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Free trade zone

Free trade zone

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A free trade zone or export processing zone (EPZ) , also called foreign-trade zone, formerly free port is an area within which 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. It is a region where a group of countries has agreed to reduce or eliminate trade barriers. Free trade zones can be defined as labor intensive
Labor intensity
Labor intensity is the relative proportion of labor used in a process. Its inverse is capital intensity....

 manufacturing
Manufacturing
Manufacturing is the use of machines, tools and labor to produce goods for use or sale. The term may refer to a range of human activity, from handicraft to high tech, but is most commonly applied to industrial production, in which raw materials are transformed into finished goods on a large scale...

 centers that involve the import of raw material
Raw material
A raw material or feedstock is the basic material from which a product is manufactured or made, frequently used with an extended meaning. For example, the term is used to denote material that came from nature and is in an unprocessed or minimally processed state. Latex, iron ore, logs, and crude...

s or components and the export of factory
Factory
A factory or manufacturing plant is an industrial building where laborers manufacture goods or supervise machines processing one product into another. Most modern factories have large warehouses or warehouse-like facilities that contain heavy equipment used for assembly line production...

 products. The world's first Free Trade Zone was established in Shannon, Co. Clare, Ireland Shannon Free Zone. 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
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...

 free-trade zones were first authorized in 1934.

Most FTZs are located in developing countries
Developing country
A developing country, also known as a less-developed country, is a nation with a low level of material well-being. Since no single definition of the term developing country is recognized internationally, the levels of development may vary widely within so-called developing countries...

: Brazil
Brazil
Brazil , officially the Federative Republic of Brazil , is the largest country in South America. It is the world's fifth largest country, both by geographical area and by population with over 192 million people...

, India
India
India , officially the Republic of India , is a country in South Asia. It is the seventh-largest country by geographical area, the second-most populous country with over 1.2 billion people, and the most populous democracy in the world...

, Indonesia
Indonesia
Indonesia , officially the Republic of Indonesia , is a country in Southeast Asia and Oceania. Indonesia is an archipelago comprising approximately 13,000 islands. It has 33 provinces with over 238 million people, and is the world's fourth most populous country. Indonesia is a republic, with an...

, El Salvador
El Salvador
El Salvador or simply Salvador is the smallest and the most densely populated country in Central America. The country's capital city and largest city is San Salvador; Santa Ana and San Miguel are also important cultural and commercial centers in the country and in all of Central America...

, China
China
Chinese civilization may refer to:* China for more general discussion of the country.* Chinese culture* Greater China, the transnational community of ethnic Chinese.* History of China* Sinosphere, the area historically affected by Chinese culture...

, the Philippines
Philippines
The Philippines , officially known as the Republic of the Philippines , is a country in Southeast Asia in the western Pacific Ocean. To its north across the Luzon Strait lies Taiwan. West across the South China Sea sits Vietnam...

, Malaysia, Bangladesh
Bangladesh
Bangladesh , officially the People's Republic of Bangladesh is a sovereign state located in South Asia. It is bordered by India on all sides except for a small border with Burma to the far southeast and by the Bay of Bengal to the south...

, Pakistan
Pakistan
Pakistan , officially the Islamic Republic of Pakistan is a sovereign state in South Asia. It has a coastline along the Arabian Sea and the Gulf of Oman in the south and is bordered by Afghanistan and Iran in the west, India in the east and China in the far northeast. In the north, Tajikistan...

, Mexico
Mexico
The United Mexican States , commonly known as Mexico , is a federal constitutional republic in North America. It is bordered on the north by the United States; on the south and west by the Pacific Ocean; on the southeast by Guatemala, Belize, and the Caribbean Sea; and on the east by the Gulf of...

, Costa Rica
Costa Rica
Costa Rica , officially the Republic of Costa Rica is a multilingual, multiethnic and multicultural country in Central America, bordered by Nicaragua to the north, Panama to the southeast, the Pacific Ocean to the west and the Caribbean Sea to the east....

, Honduras
Honduras
Honduras is a republic in Central America. It was previously known as Spanish Honduras to differentiate it from British Honduras, which became the modern-day state of Belize...

, Guatemala
Guatemala
Guatemala is a country in Central America bordered by Mexico to the north and west, the Pacific Ocean to the southwest, Belize to the northeast, the Caribbean to the east, and Honduras and El Salvador to the southeast...

, Kenya
Kenya
Kenya , officially known as the Republic of Kenya, is a country in East Africa that lies on the equator, with the Indian Ocean to its south-east...

