FREE TRADE ZONES

We have to look back more than two thousand years ago, to understand the concept of Free Zone.
When the Phoenicians in the cities of Carthage and Tyre, gave fiscal profits on the goods, which had not
been sold in the market or had been returned to their point of origin.
In the Middle Ages, Livorno and Marseilles were declared free ports. Lately, Hamburg and Trieste
operated as free ports. Hamburg, one of the first operating, had and still has a special importance. Their
work made that political and economic trade difference, which dominated the Hanseatic League in that
region during the XIX century. Concerning Trieste, its Free Zone dominated the whole trade of the
Austro-Hungarian Empire for many years.
In the last decades, Free Trade Zones have been the tools through which many countries overcame their
economic crises. Using Free Zones they were able to create new employment and to reduce poverty,
without being obliged to wait for many years for the whole economy to be reformed. The list would be
too long; we just name two countries: Taiwan and South Korea.
The Free Trade Zones have largely contributed to the fact that both countries have reached an
important level of economic development. This has occurred, despite the fact that neither country has
any significant amount of natural resources.
HOW TO DEFINE A FREE ZONE
A Free Zone is a portion of clearly defined and isolated land or setting, with a special fiscal and customs
status of extra-territoriality.
The main advantages that a Free Zone enjoys, both fiscal and physical, include:
• The infrastructure
• The industrial processes
• The maquila process
• The trade of products and services
• The capital
• The natural or juridical people operating in there
The percentage of the fiscal benefits, as well as the period of application of the incentives varies
according to the law of each country or region.
There are more than 20 types of Free Zones in the world, but their definition is conceptually the same: a
defined area with a special tax and imports regime. So we have:

• Free Port
• Export Processing Zones
• Free Trade Zones
• Bonded warehouses
• Fiscal Warehouses
• Offshore Centres
And at the present time, new types of them are being developed, such as:
• Tourist, hospital (medical) and educational Free Trade Zones
• Logistical Free Trade Zones
The present boom in the establishment of the e-commerce "B2B" whose activity is a virtual Free Zone, is
that e-commerce has a problem with the delivery and storage of goods which could be solved by the
fact that merchandise could be stored in a Free Zone located near the customers. This would reduce the
delivery delay and the storage costs.
COMPETENT AUTHORITIES
The Free Zones are regulated by the established laws from the government of each country, and in
many locations by an entity, which controls the execution of the Free Zone law and its activities. This
Free Zone authority guarantees to the investors, reliable services and well regulated and properly paid
labour.
The concession for the exploitation and development of a Free Zone can be handled through open,
public bidding or by a direct concession to possible promoter companies.
The Concessionaire Company or operator can be public, private or mixed. The duration of the
concession can be for a period from 10 to 20 years, which can be extended.
The ground area or land in the Free Zones can be public or privately owned.
ACTIVITIES
Free Zones are different from industrial parks whose only activity are the production processes. Free
Trade Zones can include:
• Industrial, production or Maquila operation
• Commercial activities
• Logistical, financial or general services
• Tourist or hospital industry
• Training plans and university studies
• Commercial promotion through fairs and exhibitions
• Social activities These activities are:
• Regulated by a Free Zone Law
• Controlled by the concessionaire or operator
• Used by user companies previously authorized, which have decided to develop their economic
activities in a Free Trade Zone partially or entirely.
Free Zones contribute with a significant importance to the upgrading of industrial activity. Being mostly
export oriented, they also contribute to improving the balance of payments.
Ireland is an example of an agricultural economy transformed by Free Zones into a techno-economic
industrial success story.
In spite of that, on many occasions some Free Zones have been criticized for their labour or
environmental conditions. Most of the Free Zones have internal regulations, which strictly control their
development. These controls are exercised on the construction, security, hygiene, environment, and
labour, in accordance with the local juridical basis of each country.
International organisms such as the ILO, UNIDO and UNCTAD supervise them.

WHO CAN INVEST AND OPERATE IN A FREE ZONE

Any natural or juridical person, whatever her nationality but of recognised personal, professional and
economic solvency. This requires the previous approval of the concessionaire and the competent
authorities according to the effective legislation in each country.
ADVANTAGES OF USING A FREE ZONE
In a generic way these are:
A free trade zone (FTZ) or Export processing zone (EPZ) is one or more areas of a country where tariffs
and quotas are eliminated and bureaucratic requirements are lowered in order to attract companies by
raising the incentives for doing business there. Free trade zones can be defined as labour intensive
manufacturing centres that involve the import of raw materials or components and the export of factory
products.
Most FTZs are located in developing countries. They are special zones where (some) normal trade
barriers such as import or export tariffs do not apply, bureaucracy is typically minimized by outsourcing
it to the FTZ operator and corporations setting up in the zone may be given tax breaks as an additional
incentive. Usually, these zones are set up in underdeveloped parts of the host country, the rationale
being 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).
In 2002 there were 43 million people working in about 3000 FTZs spanning 116 countries producing
clothes, shoes, sneakers, electronics, and toys. The basic objectives of EPZs are to enhance foreign
exchange earnings, develop export-oriented industries and to generate employment opportunities.
trade barrier is a general term that describes any government policy or regulation that restricts
international trade, the barriers can take many forms, including:
• Import duties
• Import licenses
• Export licenses
• Quotas
• Tariffs
• Subsidies
• Non-tariff barriers to trade
Most trade barriers work on the same principle: the imposition of some sort of cost on trade that raises
the price of the traded products. If two or more nations repeatedly use trade barriers against each
other, then a trade war results.
