The following dramatisation depicts an event in the late seventies during strike action by HM Customs and Excise.
Two besuited reps struggle to carry a heavy crate through the Port of Dover. Written on the box is ‘Les numéro treize widgettes’ with a cog wheel as illustration. Exhausted, they placed their burden on the bench beneath the beady eyes of a lone senior customs officer – evidently not on strike:
Officer: “What’s in the package Sir?”
Rep 1: “What it says on the box, mate! We’re from an engineering firm and there’s a car outside to pick us up and take us to Slough. It’s urgent. My guv’nor’s got a big order, and we mustn’t stop production.”
Officer: “Don’t you ‘mate’ me Sir, I am an officer of the Crown. Open that box.”
Rep 2 retrieves a sheaf of paper from his jacket pocket and replies: “Here you are Officer, from our supplier in Calais. Proves what’s inside.”
He flamboyantly casts the papers on the bench. The customs officer growls: “I am asking you to open the case, so I can see if it is engineering parts…”
The outcome of this techy exchange remains unknown, but it is doubtful these men were either arms smugglers or drug dealers. Just rather weary. What is memorable is that while the lone official was checking the widgets, there was the ‘clink clink’ in the background from bottles of contraband carried by tourists taking advantage of the situation and sneaking out through ‘Nothing to Declare’.
It is redolent of the sketch involving an unlicenced street musician, his monkey, a jewellery raid, and of course, Inspector Clouseau …
That was then, but now it is all coming back!
UK ports have been enjoying frictionless trade with our EU neighbours for years. Then Brexit threw a metaphorical spanner in the works, a metaphor the reps would understand. The Financial Times (5-7 March) reported: ‘UK-EU trade falls sharply as Brexit disruption starts to bite.’ Key take-away points are that for January, French exports to the UK were down 13%, and 20% the other way. German exports were down 30% “continuing a trend of declining trade between the two countries since the Brexit Referendum in 2016” and the proportion for Italy is worse. There are other factors, including Covid, but Brexit is clearly the major cause.
‘Frictionless Trade’ is the removal of both tariff and non-tariff barriers to trade: free movement of goods, services, capital, and people between countries. Frictionless trade means not only the removal of taxes and charges at borders but also alignment of regulatory and legal frameworks with another country.
A steady decline since 2016 suggests a lack of willingness to trade with UK, and partial blame is attributed to requirements from customs, including certifications. Delays are hardly the frictionless trade promised by the government in 2016; neither are these considered to be merely teething problems, as reported by the BBC on 12 February.
What about freeports?
According to the Institute of Government, the concept of freeports is a special kind of port where normal tax and customs rules do not apply. Candidates for freeport areas can be either maritime or airports. Contrary to what the government would have you believe, freeports were allowed under EU law and UK has had several including Tilbury, Southampton and Glasgow Prestwick Airport.
Because tariffs on component parts are often higher than tariffs on finished goods, it can be advantageous to transport components to a freeport to manufacture finished goods and then import these into the rest of that country with a lower tariff, says Abbas Panjwadi.
“Within designated zones, stretching up to 45km from ports, the government’s free ports prospectus describes how usual customs, planning and tax measures will not apply. Goods and components will, in effect, remain offshore, allowing, say, a new factory to be built, processing raw materials and components without customs paperwork or tariffs, to re-export as more valuable goods.”
Inevitably, Rishi Sunak is behind freeports, with promises of employment in deprived areas and ‘green industry’ for such as Humberside, Liverpool or Teesside as candidates apply for freeport status. This is, of course, in line with the desire to make the UK economically more like Singapore.
One criticism of freeports is that companies will just move their operations into the freeport areas which is to the detriment of already hard-hit towns and the workers who would have to move. Also there may be reduced regulation with the threat of loss of workers’ rights. Then there may be ‘relaxation’ on employers paying national insurance contributions and an overall loss of revenue to the government through concessions from legal non-payment of stamp duty and business rates.
The fear that mini-tax havens will be created on British soil is real; 45 km gives a lot of wriggle room for ‘virtual freeports’. For instance, that radius from Liverpool takes in much of south Lancashire and north Cheshire. Practices developed in ‘sleaze ports’ could leak into the wider economy. Tax dodgers and money launderers could be two kinds of beneficiaries.
So, will freeports work and for whom?
A BBC report (3 March) finds supporters claiming they encourage manufacturing and job creation in less affluent areas; opponents claim no overall boost to jobs, with an economic burden of moving activities geographically. Despite claims made by James Cleverley (minister of state for Middle East and North Africa) and the chancellor, Abbas Panjwadi reports that there are around 80 zones within the EU with free port characteristics. These are still subject to EU rules and presumably, trade through EU freeports would still bind UK to EU regulations. Also trade from UK freeports to the EU will be subject to EU regulations. So freeports are not entirely ‘free’ of regulation!
Would we therefore be better off in ‘Global Britain’? Falls in governmental revenues and employment conditions look likely with no good news for overall employment, since this may only move geographically. Whatever the future may hold for freeports, I cannot help thinking how convenient it was when there was frictionless trade to and from our neighbours.
I dedicate this article to all presently suffering from frictional trade.
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