, Sri Lanka
Sri Lanka
Sri Lanka, officially the Democratic Socialist Republic of Sri Lanka is a country off the southern coast of the Indian subcontinent. Known until 1972 as Ceylon , Sri Lanka is an island surrounded by the Indian Ocean, the Gulf of Mannar and the Palk Strait, and lies in the vicinity of India and the...

, and Madagascar
Madagascar
The Republic of Madagascar is an island country located in the Indian Ocean off the southeastern coast of Africa...

 have EPZ programs. 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.

Corporations setting up in a zone may be given tax break
Tax break
Tax break is a slang term referring to any item which reduces tax, including any tax exemption, tax deduction, or tax credit. Tax break is also a pejorative term used in the United States to refer to purportedly favorable tax treatment of any class of persons, as in "individuals get a tax break...

s 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
Argentina
Argentina , officially the Argentine Republic , is the second largest country in South America by land area, after Brazil. It is constituted as a federation of 23 provinces and an autonomous city, Buenos Aires...

, Brazil
Brazil
Brazil , officially the Federative Republic of Brazil , is the largest country in South America. It is the world's fifth largest country, both by geographical area and by population with over 192 million people...

, Chile
Chile
Chile ,officially the Republic of Chile , is a country in South America occupying a long, narrow coastal strip between the Andes mountains to the east and the Pacific Ocean to the west. It borders Peru to the north, Bolivia to the northeast, Argentina to the east, and the Drake Passage in the far...

, Mexico
Mexico
The United Mexican States , commonly known as Mexico , is a federal constitutional republic in North America. It is bordered on the north by the United States; on the south and west by the Pacific Ocean; on the southeast by Guatemala, Belize, and the Caribbean Sea; and on the east by the Gulf of...

, Paraguay
Paraguay
Paraguay , officially the Republic of Paraguay , is a landlocked country in South America. It is bordered by Argentina to the south and southwest, Brazil to the east and northeast, and Bolivia to the northwest. Paraguay lies on both banks of the Paraguay River, which runs through the center of the...

, Peru
Peru
Peru , officially the Republic of Peru , is a country in western South America. It is bordered on the north by Ecuador and Colombia, on the east by Brazil, on the southeast by Bolivia, on the south by Chile, and on the west by the Pacific Ocean....

, and Uruguay
Uruguay
Uruguay ,officially the Oriental Republic of Uruguay,sometimes the Eastern Republic of Uruguay; ) is a country in the southeastern part of South America. It is home to some 3.5 million people, of whom 1.8 million live in the capital Montevideo and its metropolitan area...

. However, the rapid development of free trade zones across the region dates from the late 1960s and the early 1970s. Latin American Integration Association
Latin American Integration Association
The Asociación Latinoamericana de Integración is a Latin American trade integration association, based in Montevideo. Its main objective is the establishment of a common market, in pursuit of the economic and social development of the region...

 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, shoe
Shoe
A shoe is an item of footwear intended to protect and comfort the human foot while doing various activities. Shoes are also used as an item of decoration. The design of shoes has varied enormously through time and from culture to culture, with appearance originally being tied to function...

s, sneakers, electronics
Consumer electronics
Consumer electronics are electronic equipment intended for everyday use, most often in entertainment, communications and office productivity. Radio broadcasting in the early 20th century brought the first major consumer product, the broadcast receiver...

, and toy
Toy
A toy is any object that can be used for play. Toys are associated commonly with children and pets. Playing with toys is often thought to be an enjoyable means of training the young for life in human society. Different materials are used to make toys enjoyable and cuddly to both young and old...

s. The basic objectives of EPZs are to enhance foreign exchange earnings, develop export-oriented industries and to generate employment opportunities.

Criticism


Free trade zones are domestically criticized for encouraging businesses to set up operations under the influence of other governments, and for giving foreign corporations more economic liberty than is given indigenous employers who face large and sometimes insurmountable "regulatory" hurdles in developing nations .
However, many countries are increasingly allowing local entrepreneurs to locate inside FTZs in order to access export-based incentives..
Because the multinational corporation is able to choose between a wide range of underdeveloped or depressed nations in setting up overseas factories, and most of these countries do not have limited governments, bidding wars (or 'races to the bottom') sometimes erupt between competing governments ..

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.

The widespread use of free trade zones by companies such as Nike
Nike, Inc.
Nike, Inc. is a major publicly traded sportswear and equipment supplier based in the United States. The company is headquartered near Beaverton, Oregon, which is part of the Portland metropolitan area...

 has received criticism from numerous writers such as Naomi Klein
Naomi Klein
Naomi Klein is a Canadian author and social activist known for her political analyses and criticism of corporate globalization.-Family:...

 in her book No Logo
No Logo
No Logo: Taking Aim at the Brand Bullies is a book by Canadian author Naomi Klein. First published by Knopf Canada in January 2000, shortly after the 1999 WTO Ministerial Conference protests in Seattle had generated media attention around such issues, it became one of the most influential books...

