 Welcome to the 13th meeting of the Culture, Tourism, Europe and External Relations Committee in session 5. I would like to remind members and members of the public to turn off their mobile phones and any members using electronic devices to access committee papers during the meeting should ensure that they are switched to silent. We have received apologies from Tavish Scott MSP, who is going to be slightly late today. Our first item of business today is evidence on the implications of the EU referendum for Scotland and our future trading relationships. I would like to welcome to the meeting cabinet secretary for economy, jobs and fair work, Keith Brown MSP and George Burgess, deputy director of EU and international trading investment policy with the Scottish Government and Russell Bain team leader analysis and policy. I would like to begin by inviting the cabinet secretary to make a few opening remarks. Thank you for the opportunity to come along this morning and to contribute to your investigation into the potential future trade relationships for Scotland following the EU referendum. First of all, it is important to reiterate the fact that Scotland did not vote to leave the European Union. Our priority therefore is to protect Scotland's interests and we are considering all possible steps to ensure that Scotland's continuing relationship with the EU. Of course, that path in front of us is quite uncertain. Also, given the conflicting information that we continue to hear from the UK Government—indeed, apparently, the forum secretary is telling ambassadors that he is in favour of free movement of people—very conflicting messages coming out of the UK Government. For that reason, we have to be prepared for the possibility that the UK Government will go for what we believe to be the worst of all possible options, which is a hard Brexit. It is not inevitable, but we have to prepare for that. The Scottish Government is clear that Scotland's relationship with the EU and its place in the single market must be protected. Of course, our aim is to get the best deal for Scotland in circumstances that are not of our choosing. Retaining membership of the single market for Scotland to protect our trading relationship with the EU and the rest of the world, of course, is extremely important. Any relationship that falls short of that risks increasing barriers to trade, reducing exports and lowering migration, all of which will affect rates of growth but also reduce productivity. That, for our part, is not a risk that we are prepared to take. Longer term, we know that independent economic forecasts point to a range of possible impacts for the economy from a redefined relationship with the EU. There is widespread agreement that a UK-EU trade relationship that is reliant on WTO rules, which would effectively be a hard Brexit, represents the worst possible outcome for trade and for the economy. The Fraser of Islander Institute, as you know, has estimated that leaving the single markets under a world trade organisation scenario could result in our economy being worse off by about 5 per cent overall, or around £8 billion after a decade. That is compared to the position that we remained in the EU. That equates to around 80,000 fewer jobs and real wages lower by £2,000 a head per year. I think that those figures, produced by the Fraser of Islander Institute, are underlined by some of the chancellor's projections from the autumn statement. Through membership of the single market, Scotland currently enjoys the free movement of good services, workers and capital within the EU, without any internal borders or other regulatory obstacles. The single market removes barriers to trade with a market of over 500 million people and opens up opportunities for citizens, workers, businesses and consumers. The EU, of course, is the world's largest trading bloc and is the largest trader of goods and services in the world. It ranks first in both inbound and outbound international investments. 42 per cent of Scottish international exports go to the EU, and eight of Scotland's top 12 export destinations are within the EU. Scottish exports to the EU were worth around £11.6 billion in 2014. Scottish businesses wishing to export to or import from the EU faced no tariffs, quotas or duties applied to the goods that they trade, so a common set of regulations and rules apply. We want to do more to boost exports from Scotland even further, not just to the EU but across global markets. I am taking a range of measures to do that, including establishing a trade board, which I can confirm that we have started the appointment process for. It is not to say that we prioritise our trade with the EU at the expense of our trade with the UK. We are clear that we want to maintain a relationship with both vital partners. The two are not, in our view, incompatible. We have heard from David Davis that there won't be a hard border between Northern Ireland and the Republic, and I am confident that the same could be the case between Scotland and the rest of the UK, should Scotland be able to secure our relationship with the EU. Having mentioned the benefits, trade benefits are being within the single market, it is also important to mention that the benefits go substantially further than just those, so a free movement of people is particularly important to Scotland to help to grow our population and drive economic growth. I think that it was an example in London of a hotel that had around 208 members of staff, 200 of which were EU nationals. I think that, similarly, our hospitality and other industries are very reliant on EU nationals for their growth. Finally, inward investment into Scotland has been an area of substantial success in recent years, with Ernst and Young figures consistently showing that Scotland is the top location for inward investment in the UK outside of London. In our place inside the single market, it is a critical factor in attracting this investment, with 79 per cent of investors citing access to the single market as a key feature of the UK's attractiveness as an investment destination in 2016. In conclusion, convener, the vote to leave the EU is an unwelcome barrier on the road towards fulfilling our economic ambitions, and that is why the Government's goal is to keep Scotland and, of course, the whole of the UK, if possible, inside the single market. In the coming weeks, we will be able to table specific proposals to protect Scotland's interests and to keep us in the single market, even if it is the case that the rest of the UK decides to leave. For that part, I would be very keen to hear the work and the views of the committee and to try to answer any of its questions. Can I begin by asking you to be aware that the committee's work? We have taken a lot of evidence and had a lot of discussions about the differences between membership of the single market and access to the single market. Could you perhaps reflect on your thinking and the differences between those two positions that you would access to the single market to be acceptable, as opposed to membership of the single market? Membership of the market gives us the position that I outlined in my statement of not having those barriers to trade, whether they are tariffs or other regulatory barriers. That comes from being a member of the single market. It is true to say that, as others have said, virtually anybody can have access to that single market. It is a question of the terms on which they have that access and there is nobody who has access, not even, I would suggest, those members of the EEA or EFTA who have membership of the single market on the same terms that we currently have. They do not have access rather to the single market in the same terms that people, countries that are members of the single market, have. It really is about the absence of obstacles to trade. It has grown up over a substantial period of time. Of course, one of the major proponents for it, as I have mentioned before, was Margaret Thatcher, who was a staunch proponent of the single market. You are talking now about the mid to late 1980s, so you have seen the single market develop over a longer period of time. It has not just happened that it was not something that was not there one day and appeared the next. It has had to grow over that period. Disentangling that to any extent, even if it allows a degree of access afterwards, is not, in my view or the Government's view, a substitute for membership of that, where you do not have the barriers, you do not have the regulations, you do not have the practices that can be limiting for trade and economic business. Those are the main differences between access and being a member of the single market. What consultation has the Scottish Government undertaken with various sectors across Scotland about our future trading relationship, and how has that informed your thinking in terms of the Government's position? There has been a huge degree of consultation. From my own part, but it is true of other ministers. I will give some examples. Mike Russell met all the major Japanese companies that operate, for example, in Scotland. That was after the note from the Japanese Government to the UK Government, which at that time was perhaps the most rigorous analysis of the implications of Brexit for business. The way that the Japanese Government did it was to consult heavily with business before putting that note together. We have done that, whether it is through Faisab, the financial services board, which we are on jointly with the financial sector, which has a huge interest in this. Other colleagues have also been talking to the agriculture and fishery sector. In addition to that, we have had a national economic forum, which both I and Paul Wheelhouse, the Business Minister, spoke at, and the First Minister addressed as well. Over a range of the different sectors that we have had last night to meet with business organisations, the CBI will meet them again later on today, with the big six. We will meet them all immediately afterwards. Indeed, on the morning after the votes on the EU 24, we had first of all a call with the governor of the Bank of England, which the First Minister and other ministers were involved in. Over the course of that weekend, I spoke to nearly all the chief executives of the major financial institutions. Since then, it has been an almost non-stop series of discussions with different sectors and business organisations about the impact. I would say that, on top of the list of the things that have been mentioned, we have mentioned in terms of movement of people. The higher education sector has been very concerned about that from very early on, but other sectors as well involve parts of my portfolio, such as the major projects that we are involved in. We have substantial numbers of EU nationals involved in completing those projects, such as the Queensbury crossing, the M8 bundle, the AWPR and so on. However, for the financial sector, it was very much about passporting and the continued beneficial effects of being within the single market. There has been substantial consultation across the sector. Have any of the businesses that you have spoken to reflected on the effect of the falling value of the pound on their businesses? Yes. It is fair to say that some of those have seen an advantage from that. Obviously, those that export, if you talk to the Scotch Whiskey Association, whom we have also been in correspondence with, they will see a benefit from that. However, as against that, people have been badly affected by that. A company that I visited in Ayrshire, which produces patio doors and double glazing and so on, the manufacturer as well has fit those units, but they get their glass from Ireland, and they were talking about a 16 per cent increase in costs that have been imposed because of those exchange rates. The input costs to business, of course, have been substantially increased because of the exchange rate, whereas other businesses will have benefited from that change as well. Thank you very much. I will now pass on to my