Economists generally agree that trade barriers are detrimental and decrease overall economic efficiency,
this can be explained by the theory of comparative advantage. In theory, free trade involves the removal
of all such barriers, except perhaps those considered necessary for health or national security. In
practice, however, even those countries promoting free trade heavily subsidize certain industries, such
as agriculture and steel. Examples of free trade areas are: North American Free Trade Agreement
(NAFTA), European Free Trade Association, European Union (EU), South American Community of
Nations.
In international trade, free trade is an idealized market model, often stated as a political objective, in
which trade of goods and services between countries flows unhindered by government-imposed prices.
Intellectually, this arrangement is supported by followers of the neoclassical and microeconomic schools
of thought, who argue that the benefit of trade is a net gain to both trading partners. It is opposed by
anti-globalization and some labour campaigners due to what they see are many tendencies for abuse by
wealthier states.
The term is given to economic policies, as well as political parties that support increases in such trade.
Free trade is a concept in economics and government, encompassing:
• International trade of goods without tariffs (taxes on imports) or other trade barriers (e.g., quotas on
imports)
• International trade in services without tariffs or other trade barriers
• The free movement of labour between countries
• The free movement of capital between countries
• The absence of trade-distorting policies (such as taxes, subsidies, regulations or laws) that give
domestic firms, households or factors of production an advantage over foreign ones
The relative costs, benefits and beneficiaries of free trade are debated by academics, economists,
governments and interest groups. Aspects of the ongoing debate are addressed below.
• Fiscal advantages
• Free currency exchange
Efficient custome procedure
• Low cost labour
• Logistical efficiency
• Economies of scale
• Economic Synergy
• Efficient Telecommunications
Each country or economic region is sovereign in regulating its Free Zones, since there is no international
law on Free Zones. Most of the Free Zones have many similar regulations. But it is always necessary in
each case, to analyse the costs and benefits
Depending on the specific context, use of the term free trade can signify one or more of the above
conditions. However, it is fundamental that only governments can restrict trade: they have the legal
monopoly over the use of physical force in a geographical area.
The term free trade has become very politically based, and it is not uncommon for so-called "free trade
agreements" to impose additional trade restrictions. Such restrictions on trade are often due to
domestic political pressure by powerful corporate, environmental or labor interest groups seeking
special protections of their perceived interests.
Free trade agreements are a key element of customs unions and free trade areas. The details and
differences of these agreements are covered in their respective articles.
History of free trade
The history of free trade is a history of international trade focusing on the developments of open
markets.
It is known that various prosperous world cultures throughout history have engaged in trade. Based on
this, theoretical rationalizations as to why a policy of free trade would be beneficial to nations
developed over time. These theories were developed in its academic modern sense from the
commercial culture of England, and more broadly Europe, in the past five centuries. In opposition to free
trade, a policy of mercantilism was developed in Europe in the 1500s and persists in various forms to
this day. Early free trade theorists who were opposed to mercantilism were David Ricardo and Adam
Smith. Free trade theorists offered trade as the reason why certain cultures prospered economically.
Adam Smith, for example, pointed to increased trading as being the reason for the flourishing of not just
Mediterranean cultures such as Egypt, Greece, and Rome, but also of Bengal (East Indies) and China.
Free trade policies have battled with mercantilist, protectionist, isolationist, communist, and other
policies over the centuries. Wars, such as the Opium Wars, have been fought primarily over trade.
All developed countries have used protectionism, but usually reduced it as they gained more wealth.
The Constitution of the United States explicitly prohibits state governments from enacting barriers to
trade between citizens and firms of the various 50 states, making the United States the largest empirical
example of free trade in the world.
Intellectual property and free trade
Historically, the free trade movement was skeptical and even hostile to the notion of intellectual
property, regarding it as monopolistic and harmful to a free, competitive economy. Indeed, during the
late 19th century, free trade advocates succeeded in reducing the length of the patents available in
many European countries. The Netherlands, remarked for its laissez-faire policies in the 19th century,
even abolished its patent system (mostly used by foreign companies) in 1867. Under the stipulations of
the Convention of Paris however did the Netherlands have to re-introduce the patent system (made law
in 1910), and was the last European country to do so (after Switzerland).
The 19th century anti-patent cause failed largely because the recession of 1874 weakened the free trade
movement of the time [1] (and also because patent advocates used a public relations campaign which
was remarkably sophisticated for its time).
It is thus remarkable (maybe even ironic) that corporations lobbying for expanded intellectual property
rights have succeeded in including Agreement on Trade-Related Aspects of Intellectual Property Rights
(TRIPS), a very strong treaty on intellectual property rights, as a membership requirement for the World
Trade Organization, the international organization dedicated to furthering the cause of free trade
(although some modern free traders would argue that markets are impossible without property
protections, and that incentives to produce highly capitalized intellectual property would be diminished
if inventors could not profit from inventions).
[edit] Economics of Free Trade
The literature analyzing the economics of free trade is extremely rich with extensive work having been
done on the theoretical and empirical effects. Though it creates winners and losers, the broad
concensus of the economics profession is that free trade is a large and unambiguous net gain for society.
