Thursday, 31 August 2017

Northport zone?

A couple of years ago, Khyaati Acharya and I put out a report arguing for policy trial areas. We called them "Special Economic Zones", but they weren't really like the little enclaves you'd see in parts of Asia. Instead, it was a way of devolving powers or regulatory responsibility down to local councils that had demonstrated a capability of handling them, along with a financial incentive mechanism to make it in Councils' interest to go for projects that would be both in their interest and the national interest.

For example, you could imagine an urban-focused RMA being applied to the Auckland area, along with tied funding lines that would rebate to Auckland Council a portion of the above-forecast tax revenues remitted from Auckland to central government. Or an investment zone for the Wellington area that would suspend the Overseas Investment Act for the greater Wellington area (no high country estates here), allow all kinds of investment, and provide a similar financial incentive for Wellington to play ball.

And a key principle of the thing was setting out success criteria in advance, and allowing the roll-out of successful zones to other councils wanting similar treatment. Every zone, in principle, had to be extendable to the whole country. So if you proposed a GST-free zone, that sure couldn't be rolled out to the whole country because then tax revenues would disappear.

Winston Peters' proposal doesn't really fit any of that:
Peters' new push

However, NZ First leader Winston Peters wants legislation to move the port's container operations to Whangarei's Northport by the end of 2027 if he in a powerful negotiating position with either main party after the end of the election.

He told the NZ Herald he would stop imported cars clogging up the city's wharves by the end of 2019 and free up Captain Cook wharf ahead of the America's Cup.

Mr Peter's plan would create a "special economic area" near Northport, which would be duty-free, GST-free and tax-free.

The ambitious plan would involve upgrading the Auckland to Northland rail line, including a new rail spur to Northport and KiwiRail has put the cost at billions of dollars.

As the council is the port's owner it is doubtful it will be railroaded into moving the port soon. Mr Goff favours the Firth of Thames for a new port in 20-30 years time, but Transport Minister Simon Bridges has already poured cold water on the idea saying the council would need to overcome funding, environmental and cultural issues. The cost of a new port has been put at about $5 billion and the government says it would not fund it.
A Northport tax-free zone would be highly distortionary. It couldn't be extended more broadly. There's a case for entrepot zones in areas handling lots of international transshipment, so that goods don't attract tax/duty unless they clear through to the other side of the zone - that makes it easier to handle international shipping and flipping containers from one boat to another without having to get customs involved. It is almost inconceivable that New Zealand could provide that kind of hub service given its location. Are ships going to go thousands of kilometers out of their way to hub here when they could just go to Singapore? I don't get it.

I'm very open to the idea that Auckland port could be moved; it seems ludicrous that the city's best real estate is tied up in unloading cars (would still need to see the CBA on any particular proposal). But the SEZ proposal ... I'm not convinced.

I prefer Peters' proposal to cover tourist costs by punting some of the revenue that central government collects from tourists down to the councils bearing substantial infrastructure costs in accommodating them to Labour's tourist tax idea though.

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