The Case for a ‘Foyle Free Trade Zone’.

Derry’s days as a regional transport hub appear to be largely behind it. In better times the city has served as a hub for shipbuilding, an international naval base, a thriving export centre and a key departure point for emigrants. Nowadays, the sole legacy of that is a small but important port facility at Lisahally.  Meanwhile, the town which bore witness to Amelia Earhart making aviation history 85 years ago contains a regional airport that survives largely through Council subsidies. And with its key tenant (Ryanair) all but withdrawing from the facility, its future is under some question. As for rail – until the 1960s Derry was an important hub with four different rail lines & stations offering links in every direction, and a further network of commuter stations in its hinterland. Nowadays the city has just a single station on the slow and infrequent line to Belfast, with the next nearest stop 20 miles away – making Derry the most isolated station on Northern Ireland’s rail network. And finally there’s road. Despite being promised a motorway connection to Belfast for the last 50 years, Derry remains the only city on the island of Ireland that isn’t connected by a motorway or dual carriageway. With the kind of infrastructure that would make a third world nation blush, it is little wonder that Derry has languished at the top of the UK’s unemployment table for years.

However – the possibility of a major reboot for the city’s infrastructure could arise from a very unexpected quarter. Whilst there is genuine concern at the impact Brexit may have on Northern Ireland, and particularly on border areas, being removed from the EU could potentially bring some unexpected benefits. Once Brexit is complete, the UK will resume full control over its own tariffs and taxes. And that has prompted some in Westminster to float the idea of creating ‘Free Ports’ and ‘Free Trade Zones’ – particularly in economically disadvantaged areas like Derry.

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Free Ports and Free Trade Zones

Free Ports and Free Trade Zones are like Duty Free shops for industry – i.e. designated areas which, for customs purposes, are treated as if they were outside the country in which they are actually based. Foreign goods can enter Free Ports, go back out again or be stored there without incurring the usual taxes, tariffs and red tape. Tariffs are only paid on goods which leave the port and enter the local economy, though often at reduced rates. Free Trade Zones (FTZs) operate in a similar way, and are like an extension of a Free Port. Foreign goods can enter them without incurring any taxes, providing those goods are intended for re-export. For example, an FTZ could contain a car assembly plant – importing hundreds of components from around the world, and putting them together to create finished vehicles. By importing the foreign parts through the Free Port and assembling them within the Free Trade Zone customs duties and red tape would be avoided on those parts, and the finished cars would be cheaper to make and re-export. FTZs are therefore all about attracting investment, boosting manufacturing and employment and promoting international trade.

 

A Global Phenomenon, Invented in Ireland

There are over 3,500 Free Ports and FTZs in 135 countries around the world, providing employment for over 66 million people. The United States has over 250 FTZs hosting 420,000 jobs, and they have helped retain domestic manufacturing that would otherwise have moved elsewhere. Interestingly, Free Trade Zones are a concept that was invented right here in Ireland ! In the 1940s, planes had to stop in Ireland to refuel before continuing on to mainland Europe. Instead of taking the easy option of using Dublin Airport for this, the Irish Government instead saw an opportunity to boost regional development by establishing a new airport at Shannon. The plan worked well for a decade until the introduction of jet planes meant that Europe could be reached non-stop from the US. With the airport’s future in jeopardy, the Irish Government again showed great imagination by creating the ‘Shannon Free Zone’ in 1959. This was an area around the airport which offered low taxes and duty-free incentives for businesses to locate there. It was the world’s first Free Trade Zone, and was an instant success – accounting for a third of the Republic’s goods exports within a decade. After Ireland joined the EEC in 1973, Shannon’s perks had to be gradually removed. Regardless, the Shannon Free Zone is to this day the biggest multi-sector business park in the whole of Ireland – with over 100 international firms employing 7,000 people and generating €3.3bn in annual trade. It is also the island’s largest recipient of foreign investment outside of Dublin.

 

Post-Brexit Free Ports ?

