UK shippers could miss out on freeport tariff benefits due to trade deal 'error'

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UK port associations are seeking clarification over claims that domestic shippers could miss out on the benefits of the recently announced freeport developments due to small print in post-Brexit trade deals.

News broke this morning that secretary of state for international trade Liz Truss reportedly signed 23 ‘rollover deals’ with countries including Canada, Norway and Singapore containing clauses which could stop manufacturers benefiting from freeport tax breaks.

In a letter to Ms Truss, shadow secretary of state Emily Thornberry expressed “deep concern” that £35.6bn ($50bn) in UK exports could miss out on tariff-free access.

“When the Treasury invited applications for its new freeports scheme, small print warned potential bidders of prohibition clauses contained in several continuity trade agreements the Department of Trade had signed in the previous two years,” she wrote.

“Despite that warning, Liz Truss went on to sign trade agreements with 10 more countries, containing the same clauses, including key markets like Canada, Singapore and Mexico.

“It would have taken an hour of discussion and the stroke of a pen to explain the UK’s freeports policy to negotiators from these countries and remove the prohibition clauses, and I cannot understand why Liz Truss failed to do that.”

Ms Thornberry’s comments followed her questioning Ms Truss in Parliament on how the new freeports would increase exports, jobs and economic growth.

Ms Truss reportedly responded that freeports were a domestic policy and therefore had not been factored into the Board of Trade’s thinking in its negotiations of new trade deals in the wake of Brexit.

“This looks like a catastrophic blunder by a minister stuck in her silo,” said Ms Thornberry. “As a result, I fear manufacturers across our country which have succeeded in bidding for freeport status risk missing out on access to key markets.

“If it needs fixing, I’ve urged her to go back to the negotiating table immediately with these 23 countries and get these clauses removed before Britain’s freeports come into operation.”

A government spokesperson said far from being a “blunder”, the deals signed by Ms Truss contained “no error”, and that it was “not uncommon” for free trade agreements to contain such provisions.

“Businesses will not be shut out of markets we’ve negotiated FTAs with; they will benefit from both our free trade programme and also from freeports,” said the spokesperson. “Where these provisions apply, businesses can choose to either benefit from the duty drawback, or the preferential rates under the free trade agreement – provided they meet the rules of origin test under that agreement.”

Chief executive of the British Ports Association (BPA) Richard Ballantyne told The Loadstar this morning the BPA had also raised the issue with government and was seeking clarification on what it meant for freeports, although he suggested it did not diminish the overall freeport strategy.

“The customs easements, which are just one tool of a freeport, are actually likely to be more useful for streamlining inward and domestic processes,” he said. “The ability for a developer or investor to take advantage of the wider enterprise and planning easements at freeports are likely to be much more attractive than the customs benefits, which are actually already available tools elsewhere from the UK government.”

Similarly, chief executive of the UK Major Ports Group (UKMPG) Tim Morris told The Loadstar the freeport scheme was “about more than tariffs and customs.

“The port operators involved in freeports continue to work with local partners and various government departments in developing the detailed business cases, and it is fair to say there’s still quite a bit of detail to be worked through on all sides,” said Mr Morris.

“While ports will be developing their understanding of the details of tariff applications, it is as least as important – if not more so – to deliver the freeports package in other areas like planning and investment incentives.”