For Northern Ireland's sake, we need to redefine Special Economic Zones.
Can we talk about Northern Ireland as a Special Economic Zone… again?
In September 2019, a few months before Brexit, the Financial Times reported on the possibility of treating Northern Ireland as a Special Economic Zone. Three years later, Northern Ireland's trade is still up for debate.
All sides of the Northern Ireland protocol (UK, EU and NI) want to avoid a hard border between Northern Ireland, Ireland (EU) and the UK.
What is a Special Economic Zone?
It's an area where business and trade laws differ from the rest of the country. There are several types of Special Economic Zones (SEZ), and Northern Ireland needs a bit from each of them.
The problems start with the definition of a SEZ; it is an area inside a territory. But Northern Ireland needs a solution for the whole territory to solve trade with their primary partners: Ireland and the UK. These definitions and rules have been agreed upon with international organisations like the WTO and the World Bank. In other words, there are flexibilities. In layperson's terms: if the decision-makers would like to, they could apply a SEZ area to the whole territory.
The second problem is that most SEZs focus on internal development and exports. Still, NI also needs special treatment in its imports, local business development and preferential treatment as a transit zone for trade between the other countries in the UK and Ireland.
The types of SEZs
It is my suggestion that Northern Ireland, as a SEZ territory, would need the following:
- A Free Trade Zone that allows NI to serve as a bridge for trade between the UK and EU while allowing local businesses to use these benefits for their trade with the EU and the UK. Goods that cross from an EU territory to the UK, or vice versa, through Northern Ireland need to be traced to allow the correct calculation of duties and regulations.
- An Export Processing Zone with an Import twist: a special permit for companies to manufacture and process goods for export, but also allowing companies to import goods with the same benefits while such products stay in NI. It is about attracting foreign investment to NI through programs of manufacture and processing for EU goods to the UK and vice-versa.
It is all about liability and traceability.
In 2020, the EU clamped down on the UK's plans to create 82 SEZs in specific ports. SEZs, known as free-ports or free-zones, have been used for illegal activities, primarily counterfeit items. In addition, SEZs can allow people to keep their identity secret. But this is optional; as previously said, SEZs are globally defined by international organisations with no specific jurisdiction.
The goal between NI, the EU and the UK is clear: no hard borders. Leaving aside all political purposes, trade and business have a specific set of rules that can be incorporated into a new framework of SEZ where traceability and accountability are at its core.
Today, we have several technologies that can help everyone trace every step of certain goods, from sensors, x-ray, smart locks and GPS devices.
Authorities and companies can achieve liability and traceability with smart contracts and distributed ledgers. Not specifically discussing blockchain, but a type of information system shared by the authorities, customs brokers and traders where every step of the document chain is recorded.
A combination of technologies can open the path for Northern Ireland to gain the status of the first SEZ territory with a digital infrastructure, ease trade, and, more important, fight illegal activities.
It sounds pretty hard.
Ports without SEZ status have illegal activities. Historically, governments approach SEZs carefully and usually spend a never-ending fight against crime.
In contrast, Northern Ireland has been battling between 2 giants for over 2 years. These 2 years have hindered NI's trade routes and its market.
Additionally, borders exist for the only purpose of introducing friction between territories.
Fortunately, Special Economic Zones are a definition, not a rule. And we have studied their behaviour throughout more than 50 years of trade. As a result, specialists in trade and tech can develop an infrastructure to be applied in Northern Ireland to facilitate trade, increase foreign investment and become a leading agent of supply chain tech.