.

Africa

  • Mauritius
    Mauritius
    Mauritius , officially the Republic of Mauritius is an island nation off the southeast coast of the African continent in the southwest Indian Ocean, about east of Madagascar...

     (the whole island is considered to be a FTZ)
  • Bizerte
    Bizerte
    Bizerte or Benzert , is the capital city of Bizerte Governorate in Tunisia and the northernmost city in Africa. It has a population of 230,879 .-History:...

     and Zarzis
    Zarzis
    Zarzis is a commune and coastal town in southeastern Tunisia, on the coast of Mediterranean Sea. The climate is mainly dry and sunny, making it a popular tourist destination mixing the old and the traditional...

     in Tunisia
    Tunisia
    Tunisia , officially the Tunisian RepublicThe long name of Tunisia in other languages used in the country is: , is the northernmost country in Africa. It is a Maghreb country and is bordered by Algeria to the west, Libya to the southeast, and the Mediterranean Sea to the north and east. Its area...

  • Walvis Bay Export Processing Zone
    Walvis Bay Export Processing Zone
    The Walvis Bay Export Processing Zone is a free trade zone in the coastal city of Walvis Bay, Namibia. Rather than being a specific area or complex, the Zone encompasses the entire city. The Walvis Bay EPZ was opened in 1996, two years after the city rejoined Namibia....

    , Namibia
    Namibia
    Namibia, officially the Republic of Namibia , is a country in southern Africa whose western border is the Atlantic Ocean. It shares land borders with Angola and Zambia to the north, Botswana to the east and South Africa to the south and east. It gained independence from South Africa on 21 March...

  • Nigeria has five free trade zones:
    • Calabar Free Trade Zone
      Calabar Free Trade Zone
      The Calabar Free Trade Zone is an area just north of the port of Calabar, Cross River State, Nigeria that is occupied by companies engaged in manufacturing, trading, provision of services and oil and gas related activities...

    • Kano Free Trade Zone
    • Onne Oil and Gas Free Trade Zone
    • Maigatari Border Free Trade Zone
    • Border Free Trade Zone

Americas

  • Zonamerica Business & Technology Park - Uruguay
  • Colon Free Zone Republic of Panama
  • Zona Franca de Manaus, Brazil
  • Bataguassu - MS, Brazil
  • Freeport, Grand Bahama
  • Maquiladora
    Maquiladora
    A maquiladora or maquila is a concept often referred to as an operation that involves manufacturing in a country that is not the client's and as such has an interesting duty or tariff treatment...

    s, Mexico
  • Las Mercedes Industrial Free Zone, Managua
    Managua
    Managua is the capital city of Nicaragua as well as the department and municipality by the same name. It is the largest city in Nicaragua in terms of population and geographic size. Located on the southwestern shore of Lake Xolotlán or Lake Managua, the city was declared the national capital in...

    , Nicaragua
    Nicaragua
    Nicaragua is the largest country in the Central American American isthmus, bordered by Honduras to the north and Costa Rica to the south. The country is situated between 11 and 14 degrees north of the Equator in the Northern Hemisphere, which places it entirely within the tropics. The Pacific Ocean...

  • Ciudad del Este
    Ciudad del Este
    Ciudad del Este is the second largest city in Paraguay and capital of Alto Paraná department, located at the Rio Paraná....

    , Paraguay
    Paraguay
    Paraguay , officially the Republic of Paraguay , is a landlocked country in South America. It is bordered by Argentina to the south and southwest, Brazil to the east and northeast, and Bolivia to the northwest. Paraguay lies on both banks of the Paraguay River, which runs through the center of the...

  • Zona Franca Industrial La palma LTD. Santiago, Republica Dominicana.
  • CentrePort Canada - Manitoba, Canada
  • San Luis Potosi, Mexico

Asia

  • Aegean Free Zone, Izmir Turkey
    Turkey
    Turkey , known officially as the Republic of Turkey , is a Eurasian country located in Western Asia and in East Thrace in Southeastern Europe...

  • Okinawa FTZ Naha, Okinawa, Japan
    Japan
    Japan is an island nation in East Asia. Located in the Pacific Ocean, it lies to the east of the Sea of Japan, China, North Korea, South Korea and Russia, stretching from the Sea of Okhotsk in the north to the East China Sea and Taiwan in the south...

     and Nakagusuku
    Nakagusuku Bay
    is a bay off the southern coast of Okinawa Island in Japan, at .American soldiers nicknamed the bay Buckner Bay, after General Simon Bolivar Buckner, Jr....

