How International Relations can encourage domestic prosperity: Freeports and SEZs.

Will Elliott is a staff writer for IR Today as well as a third year Classics student at KCL with an internship at the Cabinet Office in Whitehall. His interests include politics and diplomacy; in particular British foreign policy and the political interaction between European countries.

Airports, seaports and national frontiers are fundamental to global integration and international development. Indeed, the ongoing project of globalisation would have been impossible but for the interconnectedness enabled by lively transport hubs. Public sector organisations, private companies and financial services institutions have relied on the international access they provide. State and non-state actors continue to thrive off the global links they impel. As consumer demand grows across regions, countries and continents ports will remain imperative to promoting multinational trade and furthering an increasingly consumer-oriented world. 

A 20thcentury innovation enhanced this phenomenon: Freeports. Freeports are also known as Free Trading Zones. FTZs are considered Special Economic Zones and thus exempt from various trade-related duties and taxes. The idea behind Freeports is to unburden companies from excessive regulation and encourage business activity. Reflecting our current era of burgeoning enterprise, Freeports have risen to prominence alongside disruptive industries. In Italy alone e-commerce transactions rose by 81% at the end of February. Across the rest of Europe first-time E-transactions increased by 13%. Moving forward, the ‘new normal’ will be dictated by this pattern of accelerated innovation. Freeports, although no guarantee of commercial success, encourage actionable conversations between stakeholders as a gateway to entering new, cross-border markets. 

As a catalyst for economic activity the results are profound. In Dubai, the use of SEZs has resulted in a 22% year-on-year increase in trading exports since 2018. Dubai’s Jebel Ali seaport, combined with Al Maktoum Airport, transformed Dubai Southinto a titan of commercial intersectionality. By encouraging SEZs the potential for fiscal growth is clear. Over 5,400 FTZs now exist globally – and1,000 of those were created within the last five years. Strategically located FTZs are ideally situated to embrace foreign direct investment and harness inevitable automation. Another example in recent years is in the SEZ Moscow Technopolis. Since 2008, the Technopolis has experienced extensive industrial development. Financial Times’ FDi Magazine gave the hub several awards, including for Cluster Development and Public-Private Partnerships. Importantly,over 130 companies now do business with the SEZ– a mixture of Russian and foreign companies. As a result, “Southport”, has been regenerated through seismic investment. The potential for urban transformation is palpable. 

Domestic issues often suffer intellectual relegation in the sphere of International Relations. Home regions are readily dismissed as irrelevant to the discussion. However, domestic prosperity and international links are closely aligned. The United Kingdom offers an example of this. Previously under-represented parts of the electorate now possess decisive influence over the scope and direction of foreign policy. The 2016 Brexit Referendum saw coastal communities in England vote by a substantial majority to leave the EU.Historic seaside towns combined their voices to set the UK on a course independent of supranationalism. Paul Green, a club steward in England’s ardently pro-Brexit ‘rust belt’, outlines the reasoning: “Knottingley is a forgotten community, and all the surrounding areas are forgotten communities as well, through lack of investment and red tape”. Globalisation often equates to empty promises and reinforcing stagnation. The foreign direct investment promised at the launch of the EEC, Euro and Lisbon Treaty is non-existent in such towns. 

Ultimately, Governments cannot expect their electorate to possess a uniformly global outlook unless they positively engage with regional communities. Indeed, coastal and port towns are among the most deprived parts of the UK. Out of the UK’s 30 largest port local authorities, 17 are categorised in the bottom quartile in the ONS’ Index of Multiple Deprivation and three quarters are ‘below average’. Compounding issues, COVID-19 has seen unemployment in counties like Lincolnshire rise to their highest levels in 20 years. Port towns which should be attracting investment are instead harshly insulated. Such isolation has led to entrenched deprivation and disenfranchisement. International development should happen with these regions – not just around them. Freeports are not solely about increasing GDP but diversifying it. FTZs could mean regeneration, fresh employment opportunities and vitality where it is needed most.      

Of course, economic activity must be sensitive to the social implications such changes bring. Those communities transformed by Freeports cannot be displaced. However, SEZs are about impetus – attracting economic activity – before being integrated into the base economy with a more sustainable set of rules. Freeports offer a decisive starting point at a time when aspirational ideas are most necessary and opportune. Moreover, it would mean a sincere invitation for neglected towns to join the international community. Ultimately, Freeports have the potential to establish renewed purpose, instill shared global vision and provide hope for the future. If properly managed, Freeports could deliver meaningful engagement with a crucial sectional interest that is too often overlooked – the forgotten communities.  

Bibliography:

{1} https://www.shiplilly.com/blog/the-worlds-major-free-trade-zones-and-special-economic-zone/.

[2] https://www.mckinsey.com/featured-insights/leadership/the-future-is-not-what-it-used-to-be-thoughts-on-the-shape-of-the-next-normal,

[3] https://www.thelondoneconomic.com/business-economics/how-to-make-sure-britains-economy-thrives-post-brexit/26/10/?utm_source=rss&utm_medium=rss&utm_campaign=how-to-make-sure-britains-economy-thrives-post-brexit.

[4] https://www.arabianbusiness.com/politics-economics/405250-abe-1935-why-special-economic-zones-remain-important.

[5] https://www.shiplilly.com/blog/the-worlds-major-free-trade-zones-and-special-economic-zone/.

[6] https://www.thelondoneconomic.com/business-economics/how-to-make-sure-britains-economy-thrives-post-brexit/26/10/?utm_source=rss&utm_medium=rss&utm_campaign=how-to-make-sure-britains-economy-thrives-post-brexit.

[7] https://ig.ft.com/sites/elections/2016/uk/eu-referendum/.

[8] https://www.reuters.com/article/uk-britain-eu-voters-idUSKBN1KS0VM.

[9] https://www.cps.org.uk/research/the-free-ports-opportunity/.

[10] https://www.lincolnshirelive.co.uk/news/local-news/unemployment-lincolnshire-jobs-universal-credit-418527.

Image credits:
https://www.weforum.org/agenda/2018/12/globalization-4-0-have-your-say/

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