In name only: Are free trade zones assisting capitalism or criminals and crony capitalists?

Roger Bate
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Roger Bate: American Enterprise Institute

AEI Economics Working Papers from American Enterprise Institute

Abstract: Global free trade negotiations have been stalled for nearly two decades, yet bilateral trade deals and free trade zones (FTZs) have compensated for this stagnation by continuing to enhance trade and growth. FTZs have flourished in emerging nations, even within autocracies that rhetorically oppose open trade. FTZs possess many attributes of capitalist economies -- free exchange, low taxes, no tariffs or other customs rules, and light regulation. All of these traits can attract foreign companies, foreign investment in domestic companies, industrial production, and overall wealth generation. However, such zones are also troubling; they can produce several negative results including a strong mafia presence, massive counterfeit operations, tax evasion, money laundering, and even terror financing. At best, FTZs are workarounds that are desirable only when the political system is captured by vested interests that limit international trade. At worst, they are deniable locations for odious regimes to gain hard currency and even credibility.

Keywords: China; Counterfeit pharmaceuticals; Free Trade Agreement (FTA) (search for similar items in EconPapers)
JEL-codes: F (search for similar items in EconPapers)
Date: 2013-10
New Economics Papers: this item is included in nep-int and nep-iue
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Persistent link: https://EconPapers.repec.org/RePEc:aei:rpaper:3651

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