colleague Lewis MacDonald. I heard you say and replied to the convener her first question that even after countries that are members of the EEA do not have the same access to the single market that we currently enjoy as full members of the single market, that fairly reflects what you said. Apart from many other aspects, they do not have the say in how the single market is formed. Obviously, they have that ability to access it, but they do not have the same rights in terms of how the market is taking forward. We had evidence a couple of weeks ago from Dagwernu Halter of Eftah, who said that in his view, and I think that this perhaps also reflects and I'm interested if this also reflects what was in your mind, full membership of the single market would normally also imply being part of the customs union, but Eftah EEA states are not part of the customs union. Would you agree that that is a significant loss as well if we are not members, as on the current basis? Not only would we not have a say in their rules and regulations, we would also be out with the customs union and that is very significant. I think that, as I have said, we believe that the current situation where you are members of the customs union, you have full membership of the single market, is the optimum position to be in and anything that moves away from that is going to be to the detriment both of the Scottish economy and indeed to the UK economy. I think that it's also important to say, I suppose that it's a very obvious point, that when people voted in the 23rd of June, even those voting to leave the EU didn't necessarily vote for leaving either a customs union or the single market and it now seems to become a shorthand for some people that that vote means leaving the single market. I don't think that that was ever on. It was in the minds of many people, I appreciate that, but some people were explicitly saying that we did not want to vote for that when we voted to leave. That's your optimum position just now and you want to try to maintain that optimum position. Clearly for countries like Norway and Iceland, which are members of Eftah and members of the European economic area but not members of the European Union, I think that people rightly say that the four freedoms are implicit in the single market. However, you would recognise that areas like agriculture and fisheries lie out with the terms of the European economic area and therefore, although in principle, full freedom of movement of goods and services is part of the single market arrangement, in practice there are some qualifications to that. I think that there will always be qualifications, but I think that those qualifications, as I say, in the evolution of the single market since the mid-1980s, we've seen those gradually removed, but I recognise the reality of the position that you mentioned. I think that the real fear is that any change to that and actually even now the uncertainty over whether there will be changes or the extent to which there will be changes is a dampener on economic activity. We don't want to see further changes to that. I recognise the exceptions that you mentioned, but we don't want to see further changes to that because we think that it's detrimental to the Scottish economy. Actually, we had a meeting with one of the major business organisations, I think, within 10 days of the vote, and they had said that one member had said that they had lost a contract already at that stage because the people involved in placing the contract didn't see, they had certainty over, in this case, Scotland's place in the EU, specifically the EU-related project in Dundee. We don't want to see, we have enough to contend with, in terms of making sure that the economy grows. We don't want to see further obstacles placed in a way. You mentioned that specific proposals will come forward shortly on how to address some of those issues. Do you envisage those specific proposals covering the issue of the customs union and the trade and goods that are not included in the terms of the European economic area agreement? We'll have to see what's brought forward. However, I think that what it will cover is, first of all, how we would envisage Scotland maintaining the current benefits of membership of the single market. I am sure that it will talk about the hierarchy of concerns and the positions that it wants to achieve. We do. Our preference is to see the UK stay within the EU. That would be in the single market, which is, I think, beneficial to Scotland as well as Scotland staying within the single market. We will cover a number of different if you like options and priorities and make clear what our preference is. Finally, I accept that the Scottish Government has been clear from a very early stage that the single market is a desirable outcome. I think that there has been less clarity around the customs union. Clearly, many of the tariff and non-tariff barriers that you have mentioned arise from the customs or would arise in the absence of membership of the customs union. I wonder if you could cast light on that this morning as to the Scottish Government's view of the importance of the customs union going forward. I think that that is better done when we publish our proposals, to be honest. Of course, we will be open to questioning on aspects like that, but I think that I wouldn't want to unveil it before it is unveiled, if you like. It will be for others, the First Minister, in particular, to bring that forward. However, I think that it will cover those areas. Of course, we are open to questioning on what we have put forward. I have to say that, having gone around most recently as last night, other business organisations and economic stakeholders will tell you that every member here must have heard the same from business organisations about how concerned they are about continuing not just uncertainty but what they perceive to be a lack of focus as to where the UK Government is going. Correspondingly, I have had, for my part, fairly encouraging responses to the fact that the Scottish Government will make as best it can, clear its proposals very shortly. However, when that happens, of course, not just this committee but all the committees of the Parliament and the various economic actors will be able to interrogate and question our proposals, which there is not long to wait for them coming forward now. Thank you. Good morning, Cabinet Secretary. Two questions. First, we do not know clearly what is going to happen at the end of the next two years' process and where Scotland will be left. However, if we do end up in a scenario where the UK has gone down the road of hard Brexit and Scotland has managed to negotiate some way of achieving a softer Brexit and at the same time, given that the UK Government has said about Ireland, there is no hard border between Scotland and England, then do you believe that there will be opportunities for investment in Scotland because there will be a competitive advantage in Scotland because any company wanting to invest in the UK but wanting access to the softer Brexit conditions would therefore be attracted to invest in Scotland? Yes, I do. That follows from what I said in an opening statement where, in terms of our attractiveness as a location for inward investment, many companies who make that decision do so if not on the basis certainly take into account the access that we have under current circumstances to the single market. It follows from that that depending on what the exact outcome is, the more you have something akin to membership of that single market, the more attractive you will be to inward investors. It is not easy to quantify at this stage, but there is a definite benefit from Scotland having retained that. The same benefits would accrue to the rest of the UK if they were to take the decision to remain within the single market. However, I also believe that, if there is a differentiated outcome in terms of the relationship to the single market, those who have the closest relationship to what we currently have will be in a position of advantage. I think that that is true. My second question relates to the Bivopet subject, which is the food and drink industry, given that it is the most successful exporting sector in Scotland in recent years. The industry still has huge opportunities in terms of global markets. I am just wondering what thought the Government is giving to putting an insurance policy in place, given the game that was going to happen in terms of a relationship with Europe, to exploit the opportunities in these wider global markets for food and drink in particular, given that it could create tens of thousands of new jobs by securing those export opportunities in the emerging markets, in the Far East and so on and so forth. Do you agree that we have to redouble our efforts in terms of making the most of those opportunities around the world? As well as trying to plan for the future, we are actively undertaking that kind of work now, which builds on the work that is done, not least by yourself. Over recent years, there has been a phenomenal increase in terms of food and drink exports. I think that even the foreign and common health office this week was tweeting about how important the Scottish whisky sector was, for example, to the UK economy, so there has been huge success. If you look at some of the examples, say, for example, to China, where you saw, I think, I am right in saying, and I acknowledge Richard Lochhead who would know this better than me, but it was shellfish when one particular case went from zero to over £20 million in a very short period of time. We are aware of the potential that is there. We are trying to upscale in the short term our presence around the EU, so doubling the number of SDI members of staff within the EU, but continuing to look into markets such as China and Brazil. If you think of the size of those two markets alone, you can see what the potential is. We have not exploited them nearly enough as yet, but we have made inroads. For example, recently, I met a whole series of chief executives from India looking to invest in Scotland and also to talk about exports to India. I do not think that it is just something that we have to plan for the future, although we are doing that in the way that we are configuring SDI. It also underlies part of the rationale for the review of enterprise and skills agencies that we are currently involved in, but we are doing that now. You are right to say that we have achieved a huge amount in relation to this, but there is much more that we can achieve. I am very impressed with your knowledge of the shellfish sector in Scotland and the statistics, but I urge the Government to accelerate our efforts to exploit those opportunities around the world and to learn from the New Zealand and the Norways, which are small countries that have really refocused their export strategies in past decades with huge economic success. Last night, I attended the cross-party group on tourism. One of the points that were raised was that of reputation, and Scotland's reputation and also the UK's reputation for being open for business. The example was given of a report that appeared in a newspaper in India within the last few weeks of five reasons not to study in the UK because of the Brexit implications. Do you think that the issue of reputation and Scotland's economic opportunity is crucial in the single market and the customs union? I think that reputation is notwithstanding the example that you have just given, a very good reputation. It is true for the whole of the UK, but in particular for Scotland. I have not seen those five reasons not to come here in relation to India. I imagine that top of the list would be something like the post-study work visa, which became very prominent when the Prime Minister visited India recently. The absence of any movement on the part of the UK Government was one of the reasons why we got so little from that. I think that the international reputation of Scotland and the UK as visitor destinations is extremely good. We have seen