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Special Economic Zones in the US – notes for Mess Hall seminar

Rozalinda Borcila:
* very rough, ongoing visual and creative research project – more to come

see also a more developed essay here: Riding the Zone

1. Context – ongoing research etc

I became interested in special economic zones – space making practices that operate through exception – as I began to work with a group of undocumented organizers. This group had collectively gathered a tremendous amount of knowledge about deportation enforcement and the conflation of local policing with border policing, having worked inside and outside of local and regional prisons and detention centers of all kinds, and being exposed to the highly differentiated, changing and discretionary practices of PoliMigra themselves. And since they were organizing in Pilsen/Little Village, and connected with old-timers in the Immigrant rights movement, they also helped me understand how the gentrification and deconcentration of the “Mexican corridor” in Chicago was being incentivized through financial-territorial instruments like an enterprise zone and local TIF district. While campaigns focused on deportation enforcement, the group’s analysis considered the economic forces that squeeze parallel economies out of existence, so that enforcement (incarceration, deportation, local policing and so on) and in general the deportation regime can be seen as working to integrate populations into the dominant economic order.

(the deportation regime)…  is also an all-out attack on the communal economies and social structures immigrants sustain: neighborhood arrangements that collectivize domestic and reproductive work, economies of barter and exchange, social and institutional practices of self-governance and so on. In other words, all the social arrangements and relations that correspond to a definition of communities as living systems. These arrangements are a nuisance from the perspective of capital; they are an impediment to efficiency and profit maximization, an obstacle to the total marketization of life … – Moratorium on Deportations Campaign statement, 2010

So my interest in special economic zones started with the Pilsen enterprise zone, and  in relation to deportation and deportability.  (Note:in terms of our seminar, this can also be a way to look at the changing nature of statecraft, between two poles – regimes of territoriality and deportability. ) Our little group did a research/action trip and moving seminar through the suburban ring of Chicago to connect the massive warehousing industry and intermodal transport system – the global movement of goods – to deportation enforcement and polimirga practices, and to gentrification and the displacement of migrant workers from Pilsen/Little Village into concentrated and isolated pockets around warehousing districts in the Western and Southwestern suburbs. This was also our first effort to  develop a self-organized experimental seminar across different forms of knowledge production, it seems important to connect these different moments and models of experimental learning. Props and much gratitude to Carmela Garcia,  José Herrera, Jesus Guillen, Mario Cardenas, Yana Kunichoff, Juan Ibarra, Jorge Mújica Murias, Michael Johnson, the no name group, and the rest of the Moratorium on Deportations Campaign for all the learning we did together. (see here – www.moratoriumondeportations.org)

Notes for 3 Crises seminar – quick and dirty introduction to the two main US-based models for establishing “special economic zones”.

Foreign Trade Zone (FTZ) – developed during the first stage of the New Deal,  consists of establishing territories within US that are considered outside of the jurisdiction of the US, “offshore onshore” – from the standpoint of trade and the movement of goods (mostly). Brief history and structure today — complicating that picture a little bit, looking at zoning as space-making processes. Then a brief introduction to the Enterprise Zone (EZ), developed in the early 80s as a neoliberal instrument,  purportedly a solution to the stagflation crisis; EZ’s are areas considered to be offshore from the standpoint of labor conditions and local regulations. And the key question, which there is not enough time for today,  is how “zone” is experimented with in the current crisis.

These are partial notes, the research is in-process. I will be doing a visual/territorial research project focusing on FTZ #22 (Chicago) – tracing its history from an “island” model to “integration” model; what exactly does integration mean? Tracking new paradigms of integration in one specific site: Joliet Arsenal. Using Renaissance 2020, the strategic futures plan of Chicago developed by the Commercial Club, to read “integration”backwards. Also developing site visits, experiential engagements and video work… .

