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In Every Nation for Itself: Winners and Losers in a G-Zero World, World Policy Institute Senior Fellow Ian Bremmer illustrates a historic shift in the international system and the world economy—and an unprecedented moment of global uncertainty.
By Ethan Wagner
Jutting out of the Iberian Peninsula where the waters of the Mediterranean and the Atlantic mix, Gibraltar seems at once an anachronism and the very height of modernity. Today, with the rest of the Iberian peninsula struggling, Gibraltar has become the most prosperous part of southern Europe, with an economy growing at a rate of more than nine percent per year.
As a remnant of Britain’s far-flung empire, it is officially a British Overseas Territory and therefore represents a thorny issue in relations between the United Kingdom and Spain, which has long claimed sovereignty over the area.
Yet Gibraltar has thrived by adapting to the times. Though the economy traditionally relied on shipping services, the territory—much like other small European states—has recently attracted money through lax banking laws, elimination of most taxes, and Internet gambling. While some other small states (including Liechtenstein and the Cayman Islands) received poor marks from the Financial Action Task Force several years ago for failing to adhere to anti-money laundering standards, Gibraltar has always managed to stay on the right side of international law.
On the surface, the outlook seems bright for Gibraltar—while their neighbors in Spain suffer through the latest round of austerity measures, Gibraltarians enjoy a per capita GDP almost 50 percent higher (one of the widest gaps between neighboring states or territories anywhere on the Continent).
Yet for all its success, Gibraltar’s future remains in doubt—Spain insists on regaining control over the territory, Britain would prefer to give it up, and Gibraltarians don’t want to change a thing from the status quo that has made them so wealthy.
Sitting astride Europe to the north and Africa to the south, the Rock of Gibraltar joins the Mediterranean to the Atlantic and has been considered a strategic stronghold since Roman times. Today, Gibraltar is a British Overseas Territory (a title formally adopted in 2002 after the UK ceased using the term “crown colony”); however, given Spanish claims to sovereignty, British desire to reach an accommodation with Spain, and the insistence of the Gibraltarian people on maintaining the status quo, its future is an open question. Above, Gibraltar rises above the Spanish border town of La Línea de la Concepción.
The hills of Morocco are visible in the distance from Gibraltar, with less than nine miles separating the Europe from the African landmass at the narrowest point of the Strait. “Gibraltar” is an Anglicized version of Jabal Tariq (meaning “Mount Tariq” in Arabic), and has historically served as a crossroads linking Europe, Africa, and Arab lands; in the process, the territory has grown wealthy from the flow of trade and capital.
Spain took Gibraltar from Umayyad troops during the Reconquista but then lost it to an Anglo-Dutch force in 1704 during the War of Spanish Succession. Though the Spanish have made repeated attempts to reacquire the territory over the last three centuries, it has been British ever since and today everything from street names to telephone booths carry an unmistakable British flavor.
Under Franco, Spain cut Gibraltar off and sealed its border for 16 years. Though it was re-opened in 1985, the Spanish officials argue that Gibraltar damages Spain’s economic interests—each day thousands of Spaniards cross over the border to buy goods, where they are cheaper than in Spanish shops due to Gibraltar’s status as a tax-free zone. In 2010, the mayor of La Línea, the town on the Spanish side of the border, infuriated Gibraltar by imposing a five-euro toll on any vehicle crossing from Spain into the territory; the toll was scrapped less than a year later.
A decade ago, backroom talks between the governments of Spain and the United Kingdom led to an announcement that the two nations would share sovereignty over the territory, provided the people of Gibraltar consented. A referendum was put to the public. When the votes were counted, there were only 187 ballots cast in support of shared sovereignty. Nearly 18,000 people had voted against the change. After the overwhelming rejection of the measure, street demonstrations in the territory denounced Prime Minister Tony Blair and Foreign Secretary Jack Straw as seeking to sell out Gibraltarians for their own interests. The current Foreign Secretary, William Hague, has repudiated Straw’s actions and stated British commitment to Gibraltar’s sovereignty, but other comments about seeking deeper cooperation with Spain have met with some suspicion among Gibraltarians.
A vigorous local press keeps the populace informed about potential threats to Gibraltar’s autonomy. Earlier this year, the Gibraltar Chronicle carried a story excerpting the memoirs of Peter Hain, the former Leader of Britain’s House of Commons, who wrote that, “Jack [Straw]'s desire to do something about Gibraltar coincided with my gut instinct that it was ridiculous in the modern age for Britain to have a colony on the tip of Spain nearly 2,000 miles away,” while the Prime Minister was keen to “secure a better relationship with Spain and to remove it [Gibraltar] as an obstruction to our relations within Europe.”
