The North holds the Key: Unlocking Canada-Scotland Trade Potential

By Polar Research and Policy Initiative

Dr Dwayne Menezes and Dr Karen Everett


On Monday, 23 September 2019, the Scottish Government launched Scotland’s first Arctic Policy Framework in Stromness, Orkney. You can read the policy document here. To mark the occasion, Polar Research and Policy Initiative (PRPI) will be publishing articles about Scotland’s Arctic expertise, interests and priorities every day for 14 days. Here is the ninth piece of our #ArcticScotland series.  

With the launch of Arctic Connections: Scotland’s Arctic Policy Framework, we wished to take this opportunity to explore the trade relationship between Canada (at the federal level), the three Canadian Territories in the Canadian North (Yukon, the Northwest Territories, and Nunavut) and Scotland, especially as trade is an important component of the document.

Trade Agreements

Currently, Canada and Scotland (by way of the UK) are involved in different trade agreements. For example, the Canada-European Union: Comprehensive Economic and Trade Agreement (CETA) is a free trade agreement and “entered into force provisionally on 21 September 2017”,[i] with the UK’s ratification taking place on 8 November 2018. Additionally, Canada and the UK are also parties to a number of WTO agreements.[ii], [iii]

Canadian and Territorial Trade by the Numbers

Canada, unfortunately, does not keep a separate record of trade with Scotland. Instead, these numbers are a part of Canada’s trade statistics with the UK as a whole. Table 1 provides an overview of this trade activity for Canada, as well as a breakdown for Yukon, the Northwest Territories and Nunavut for 2016 – 2018.

At a national level, the table shows that Canada increased the value of imports it received from the UK from 2016 to 2018, while there was a decline in the value of domestic exports from 2017 to 2018. At the territorial level, the table shows that Yukon and Nunavut have generally imported much more from the UK than they exported, while the Northwest Territories (NWT) did not have any significant import of goods from the UK during this time period. However, Nunavut substantially increased the value of its exports to the UK in 2018.

The key observation here is that while Canada’s domestic exports to the UK surpassed CAD 15.6 billion in 2018, the three Northern territories accounted for less than CAD 5 million. In 2017, while Canada’s domestic exports to the UK surpassed CAD 17 billion, the three Northern territories accounted for only CAD 45,877 – or a paltry 0.00027%. Even in terms of imports, while Canada imported over CAD 9.2 billion of merchandise from the UK in 2018, the three Northern territories imported just CAD 388,756 worth of merchandise from the country – just over 0.004%. 

Canada

The short-term trends in Table 1 raise interesting questions about what opportunity there is for the Territories to grow their domestic exports to the UK and Scotland. These opportunities can be better understood in relation to the international Harmonized System Code,[iv] which Canada uses to classify exports and imports (see Table 2) at both the national and territorial/provincial levels. 

Canada

The value of Territorial exports to the UK is shown in Table 3 and is organised according to the HS Codes. For Yukon, there has been a decline in the number of categories (HS Codes) from which goods were exported to the UK. There has also been an increase in the value of goods in Codes I (Live animals and animal products) and XXI (Works of art, collectors’ pieces and antiques), which shows the potential for continued growth in these areas, even if the values are currently modest. The Table also shows a loss as Yukon did not export goods to the UK from HS Code XVII (Vehicles, aircraft, vessels and associated transport equipment) since 2016, which was their highest valued export during this three-year period.  

For the NWT, the Table shows that HS Code XVI (Machinery and mechanical appliances; electrical equipment; parts thereof; sound recorders and reproducers, television image and sound recorders and reproducers, and parts and accessories of such articles) provides the most opportunity for the Territory, while there is a potential growth opportunity in HS Code XVIII (Optical, photographic, cinematographic, measuring, checking, precision, medical or surgical instruments and apparatus; clocks and watches; musical instruments; parts and accessories thereof). There also appears to be a lost opportunity in HS Code XXI (Works of art, collectors’ pieces and antiques) as the NWT have not exported anything to the UK from this code since 2016.

Canada

Nunavut has a different pattern with their exports. For instance, the number of HS Codes from which Nunavut exported doubled from 2016 to 2017, and then reduced by a third in 2018 as the Territory started to export goods from HS Code V (Mineral products). This suggests a focus on mining exports rather than diversifying the range of exports from the Territory. However, the value of goods exported in HS Code XXI (Works of art, collectors’ pieces and antiques) increased consistently during this three-year period, suggesting a possible area of growth.  