2.  FTZs – Foreign Trade Zones – from zone, to zone project, to zone universe

•    FTZ are significant in terms of scale of economic activity, also in terms of the ideological function they perform
•    Bibliography:  why such an absence of critical work on Foreign Trade Zones? A lot has been written about free trade zones, maquilladoras, export processing zone and so on around the world. A lot of scholarship on the direct historical precedents, historically the laboratories for the practice of modern extraterritoriality, or extraterritoriality as an instrument of statecraft – colonial freeports in 18th and 19th century , esp British outposts in China (Gouangjou) and the Caribbean (Kingston) (also sites of freeports today). Primary research on FTZ: Two studies of political and cultural history of the FTZ, monographies written by economic geographers in 1964 and 1965 . Since 1980′s, consulting thinktanks publish hundreds of studies touting the economic benefits of FTZ’s; and some independent academic quantitative and regressive analyses that are more inconclusive.  Academic research on  FTZ’s seems focused on asking: “do they work?”; not nearly as much attention has been paid to FTZ’s as a socio-spatial form, or the ideological function they perform. For the early cultural history I am heavily relying on the work of Dara Orenstein : Foreign Trade Zones and the Cultural Logic of Frictionless Production – Radical History Review — see also here for Orenstein’s collection of primary documents   Offshore Onshore

•    Precedent in the US: during the financial crisis of the late 1830’s bonded warehouses are introduced, following model of Britain and Netherlands, where goods could be imported and temporarily stored duty-free. Bonded warehouses do not escape regulatory oversight (commerce department, this or that seed inspection bureau, time limits etc) – so bonded warehouses were understood as sitting within national territory and shielding merchants from tariffs by administrative fiat, not by jurisdiction
•    1894 – 1918 Orestein charts the political pressure from merchant associations, railroad margates and chambers of commerce to open up freeports in the US on East Coast. What lobbyists see as models are the European freeports of the 19th century, esp the German model, particularly Hamburg. Freeports were about the international movement of goods and also about storage and warehousing. (without storage, no circulation). Freeports allowed goods to be warehoused outside the tariff jurisdiction (and regulatory mechanisms) of the nation state. This means commodities could sit “off the grid” without incurring tarriffs – merchants could wait for optimum market conditions for inserting goods into national markets.
•    in the US, these efforts were unsuccessful until 1934, with the passage of Foreign Trade Zones Act in the first phase of the New Deal. The US-version of the Freeport is called a Foreign Trade Zone, although apparently neither the legislators nor the administrators of the first zone seemed to remember the correct term, nor to understand if foreign is a modifier for trade or for zone… What is remarkable about the rhetoric of the FTZ boosters: it is not  about manufacturing and export, but about trade, and the dream is to depose Britain as the world’s marketplace

“Half of the goods bought by the United States from England are not produced there at all. Cotton from Egypt we buy in London. Tin from Bolivia we buy in London. We buy East Indian spirits in English ports. This should all be reversed” – Congressman Emmanuel Celler of NY,  1934

•    The Foreign Trade Zones Act refers to the zone as a space of exception, and a space of circulation:

(……) isolated, enclosed and policed area outside of US customs territory;
boundaries are under authority of US customs agencies;
The boundary is to be build under strict specifications (slide)
located in or adjacent to US international points of entry
various procedures for tariff and ad valorem tax relief –
“off shore” signifies a differential from economic regulations in the domestic economy

•    modern free ports were national regimes
•    looking at the discourse and imagery of the first FTZ: what comes in to subsume and suppress anxiety over zone as a partly denationalized territory (and of the magic of how exactly this works)   is an emphasis on the fence (dominates the legal text and dominates the diagrams and maps drawn out in the first FTZ in staten island; it also is the central to the iconography of the photographs of of FTZ #1)
•    the first decade of FTZ history – confusion as to what this is, what exactly is the juridical status of the territory…??? Outside the landed boundary of the fence was the US, on the other side of the water boundary was the rest of the world – how does FTZ mediate between one regime and the other (the national regime and the regime of global trade) ?

