The company decides to manufacture the software cartridges for your game in one country, and to manufacture the new video game players in another country. It will package your game cartridge with the game player in yet another country, and then ship these packages out to sell in about 20 different countries around the world.

How can you and the gaming company keep track of all those moves? And where can you store all the game cartridges and game players between when they are created and when they are packaged and shipped out around the world?

What you need is a Free Trade Zone. A free trade zone is usually located at a seaport or an airport. It is an area that has been specially created for people who ship or trade products. The country that hosts the free trade zone does not collect taxes, duties, or tariffs on goods so long as they are in the free trade zone.

Because there are no taxes as long as you stay inside the zone, a free trade zone can be a good place to store goods temporarily in between shipments. It can also be a good place to manufacture products such as toys or clothing, especially if those products are made from raw materials that come from many different places.

You and the gaming company might decide to store the game cartridges and game players at warehouses at the free trade zone. You might even decide to hire people and set up the equipment needed to box and package the game cartridges with the game players. Then, you can ship them out from the free trade zone and you'll only have to pay taxes on them once, when they arrive at their final destination.

Cities and countries all over the world have established free trade zones. By creating a place where traders can move goods around easily without having to pay taxes, the people who create free trade zones hope to attract more jobs and more trade to their area. Here are a few examples of free trade zones around the world:

1. The Jebel Ali Free Zone (JAFZ) is located in the United Arab Emirates at the Port of Dubai. It is a convenient location for shippers because it is right at the entrance to the Persian Gulf, which gives it easy access to the entire Arabian peninsula. It is also quite convenient to Asia, India, and Europe. Can you find Dubai on a map?

2. The Colon Free Zone is located at the Atlantic entrance to the Panama Canal. This zone offers traders a place to store or repackage their goods before they are moved on. It also has many businesses that make their living selling supplies - tax free - to the 13,000 ships that cross through the canal each year.

3. Hong Kong and China have been discussing creating a Free Trade Zone on Hong Kong. Because mainland China is not yet completely open to free trade, many people in Hong Kong hope that a free trade zone could help them attract more foreign business.

4. The Minnesota Foreign Trade Zone #119 is located in Minneapolis, Minnesota. It gives traders the opportunity to repackage, test, assemble, or even re-export their products without ever officially being on U.S. soil and therefore subject to U.S. taxes.

Study Questions:

1. Do you think free trade zones are a good idea? Why or why not? Use the library to learn more and write a 1-page paper explaining your position.

2. Does your town or a town near you have a free trade zone at its airport or seaport? Use the Internet or an archive of your local newspaper to learn more. If you find one, write a one-page paper about the history and functions of your free trade zone.

Check out past Trade Topics entries!