     Free Trade Zone.
  • Inspira Pharma and Renewable Energy Park, Aurangabad, Maharashtra
    Maharashtra
    Maharashtra is a state located in India. It is the second most populous after Uttar Pradesh and third largest state by area in India...

    , India
    India
    India , officially the Republic of India , is a country in South Asia. It is the seventh-largest country by geographical area, the second-most populous country with over 1.2 billion people, and the most populous democracy in the world...

  • Sricity Multi product SEZ, part of Sricity which is a developing satellite city in the epicentre of Andhra Pradesh
    Andhra Pradesh
    Andhra Pradesh , is one of the 28 states of India, situated on the southeastern coast of India. It is India's fourth largest state by area and fifth largest by population. Its capital and largest city by population is Hyderabad.The total GDP of Andhra Pradesh is $100 billion and is ranked third...

     & Tamil Nadu
    Tamil Nadu
    Tamil Nadu is one of the 28 states of India. Its capital and largest city is Chennai. Tamil Nadu lies in the southernmost part of the Indian Peninsula and is bordered by the union territory of Pondicherry, and the states of Kerala, Karnataka, and Andhra Pradesh...

    , India
    India
    India , officially the Republic of India , is a country in South Asia. It is the seventh-largest country by geographical area, the second-most populous country with over 1.2 billion people, and the most populous democracy in the world...

  • Arshiya International FTWZ, India's first Free Trade and Warehousing Zone. The largest multi-product Free trade and warehousing infrastructure in India. Arshiya's first 165 acre FTWZ is operational in Panvel, Mumbai to be followed by one in Khurja near Delhi. Khurja Infrastructure to have 135 acre FTWZ, 130 acre Domestic Distribution Hub 'Distripark' & 50 acre Rail siding. Arshiya International will be developing three more Free Trade and Warehousing zones in Central, South and East of India.
  • Kandlar Trade Free Zone, India

Europe


Middle East

  • Jebel Ali Free Zone
    Jebel Ali Free Zone
    Jebel Ali Free Zone is a free economic zone located in the Jebel Ali area at the far western end of Dubai, United Arab Emirates, near Abu Dhabi...

    , Dubai
  • Aras Free Zone
    Aras Free Zone
    Aras Free Trade - Industrial Zone is situated in East Azarbaijan province, in the north-west of Iran, adjacent to Autonomous Republic Nakhichivan, Armenia and the Republic of Azerbaijan. The Aras Free Zone measures 97 km². It is located 137 km from Tabriz, one of the major academic and...

    , East Azerbaijan province Iran
    Iran
    Iran , officially the Islamic Republic of Iran , is a country in Southern and Western Asia. The name "Iran" has been in use natively since the Sassanian era and came into use internationally in 1935, before which the country was known to the Western world as Persia...

  • Bahrain Logistics Zone, Kingdom of Bahrain
    Bahrain
    ' , officially the Kingdom of Bahrain , is a small island state near the western shores of the Persian Gulf. It is ruled by the Al Khalifa royal family. The population in 2010 stood at 1,214,705, including 235,108 non-nationals. Formerly an emirate, Bahrain was declared a kingdom in 2002.Bahrain is...

  • Aden
    Aden
    Aden is a seaport city in Yemen, located by the eastern approach to the Red Sea , some 170 kilometres east of Bab-el-Mandeb. Its population is approximately 800,000. Aden's ancient, natural harbour lies in the crater of an extinct volcano which now forms a peninsula, joined to the mainland by a...

    , Republic of Yemen
  • Chabahar
    Chabahar
    Chah Bahar is a city in and capital of Chah Bahar County, Sistan and Baluchestan Province, Iran. Chah Bahar is a free port on the coast of the Gulf of Oman. At the 2006 census, its population was 71,070, in 13,837 families...

    , Iran
    Iran
    Iran , officially the Islamic Republic of Iran , is a country in Southern and Western Asia. The name "Iran" has been in use natively since the Sassanian era and came into use internationally in 1935, before which the country was known to the Western world as Persia...


Oceania

  • Bayan Lepas
    Bayan Lepas
    Bayan Lepas is a town in Penang, Malaysia being home to the Penang International Airport. It has a population of about 141,000 people. Bayan Lepas is the main industrial hub of Penang, being home to the Free Industrial Zone, where factories of many multinational companies are located...

