Free trade zone

This article is about the special economic zones. For information on agreements for free international trade, see free trade area.

A free trade zone (FTZ) is a specific class of special economic zone. They are a geographic area where goods may be landed, handled, manufactured or reconfigured, and reexported without the intervention of the customs authorities. Only when the goods are moved to consumers within the country in which the zone is located do they become subject to the prevailing customs duties. Free-trade zones are organized around major seaports, international airports, and national frontiers—areas with many geographic advantages for trade.[1] It is a region where a group of countries has agreed to reduce or eliminate trade barriers.[2] Free trade zones can also be defined as labor-intensive manufacturing centers that involve the import of raw materials or components and the export of factory products.

Synonyms

FTZs are referred to as "foreign-trade zones" in the US (Foreign Trade Zones Act of 1934). In the United States, FTZs provide Customs-related advantages as well as exemptions from state and local inventory taxes. In other countries, they are called "special economic zones" or "free zones" and were previously called "free ports" or "export processing zones". Free zones range from specific-purpose manufacturing facilities to areas where legal systems and economic regulation vary from the normal provisions of the country concerned. Free zones may reduce taxes, Customs duties, and regulatory requirements for registration of business. Zones around the world often provide special exemptions from normal immigration procedures and foreign investment restrictions as well as other features. Free zones are intended to foster economic activity and employment that could occur elsewhere. Farole, Akinci, ed., "Special Economic Zones: Progress, Challenges and Future Directions, World Bank, 2011.

Export processing zone

An Export processing zone (EPZ) is a specific type of FTZ, set up generally in developing countries by their governments to promote industrial and commercial exports. Most FTZs located in developing countries: Brazil, Colombia, India, Indonesia, El Salvador, China, the Philippines, Malaysia, Bangladesh, Pakistan, Mexico, Costa Rica, Honduras, Guatemala, Kenya, Sri Lanka, Mauritius and Madagascar have EPZ programs.[3] In 1997, 93 countries had set up export processing zones employing 22.5 million people, and five years later, in 2003, EPZs in 116 countries employed 43 million people.[3]

China

China has specific rules differentiating an EPZ from a FTZ. For example, 70% of goods in EPZs must be exported, but there is no such quota for FTZs.[4]

Background

The world's first Free Trade Zone was established in Shannon, Ireland (Shannon Free Zone).[5] This was an attempt by the Irish Government to promote employment within a rural area, make use of a small regional airport and generate revenue for the Irish economy. It was hugely successful, and is still in operation today. The number of worldwide free-trade zones proliferated in the late 20th century. In the United States free-trade zones were first authorized in 1934.

Corporations setting up in a zone may be given tax breaks as an incentive. Usually, these zones are set up in underdeveloped parts of the host country; the rationale is that the zones will attract employers and thus reduce poverty and unemployment, and stimulate the area's economy. These zones are often used by multinational corporations to set up factories to produce goods (such as clothing or shoes).

Free trade zones in Latin America date back to the early decades of the 20th century. The first free trade regulations in this region were enacted in Argentina and Uruguay in the 1920s. The Latin American Free Trade Association (LAFTA) was created in the 1960 Treaty of Montevideo by Argentina, Brazil, Chile, Mexico, Paraguay, Peru, and Uruguay. However, the rapid development of free trade zones across the region dates from the late 1960s and the early 1970s. Latin American Integration Association is a Latin American trade integration association, based in Montevideo.

Free Trade Zones are also known as Special Economic Zones in some countries. Special Economic Zones (SEZs) have been established in many countries as testing grounds for the implementation of liberal market economy principles. SEZs are viewed as instruments to enhance the acceptability and the credibility of the transformation policies and to attract domestic and foreign investment.

In 1999, there were 43 million people working in about 3000 FTZs spanning 116 countries producing clothes, shoes, sneakers, electronics, and toys. The basic objectives of EPZs are to enhance foreign exchange earnings, develop export-oriented industries and to generate employment opportunities.