Two simple ways to understand the benefits of free trade are through David Ricardo's theory of
comparative advantage and by analyzing the impact of a tariff or import quota.
Simple Theoretical Framework

The pink regions are the net loss to society caused by the existence of the tariff.
A simple economic analysis using the law of Supply and Demand and the economic effects of a tax can
be used to show the clear benefits of free trade.
The chart at the right analyzes the effect of the imposition of an import tariff on some imaginary good.
Prior to the tariff, the price of the good in the world market (and hence in the domestic market) is
Pworld. The tariff increases the price to Ptariff. The higher price causes domestic production to increase
from QS1 to QS2 and causes domestic consumption to decline from QC1 to QC2. This has three main
effects on societal welfare. Consumers are made worse off because the consumer surplus (green region)
becomes smaller. Producers are better off because the producer surplus (yellow region) is made larger.
The government also has additional tax revenue (blue region). However, the loss to consumers is greater
than the gains by producers and the government. The magnitude of this societal loss is shown by the
two pink triangles. Removing the tariff and having free trade would be a net gain for society.
An almost identical analyses of this tariff from the perspective of a net producing country yields parallel
results. From that country's perspective, the tariff leaves producers worse off and consumers better off,
but the net loss to producers is larger than the benefit to consumers (there is no tax revenue in this case
because the country being analyzed is not collecting the tariff). Under similar analysis, export tariffs,
import qoutas, and export qoutas all yield nearly identical results. Sometimes consumers are better off
and producers worse off, and sometimes consumers are worse off and producers are better off, but the
imposition of trade restrictions causes a net loss to society because the losses from trade restrictions are
larger than the gains from trade restrictions. Again, trade restrictions are a net loss and free trade is a
net gain.
Comparison to Effects of Technology
A more intuitive understanding of free trade can be achieved by making a comparison to technological
progress. There is little difference between a farm worker's job being replaced by a tractor and a farm
worker's job being replaced by importing the fruit in question from Brazil (free trade). Free trade and
new technology can both be highly disruptive. Both can drive domestic companies out of businesses and
create large job losses. Both create new opportunities for different types of jobs. Both free trade and
technological progress increase the productivity and the purchasing power of people. While opposition
to technological progress has basically disappeared, opposition to free trade remains remarkably strong
in many circles.
Trade Diversion
Economically, global free trade is an unambiguous good, but the selective application of free trade
agreements to some countries and tariffs on others can lead to economic inefficiency through the
process of trade diversion. It is economically efficient for a good to be produced by the country which is
the lowest cost producer, but this will not always take place if a high cost producer has a free trade
agreement while the low cost producer faces a high tariff. Applying free trade to the high cost producer
(and not the low cost producer as well) can lead to trade diversion and a net economic loss. This is why
many economists place such high importance on negotiations for global tariff reductions, such as the
Doha Round.
Criticism of Free trade
Main article: Free trade debate.
Free trade is one of the most debated topics of the 20th and 21st century. Different arguments are used
by those who favour and by those who oppose free trade, or feel that more constraints are needed.
These arguments can be divided in economic, moral and sociopolitical arguments.
Alternatives to free trade
Tobin Tax
Main article: Tobin Tax.
A Tobin tax is the suggested tax on all trade of currency across borders. This is intended to put a penalty
on short-term speculation in currencies. This policy is an alternative to the free flow of capital across
borders. This policy has little if nothing to do with the free flow of goods and services.
Fair trade
Main article: Fair trade.
The fair trade movement, also known as the trade justice movement, promotes international labor,
environment and social standards for the production of traded goods and services. The movement
focuses in particular on exports from the Third and Second Worlds to the First World.
Balanced trade
Main article: Balanced Trade.
Balanced trade is an alternative economic model to free trade. Under balanced trade, nations are
required to provide a fairly even reciprocal trade pattern; they cannot run large trade deficits. If deficits
appear, the surplus nation must find a way to balance out trade or risk sanctions, fees, or quotas. Critics
say this may discourage innovation as one country may reduce its efforts to produce products needed by
the other.
Many economists would call balanced trade a modern day form of mercantilism (a discredited economic
policy). Though it is has intuitive appeal, there is absolutely no economic reason why a trade deficit is
automatically bad. For example, if a country is running a trade deficit, this automatically implies it is
running an investment surplus. If this investment increases the capital stock, sparks new innovation, and
increases productivity, there is absolutely no reason why a trade deficit would cause a problem.
Empirically this also appears to be true as a number of countries, such as the U.S., have run large trade
deficits for years with no discernable adverse impact.
International barter
Some nations have prohibited trade under monetary terms of trade. For example, Hjalmar Schacht
arranged barter for Nazi Germany to bypass the free market which he thought was rigged by Anglo-
American capitalists. [2] The former Soviet Union occasionally arranged bilateral barter within its sphere
of influence. See Comprehensive Program for Socialist Economic Integration or Comecon. Arab League
nations have also occasionally replaced monetary trade with barter.
Increase the credit risk to international loans
George Soros and others argue that some of the most destructive free trade, such as developing world
agricultural monoculture, is driven by export-oriented production targets set by the International
Monetary Fund (IMF) and the governments it supports. He suggests that the volume of this trade would
be lower if the lending banks were liable for credit default instead of receiving IMF bail-outs. If banks
were responsible for default, the levels of lending would be lower and lead to more sustainable export
programs due to the discipline of the free market, he believes.
