Title

Free-Trade Zones

Wednesday, September 12, 2018
3:00pm
Russell Senate Office Building, Room 385
Washington, DC
United States
Productive or Destructive?
Unofficial Transcript: 
Moderator(s): 
Name: 
Paul Massaro
Title Text: 
Policy Advisor
Body: 
Commission on Security and Cooperation in Europe
Witnesses: 
Name: 
Dr. Clay Fuller
Title: 
Jeane Kirkpatrick Fellow
Body: 
American Enterprise Institute
Name: 
Jack Radisch
Title: 
Senior Project Manager
Body: 
OECD High Level Risk Forum
Name: 
Pedro Assares Rodrigues
Title: 
Representative
Body: 
Europol Liaison Bureau

Free-trade zones (FTZs) are duty-free areas within a country’s borders designed to encourage economic development by allowing goods to be imported and exported under less restrictive conditions than are present elsewhere in that country. In many places, these zones generate jobs and revenue; however, they also are hospitable to illicit trade and money laundering. In the worst cases, law enforcement fails and FTZs become global hubs of criminal activity.

According to Dr. Clay Fuller of the American Enterprise Institute, attempts to study FTZs are often thwarted by discrepancies in the definition and measurement of FTZs, a lack of coordination between the private and public sectors to collect data, and a dearth of globally aggregated data. Dr. Fuller agreed that FTZs have played a role in fostering corruption and suggested that better aggregate data is needed to reach further conclusions.  Essential to overcoming their challenges, FTZs must first be identified in a standardized format before the data can be accurately amalgamated.

The Organization for Economic Cooperation and Development (OECD) has begun to study these problems from a global perspective through its Task Force on Countering Illicit Trade. Jack Radisch, Senior Project Manager at the OECD, reported that the trade in fakes is a $461 billion industry. This problem is exacerbated by FTZs, which can enable the movement of illegal goods. Stephane Jacobzone, Deputy Head of OECD’s Public Governance Division, expressed concerns about global “governance gaps,” such as those created by FTZs with poor oversight, which allow criminal activity to thrive.

Pedro Assares Rodrigues, a EUROPOL Representative with the Europol Liaison Bureau, underscored the significance of global coordination by discussing the risk of FTZs to harbor terrorist activity. The United States and EUROPOL have united to combat global security threats through projects such as the Secure Information Exchange Network Application, allowing the US and EU to work efficiently and securely.

Alongside Mr. Assares Rodrigues’ call for greater international coordination, panelists offered potential policy responses to criminal activities within the FTZs from both the private and public sectors.  For example, Dr. Fuller proposed that private companies should be enlisted to report data on FTZs, though he stipulated that government must protect the privacy of companies throughout the process.

Dr. Fuller also added that countries that already participate in international data sharing agreements or multilateral conversations about FTZs should beseech their trading partners to join these same data-sharing partnerships.  Mr. Radisch and Mr. Jacobzone added that the OECD is working toward a comprehensive FTZ “code of conduct” that could eventually be adopted by member states.

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