•    initially, manufacturing is specifically prohibited from zone activity – starting in the 50’s it is allowed on a case by case basis. Orestein notes that the question of manufacturing is a question of labor intensive processes which is a quest of labor politics.  In the first 40 yrs there are relatively few zones built and activated (by 1970 there are 7 zones established only), but each development, and each zone designation, each new commercial interest wanting to operate in the zone, is accompanied by a tremendous amount of rhetoric and negotiation around what can happen within zone and how it is isolated from the rest of the economy. How zone is talked about , imagined , represented and understood produces certain understandings of the distinction between production and circulation. The absence of labor helps to define zone as sites of circulation, not sites of production – ZONE becomes in a sense a regime that visually and rhetorically separates labour from trade, workers from commodities.

•    WPA posters depict manufacturing and toiling in the mines of the west, not in the FTZ of the east coast  — see Orenstein’s in-progress website  http://offshoreonshore.info/
•    FTZ also becomes a regime in which commodities replace workers – the fetishistic animation of commodities in the absence of real workers — commodities become reconceptualized as “live storage” – the time value of commodities which levitate and are put into circulation as collateral becomes a specific spatial fix to the credit crisis.

(note) History of the first 40 years of FTZ is also a history of the modern goods movement and warehousing economy,  a de-laboring of the global goods movement in general. In the 60’s containerization becomes standardized – which effectively removes human associations from products and dissolves distinctions between land and sea. Goods movement becomes a set of abstractions, of timetables.

(note) Today – FTZ – supply chain management, warehousing industry and logistics as well as development of major intermodal transport hubs(ports – inland ports) rail to rail, rail to road  – the networks of global goods movement – imagines the movement of goods in the absence of people. One of the main measurements of activity in intermodal facilities is number of lifts (cargo lifts). The only “workers” imagined in the FTZ are managers, administrators, clerical staff, tech staff, consultants and so on.  **** primary research done by Warehouse Workers for Justice on working conditions in the warehousing districts of FTZ #22 in Chicago    http://www.warehouseworker.org/badjobs/

•    Starting as early as 1940 FTZ: strategic stockpiles of resources, thus helping the government anticipate entry into the war; 1950′s – manufacturing can be allowed on a case by case basis; “island model” whereby commercial and production activity within the zone is isolated from the rest of the economy
•    FTZ act (amendments) – and a lot of changes to the FTZ regulations – interpret what some of this means.  Also changing depending on each round of GATT agreements (1946-1995) – battles over high-value added goods, increasing exceptions to the tariff rate, increasing manufacturing. FTZ Association becomes main lobby group to influence regulations: -Zones program acts as a tool by which the United States can practice both the letter and spirit of its trade laws and policies –
•    1980 – duty on products manufactured in Zones should not be assessed on U.S. value-added – that is, value which consists of domestic materials, parts, labor, overhead, or profit, only on foreign non-duty paid content. .. integrated model begins.
•    Since 1986, U.S. Customs’ oversight of FTZ operations has been conducted on an audit-inspection basis, whereby compliance is assured through audits and spot checks under a surety bond, rather than through on-site supervision by Customs personnel; increasingly, self-compliance via data integration.

FTZ regulations today:

⁃    processes that take place in zone: manufacturing, assembling, disassembling, mixing, testing, destruction, repackaging, repair, exhibition
⁃    Established by Department of Commerce FTZ Board – US Customs Port of Entry
⁃    Grantor agency manages zone project within a specified grantor territory, interpreted as being 60 miles or 90 min from outer boundary of port of entry
⁃    Developers or other commercial enterprises within the grantor territory apply for zone activation through Grantor Agency – for specific footprint (enclosed area)
⁃    Boundary: under supervision of Customs and Border Protection – since 1980 compliance is assured through audits and via electronic integration
⁃    General purpose zones or sites – multi-use warehousing, distribution centers (operate as “public utilities”)
⁃    Special purpose subzones – single-user and manufacturing; subzones may lie outside of grantor territory but are integrate in zone projects
⁃    Set of expanding exceptions on tariff and ad valorem taxes, also inventory taxes
⁃    United States has over 277 zone projects; each project has multiple zones, and multiple subzones
⁃    2,500 firms that operated under FTZ during 2009
⁃    Main processes: assembling, disassembling, repackaging, oil refining, automotive, pharmaceutical, and machinery/equipment sectors
⁃    In 2008, shipments into FTZ’s total $693 billion, or roughly 40% of US manufacturing GDP