Table 3 also shows that there is minimal consistency between the Territories in term of what goods are exported from the region to the UK, with the exception of goods from Code XXI (Works of art, collectors’ pieces and antiques), and to a lesser extent in Code XVIII (Optical, photographic, cinematographic, measuring, checking, precision, medical or surgical instruments and apparatus; clocks and watches; musical instruments; parts and accessories thereof). This suggests that each Territory has different areas of expertise, and that as a region, the Canadian North has the potential to provide goods in a range of categories, even if the extent to which it can do so differs.

The value of imports to the Territories from the UK are found in Table 4. Yukon has substantially decreased the value of imports it received from the UK between 2016 and 2018. There was also a significant decline in the value of imported goods from HS Code XVI, while both HS Codes XV and XVIII saw substantial declines in 2017 and then increases in 2018 (although not reaching 2016 levels).

The NWT did not import any goods from the UK between 2016 and 2018.  

CanadaNunavut also experienced a decrease in the value of imports it receives from the UK, although not to the same extent as Yukon. With the exception of 2017, Nunavut received the highest value of imports from HS Code XVII (Vehicles, aircraft, vessels and associated transport equipment) and imported a more diverse range of goods based on the number of HS Codes in 2017 and the least in 2018.

Table 4 also shows that with the exception of Nunavut in 2017, Yukon and Nunavut generally do not receive the same categories of imports. This suggests that each Territory requires different goods.

Scotland’s Trade by the Numbers

Scotland keeps statistical records of their exports, and Table 5 shows that the European Union (EU) is, by value, the primary destination of Scottish exports, while North America is the second largest destination. The table also shows that the value of exports to North America increased during this time period.

Canada

Table 6, however, shows that the United States of America (USA) is the final destination for not only the majority of exports to North America, but also Scotland’s exports in general even though the EU is the largest regional destination. Canada, highlighted in yellow, therefore, receives substantially less from Scotland than the USA.  

CanadaThe United Kingdom also keeps statistical record of export destinations from Scotland’s internal regions (Table 7). While Canada overall ranks lower as an export destination, this data shows that Canada is in the top 6 export destinations for the Highlands and Islands, as well as North Eastern Scotland, and is in the middle for SC Energy.

Canada

Certainly, Canada is an important market for Scottish exports.   

Improving Trade Opportunities  

Prior to the release of Scotland’s Arctic Policy Framework, efforts were already underway to increase trade between Scotland and Canada. For example, the Scottish Government had identified that “key sectors where Scotland could sell more are:

  • mining support and services
  • computer and information technology (IT) services
  • the manufacture of computer, electronic and optical products
  • machinery and equipment
  • engineering
  • food
  • chemical sciences”[v]

Some of these align with the types of products the Territories are importing based on the HS Codes discussed earlier. To further improve economic relations, Scotland opened “a new office in Canada to strengthen economic ties between the two countries”[vi] in 2019.

Scotland’s Arctic Policy Framework indicates that trade continues to be a priority as part of the economic development plan. The document explains that “Arctic countries are major trade partners for Scotland, accounting for around 27.5% of our total exports and five of our top 20 export destinations in 2017”, with the goal to increase Scottish trade in general.[vii] The Framework further explains that Canada is “among the top export markets showing the strongest near-term growth potential for Scotland.”[viii]

The potential for increased trade between Scotland and Canada is further supported as Canada’s recently launched Arctic and Northern Policy addressed trade (in general) in its international chapter. More specifically, the Policy recognises that the Federal Government can do more to improve Northern trade and, among other things, “Canada will use its Trade Commissioner Service to better connect Arctic and northern businesses—including Indigenous-led businesses and women entrepreneurs—with export opportunities provided by free trade agreements”.[ix] Our recent article by Andrew Chater draws attention to the scope for multifaceted engagement between Scotland and Canada.

Conclusion

The tables from the previous sections show there is potential for increased exports form the Canadian Territories to Scotland in certain areas and that Canada is also a top destination for Scottish exports. Both Canada and Scotland have recently released new Arctic/Northern policy frameworks that identify increased trade as a policy objective. As such, it should be expected that trade between Canada, the three Territories and Scotland will increase in the coming years.


