The Development Process, Functional Evaluation, and Implications of World Free Trade Zones

China officially launched a Pilot Free trade Zone (FtZ) in Shanghai on September 29, 2013, taking a solid step forward to boost reforms in the world's second-largest economy. Since then, many discussions and analyses of the connotations, functions, and system design of FtZs have started and are under way. People have high expectations for their role in promoting the deepening of china's economic reform. By November 22, 2013, data on the official website of the china (Shanghai) Pilot FtZ show more than 1400 new companies coming into the zone with a total registered capital of nearly rmB40 billion1 (approximately US$6.6 billion). But as is well known, FtZ management that is "inside the border while outside the customs territory" (i.e., tax exemptions, tax rebates and tax bonds) is not new. there are about 3500 FtZs located in 135 countries, and more than 170 active foreign trade zones (i.e., FtZs) in the USA alone (Bolle and Williams 2013). And more specifically, world-renowned free ports (one type of FtZ) like Singapore and Hong Kong, as well as typically business-based FtZs like dubai in the United Arab Emirates and colon in Panama, are now at the highest level of FtZ, with integrated functions. therefore, the Shanghai Pilot FtZ can learn from these world-renowned FtZs by playing to their strengths and rising above their weaknesses. Only in this way can we ensure the correct path for china's opening up and fundamentally promote its long-term economic development.1. History and current situation of the World's ftZsAccording to the Kyoto convention signed by the International customs council in 1973, a FtZ is defined as follows: it "refers to a part of the territory of a contracting Party where any goods introduced are generally regarded, insofar as import duties and taxes are concerned, as being outside the customs territory. " In layman's terms, it means being "inside the border while outside the customs territory," which is fundamentally different from being "inside the border and inside the customs territory" like a bonded zone. In terms of nomenclature, FtZs are also called free ports, foreign trade zones, free zones, free economic zones, export processing zones, and so on in different countries and regions. In fact, the world's FtZs have experienced various forms of evolution and have different characteristics due to differences in geographical location, stage of economic development, and categories of goods and services. So it is necessary for us to investigate their emergence, development, and current situation, so as to fully understand the nature and characteristics of different types of FtZ.1. 1. Free Ports: Starting in Europe, with Transit Trade as Their Main FunctionThe FtZ was first created for trade facilitation. In 1547, the world's first free port-leghorn (livorno) Free Port appeared in the Gulf of Genoa, northwestern Italy (now tuscany, near Pisa). At that time, the basic functions of free ports were to attract foreign merchant ships and engage in transit trade, that is, to import foreign goods and then re-export them to foreign countries without processing and to provide tariff exemptions for the cargo vessels plying their trade. they mainly played the role of collection and distribution of goods, thus contributing to the economic development of the country or region adjacent to the free port. For example, the second-largest port in Europe, Hamburg, which was founded in 1189, was one of the world's largest transit ports for coffee, cocoa, spices, and carpets. this prototype of free ports in the modern sense mainly provided cargo handling and storage in the transit trade and required relatively little land. But the main advantage of free ports is that the majority of the foreign goods are duty-free, although the types of trading goods are relatively simple.1. 2. Post-War Export Processing Zones, with Attracting Investment and Employment as Their Main FunctionAfter World War II, countries around the world gradually turned their attention to economic development, so the FtZs began to change from focusing on transit trade to attracting investment, creating jobs, and promoting the export of manufactured goods. …