Suddenly we’re off the map. Until now, it has been easy enough to keep track of our progress along the southern coast of Sri Lanka. There is only one road of any significance, and it has taken us through a succession of clearly marked towns and villages. The map shows Hambantota as just another dot, a small fishing community of 11,000 inhabitants. The reality is completely different.

Even our Sri Lankan driver, Koshala, who was last here just a few weeks ago, is astonished by what we find. A sign diverts us briefly onto a near-empty two-lane highway. “This is new,” he says. Chinese-owned construction vehicles fuss along the verges, making the finishing touches. Up ahead, we see vehicles laying down fresh asphalt. Farther on, the new route is being extended across virgin land.

Looking coastward, an even more dramatic transformation is taking place. Tiny Hambantota harbor is morphing into the $1.4 billion Magampura Mahinda Rajapaksa Port, which will employ 50,000 people with capacity to handle 20 million shipping containers each year. Meanwhile, inland, Mattala Rajapaksa International Airport has just come into operation, providing Sri Lanka with a new aviation gateway in addition to Colombo’s Bandaranaike International Airport.

We are witnessing the birth of a free trade zone. In part, Hambantota owes its good fortune to the munificence of its most important son, Sri Lanka’s current president, Mahinda Rajapaksa. But there is also geographic good fortune at work. The town is ideally located to siphon off the annual flow of 36,000 container ships and 4,500 tankers plying the international shipping lanes just offshore. They need a reason to stop here. The free trade zone will provide it. The port authorities hope to attract 10 percent of passing vessels each year.

Trade between nations is a double-edged sword. For developing countries especially, it can stimulate economic growth, providing jobs and prosperity. At the same time, there is a genuine risk that outside interests will exert excessive control. Fledgling indigenous companies can be snuffed out by powerful multinationals. The fate of millions of citizens in an economically weak nation can be determined by decisions made in a strong one.

Consequently, countries have always sought to protect their economic sovereignty by imposing restrictions on international trade. If you’ve ever tried doing business abroad, you know all about protectionism: mountains of paperwork and red tape along with import tariffs, administration fees and taxes that significantly eat into potential profits. For governments, it’s a conundrum. How do they protect domestic economic interests without deterring inward investment? In the second half of the 20th century, a solution emerged.

Borders are unilaterally flexible. If a country wishes, it can declare part of its territory international, reducing bureaucracy and actively encouraging foreign investors. Thus free trade zones came into being.

One of the first of these zones was in an unlikely setting: rural Ireland. As at Hambantota, geography was a determining factor. Prior to the jet age, trans-Atlantic flights had to stop for fuel along the way. After World War II, little Shannon Airport, on Ireland’s west coast, was upgraded to meet this need. It rapidly became one of the busiest airports in the world.

The Irish government was quick to recognize the financial potential of the booming transit traffic. In 1947, Shannon’s international lounge became the site of the world’s first duty-free shop, thanks to a law that put it outside the jurisdiction of the country’s tax authorities. Enticed by tax-free bargains, transit passengers spent millions of dollars, providing the country with a new source of hard currency.

The introduction of long-range jets in the late 1950s killed the transit trade almost overnight, but by then the government had learned the benefits of tax exemption. In 1959, the Shannon Free Zone was unveiled adjacent to the airport.

Lured by tax incentives and the easy access to global markets that the airport provided, foreign companies set up manufacturing outposts within the zone, employing thousands of local people. More than half a century later, Shannon Free Zone is home to more than 100 companies and employs 6,500 people.

The blueprint established at Shannon has adapted across the globe. Today, an estimated 3,500 free trade zones in 135 countries employ around 66 million people.

In its most basic incarnation, a free trade zone is established beside an airport or sea port. Goods can be brought into the zone, held there, traded and even reassembled without being subject to import duty. Duty is levied if goods are transferred from the zone into the host country, but not if they are exported to another country.

Some free trade zones consist of no more than a few warehouses within a secure compound. Others incorporate vast industrial and manufacturing facilities. The revenue lost from taxation, it is argued, is dwarfed by the employment the zones generate and the lasting boost to the local economy.

“Every time we import goods,” says Babatunde Fashola, governor of Lagos State in Nigeria, “we invariably, without knowing it, export jobs.” Free trade zones, he argues, are an effective method of recapturing those jobs.

Nigeria currently has 25 designated free trade zones, of which nine are fully operational and six are under construction. The operational zones are estimated to have injected $9.4 billion into the country’s economy in 2012. The overseeing agency, the Nigeria Export Processing Authority, predicts an increase to $15 billion within the next five years as new zones open.

The story is similar throughout Africa, where free trade zones have become a reliable tool for stimulating fresh investment. For investors, they provide a straightforward — and lucrative — means of establishing a presence in a new region.

As we have seen, geography is often the key to ultimate success. No amount of slick promotional videos and tax incentives can change that. If a country is fortunate enough to be close to established trade routes, all it needs to do is tap into them.

The world’s second-largest free trade zone is located at one of the busiest pinch points of international trade, the Panama Canal. Colón Free Trade Zone was created at the canal’s Caribbean entrance more than 60 years ago. It evolved into the world’s ultimate duty-free shop, where global retailers shop for items such as electric appliances, alcohol, cosmetics and jewelry by the container load. In 2012, the zone had a turnover of $30.8 billion, a 5.6 percent increase over the previous year.

Not even Colón comes close to the undisputed champion of free trade, Hong Kong. Under British rule in the 19th century, the territory pioneered the concept of laissez-faire capitalism. Taxation and regulations were stripped to a minimum. The benefits of the strategy were manifested in the busy port and the ever-rising skyline.

In 1997, when Hong Kong was returned to communist China, its free-market economy was preserved under a policy of “one country, two systems.” Mainland China has since undergone a remarkable economic transformation yet retains many of the protectionist instincts of communism. Foreign businesses trying to invest there have long complained about the restrictions and lack of financial incentives.

That may be about to change. New proposals aim to create a free trade zone in Shanghai, possibly including tax breaks and a relaxation of foreign exchange rules. It could be a game changer, not just for Hong Kong (for whom Shanghai could emerge as a serious rival) but for the world.

Globally, there is increasing recognition of the benefits of reducing trade regulation. The European Union effectively operates as one huge free trade zone, with goods transported between member nations without restriction. The North American Free Trade Agreement serves a similar purpose for the United States, Mexico and Canada. By 2018, there could be a continent-wide African Free Trade Zone, representing a single market of 527 million people with a combined gross domestic product of $625 billion.

Trade created the modern world. Many of the most important towns and cities owe their existence to the international flow of goods and services. At Hambantota, we see an international trading hub in the making. Future maps will show the huge new port, the airport and the sprawl of development that will spring up in the free trade zone between the two.

These changes are reflected globally. Regional free trade zones are eroding borders. Politicians have begun negotiations to create the Transatlantic Trade and Investment Partnership, a single market incorporating the European Union and the United States that will account for more than half of the world’s gross domestic product. The map of the world is being redrawn.