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With port bosses keen on having a free port trial at Grimsby and Immingham, Parliamentary Correspondent Patrick Daly looks at what they entail.

Any idea that involves the Treasury losing money tends to be a non-starter for Government – which is why it is so interesting that free ports are gaining support.

Liz Truss, Chief Secretary to the Treasury, has agreed to meet with MPs, Associated British Ports (ABP) and other Humber business leaders to discuss the proposition.

The Cabinet minister is not alone in supporting the concept either. Trade Secretary Liam Fox has said the Government will look at it and junior ministers in the Department for Exiting the European Union (DexEU) have privately suggested they are in favour of bringing them in after Brexit.

Suella Braverman, the Brexit minister, was in North East Lincolnshire on Friday to open the new £5.2 million Humber Marine Control Centre at the Port of Grimsby.

(Image: Jon Corken)

She also used the opportunity to speak with ABP bosses about their ideas for introducing free ports on the Humber.

Simon Bird, ABP's Humber director, has spoken publicly about why the eastern tidal estuary, with the largest set of ports by tonnage in the UK, should be given the green light to trial free ports .

And so with the creation of a free port firmly on the cards, here are a look at the pros and cons of setting them up in the Humber.

What is a free port or free trade zone?

(Image: Submitted photograph)

A free port is a zone within a country which is treated, for customs purposes, as an independent jurisdiction.

This means goods can be made, imported and exported in the zone without incurring normal trade barriers like customs duties or taxes.

The idea has reared its head because it would enable UK ports to escape any nasty taxes imposed by Brussels after the UK leaves the European Union, allowing Immingham, Grimsby, Hull and Goole to remain attractive trade destinations.

Rishi Sunak, the Richmond (Yorkshire) MP and now Communities minister, has written a paper about free ports. He argued that there is an opportunity to increase manufacturing through free ports after Brexit.

Rather than pay import duties on every part or raw material needed to create a finished product, factories could set-up in the free trade zone along the port and only pay a tax on the final product.

It is for that reason that the seafood processing industry, as explained below, has been vocal about wanting to explore the possibility of free port status.

Who wants a free port in the Humber?

It has some solid support from the region’s big hitters. As mentioned, ABP are firmly behind it and have lobbied ministers on securing a trial.

Mr Bird, the Humber chief, has even suggested that free port status could be applied to the M62 motorway as well to create a zone stretching from the Humber to Liverpool.

Simon Dwyer, spokesman for the Seafood Grimsby and Humber cluster, found himself barraged with media requests from all over the world after he revealed to the Telegraph that the seafood processing industry saw it as a good way of avoiding being hit by Brexit taxes.

Cleethorpes MP Martin Vickers is a firm supporter and Grimsby MP Melanie Onn has been involved in the talks, while the Hull and Humber Chamber of Commerce has also engaged with it.

Are there any drawbacks?

There are certainly detractors of free ports – including locally.

Martyn Boyers, chief executive of the Grimsby Fish Dock, told MPs last year there was “no substance or justification” for the town going it alone with a free port.

“I don’t go along with that at all, having us as a free trade port. That’s not going to work,” he told the Commons environment committee.

The Government is known to have doubts as well. The argument for free ports is that they will encourage trade in the long-term.

But in the short-term, the Treasury loses a major income stream – duty taxes on goods entering and leaving the UK.

Pro-EU supporters also dislike the concept as it only works if Britain heads for a hard Brexit where it leaves the single market and the customs union.

Europhiles say a hard Brexit would kill-off far more jobs than the establishment of free ports – predicted to create 86,000 jobs – would bring in.

And finally, there is the not-so-ideal examples of shady exporters using free ports as tax havens for their expensive art, vintage wine and even stolen goods. The Geneva Free Port reportedly has 1.2 million art works in storage, with 1,000 of them thought to be Picassos.

Art dealers are able to keep their purchases under lock and key in Geneva so as to escape government duties before they are ready to sell or lend the art work.

How would a Humber free port work?

ABP’s idea is to draw a perimeter, agreed with HM Revenue and Customs, around the outskirts of each of its four Humber ports and treat those areas as free trade zones.

The private port operator has already earmarked land in Hull for a factory which could benefit from favourable trading conditions within a free trade zone.

There has been talk on the south bank of the Grimsby-Immingham free trade zone stretching out as far as the Europarc, making the business park off the A180 a hotbed for manufacturers and traders wanting to move in.

Where do free ports or free trade zones exist?

While free ports have been almost entirely flushed out of the EU, they have proved popular elsewhere. China, the USA, Brazil and the United Arab Emirates have all established them in different guises.

According to Mr Sunak MP's free trade report, published through the Centre for Policy Studies, a right-leaning think tank, free zones today account for $500 billion of “direct trade related value added activity” across the globe and there are 3,500 of them in 135 countries, employing 66 million people.

Dubai, United Arab Emirates

(Image: Getty)

The UAE created a man-made free zone in Jebel Ali, Dubai, in 1985 and it is now one of the world’s largest ports, home to thousands of businesses from 100 countries and with 135,000 employees.

Although the domestic UAE market is relatively modest, global companies use Dubai as a processing and manufacturing hub in order to take advantage of its infrastructure, duty savings and strategic location.

The zone now accounts for 20 per cent of UAE’s foreign direct investment.

Luxembourg

Geneva might have started the trend but Le Freeport Luxembourg – a storage facility opened adjacent to Luxembourg City airport in September 2014 – has looked to exploit the high-end storage element of free ports.

With 80 per cent of museum art collections being kept in storage, its 22,000 sq m of storage space has proved a massive success, being at 60 per cent capacity before even being officially opened.

Clients can acquire a whole unit for about €1,300 per month for a 20 sq m unit where it offers a controlled and secure environment, along with the aforementioned tax breaks.

Manaus, Brazil

The creation of 10,000 km free trade zone in Manaus helped the Amazonian region switch trade away from, often illegal, timber felling.

Generous tax breaks helped to create an industrial base offering urban jobs. Tax incentives included a reduction of up to 88 per cent on import tax, exemption from excise duty and VAT cuts of between 55 and 100 per cent.

Since its formation, manufacturers from around the world have flocked to Manaus with approximately 100,000 jobs in western Amazonia directly related to the Manaus free trade zone.

It has become a hub for motorbikes and electronics manufacturing with the likes of Harley-Davidson, Honda, Siemens, LG, and Samsung all setting up substantial operations in the area.

Shannon, Co. Clare, Ireland

Ireland’s free port project has suffered since joining the EU in 1973, given Brussels is anti them for competition reasons, but that it had been very successful in its venture and was even credited as inspiring China to set-up its own in the 2000s.

The Irish government launched the Shannon free zone in the 1950s with the intention of using low tax, duty-free incentives to stimulate economic activity.

In addition to the deferral of tax arrangements, imported goods were also exempted from VAT and grants were offered for innovative product research.

The free zone attracted a host of global companies and by the 1960s accounted for a third of Ireland’s exports of goods.

The Shannon free zone remains, outside of Dublin, the Republic’s largest target of foreign direct investment and employs 7,000 people and generates €3.3bn in trade annually.