International price floors
Some argue that free trade is responsible for the decline in international commodity prices. One reason
for these low prices is the over-production of subsidized commodities in the developed world. Rather
than removing the production subsidy for farmers in the rich world some suggest extending them to
farmers in the developing world. For instance, producers in Poland lobbied to be included in the
Common Agriculture Policy. The reason that rich-country farmers need subsidies to thrive is the
comparative advantage of cheap land and labour enjoyed by their poor-country competitors.
Separating world prices from domestic prices
Foreign trade of Communist Czechoslovakia was conducted at "free trade" import prices, with the
Ministry of Foreign Trade selling the goods on, into the internal market, at pre-determined prices for
each good. In this way, Czechoslovakian consumers were insulated from shifts in world prices whilst
having some access to foreign products.
It is difficult for governments to sustain different internal prices over the long term. If the internal price
is set below world prices, smugglers try to profit from the differential by illegally exporting the product
to nations where they can sell it at a higher price. To the extent smugglers succeed, the domestic
government is indirectly subsidizing foreign consumers. This problem has been vividly illustrated in
nations where fuel prices are subsidized below world prices; domestic shortages frequently occur as a
significant portion of the good is illegally smuggled out of the country. Rationing and black markets are
stimulated by artificially low prices; in Iraq the famously long petrol pump queues for petrol at 50
dinars/litre can be bypassed by buying on the black market at 250 dinars/litre. Unofficial markets are a
common problem wherever the "official" price is below (or above) the free trade price. [3]
Despite the difficulties of maintaining fixed commodity prices, many Governments that attempt it claim
that doing so "immunizes" their economies against destabilizing price shocks. It is sometimes argued
that the social and economic benefits alone, outweigh the disadvantages (of import-price stability).
On the other hand, international prices tell the costs of producing certain products and the benefits of
consuming them. By separating the prices this flow of information is halted and therefore the local
decisions are decoupled from the global needs and possibilities, thus hindering the producers in the
country to produce the products where they have a comparative advantage and the consumers to
consume the products that can elsewhere be produced so cheaply that they would like to consume
them at those prices instead of consuming some other kind of products or less products (or services).
Regional trading blocs
James Goldsmith advocated free trade within regional trading blocs, but not between blocs (such as
European Community countries). If countries within the "customs union" had similar living standards
and norms of social and environmental policy they would not race to the bottom. He also proposed
protectionism in the goods market, whilst allowing free trade in technology and capital.
Free Trade Zones
• Greater Arab Free Trade Area (GAFTA)
• South American Community of Nations (planned for 2007)
• Mercosur
• Andean Community
• Colón Free Trade Zone
• Jamaican Free Zones
• Jebel Ali Free Zone
• Shannon Free Zone
• Bangladesh' Export Processing Zone
• Mauritius' Export Processing Zone
• Saipan
Greater Arab Free Trade Area
GAFTA Members
"GAFTA" redirects here. For the Grain and Feed Trade Association, see Grain and Feed Trade
Association.
As of 1 January 2005, the Greater Arab Free Trade Area also referred to as (GAFTA) has come into work.
The Greater Arab Free Trade Agreement is a pact made by the Arab League to achieve a complete Arab
economic block, one that can compete within Internation Playground, the GAFTA is perhaps a beginning
of a strong Arab economy and self sufficiency, and is relatively similar to the European Union and the
ASEAN.
The Project was adopted in the Arab League Summit of Amman in 1997, with 17 Arab League members
signing the pact.
Progress
The Greater Arab Free Trade Area was a project adopted in 1997, which was agreed on by 17 Arab
League members, The Agreement was to agree on decreasing the customs on the Local production, and
to make an Arab Free Zone for exports and imports between members. The members participate in 96%
of the total internal Arab trade, and 95% with the rest of the world by applying the following conditions:
1-Instruct the inter-customs fees: to reduce the Customs on Arab products by 10% annually, the 14 Arab
states reported their custom tariff programs to the Security Council of the Arab League to coordinate
them with each others, except for Syria that is still using the Brussels tariffs system.
2-Applying the locality of the Arab products: All members have shared their standards and specifications
to help their products move smoothly from one country to another. The League also created a project to
apply the Arab Agriculture Pact: which is to share the standards of the agricultural sector and inject
several more restrictions and specifications where all members have involved in them. Six members
were granted exceptions for several of their goods, Morocco, Lebanon and Jordan proposed for several
more exceptions, but were disapproved by the Arab League. the exceptions would benefit a 10% stable
customs for exporting goods.
4-Private sectors: The League created a database and a service to inform and promote for the private's
sectors benefits, and how there work would be in the GAFTA treaty is needed.
5-Communication: The Arab Economic and Social Council in its 65th meeting agreed on pointing a base
for communication to ease communication between member states, and also to work to ease
communication between the Private and public sectors to apply the Greater Arab Free Trade Area
between members.
5-Customs Duties: in the 67th meeting the Arab Economic and Social Council agreed that the 40%
decrease on customs on goods in the past 4 years of the GAFTA will continue. and following the
decisions of the Amman Summit of the Arab League, the members will put more efforts to eliminate all
customs duties on local Arab goods.
