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John Simpson

'Free-port' concept could bring many complexities

John Simpson


Belfast could potentially become a free-port

Belfast could potentially become a free-port

Belfast could potentially become a free-port

Prime Minister, Boris Johnson, hopes to launch 10 cities in the UK as 'free-ports'.

The attraction of free-port status is a series of exemptions from customs and excise duties and tax concessions to make the area within the port attractive for new investment.

For Northern Ireland this free-port concept poses an important question.

Would permission to create a free-port around the city of Belfast be a useful development idea?

Alternatively, would the designation of a free-port around Derry/Londonderry be attractive?

Even more ambitiously, conceivably the whole of NI might be considered as a bid for this status.

Bids for one option to gain this locational advantage must be evaluated. The answer from a wider local perspective, however, is not clear-cut.

Whether there should be a bid for any free-port status in Northern Ireland raises questions which illustrate some of the complexities of the Withdrawal Agreement from the EU.

Even without any special qualifications caused by the Withdrawal Agreement, the concept of free-ports brings a series of qualifications.

Drawing a boundary round a free-port creates administrative and financial problems. The obvious distinction is that, for business decision making, being either in or out (on the other side of a local government boundary or the boundary of a harbour estate) becomes a critical factor, if the financial benefits of being inside a free-port are important.

The free-port concept may bring new investment into the designated area that, otherwise, might not come into NI or the incentives available in the free-port may distort an investment decision to locate inside the area instead of somewhere just outside.

This distortion of location decisions was a feature of the influence of enterprise zones (including Belfast) just over 30 years ago.

Belfast Harbour Commissioners may understandably promote the concept for the Harbour Estate.

However, other parts of the Belfast conurbation or places away from Belfast may have obvious reservations.

Policing the movement of goods into and out of a free-port becomes a necessity. Goods admitted free of duty for processing or trans-shipment should be documented (and subject to charges) if they leave the free-port.

Formal entry and exit 'gates' may be needed.

Free-ports are not a new idea. Shannon Airport (and a defined surrounding area) was a free-port before the Republic entered the, EU but soon afterwards saw the special customs duty and taxation regime abolished.

Similarly, Prestwick Airport, without much protest, lost that special status.

Within the EU the competition policies permitted within the State Aid rules have made the incentive effects of free-port status less attractive.

The special NI protocol in the UK Withdrawal Agreement from the EU means that, to get the best of both worlds in unfettered trade arrangements GB-NI and NI-EU, there are continuing obligations for NI to maintain regulatory alignment with continuing EU trading standards.

If NI wanted to operate a free-port policy (whether for one or other of the options) the arrangements would be assessed within the constraints of EU State Aids policies.

Before making a case for free-port status, a reminder of the tax offsetting conditions that came with a potential variation in corporation tax in NI would serve as something of a deterrent.

The debate about the possible value of free-port status in NI illustrates some of the early complications (as well as advantages) of the new customs status for NI after Brexit is completed.

The Chancellor of the Exchequer has caused concern to many businesses in GB by emphasising that there would not be an effort to maintain widely based regulatory alignment of trading standards and other reciprocal measures in the delivery of UK policies.

For NI, where we have a vested interest in maintaining regulatory alignment with the EU, this introduces a possible wider debate on how to accommodate divergence.

The free-port option is not persuasively attractive. Living with Brexit will not necessarily always be comfortable.

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