Freeports: British Towns and Cities Bid to Become Post-Brexit Tax-Free Zones

LIVERPOOL, UNITED KINGDOM - DECEMBER 10: Shipping containers are stacked on the dockside at The Port of Liverpool on December 10, 2020 in Liverpool, United Kingdom. Carriers are reporting a severe shortage of shipping containers to bring goods from China to Europe. To help with the equipment imbalance Asian ocean …
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Over 30 airports and seaports across the UK are bidding to become freeports, otherwise known as free trade zones, in a post-Brexit trade shakeup that could see 10 tax and regulation-lite or free regions created.

The UK government is seeking to “turbocharge” the regions in the post-Brexit economy through the creation of ten so-called freeports, an opportunity potentially so lucrative for the regions involved the business-focussed Financial Times reports that 30 ports, airports, towns and cities have applied to be considered.

Several areas have revealed their hopes to become one of the ten, including the city of Sheffield, a group of docks near Bristol, and a group of docks and industrial areas in the Thames estuary and east London. The government is expected to reveal its choices in March. The Financial Times report notes the level of attention the scheme has got will be seen as good news for UK Prime Minister Boris Johnson, who has championed freeports and who promised to ‘level up’ depressed regions in the 2019 general election.

Under the plan, the new freeports would be free of normal tax and tariff rules, as well as other regulations, for the purpose of importing and exporting — essentially turning whole areas up to 45 kilometres wide into massive bonded warehouses. As well as allowing the easy importing, exporting, and forwarding of goods, the zones would also boost factories inside the zones. In one case, an entire car engine factory is inside the area encompassed by one proposed Freeport.

Even payroll taxes and planning to build new factories and warehouses could be relaxed in the zones, depending on how the plan eventually emerges.

The plan was proposed in a 2016 paper by Rishi Sunak — now the Chancellor of the Exchequer — which outlined how enhanced activity encouraged by zero-tax zones could “boost trade, manufacturing and the North” in post-Brexit Britain. Proponents of freeports believe they will increase employment and prosperity. Indeed, Sunak’s report claimed that if British freeports were as successful as the United States’ own zones, they could create 86,000 jobs.

Nevertheless, there are those who oppose freeports. The Labour party has criticised the plan, calling them a “Thatcherite” attack on tax collection and regulation in one case, and in another a “race to the bottom” that would benefit “money launderers and tax dodgers”. That is a sentiment shared by the devolved Welsh government, which hasn’t even allowed Welsh cities to bid to become freeports at all, citing concerns over lost tax revenues.

Some mainstream media outlets have also run with headlines showing clear opposition to the plan. The Guardian questioned whether they were actually freeports or actually could more accurately be termed “sleaze ports”, accusing the UK of creating “mini tax havens”. The paper noted the dividing lines on support for the scheme, pointing out that those for voted for Brexit like them and those who didn’t, don’t.

A surprisingly forthright BBC article prominently featured a critic of the scheme who claimed freeports don’t actually create jobs at all, and only move them.

The government is more upbeat, however. The 2019 statement accompanying the announcement of the policy claimed: “Freeports [will] ensure Britain’s port cities and airports are ready to take full advantage of post-Brexit opportunities, including increased trade with the USA and fast-growing Asian markets as we sign our first free trade deals with global partners.

“…There are already thousands of very successful free trading zones around the world, with the United States having pioneered the creation of over 250 free trade zones, employing 420,000 people, many in high-skilled manufacturing jobs.”

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