Though perhaps of lesser military importance now than it was in previous years, Gibraltar remains a key shipping lane, with more than one quarter of global maritime traffic transiting the strait each year. Roughly 300 cargo vessels pass through daily, or roughly one ship every five minutes. Gibraltar’s shipyards still represent an important industry, offering docking, refueling, and repair services—however, its relative importance had declined, with its share of the economy dwindling from 60 percent in 1984 to a mere seven percent today.
Gibraltar’s economy relies heavily on banking, as financial confidentiality rules have attracted deposits of large sums of money from around the world (and led to accusations of condoning money laundering and tax evasion from many states). Marine services and Internet gambling are among the other largest sectors of the economy.
Modern engineering has reclaimed land from the sea and expanded the area on which to build. Here, the skies are filled by the modern high-rises of Ocean Village Marina in the more recently developed section of town, where a building boom has been matched by an influx of wealthy British and retirees looking to enjoy an upscale Mediterranean lifestyle. Gibraltar has continued its efforts to attract the wealthy through a set of special tax incentives for “high net-worth individuals.”
Gibraltar also relies heavily on tourism—both from around Europe and just across the border in Spain—and does its best to lure shoppers with low prices, favorable exchange rates, and non-existent sales taxes. Much to the dismay of its northern neighbors, the territory’s promotional materials declare “A carton of cigarettes will cost half of what it does in Spain,” and, “men looking for a very special gift for their sweethearts will find jewelry a good buy—some items are about 35 percent cheaper than in Spain.”
Originally brought to Iberia during the Moorish conquest, the Barbary Apes (a misnomer, as they are actually tailless Macaques) roam freely atop the Rock. A longstanding legend had it that when the last ape leaves Gibraltar, Britain’s rule over the territory will end. When Winston Churchill came to Gibraltar during World War II to plan the North Africa landings with General Eisenhower, he heard the legend and, learning of the pack’s dwindling numbers at the time, ordered British military authorities to care for the monkeys and secretly import more animals lest they die out and provide a propaganda victory for the enemy.
Signs abound of Gibraltar’s efforts to carve out a unique identity for itself distinct from both Britain and Spain, which serves to solidify Gibraltar’s status as an autonomous territory. Gibraltarian coats of arms are displayed prominently on buildings, posters proudly proclaim the territory’s claim to the 2009 Miss World title, and newspapers heap excited praise on a Gibraltarian rhythmic gymnast who qualified for the 2012 Olympic Games. Athletes can compete under the flag of Gibraltar in the Commonwealth Games but for the Olympics they must compete as part of the British team per IOC rules.
The UK-Spanish rivalry in Gibraltar is infused with the echoes of history and emotional ties to territory. Nearby is Cape Trafalgar, where Lord Nelson, one of Britain’s most celebrated military heroes, defeated a joint Spanish-French naval force in 1805. Nelson’s body was brought ashore at Gibraltar and the remains of his troops are interred at a cemetery near the territory’s western coast.
More recently, tensions have risen over claims by Gibraltar (and fanned by the UK tabloid press) that Spanish vessels have made fishing and patrolling incursions into the territory’s waters. In 2009, four of Spain’s Civil Guard officers were detained after landing in Gibraltar (they had been pursuing suspected smugglers) and the incident threatened to escalate into a diplomatic crisis. Algeciras, one of Spain’s major ports, lies just across the bay from Gibraltar, leading to numerous disputes over where Spanish and British territorial waters begin and end.
So what comes next for Gibraltar? Its dogged resistance to any change seems to be working, with a chastened London seemingly wary of once again appearing to disregard the wishes of the local population. A political declaration of unity signed by all members of Gibraltar's Parliament defiantly reads, “the people of Gibraltar will never compromise, give up or trade their sovereignty or their right to self-determination; that Gibraltar wants good, neighborly, European relations with Spain; and that Gibraltar belongs to the people of Gibraltar and is neither Spain's to claim or Britain's to give away." But whether the defiance of a 30,000-strong population can continue against the combined will of the United Kingdom and Spain remains to be seen.
Ethan Wagner is a student at Columbia University's School of International and Public Affairs focusing on economic development.
[Photos courtesy of Ethan Wagner]