Colón Free Trade Zone
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The Colón Free Zone is a gigantic entity at the Atlantic gateway to the Panamá Canal, dedicated to re-
export an enormous variety of merchandise to Latin America and the Caribbean is also the largest free
zone in the Americas and second largest in the world. It started operations in 1948 and occupies about
600 acres. It is located near the Atlantic Entrance of the Panamá Canal. Divided in two big areas: one
located in Colón, segregated from the city itself by a wall; and the other relatively new, in the France
Field area, which is designated for warehouses covering 130 acres and at a distance of only 400 yards
from the Colón commercial sector.
Origins
Since 1917, only three years after the opening of the Panamá Canal, the possibility of having a free zone
area in Colón was discussed. It was not however, until the end of WWII that the idea became substance.
During the war, many locals obtained employment in the construction of defense facilities and facilities
to provide services for the movement of troops, and with the end of troop arrivals, came the hard times.
Later, Dr. Enrique A. Jimenez, President of the Republic in 1945, took the initiative to make the free zone
project a reality, making use of the geographic position of the ports and the interoceanic waterway, a
compulsory route for worldwide navigation. He recommended the reconsideration of a project prepared
by George E. Roberts, Vice President of the First National City Bank of New York, which contemplated
the creation of a free zone area in Colón and which had been submitted to the Government in 1929.
In 1946, the Government employed Dr. Thomas E. Lyons, renowned authority on free zones, to carry out
a feasibility study in the area suggested for the project. Based on his recommendations, the Government
approved Law No 18 of June 17, 1948, which creates the Colón Free Zone as an autonomous institution.
Progress
Nowadays the Colón Free Zone receives more than 250,000 visitors a year and has 1,751 companies
established in this place and generates exports and re-exports valued at more than US$6.5 billion in
2005, which can count on all the services and facilities offered by the Free Zone, for importing, storing,
assembling, re-packing and re-exporting products from all over the world: from all types of electric
appliances to pharmaceutical products, liquor, cigarettes, office and home furniture, clothing, shoes,
jewelry, toys, etc. It is considered the "Trading Showcase" of Central and South America as well as for
the Caribbean region. The Colón free Zone is an important Transshipped supplier of goods to other free
zones such as Hong Kong (China) followed by Taiwan, United States, Japan, Korea, France, Mexico, Italy,
Puerto Rico, Switzerland, united kingdom, Malaysia and Alemania. These countries supplied nearly 87
percent of all Colón Free Zone imports in 2004. Colombia is the largest buyer of merchandise, buying
nearly 16 percent of all Colón Free Zone exports. Other principal buyers are Venezuela, Panamá
(domestic market), Guatemala, Ecuador, Costa Rica, Dominican Republic, the United States, Chile, Cuba,
Honduras, Perú, Brazil, Nicaragua and El Salvador. These countries buy approximately 83% of all exports
from the Colón Free Zone. All that gives the Colón Free Zone the right to be called "The First Free zone
of the Western Hemisphere". The existence of modern seaports with the most modern facilities,
container ports, direct access through the Pan-American Highway, air access, and trains daily
transporting containers from the Pacific Ocean to the Atlantic Ocean. Dividends arising from external
operations or from those operations that are executed or consumed abroad are tax-free. There are no
Capital Investment Taxes. Municipal or Local Taxes do not apply to firms operating in the Free Zone and
there are no taxes on shipments to or from the Free Zone from or to anywhere in the.
The Jamaican Free Zones are a government initiative to encourage foreign investment. Businesses
operating within these zones have no tax on their profits, duty exemption on imports and exports, and
relaxed customs procedures. However, they must export 85% of their produce outside of CARICOM.
Created under the Jamaica Export Free Zones Act the zones are operated by the government. Businesses
that operate in the zones must be in the fields of warehousing and storing, manufacturing,
redistribution, processing, refining, assembling, packaging, and also service operations. These businesses
gain 100% tax holiday in perpetuity, no import licensing requirements, and exemption from customs
duties on capital goods, raw materials, construction materials, and office equipment.
Jamaica has four free trade zones but companies outside of the zones can apply for Free Zone status as
Single Entity Free Zones. The government initially used the zones to promote the garment and related
industry, this push expanded to information technology in the 1990s with addition clauses added to the
act in 1996.
From 1985-1995 the combined export output of the zones in textiles was US $1.31 billion. Around
12,000 people were employed in the textile factories, about 1.6% of the total workforce. However since
1995 the industry has been in a serious depression due to structural problems in Jamaica and increased
foreign competition.
The first free zone created was the Kingston Free Zone (KFZ) in 1976 on ground adjacent to the Kingston
Container Terminal. The 180,000 square metre site contains 72,835 square metres of factory space. The
other major free zones are Montego Bay Free Zone (MBFZ), Garmex Free Zone, Hayes Free Zone, and
Cazoumar Free Zone.
WTO rule changes agreed at Doha will end export subsidies in 2007.
The free zones have been attacked as US subsidised "sweatshops", the minimum wage is US $30 a week.
Free trade area
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A free trade area is a designated group of countries that have agreed to eliminate tariffs, quotas and
preferences on most (if not all) goods between them.
It is the second stage of economic integration.
Countries choose this kind of economic integration form, if their economical structures are
complementary. If they are competitive, they will choose customs union.
Unlike a customs union, members of a free trade area do not have the same policies with respect to
non-members, meaning different quotas and customs. To avoid evasion (through re-exportation) the
countries use the system of certification of origin most commonly called Rules of Origin, where there is a
requirement for the minimum extent of local material inputs and local transformations adding value to
the goods. Goods that don't cover these minimum requirements are not entitled for the special
treatment envisioned in the free trade area provisions.