real growth in tourism over recent years. It is also true to say that, in relation to a question from Lewis MacDonald about the exchange rate, that has been a beneficial impact as well. Although I do think that we were seeing substantial growth just anecdotally, the Edinburgh Festival and Frings this year is somebody who is born up in Edinburgh. I have never seen it as busy or reaching different parts of the city as it was this year. The thing is to make sure that we capitalise on that. Things like the NC500 going round the top of Scotland opens up new areas. Some of the hospitality establishments say that we are struggling to cope with the new demand that that initiative had brought. We have substantial benefits. It is probably best if we do not have foreign and common wealth office tweets that show the wrong bridge when they are trying to claim credit for the Queensferry crossing rather bizarrely, but it showed a picture of the rail bridge, which in itself is a pretty good attraction for Scotland. We have that, but our international reputation is extremely important. Part of the initiative that I mentioned before about increasing the number of SDI staff in the EU—for example, we often talk about India and China, which is becoming increasingly important, but Germany is an extremely important market for tourism here in Scotland. We have to make sure that we do more across the EU, as well as in other destinations. Of course, North America is also extremely important, not just for the numbers, but for the amount that is spent by North American visitors when they come to Scotland. We have an extremely good product to sell. I would hope that the large amount of international activity that is being undertaken, especially by the First Minister, Mike Russell and others, will also have the benefit of raising Scotland's profile. People will have different views, I am sure, on the referendum in 2014, but that, along with the Rider Cup and the Commonwealth Games, all raise Scotland's profile internationally to a very large extent. We have to try and capitalise on that to help what is already a very strong industry in Scotland in relation to tourism. In terms of the customs union, what assessment has the Scottish Government made of the potential costs to Scottish businesses of non-tariff barriers, such as customs checks, rules of origin checks and product testing, in the event that the UK and Scotland leaves the customs union? I have mentioned some of the work that has been done already. If you look at some of the studies done by Fraser of Alland and so on, they will give indications as to what the implications of barriers are. I think that, for those of us who are old enough to remember, that when you had to go through such barriers previously going around Europe, it is a disincentive. I suppose that, for some people, there was always a fear that they would not get access when they came into a customs barrier. It is pretty obvious that, if you have those kinds of barriers, that acts as an inhibition on movement of people for purposes other than employment, to visit and so on. I do not think that anybody would argue against a position that having barriers where previously they were none is going to be anything other than a bad thing for movement of people in relation, in this case, to tourism. Finally, one of the areas that I have got an interest in is out of the cruise tourism, also with the Greenwick Ocean terminal. Over the last two years, more than 200,000 people have come into Scotland through cruise ships in Greenwick. One of the areas of concern has been that they face-to-face passport checks, which is how you will be aware of, in terms of the added time and the added financial cost that is borne from that. How important, going back to the issue of reputation but also the welcome that people will actually get when they come in? I bear in mind that most of the passengers are European, as well as the additional time constraints available for the staff. How important do you think that some of those non-tariff barriers are in terms of trying to encourage people to come into Scotland? I remember discussions that we had at that time, I think that I was a transport minister at the time and had that interest. It does have an effect. If you are somebody, a new-use citizen going round waters of the EU, you do not expect to have that kind of face-to-face interrogation as it sometimes was about your right to be there in the first place. It came certainly to some of those people as a surprise. Of course, they would relate that experience to others. Of course, that is not what you want to have when you are trying to relax on a cruise. The importance of the industry in Scotland is huge in your area, but we have recently, with the UK Government, agreed to invest substantially in Aberdeen City Deal, part of which is about the enhancement of the harbour. It is trying to attract more cruise ships. It is extremely important in the Northern Isles and Scotland. The Western Isles is looking to do a lot more. If you are looking to grow that trade as we are, the benefits of having substantial cruise ships of people visiting the shore can be substantial for local businesses, whether they are in the fourth in the Northern Isles or elsewhere. If you have that perception growing, it can be a difficult place to come to. You might get stopped and checked. The way that it was done happened very quickly, so people had no understanding that might happen to them in terms of those face-to-face interviews from before. It can have a detrimental effect, and we made representations to the UK Government at the time to say that this could do that. You are right, and it points to the general principle that the more straightforward it is for people to visit other countries, in this case by cruise ship, the less likely they are to feel that kind of intrusion. There has obviously got to be a legitimate role for security services and other parts of the state to be able to protect themselves. However, in terms of recreational activity, that acts as a disincentive, and we could see more and more of that as a result of Brexit. I am afraid that I am going to have to move on perhaps later. Emma Harper. Good morning, cabinet secretary. Richard Lochhead mentioned food and drink industry, and I am interested in highlighting agriculture and the business that might be affected because of our exit from the European Union. We have heard previously about WTO tariff options and how they relate to agriculture. I am interested in whether the Government has done any assessment of the impact on Scotland of trading under WTO rules, in particular regarding agriculture, and how the Scottish Government is working with the UK Government to ensure devolved interests such as shares of tariff rate quotas and allowance for agricultural subsidies are actually firmly considered as the UK seeks to negotiate new trade deals? Yes, we have. We had the Scottish Government paper from August that summarised the impact that leaving the EU could have on Scotland based on recent studies. That analysis indicates that Scottish GDP could be up to £11.2 billion lower, as I mentioned by 2030, compared to the forecast GDP in the absence of Brexit, and specifically WTO trading relationships. If that was what was to be the result, it could reduce Scottish GDP by that extent. We also applied analysis of Treasury by the Treasury on the impact of UK tax revenues to Scotland, which suggested that we could see our tax revenues reduce between £1.7 billion and £3.7 billion a year by 2030. Of course, I have mentioned the separate modelling that we had undertaken by the Fraser of Allander Institute with the WTO scenario. Perhaps on the particular point about agriculture, Mr Burgess might be able to answer that. I have been in touch with the Department for International Trade specifically around the tariff quotas issue, together with colleagues leading on agriculture and food areas, to make sure that Scotland is a full and equal partner in the UK Government's considerations of its approach to the WTO on that. Otherwise, there is a risk that the Department for International Trade will simply look to DEFRA and not to the whole of the UK. As well, there is an issue about not just what quotas the UK and the EU set but the quotas that are set by other countries for exports from the UK and the EU. My sense is that the UK Government is only beginning its consideration of that. Rest assured that we will make sure that Scottish interests are well represented and heard in that. Engagement with the UK Government has been quite frustrating over a number of areas, but DEFRA, because of the engagement that it has had previously with devolved administrations, has been a bit more engaged than perhaps some of those other areas. Some of my colleagues could mention that or talk about that more than I could, but I think that DEFRA has had that relationship in the past, so that relationship has been a bit more productive than it has been in some other areas. Just to go back to your point about the situation with the EU. It is not just about the EU, as Mr Burgess says, but we have, through the trade agreements that the EU has made, agreements with more than 50 countries. We are working closely with the industry to understand the full implications. I think that that is something that perhaps the public debate has not focused on so much, the power of the EU in achieving those. Also, if you end up with a hard Brexit for the whole of the UK in trying to come to the trade agreements that everyone talks about, you are going to have to contend with a very large and powerful EU that might have a different interest. I think that that is extremely important. Just to say that, for example, 80 per cent of Scotland's red meat exports are destined for the EU, and figures from the industry show that the value of beef and lamb exports on the EU in 2015 was approximately £73 million, which accounts, as I say, for about 80 per cent. However, if we were to be subject to the current tariff that applied to countries outwith the EU, which should be the potential outcome from a hard Brexit, then the same volume of beef and lamb would cost around 50 per cent more for importers to buy our products, so that you can see the disadvantage that would suffer as a result of that. Good morning, cabinet secretary. The reasons that many of us did vote to remain, I thought, were neatly summarised in terms of our international trading relationships and new opening remarks. Insofar as you are working to secure new business for us wherever in the globe, obviously we commend you for that, and the whole Parliament, I hope, would support you in those endeavours. I should also say, as the convener of the committee, that it recommended the design of the forth crossing to Parliament that the foreign and common wealth office are very often lacking in their understanding of domestic matters. I would like to ask you about the broader international trading relationships that are emerging. The Scottish Government and the Green Party, I think it could be said, have been hand in glove with President-elect Trump, a happy thing, I think, in relation to their view of TTIP and the route to international trading through large block arrangements. The prospective new trading secretaries of the United States have said very much they are in favour of bilateral agreements. I wonder what conversations you have had. Have you, like the mayor of London, had an opportunity to have conversations with the Secretary of State for International Trade about how Scotland's interests, irrespective of the environment that we find ourselves in in the future, are reflected in what appear to be moves towards more bilateral agreements with major countries rather than trading block agreements? That clearly will be crucial for many of the products, the food and drink sector that we were talking about, to secure Scotland's interests. I wonder what opportunities you have had to have meetings with the Department of International Trade. I know that your colleague touched