Adam Johnson, director of Leeds-based Tudor International Freight, said the government had just created a Freeports Advisory Panel, including ministers from the Treasury and Department for International Trade, plus experts in areas such as technology, business, economics and tax. It had done this with a view to launching up to 10 freeports across the country, following Britain’s departure from the EU, scheduled to happen by 31 October.
Johnson said: “Freeports, which can include airports as well as shipping destinations, are designated areas within a country with special economic status.
“Traders don’t have to pay tariffs and must supply only reduced documentation for goods entering these zones from abroad. Businesses retain these advantages if they sell, store or process such imports – by using them as components and then re-exporting them, for example – without them entering the wider country. The latter would mean obligations such as duty payments perhaps being deferred, but not avoided.”
Johnson said international trade secretary Liz Truss had claimed the envisaged freeports would transform towns and cities across the UK, onshoring enterprise and manufacturing as gateways to our future prosperity and creating thousands of jobs.
He said: “The first point to make about these assertions is, at the risk of stating the obvious, introducing 10 freeports is unlikely to go anywhere near mitigating the economic downsides of a no-deal Brexit or even the UK leaving the EU customs union alone. These results could include bankruptcies and job losses.
“Another reason for slight scepticism among manufacturing sector companies is the government announced in March there would be no tariffs on 87% of our imports for up to a year, if – as seems increasingly likely – we leave the EU without a deal. Freeports would therefore apparently bring few additional benefits to UK businesses, at least initially, other than reduced form-filling and perhaps a slightly lighter regulatory regime than would apply elsewhere in the country.”
Johnson said there were about 3,500 freeports in around 135 countries worldwide but evidence of the benefits they delivered also seemed patchy: “The UK Trade Policy Observatory, run by Sussex University and the Chatham House thinktank, probably Britain’s principal trade experts, for example, has said freeports’ effectiveness depends significantly on local factors. These include their designs, capital, ability to offer skilled labour and transport infrastructures.”
He continued: “One final reason for manufacturing sector businesses to suspect the government may be over-hyping the benefits of freeports was the suggestion by new Prime Minister Boris Johnson, during the Conservative leadership election campaign, that we had to leave the EU to be able to create these zones. In fact, there are currently about 80 similar areas within the bloc and we lack them here partly because the domestic legislation making them possible lapsed in 2012 and the Conservative-led coalition government of the time didn’t renew it.”
Johnson acknowledged freeports could offer advantages to the wider economy, including by encouraging the clustering of individual or related industries, and said, if they were reintroduced to the UK, he would certainly wish them well. But, for all these reasons, he would advise manufacturing industry businesses to take the government’s claims about their benefits with a pinch of salt, at least until convinced otherwise.