The question of freeports has come up again as one of the 'benefits' of Brexit. We know the Chancellor has spoken in favour of them and the government is planning ten dotted around the UK. Now the FT have commissioned a report from the UK Trade Policy Observatory and finds that there is very little advantage, in fact the duty savings are said to be non-existent. Steve Peers tweeted a link to the FT article by Peter Foster yesterday:
New study by @uk_tpo suggests limited gains from freeports after Brexit - FT story by @pmdfoster pic.twitter.com/RZS9HgdNCs— Steve Peers (@StevePeers) August 2, 2020
Apparently, one of the main reasons they are attractive in the USA is because of an advantage known as tariff inversion. Where there are high tariffs on intermediate goods but lower ones on the finished products into which those intermediate goods go, there is a benefit to import duty free and assemble the finished product in the freeport before crossing the border and paying the lower tariff. The US has several hundred freeports according to the report.
But when the TPO looked at the UK's Global Tariffs regime they found these opportunities for inversion barely existed since one of the stated objectives of the UKGT system was to reduce tariffs on intermediate goods. An example of the left hand not knowing what the right hand is doing.
There were a few sectors, including pet food where a significant 'wedge' existed between tariffs on intermediates and related final products to make freeports beneficial but they accounted for just 0.6% of UK imports of intermediates.
In February The Guardian had a report of the EU clamping down on freeports which it saw as an opportunity for criminals to exploit:
"The ports are said to allow counterfeiters to land consignments, tamper with loads or associated paperwork and re-export the products without customs intervention, disguising the true origin and nature of the goods, and the identity of the original supplier. The commission said they were also used for narcotics trafficking, the illegal ivory trade, people smuggling, VAT fraud, corruption and money laundering.
On this subject, I noticed the other day that someone at The Guardian had discovered the 1032 page tome published by Matthew Elliot at Business for Britain for Britain (what a spectacular misnomer that's turning out to be, eh?) in 2015. I used to quote from it on this blog quite a bit in the past because it was so obviously wrong.
Anyway, I searched in it for what it said about freeports - and guess what? It doesn't mention them at all!
This is the problem with Brexiteers isn't it. They are making it up as they go along. When all the original perceived 'benefits' are slowly evaporating, new ones like freeports come along to take their place. In any event being a member of the EU did not prevent us having freeports before.
David Henig also pointed out some time ago that if these freeports (assuming we ever get any) are of a size to make them worthwhile people are going to have to get used to crossing borders every day to work or even shop, if they live inside the free port zone.
I am convinced that one day - and it may take a few years - it will become clear to the great majority in this country that all of the arguments for Brexit were the result of nothing more than colossal ignorance.