US Foreign-Trade Zone Board and ASF

In the US, the Foreign Trade Zone Board is led by the Secretary of Commerce and the Secretary of the Treasury. In January 2009, the Foreign-Trade Zones Board adopted a FTZ Board staff proposal to make what it called the Alternative Site Framework (ASF) as a means of designating and managing general-purpose FTZ sites through reorganization. The ASF provides Foreign-Trade Zone Grantees with greater flexibility to meet specific requests for zone status by utilizing the minor boundary modification process. The theory of the ASF is that by more closely linking the amount of FTZ designated space to the amount of space activated with Customs and Border Protection, Zone users would have better and quicker access to benefits. When a FTZ Grantee evaluates whether or not to expand its FTZ project in order to improve the ease in which the Zone may be utilized by existing companies, as well as how it attracts new prospective companies, the Alternative Site Framework (ASF) should be considered. The ASF may be an appropriate option for certain Foreign-Trade Zone projects, but the decision of whether to adopt the new framework and what the configuration of the sites should be will require careful analysis and planning. Regardless of the choice to expand the FTZ project, the sites should be selected and the application should be drafted in such a manner as to receive swift approval, while maximizing benefit to those that locate in the Zone. Successful zone projects are generally the result of a plan developed and implemented by individuals that understand all aspects of the FTZ program.[6]

The Foreign Trade Zone Board (FTZB) approves the reorganization of Foreign Trade Zone (FTZ) 32 under the alternative site framework. The application submitted by its grantee, The Greater Miami Foreign Trade Zone was approved and officially ordered by the FTZB on January 8, 2013. From California, to Oklahoma to North Carolina to New York State, FTZs all across the nation have recently been making use of the flexible opportunities offered by the Alternative Site Framework (ASF) program. The ASF program is designed to serve zone projects that want the flexibility to both attract users/operators to certain fixed sites but also want the ability to serve companies at other locations where the demand for FTZ services arises in the future. FTZ 32 was founded in 1979 and processes over $1 billion in goods with products from more than 65 countries and exported to more than 75 countries worldwide, with speed and efficiency. According to the official order from the FTZB, FTZ 32 existing site 1, Miami Free Zone will be classified as a magnet site.[7]

Criticism

Sometimes the domestic government pays part of the initial cost of factory setup, loosens environmental protections and rules regarding negligence and the treatment of workers, and promises not to ask payment of taxes for the next few years. When the taxation-free years are over, the corporation that set up the factory without fully assuming its costs is often able to set up operations elsewhere for less expense than the taxes to be paid, giving it leverage to take the host government to the bargaining table with more demands, but parent companies in the United States are rarely held accountable.[8]

Political writer Naomi Klein has also criticized the transient nature of FTZs, noting the factory closures connected to the 1997 Asian financial crisis. She criticized the low wages and long hours, citing work days of twelve or more hours in Indonesia, Philippines, Southern China and Sri Lanka circa 2000.[9]

List of free trade zones

This list is incomplete; you can help by expanding it.

Africa

Morocco

* Atlantic Free Zone Kenitra

Source: http://www.mce.gov.ma

Egypt

Egypt has nine free trade zones:[10]

Djibouti

Gabon

Kenya

According to the Kenya EPZ Authority the aim of the program is "to transform the economy from import subsitution to a path of export led growth". "EPZs are designed to further integrate Kenya into the global supply chain and attract export-oriented investments in the zones, thus achieving its economic objectives of job creation, diversification and expansion of exports, increase in productive investments, technology transfer and creation of backward linkages between the zones and the domestic economy"."The program has contributed significantly to achieving these objectives with over 40 zones in place, close to 40,000 workers employed and contribution of 10.7 % of national exports. Over 70% of EPZ output is exported to the USA under AGOA".[11] These include:

Libya

Namibia

Nigeria

Nigeria has seven free trade zones:[13]

Tanzania

Tunisia

Seychelles

Asia

Bahrain

Bangladesh

China

Tianjin Free-Trade Zone

India

SuRSEZ is the First Operating Zone in the private sector in India. The track record of SuRSEZ in the last 5 years speaks for itself. From a level of about Rs.62 crores in 2000-01, exports from SuRSEZ rose to Rs. 2400 crores in the year 2005-06.