on that, but I think that that is going to be a crucial part of the future environment, irrespective of how the whole issue of the European Union settles. I think that Jackson Carlaw is exactly right to say that whatever the scenario that transpires, we have to make the best of that and we have to work within that environment. I am not sure that handing love with President-elect Trump in relation to TTIP is the way that I would describe our respective approaches to TTIP, but what we have done is have that discussion, so I might with the Secretary of State, probably just before he made his comment about British businesses being fat and on the golf course every Friday, which I am not sure how that would have promoted either trade from Britain or elsewhere. We did actually come to a constructive agreement whereby I had laid out for him some of the things that I have mentioned before about how we intend to upscale in the EU and elsewhere our activity. I suppose that it would have to be characterised as trade promotion. We are not able, of course, in this Parliament to strike trade agreements, but I did say to him at that stage that I would want to see that being done with the UK Government. The UK Government, whatever we think of the political settlement that we have just now, has a wider network of offices around the world. They are meant to represent Scotland as well. Scottish taxpayers pay into that, and it is fair to say that we do not feel that we get, if you like, the support that we should do in relation to the way that international trade is promoted through that network. I had laid out to Liam Fox that I wanted to see the work that we are doing to expand our presence because of the oncoming threats of Brexit and so on. I would like to see that being done with the UK Government. I generally want to see that being done with the UK Government. What we have tried to achieve—this is also true of the economic development and skills review—is a much more focused international presence. If people are not working against each other from Scotland, you can get a visit in a country whereby the minister may be there one week, somebody from university, the next. One of the trade organisations at the chambers of commerce may have an event a month later, so we have to be more focused in relation to that. That focus should also include what the UK Government can offer through its network. We have had those discussions. I have spoken directly with Liam Fox on that and, of course, on international trade elements. Both the Governments have had that conversation at official level. It may be the case if we have to rely increasingly on bilateral trade agreements. I think that that is extremely problematic, not least because it cannot even be begun until after we have exited the EU because of the nature of obligations to the EU. That kind of hiatus is not going to be good for trade. The bottom line is that we have not accepted that hiatus. We are trying to upscale what we are doing not just in the EU but around the world and the markets, which are important to us. I am happy and keen that that should be done in conjunction with the UK Government. Briefly, to add Lord Price, the Minister for State and Department for International Trade, visited Scotland and recently met Paul Wheelhouse. He outlined his department's approach. The first priority there is sorting out the UK's schedules of commitments at the WTO, followed by getting a trade arrangement in place with the EU and then with those countries with which the EU has a trade arrangement. New bilateral trade agreements with other countries seem to be relatively far down the queue, even though members will have seen from the press engagements with Australia and New Zealand and India. There is also an assumption that bilateral will be faster than the multi-lateral agreements that CETA has taken about seven years for negotiation. After-countries already have a trade agreement with Canada, but even with a smaller bloc dealing with Canada, it took about 10 years for negotiation, so bilateral is not necessary. Is that not the distinction? You are dealing with a bloc rather than bilaterally with two countries, where, of course, the arrangement is one between two countries and not one between two countries that then has to be endorsed by half a dozen others in the bloc. That has been the problem with TTIP, which the United States is now disassociating itself from as many other representatives in various countries across the other affected nations have expressed concerns about, too. I am encouraged, however. The meeting that you had with Dr Fox, who I think is volunteered to come to this committee at some point, by definition, if you were referencing it to the golf course, comment was some time ago. Is there in prospect the opportunity for an ongoing schedule of meetings between you and the Secretary of State? I do feel very strongly that we need to ensure that Scotland's interests are fully represented in whatever the new arrangements are that he is seeking to negotiate on behalf of the United Kingdom, because if the outcome of this is not the one that is preferred by the Scottish Government, then it will be fundamentally important that Scotland's opportunities are maximised in those new arrangements. Yes, and we agreed to have further meetings. I would say that that was perhaps easier to achieve than it has been in many other areas with the UK Government, so we had that willingness and we have agreed to have further meetings. Just to come back to the point about bilateral agreements, one of the major issues that we have is that we do not have, either in Scotland or the UK, the expertise to carry out those, certainly a large range of potential bilateral agreements. At one comment from somebody who I will not mention whose name everyone would know if I did, said that if it had been the case that the UK had been having to carry out the discussions on CETA, they would, in their words, have been eaten alive by the trade negotiators, which Canada has, because they have been doing this, obviously, for a long period of time. I think that I am right in saying that somebody like KPMG has been tasked by the UK Government to cast around the world to get people that have got that expertise with limited success, it seems to me a bit of a reversal about the reports from free movement of people to actually try and get people around the world to come here to help negotiate Brexit, but that's a genuine concern. If things go according to the timetable that the UK Government has set out and we have article 50 in March next year and then we leave the EU in two years' time, within that period we are going to have to have scaled up massively on the experience of discussing these trade deals with some extremely hard headed and experienced trade negotiators around the world. Doing that for one country, say like Canada, is a big enough task, but to do it simultaneously for India, for China, for Australia, for the US seems to me like a pretty big task. On the basic points that Jackson Carlaw makes about continuing against the UK Government, we want to do that. As has been said, Lord Price has also been here on two occasions, certainly with Paul Wheelhouse on one occasion and we will have further meetings with Dr Fox as well. You mentioned the immediate post-Brexit period. If we were in the theoretical situation of being part of the UK, which is in a hard Brexit, the WTO default situation, that immediate period is shocking and potentially quite damaging, certainly damaging to the Scottish economy. Has the Scottish Government considered what actions you would be able to take to mitigate as much of the damage there as possible if we are in that situation? Yes, and I suppose that understanding that that might be a potential outcome is one of the things that underlies the activities that we are undertaking just now. As I have said, we are not able to reach trade agreements that are not within the remit of this Parliament or the Government in Scotland, but what we can do is promote those relationships and we are doing a lot of work around that. If we did have, as you quite rightly say, this sudden and huge shock that people would be active within the economy in Scotland in terms of having their trade relationships altered in such a dramatic way to go down to WTO rules, I should say that there is also working on within the UK Government to try and disentangle some of the quotas that are currently laid out in the EU a lot but not disaggregated. So there is work going on, it is true as well, at the UK Government level. Preparation for that kind of shock is something that is implicit in what we are doing, while, at the same time, as I have mentioned in what we intend to propose very shortly, we are trying to see if we can avoid that scenario. Going back to Jackson Carlaw's point about trade deals, I would not want to put words into your mouth, but the Green Party certainly always felt that we came more from the Bernie Sanders School of Thought on these deals than the Trump School. Given that last week or the week before, we found that the Scottish NHS was not exempt from CETA and your comments a moment ago around the relative inexperience of the UK's trade negotiators. Is this mix of ideological motivation at the Department of International Trade and inexperience a recipe for huge risk to Scottish public services in any future trade deal? In future, yes. I would have to say in relation to CETA, obviously that was carried out by EU negotiators who themselves are pretty experienced in relation to that. Unfortunately, we do not carry out that negotiation. It is still to be ratified, I think, by the UK Parliament, as it will have to be by all EU states. We do not carry out that, so we can make our views known, as we did through TTIP, on the very point that you mentioned. However, yes, I think that that is a concern. It is not something that should be easily brushed under the carpet. If you have a situation in which you are going to move to have to carry out all your own trade negotiations and do it on a global basis, whereas all your current trade deals that you have and the trade environment is set by the EU, as I have said, is a large, powerful trading bloc, the biggest in the world, then you really have to go into that prepared. If you have a situation in which you are trying desperately to cast around to get people from overseas to come and do that, first of all, how sufficiently are they aware of UK trade and industry and its requirements, apart from the other aspects that you mentioned. It is a real threat that has not been given sufficient focus. You are quite right if what you are saying is that in that scenario, too few people, too little experience trying to do too much and too quick a timescale, then the potential for things to be missed to our disadvantage whether Scotland or the UK must be pretty high. There has been discussion already that the committee has certainly looked at it, the potential need to re-evaluate the devolution settlement in the event of Brexit, where powers are repatriated to, to Westminster or directly to here. Would that be a case for perhaps a wider look at Scotland's relationship with the rest of the UK? Seat is a very good example where the Canadian provinces had a huge level of involvement because deals cannot be approved without them. Is that a case for the Scottish Government to start arguing for a serious statutory role in those negotiations, or at least in the approval of any final deal? I think that it is almost, if you like, our standing position that we want to have the maximum possible role in your right to say. I mean, obviously, Canada is in a confederal system where the provinces have very substantial powers, but yes, I think, especially if it is the case that a UK Government of whichever political persuasion and a Scottish Government of a very different political persuasion have different priorities, then it seems to me, you know, if a country like Canada, a confederal country, can make sure that it takes a very substantial