Wednesday 12 February 2020 4:06 am

Have the economic benefits of post-Brexit free ports been overhyped?

Adrienne Buller is an economist and senior research fellow at the Common Wealth think tank.
Tom Clougherty
Tom Clougherty is head of tax at the Centre for Policy Studies.

Have the economic benefits of post-Brexit free ports been overhyped?

Adrienne Buller, senior research fellow at think tank Common Wealth, says YES.

Free ports are a white elephant — a symbolic gesture from the government in lieu of meaningful investment in “levelling up” regions outside London.

There is little evidence to support the idea that free ports create jobs or attract new businesses. Rather, research from the UK Trade Policy Observatory shows that they tend to relocate jobs from elsewhere in a zero-sum game, with negligible overall economic benefit.

The government hopes to portray these special economic zones as the crown jewel of post-Brexit sovereignty, but the EU has long allowed free ports. Just this week, however, the EU has had to clamp down on more than 80 free ports after discovering that their special status has made them a hub for financing terrorism, tax evasion, and money laundering.

If the government wants to fulfil its important promise to invest in areas outside London, it should scrap free ports in favour of a credible investment strategy for green manufacturing and industry in these communities.

Tom Clougherty, head of tax at the Centre for Policy Studies and a member of the Freeports Advisory Panel, says NO.

A free port is geographically inside a country, but treated as outside it for customs purposes. Goods can be brought in, processed, and re-exported without facing tariffs or duties. It is only when goods leave the free port and enter the host country that the usual rules apply.

Free ports offer a way to boost trade and bring private investment to Britain’s regions. They build on an existing strength: the UK’s highly competitive, privatised ports industry. They can also be a powerful tool for “levelling up” — our largest ports are disproportionately located in areas that suffer from relatively poor economic outcomes.

Of course, Britain must always be a free-trading country, and low tariffs can limit the appeal of traditional free ports. But this model can be adapted. New tax, regulatory, and planning policies can help free ports — and surrounding areas — to thrive.

Free ports should become hotbeds of radical, pro-growth policy. If they do, the economic benefits could be significant.

Main image credit: Getty

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