The economy of an Independent Wales

Wales wealth. How to get and how to spend it

Wales currency and how to pay for the investment.

[ The cost of border and trade and currency transaction costs ]

So if you have been following, a £31 billion investment commitment.

Before we get to that however, the remaining costs of Independence.

Border and trade costs.

It often appears as headline news when someone offers a report, usually an ‘ academic ‘ report,  into the costs of Independence.

There is however a noticeable, or perhaps not so noticeable, shyness about extolling the very many benefits of Independence.

There are so many figures, by so many different ‘ studies ‘  with so many assumptions,  membership of the EU, or maybe not, will there be a hard border, what trading group will Wales belong to and with what tariffs.

So many assumptions as to make these studies at best questionable

So let's put the costs into perspective.

Wales, on Independence, is not a member of anything.

Decisions on whether to join this trading group or that, will be made according to what is in the best interest of Wales.

The starting point however, is that Wales will be an internationalist, free and open market nation.

It makes no sense to be anything other.

Trading, as at present, has costs.

It also has benefits.

The specific costs being examined here, is what will be different as an Independent nation.

The major change for business in particular, is that the remaining UK [ UKr ] will become a foreign country.

It will do so in terms of trade, borders and currency.

So should the consideration of this be a deterrent to Wales Independence.

As with all regarding any action jeopardising the ‘Union ‘ are often hysterical and overstated.

We leave to one side the considerable benefit to business in an Independent Wales. That will be dealt with later

We put the costs in perspective.

Over 50% of Wales business and service output is sold internally, within Wales So not affected by any border costs.

Exports outside the UK total £20.5 billion [  Wales government 2023 ] an increase of 15.5% from pre pandemic levels.

There is little reason for Tariff costs to businesses carrying out this export trade to significantly change from the present arrangements.

The UK government Office for Internal Market [OIM ]in its report to 2023  put Wales' sales to the rest of the UK at £26.1 billion.

This figure is down by 28% from a decade earlier.

It appears superficially [ without further analysis ] that Wales exports are increasing outside the UK and decreasing in the UK internal market.

It is likely that this trend is likely to continue as an Independent Wales concentrated on a more high tech production regime and which is internationally orientated.

That is not to say that significant trade will not continue between neighbouring nations.

So how will the border affect the costs of these cross border exports?

Logic will point to them being minimised.

The OIM report also pointed to Wales' purchases, that is UKr exports to Wales totaled £27.6 billion, so it is in no one's interest to impose unnecessary tariff or taxes.

Furthermore Wales will be producing significantly more clean renewable energy, much of it for export.

Energy that UKr, especially England badly needs.

It wouldn't make economic or political sense for the UKr to be imposing unnecessary costs on that.

And then there's water.

England in particular, relies on water from Wales and will continue to do so as there is no realistic short/medium term alternative.

After Independence UKr will have no right to that water source. It will become a natural resource of Wales.

Without suggesting that this water supply will be denied. It would make any suggestion of UKr imposing a ‘ hard ‘ border seem counterproductive..

Finally, the UK is a self acclaimed supporter of tariff free trade. It is a member of the World Trade Organisation, an organisation whose rules promote such trade.

It would be therefore strange if Wales was singled out to receive  less equitable treatment.

So, although there may be some additional trade and border costs after Independence, they will not be the headline grabbing, doomsday scenario that many opponents may wish.

Currency transaction costs.

When Wales gets its own currency, it will carry some additional costs.

Each of us incur financial transaction costs almost daily.

Use of a credit card has transaction costs.

Buying a house or booking a holiday has transaction costs.

Indeed as the word indicates, almost each financial transaction has a cost.

Costs imposed by financial institutions.

Banks, credit card companies, or agencies conducting the transaction.

Currency exchange also has a cost.

This occurs when we holiday abroad or purchase goods outside the pound sterling area.

Currency needs to be exchanged and costs are incurred, transaction costs.

It is usually a seamless process. We swipe a credit card in France and the bank in the UK is debited.

The exchange rates and charges are automatically calculated.

As easy as that,

Businesses too incur currency transaction costs.

When they buy and sell outside the UK, currency has to be exchanged and costs incurred, transaction costs.

It is a cost of business.

The difference on Wales Independence, is that UKr becomes a foreign country and the pound a foreign currency.

That makes every financial transaction with UKr subject to currency transaction costs.

There is no avoiding that fact and although the transaction itself will continue to be seamless, there will be costs.

A cost of Independence.

Thats choice

The choice between austerity, health and social care in crisis, low wages, lower education standards, affordable housing shortages and poor, and diminishing local services.

The consequence of policy decisions made elsewhere.

Or the choice of the benefits of Wales specific policy decisions. Decisions made for Wales benefit.

Policies possible only in Wales becoming a sovereign state with a sovereign currency.

Next up. Wales currency and where will Wales get the money from.