An Overview of Brexit’s Effect on Gibraltar: Too Early to Predict an Outcome but Just in Time for Some Very Undiplomatic Entertainment

Brexit, Gibraltar Comments Off on An Overview of Brexit’s Effect on Gibraltar: Too Early to Predict an Outcome but Just in Time for Some Very Undiplomatic Entertainment

 Robert Thornton

August 11, 2017

 

Gibraltar is a prosperous British Overseas Territory located on about 1,500 acres of land, mostly rock, on the Iberian Peninsula at the foot of Spain.  With a population of about 32,000, plus some 10,000 “frontier workers” who commute in for jobs, Gibraltar is a financial center and tourist destination as well as the home of British Forces Gibraltar which provide the Territory’s defense. And then there are the 300-odd Barbary apes (macaques actually) that have become the symbol of British possession and a favorite tourist attraction. It is said that Britain will rule Gibraltar as long as the macaques occupy the Rock.

 

Gibraltarians are British citizens who enjoy 300 days of sunshine a year, a prize indeed, and they are also EU citizens on modified, favorable terms. Gibraltar is fiercely independent, valued by the UK, coveted by Spain, and a solid EU contributor. Thus, Brexit has profound implications to Gibraltar, Britain, and Spain with significant splash-over issues to the EU and even the United Nations.

 

Britain has maintained possession of Gibraltar since it was won from Spain in the War of Spanish Succession and formally ceded to Britain “in perpetuity” under the Treaty of Utrecht in 1713. Spain claims sovereignty over the Rock and has tried twice to re-take it by force (1727 and 1779-1783). But aside from the periodic border tantrums, hassles at the international airport (which was built by Britain in WWII on Spanish-claimed land), and nuisance fishing disputes, Gibraltar exists peacefully today as a self-governing UK possession, which benefits Britain, Spain and the EU.

 

Gibraltar’s wealth, to a great degree, is a result of its membership in the EU market which supports its economy of financial services, internet gambling and tourism. Gibraltar maintains low-tax policies to the chagrin of Spain and the EU, which often refer to it as a tax haven and smuggling center (cigarette smuggling is the primary issue because taxes on cigarettes are much higher in Spain¹). Gibraltar’s 2015 GDP per capita was almost £60,000, over 100% greater than per capita British GDP and 3.5 times greater than per capita Spanish GDP (U.S. equivalent per capita GDP in 2016 was approximately £44,000). Forty percent of Gibraltar’s jobs are held by “frontier workers.” Over half of them are estimated to be Spanish citizens from Spain’s adjacent Campo de Gibraltar, a poor region with about 35% unemployment. Gibraltar is estimated to provide 25% of the GDP and 24% of the permanent jobs in Campo de Gibraltar.²

 

Gibraltar enjoys the benefits and limitations of Britain’s EU membership by virtue of having joined the EU with Britain in 1973. Because its prosperity depends on access to the EU’s approximately 500 million citizens, it voted, not surprisingly, against Brexit. The vote, which was tallied as part of the south- west England regional count, was 96% to 4% (with over 83% voter turnout) to Remain in the EU. Economic participation is where Gibraltar identifies most closely with the EU and may begin to diverge from the UK’s interests relative to the EU.

 

Sovereignty, however, is where Gibraltar most closely aligns itself with Britain. Gibraltarians greatly value their constitutional, self-governing status with Britain, which has sponsored two “sovereignty” referendums in the Territory. The most recent referendum in 2002 was based on a proposed joint UK-Spain sovereignty scheme. Gibraltarians voted 99% to 1% (with 88% voter turnout) against the joint sovereignty scheme and, thus, to retain their British constitutional, self-governing relationship.

 

Gibraltar also has been a “non-self-governing territory” in the United Nations since 1946 and has consistently expressed its right to self-government as a British Overseas Territory. The UN’s role in relation to Gibraltar has been limited to recognizing the three parties’ contentions about sovereignty and urging the UK and Spain (but not necessarily Gibraltarians) to resolve the issue. ³

 

The sovereignty matter underlies most issues, which create conflict with Spain. Spain accepts none of Gibraltar’s or Britain’s sovereignty claims and further contests the legitimacy of Gibraltar’s international airport and claimed 3-mile nautical territorial limit. Conversely, Britain maintains that it will never compromise the sovereignty of Gibraltar against the will of its citizens. ³

 

So against the somewhat schizophrenic backdrop of over 300 years of disputed British possession, a prosperous tripartite EU membership, and an economy beneficial to all parties…enter Brexit.