[i] European Commission. “Canada-EU Comprehensive and Economic Trade Agreement (CETA),” last modified April 12, 2019. https://ec.europa.eu/trade/policy/in-focus/ceta/
[ii] Government of Canada. “Trade and Investment Agreements,” last accessed September 14, 2019. https://www.international.gc.ca/trade-commerce/trade-agreements-accords-commerciaux/agr-acc/index.aspx?lang=eng
[iii] As the UK moves closer to Brexit, “the Government’s aim is to roll over the EU’s trade agreements into equivalent UK-third country agreements.” While this has yet to be negotiated for CETA, “it was reported in September 2017 that the Canadian Government was looking for a ‘seamless transition’ of its trading relations with the UK after Brexit.” See: Dominic Web. CETA: the EU-Canada Free Trade Agreement. Briefing Paper Number 7492. House of Commons Library: May 7, 2019, 18. https://researchbriefings.files.parliament.uk/documents/CBP-7492/CBP-7492.pdf
[iv] The World Customs Organization provides further details on the goods found in each of the codes. See: World Customs Organization. “HS Nomenclature 2017 Editions,” last accessed September 27, 2019. http://www.wcoomd.org/en/topics/nomenclature/instrument-and-tools/hs-nomenclature-2017-edition/hs-nomenclature-2017-edition.aspx
[v] Scottish Government. “Canada,” last accessed September 15, 2019. https://tradingnation.mygov.scot/country-profiles/canada/
[vi] Lucinda Cameron. “Scottish Government to Open New Office in Canada,” The Scotsman, last updated August 20, 2018. https://www.scotsman.com/news-2-15012/scottish-government-to-open-new-office-in-canada-1-4786635;
[vii] The Scottish Government. Arctic Connections: Scotland’s Arctic Policy Framework, (Edinburgh: The Scottish Government, 2019), 37. https://www.gov.scot/binaries/content/documents/govscot/publications/publication/2019/09/arctic-connections-scotlands-arctic-policy-framework/documents/arctic-connections-scotlands-arctic-policy-framework/arctic-connections-scotlands-arctic-policy-framework/govscot%3Adocument/arctic-connections-scotlands-arctic-policy-framework.pdf
[viii] The Scottish Government. Arctic Connections, 37.
[ix] Crown-Indigenous Relations and Northern Affairs Canada. “Arctic and Northern Policy Framework International Chapter,” last modified September 10, 2019. https://www.rcaanc-cirnac.gc.ca/eng/1562867415721/1562867459588

On Monday, 23 September 2019, the Scottish Government launched Scotland’s first Arctic Policy Framework in Stromness, Orkney. You can read the policy document here. To mark the occasion, Polar Research and Policy Initiative (PRPI) will be publishing articles about Scotland’s Arctic expertise, interests and priorities every day for 14 days. Here is the ninth piece of our #ArcticScotland series.  

Dr Dwayne Ryan Menezes is the Founder and Managing Director of Polar Research and Policy Initiative (PRPI). He is also the Founder and Managing Director of Human Security Centre and Commonwealth Policy Development Centre. Over his academic career, Menezes read Imperial and Commonwealth History at the LSE and the University of Cambridge, graduating from the latter with a PhD in History. Subsequently, he held visiting or postdoctoral fellowships at research centres at the universities of Cambridge, Oxford and London. At present, he is an Honorary Fellow at the UCL Institute of Risk and Disaster Reduction at University College London and an Associate Fellow at the Institute of Commonwealth Studies, School of Advanced Study, University of London. Over his policy career, Menezes has served as Head of the Secretariat of the All-Party Parliamentary Group for Yemen in the UK Parliament (2015–present); Consultant to the Secretary-General of the Commonwealth (2014–2016); Principal Consultant to the European Parliament Intergroup on the Freedom of Religion or Belief (2015–2016) and Research Associate to a UN Special Rapporteur (2013–2014). He is a Fellow of the Royal Historical Society, the Royal Geographical Society and the Royal Society of Arts.
Dr Karen Everett is a Fellow at Polar Research and Policy Initiative, with a focus on trade and investment in the Canadian North, as well as border security in Arctic and sub-Arctic borderlands. Karen is also a Postdoctoral Fellow with the Canada Research Chair on Comparative Aboriginal Condition at Université Laval. She completed her PhD program at the Frost Centre for Canadian Studies and Indigenous Studies at Trent University where her research examined security in the Canadian North, including emerging regional border management issues. Additionally, Karen explored how securitisation theory and the principles of multi-level governance can contribute to the policy-making process. Karen is also a member of the UArctic Thematic Network on Geopolitics and Security and was previously a Research Scholar with the Arctic Futures Initiative at the International Institute for Applied Systems Analysis (IIASA) in Laxenburg, Austria. Karen is currently based in Québec City, Canada.
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