Special economic enclaves: Why we must pay attention to the UK’s Freeports

Around the world, corporate-aligned governments have initiated thousands of Special Economic Zones (SEZs) in which normal tax, environmental, and workers’ rights laws don’t apply.

by Tom Hall

Around the world, corporate-aligned governments have initiated thousands of Special Economic Zones (SEZs) in which normal tax, environmental, and workers’ rights laws don’t apply. This secession of national territory to the super rich and multination business interests in the name of growth, investment, and innovation has now returned to the UK’s shores after a near decade long hiatus.

This process is spearheaded by Prime Minister and former Chancellor Rishi Sunak and his friends in right-wing think tanks with undisclosed, shadowy funding models (notably the Thatcherite Centre for Policy Studies), the resurrection of Margaret Thatcher’s policy of British Freeports. Previously, six freeports operated in the UK and Northern Ireland between 1983 and 2012 at which time they were not renewed under Cameron’s austerity government as they seemed to provide little in the way foreign investment incentives or local economic growth stimulation.

The policy has been met with little media or parliamentary attention and scrutiny. In response to one of the Sunak administration’s flagship industrial policies, the British media has opted for either silence, credulity (including via Conservative-sponsored fake local news outlets), or dismissal of it as a desperate and futile attempt to revive an already failed policy.

Excepting interventions from smaller alternative media outlets or the occasional suggestion that freeports might go wrong, this kind of basic analysis has appeared in lieu of investigation into the workings of the various infrastructure projects. Whilst exactly what will happen inside the eight currently operational freeports in England and the further proposed sites in Scotland, Wales, and Northern Ireland remains fairly obscure, it is worth at least asking the question of what the function of freeports are as a part of British economic policy and how they will affect the state of the nation and the lives of the workers and communities mixed up in them.

What are Special Economic Zones?

Whilst Conservative policy makers are contented to present their industrial strategies in the forgiving vacuum of their own economic models, investigating actually existing historic SEZs allows us to see how they behave in reality. It is important not to view SEZs as a uniform policy and rather discuss the history and context of them as they have manifested in a number of different forms for different purposes in the Global North and South.

In China, SEZs that encompass some of its largest cities are credited by many as being partially responsible for the meteoric economic rise in the country over the last half century. This, however, has been accompanied by large amounts of public infrastructure investment, government subsidies, and a low wage, high exploitation model for treating manufacturing and logistics workers in such zones. Except for the latter wage squeeze[5], none of these other factors appear forthcoming from the UK government. Whilst a paltry £25 million (maximum) in seed funding has been allocated to each of the eight freeports, the promised projects, such as hydrogen energy production (if workable, a low emission alternative to fossil fuels) and research at the Teesside site, would require substantially greater funding and subsidies that are entirely absent from any relevant government documents. The best the Conservatives could muster was a proposed £120 per household levy on energy bills, proposed seemingly for no other reason that to discredit green infrastructure initiatives as bad for working people.

In other nations less independent than China, SEZs have played a central role in neocolonial resource extraction. Through legalistic clauses embedded in SEZ policy, business representatives and neocolonial powers (particularly the United States) are able to force successive governments to leave SEZs in place along with their ability to privatise land, exploit workers, and destroy the environment with the threat of international legal action. From Cambodia to India, Guatemala to Mauritius such SEZs that were promised by multinationals and the IMF (International Monetary Fund) to aid development have ballooned into whole cities (like Lavasa in Maharashtra, India) ruled by corporate overlords and built around the extraction and export of a nation’s resources and the exploitation of their labour force for the enrichment of foreign finance capital.

Although it would be absurd to suggest that freeports in the Global North function in similar ways as they do in resource rich Third World nations, the extreme economic experiments forced upon much of the world can be moulded and adapted to benefit international capital at the expense of more privileged workers in the colonial core (much as colonial discipline was the crucible for Western policing). As Glasgow MSP Paul Sweeney pointed out with regards to the last iteration of British freeports, businesses took advantage solely of the tax exemptions using their own raw materials and logistics rather than making any supply chain spending in the UK to ‘invest in the British economy’. Making such initiatives more tax-free land and storage occupations for foreign business than vectors of internal economic growth. It’s fairly clear given both the lack of funding commitments or extreme clauses vis-à-vis workers’ rights and legislation that the Britain’s new SEZs will be modelled neither after the Chinese or neocolonial model. We must, therefore, explore the particularities of the British model and how it is currently unfolding in England.