Indonesia

Iran

Japan

Jordan

Korea, North

Malaysia

Oman

Pakistan

Philippines

Agro-Industrial Economic Zones in the Philippines
Name Location Developer/Operator Region Area (Hectares)
Agrotex Gensan Economic Zone "Barrio Tambler, General Santos City" "Agrotex Commodities, Inc." R-XII 11
AJMR Agro-Industrial Economic Zone "AJMR Port Complex, Km. 20 Tibungco, Davao City" AJMR Port Services Corporation R-XI 8.96
Balo-i Agro-Industrial Economic Zone "Barangay Maria Cristina, Baloi, Lanao del Norte" Balo-i Industrial. Inc. R-X 13.9
Carmen Cebu Gum Industrial Zone "Cogon West, Carmen, Cebu City" Pacific Poly Gums Holdings Corporation R-VII 7.6
CIIF Agro-Industrial Park - Davao "KM 9.5, Barangay Sasa, Davao City" "CIIF Agro-Industrial Park, Inc." R-XI 8.54
DADC Economic Zone "Barangay Darong, Municipality of Santa Cruz, Province of Davao del Sur" Darong Agricultural and Development Corp. R-XI 15
Ecofuel Agro-Industrial Ecozone "Sta. Filomena, San Mariano, Isabela" "Ecofuel Land Development, Inc." R-II 24
Kamanga Agro-Industrial Economic Zone "Brgy. Kamanga, Municipality of Maasim, Province of Sarangani" Kamanga Agro-Industrial Ecozone Development Corporation R-XII 54.6
New Jubilee Agro-Industrial Economic Zone "Barangay Hilapnitan, Municipality of Baybay, Province of Leyte" "New Jubilee International Holdings, Inc." R-VIII 4.98
Philippine Packing Agricultural Export Processing Zone "Bugo, Cagayan de Oro City" Philippine Packing Management Services Corporation R-X 27
Samar Agro-Industrial Economic Zone "Barangay Malajog, Tinambacan District, Calbayog City, Western Samar" Hi Best Property Developer Corporation R-VIII 7.26
San Carlos Ecozone "Palampas and Punao, San Carlos City, Negros Occidental" "San Julio Reality, Inc." R-VII 25.79
Sarangani Agro-Industrial Eco Zone "Municipality of Alabel, Province of Sarangani" Alsons Development & Investment Corporation R-XII 317.24
Sarangani Economic Development Zone "Cannery, Polomolok, South Cotabato" Sarangani Resources Corporation R-XII 72.87
SRC Allah Valley Economic Development Zone "Tubi-allah, Surallah, South Cotabato" Sarangani Resources Corporation R-XII 56.1
SRC Calumpang Economic Development Zone "Calumpang, General Santos City" Sarangani Resources Corporation R-XII 18.67
Valencia Special Economic Zone "Barangay Palinpinon, Municipality of Valencia, Province of Negros Oriental" "Municipal Government of Valencia, Negros Oriental" R-VII 4.33
Freeports or Special Economic Zones in the Philippines
Economic Zone Address Location
Aurora Pacific Economic Zone[17] Casiguran, Aurora Luzon
Cagayan Special Economic Zone[18] Lal-lo, Cagayan Luzon
Freeport Area of Bataan Mariveles, Bataan Luzon
Cavite Economic Zone Rosario, Cavite and General Trias, Cavite Luzon
Clark Freeport Zone Angeles City and Mabalacat City, Pampanga Luzon
Subic Bay Freeport Zone Olongapo City and Subic, Zambales Luzon
Poro Point Freeport Zone[19] La Union Luzon
Baguio City Economic Zone Baguio City Luzon