 

While the UK has been contorting itself over exactly what Brexit means and how to approach the negotiations, the EU has mobilized the 27 remaining countries and published, in April 2017, their 26-point draft negotiating guidelines. The guidelines include generally conciliatory comments about Ireland and Cypress, but about Gibraltar, Guideline 22 says: “After the United Kingdom leaves the Union, no agreement between the EU and the United Kingdom may apply to the territory of Gibraltar without the agreement between the Kingdom of Spain and the United Kingdom.”⁴ Note that there is no mention by the EU of Gibraltar participating in the negotiations even though it is an EU member, albeit as an entrant with Britain.

 

The wording of the EU Guidelines set-off a firestorm of undiplomatic rhetoric from both sides, with Britain’s former conservative leader, Michael Howard, uttering fighting words comparing the British position to that of the Falklands Islands and Argentina.⁵ Howard’s war mongering occurred after the Spanish Foreign Minister, Jose Manuel Garcia Margallo, said “the Spanish flag will fly over Gibraltar sooner than (Chief Gibraltar Minister) Fabian Picardo thinks.”⁶ Howard is not a player in the UK Brexit negotiations and Spain appointed a new, more diplomatic Foreign Minister, Alphonso Dastis, before the rhetoric descended into a Trumpian tweetstorm. But the animosity and bellicose background noise still exists.

It’s not just noise coming out of the UK-Spain dust-up over Gibraltar. This image from Bennymarty/Depositphotos appeared in the Spanish publication news@thelocal.es on 4 April 2017. It shows an ape on a rock, Spain in the background, and the Union Jack upside down.

 

So where does this leave Gibraltar, the unfortunate divorce child, as referred to by several commenters? Thus far, neither the UK nor EU has made any progress in substantive negotiations for Brexit, so any outcome is possible. Most of the lead-up to negotiations at this point may have been posturing, although both sides say not, and the rhetoric is beginning to moderate enough for a few rational thoughts to emerge. All sides seem to recognize the economic implications of the Rock and the need for a smooth transition that avoids a “hard Brexit” (Britain leaving the EU without a formal agreement). Exactly what all this means is still quite unclear, but sometime over the next two years real Brexit issues will have to be addressed, and the Gibraltar question, while seemingly a small nuisance in the grand scheme of Brexit, has implications in many areas and for many member and non-member states beyond the Rock.

 

In the meantime, the Gibraltar economy is hedging its bets, possibly to the economic detriment of Spain but with worrisome implications to Britain. Some of the internet gambling businesses have sought licenses in Malta, an EU country with liberal policies under which they think they could continue to access the EU market and prosper. Gibraltar insurance companies, which insure approximately 17% of UK cars (twice the market share of Lloyd’s of London⁷) as well as such risks as employer liabilities in the UK and the EU, are being advised to investigate licensing in the UK, Luxemburg, Malta and/or Dublin to assure access to both the UK and EU markets.⁸ The implications of Brexit on access to the EU market are profound to Gibraltar and Spain, significant to Britain, but aside from principle, mostly nuisance to the EU. Unfortunately, the EU appears to have ceded the Gibraltar issue to Spain in Guideline 22, and a Whitehall-Madrid sideshow could become a major thorn in the EU’s side.

 

The Brexit game is still in the early innings, or overs if you are in to cricket. If you listen from the British point of view, you might think Don Quixote is tilting southwest with his merry band of jousters. If you listen from the Spanish point of view, you might think Admiral Nelson is rising from his keg of rum to re-assemble the fleet. There seems to be no predictable outcome at the moment. The most rational view right now could well be held by the macaques, which still seem comfortably at home on the Rock.

 

¹ Special Committee on the Situation with regard to the Implementation of the Declaration on the Granting of Independence to Colonial Countries and Peoples. Gibraltar Working paper prepared by the Secretariat, United Nations General Assembly, 7 March 2017. Page 7/16.

² All economic statistics are taken from House of Commons Library Briefing Paper Number 7063, Brexit and Gibraltar, 2 May 2017.

³ Ibid. Page 16/16.

⁴ European Council (Art. 50) (29 April 17) Draft guidelines following the United Kingdom’s notification under article 50 TEU

⁵ Fiona Govan, thelocal.com, 4 April 2017.

⁶ The Sun, 3 April 2017.

⁷ Chris Johnson, Rock steady: the story of Gibraltar’s booming insurance sector, NewStatesman, 25 November 2014.

⁸ Nigel Freeman, What could Brexit mean for Gibraltar Insurers, Hassans briefing note, 2016.

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