The case of the Teeside freeport

It seems, judging by the current record of the Teesside freeport, the SEZ overseen by Tory mayor Ben Houchen, that the policy effectively acts a direct transfer of public funds into private hands for little gain to locals or the public at large. This is not least because, as the Office for Budget Responsibility have reported, the loss in tax revenue (and likely the simple migration of investment already in the UK to the new tax havens) will cost the government £50m a year. However, this isn’t the only way in which the policy is a money sink lining the pockets of the hyper-wealthy.

The Teesside freeport promised thousands of highly paid jobs in hydrogen, wind power, and carbon capture amongst other nominally green industrial pursuits. Such projects sound like exactly the sort of thing a modern economy needs to be doing in order to keep up with a growing need for sustainable alternatives. However, much of this has already been scrapped or made completely unviable. Although the hydrogen projects have been announced, after the revelations of Sunak’s scrapping of net-zero, they no longer appear on the Energy Department’s website. The work that was supposed to take place developing monopile foundations for the massive proposed offshore wind farm in Dogger Bank (now that onshore wind has been banned) by the South Korean firm SeAH appears to already be underway in the Netherlands by the Dutch company Sif.

Beyond this, many of the contracts for the work in question have been handed over to cronies close to Teesside mayor or the Conservative government who show no haste in actually completing the work, or even laying the infrastructure. Teesside freeport has already become wrapped up in two major scandals currently under investigation over industrial corruption and ecocide. The project has simultaneously dumped toxic industrial waste killing off sea life (particularly shellfish) and sold land worth millions of pounds to its industrial rentier investors for thousands of times less than it’s worth.

In this regard, Britain’s new SEZs offer a continuity in public spending projects under the British model of neoliberalism. From PFI procurement to the Serco Test and Trace contracts, the state is taking its role to be facilitating the expansion of markets – even to the detriment of its own abilities to act upon the country – and the transfer of wealth away from working people into then pockets of domestic and global billionaires. RMT General Secretary Mick Lynch puts this well in his response to the Scottish ‘green freeport’ proposal:

England's Freeports have yet to create a single job and it looks like Scotland's Green Freeports would hand tax breaks, public subsidy and more strategic control of Scotland's ports network to employers who have seen profits increase during the pandemic, in return for vague assurances over trade union consultation and de-regulation.

Who stands to gain?

Strategic control and wealth transfer to whom exactly? We ought not miss out on discovering and critiquing which private and public investment groups Britain is signing itself up to operate tax haven enclaves for.

Of the local freeport initiatives that have divulged, in full or in part, which businesses they are partnering with, they find themselves in the company of the some of the world’s least reputable corporations. Multiple arms dealers for example, have been closely involved in freeport development. The chairperson of Solent Freeport near Plymouth naval base, Brian Johnson, is the UK Business Development Director at BAE Systems – the British arms company responsible for much of the murder and destruction in the world’s worst contemporary humanitarian crisis in Yemen operated by Britain’s close ally Saudi Arabia with the assistance of British engineers and arms companies. Rolls Royce famous not only for the manufacture of luxury cars but also for the manufacture and sales to over 160 countries of military grade technology and notably nuclear capable aeroplanes and submarines, have emerged as a key partner for the approved Anglesey Freeport in North Wales. These disreputables are joined in the Anglesey project by Bechtel, an engineering company which profited from American imperial infrastructure contracts following its invasion of Iraq.

Notorious polluters such as fracking lobbyists and chemical manufacturers INEOS, a British multinational, and Shell Oil are some of the key partners in the upcoming ‘green’ freeports licensed to open in Scotland over the next year or so. Additionally, oil giant BP has been awarded substantial capital allowances to develop (in a fairly transparent act of greenwashing) the supposedly green initiative of carbon capture at the Teesside freeport.

