UK Free Ports

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UK Free Ports
« on: March 04, 2021, 11:07:02 AM »
What are the economic advantages?

Advocates of free ports say that the special zones encourage imports because of the reduction in tax-related costs.

Under the UK’s proposals, a firm can import goods into a free port without paying tariffs, process them into a final good and then either pay a tariff on goods sold into the domestic market, or export the final goods without paying UK tariffs.

They also say that companies who operate within the zone see additional benefits due to “agglomeration”, where the clustering of businesses leads to economic advantage.

Additional incentives such as discounted business rates and reductions in stamp duty can also encourage further investment into the zones.

For the government, the policy is a key part of its “levelling up” agenda, the attempt to rebalance economic equality around the country.

Construction group Mace says that free ports could help create 150,000 new jobs, while annually contributing £9bn to the UK economy.
What are the disadvantages?

However, not everyone is so keen on the policy. In the summer the UK Trade Policy Observatory (UKTPO) said that the benefits of such zones would be minimal because tariffs in the UK are already so low.

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There is also the concern that free ports do not actually encourage new business, but simply see existing firms move in to take advantage of the tax benefits.

And then there are fears, raised by the Labour Party among others, that the zones could be taken advantage of by tax dodgers avoiding customs scrutiny.

Finally, much of the benefit of free ports depends on existing transport links and access to labour.

UK chancellor Rishi Sunak has confirmed in his budget announcement that the UK will have eight new freeports.

The eight regions selected to be freeports are East Midlands Airport, Felixstowe and Harwich, Humber, Liverpool City Region, Plymouth, Solent, Thames, and Teesside.

Sunak said the freeport policy is "on a scale we’ve never done before" and will be key in creating jobs and make it easier and cheaper to do business as well as creating jobs.

"I see old industrial sites being used to capture and store carbon, vaccines being manufactured, offshore wind turbines, creating clean energy for the rest of the country, all located within a freeport, with a Treasury just down the road, and the UK infrastructure bank only an hour away," he said.

Freeports already exist around the world. One of the biggest is in Geneva, Switzerland. A 2017 study estimated around SwFr 100bn (£84.4bn, $110bn) worth of art and antiques are stored tax free in Geneva’s freeport. Hong Kong also traces its roots to freeport status.