     Free Trade Zone, Penang
    Penang
    Penang is a state in Malaysia and the name of its constituent island, located on the northwest coast of Peninsular Malaysia by the Strait of Malacca. It is bordered by Kedah in the north and east, and Perak in the south. Penang is the second smallest Malaysian state in area after Perlis, and the...

    , Malaysia
  • Batam
    Batam
    Batam is an island and city in Riau Islands Province of Indonesia, known for its free trade zone area as part of the Sijori Growth Triangle, is located off Singapore's south coast...

     Free Trade Zone, Batam
    Batam
    Batam is an island and city in Riau Islands Province of Indonesia, known for its free trade zone area as part of the Sijori Growth Triangle, is located off Singapore's south coast...

    , Indonesia
    Indonesia
    Indonesia , officially the Republic of Indonesia , is a country in Southeast Asia and Oceania. Indonesia is an archipelago comprising approximately 13,000 islands. It has 33 provinces with over 238 million people, and is the world's fourth most populous country. Indonesia is a republic, with an...

  • Cavite Export Processing Zone, Rosario, Cavite City, Philippines
    Philippines
    The Philippines , officially known as the Republic of the Philippines , is a country in Southeast Asia in the western Pacific Ocean. To its north across the Luzon Strait lies Taiwan. West across the South China Sea sits Vietnam...

  • Kulim
    Kulim
    Kulim is the third largest town in Kedah after Alor Star and Sungai Petani is located at the South East of Kedah state and East of Penang state in Malaysia. Kulim is a district consist of 15 smaller sub-districts also known as "mukim"...

     Hi-Tech Park, Kedah
    Kedah
    Kedah is a state of Malaysia, located in the northwestern part of Peninsular Malaysia. The state covers a total area of over 9,000 km², and it consists of the mainland and Langkawi. The mainland has a relatively flat terrain, which is used to grow rice...

    , Malaysia
  • Port Klang Free Zone
    Port Klang Free Zone
    Port Klang Free Zone is a ' located in Malaysia. It offers extensive distribution and manufacturing facilities. It is located along the Straits of Malacca, Port Klang, Klang, Malaysia. The PKFZ was previously managed by Jebel Ali Free Zone Authority . However, it was taken over and rebranded by a...

    , Klang
    Klang
    Klang , formerly known as Kelang, is the royal city and former capital of the state of Selangor, Malaysia. It is located within the Klang District in Klang Valley. It is located about 32 km to the west of Kuala Lumpur and 6 km east of Port Klang...

    , Selangor
    Selangor
    Selangor also known by its Arabic honorific, Darul Ehsan, or "Abode of Sincerity") is one of the 13 states of Malaysia. It is on the west coast of Peninsular Malaysia and is bordered by Perak to the north, Pahang to the east, Negeri Sembilan to the south and the Strait of Malacca to the west...

    , Malaysia
  • Pasir Gudang
    Pasir Gudang
    Pasir Gudang is an industrial town located 35 km east of Johor Bahru in Malaysia . It is the eastern end of the Johor Bahru metropolitan area. The population is around 100,000. It is connected by the 4 lane Pasir Gudang Highway, a trunk road, and a railway line to Johor Bahru...

     Free Trade Zone, Johor
    Johor
    Johor is a Malaysian state, located in the southern portion of Peninsular Malaysia. It is one of the most developed states in Malaysia. The state capital city and royal city of Johor is Johor Bahru, formerly known as Tanjung Puteri...

    , Malaysia

See also


  • Special Economic Zone
    Special Economic Zone
    A Special Economic Zone is a geographical region that has economic and other laws that are more free-market-oriented than a country's typical or national laws...

  • Foreign trade zone
    Foreign trade zone
    A foreign-trade zone in the United States is a geographical area, in United States Ports of Entry Ports of Entry, where commercial merchandise, both domestic and foreign receives the same Customs treatment it would if it were outside the commerce of the United States...

  • Free economic zone
    Free economic zone
    Many countries have, or have had at some time, designated areas where companies are taxed very lightly or not at all to encourage development or for some other reason...

  • Free Trade Area
    Free trade area
    A free trade area is a trade bloc whose member countries have signed a free trade agreement , which eliminates tariffs, import quotas, and preferences on most goods and services traded between them. If people are also free to move between the countries, in addition to FTA, it would also be...

  • List of international trade topics
  • :Category:Special Economic Zones
  • Globalization
    Globalization
    Globalization refers to the increasingly global relationships of culture, people and economic activity. Most often, it refers to economics: the global distribution of the production of goods and services, through reduction of barriers to international trade such as tariffs, export fees, and import...