Brexit is like nuclear power: everyone has
an opinion about it but almost nobody knows
how it really works.
To many, Brexit means the UK isolating themselves
from the rest of the world.
But Brexit supporters think the exact opposite
- that Brexit means globalization and open
markets... on steroids.
Just check this out.
Fears Boris Johnson is planning to turn UK
into ‘Singapore-on-Thames’ after Brexit
In 2019, the phrase ´Singapore-on-Thames´
became a sort of mantra for many Brexiteers.
As you know, Singapore is one of the main
hubs for international trade.
They have free market deals with nearly everyone
and their laws have attracted thousands of
companies.
According to Boris Johnson, the European Union
is blocking the UK from becoming as free and
open as Singapore is.
And there is some truth to this.
No, I haven’t gone nuts!
Think about it for a moment.
The EU is the biggest free market area in
the world.
Thanks to this, there are 28 countries that
can trade with each other.
And yes, it is true that the EU has very few
tariffs when it comes to foreign trade.
But it’s also true that, for years, Brussels
has been cheating in the international free
trade market.
Guerre des frites: EU sues Colombia at WTO
over fries
Yes, you head it right... we’re talking
about French fries.
Europe has been selling French fries to Colombia
for years.
So far, so good.
The EU and Colombia have a free trade agreement,
so everybody is happy.
So, what’s the problem?
The problem comes when Brussels heavily subsidies
European farmers.
Thanks to CAP grants, producers can sell under
market price to the Colombians.
Add to this the EU food regulations, which
tend to be stricter than elsewhere and you
can understand why Colombian farmers can hardly
compete with European ones.
Many of you may think that French fries is
a stupid example.
But we can find the same issue in a much bigger
industry.
The battle between American BOEING and European
AIRBUS follows the same principle.
And here we would be talking about something
much more serious than just some chips.
US imposes record $7.5 billion tariffs on
European goods
In other words, the United Kingdom wants to
stay away from all these trade wars.
In order to do that, Johnson’s post-Brexit
plan would be to sign free trade deals with
anyone.
Deals that would allow the UK to trade with
the whole world without restrictions.
All of this sounds beautiful but... there
is another problem here: TIME.
Negotiating a trade deal between two countries
can take years.
So, the UK will need more than a decade to
see the Singaporean dream come true... if
it ever does.
And what would happen in the meantime?
The UK would have to trade with the world
according to World Trade Organization rules,
which are not as convenient.
So, if you’re watching this video from Brexitland,
you’d better get ready for lots and lots
of tariffs while your government negotiates
something better.
Or maybe not?
What if there was an easy, quick and handy
solution for all of this?
Oh yes! Boris Johnson has a not-so-secret
plan to have free trade without negotiations.
I’m talking about this.
Boris Johnson Widens Push for Singapore-Style
Free Ports in U.K.
Exactly!
The so-called ‘supercharged free ports’.
These ports would work as islands of free
trade in the middle of the UK.
Here is an example.
Imagine that we have a Colombian ship full
of potatoes and we want to sell those to the
UK.
Let’s assume that the tariff for this would
be 30%.
But now, imagine that instead of loading your
merch in, say Liverpool, you do it in a supercharged
free port in the Port of Tyne, near Newcastle.
Initially you pay no tariffs.
Very close to the port there is a factory
that can process those potatoes, cut them
into chips, freeze them and put them into
bags.
And this factory is built on special ‘free
port’ land.
So far, you haven’t paid any tariff whatsoever.
Besides, the taxes here are very low and there
is freedom of movement.
No border control, no customs checks... nothing!
Then, once we have the frozen French fries,
we sell them to the UK market.
This is when you have to cross the border
that limits the area of the supercharged free
port.
However, you are now already in the UK when
you have to pay the tariffs.
But hey!
Unlike raw potatoes, frozen fries just have
a 10% tariff.
So now Colombians have paid less tariffs,
you have secured some jobs and you have bypassed
lots of trade restrictions.
Easy, right?
Sounds like a great idea, doesn’t it?
Then... why didn’t they do it before?
Why does the UK need to be out of the EU to
do this?
Today we are going to answer to all of these
questions but, before we do, let’s take
a look back at the history.
THATCHER’S LEGACY
If you ever travel to London, there’s a
place you cannot miss: Canary Wharf.
It’s one of the most modern neighbourhoods
in town, with lots of skyscrapers and even
a funicular.
Canary Wharf is one of the world’s financial
hubs.
And this is surprising given that in the 70s,
this area was extremely poor.
Back then, this region had a port: the Isle
of Dogs port.
And they had a big problem.
During the 70s, merchant ships started getting
bigger and bigger.
So big that they couldn’t fit into the Isle
of Dogs port.
So, year after year, they had less and less
traffic.
In the 70s, this area was marginalized.
But things changed in 1982.
Back then, the British Prime Minister was
the woman you see on the screen: Margaret
Thatcher.
Thatcher was a big fan of businesses.
So, in order to restore this neighbourhood,
she had an idea: she turned it into a so-called
‘enterprise zone’.
Basically, this area would have lower taxes
and much more flexible urban laws.
Besides, the government would make sure it
was well connected with public transport and
roads.
All of this was enough to convince lots of
developers to come here and build office buildings
and today, Canary Wharf is a skyscraper forest,
makes lots of money and employs thousands
of highly skilled workers.
In other words: the experience was good.
So good that Thatcher repeated it over and
over again.
During the 80s, the United Kingdom started
opening more and more enterprise zones with
lower taxes.
If this wasn’t enough, they also gave licences
to some ports to become free ports, with no
tariffs whatsoever.
