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Ben Houchen: Why free trade zones are not just for port places

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Free trade zones, often referred to as free ports, represent one of the biggest opportunities for sustainable economic growth and job creation in Britain today. If implemented properly they could do more to rebalance the UK economy and empower the regions than any other policy so far. 

Regardless of the nature and details of our future relationship with the European Union, free trade zones could create massive opportunities for Britain’s businesses and local authorities alike.

Contrary to assumed wisdom, while free trade zones are often located at sea ports this is not exclusively the case. In fact many exist around airports and other major logistical hubs.

A free trade zone, wherever it is geographically within a nation, sits outside of its customs border. This means that goods, such as raw materials, can enter the free trade zone without occurring any tariffs and duties usually due at the national border, and leave the country in a similar tax free manner. Free trade zones build on the duty deferral companies enjoy from the bonded warehousing schemes that exist in the UK today, by allowing processing and manufacturing activity at more competitive costs.

When it comes to the national public finances, free trade zones mean sacrificing some direct tax revenue in return for jobs, economic growth and their contribution to the exchequer. At a local authority level, a free trade zone can mean greater business rates revenue and lower unemployment.

To put the possibility of free trade zones in perspective, a report by Mace Group indicated that across the Northern Powerhouse regions they could create 150,000 jobs and add £9bn to the economy.

In my experience, having taking this policy forward from a report written by Rishi Sunak, now local government minister, and explored how it would work in my region, I’ve found support from across the political spectrum, from officers and from the public.

Bringing the development of UK free trade zones to the combined authority level and engaging with colleagues in local authorities has allowed officers to explore cutting edge concepts in UK trade policy usually reserved for the corridors of Whitehall. What we’ve found is that on top of the vital work that officers deliver on a day-to-day basis, they are more than up for the tasks of driving forward the mechanisms of international trade.

As a politician it’s easy to get bogged down in ideology. While free trade can be painted as party political, for me free trade zones are purely a pragmatic solution to some of the issues we face in the Tees Valley.

Practically, you can view free trade zones as an extension of enterprise zones. They provide the basic model and rational case, just at a simpler level. They can help your area or region to build on its strengths, by making it easier to do what you already do, as well as opening up additional opportunities in through circular economy projects.

In the Tees Valley this means chemicals and manufacturing, but it could just as easily mean the automotive industry, agricultural products or even luxury food and drinks.

I have already commissioned research into how a free trade zone would work in my region and, on a wider scale, both outside and inside of the EU’s customs arrangements. This covers trade policy, financial incentives, protection against illegal activities, economic modelling, and the technology that will facilitate faster and better trade. Colleagues in parliament have started an all party parliamentary group on free ports and the government has asked for serious proposals.

In local and regional government, if your area wants to realise the benefits of free trade zones now is the time to start looking at how it would work for you and, if they become government policy, how you can be an early adopter.

By Ben Houchen (Con), Tees Valley mayor

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