continue for the foreseeable future (Côte d’Ivoire, 2020).
• Coronavirus won't kill globalization – but a shakeup is inevitable (Du et al 2020).
• Diversification is not necessarily radical restructuring of value chains (McKinsey 2020).
• Global value chains have always been restructuring. COVID is merely a catalyst for faster
change.

9. 02| Trade in Scotland

10. 02 | International trade in Scotland
02.1 Export profile (1)
Source: Scotland, Trade and Brexit, House of Commons Scottish Affairs Committee, Seventh report of session 2017-19, 2019

11. 02 | International trade in Scotland
02.1 Export profile (2)
UK Trade with US: sector-service total, 2011-2017
Source: Authors compiled based on Office of National Statistics International
Trade in Services, 2015-2017.
Based on the submitted written evidence to the Parliament’s inquiry by EU
International Agreements Sub-Committee (25 September 2020), by Oleksandr
Shepotylo, Jun Du and Uzoamaka Nduka
UK Regional service exports: sectors, services and trading
partners, 2011-2017

12. 02 | International trade in Scotland
02.2 Brexit Uncertainties and UK trade (1)
QUARTERLY GROWTH IN UK TOTAL EXPORTS TOWARDS EU AND EXTRA-EU MARKETS (DOUCH, DU AND VANINO, 2020)
Brexit uncertainties

13. 02 | International trade in Scotland
02.2 Brexit Uncertainties and UK trade (2)

14. 03| Trade beyond COVID and BREXIT

15. 03 | Trade beyond COVID and Brexit
03.1 What we do and do not know
• Productivity is the key to trade, and hence technology, diffusion, skills are important.
• Happy few and high concentration
• Intermittent exporters the betweeners
• Shift attentions from exports vs. value-added
• Interventions and their effectiveness
• Exports have multiplying effects, how do happy few spill the benefits around? Who lose out in
the globalization and what can social policy do?
References:
COVID-19 Pandemic and Global Value Chains, 2020, with Agelos Delis, Mustapha Douch and Oleksandr Shepotylo, LBGCBP Insight Paper, 5 May
Ten Facts About the UK Professional and Business Services Sectors and Their International Traders, 2020, with Mustapha Douch, Uzoamaka Nduka and Oleksandr Shepotylo,
LBGCBP Insight Paper, July
Defying Gravity? Policy Uncertainty and Trade Diversion, 2019, with Mustapha Douch and Enrico Vanino, LBGCBP Research Paper No. 3
UK Trade in the New Globalised World: A Briefing, White Paper No. 1, 2018, Lloyds Banking Group Centre for Business Prosperity Research Paper No. 1

16. 03 | Trade beyond COVID and Brexit
03.2 Opportunities and Challenges
Challenges
The full extent of the disruptions
of the COVID and Brexit is yet to
manifest;
supply chain fragility;
tariff and non-tariff trade barriers,
as well as trading in unfamiliar
territories;
Adapting to fast technological
changes;
Opportunities
new products, new sectors and
new markets, new ways of
engaging in trade, with potential
new trade partners, facilitated with
new technologies, seizing
opportunities in net-zero transition
and levelling up agenda; policy,
networks and supports.
Benefits
Learn to learn-by-exporting;
Balance the gains from trade
more widely to be
sustainable.

17. 04| Key takeaways

18. 04 | Key Takeaways
• COVID is a catalyst for changes in the globalization already underway.
• Impact of Brexit will be much more profound on trade than that of COVID.
• Productivity is key to trade.
• Challenges arise with tariff and non-tariff trade barriers, as well as trading in unfamiliar
territories
• Opportunities arising with the new products, new sectors and new markets, with potential new
trade partners, facilitated with new technologies, seizing opportunities in net-zero transition.
• Balance the gains from trade more widely to be sustainable.

19. Thank you
Jun Du
Professor of Economics
Economics, Finance and Entrepreneurship Group
Aston Business School
Aston University
Birmingham
B4 7ET
UK
Email: j.du@aston.ac.uk, @JunDu_Economist
Centre Director of Lloyds Banking Group Centre for Business Prosperity (LBGBP)
For further details please visit :
www.enterpriseresearch.ac.uk
@ERC_Uk
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