Freeports – giving up control .

Fresh in his job as Conservative Party Chairman in the the new kamikazi Brexit government, James Cleverly announced on Radio 4 that they have plans for 6 “free ports” to get up and running once the UK is “freed” from the obligations of EU membership. By the end of the week Liz Truss had upped this to ten.

This makes clear what their intentions are and undermines any claims by Johnson that it will be possible to maintain good relations with “our friends in Europe” once these are in place.

Despite their rhetoric about “Brussels red tape”, they know that if they want to sell goods into the EU they have to meet EU standards. There’s no getting around that even if they wanted to go on a path of cutting costs and corners on quality to go for a cheap and nasty strategy; at least so far as selling into Europe is concerned. Companies that concentrate on the rest of the world could, however, find a niche for shoddy goods if their costs were low enough.  How far they have to go to make the workers of this country poor enough so their costs are low enough to compete with qualitatively poorer countries is an experiment they will no doubt be keen to try out.

Cleverly argued that setting up free ports would “bring money into the exchequer.” This is odd; because the whole point of them is that companies using them do not have to pay domestic taxes or customs duties; leading to a direct loss of revenue compared with now. The only logic would be that, faced with a UK outside the EU market, international capital will need some serious incentives to even consider investing here.

A “free port” is a classic third world development strategy for countries desperate to attract footloose capital, any capital, by slashing taxes and regulations to zero (or near as dammit) within them. They have also been adopted in the United States, as US capital seeks to withdraw itself from any financial obligations to the society that sustains it. A Free Port is a place in which the writ of the investor runs more than that of the elected government. They will have taken back control from the people. “Democracy” will kneel before them with its begging bowl out. It is a direct abdication of sovereignty. Far from “controlling our own laws” we would be giving them up to footloose multi nationals – who take from everywhere and have obligations nowhere.

The big claims being made for them should be taken with a shovel full of salt. The Centre for Cities Report* on Enterprise Zones – on which Freeports are modeled, points out the following issues.

  1. Over optimistic job creation predictions Estimates cited alongside Johnson’s announcement claim that Freeports will add £12 billion to the economy and create 150,000 jobs. Just as, in 2011, the Treasury claimed that enterprise zones would create 54,000 private jobs by 2015. They didn’t. In fact between 2012 and 2017 the zones had created just 13,500 sustainable private sector jobs.
  2. Hype about the type of jobs.  95 per cent of these 13,500 jobs were lower skilled, so the zones have not provided the answer for areas wanting to shift their economy from lower-skilled to higher-skilled economies.
  3. Displacement Of all the jobs in enterprise zones in 2017 that were not there in 2012, at least one third moved from elsewhere.

Full report here.  https://www.centreforcities.org/blog/why-free-ports-do-not-hold-the-answer-to-job-creation-in-a-post-brexit-world/

This displacement means that places without this special status are being set up to shrink and shrivel from a lack of investment, further reducing revenue to the exchequer. The consequence would be a creeping expansion of zero taxation regimes to as many manufacturing or trading areas trying to compete by offering further incentives.

EU regulations forbid Free Ports, so, as this is aimed at attracting investment from countries in the EU that expect companies to pay their fair share of tax, this would aggravate relations with them.

The domestic “benefits” of such ports accrue mostly to landowners within them. It remains to be seen how far regulations safeguarding workers rights will also be slashed in this desperate race to the bottom.

How low can we go? Quite a bit further if we let them get away with it.