Another important issue associated with today’s ports involves free-trade zones,
which can be defined as “part of an economy, geographical or functional, in
which the rules and other institutions for the production and distribution of goods
and services differ from those in the rest of the economy.”17 Free-trade zones of-
fer the potential for attracting nondomestic investment to generate jobs and spur
economic development. The most prominent types of free-trade zones are for-
eign trade zones, special economic zones, and export processing zones. Free-
trade zones typically are located adjacent to, or in close proximity to, water ports,
but these trade zones can also be located at airports.
Although free-trade zones have been in existence for hundreds of years, their
worldwide popularity has increased dramatically over the past 25 years, from ap-
proximately 80 free-trade zones at the beginning of the 1980s to over 600, and
counting, at the present time. Reasons for the increased number of trade zones
include globalization and its emphasis on cost competitive goods and services as
well as the adoption, to varying extents, of economic reforms in Asian, Euro-
pean, and Latin American nations.18
Free-trade zones offer a variety of incentives to parties engaged in global
commerce. Due to the diversity in the types of free-trade zones (foreign trade
zones versus export processing zones) as well as diversity in their rules and reg-
ulations (one trade zone might permit manufacturing activities while another
trade zone doesn’t), the benefits to free-trade zones vary from country to coun-
try (and may vary from free-trade zone to free-trade zone within a country). As
a result, a definitive listing of free-trade zone benefits is not possible. What all
free-trade zones share in common, however, is that “goods can enter duty-free
and remain duty-free unless, and until, they enter the customs territory of their
countre