Three months on from July 15 

By John Isola 

Barring a few teething issues in the first two weeks, for most people the provisional implementation of the Treaty on 15th July would seem to have gone relatively smoothly, and the benefits are there to be seen – a free-flowing border like never before. 

However, this belies the situation that has been, and continues to be, experienced by those involved in the handling of goods coming into Gibraltar. Customs agents, transport companies, wholesalers, retailers, ship chandlers and shipping agents, to name but a few. Spare a thought for the people who have worked long hours throughout the summer, having to cope with pressure coming from all angles. The issues were widely reported in the early stages because they affected the man in the street – shortages of supplies, including medicines, etc. But once the goods started flowing again, the story fell by the wayside. 

Whilst the situation has improved, there are still numerous issues. Even once these are eventually resolved, the new norm will involve much more time and effort than before, with more processing required, resulting in staff working longer hours and trucks having to wait longer to enter Gibraltar. This leads to higher costs, which in turn will undoubtedly be reflected in the prices on the shelves of our shops. So it is not just the headline increase arising from the new transaction tax that is impacting the competitiveness of our retail and wholesale sectors, and this at a time when it is much easier for consumers to pop over and shop on the other side of the border. 

To give credit where it is due, it must be said that the Minister for Business, HM Customs and, in particular, a small group of Customs officers went out of their way, often after hours and sometimes late into the night, to assist businesses on an individual basis in the early days and weeks. I know this because I often experienced it firsthand. Thereafter, the Collector of Customs set up a series of weekly meetings, alternating between the Chamber and the Business Trade Facilitation Committee, to keep stakeholders informed of developments. I also know that the Spanish authorities have been cooperating fully and assisting in every way they can. Spanish Customs agents and transport companies have also experienced, and continue to suffer, similar difficulties. 

But the reality is that there has clearly been very little time to prepare for what is a mammoth task. The clearance systems introduced on 15th July, which businesses on both sides of the frontier use to clear goods into and out of Gibraltar, are not tried and tested EU systems. They are bespoke systems based on EU systems, designed for bespoke arrangements for which negotiations on the practicalities had only been concluded a few days before implementation. My perception is that certain aspects are still being hammered out as I write this. 

In some ways, this is only to be expected, as what we have agreed to is not dissimilar to what happens when a country joins the EU. But in the case of the latter, a country usually gives itself between one and two years to prepare. In our case, there were special circumstances which gave us little option but to accept the very short timescale. 

Whilst we must continue to work hard towards resolving these issues, for example by looking at ways, if necessary on a cross-border basis, to cut out red tape and improve the systems through greater automation to reduce costs and waiting times, the reality is that the transaction tax and higher excise taxes will make it more difficult for our retail and wholesale sectors to compete in what was already a difficult environment. 

After all, Gibraltar is a very small market and businesses here do not have the purchasing power of some of the large retailers across the border, not to mention our higher cost base, particularly land costs. The Treaty seeks to level the cross-border playing field by forcing an increase in taxes on goods, yet the minimum wage in Gibraltar is 23% higher than Spain's minimum wage. 

In my opinion, it is important for the community that these sectors continue to thrive and do not face decline. Currently, they employ over 3,500 people, of whom 35% are Gibraltarians. These employees contribute tens of millions of pounds in PAYE and social insurance. 

Main Street, which is the heart of the community, needs to have a healthy mix of different offerings which is attractive to locals and tourists alike. There is a risk, post-Treaty, that Main Street will become a row of cafés and hospitality venues. 

The increase in footfall because of the Treaty will attract more visitors. People always spend when they travel, but we need to ensure that the Main Street experience is attractive enough for those visiting us to want to return. There needs to be a plan of action to improve that experience. 

Retailers will need to adjust their offerings to make them more distinguishable from those of the Spanish high street, and this will require investment. Meaningful financial support should be provided to assist retailers and wholesalers through this transition. After all, it is these sectors that will have to make the greatest adjustments post-Treaty for the sake of the other business sectors and the community at large that have benefited from the Treaty. 

Whilst the Treaty presents significant challenges for some sectors, it also brings opportunities for others, particularly tourism and hospitality. But we should not assume that an increase in visitors will automatically translate into greater economic benefits. 

Gibraltar needs to take a good look at itself if it is not to squander the opportunities the Treaty will afford. There is a real danger that we could attract many people who have never been here before, only for them to go away with a bad taste in their mouths – the worst form of word of mouth. 

For years, the Chamber has advocated much more investment, not just financial, but in time and effort, in tourism and transportation. The Chamber published its Tourism Paper a few years ago, and that remains as valid today as the day it was published. 

I recognise that there has been some progress, with significant investment in some of the tourist sites, partly from private investors, some extra planters in Main Street, and changes to and enforcement of some transport regulations. But in my opinion, a much more concerted and rapid response is required. 

The letter published in the Chronicle a couple of days ago from a visiting cruise passenger about the state of our cruise terminal and the roadway to town is embarrassing, to say the least. I understand that investing in the frontier entry point made little sense until we knew the outcome of the Treaty, but the cruise business would not have been affected by a non-negotiated outcome. 

The Chamber's Tourism Paper advocates the introduction of a free shuttle from the cruise terminal to town, as provided in many other ports, which would more than pay for itself through the knock-on economic benefits. The Chamber's own survey a few years ago showed that more than 50% of passengers arriving on cruise ships in Gibraltar do not disembark! 

The often-repeated scenes at the bottom of Casemates Hill this summer, of hundreds of tourists queuing for taxis, prove the point about transportation. It's encouraging to see more footfall, but our transportation systems cannot cope. We need to provide more alternatives, including sustainable ones. 

Imagine the visitor experience of someone who chooses to drive in and ends up on the Scalextric circuit, unable to find anywhere to park, only to head back to Spain two hours later, having endured the gridlock that could become the norm with the extra footfall. 

When Sir Peter Caruana, at the recent event in London, said that “Gibraltar has never sought quantity, we've sought quality”, he was referring to financial services and gaming. However, this is what we should aspire to for tourism as well. It would be better to attract one million tourists who spend £10 each than ten million who spend £1 each. 

But, as we have done with financial services, and as already mentioned above, if we are to have any chance of making progress towards achieving this, much more investment is required – not just financial, but in time and effort, and in developing a strategy. 

Of course, now that we have the certainty that the Treaty provides, it is sensible to look for new areas of business that could be attracted to Gibraltar. The Minister for Business' initiative to set up a Business Think Tank is a very welcome move. 

It is still early days and there is much to do, but despite the headwinds being faced by some sectors of the business community, and as I have always said to the Chamber's members, the alternative – a non-negotiated outcome – would have been much harder to bear. 

John Isola is the president of the Gibraltar Chamber of Commerce.