A boost to our recovery brought by freeports is a major benefit of Brexit

After the corona virus crisis subsided, the UK government is now focusing on how to get the UK economy going again. In the short term, it is of course very important to conclude a good deal on future access to trade with the EU when the UK regains its freedom of regulation and trade from January 1st. In the longer term, however, there is more to do.

An absolute priority should be the creation of so-called "free ports", as is the case now announced by Chancellor Rishi Sunak. The UK government plans to create ten of them by introducing extensive tax cuts and a revision of planning laws in select areas to make them fully operational by April 2022.

Labor immediately rejected the plan and pointed to problems in some EU countriess free ports, but that's short-sighted. Britain has the opportunity to learn from continental mistakes and build a bespoke free port model that creates tens of thousands of jobs in disadvantaged areas in Britain.

How international trade minister Liz Truss did Put it: “Freedoms changed London's Docklands in the 1980s, and free ports will also change cities across the UK. They will bring businesses and manufacturing on land as the gateway to our future prosperity on land and create thousands of jobs. "

Free ports are already widespread – there are around 80 Free ports in the European Union and some 3,500 worldwide. Britain once had seven facilities, including in Liverpool and Tilbury Harbor, but all were closed until 2012.

The core of a free portThe economic potential is the special customs status. For goods arrive No customs duties or taxes will be levied on a free port from abroad unless they leave the facility. Some free ports too contain Factories that mainly produce goods for export take advantage of the fact that tariffs on raw materials are often higher than on finished products.

The EUs Free ports were restricted by the blocks State aid Rules that Consider The tax or customs exemptions that are largely granted to free ports are unfair "subsidyTo companies. Such an interpretation can be seen as a violation of the spirit of state aid rules, and occasionally the European Commission has been overridden by EU judges because of its tendency to classify tax breaks as "State aid ”, particularly in the current case regarding Apple and Ireland. In any case, once the UK regains regulatory independence, it will free To create free ports according to milder WTO rules.

Opponents have suggested that the free trade areas could open up the UK to financial crime. According to Labor MP Peter Dowd, the EUs existing free ports serve as "tax-free warehouses where art, wine and gold are hoarded ”.

Free ports on the continent were indeed repeated accusations that sheA haven for money laundering and tax evasion. Opponents often choose the one mentioned in Luxembourg "Le Freeport Luxembourg ". It is obsessed by Yves Bouvier, a Swiss art dealer examined in his home country for bypassing hundreds of millions of Swiss francs in taxes and once was accused to defraud a former customer by $ 1 billion. Bouviers The Free Port of Luxembourg claims to strictly comply with all anti-money laundering regulations and has stationed three customs officials permanent in the plant.

However, Members of the European Parliament who visited the facility were skeptical of these claims. It was described as "black hole ”while another recommended that were customs controls "extremely superficial ”.

In addition to drawing political decision-makers ire, the free port model popular by Yves Bouvier notIt doesn't seem to be very profitable. The chairman of the Free Port of Luxembourg, a former Socialist MEP, recently stepped back because the plant suffers losses in the millions. The former editor-in-chief of a newspaper, who reported extensively on the facility, Fabien Grasser, actually has claims he was fired because of his newspapers critical attitude towards the free port.

In her hurry to demonize Britains free port plan, however, critics have not realized itIt is very different from the faulty facilities abroad. Instead of imitating Yves BouvierFor the free ports in Luxembourg and Singapore, the United Kingdom will try after Brexit to establish something closer to the original idea of ​​a free port and to repeat part of the success of Europe Shenzen in China or the "Jebel Ali free zone"in Dubai. This is in line with proposals Made by former MEP Ana Gomes, who asked the Commons to introduce a so-called "Bouvier rule" that prohibits the storage and sale of works of art above a certain value.

The facilities would not become Boltholes for priceless art. In fact, the UK government has made it clear specified it "does not intend to label free ports for the purpose of high quality luxury storage ”, such as works of art. Instead, the focus is on creating an attractive business environment in disadvantaged Areas.

Something Arguments The problem with free ports is that they would not achieve this goal, as the facilities would just sell the business from other parts of a country and do not create any new economic activity on the net.

There are two answers to this. First, even if this were true, it would certainly not be the end of the world to create more jobs in less affluent parts of Britain such as the North. Second, it iss factually wrong to claim that it would notThese are not additional business opportunities if the effective tax and customs duties are also lower, which means that both London and the North would make a profit.

The UK is already in a good position to ensure that the economic benefits of free ports are evenly distributed. As Chancellor Rishi Sunak wrote in a strategy paper 2016:

"Unlike many other countries, often with just a single (taxpayer-funded) super port, the UK contains dozens of successful, large ports. everything financed privately. These are spread across the country and already house production clusters. "

While the plan to establish ten free ports across the UK is still in the pipeline consultation Several applications have already arrived in the phase. One comes from the Tees Valley in north-east England, whose mayor Calls it a "A fantastic opportunity to boost our local economy and create much-needed jobs, growth and investment. "

Tees Valley is already one "Corporate zoneThis means that it enjoys certain tax breaks, infrastructure incentives and reduced regulations. By combining the advantages of such a business zone and a free port, companies could import, process and export goods without costly customs bureaucracy.

The benefits for regions like Tees Valley could be significant. Consulting and construction group Mace has estimated that makes seven "charged free ports ” Boost International trade in the UK is increasing by £ 12 billion annually as it would also increase the UK's GDP by £ 9 billion after 20 years and create 150,000 additional jobs.

When setting up free ports, the UK government should continue its strategy of converting them to areas with minimal tariffs, import sales tax and social security contributions rather than warehouses for luxury goods. In this way the initiative could become the United KingdomThe main benefit of Brexit. Maybe Europe could even be inspired.

Pieter Cleppe is a non-resident fellow of the Property Rights Alliance based in Brussels.


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