“The concept of Free Ports is thousands of years old (with Delos in Ancient Greece having originally pioneered the concept). Today they prosper all around the world. Handling over $750 billion of merchandise and employing 420,000 people, over 3,500 Free Ports are operating in 135 countries, from Boston and Seattle in the US, to Shanghai in China to Manaus in Brazil.
Rather, I should say that they prosper all around the world with the exception of in the EU, where just one Free Port exists: Trieste.
And even that historical anomaly is greatly limited in terms of what it can offer by Single Market regulations and the EU Customs Code. In reality, as the UN has noted: “Free Trade Zones, as originally conceived do not exist anywhere in the EU”.
The definition of a Free Port differs widely – but at its heart is the idea that an area around a port’s hinterland is designated as being outside its territory for customs purposes. This means that manufacturers can import, manufacture and re-export goods without incurring duties or tariffs. And some jurisdictions also choose to offer additional benefits such as regulatory flexibility or tax incentives for R&D.
Now, as Rishi Sunak MP explains in a brilliant paper published today by the Centre for Policy Studies, Brexit offers the opportunity for the UK to join this flourishing club. With control over our own trade and customs policy, and freed from the constraints of State Aid rules (but still adhering to the less onerous WTO regime), we will soon be able to pursue an ambitious free trade policy, using our sovereignty to encourage investment, economic growth and employment in key regions of the country.
And in doing so, we would be building on a crucial and under-recognised national strength. For our port sector is world class, being both the second largest in the EU, and one of the most efficient (not least because British ports are, unlike those in most of the rest of the EU, largely privatised).
On top of that, enabling UK ports to expand their manufacturing capacity would be a practical and effective way of rebalancing the economy. Of our 30 largest ports, 17 are in the bottom economic quartile. And if British Free Ports were to become as successful as those in the US, we could expect to see as many as 86,000 jobs created, predominantly in manufacturing.
The international evidence is clear: sectors that rely on complex supply chains – such as pharmaceuticals, chemicals, and vehicle production – are those which are most likely to benefit from a Free Port system.
Another great advantage of a Free Ports policy is its fundamental simplicity. The wealth of international precedent make implementation possible over a short timescale. A determined government could see the first Free Ports become operational within as little as a year of announcement, as was achieved with Enterprise Zones introduced by the Coalition in 2011.
The politics are straightforward as well. Significant cross-party should be a given. After all, which Labour MP with a port interest would want to oppose a measure which would so greatly benefit his or her constituents?
The obvious mechanism for deciding upon the locations of the first Free Ports would be a hybrid approach. A number of locations would be decided upon centrally in accordance with the priorities of the Government’s industrial strategy – Tyneport, with its importance for the UK car industry, being an example. The remaining locations, meanwhile, could be decided through a bidding process in which Local Enterprise Partnerships, devolved administrations and the ports themselves would be able to submit their case for participation.
So here is a practical, well-tried and effective opportunity to take advantage of the new freedoms which we will enjoy post-Brexit. It could mean tens of thousands of new jobs in those regions of the UK which need them most, a boost for UK manufacturing and above all an important signal that Britain is open to the world.”
This article was originally published on Brexit Central.
Date Added: Tuesday 15th November 2016