cue from the needs of its provinces, I'm not likening Scotland to a province by any means, but I think that we should be able to do that within the UK. I think that you've seen that debate develop further. It's perhaps difficult to be focused on a specific outcome because there's so much that seems to be uncertain just now. And I say that from talking to the business community in last week, how they feel that they've never had a period quite like this in terms of so much being uncertain and so few cues as to how things might go. But yes, of course, we've always had a position, we've tried to maximise the role of Scotland in any of those things. You talked about increasing reliance on bilateral agreements being extremely problematic. Do you acknowledge that an increasing reliance on bilateral agreements is likely under almost any imaginable scenario? I'm thinking, for example, of EFTA and the European Economic Area, where those countries, whether within or without the EEA, have access to arrangements with the European Union but also have bilateral agreements and the freedom to negotiate bilateral agreements elsewhere. EFTA members can also collectively negotiate, as we heard, in relation to Canada. As Mr Burgess said, there are 50 countries out with the European Union with which the European Union currently has trade arrangements. Any scenario of being out with the European Union presumably means that those agreements have to be negotiated again, even where we have to remain in the single market. First of all, would you acknowledge that increasing reliance on bilateral agreements is inevitable? Secondly, could you say a bit more about how the Scottish Government is able to put across to the UK Government and others what our international trade priorities are? If things go and again, it's back to that idea of being uncertain as to how things will develop. However, if there is increasing reliance on bilateral agreements, first of all, in relation to EFTA countries, they are going to want to make sure that they do nothing in their negotiations with other countries that upsets a relationship or undermines a relationship in relation to the single market. They are going to be very conscious of that. If we take one example, the EU has not managed, despite the wealth of experience at Scotland, to reach a trade agreement with India. If you imagine the situation of a hard Brexit, the UK or Scotland is trying to strike a deal with India, what is going to be further up the list of priorities for India? I am sorry to interrupt, but my question is really about the softest imaginable Brexit. Are there any circumstances in the view of the Scottish Government in which bilateral agreements will not be required in order to take forward trade? Oh yes, if we retain membership of the EU, which is something that we have said that we would want to achieve as well yet. But only in those circumstances? It depends again on the nature of how, if you retain membership to the single market, you treat the terms on which that happens as well. There are circumstances in which you can avoid having to do that. Finally, in relation to the ability of the Scottish Government to discuss those matters with the Department for International Trade, what is your existing at home within the Scottish Government in Scotland? What departmental support will you have, and what expertise do you have in-house for such negotiations? You will know the configuration of the Scottish Government, but you will appreciate that, since Brexit, there has been a substantial amount of reorganisation to make sure that that support and civil services are configured, so the establishment of, for example, a specific economy unit within the Government. As I have mentioned, the upscaling of our activities through SDI, but also through the enterprise and skills review, what we are seeing is the ability to focus more clearly on those things. We do not have the resources that the UK Government has in relation to that, but Brexit is interesting when I got this job, Brexit did not exist really, and it is amazing the difference that it has made to the job that I do, and that is reflected in the civil service support that I get as well. If I were just before we wind up, if I could just go back to Mr Burgess, you mentioned very politely earlier that you felt that the Department of Foreign Trade was just at the very beginning of the process of considering what WTO rules might mean for a post-Brexit UK. We took quite extensive evidence from WTO experts in the committee a few weeks ago, and one of the things that they had said is that the Nissan deal, which we do not know the details of, had been promised that any tariff implications would be met by the UK. That would be against WTO rules, and indeed any WTO rules insist that free trade deals have to go across all sectors. You cannot single out one particular sector, and you cannot pay the tariffs of one particular sector. Do you think that in your discussions with the Department of Foreign Trade there is the understanding of that kind of thing? I do not want to do a disservice to the Department for International Trade. There are a lot of good, there are experienced people in there. It is a department that is growing rapidly. My comment earlier was on a very specific point about those tariff quotas in other countries, third countries' schedules, that at the moment the EU has a benefit from being able to export a certain amount of a particular commodity to the United States and how those might be divided up between the rest of the EU and the UK. My comment about the Department for International Trade being at the beginning of the process was very specifically on that point. They do have staff that are experienced. That experience so far has been directed towards working as part of the EU's negotiations, rather than negotiating in their own right. Nevertheless, there are people there that know and understand the WTO and those mechanisms well. What we are seeking to do, and I would say so far being quite successful, is working with the Department for International Trade to understand what they are working on to see how best we can input to that work and to make sure that Scotland's interests are protected in that process. I would say that the dialogue with them at official level and, as the cabinet secretary has said, between ministers has been relatively good so far. I certainly hope that that continues. Okay, thank you very much. We'll now have a very short suspension before we go to the next evidence session. Hello, Ian. It's David at the Parliament. Are you able to hear me at the moment? Yeah, excellent. Thank you, Ian. The committee is just having a short suspension while the witnesses change over here. We can see and hear you. I'll just check with my broadcasting colleagues that they are happy. We are fine. Thank you very much, Ian. It's now back over to the convener to restart the meeting whenever the committee is ready. Welcome back to the second session of our witnesses. Our second item of business is evidence on the implications of the EU referendum for Scotland with Ian Duncan, MEP. Welcome, Mr Duncan. I understand that Mr Duncan has to leave at 10.25 in order to vote. I'm not sure if he still wishes to make some opening remarks or if he feels there is too much pressure of time. Madam convener, welcome. You'll be pleased to know that the president of Tunisia is overrunning and so the votes have now been postponed. I believe that there is plenty of time to speak to you. So if you are amenable, I will make my opening remarks. It's a pleasure to speak before this committee. You will probably be aware that I was a servant of the committee for almost a decade laterally as a clerk and have a very strong appreciation of the work done by this committee. Let me cover some of the areas where I think I can offer some insight from Brussels. I cover fisheries, I cover energy and I cover climate change and each of these particular areas are of vital importance to Scotland and each of them have a serious part to play in the Brexit deal. So let me start at the beginning by talking about climate change. I was an attender at the recent Marrakesh meeting. I've been a parliamentary delegate to each of the UN climate change conferences and the Paris Accord is an absolutely essential element for global climate change. Brexit has the risk of impacting upon that in a negative way. Let me explain why. The European Union depends upon contributions from a number of member states to those in the east decarbonise. Those who have Soviet era technology which primarily relies upon coal and the parliament's lead negotiator right now on what are called the carbon markets and the carbon markets rely upon a series of funds to move money to Eastern Europe to help them decarbonise. We are the second biggest contributor to those potential funds and our contributions are measured in the billions. If we are not giving that money then the reform of those carbon fuel power stations will struggle and that is not insignificant. In addition to that when the targets were set for the European Union it was recognised that the UK would be able to shoulder a larger part of the burden. If the UK steps outside that commitment it will represent a significant increase for each of the remaining member states which for some will be difficult to meet. So important do I believe the issue of climate change that I have recommended to my own government and to anyone else frankly who will listen this should not be part of the climate this should not be part of the Brexit negotiations. I suggest that we take it out. We are already committed to funding on a global level decarbonisation I believe committing that money forward into Eastern Europe would be a good thing to do good for the United Kingdom good for Europe good for the globe good for climate change. Taking it forward when we look at electricity now electricity again becomes very important we don't quite have an open electricity market across Europe we are and again Scotland will soon become a net importer of electricity. I've been a strong advocate of a North Sea electricity grid connecting up those markets around the North Sea basin. Integral to that is Norway and Iceland as well as our sounds. I believe again that that collaboration should continue. I believe again that our market and the markets on the continent are better and safer when we are connected. I'll be advocating strongly again that through Brexit we do not lose sight of the fact that we can continue to address climate change primarily again by interlinking our renewables ambitions. I think that is important. Looking at fisheries again this is an interesting area you'll be aware of the recent study done by the North Atlantic Fisheries College based up in Shetland that noted that 65% of the EU catch excluding ourselves is caught in our waters. You'll also be aware that in terms of the North Sea certainly the EU waters constitute less than 25% and for the pelagic the distant waters it constitutes broadly only about 15%. In this area again and you'll be aware of the passion with which fishermen have addressed the issue of Brexit. I believe again we need to find a better way of addressing the challenges of our maritime resources and I think we're in a strong position to do that. I believe we should be able to get a better deal for our fishermen as we emerge through this. You'll also be aware that today is the EU Norway talks that will determine the quotas for the North Sea. We always think of the end of year December Council's when this is done. Of course it actually is done now. It's done now because we share the North Sea with Norway. After Brexit the Northern North Sea will be shared between the United Kingdom and Norway not the EU and those negotiations will be bilateral between the UK and Norway and it's important to stress that. The Southern North Sea will be a trilateral negotiation and out of that will emerge a different settlement. Important again of course not to lose sight of the fact that we might catch the