Another important freeport partner is DP World, a logistics multinational based in and owned by the government of the United Arab Emirates (a country in which independent trade unions remain illegal). DP World have already made their mark on the British industrial landscape through its ownership of government contracted P&O Ferries. Last year they knowingly unlawfully sacked almost 800 workers with no concrete response from the UK government who have funded contracts with DP World to the tune of hundreds of millions of pounds, some of which is funding projects that will not take place in the UK (a likely thinly veiled neocolonial embezzlement project funded by British International Investment plc.).

Foreign governments having significant ownership and control over economic and public life in the UK is nothing new. As of March 2022, for example, there were over 12,000 US military personnel and an unknown number of intelligence officers and assets operating in the UK. Train operating companies in the UK which are currently refusing their workers a fair deal are owned by the governments of France, Germany, and Italy amongst others. Almost half of Britain’s onshore wind is owned by foreign governments and 82% of its total wind capacity is owned by foreign companies. Of this energy and transport infrastructure much of it is also manufactured elsewhere, freeports are not likely to change this. Rather, they serve to provide more latitude for private investment to use the UK as a Western European experiment in hyper-capitalism and the selling off of land, rights, and public services in this country.

Critical media response

The outlets typically critical of the Conservative government have remained largely quiet on the subject of freeports. Taking only a little time to report on the corruption allegations and ecological destruction at the Teesside freeport. Questions over who benefits from such corruption, crime, and tax sanctuary is left in the realm of conjecture rather than concrete analysis. This kind of surface level journalism has been recently made clear by the litany of sanctimonious reactions to Levelling Up Minister Michael Gove’s press tour on freeports. Responding to his claim that our new SEZs are a Brexit dividend, they chose not to question the motivations or structural factors behind the freeport scheme but to point out the fact that freeports did indeed exist when the UK was an EU member state. This rather facile reasoning ignores that the EU’s rules on government business subsidies prohibit freeports from operating with a 0% corporation tax and the current EU crackdowns on corruption and deregulation in its SEZs. The media landscape in this country is either completely loyal to the Conservative government, uninterested in the effects of its industrial strategy, or so obsessed with the idea that it is run by incompetent ideologues that the purposeful dismantling of state infrastructure in favour of a corporate utopia is a possibility they refuse to consider.

Welcome to Technotopia

In the British context – a service-based economy – freeports offer little in the way of a nation-shaping policy. Whilst they provide neat ways for corporations to commit fraud, dissolve regulations, and devour the very nation states that made them, there is an extent to which the media’s dismissal of them as a will-o-the-wisp is fair. They, along with the rest of the Conservative government’s economic policy are part of the planned obsolescence and managed decline of the UK’s economic and welfare independence in favour of global supply chains and private services. Such policy is extremely unengaging to read about or discuss. Not only this but the structure of the corporations and individuals managing British ports and industrial estates is rarely investigated, discussed, or commented on, without even delving into the issues of the state of precarity, pay, and conditions for industrial, logistics, and port workers. Gone are the days of the bosses’ names being commonly known to us.

One can perhaps understand why the establishment media are unbothered by such an admittedly dull project. The model of capitalism that Britain pursued has made it weak to the impending external shocks of climate change, financial crises, and pandemics. Its financial service-based economy and corporate-run government make its infrastructure projects and industrial strategy decidedly less exciting than the Chinese mega cities and thousands of kilometres high-speed rail or even Joe Biden’s Inflation Reduction Act in the US.

With such a boring dystopian project, however, the death of liberalism and its state projects are a fait accompli, leaving room only for the drudgery and techno-bullshit jargon speak of initiatives such as freeports which serve to strip what little democracy liberalism affords in place of corporate rule and vassal status to the United States and its petrodollar allies. The Freeport policy, along with the more accelerated direct corporate rule over territory found in the charter cities of Third World nations such as Honduras or America’s Amazon factory towns should provide us a barometer for the new economic model that workers will have to contend with. One in which the state no longer mediates between workers and capital in the same way.

As the liberal model of capitalism decays around us, our analysis of specific policies and powerful individuals will come to shape how we understand the new power dynamic that we will have to deal with. To fully contend with the new multinational corporate sovereigns, our analysis needs to reorient itself away from seeing the nation-state as the primary vector of power. This is a shift in perspective that the capitalists have already made. Corporations have a clear counter-democratic vision for the future and a means to achieve it. It’s time that we caught up with them.