Although common elsewhere, there are currently no Free Ports or Free Trade Zones in the UK and EU regulation makes it nigh-on impossible to set any up. So in November the influential ‘Centre for Policy Studies’ in London published a report called ‘The Free Ports Opportunity’. It recommended that the UK should seize the opportunity Brexit presents to establish Free Ports in disadvantaged port cities around the UK. They estimate that 86,000 new jobs could be created in this way, both at the ports themselves and via the manufacturing clusters that would develop nearby. For a Government nervous about Brexit, Free Ports offer two very attractive benefits. Firstly, they can be introduced quickly and easily – providing a rapid economic boost to reduce the negative impact from EU withdrawal. Secondly – as most ports in the UK are owned by independent statutory bodies rather than the State (including Foyle), they would require little or no government funding and could instead raise capital for themselves (contrast that with the impending reduction in Northern Ireland’s Corporation Tax rate, which is expected to hit Stormont’s block grant by £240m every year). A Free Port and Free Trade Zone in Derry could therefore provide the single biggest post-wartime boost to the city’s economy.

 

Foyle Free Trade Zone

So what might a Foyle Free Trade Zone look like ? Not only should it make Lisahally a Free Port, but by also granting the same status to City of Derry Airport the concept could be amplified dramatically. The 3 mile stretch of largely industrial and agricultural land between Foyle Port and the Airport could then serve as the Free Trade Zone – creating a huge new economic engine room bounded by two international transport hubs, Lough Foyle and the A2 (see map). This would not only usher in a golden era in manufacturing and logistics for the city, but would also provide a lifeline to its ailing transport infrastructure. City of Derry Airport’s viability would be greatly improved with Free Port status, as would its value – enabling the council to not only remove subsidies, but to potentially sell it. And with the Derry to Belfast train line running through this new Free Trade Zone, a brighter future could also be envisioned for the railway. New rail stations at either end of the Free Trade Zone – one serving the Airport & the fast growing village of Eglinton at its eastern end, and a second serving the Port & and the neighbouring Strathfoyle community at its western end – would connect the FTZ and these two transport hubs directly into Ireland’s rail network. It would also open up the possibility of rail freight returning to Northern Ireland for the first time since 2003, and reintroduce a commuter rail network for the city.

 

Making the Case for Derry

There is no guarantee that the UK Government will introduce Free Ports/Free Trade Zones, but the idea is certainly being discussed in Westminster circles. It is therefore vital that a new Stormont Government seizes the initiative and helps make the case both for Free Trade Zones in general, and for one located in NI. As with the Free State Government’s decision in the 1930s to look beyond Dublin and towards Shannon, I would urge Stormont to likewise, for once, look beyond Belfast as the preferred location for any such facility in Northern Ireland. Derry has all the ingredients needed to create a Free Port – an existing port facility on a train line, with significant available land and a neighbouring airport. Derry and Strabane have the greatest economic need of any area in Northern Ireland – with an unemployment rate more than twice the UK average – such that a Free Port/FTZ in the north west would have a greater economic and social impact than in any other location. It would also be a catalyst for major improvement in the city’s infrastructure, finally addressing a decades-long disparity which has stunted the region’s economy and population growth. And from a practical and financial viewpoint, Derry has significantly more land available beside its port than Belfast does – especially as Belfast City Council intends to use a lot of its brownfield harbour land for housing. With land values significantly lower in Derry than in Belfast, locating such a facility in the north’s second city would also come with a substantially lower price tag. Finally – locating such a facility on the Foyle would ensure that the best days are no longer all in the past for a city that what was once a great regional and international transport hub.

Fifty years ago the Irish government consciously looked beyond Dublin and created economic history at Shannon through foresight, creativity and a desire to spread economic benefits throughout their jurisdiction. For once Stormont should be persuaded to do the same, and to get behind a campaign to create a Foyle Free Trade Zone for Derry and the North-west region as a whole.

 

Steve Bradley is a regeneration consultant, commentator and writer based in London. He is originally from Derry. @Bradley_steve

 

Steve Bradley is a native of Derry, who is now based in England. He works as a regeneration consultant, writer, commentator and social entrepreneur. You can follow him on twitter: @Bradley_Steve

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