Labour’s demand for an EU customs union risks killing the dream of Free Ports in struggling coastal communities

Labour’s demand for an EU customs union risks killing the dream of Free Ports in struggling coastal communities

At a crucial moment in the battle to leave the European Union, I am fighting to keep a dream alive.

It is a vision that could increase the UK’s economic competitiveness, boost international trade, create thousands of jobs, and rejuvenate many of Britain’s coastal communities and regions all at once, as set out in a brilliant paper by my colleague Rishi Sunak, it is The Free Ports Opportunity.

For the last two years, Teesside has been buzzing about the idea of hosting a Free Port at Teesport. This idea has huge support from the local business community and from local politicians like the Tees Valley Mayor Ben Houchen. The former Brexit Secretary David Davis visited our port last year to support the case.

But now this dream is in danger of dying – because of Labour’s demand that our exit from the EU must involve remaining in a Customs Union.

To understand why, you need to understand what a Free Port is.

A Free Port is an area that is physically within a country but legally outside it for customs purposes. Consequently, goods that enter a Free Port do not incur import duty. Instead, import duty is only paid if and when goods pass out of the Free Port and into the domestic economy.

This offers a number of advantages. Goods can be imported, processed, and then re-exported without incurring any duty. This incentivises international businesses to use the Free Port as part of their supply chain, thereby stimulating domestic manufacturing and creating jobs in the process. Free Ports also often offer their users a number of additional advantages, including tax reliefs and a simplified regulatory environment.

They are not a novel or untested idea. Indeed, there are now approximately 3,500 Free Ports operating in over 135 countries.

The UK is unusual in that we have no operational Free Ports. But there is a really compelling economic and social case that we need them.

Free Ports would make post-Brexit Britain a hugely attractive location for international businesses to process and trade their goods. Wherever Free Ports have been implemented properly around the world, they have demonstrated this effect.

Just look at how quickly and impressively the Jebel Ali Free Zone in the United Arab Emirates has transformed Dubai. In the space of just a few decades, this Free Zone has brought unimaginable wealth to the country. It now hosts 7,000 global companies, employs 145,000 people, and accounts for around 40% of the UAE’s total Foreign Direct Investment.

Jebel Ali may be a unique example, but Free Ports have also demonstrated their worth in highly developed and mature economies. The growth seen in Free Ports in the US, for example, has outperformed the US economy as a whole. Indeed, Rishi Sunak’s report predicts that if a Free Port programme in the UK were as successful as those in the US, we would create an additional 86,000 jobs.

Here in the UK, such a boost to our great port towns and cities is sorely needed. Half of the twenty most deprived UK districts are located on our coast. The European political project offered these communities very little – indeed, the Commons Fisheries Policy has been partly responsible for their demise. It was unsurprising, therefore, that almost 100 of the 120 English parliamentary constituencies that have a coastline voted to Leave in June 2016.

A report produced by the consultants Mace Group last year looked at what a programme of ‘supercharged freeports’ in the North of England might mean for the regional economy. It found that such a programme, once established, would:

  • Boost UK trade by nearly £12 billion a year
  • Create 150,000 extra jobs across the North
  • Provide a boost to Northern powerhouse GDP of £9 billion a year (equivalent to £1,500 a year for every household in the North)

Although I’d eventually love to see Free Ports dotted around the entire UK coastline – like giant magnets pulling in container ships from every direction – I won’t miss an opportunity to fly the flag for Teesport in our bid to be the first new Free Port in the country.

Teesport is a hugely ambitious port, run by the extremely professional and impressive team at PD Ports. The container platform at Teesport has seen £120m invested over the past seven years, bringing improvements in infrastructure and state-of-the-art equipment to expand capacity. It would be the perfect site for a Free Port.

However, leaving the EU – and leaving it properly – is crucial for this opportunity to be realised.

This is where Labour’s demand for a customs union – and the Government’s apparent flirtation with it – is so dangerously misconceived.

A Customs Union would give the EU unilateral control over our trade and customs policy, and hand them power over the UK’s state aid rules. This would completely undermine any prospect of setting up meaningful Free Ports in the UK post-Brexit, as the necessary allowances would almost certainly be found to breach state aid requirements.

By pursuing their ideological drive for close alignment with the EU, therefore, the Labour Party is letting down many of their traditional voters in the UK’s most deprived regions, and denying them the opportunities that would otherwise be available if their decision to leave the EU were to be properly respected.

In areas like the North East, the Labour Party, with their narrative of gloom and negativity, has dampened the natural British spirit of enterprise and opportunity for too long. Denying our coastal communities the Free Ports opportunity because they are too afraid to let the British people govern themselves is just the latest expression of this defeatism.

We can and must do better – but we must reject the Customs Union if we are to do so.