•    concept/rhetoric of FTZ : from zone, to zone project, to zone universe
•    not only 277 perimeters on map, with around 1000 activated sites, zone is also a set of procedures and codes, a permitting and management system, a set of policy instruments, mediated by a constellation of terms: venture, innovation, flexibility, competitiveness, efficiency, profit recovery, trade.
•    Commodities that move within the zone universe — between zones/subzones, ports of entry and military bases — never enter the territory of the United States. This means they can be assembled or stored, repackaged or tested without incurring tariffs. It also means that commodities appear as continuously moving, never in place.
•    Because they are territories but also policy instruments and financial mechanisms (responsive to “global trade factors” and historically changing), FTZs constantly under construction, expanding and reconfiguring internally. As smaller areas consolidate, new zones are carved out, and the differentials or distances that are produced by zone-ing expand in scope. More and more territories and processes (including industrial and manufacturing processes) are off-shoring, and “off” signals increasing distanciation and increasingly stratified differentials. Centralized “magnet zones” are expanding, but so too is the constellation of small, discontiguous zones outside of FTZ geographic boundaries; the interconnectedness and integration of zones and subzones, as well as of processes that take place within them, is deepening. Much of the acceleration of FTZ has to do with the emergence of enterprise zones — which are a separate instrument but often nested within FTZ.

3. ENTERPRISE ZONES – EZ

•    British model, credited to Peter Hall who imagined bringing the maquilladora model into the urban areas of the developed world . ‘wages would find their own level’ in zones of   “fairly shameless free enterprise. . . outside the scope of taxes, social services, industrial and other regulations”. The resulting low wages, reduced regulations, and minimal taxation would incentivize or attract investment. If FTZ is about offshoring from the standpoint of the movement of goods, EZ are imagined as offshoring from the standpoint of labor conditions primarily.  In Britain the first zones opened in 1981.
•    In the US, the idea appealed to Washington-based conservative Heritage Foundation, in conjunction with the Reagan presidential campaign. National legislation failed to pass, but states began adopting the model and experimenting in the early 80’s – Illinois was one of the first to establish legislation. The EZ is designated by local (usually state or county) jurisdictions. The possible location for EZs is not connected to ports of entry but instead is identified in terms of “underdevelopment” indicators and rhetorically justified in terms of job creation and local development. In these areas, which are not physically enclosed, commercial interests activate zone-ing to off-shore from the standpoint of labor, land use and tax abatement regulations, in relation to local and state taxes, among many other factors.  (example: exception to taxes paid on building materials,  a “jobs” tax credit, exceptions on state taxes and utility taxes for electricity and natural gas etc. this is standard. Plus, grants and deals for road repair, new water and sewage plants.  Etc.)
•    While “job creation” is one of the justifications for EZs, they become areas of corporate quasi-sovereignty – corporations exert de facto control over the conditions of living , laboring and migration of populations in special zones.  Zone makes flexible what exactly can be called a job, what are conditions under which people can be hired, retained, trained, discarded and worked (the rise of the perma-temp regime). Many EZ’s offer a credit for every job created, often with a cap on wages – so they effectively incentivize low wage jobs. (perma-temping  keeps wages low, keeps ability to unionize at bay).
•    establishing new EZ’s means a frenzy of deal-cutting and buyouts.  Most EZ benefits end up going to major corporations – in California a study finds the vast majority of EZ benefits have gone to less than one percent of the states corporations, those with revenues of 1 bill or more. Major corporations like Wells Fargo, Nordstrom and Levi Strauss are subsidized by the Enterprise Zone program. Even big banks get a cut through a tax deduction on loans.
•    EZ – competition has to do creating and speculating upon labor market differentials – zones can be designated at small scales – inter-area competition at level of counties or municipalities : play one area, one group of workers, off against another, to the net benefit of capital – inter-area competition

4. preliminary notes for a CASE STUDY: FTZ #22, Chicago
•    Established in 1975 –Illinois International Port District is the grantor agency – the first site, which is still the magnet site today, is a number of warehouses inside Calumet Harbor (below). Then a few sites added in late 1970’s and early 80’s

