Government accused of ‘catastrophic’ blunder over freeports
FEARS FIRMS BASED IN THEM MAY NOT BENEFIT FROM POST-BREXIT TRADE DEALS
THE government has been accused of a potentially catastrophic blunder with its freeport plans, amid claims companies based within them could miss out on new trade deals.
Labour says the eight new low tax zones announced by Chancellor Rishi Sunak in the spring Budget might not be able to benefit from 23 post-Brexit deals struck by the UK Government.
The opposition – still recovering from disastrous local election results – believes manufacturers based within those areas might suffer if they export goods to countries where the UK has signed new agreements.
Exports of goods to the 23 countries concerned – including Switzerland, Canada, Norway and Singapore – were worth £35.56 billion in 2019, almost 10 per cent of the UK’s total goods exports, Labour said.
However, the government has denied there will be any extra tariffs for manufacturers.
Backers of the freeports – including an inland one centred on East Midlands Airport which it has been said could support 60,000 jobs – say streamlined planning, tax reliefs, business rates reliefs and easier customs procedures will attract employers and overseas investment.
Opponents such as the TUC have said freeports don’t create jobs but allow “freeloading employers to dodge taxes and deny workers their rights”.
The other freeports given the goahead are in Felixstowe and Harwich, the Humber region, the Liverpool City region, Plymouth, the Solent, Thames and Teesside.
Labour said trade ministers failed to remove wide-ranging “duty exemption prohibitions” contained in 23 of the new overseas trade agreements it had signed.
The prohibitions state that any business which has not paid duty on its imports cannot benefit from reduced tariffs on its exports.
Shadow international trade secretary Emily Thornberry has written to International Trade Secretary Liz Truss exposing what she calls a “catastrophic negotiating blunder that risks leaving manufacturers in the UK’s new generation of freeports shut out of £35 billion in export markets” and asking for clarification. Ms Thornberry said: “Last November, when the Treasury invited applications for its new freeports scheme, the small print warned potential bidders of the prohibition clauses contained in several continuity trade agreements the Department of Trade had signed in the previous two years.
“But, despite that warning, Liz Truss went on to sign trade agreements with 10 more countries containing the same clauses, including key markets like Canada, Singapore and Mexico.
“It would have taken an hour of discussion and the stroke of a pen to explain the UK’s freeports policy to negotiators from these countries and remove the prohibition clauses from those agreements, and I cannot understand why Liz Truss failed to do that.
“On the surface of it, this looks like a catastrophic blunder by a minister stuck in her silo, and, as a result, I fear that manufacturers in towns, cities and regions across our country who have succeeded in bidding for freeport status risk missing out on access to key markets.”
A government spokesman said: “There is no error and it is not uncommon for free trade agreements to have these provisions.
“Businesses will not be shut out of markets we have negotiated free trade deals with.
“They will benefit from both our free trade programme, and also from freeports, which provide tax breaks, simpler planning restrictions and cheaper imports.”
The government said where the provisions apply, firms will be able to opt for either “duty drawback” – the refund of import duty when goods are re-exported – or from the preferential rates under the free trade agreement, providing they comply with the deal’s rules of origin tests.
In his Budget in March, the Chancellor promised “eight new freeports in eight English regions, unlocking billions of pounds of private sector investment, generating trade and jobs up and down the country”.
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This looks like a catastrophic blunder by a minister stuck in her silo Emily Thornberry