Import substitution and the demand for skilled labour in Scotland

It is, of course, well-known that Scotland is highly 'open' with respect to external trade, with, for example, exports and imports representing 80% and 87% of 1994 GDP respectively.1 However, it is probably fair to say, that, in terms of policy discussion and formulation, considerably more attention is paid to Scotland's performance in export markets than to the impact of import penetration in Scottish markets. This is perhaps unfortunate since, at least at the most general level, 'export promotion' and 'import substitution' can be seen as substitute (or, better still, complementary) policies for enhancing Scottish economic activity.2 In order to inform discussion of the merits or otherwise of import substitution policies for Scotland, the present paper provides quantitative estimates of the effects on the Scottish economy of a marginal change in imports, separately from the Rest of the UK (RUK) and from the Rest of the World (ROW). As part of the 'Scotland's Trade in Skills' project3 the results presented emphasise the impact of changing imports on Scotland's requirements for skilled labour. Formally, this is an embodied factor content analysis, with 'skilled labour' being the sole identified production factor.