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.
Don’t forget that we publish brand new videos like this one every week so subscribe to VisualPolitik
and hit that bell button so you won’t miss any of our posts.
If you liked this video, give us a thumbs up and, as always, I’ll see you next time.