Cumulation is the relationship between different FTAs regarding the Rules of Origin — sometimes
different FTAs supplement each other, in other cases there is no cross-cumulation between the FTAs.
The Free Trade Area is a result of a Free Trade Agreement (a form of trade pact) between two or more
countries. Free Trade Areas/Agreements (FTA) are cascadable to some degree — if some countries sign
agreement to form free trade area and choose to negotiate together (either as a trade bloc or as a
forum of individual members of their FTA) another free trade agreement with some external country (or
countries) — then the new FTA will consist of the old FTA plus the new country (or countries).
A Free Trade Area is a region in which obstacles to unrestricted trade have been reduced to a minimum.
Within an industrialized country there are usually few if any significant barriers to the easy exchange of
goods and services between parts of that country. For example, there are usually no trade tariffs or
import quotas; there are usually no delays as goods pass from one part of the country to another (other
than those that distance imposes); there are usually no differences of taxation and regulation.
Between countries on the other hand, many of these barriers to the easy exchange of goods can and
often do occur. It is commonplace for there to be import duties of one kind or another (as goods enter a
country) and the levels of sales tax and regulation often vary by country.
The aim of a free trade area is to so reduce barriers to easy exchange that trade can grow as a result of
specialisation, division of labour, and most importantly via (the theory and practice of) comparative
advantage. The theory of comparative advantage argues that in an unrestricted marketplace (in
equilibrium) each source of production will tend to specialize in that activity where it has comparative
(rather than absolute) advantage. The theory argues that the net result will be an increase in income
and ultimately wealth and well-being for everyone in the free trade area. However the theory refers
only to aggregate wealth and says nothing about the distribution of wealth. In fact there may be
significant losers, in particular among the recently protected industries with a comparative
disadvantage. The proponent of free trade can, however, retort that the gains of the gainers exceed the
losses of the losers.

Is a Free Trade Zone Emerging in Northeast Asia in the Wake of the Asian Financial Crisis?'.
by Kevin G. Cai
Introduction
Since the mid-1980s Northeast Asia [2] has witnessed a phenomenally accelerating economic integration
among its economies, as manifested by the declining importance of the United States both as a market
and as a source of investment for Northeast Asian economies and the concurrent deepening economic
interdependence among the economies in the region with rising intraregional trade and direct
investment flows [3] (See Tables 1-5). As an autonomous process, however, growing economic
integration in Northeast Asia has been primarily driven by market forces, but short of a formal regional
grouping equivalent to the European Union (EU) and the North American Free Trade Agreement
(NAFTA). The very nature of economic integration in Northeast Asia is due largely to the continuing
existence of some significan
Most fundamental among these constraints are the persisting political suspicion among the countries,
derived from political and ideological diversities and bitter memories of the past experience in the
region, and the continuing existence of the politically sensitive issues of the divided states (the Korean
Peninsula and China/Taiwan). Besides, lack of experience in conducting multilateral negotiations and
building multilateral institutions, combined with a cultural orientation of the region that emphasizes
consensus, is not favorable for multilateralism in Northeast Asia either.
On the other hand, Northeast Asian economies are still highly externally-oriented, as is evident in the
high ratio of trade in their GDP. Their fast economic growth is closely related to their external ties,
especially export markets in North America and Western Europe and energy and resource supplies from
the Middle East, Australia and the Americas. In particular, although the importance of the United States
as a market relative to internal Northeast Asian markets has declined, it nevertheless remains the single
most important export market for most Northeast Asian economies. For example, the share of exports
destined for the United States is still as high as 28.1 percent for Japan, 15.8 percent for South Korea,
27.6 percent for Taiwan, 21.8 percent for Hong Kong, and 17.9 percent for China respectively. (See Table
2)
Furthermore, because of the growing worries about a militarily resurgent Japan and an assertive China
with its increasing economic strength, the region still counts on continued U.S. military presence for
keeping security...
t constraints that make official regional schemes hard-born in Northeast Asia.

THE ECONOMIC COMMUNITY

We claim all economic systems to be under the judgment of God no less than other facets of the created
order. Therefore, we recognize the responsibility of governments to develop and implement sound fiscal
and monetary policies that provide for the economic life of individuals and corporate entities and that
ensure full employment and adequate incomes with a minimum of inflation. We believe private and
public economic enterprises are responsible for the social costs of doing business, such as employment
and environmental pollution, and that they should be held accountable for these costs. We support
measures that would reduce the concentration of wealth in the hands of a few. We further support
efforts to revise tax structures and to eliminate governmental support programs that now benefit the
wealthy at the expense of other persons.
Issues
• Corporate Responsibility
• Debt Relief
• Economic Justice
Federal Budget and Taxes
• Gambling
• Globalization and Trade
• Hunger
• Labor and Worker Justice
• Poverty
Social Security
Budget Update...
