Why Covid-19 lockdowns could lead to more free trade, not less

Montserrat Magallán

August 7, 2020

Historic events like pandemics and global economic crises force us to change the way we think about supply and demand. International trade is under existential threat thanks to the rise of consumer nationalism. Lockdowns have had disastrous effects on economies around the world. The WTO is issuing stark warnings of plummeting international trade.

There might be a way to avoid that, through the wonder of free economic zones. These special jurisdictions enjoy conditions designed specifically for freedom of trade. Host nations forego certain restrictions in order to pave the way for economic liberty. Taxes and regulations can be sidestepped under certain circumstances.

Free economic zones can be as large or as small as needed, and the advantage they glean from skirting bureaucratic hindrances can be adjusted to their particular situation. As such, they can bloom into havens of economic prosperity, providing tax and regulatory relief for businesses and residents alike. That is the aim of the department for international trade’s scheme for post-Brexit free ports in the UK.

As of 2019, the regions with the greatest number of free economic zones were the United Arab Emirates, China and the Philippines. All three countries have used these special zones to aid their developed, industrialised economies in combatting poverty, promoting socio-economic development, integrating local firms into global value chains and facilitating foreign investment.

As of this year, there are around 5,200 free economic zones around the world. They are responsible for as much as $3.5tn worth of exports each year. That’s the equivalent of around 20 per cent of all global trade. And yet, that is just a fraction of their overall potential.

Free economic zones can be useful for political as well as economic purposes. As countries around the world seek to distance themselves from China and engage in de-Sinoficiation of their economies in particular, free economic zones can be a very useful tool. In Bangladesh and Cambodia, for example, they have been instrumental in the push for foreign investment that comes from places other than China, in what has become known as “China plus one” economic strategy.

Companies and entrepreneurs can benefit immensely from increased freedom to conduct their business and provide new sources of employment. No party loses out – everyone benefits. Tax reductions act as a kind of legal incubator for the next generation of startups. All that is required is for governments to play ball and GDP per capita can increase by as much as three per cent each year, with minimal cost and effort on the part of state actors.

It seems like a no-brainer. Free economic zones are an easy and accessible tool to breathe some life back into our economies after the Covid-19 lockdowns. They allow for more socially and environmentally conscious business progress and they promote the constructive transfer of capital, innovation and technology around the world.

There are lots of different types of free economic zones, used for lots of different reasons. There are few problems that cannot be solved by the liberalisation of economy and trade. While reforming or overhauling entire government bodies designed specifically to regulate those things is a herculean task, cordoning off special zones which can sidestep their jurisdiction is an achievable goal with immense potential for economic reinvigoration.


  • Montserrat Magallán

    Montserrat Magallán is head of entrepreneurship at the Mexican Institute of Financial Executives. She is also a local coordinator with Students for Liberty.

Written by Montserrat Magallán

Montserrat Magallán is head of entrepreneurship at the Mexican Institute of Financial Executives. She is also a local coordinator with Students for Liberty.


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