Freeports and freezones: Beyond the call of duty?
The concept of freeports has been in the news in the UK recently, as the government has proposed the creation of 10 such entities around the country, promising the creation of thousands of new jobs and the “turbo-charging” of local economies. Laudable aims in theory but the reality is somewhat more challenging.
Freeports are designated areas of a country which are inside the geographic boundary of that country but are considered to be outside of it for the purposes of import duties and tariffs. These duties are not payable until the goods are released for free circulation in the domestic economy (or used or consumed within the freezone). Goods can also be re-exported from the freezone without incurring duties, and activities such as processing and manufacturing may be carried out.
Freeports, free zones and other variants are prolific around the world, with at least 1,000 in existence. Significantly, the greater the barriers to trade (e.g. high tariffs), the more relevant and useful freezones are. General moves towards freer global trade over the past few decades have tended to erode the need, although President Trump currently seems to be undoing this as far as the US is concerned.