The government have been accused of a “catastrophic blunder” which could mean manufacturers based in Freeports, such as the recently announced one in Teesside, missing out on exports to key markets around the world.
Labour claims that firms would face tariffs if they were exporting to a series of counties who have signed post Brexit trade deals with the UK. It has emerged that trade deals signed with 23 countries include prohibiting tax breaks that Freeports were supposed to provide.
Chancellor Rishi Sunak championed Freeports as part of the Government s “levelling up” agenda to spread economic and jobs across the country. Teesside was one of eight zones to be awarded special economic status around the country.
Freeports are usually located around shipping ports or airports, and goods that arrive at them from abroad are exempt from normal import tariffs. These tariffs were not paid if the goods are moved overseas only if they are moved elsewhere in the UK.
The Opposition claim that manufacturing operations within Freeports could face tariffs on their exports to key markets including Switzerland, Canada, Norway and Singapore which in 2019 saw £35.5bn in exports.
Labour claim trade ministers have failed to remove wide-ranging “duty exemption prohibitions” from trade deals. This means that business will not be able to benefit from reduced tariffs on their exports if they are part of the business is part of the Freeport.
Labour have accused the government of knowing about the situation and continuing to sign trade agreements with other countries. Shadow international trade secretary Emily Thornberry said: “Last November when the Treasury invited applications for it’s 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 last two years.”
Ms Thornberry added: “Despite that warning the International Trade Secretary, Liz Truss went on to sign trade agreements with 10 more countries containing the same clauses”.
The Opposition do not think the issue of business’ facing the prospect of tariffs on their sales is restricted to Teesside. Ms Thornberry said: “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 spokesperson 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.”
Echoing the government spokesperson, newly re-elected Tees Valley Mayor, Ben Houchen said: “This is a common provision seen in trade deals across the world. It is not an error and does not have an impact on the benefits Freeports bring.”
Reacting to Labour’s accusations, he said: “I know Labour are salivating at the idea this will adversely affect Teesside, but it won’t. The Teesside Freeport will be transformational for our local economy, creating over 18,000 well paid jobs for people across Teesside.”
He went on to say: “These are not jobs of the future; they are being created right now; including the likes of GE Renewable Energy who recently announced they would build a state-of-the-art factory on the Teesworks site to manufacture blades for offshore wind turbines.”
Mr Houchen added: “If we hadn’t secured a Freeport for Teesside these jobs would have simple gone to France.”
The announcement of the Teesside Freeport was at the centre of a controversy when it emerged that a rival bid by north east neighbour, Tyneside had actually scored higher than the Teesside bid.
The final decision was made by Mr Sunak and Communities Secretary, Robert Jenrick who agreed the Teesside bid should leapfrog the North East Tyne because of its “stronger alignment with Government policy, in particular the Net Zero agenda and the prime minister’s 10 Point Plan.” Locally these claims have been refuted because environmental factors were already included in the scoring system and the bidding prospectus.
At the time of the Freeport announcement the satirical magazine, Private Eye noted: “What Teesside certainly scores highly on is alignment with the Tories. The outcome won’t harm Mr Houchen and the Tories’ local government election”.
Conservative, Mr Houchen was re-elected as Tees Valley mayor in the 6th May election, beating Labour’s Jessie Joe Jacobs, the only other candidate, by taking 73% of the vote.
Following his election victory Mr Houchen said he wanted to bring “attractive jobs” and investment to the area. He said: “We’ve made a fantastic start and I am confident the things we have put in place will bring benefits for everyone across our region, but there is still a long way to go.”
If Labour’s assessment of the situation is correct businesses in Freeport schemes have still got work to do.
Apart from Teesside the seven other Freeports in England are, East Midlands Airport, Felixstowe and Harwich, Humber region, Liverpool City Region, Plymouth, Solent and Thames