fish but other people eat it and I'm very happy to touch upon that within the market discussion I suspect might follow. Let me talk a little bit about the mood out here. I think for the first time now there's a general acceptance that Brexit is indeed going to happen. First there was the bargaining element in the Kublau Ross approach to this. There was a suggestion that we could by some other means avoid that particular outcome. I think there's now an acceptance that that will indeed go forward. That acceptance has led to a great deal of unease amongst a number of member states and their representatives here. Not least because we are the second largest net contributor in terms of finance so when David Cameron secured a cap in the budget the last time around that was heralded as a great step forward in some respects going forward there will be a fall in the EU budget. It will go down. The money is available for all the projects will be less and I don't think that should be underestimated as a concern expressed particularly the time today the votes I'll be taking part in very shortly are about the EU budget. Again for the European Parliament wish that budget to go up and so I'm very conscious right now that people are now beginning to take this seriously from their own national interests as well as a collective community interests and that will be an important element I believe of those negotiations going forward. Now I'm quite happy to talk about these areas. I cover other areas as well. I cover LGBTI rights in the European Parliament. I cover agriculture as well. I'm very happy to comment upon these areas where I don't know. I will happily tell you I don't know the answer. It may be that I have colleagues who can help in the future and I would recommend them to you as a potential future witness but until that point I'm very happy to take questions. Thank you very much Mr Duncan. If I could quote from the president of the European Council Donald Tusk he back in October actually reflected on what he called the cake philosophy that one can have the EU cake and eat it too. To all who believe in it I propose a simple experiment buy a cake, eat it and see if it's still there on the plate. The cake philosophy was back in the news again this week when it notes that were caught by the press suggested that the have your cake and eat it approach was the favoured approach by the UK Government. I wondered if you think that that is likely to the UK Government is likely to be able to have its cake and eat it or what the cost of Brexit is likely to be. Another interesting way of looking at that is to have your EU president and eat it because unfortunately Donald Tusk's certainty in his role as you will be aware is now in doubt. That would be a significant impact on the negotiations I believe going forward because again he's no longer supported by his own member state. I would argue going into negotiation the best possible way to go in is with the have your cake and eat it approach. The very suggestion you go in with anything less than the biggest thing you want to have would seem to me a very very weak way to begin a negotiation and that is why again right now on the other side that's exactly what the EU is doing as well as it begins to examine these elements. So for example much in the news and rightly so is a question of residency of EU citizens rights within the United Kingdom and again a very strong move to have that recognised and taken out of the negotiations. I think that's a good thing to have done but of course you'll be aware that just to the matter a few days ago Chancellor Merkel said no that's not that's now part of the negotiation so again this idea that we face where we can look at this as anything other than a hard negotiation from both sides at the beginning. I don't think we should be in any doubt that both sides will have to negotiate with the hardest possible position at the beginning but if we have to find a compromise which is good for the EU and good for the United Kingdom then we will need to find that common sweet ground in the middle and that is what we're looking for the sweetest cake possible. And will you be encouraging your colleagues to compromise on the issue of free movement which seems to be at the crux of matters? Again the issue of free movement is worth exploring in some greater depth. You will be aware that when the eastern states joined the EU not so many years ago the right to free movement was absolutely circumscribed. Only the UK and Ireland allowed free movement at that particular point. This inherent right that we take for granted was not offered to those who came from Poland or the Czech Republic or Slovakia. That freedom of movement that we now claim is inviolable was frankly set aside. So I would argue right now that we need to find an appropriate way to address the issue of the freedom of movement of workers that's what the treaties say and I believe we should find that after all we have a significant migrant population in Scotland and in the United Kingdom and we depend upon that and our economy depends upon that and people do want to come here for that very reason and so again when we're looking at the settlement that comes through here I would hope we can find a sensible approach not just to the citizenship issue but also to the movement of people issue and I believe we can find that because both the EU and the UK would be the weaker if we cannot find common ground on that point. The convener mentioned one apparent set of objectives that was made public last week but there were others that were made public very officially and the Office of Budget Responsibility has predicted that the requirement for public borrowing will increase by some £58.7 billion over five years as a result of Brexit. Does that figure sound reasonable to you? I'm not an economist I would have read the same figures you did so I can often know further insight into that. The Institute of Fiscal Studies published figures also last week which said that our real wage levels are likely to continue to be low and we will have the longest period of pressure downwards on real wages for 70 years. Do you recognise and are you prepared to comment on those numbers? Yes I can happily comment on those. We're going to go through a period of economic turmoil. Macro constitutional change brings that. I'm under no illusion about that. I was very clear that that would be the consequence of independence for Scotland. I'm very clear that that would be the consequence we will live through right now. The challenge going forward is how then do we emerge from the other side and what do we do to try and ensure that we protect as best we can every single element of our economy as strongly as we can and so in that regard those figures are important but it's also important to look at forecast figures to see what we can be looking at, what we should aspire to be rather than looking at worst-case scenarios. We should prepare for the worst-case scenarios, we should build for the best-case scenarios. Given that you don't dispute the OBR's prediction of a very substantial hit on the UK economy over the next five years and that you accept the IFS's projection of a very substantial hit on the wages of working people over the next five years, what is it that you see as the silver lining to these very enormous clouds that you acknowledge are hanging over us? Well again to be clear those enormous clouds are as nothing compared to clouds hanging over the Eurozone as we'll find during the upcoming referendum taking place in Italy today, if that not today later on this month, if indeed we find that vote goes against play minister Renzi then we will find a run on those banks, we will find the Eurozone itself beginning to go through a cathartic critical moment. What I would note just now in looking at these figures is we need to see the challenge for both sides of the channel in this regard because there are going to be challenges ahead, we should be under no illusion about that. What we do need to try to work at is what is the growth strategy we are trying to build bearing in mind again when you look at the sporotic growth that you're witnessing in the Eurozone compared even now still to the growth within the United Kingdom. The economy within the United Kingdom is more robust than it might have been thought and has managed to weather these early tremors. There are bigger tremors to come, I'm under no illusion about that. But again I note as I cast my eye to the European continent that they too have extreme problems going forward and the real issue that we do face now is we are far more uncertain times not least because of Brexit but also because many of the shibbolists with the EU have relied upon have been moved. Our membership of the EU has been vital both in terms of liberalising the wider economy and the markets there. We have been a principal driver for free trade agreements at a global level. If you take our advocacy out of that it becomes different and then throw into that equation the slightly quixotic and whimsical element of the arrival of Mr Trump and in the world does become very, very uncertain going forward. I accept all of that and the point you're making about the impact of Brexit in the European Union is one that has been made by a number of witnesses to this committee from other European Union member states and indeed from other European countries. The question then I think has to be how the United Kingdom can go forward in its relations with those European Union member states if the European Union is in the degree of difficulty you've described. From a Brussels perspective what do you believe is possible? You've talked I think this morning of wouldn't it be good to exclude climate change, wouldn't it be good to exclude the rights of residents of EU nationals living in the United Kingdom, wouldn't it be good to maintain the North Sea electricity grid? I think I would agree with all those three wouldn't it be good but how possible is it to do any of those things in a circumstance where the UK is not clear about its negotiating position and the EU is in increasing difficulty in its own right? The one thing I would note is the morning after the Brexit vote the British Government fell. I think it's important to stress that a new government came in whose policy was fundamentally different from its predecessor. It was now a government that had to take forward the Brexit approach. David Cameron was not an advocate of that. It has taken time for a government which had a fundamentally different policy to vote fast. In some respects taking that time has been helpful for both sides because I don't believe truthfully that the EU was in any better preparedness for this unexpected convulsion than we in the United Kingdom were and so right now they too are developing what I believe are very challenging talks intra-27 and that in itself will be the measure of what comes out because there are elements of this where you would hope that common sense would play a part. I thought the residency question would be one of them where common sense would play a part and I thought that with the movement on the British side I thought there would be a compensatory movement on the European side but that common sense is not applied there and that disappoints me. When I look at something like climate change again I would say common sense surely must apply here. We must be able to see a way through recognising the greater threat that this represents to us but I'm not sadly as optimistic as I would like to be on these areas. There are clearly areas where we can collaborate and collaborate very strongly whether it be on Erasmus, whether it be on Marie Curie, whether we look again at the horizon 2020 approach. There are many areas in which we can continue to work very closely intimately indeed with the European Union but I hope common sense is the watchword from both signs because both signs will be damaged by a failure to find the common sensible approach to resolving these issues. I suppose the other point that's