Gibraltar, Spain and Brexit: What IS Madrid objecting to?

Posted on Nov 22 2018 - 9:53pm by admin

Spanish Prime Minister Pedro Sanchez, backing comments made this week by his Foreign Minister Josep Borrell, warned Spain would torpedo the current Brexit withdrawal agreement without changes on how a divorce deal would apply to Gibraltar. The PSOE leader’s threats to wreck the EU and UK’s painstakingly crafted deal come after the EU in April, 2017 granted Spain an effective veto over Gibraltar being included in any final Brexit trade deal the UK signs with the EU. According to last year’s EU draft negotiating guidelines, London and Madrid would have to agree bilaterally on Gibraltar’s inclusion in any overall Brexit deal, with Mr Sanchez unleashing that veto at the 11th hour this week, demanding clarification to Article 184 of the draft withdrawal agreement, which covers negotiaitions on the future EU-UK relationship.

Gibraltar

Spain is demanding changes to Gibraltar’s status in the Brexit negotiations (Image: Getty)

Mr Sanchez said: “In the past 72 hours, none of the documents has clarified something which is fundamental for us – Gibraltar is not part of the UK.

“As a country, we cannot assume what is going to happen in the future with regard to Gibraltar they are going to negotiate between the UK and the EU.

“It should be negotiated between Spain and the UK. As it stands, the Spanish government will vote against the Brexit deal.”

Theresa May has affirmed the UK’s commitment to Gibraltar, insisting the draft deal applies to Gibraltar and underlined Downing Street’s commitment to the Rock in the House of Commons on Wednesday. 

But why is Spain throwing a spanner in the works at this late stage?

Pedro Sanchez

Spanish Prime Minister Pedro Sanchez warns Spain could wreck Brexit deal (Image: Getty)

Mr Sanchez’s left-wing government, which took over from right-wing PP leader Mariano Rajoy’s administration in June, had appeared to adopt a more conciliatory tone towards Gibraltar.

Whereas Mr Rajoy’s first Foreign Minister, Jose Manuel Garcia Margallo, boasted of planting a Spanish flag on the Rock the day after the June 2016 Brexit referendum, Mr Sanchez’s government has indicated the current administration would not be aiming for sovereignty over the Rock during Brexit negotiations.

But Madrid is now pushing for concessions to be won from the Rock.

Gibraltar’s tax system has long been a bugbear to Spanish governments, who label the British Overseas Territory a tax haven, a phrase rejected by Gibraltar’s government and the international community.

Cigarettes

How much tax Gibraltar places on tobacco is one of the key concerns for Spain in (Image: Getty)

There is no VAT on the Rock, with corporation tax 10 per cent compared to 25 per cent in Spain.

Madrid claims this harms Spanish businesses across the border in the Campo de Gibraltar area.

But Spanish territories in Africa, Ceuta and Melilla, as well as the Canary Islands, also have no VAT.

Gibraltar’s low tax system means tobacco is cheaper than in Spain, with Spain arguing this encourages cross-border smuggling.

Gibraltar

The status of 10,000 cross-border workers is among four agreements in the Gibraltar Protocol (Image: Getty)

A packet of 20 cigarettes in Gibraltar costs from around £2.30 (2.58 euros) with the price around £4.46 (five euros) in Spain.

In the past, Spain has also demanded joint control over Gibraltar International Airport.

In May, Gibraltar rejected Mr Rajoy’s government calls for joint management of the airport and Spain’s Guardia Civil to be stationed there.

The rights of 10,000 cross-border Spanish workers who travel onto the Rock each day is also a key part of current negotiations.

Fabian Picardo

Gibraltar Chief Minister Fabian Picardo will meet his Cabinet on Thursday (Image: Getty)

The environment and cross-border cooperation over policing and border control form other central parts of the talks.

On Wednesday, it was revealed Spain and Britain had signed four memorandums of understanding and a tax agreement to accompany the Gibraltar Protocol on how the Rock will be regulated after Brexit.

The agreements, thrashed out in parallel talks to the main Brexit negotiations, provide a framework for co-operation with Spain on citizens’ rights, tobacco, the enviroment, police and customs issues and taxation.

But problems remain, with Spain objecting to language relating to the Rock on the draft Brexit withdrawal agreement.

Spain is claiming it had not been aware of Article 184, which says the EU and the UK will “negotiate expeditiously the agreements governing their future relationship”.

According to the BBC, Spain’s government now wants the words “This does not apply to Gibraltar, which will be subject to bilateral talks between the UK and Spain” added to the 585-page withdrawl agreement document.

Last month, Mr Borell said: “If the Brexit agreement needs to be signed tomorrow, it will be signed and Gibraltar won’t be a problem.”

Spain is leaving it very late in the day to change that stance.

It remains to be seen what other EU members will make of Madrid’s late intervention and threat to bulldoze the entire deal when EU leaders meet on Sunday.

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