•    Expansion 1987-1989 – procedural changes in interpreting what it means to be adjacent to the boundaries of the port of entry create the idea of a grantor territory, a perimeter of off-shorability.
•    Also, EZ in IL is created in 1982. In IL, counties or municipalities designate zones and IL Department of Commerce and Economic Opportunity certifies them.  1983 – Illinois Enterprise Zone Association established – a group of developers, consultants, business leaders and government officials, lobbying group.
•    Second expansion in of FTZ in 2000 – expansions again in 2002 and 2003
•    partial map of FTZ #22 in 2010, indicated perimeter of grantor territory across 6 counties as well as activated multi-purpose FTZ sites. does not include 14 subzones. Nor the zones that were activated and then deactivated or shut down, nor the sites for which there is no address or footprint available though gov records. still working on this map.

•    More and more EZ’s are also being activated within FTZ#22, producing increasingly stratified differentials across a greater range of territorial scales. Meanwhile, the rhetoric of tariff differentials, competitiveness for private entities, profit restoration and trade efficiency which had been historically associated with justifications for FTZ is replaced by claims of civic engagement, local development and job creation, typically reserved for enterprise zone-ing
•    Integration at this stage of FTZ #22 restructuring apparently has to do with at least three ways in which the zone as a space of exception expands, gains permanency, and becomes molecularized (granulated) throughout the whole landscape of administrative units, governmental agencies, and special interests of all kinds. First, there is a considerable expansion of the perimeter of the service area – since this can be either a 60-mile or a 90-minute transit radius from the port of entry, new rail, inland waterways, and express roadways expand the distance covered horizontally. The zone is also rooting itself more deeply into local jurisdictions, cutting incentive deals at the level of local zoning laws and permitting processes, such that a host of previously unconnected localized actors and dispersed agents are brought into the incentivizing process, sometimes in overlapping relations. Secondly, there is a move toward permanence around increasingly autonomous magnet sites, which were initially designated with set expiration or “sunset dates” and required oversight by Customs and Border Protection and Border Patrol. Currently, sunset dates are being removed, and regulatory oversight often is farmed out to third party contractors; in addition to making magnet sites permanent exceptions, there is now a self-interested coincidence between magnet site and grantor as public-private economic entity, rather than government agency. Thirdly, there is increasing flexibility for zone designation initiated by end-users for a number of industries, such as mixed-use warehouse districts and corporate parks, oil refineries, pharmaceutical and aerospace works, testing and destruction facilities. It becomes faster, cheaper and easier to activate zone-ing at smaller and smaller scales and at greater distance outside of the designated perimeter of the service area.
•    In a sense, integration refers to the zone universe as a form of governance through economic integration across a range of distinct municipalities, governing bodies and so on…. .

5. preliminary notes for a CASE STUDY – JOLIET ARSENAL site within FTZ #22
•    Joliet Arsenal is located within the FTZ 22 perimeter.  Former weapons manufacturing site; the Illinois Land Conservation Act of 1996 outlines how this site should be redeveloped – remaining land for military use; a wildlife refuge and the remaining for private development.
•    JADA – Joliet arsenal development authority – a quasi-public agency (private), mediate between all the taxing bodies, government agencies and private interests – the state utilizes the agency as facilitator of local and inter-municipal agreements.  JADA is very nimble and works at all diff scales – focus on working with 2 CenterPoint developments on consolidation of intermodal sites, together these massive warehouse districts and intermodal hubs form the second largest inland port in the country.