worth stressing is it's only really in the last few weeks here that that recognition of inevitability of departure has become accepted. Up until that point there was a view that perhaps by other means whether it be the need for another election in the United Kingdom or an issue which might somewhere rather change the government's policy might still allow this to continue on. There isn't a broad finality, a recognition that this is not now likely to be the case and so I think there is a sorrow in that and I'm witnessing that amongst many colleagues. I work very closely with colleagues from across the political spectrum and across the national divide. We work very closely, we make good progress together and they know that they will miss us. I will certainly miss doing that too. Mr Duncan, you mentioned the North Sea offshore grid in your opening remarks. That's something that has been pioneered, pushed by the European Commission. It's a collaboration of EU member states in Norway, which has significant links with the EU. Even similar smaller projects like the Eil's project for Scotland, the Republic of Ireland and the north of Ireland, the feasibility funding for that, came through European Union funds. I would be interested in your further thoughts on what the future of these energy collaboration projects might be, particularly if we are heading towards a hard Brexit scenario, because the implications there are not just for ourselves, but particularly for the Republic of Ireland as well, due to the geographical realities of integrating them into a European grid that the UK might not then be part of. Thank you, Mr Greer. I'm always very conscious of not using the word harder, soft Brexit in this context. I think the North Sea grid is a no-brainer, frankly. I thought it was an easy thing for people to see. When we were looking again at the challenges facing the European Union, both in terms of climate change and energy security, the North Sea represented a stable investment prospect. You'll be pleased to know that I wrote a paper with one of your colleagues out here, Bass Eichhout. We sat and we wrote a paper together. The first time a green in a Conservative had written a paper jointly in the European Parliament, there was much surprise at that, but we were on the same page. For different reasons I suspect we were on the same page, which was, this is a good thing. The funding which has come so far has been good, but that is still, if you like, the early stage funding. In order to move this forward, it's serious money. Now, I had thought there's something here called the FC Fund, the Junker Fund, which is a vast, big pot of money, and I've been lobbying furiously to get cash from that to try and get this moving forward. I haven't been successful because, in truth, a lot of the endeavors and energy and climate change have been more about the energy security than they have been about the Paris Accord, and they've tilted the money more to the east. So a lot of it's been around pipeline questions, a lot of it's been around security questions on the eastern neighbourhood margins. So going forward, I still think the North Sea grid is an absolutely pitch-perfect necessary element to our collaboration in terms of electricity and on climate change. The body that exists trying to take this forward is not in the EU institution, so it need not be impacted by the Brexit issue. And as you point out, Norway and its renewables and its power stations, which allow you to broadly store the electricity, are vital. And I think Scotland will be vital as well. If only our power stations were on the other side of the country, that would be a lot easier, but we can't change the mountains, sadly. But I think, again, going forward, this is an area where we need to be clever about it because it's absolutely vital for our energy needs, our electricity needs, our climate change ambitions, and for the rest of Europe. So what suggestions then would you give to the Scottish Government to ensure that the UK Government doesn't jeopardise this and that a UK outside of the EU is still part of these projects? I don't think that the UK Government will. I mean, the meetings I'm having with them are to recognise why this is important. There will be an interregnum as people become focused upon things which are not about energy and not about climate change and will be focused upon other elements. So I'm not under any illusion that this will be more of a challenge. But the UK Government now is committed to the North Sea grid. That's helpful. The Scottish Government is too. I'm ambitious to bring some of my European colleagues up to Scotland. I'm intending to write the next draft or the next version of this particular joint paper with Mr Eichhout so that both of us, again, can present this as how on earth do we do it now that Brexit is here, so that we see that road going forward. I think we have opportunities to collaborate because people still want the same outcome. There's just no longer a quite as clear about how the move on the board gets us to it. To some degree, as much in your hands as mine, is the pressure that we must place upon all those who are involved to get the right outcome. That, I hope, will be something that we will be able to collaborate on together. Thank you, and Jackson Carlaw. Good morning, Mr Duncan. You've touched on a couple of specific areas. I quite like your impression of atmosphere. It's sometime now since the committee was in Brussels, we were there in July, and the committee has also heard evidence from other of your colleagues. Undoubtedly, when we were there, there was still very much astonishment and consternation, I think, in the political establishment on both sides of the channel at the outcome of the referendum, and a great deal of recognition and sympathy within the European Union that Scotland, together with other areas of the United Kingdom, but Scotland certainly had delivered a different result to other parts of the United Kingdom in the referendum. The question then was what capital could be attached to those regrets. Since then, of course, everybody's been away in their own summer recess over there, you've come back, there are other problems, there are other elections facing member states. You've hinted at a sort of coming to terms with the inevitability of Britain leaving amongst colleagues in the European Union now. What practical recognition do you think remains in relation to the vote that Scotland took, along with other parts of the United Kingdom, and how that might figure as we go forward in any negotiated settlement? Mr Carroll, yes, that's very much the question on many people's minds. I would note a couple of things here. There was a lot of regret, particularly about Scots, because for some reason Scots are just liked more than some other individuals, make of that pretty well. So there was a regret, but the reality is you can't bank regret. That's the bottom line. And so much as there was sympathy amongst a number of member states and representatives of member states, when it comes to the negotiations, it's not going to be done on a sympathetic basis. It will be done fighting for national self-interest. That's why again, I'm very keen to see each of the home nations within the United Kingdom linking arms to get the strongest possible deal, because it's in the interests of the other side to try and encourage division, to encourage some sort of gap between potentially Cardiff in London or Edinburgh in London or whatever. What we need to know going forward is there is an absolutely a rock solid, iron clad British position for the best deal that everybody is signed up to. So for example last week, I was in Strasbourg last week, but the Scottish Minister, Mr Russell, was across. Some of his comments were very unhelpful truthfully because they encouraged Spain to intervene at a stage when it simply would not have done so. Spain is one of these nations which you can always see on the edges ready to get involved. It doesn't often do so. Last week it did. It got straight in there and was very clear that there will be no Scottish exceptionalism. And I think that is again the sort of division which can be exploited by these negotiators. We need to have a team UK approach to get the best deal. That is what we must have. And I believe we can get that deal because I do believe working in strong collaboration, Edinburgh to London, London to Cardiff, Cardiff to Belfast. So I think we can do that. But there is now a recognition that each of those nations is fighting for their interests as well. When we talk about the negotiations will be how do we reconcile? Because it's not actually won against 27. So when it comes to fisheries for example, we're primarily having to deal with those who are bordering the North Sea. So that's not 27. That's a subset. And we're looking at some of the issues we have around our greater trade interests. It's not 27 because not each of the 27 states trades equally with us. When it's freedom of movement questions again, it's not one versus 27. The Eastern European states have a greater interest in freedom of movement than might be the case of Italy or Spain. So what we're having to see now is we need to be united. That's the first statement and a given. But we also have to recognise that it's no longer in the interests of the EU to be our friends and sympathetic though they may well be, that will cut no mustard out here. The Prime Minister indicated that she had sought to take the issue of freedom of residency status for EU nationals and UK and Scottish nationals within the European Union. But that initiative was publicly rebuffed by Chancellor Merkel and one or two others. Is that a widely held view across the European Parliament member states? Are there others who indicated that they would have preferred that an arrangement could have been made exceptionally at the start of this process or do they too see that very much as something they are not willing to do because they choose to make that part of the negotiation? I'd be very frank. There was shock in the Parliament when that announcement became clear because everyone but everyone here had assumed the stumbling block was Theresa May and her inability to negotiate and her unwillingness to recognise this shouldn't be part of the negotiations and a lot of people have been talking about that and gained a lot of currency. When Chancellor Merkel's very clear and trenchant view came out there was stunned silence truthfully, stunned silence amongst people who believed it was Britain being exceptional in this regard and being too mean spirited to our European colleagues. There's now a recognition that this really is going to be hardball because even on the issues where we can see the common sense of a mutual approach if you like taking it out of the debating and negotiating chamber, there's now a recognition that it is hardball and it will be hardball from the 27th even on the issues where we don't believe we have a disagreement. We do recognise that the Brits in Spain or the Eastern Europeans in Scotland, whatever it happens to be are an integral part of our community, our economy, our country. That's a no-brainer to take that out of the equation and yet it's still once again four square back in there. It's an negotiating tool brought back to the table by the Germans. Can I just come back as a supplementary to Jackson Carlos' previous question? When we were in Brussels, one of the member states that we spoke to made the point that if Scotland presented a proposal, a differentiated Scottish proposal that was endorsed by the UK Government, people would be far more likely to listen to a proposal that was endorsed by the UK Government. Of course, Mrs May, when she came to Edinburgh in July, indicated that she was listening to Scotland and understood Scotland's concerns. I believe that that was a point that Mr Carlos has made in the chamber as well. If a Scottish position was endorsed by the UK Government, other member states would view it differently. Would you agree with that and would you be