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Trade and Economic Growth - What are Free Ports?

AS, A-Level, IB
AQA, Edexcel, OCR, IB, Eduqas, WJEC

Last updated 17 Feb 2023

Free ports are designated areas within a country that are exempt from certain taxes and customs duties. The UK government has recently introduced a free ports policy to help boost economic growth, investment, and jobs in specific regions of the country.

In September 2021, the UK government announced the creation of eight Freeports, which are located in various ports across the country. These Freeports are:

  1. East Midlands Airport
  2. Felixstowe and Harwich
  3. Humber
  4. Liverpool City Region
  5. Plymouth
  6. Solent
  7. Teesside
  8. Thames

The Freeports offer a range of tax incentives and other benefits to businesses operating within the designated areas, including:

  1. Exemption from customs duties on imports into the Freeport zone
  2. Exemption from import tariffs on goods that are re-exported from the Freeport zone
  3. Reduced bureaucracy and paperwork for businesses
  4. Enhanced capital allowances for businesses investing in new equipment and machinery within the Freeport zone
  5. Support for innovation and job creation within the Freeport zone

The government hopes that the Free Ports will attract inward investment and create jobs in some of the country's most deprived areas where per capita incomes are lower and unemployment rates above the national average. By creating special economic zones with tax and customs benefits, the government aims to make it easier and more attractive for businesses to establish operations in these regions. The Free Ports policy is part of a broader government strategy to level up economic growth across the country after the COVID-19 pandemic.

The idea of Freeports is not without criticism, and there are several concerns that have been raised about the policy. Some of the key criticisms include:

  1. Lack of transparency: The lack of transparency in the operation of Freeports has been criticized. There are concerns that they could be used as a way for companies to avoid taxes and regulations, without proper oversight.
  2. Risk of money laundering and criminal activity: Freeports can create opportunities for money laundering and other criminal activity, as goods can be imported, stored and re-exported without proper customs checks.
  3. Environmental concerns: The policy has been criticized for the potential negative impact on the environment. The relaxed regulations in Freeports could lead to increased pollution and other environmental hazards.
  4. Unfair competition: There is a risk that Freeports could create unfair competition for businesses that are not located within the designated zones. This could result in an uneven playing field and harm businesses outside the Freeport areas.
  5. Limited benefits: Some critics argue that the benefits of Freeports may be limited, and the policy may not lead to the desired economic growth and job creation. This is because Freeports are often located in areas that already have good transport links and access to markets, so the benefits of the policy may be overstated.

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