This is how NISSAN opened their Newcastle
factory, near the Port of Tyne, that employs
7000 people.
So, what’s the problem?
These two great examples I just gave you are
some of the few that really worked out.
In most cases, these special economic zones
didn’t generate as much growth as Thatcher
thought.
According to many studies, 40% of the new
jobs they created were just relocated ones.
This means, instead of brand new companies
and brand new jobs being created, businesses
from other areas moved into the enterprise
zones.
So, the net result was 0.
But beyond this, the Government had to spend
lots of money on infrastructure to make the
enterprise zones really attractive to businesses.
Just to give you an example, Canary Wharf
has its own airport: London Central.
So, basically, for each job that was created
with this policy, the Government spent 17,000
pounds.
In 2012, the United Kingdom stopped giving
licenses to these zones.
No more tax breaks, no more tariff free ports.
So now you might wonder... if the idea was
so bad... why do they want to do it again?
Why are so excited about it?
Let’s have a look at it!
HARD BREXIT THERAPY
While the UK lost its faith in these special
economic zones, the European Union did the
opposite.
You might not know but, today, Europe has
more than 80 special economic zones with lower
taxes and lower or no tariffs.
For example, if your Colombian friends want
to unload their French fries in the Port of
Cadiz, in Southern Spain, they would pay no
tariff.
They can store those tasty, tasty, fries in
the port for as long as they want.
Of course, as soon as they want to sell in
Spanish territory, they cross a beautiful
border with some customs checks and they pay
the tariff.
But if they just store the fries because,
eventually, they want to send it to, say,
Morocco... they pay no tariff whatsoever to
Spain.
So now you might wonder... if this is already
happening in Europe... why does Boris Johnson
need a Brexit to do it, huh?
Well... here you have the reason.
The Treaty on the Functioning of the European
Union, passed in 2007, is one of two primary
Treaties of the European Union
So, what does this treaty say?
Among many other things, it says that these
special economic zones can be created for
two purposes: one, helping a poor region to
develop or two, boosting a specific type of
industry like green energy or something like
that.
All of this explains why most of these 80
zones are placed in Eastern Europe.
Croatia has 11 free zones while Austria and
the UK have none.
And this makes sense because the wealthiest
Croatian region has 11,400 EUR of GDP per
capita.
Meanwhile, the Newcastle area, one of the
poorest regions in UK, has 35,000 EUR of GDP
per capita.
I think it’s clear who needs the most help,
right?
So... yes and... no.
Of course, from an EU perspective, the UK
does not need special economic zones.
But if we look at it from a British perspective,
we can see how there are big differences between
regions.
Western Inner London has a GDP per capita
of 191,000 EUR.
So, as you can see, compared with London,
the Northern regions are much poorer.
And economics is sometimes a matter of comparison.
In fact, these poorer regions are where Brexit
is so popular.
And all of this explains why in this area
of the country, this free port idea sounds
like heaven to many.
Port of Tyne wants "virtual free port" stretching
to Nissan factory (in Newcastle)
But the question remains the same.
Special economic zones didn’t do marvels
in the 80s... why would they do it now?
And this is when we get to the idea of the
supercharged free ports.
Basically, in the 80s we had two types of
special economic zones: enterprise zones,
with some tax breaks, and free ports, with
no tariffs.
Imagine what would happen if we merge these
two into one thing.
What do we have?
We have a place with freedom of movement,
low taxes, flexible urban regulations and
no tariffs.
Boom!
All of a sudden, we can make the story of
the Colombian French Fry maker possible.
They come with their raw ingredient, they
unload it, they process it and then they sell
it with lower tariffs.
In the meantime, we have created companies,
factories and jobs for lots of people in the
poorest areas of the countries.
Sounds good?
Well... in the North, this sounds really good.
‘Free ports’ plan for North could give
UK £9bn boost
According to a consultant named the MACE GROUP,
filling Northern England with these supercharged
free ports would create over 150,000 jobs.
As you can imagine, the port associations
in the country are enthusiastic about the
idea.
Conservatives are happy too.
And Labour is pretty much divided.
On the national level, they say this.
Boris Johnson’s ‘free ports’ are for
the super-rich to dodge taxes and launder
money
Nevertheless, the Northern English Labour
MPs aren’t as clear.
Just look at what Mike Hill, an MP from Manchester
says...
Mike Hill: For jobs in Northern coastal towns,
create supercharged free ports
So now the question is...
Are we really talking about the last resort
for post-Brexit UK?
Can these free ports really work?
So far it looks as though they have more advantages
than disadvantages.
But we are not talking about a game changer
at all.
Can they create jobs?
Of course they can!
Definitely, in Newcastle, where the Nissan
factory is based, they could be a great incentive
for other car manufacturers to set assembly
plans.
They could import the cars piece by piece
and then put them all together in the UK.
This could provide some jobs... but not really
highly skilled ones.
At the end of the day, assembly is one of
the cheapest parts of the value chain of a
product.
But anyway, we are just making predictions...
and that’s not our job.
So now the question goes to you.
Do you think these supercharged free ports
are going to turn the UK into a Singapore-on-Thames?
Would this make up for the losses of a Hard
Brexit?
Please, leave your answer in the comment section
below.
Before finishing this video, I would like
to thank ADRIANOPLE GROUP for helping us with
the research.
Adrianople Group is a political intelligence
company specialized in special economic zones.
They have given us lots of insights and we
want to thank them.
This is not a sponsor, just a simple thank
you.
Also visit RECONSIDER MEDIA.COM, the podcast
that provided the vocals in this episode that
were not mine.
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