encouraged in your colleagues in the UK Government to take that approach? May I ask a question? Which EU Government were you meeting with? As Mr Carlos knows, our discussions were with a number of Governments and they were off the record, so it wouldn't be appropriate to say who, as Mr Carlos hasn't said who it was either. I would be surprised if it would depend upon which Government representatives spoke to you. That would be quite an explosive position for a member state to have taken. We saw, for example, last week when this issue about talks being undertaken between the Scottish Government and the Spanish Government, how quickly the Foreign Minister of Spain stepped in to say there were no talks, whatever. So I would be really surprised if a member state now were advocating Scottish exceptionalism, because I don't believe, and I genuinely would be very surprised if that was the opinion strongly held by the Government in anything other than what might be very private discussions that you would have very, very far off the record. What I was talking about, and I think that what Mr Carlos has spoken about previously in the chamber, was a position that was endorsed by the UK Government. I couldn't see what the problem would be if the UK Government endorsed a particular Scottish position. My recollection is that, when we met with some of the ambassadors to the European Union, there was a suggestion that there were variables, I think, whether they were around Erasmus or Horizon 2020, where there were specific Scottish interests that might be reflected, but that in order for any European Government to be able to have a meaningful conversation around those variables with Scotland, I think very much that the team UK approach had to be established in order that there was a harmony in those discussions, because they felt that if there was a sense of an antagonism between the member nations within the United Kingdom, the expression that they used was that the shutters would come down in any such discussions. I'm not sure my recollection was that it was of a more fundamental variance, but more that there were obvious within the arrangements that had to be obtained areas where Scotland would have an opportunity to have a slightly different arrangement arrived at. I would anticipate there being elements where there could be a differential relationship between Scotland and the EU, if, for example, there were an appetite in England and Scotland to continue with Erasmus, but not for Wales to do so, or whatever it happened to be, yes, I could perceive that there would be opportunities within the framework established by the UK Government and the negotiations. But if there were to be a recognition of an entirely separate packaged deal, even that alone would raise anxieties, certainly with the Spanish who have been very vocal thus far on that matter, I suspect the same would probably be true in Belgium because of their issues around separation. There are other places within the EU where that notion would be troubling, I think, so, yes, there are certainly possibilities for Scotland or any member of the home nations to determine a different suite of elements within the UK negotiated package. I think that probably is true, but it would depend on what level you're doing and what fundamental level and how far you drilled down. Thank you. I don't think we did get down to drilling down to mentioning Erasmus, or horizon 2020, but I think that we'll just leave it at that. I don't know if we have any more. Stuart McMillan. Thank you. Good morning, Mr Duncan. In terms of the two-year negotiation period, do you think that that will be reached bearing in mind the next round of EU elections to place in 2019? Yes, yes, I think it will. I don't think you're going to get the fully fledged and wrapped up package by that particular point. I think there will be transition elements to it. I think one of the first elements of that transition will be the end of the role of MEPs, the end of the role of our involvement in the College of Commissioners. I think those elements will end probably in the spring of 2019. I would anticipate that. The exiting, oddly enough, probably isn't that challenging a concept insofar as cancelling your membership is straightforward. The test is what then replaces it, and that's why it needs to be looking at potentially transition arrangements in particular areas, whether it be in the wider question of food and drink, which Mr Locke had raised earlier, whether it be in the areas around the market question, which I suspect is the beating heart of this, whether it is in the cultural and social elements, there are different transition peers you can anticipate before our relationship with the EU ends. So I think the idea that we will literally be entirely out and concluded and everything detailed and done by that date. No, I don't think that is the case, but I don't think that necessarily need to be the case either. I think the transition element will be important as we begin to see the evolution of our relationship with the EU. Thank you for that. In terms of the transitional element, how do you see the discussion taking place with the electorate across the UK? The issue of transitional arrangements weren't really something that was raised too much from my recollection about the EU referendum. No, you're right, Mr McAll. I would always argue that a referendum is the wrong way to make fundamental constitutional change because you reduce very complex issues down to a yes, no question. And I think in that process, as we've witnessed in our two referendums, that can lead to confusion, that can lead to frustration, that can lead to animosity. I think it will be absolutely essential to see as the deal itself evolves, that the United Kingdom Parliament and the Parliaments of the Devolved Home Nations themselves are actively involved, both in the deliberation and discussion on that. I think that will be necessary. We are going to go through this fundamental change in our constitutional arrangement. I think that is right and that is proper. And there will be, I would imagine, an electionable approach at some point upon which there may well be this question held dear by certain manifestos or certain political parties who will then seek a mandate through that. I don't anticipate that anytime soon. I think we'll be sticking to the fixed timetable. But I think it's absolutely essential that people understand the length and breadth of the nation, what exactly is happening. The one thing I would note, and there are six of us out here, and I think we remain the anonymous elected members from Scotland, and so far as we are not widely known back at home. And that's not for want of effort. I know if I speak to your colleagues, Mr Smith and Mr Hutch, and they too are very staunch in their attempts to try and communicate. It isn't always that easy. There isn't always a great appetite to hear from your local MEP. So trying to help people understand how the EU works itself has always been something of a challenge. Trying to help people understand how it will work without the EU is equally challenging. And we will have a role for that, I hope. I mean, I know that my five, that my four colleagues will be working very hard on trying to take that particular matter forward. That will be an issue, however, because it's a dialogue and it does require the people who want to be part of that dialogue. And I know thus far, in terms of our understanding and engagement with the EU, it hasn't always been based upon the soundest of understanding about how it works and what it means. And finally, bearing around the issue of the transitional arrangements, what do you consider will actually be the impact of leaving the EU on businesses and also on inward investment for Scotland? Well, I would argue that any constitutional adjustment impacts on confidence, which does. It impacts upon investment. I think that is true. I think it's a sad but true statement. It was true, I believe, during the independence referendum. It's true now. The challenge for us now is to try and embrace the opportunities it gives us. So I know there's been some discussion about free trade agreements bilateral or multilateral. Seven years for a multilateral agreement with Canada was way, way too long. Several years were spent on dealing with the human rights elements. For example, two years were spent on that. Not that human rights are unimportant, but again, as we start to look at Canada and its human rights record, it isn't necessarily that bad and should not, I think, have delayed their agreement by two years. There are opportunities, I believe, when we look at bilateral agreements. That is evident. And the EU hasn't been very good at brokering multilateral agreements. So when earlier on there was discussion about the EU has the expertise, yes and no, it does have the expertise. Much of that expertise recently has been consumed by only two agreements, CETA, which should pass through and TTIP, which is dead. And those are the agreements that they've focused almost exclusively upon to the exclusion of areas for Scotland we principally benefit. So if we'd had the EU working hard in Southeast Asia or in India, where again the, to Mr Locke's credit, the spirits drinks industry would see an extraordinary benefit if the EU had broker deals there, but it didn't. And the other problems I've written, I commissioned two reports on the notion of enforcement of a free trade deal. A free trade deal is only good if you can enforce the rules and so forth. The EU is dreadful at enforcing its free trade deals. We've commissioned a learned academic from Zurich who came across. We looked at what the target should be for enforcement of EU trade deals. Now you would think that the target should be 100% enforcement. The target the EU set itself as 20%. It's currently meeting 10% of its enforcement requirements. So the free trade agreements brokered by the EU were not actually worth the paper they're written on. And you need a serious enforcement division within the EU to address this. And I've raised this. I've raised it with the commission saying you need to enforce the free trade agreements. And they keep coming back saying it's not one of our priorities. The priority is brokering the deal. The enforcement isn't the important. I can't think what the point of that is. So I digress gently but I come back again to a very simple point which is there are opportunities now for a bilateral agreement to be moved forward more quickly. And I would say that because trying to move forward at the pace of the slowest camel in the train of 28 has proven to be, as we probably see with CETA, and even allowing for the Wallonian intervention at the very end, has been a bedraggling process to try and get us here. And TTIP, which was meant to be the single biggest trade agreement on the face of the planet, is dead now. Supplementary from Ross Greer. It's on a slightly different point, if that's okay. Just very briefly, Mr Duncan, it's been really useful to get your reading of the Mood Music in Brussels in regards to the UK home nations. I was just wondering specifically what the level of understanding is of the absolute necessity of ensuring there's no hard border between the Republic of Ireland and the north. That has implications for some of the potential solutions that have been mooted for Scotland, but it is in itself essential as part of an international treaty between the state that we are part of and another state. It's probably not well understood here. That's an issue that clearly, rightly, is of great concern to the UK and to Ireland, but it probably isn't fully appreciated anywhere else, if I'm being honest. It needs to be, so I would argue that that's important, but certainly within the Parliament, their focus has not been on that border question. I think even discussing it, most people who are not already familiar with it don't get it. Thank you very much. We'll think we'll wind up now, and I'd like to thank Mr Duncan for coming to give evidence to us. We will now suspend.