There is a deep sickness in Westminster that, as we approach Brexit, infects everything. It extends beyond our ludicrous politicians, outwards into the nexus of ideas shared and valorised by politicians, think tanks and lobbyists that grease the wheels of the legislative machine, and threatens every interstice of our national life.
Nowhere is the sickness more evident than in Westminster’s current fetishisation of “Freeports”. This policy wheeze is virtually guaranteed to do none of the things its supporters claim, while causing incalculable harm. And yet it is currently championed by breathless politicians on all sides who are so blinded by events that they apparently can know no better.
Freeports are, essentially, seaside local low tax zones. Goods in freeports are considered to be “in transit”, so do not attract regular import and export duties. This, its champions suggest, brings vital support to a local area’s manufacturing industries, which results in activity, jobs and inward investment.
We are not short of examples; some 3,000 such free trade zones exist worldwide. Most house manufacturers who avoid tax on imported raw materials before exporting finished products. They are also exploited by some of the most shameless spivs in the international art market. Collectors and fencers of Picassos and Hockneys avoiding taxes on purchases by warehousing culture and stockpiling heritage. The Economist suggests that “hundreds of billions of dollars” of goods are stored in such to avoid tax. The famous Geneva freeport in particular is a hive of the lurid and the crass, the unequal and the downright criminal. As a vision for our localities this is bad enough, the closest thing to Tony Blair’s disastrous supercasino plan, which assumed that the way to build our regions is to turn local people into factotums for the feckless and the sozzled.
But a cursory glance at the material shows that the purported benefits of Freeports are based on the most tendentious of data. The right wing Centre for Policy Studies, in a report headed up by the Conservative party’s Rishi Sunak MP, claim that by creating freeport areas in our major port cities in the north we can create 86,000 extra jobs. MACE, a construction consultancy, goes even higher, estimating an enormous 150,000 high value (with an income of more than £60,000) jobs from an extra £12bn a year in revenue to the UK Economy. Policy North, another right wing think tank, estimated that the creation of a necklace of Northern freeports will see 612,000 jobs and £12bn of investment.
Such estimates are farcical. Policy North references numbers from a study by a McMaster University study, which make it clear that it has no evidence to suggest that any of the jobs in question were created by the Freeport. Indeed this report in turn references a study by the International Trade Commission that “determined that FTZs [Free Trade Zones] were having a small overall effect on U.S. revenue collection, employment and the economy in general”.
The Centre for Policy Studies’ analysis fares no better: Sunak’s report is cocktail napkin mathematics. He produces his figure of 86,000 jobs by simply dividing the number of jobs in FTZs in America by the size of the national workforce, and multiplying it by the size of the relevant workforce.
Simultaneously, a report recently published by the World Bank was scathing about the potential of Freeports to improve lives or livelihoods. First, it suggested, Freeports do not catalyse economic development. In fact, on average, most zones’ performance only resembles the national average. Secondly, growth in Freeport areas happens early on in the life of the Freeport. After an initial boost, the economic performance of these zones evens out to that of their surrounding area. Thirdly, the economic spillover from whatever benefits there may be – unconvincing as they are – from freeports only appears to affect the immediate vicinity. “The effect declines sharply beyond 20km and is barely evident beyond 50km from the center of the zone.” Witness Delaware in the United State, which opened a freeport in 2015. The unemployment rate has indeed decreased but only at the national rate since opening. Further, unemployment in Delaware has remained consistently above the national average.
There is an appropriate worry that Freeports are not conducive to quality jobs; that what is on offer to many are low security, low wage, low job quality roles. The World Bank in another report on free trade zones highlight that “union rights have been legally constrained or de facto discouraged [in FTZs]”. The International Labour Organization pulls a similar line from their report, that, “The generous incentives and low costs to entry attracts simple processing industries to invest in the zones; such companies often lack professional management, particularly in human resources and management”.
Professor John Tomaney of University College London is an outspoken critic: “Freeports have become an article of faith for some advocates of “Global Britain”. But the evidence that they would contribute to economic development in northern England is very far from convincing. Experience from elsewhere in the world is that they provide many advantages to firms and their shareholders, but far fewer to local workers and taxpayers. In many parts of the world they have been used as cover to drive down labour standards and reduce environmental protections.”
Supporters of freeports claim both precedent and huge public support. Conservative right wingers find themselves in rare alliance on the matter with centre-grounders like former chief advisor to the Prime Minister, Nick Timothy, who suggested that Freeports should be a limb of the free trade alternative to her Brexit deal. They also point to a recent poll done by Survation which shows 83 per cent of British People support freeports. Once again, the quality of that poll calls into account the self-awareness or bona fides of those quoting it. Freeports were specifically claimed to “encourage domestic manufacturing, increased international trade and job creation”. This, as we have seen, is far from proven. At the very least we must debate the countervailing views.
It is a sign of our desperate and ailing times that such an intellectually and ethically troubling idea, presented in such a ham-fisted way, can achieve almost mythical powers of national healing and restoration quite so quickly. It is worth noting that the above is not some academic discussion; the Treasury in October under the direction of Robert Jenrick MP, initiated a consultation into establishing Freeports across the North. Perhaps we should not be surprised that, in a time of ubiquitous division, anything that on the face of it brings together left and right, social justice warrior and free market fanatic, is seized upon, as a rare, magical object of consensus. The reality is, though, that we are wise to this. Just because those in power agree something is a good idea for the rest of us, it doesn’t make it so: the opposite in fact may well be true. The dignity of our people, for the men with pens, often seems to be expendable.
There are alternatives to this dystopia. Economic models based, not on inwards investment, but building local assets, investing in local institutions, creating local employee owned movements. The inward investment model has a rival in the community wealth movements that find expression in places like Preston and in the work in Chicago of Ted Howard and others and that form a real model of local ownership and hope: an economics of belonging, that if applied might get us out of this mess. But the freeport model and it associated degradation and corruption is where Westminster is at right now. What cure can suffice when the rot runs this deep?
Asheem Singh is the director of economics at the Royal Society for the encouragement of Arts, Manufactures and Commerce. He was assisted in researching this article by Toby Murray.This article is from the CityMetric archive: some formatting and images may not be present.