In April, the House and Senate adopted a budget conference report that directs various committees to
cut mandatory spending programs under their jurisdiction. By mid to late September, those committees
will make recommended cuts totaling over $30 billion. For example, the Agriculture Committee must
find $3 billion in mandatory savings which could come from any programs under that committee
jurisdiction - agricultural subsidies, conservation programs or nutrition programs such as Food
Stamps.Over the next month Congress must understand that the budget is a moral document - a
statement of who and what we value as a nation. As people of faith we must tell them that when they
talk about a $600 million cut to Food Stamps that it is more than just a number - there are 300,000
children who will be cut off from critical nutrition assistance and our faith calls us to speak out on their
behalf.G The movement of capital and goods and services around the world, trade between nations and
the increasing debt owed to rich nations by poor ones calls for urgent action. The rich are getting richer
and the poor are getting poorer. This web page provides information and action suggestions.

Social Principles The Economic World 163lobalization and Trade

Gambling
The Church has a key role in fostering responsible government and in developing health and moral
maturity that free persons from dependence on damaging social customs. We believe that gambling is a
menace to society, deadly to the best interests of moral, social, economic, and spiritual life, and
destructive of good government. We work toward a world and an economy, which is free of gambling.
Furthermore, we urge national, tribal, state and local governments to read, analyze and implement the
recommendations of the National Gambling Impact Study report released by the United States in 1999.
In this section of the website you will find a link to this report as well as many other tools to assist you in
being a faith witness in combating gambling in our world
Regional Economic Communities (RECs)
CEN-SAD | COMESA | ECCAS | ECOWAS | IGAD | SADC | UMA

Community of Sahel-Saharan States (CEN-SAD)

The Community of Sahel-Saharan States CEN-SAD is a framework for Integration and Complementarity.
It intends to work, together with the other regional economic communities and the Organization of
African Unity, to strengthen peace, security and stability and achieve global economic and social
development.
CEN-SAD was established on 4th February 1998 following the Conference of Leaders and Heads of States
held in Tripoli (Great Jahamiriya). The Treaty on the establishment of the Community was signed by the
Leader of Great El-Fateh Revolution and the Heads of State of Burkina Faso, Mali, Niger, Chad and
Sudan. The Central African Republic and Eritrea joined the Community during the first Summit of the
organization held in Syrte in April 1999. Senegal, Djibouti and Gambia joined during the N’djamena
Summit in February 2000. Others countries joined later, and still more are in the process of joining the
Organization.
Economic Community of Central African States (ECCAS)
At a summit meeting in December 1981, the leaders of the Central African Customs and Economic Union
(UDEAC) agreed in principle to form a wider economic community of Central African states.
CEEAC/ECCAS was established on 18 October 1983 by the UDEAC members and the members of the
Economic Community of the Great Lakes States (CEPGL) (Burundi, Rwanda and the then Zaire) as well as
Sao Tome and Principe.Angola remained an observer until 1999, when it became a full member. ECCAS
began functioning in 1985, but has been inactive since 1992 because of financial difficulties (non-
payment of membership fees) and the conflict in the Great Lakes area.The war in the DRC has been
particularly divisive, as Rwanda and Angola fought on opposing sides.
Common Market for Eastern and Southern Africa (COMESA)
The Common Market for Eastern and Southern Africa was founded in 1993 as a successor to the
Preferential Trade Area for Eastern and Southern Africa (PTA),which was established in 1981. COMESA
formally succeeded the PTA on 8 December 1994. The establishment of COMESA was a fulfilment of the
requirements of the PTA Treaty, which provided for the transformation of the PTA into a common
market ten years after the entry into force of the PTA Treaty.
Economic Community of West African States (ECOWAS)
The idea for a West African community goes back to President William Tubman of Liberia, who made the
call in 1964. An agreement was signed between Côte d'Ivoire,Guinea, Liberia and Sierra Leone in
February 1965, but this came to nothing. In April 1972, General Gowon of Nigeria and General Eyadema
of Togo re-launched the idea, drew up proposals and toured 12 countries, soliciting their plan from July
to August 1973. A meeting was then called at Lomé from 10-15 December 1973, which studied a draft
treaty. This was further examined at a meeting of experts and jurists in Accra in January 1974 and by a
ministerial meeting in Monrovia in January 1975. Finally, 15 West African countries signed the treaty for
an Economic Community of West African States (Treaty of Lagos) on 28 May 1975. The protocols
launching ECOWAS were signed in Lomé, Togo on 5 November 1976. In July 1993, a revised ECOWAS
Treaty designed to accelerate economic integration and to increase political co-operation, was signed.
Intergovernmental Authority for Development (IGAD)
The Intergovernmental Authority on Drought and Development (IGADD) was formed in1986 with a very
narrow mandate around the issues of drought and desertification. Since then, and especially in the
1990s, IGADD became the accepted vehicle for regional security and political dialogue The founding
members of IGADD decided in the mid-1990s to revitalise the organisation into a fully-fledged regional
political, economic, development, trade and security entity similar to SADC and ECOWAS. It was
envisaged that the new IGADD would form the northern sector of COMESA with SADC representing the
southern sector.
One of the principal motivations for the revitalisation of IGADD was the existence of many
organisational and structural problems that made the implementation of its goals and principles
ineffective. The IGADD Heads of State and Government met on 18 April 1995 at an Extraordinary
Summit in Addis Ababa and resolved to revitalise the Authority and expand its areas of regional co-
operation. On 21 March 1996, the Heads of State and Government at the Second Extraordinary Summit
in Nairobi approved and adopted an Agreement Establishing the Intergovernmental Authority on
Development (IGAD.
