Editing Special economic zone (section)

== SEZ regulation in Europe  ==

It is worth noting that SEZs in Europe are often seen as “unlikely cases” because they operate under stricter regulations compared to other regions. Unlike zones in [[Asia]] or [[Africa]], European SEZs must align with EU state aid rules and fair competition principles. This makes their model unique, as they prioritize high-value-added industries, [[green energy]], and technology sectors over labor-intensive manufacturing. These characteristics underscore Europe’s commitment to sustainable and knowledge-driven economic growth.<ref>{{cite journal |last1=Frick |first1=Susanne A. |last2=Rodríguez-Pose |first2=Andrés |title=What draws investment to special economic zones? Lessons from developing countries |journal=Regional Studies |date=2 November 2023 |volume=57 |issue=11 |pages=2136–2147 |doi=10.1080/00343404.2023.2185218 |bibcode=2023RegSt..57.2136F }}</ref> 

The regulatory framework governing SEZs in Europe operates at multiple levels, encompassing EU, national, and local jurisdictions.

At the EU level, the regulations emphasize compliance with overarching principles of [[State aid (European Union)|state aid]], competition, and customs policies. However, SEZs often challenge these principles through deviations justified by their economic benefits. For instance, Articles 107-109 of the [[Treaty on the Functioning of the European Union]] (TFEU) explicitly prohibit state aid that distorts competition, unless such aid is deemed necessary for fostering regional development or addressing specific market failures. SEZs navigate these constraints by demonstrating their contributions to broader economic goals, such as reducing regional disparities or promoting innovation, thus aligning with permissible exemptions under [[Law of the European Union|EU law]]
[[Customs Regulation 1383/2003|Customs regulations]] are similarly governed by the EU. Policies like Regulation 524/2008 enable the establishment of tariff-free zones, aimed at facilitating trade and attracting investment. These zones must operate transparently and ensure non-discriminatory treatment to avoid unfair competition
Economic and social cohesion is central to the EU’s regulatory framework, requiring SEZs to align with the Union’s objective of equitable regional development. For example, the SEZ established in Italy’s [[Campania]] region explicitly targets underdeveloped areas, offering fiscal incentives and streamlined administrative processes to stimulate growth. Such initiatives are designed to comply with EU policies on regional cohesion while addressing localized economic challenges.<ref>{{cite journal |last1=Győrffy |first1=Dóra |title=Liberal and illiberal industrial policy in the EU: the political economy of building the EV battery value chain in Sweden and Hungary |journal=Comparative European Politics |date=October 2024 |volume=22 |issue=5 |pages=574–593 |doi=10.1057/s41295-023-00374-0}}</ref>

Taxation within SEZs, however, falls under the purview of national governments. The EU lacks the authority to harmonize tax systems across member states, resulting in significant variations in SEZ tax policies. For instance, some countries offer aggressive tax incentives to attract Foreign Direct Investment (FDI), leading to a "[[race to the bottom]]" that exacerbates economic disparities between regions. National authorities independently design these fiscal policies, often prioritizing immediate investment inflows over long-term equitable development<ref name="The Pervasive Problem of Special Ec"/>

SEZs justify their breaches of EU principles by emphasizing their potential to generate significant economic and social benefits. For instance, they argue that tax incentives and regulatory flexibility are critical for attracting Foreign Direct Investment (FDI) and creating jobs in economically lagging regions. These justifications often rely on data demonstrating positive [[spillover effects]], such as increased regional productivity and enhanced infrastructure. Nevertheless, these arguments remain contentious, as critics highlight risks like [[tax evasion]], resource misallocation, and exacerbation of regional inequalities<ref name="Liberal and illiberal industrial po"/>