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The future of freeports

Summary:
In 1983, 36 years ago, Dr Eamonn Butler and Dr Madsen Pirie, founders of the Adam Smith Institute, wrote Free Ports. 3 years later, Dr Butler co-authored Free Ports Experiment. In 1981, the ASI had proposed freeports for the UK – and six were established – but their chances of great success were scuppered from both sides by the EU and HM Treasury. The European Union steadfastly refused to ease any of their choking regulations – and the UK Treasury, similarly, refused to ease VAT or tariffs. According to Dr Madsen Pirie in the Spectator today, ‘the freeports were effectively just reduced to being bonded warehouses, where goods could be stored, and only be taxed when they left.’The Adam Smith Institute has long been clear that this isn’t what freeports should be about. Freeports could, and

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In 1983, 36 years ago, Dr Eamonn Butler and Dr Madsen Pirie, founders of the Adam Smith Institute, wrote Free Ports. 3 years later, Dr Butler co-authored Free Ports Experiment. In 1981, the ASI had proposed freeports for the UK – and six were established – but their chances of great success were scuppered from both sides by the EU and HM Treasury. The European Union steadfastly refused to ease any of their choking regulations – and the UK Treasury, similarly, refused to ease VAT or tariffs. According to Dr Madsen Pirie in the Spectator today, ‘the freeports were effectively just reduced to being bonded warehouses, where goods could be stored, and only be taxed when they left.’

The Adam Smith Institute has long been clear that this isn’t what freeports should be about. Freeports could, and should, be hi-tech, high enterprise hubs for the British economy, springboards for regional and global competition through free trade, and gateways to local employment and prosperity.

Freeports aren’t a new concept – they rose to prominence in post-Renaissance Italy – and they aren’t a complex idea. As Dr Butler explains in his piece for the Telegraph today: ‘take a bit of land near a port or airport and treat it as if it were a foreign country as far as import/export trade is concerned. So, people can fly or ship in goods from abroad, store, consolidate, process, assemble, package or label them in the freeport, and fly or ship them out again. All this with no import tariffs, no VAT or any other taxes, and no paperwork when the goods leave. All plain and simple for the importers and exporters, and a nice generator of jobs, enterprise and investment for the local community.’

Despite the simple nature of freeports policy – and the limited cost to the public purse – government has insisted on getting them wrong in the past. The sites rolled out when the Adam Smith Institute first championed the idea were chosen by the government for political reasons, not for sound business ones. Freeports should have regulations which are as simple as possible – and tax codes to match. Freeports should be treated as foreign territory in many ways – and managed through an independent port operator – not a meddling government.

If done right, freeports can be a huge win for post-Brexit Britain. We can increase the capacity of our ports, develop strategic assets needed to be a serious global player on trade, and boost jobs and British products at the same time. As Dr Pirie said today: ‘Liz Truss, as the new International Trade Secretary should be bold. We should support her fight for real freeports, ones that can draw business, wealth and jobs to some of the UK’s ports, located in areas that have not kept pace with its economic expansion, and which could be regenerated with a such a boost. Low taxes and low regulation mixed with high-tech and tall global ambition — a recipe for success.’

Freeports are one of those policies which can make one really excited for the future – if they’re rolled out in the right way. Since 1981, the Adam Smith Institute has led the calls for freeports policy – and there’s now a wealth of evidence from around the world that shows we’re right. If done properly, freeports can be serious assets to an economy – we look forward to continuing to make the case for them. 


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