Saudi Arabia

Tajikistan

United Arab Emirates

Dubai

Yemen

Europe

Belarus

Ireland

Latvia

Lithuania

Poland

Romania

North America

Bahamas

Canada

Dominican Republic

El Salvador

Guatemala

Haiti

Jamaica

Mexico

Panama

United States

South America

Argentina

Brazil

Chile

Colombia

Paraguay

Peru

Uruguay

See also

References

  1. ↑ "Definition of Free Trade Zone-Source-Britannica".
  2. ↑ Arthur O' Sullivan; Steven M. Sheffrin (2003). Economics: Principles in action. Upper Saddle River, New Jersey 07458: Pearson Prentice Hall. p. 454. ISBN 0-13-063085-3.
  3. 1 2 Sargent, John and Matthews, Linda. "China vs. Mexico in the Global EPZ Industry: Maquiladoras, FDI Quality and Plant Mortality" (PDF). University of Texas Pan America. Retrieved 2009-11-11.
  4. ↑ "Compare". Yusen Logistics Co., Ltd. Retrieved 9 May 2014.
  5. ↑ "Welcome to Shannon Development".
  6. ↑ "Foreign-Trade Zone Alternative Site Framework (ASF)". Foreign Trade Zone Corporation. Retrieved April 1, 2013.
  7. ↑ "81b. Establishment of zones". Retrieved 10 April 2013.
  8. ↑ The Politics of Globalization: a reader at Google Books Millen, Joyce and Timoth Holtz, "Dying for Growth, Part I, The Politics of Globalization, ed. Mark Kesselman, Hougton Mifflin, 2007
  9. ↑ Naomi Klein (2000). No Logo. Flamingo. pp. 204–229.
  10. ↑ "The Egyptian Free Zones". Ahmed Beleity. 2012.
  11. ↑ Kenya, EPZA (2012-10-17). "Welcome to the Export Processing Zones Website". EPZA Kenya. Retrieved 2012-11-04.
  12. ↑ "Libyan Free Trade Zone". 2006.
  13. ↑ "Free Trade Zones". nigeriafirst.org. 2006.
  14. ↑ "Arshiya launches India's first FTWZ in Mumbai". The Economic Times. 2010-08-18.
  15. ↑ Arvand Free Zone
  16. ↑ Qeshm
  17. ↑ http://www.senate.gov.ph/republic_acts/ra%209490.pdf
  18. ↑ http://laws.chanrobles.com/ph/ra/republicactno7922.html
  19. ↑ http://www.bcda.gov.ph/freeport_and_ecozones/show/10
  20. ↑ "Jebel Ali Free Zone". Business-Dubai.com. Retrieved 23 November 2015.
  21. ↑ http://portlansing.com/what-foreign-trade-zone
  22. ↑ http://www.ontariothinksbusiness.com/choose-ontario/international-trade
  23. ↑ http://home.elpasotexas.gov/ftz/index.php
  24. ↑ Port of Houston Authority Foreign Trade Zone. Port of Houston Authority of Harris County, Texas. 2012
  25. ↑ http://city.milwaukee.gov/Directory/Port/FOREIGN-TRADE-ZONE-NO.-41-GRAN1/FTZ--General-Information.htm#.U7YA4ZRdVKY
  26. ↑ http://www.tampaftz.com/
  27. ↑ MASSPORT.COM - Port of Boston - FTZ #27
  28. ↑ http://aguadapark.com/en
  29. ↑ http://www.zonapdc.com/
  30. ↑ http://www.wtcfreezone.com/
  31. ↑ http://www.zonafrancacolonia.com/default.php?lang=en
  32. ↑ http://www.zonafrancacoloniasuiza.com/
  33. 1 2 http://www.floridasur.com.uy/
  34. ↑ http://www.zonafrancarionegro.com/servicios.php
  35. ↑ http://www.upm.com/uy/Pages/default.aspx
  36. ↑ http://web.zonamerica.com/en/home/

External links

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