Southern African Development Community (SADC)
The concept of a regional economic co-operation in Southern Africa was first discussed at a meeting of
the Frontline States foreign ministers in May 1979 in Gaberone. The meeting led to an international
conference in Arusha, Tanzania two months later which brought together all independent countries,
with the exception of the then Rhodesia, South West Africa and South Africa, and international donor
agencies. The Arusha conference in turn led to the Lusaka Summit held in the Zambian capital in April
1980. After adopting the declaration, which was to become known as ‘Southern Africa: Towards
Economic Liberation’, Sir Seretse Khama was elected the first chairman of the SADCC.
Union du Maghreb Arabe (UMA)
The first Conference of Maghreb Economic Ministers in Tunis in 1964 established the Conseil Permanent
Cunsultatif du Maghreb (CPCM) between Algeria, Libya, Morocco, and Tunisia, to coordinate and
harmonize the development plans of the four countries as well as interaregional trade and relations with
the EU. However, for a number of reasons, the plans never came to fruition. It was not until the late
1980s that new impetus began to bring the parties together again. The first Maghreb Summit of the five
Heads of State, held at Zeralda (Algeria) in June 1988, resulted in a decision to set up the Maghreb High
Commission and various specialized commissions. Finally, on February 17, 1989 in Marrakech, the Treaty
establishing the AMU was signed by the Heads of State of the five countries.
European Communities was the name given collectively to the European Economic Community (EEC),
the European Atomic Energy Community (Euratom) and the European Coal and Steel Community (ECSC),
when in 1967, they were first merged under a single institutional framework with the Merger Treaty.
The term now technically only refers to the EEC and Euratom, as the ECSC expired in 2002.
Soon after the establishment of the ECSC two more European Communities were proposed: European
Defence Community and European Political Community. They were later rejected.
The EEC, established in 1958, soon became the most important of these three communities, subsequent
treaties adding it further areas of competence that extended beyond the purely economic areas, while
the other two communities remained extremely limited. The ECSC ceased to exist when the Treaty of
Paris which established it expired in 2002. Seen as redundant, no effort had been made to retain it — its
assets and liabilities were transferred to the EC, and coal and steel became subject to the EC treaty.
With the entry into force of the Maastricht Treaty in November of 1993, the European Economic
Community changed its name and became the European Community. The European Community,
together with the two other pillars, became collectively known as the European Union which exists
today.
In October 2005 the European Energy Community was created - the first covering both the European
Union and some non-member states (like the European Economic Area).

European Economic Community

The European Economic Community (EEC) was an organization established by the Treaty of Rome (25
March 1957) between the ECSC countries Belgium, France, Italy, Luxembourg, the Netherlands, and
West Germany, known informally as the Common Market (the Six). The EEC was the most significant of
the three treaty organizations that were consolidated in 1967 to form the European Community (EC;
known since the ratification 1993 of the Maastricht treaty as the European Union, EU). The EEC had as
its aim the eventual economic union of its member nations, ultimately leading to political union. It
worked for the free movement of goods, service, labour and capital, the abolition of trusts and cartels,
and the development of joint and reciprocal policies on labour, social welfare, agriculture, transport,
and foreign trade.
In 1956, the United Kingdom proposed that the Common Market be incorporated into a wide European
free-trade area. After the proposal was vetoed by President Charles de Gaulle and France in November
1958, the UK together with Sweden engineered the formation (1960) of the European Free Trade
Association (EFTA) and was joined by other European nations that did not belong to the Common
Market (the Seven). Beginning in 1973, with British, Irish, and Danish accession to the EEC, the EFTA and
the EEC negotiated a series of agreements that would ensure uniformity between the two organisations
in many areas of economic policy, and by 1995, all but four EFTA members had joined the European
Union.
One of the first important accomplishments of the EEC was the establishment (1962) of common price
levels for agricultural products. In 1968, internal tariffs (tariffs on trade between member nations) were
removed on certain products.
[edit] The future of the European Communities
The signed but unratified European Constitution would merge the European Community with the other
two pillars of the European Union, making the European Union the legal successor of both the European
Community and the present-day European Union. It was for a time proposed that the European
Constitution should repeal the Euratom treaty, in order to terminate the legal personality of Euratom at
the same time as that of the European Community, but this was not included in the final version.
The Regional Economic Communities
• The Arab Maghreb Union (AMU), with five members.
• The Common Market for Eastern and Southern Africa (COMESA), with 20 members.
• The Economic Community of Central African States (ECCAS), with 10 members.
• The Economic Community of West African States (ECOWAS), with 15 members.
• The Southern African Development Community (SADC), with 14 members.
• The Inter-Governmental Authority on Development (IGAD), with seven members in eastern Africa.
• The Community of Sahel-Saharan States (CEN-SAD), with 18 members.
In addition, six other RECs are geographically limited or subsets of larger RECs:
• The West African Economic and Monetary Union (UEMOA), with eight members, all also belonging to
ECOWAS.
• The Mano River Union (MRU), with three members, also belonging to ECOWAS.
• The Central African Economic and Monetary Community (CEMAC), with six members, also belonging to
ECCAS.
• The Economic Community of Great Lake Countries (CEPGL), with three countries, also belonging to
ECCAS.
• The East African Community (EAC), with three members, two belonging to COMESA and one to SADC.
• The Indian Ocean Commission (IOC), with five members, four belonging to COMESA and one to SADC.
• The Southern African Customs Union (SACU), with five members, all of which belong to SADC and two
to COMESA.