Rishi Sunak’s free ports plan reinvents Thatcherism for the Johnson era – The Guardian

Opinion[1]Economic policy[2]

Rishi Sunak’s free ports plan reinvents Thatcherism for the Johnson era

Instead of ‘levelling up’ the economy, they would entrench the power of corporations and deepen market competition




‘The attraction of free zones for corporations is clear: trade state bureaucracy for your own rules.’Photograph: Charles Bowman/Getty Images/Robert Harding World Imagery

In 2016, a little-known Conservative MP authored a paper[4] for the Centre for Policy Studies, the free-market thinktank founded by Keith Joseph and Margaret Thatcher. Looking ahead to Britain’s post-Brexit future, the report argued, the government should seize the opportunity to create a string of free ports across the country to revive manufacturing. These engines of economic growth would reconnect Britain with its “proud maritime history” and act as a “beacon of British values”.

The MP in question was Rishi Sunak. Four years later, Britain has left the EU, Sunak has been promoted to chancellor of the exchequer, and Boris Johnson is shaping the direction of Britain’s economy. If Johnsonism, as Ferdinand Mount writes, “is not a continuation of Thatcherism at all[5]“, Sunak’s 2016 proposal should make us wonder.

His recent plan for free ports[6], based on the 2016 report, reheats an idea that first gained prominence under Thatcher’s government, and reeks of precisely the free-market ideas from which the new government is supposedly distancing itself. Though the Conservative party’s post-Brexit economic worldview has often been likened to “Singapore-on-Thames[7]“, Sunak’s vision is more Tennessee-on-Tyne. Free ports most resemble the foreign trade zones[8] that have existed in the US since the 1930s, where goods aren’t subject to tariffs[9] until (and if) they cross over into the domestic market.

US free trade zones work because of conditions the UK doesn’t share, including higher tariffs on car parts that make it cheaper for companies to manufacture finished cars in US free trade zones. Sober observers of the free port policy realise the difficulties that the UK would have in making a success of it. One consultant, Neil Davidson, reminded MPs in 2019 that the UK actually had five free ports until 2012.

It allowed them to lapse because there was no advantage to be gained beyond the considerable advantages the UK already enjoyed from its EU membership. But the real utility of free ports may in fact be ideological. They are reminiscent of the free-market enterprise zones policy that first gained popularity during the Thatcher era, the unlikely brainchild[10] of anarchist city planner Peter Hall and Thatcher’s longest-serving cabinet minister, Geoffrey Howe.

Michael Heseltine helped set up enterprise zones in places such as Corby, Wakefield, Liverpool and the Isle of Dogs in London. By freeing discrete areas of the city from regulations and taxes, they were ostensibly intended to cut red tape and unleash grassroots entrepreneurship – exposing the limitations of top-down state investment in the process. Yet their legacy was mixed.

Total net employment benefits were small, and the policy was costly[11]. Speaking to the US libertarian thinktank the Heritage Foundation in 1980, the historian Paul Johnson described the zones as a “dagger aimed at the heart of socialism[12]“. The “localised freedom” of low taxes and deregulation, wrote Stuart Butler, a policy analyst at the Heritage Foundation, can “act like a benign cancer[13]“, rotting “the foundations of the unfree state around it”.

In 1980s Britain, the benefits of enterprise zones flowed largely to property investors. One of their success stories was the Isle of Dogs, an area that exemplifies the lopsided growth and extremes of inequality[14] that Johnson’s government seeks to level out. A slowdown in the global economy since 2008 has led nation states across the world to offer ever-more inducements to would-be corporate investors.

The world is full of zones designed for this purpose – nearly 5,400 by the latest estimates[15], with 1,000 new zones appearing in the last five years. In many cases, the zonification of the Earth has led to what critics[16] long feared: a race to the bottom. Free trade zones splinter the world into jurisdictions engaged in a constant competition to attract multinational companies, locking nations into a global “place war” to offer businesses the most enticing incentives and the lowest labour costs.

In some places, the exemptions granted to businesses in free trade zones have ripped important rules to ribbons. In Bangladesh, the Chittagong[17] free zone banned strikes and reportedly paid workers less than the minimum wage, while in a free zone in the Philippines[18], state police battled with private security guards over government plans to enact health and safety regulations. The attraction of free zones for corporations is clear: trade state bureaucracy for your own rules.

Free zones make tax, labour law and health and safety regulations into a service that companies can opt out of. After Brexit, the UK will be free to introduce free ports as it chooses. Yet it’s unlikely that the country will be able to compete with the world’s most successful free port, Jebel Ali, in the United Arab Emirates, where corporations, as Davidson noted in 2019, enjoy “0% corporation tax, no VAT, no income tax, no taxation at all[19]“.

Far from bringing tangible economic benefits, the more likely outcome of UK free ports is shifting existing jobs into enclaves around the country, as companies chase the tax breaks on offer. This is perhaps the most plausible way to understand the free ports strategy. Rather than “level up” the UK as a tool of economic policy, their real agenda may be to deepen an ethos of market competition, entrench the power of corporations and reinvent Thatcherism, Johnson-style, for the 2020s.

o Quinn Slobodian is a historian and author of Globalists: The End of Empire and the Birth of Neoliberalism

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References

  1. ^ Opinion (www.theguardian.com)
  2. ^ Economic policy (www.theguardian.com)
  3. ^ (www.theguardian.com)
  4. ^ paper (www.cps.org.uk)
  5. ^ is not a continuation of Thatcherism at all (www.lrb.co.uk)
  6. ^ recent plan for free ports (assets.publishing.service.gov.uk)
  7. ^ Singapore-on-Thames (www.theguardian.com)
  8. ^ foreign trade zones (www.nber.org)
  9. ^ aren’t subject to tariffs (fas.org)
  10. ^ unlikely brainchild (academic.oup.com)
  11. ^ policy was costly (www.centreforcities.org)
  12. ^ dagger aimed at the heart of socialism (www.cato.org)
  13. ^ act like a benign cancer (www.cato.org)
  14. ^ extremes of inequality (www.theguardian.com)
  15. ^ 5,400 by the latest estimates (unctad.org)
  16. ^ critics (www.dukeupress.edu)
  17. ^ Chittagong (www.theguardian.com)
  18. ^ Philippines (www.academia.edu)
  19. ^ 0% corporation tax, no VAT, no income tax, no taxation at all (data.parliament.uk)
  20. ^ Economic policy (www.theguardian.com)
  21. ^ Opinion (www.theguardian.com)
  22. ^ Tax and spending (www.theguardian.com)
  23. ^ Economics (www.theguardian.com)
  24. ^ Rishi Sunak (www.theguardian.com)
  25. ^ Brexit (www.theguardian.com)
  26. ^ Trade policy (www.theguardian.com)
  27. ^ Margaret Thatcher (www.theguardian.com)
  28. ^ comment (www.theguardian.com)
  29. ^ Facebook (www.facebook.com)
  30. ^ Twitter (twitter.com)
  31. ^ Email (www.theguardian.com)
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