•    JADA worked to secure the conditions for the new sites:  village of Elwood incorporates the land and forms a TIF district in 2000, tax breaks for 23 years – 100-200 million subsidy. Village and state paid for a new $25 mil water and sewer plant . EZ is formed in 2002, rubber stamped by governor:  sales tax exemptions on construction materials used for buildings within the zone (7-10 mil), a $500 credit on Illinois income taxes for each worker hired and an investment tax credit for machinery and other equipment. tax abatement on commercial property tax.
•    In addition, the Illinois Department of Transportation : 125 mil in public roadway funds
•    Also political firepower to strongarm the army and the EPA regulations for cleanup of the site; the group includes U.S. Sens. Dick Durbin (D-Ill.) and Peter Fitzgerald (R-Ill.), U.S. House Speaker Dennis Hastert (R-Ill.) and state Rep. Jerry Weller (R-Ill.)–  lobbying the Army for accommodations that would allow Oak Brook-based CenterPoint Properties to seize  “unique but fleeting opportunity for economic redevelopment”.   …. to expedite an agreement that explicitly permits the proposed intermodal rail facility and that redirects the roughly $8 million allocated by the Army for preliminary work on a biological remediation facility at the Arsenal, to be used instead for excavating and removing a former landfill on the industrial park site.
•    Intermodal, problem of political economy:
⁃    Chicago is not only the nation’s most dense hub for rail-to-rail transfers; it is also the most dense rail/truck intermodal center, accounting for about 5 million lifts (intermodal exchanges of containers and trailers) between rail and truck. This number is expected to grow to 12 million by the year 2020.  To put these numbers in perspective, the next largest rail/truck hub in the country is the Los Angeles/Long Beach region with about 3 million lifts per year.
⁃    Chicago : 10 rail companies, operate 100 switching yards – crossovers take time
⁃    consolidation of freight flows becomes one of the primary strategic objectives in the Commercial Club of Chicago’s document Renaissance 2020. This means regional economic integration across distinct municipal governments. The Illinois Constitution provides a mechanism for regional cooperation but it is seen as not efficient. Also, the strategic plan calls for a framework requiring municipal corporations to take account regional economic interests in the process of levying taxes; attracting new development; and designing and implementing their zoning, building, and housing codes.
•    Commercial Club solution:
⁃    Administrative reform for economic integration;  1. Stratified and targeted abatements and incentives that are end-user driven; 2. Overall regional policy that creates good business climate.
⁃    what does governance look like?
⁃    ”First, effective economic development directions must be led by private market initiatives while government policies should be designed to maintain a strong general business climate. business  leadership is necessary because the private sector has a natural understanding of the sources of economic growth and of the needs and conditions for job creation.  Also business leadership can provide continuity across changing government administrations.”
⁃    example from Renaissance 2010: “Over the last few years, the Illinois Community College System has developed a “Workforce Preparation Action Plan.” One of the initiatives under this plan (termed Education to Careers) calls for state and local partnerships of business, labor, and education to prepare young people with the basic academic and technical skills needed for careers in skilled and profitable jobs.  The program includes school-based learning and career counseling, work experiences integrated with educational programs, and activities that connect educators and employers.”
⁃    regional governance: the RCC, a quasi-public agency will provide strong incentives to counties and municipalities to use their powers in ways that advance reintegration of regional activity with global trade.  The chief incentive mechanism will be the RCC’s bond-issuing function. In addition, the RCC will have other powers and responsibilities to be exercised on its own initiative.    Private public entity that The state would utilize as facilitator of inter-municipal agreements.  Has the power to persuade, not the power to compel funding through taxes on services and redistributing the concentrated retail sales taxes from high density retain municipalities.

6. Directions for speculative research, (experiential, visual etc)

•    How can we read Joliet Arsenal site backwards, from the perspective of the future as imagined by Ren 2020? How do different collective bodies navigate the system of boundaries that make up FTZ 22? Where and how do frictions appear, entanglements develop?

•    experimental site visits and guided tours begin spring 2012, open to participants in the seminar. Also auctioned off at AREA auction, and proposed to colleagues in undocumented and migrant justice movement locally; how to intersect regimes of extratetrritoriality and regimes of deportability? can the zone serve as a paradigm for neoliberal statecraft (territproes and populations become zoned for maximum optimization and reinsertion into capital circuits???)

•    mapping project of FTZ #22 – focusing on criss-crossing juridical frameworks if possible (in-process)
•    a first text  will be published with Compass Group book, see link in readings (it is the final draft ,suggestions welcome)

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