Free Market Zones: Deregulating Canadian Enterprise

Karl Burak was a solicitor in North Vancouver, B.C.

This carefully written book states a strong case for the adoption in Canada of a concept of limited laissez-faire in defined economic zones. It is not a fanatic, over-zealous proposal of the right. It merely advocates the establishment of free economic zones where commerce and industry that least require government protection are selectively and substantially deregulated.

This book will not be popular with those interests that thrive on regulation nor with unimaginative government and entrepreneurs concerned to preserve existing forms of management and revenues. They tend to cling to what they perceive as being politically and economically advantageous even when the economy becomes stagnant and production of wealth declines. This is unfortunate, because Dr. Grubel, who is a professor of economics at Simon Fraser University, proposes a system that, in a number of forms, has been tried and proven elsewhere.

Dr. Grubel begins by suggesting that the traditional arguments for regulation are proving insufficient because, among other reasons, today’s consumers have alternative choices. Both the regulated and the regulators have acquired vested interests in regulation; the effect of regulation in some cases is to foreclose alternatives; the real costs of regulation are understated; and non-market failures in regulated industries are unbeneficially perpetuated. The most obvious but politically unrealistic response would be to reform by deregulating on a grand scale in those areas where non-market failures have produced undesirable economic and social costs. Because such a response would cause insurmountable resistance from governments, regulated monopoly interests, and bureaucracies involved with regulation, Canada should as an alternative adopt a limited form of deregulation through the establishment of free economic zones.

These zones would include: free market zones or defined areas where goods would enter free of quota restrictions, duties, exchange controls and reporting requirements; free enterprise zones where entrepreneurial activities would be exempted from land development taxes, local property taxes, income taxes, corporate taxes on expenditures for industrial and commercial property, and levies on the training of labour; free gambling zones where optimally located gambling establishments would function with minimum levels of regulation and licencing; free medical zones where the sick would have quick access to new drugs and treatments at lower costs; free banking zones where financial institutions would have access to funds and customers of the world inter-bank market — and ultimately capture a significant share of the world currency banking business; free investment zones that would augment the domestic investment industry; and free insurance zones that would return to Canada insurance business which existing regulations have diverted to global insurers such as Lloyds of London. Free economic zones such as these should be politically, economically, and socially acceptable. Similar forms of deregulation in defined economic zones or areas have been highly successful — the free port of Hong Kong, deregulation of the U.S. airlines industry, gambling industries in Monte Carlo and Nevada, and the Euro-currency banking system. Such zones would appeal to vested interests by affording new and much-needed opportunities to expand. They would increase existing levels of government revenues. They would free the flow of capital, lower prices, and expand trade. All of these results are thoroughly analyzed and logically supported by Dr. Grubel.

Dr. Grubel puts forward a proposal that may remedy some of the economic ills we face today. His proposal may in the end prove unsuccessful, and he may underestimate the objections that would be taken to free economic zones, but he does present a reasoned position that merits the serious consideration of policy makers, planners, suppliers, and consumers. If deregulation in the form of free economic zones were attempted, it would touch all of us. It would offer an alternative approach in which most of us would be willing to participate. It is encouraging to read a book of this kind.