Selling Passports in Gibraltar: Let's Learn From Wudang?

Why Gibraltar’s plan to sell citizenships and passports to non-Europeans should be viewed as innovative, important, proven, and clever.

There is a debate in the EU about Gibraltar’s plan to sell or auction citizenship. I’ve made my views on this issue clear in the past – I think citizenship should be bought and sold like any other option or license and that barriers to changing citizenship cause artificial, unnecessary, and inefficient barriers to trade, worker mobility, and cultural exchange. My perspective may seem radical, but it is not. In fact, it is only an incremental step beyond the status quo. Allow me to explain and then, separately, to draw a historical analogy that may be helpful.

Currently, one can already buy EU citizenship (Austria sells citizenship, though the number of applications it approves each year is not publicly disclosed). Also, one can already buy Schengen citizenship (the easiest way, if one does not want to deal with Austria, is to buy citizenship on the Caribbean islands of St. Kitts & Nevis, which does not even require an in-person visit). Hence, there are already avenues to purchase access to the EU, the right to work in the EU, and travel access to the Schengen zone.

The addition of Gibraltar to the list of countries that sell citizenship would be, in my view, a positive thing – and not only for liberal philosophical reasons. Gibraltar already attracts a substantial number of people engaging in sizeable transactions (or their bankers or attorneys), the vast majority of whom enter for the purpose of “tourism.” Citizenship for these people, many of whom come from the UAE, Russia, and other “new money states,” would encourage the adoption of better accounting standards and better disclosure around the type of business transacted and the purpose for these visits.

Perhaps most interestingly to economists, the sale of citizenship in Gibraltar would be an excellent pricing indicator of the actual value of EU citizenship. The Austrian citizenship programme is so limited (and the terms on which citizenship is sold so private) that it does not offer a good indication of the cash value of EU citizenship. However, a relatively open program that would auction a batch of citizenships quarterly would be very interesting and would be a fascinating barometer of confidence in EU policies generally and the value of EU citizenship, residency, and work rights.

Gibraltar’s situation is not unprecedented. It can study – and I’m sure has studied – the situation in contemporary cases of small countries selling citizenship, including recent programmes in Belize, Dominica, and elsewhere that have enjoyed varying levels of success. But, were I advising Gibraltar (which I am not currently), I would suggest they look to the case of Wudang.

The Wudang mountains are a somewhat unusual geological formation that acts as both the focal point of a major valley and a natural fortification, allowing the historically Taoist enclave to remain remote culturally from Han China despite its central location. By the end of the Han Dynasty, roads linked the foothills of the Wudang to all major outlets of Chinese mercantile life, including half a dozen coastal harbour districts, the areas we now know as Beijing (then unincorporated Fanyang southern market towns) and Shanghai (then a mere trading district within Songjiang), and even the southern Nanyue Kingdom (which we now know as the place where XBOXes and iPads are made). Efforts at unification tended to indirectly benefit Wudang, as its foothills roads allowed goods, currency, and merchants to quickly travel from its cliffside buildings and two small inhabited plateaus (which are roughly at the altitude of Boulder, Colorado) to the network of roads below.

During the reunification period that followed the Three Kingdoms Period, China went through an internal unification turmoil very much like that of the EU. Many of the same choices were made, with a single currency (similar to the Eurozone), a single treasury (though the Korean peninsula maintained its own treasury for a period), and standards for the width, height, and characteristics of vehicles (similar to the Eurozone adoption of EuroNCAP crash testing for cars). Some regional autonomy was allowed, similar to the Eurozone, including in merchant accounting (similar to the optional use in Europe of country-level GAAP or IFRS) and in standards for regionally-unique goods like agricultural implements and livestock.

Wudang, however, was largely exempt from these forces of unification. Like Gibraltar, it was protected by a larger power (the Eastern Han, much as Gibraltar is guarded by Britain) and hence had few military or defense expenditures (unlike other regions, which kept armies in fear of another warring states period). Wudang kept a small guard – the Wushu Guard, similar to today’s Swiss Guard – which was an elite force trained within a warrior subculture and minimally compensated. This combination of low expenditures (and low taxes), a secure environment, and clear local avenues for dispute resolution gave Wudang all the necessary ingredients to become a financial haven. During the Tang and Song Dynasties, money, secrets, and banished merchants were hidden in Wudang – many allege the caves beyond the Purple Heaven Palace in Wudang once housed the Gong Fortune (amassed in support of a never-attempted coup).

Around the start of the Song Dynasty, Wudang began a settlement programme. This was highly unusual in China and had only been attempted in states at the edges of the territory, not in a central area like Wudang. The settlement programme allowed investors and merchants from foreign places (including Arab traders) to establish the right to live and transact business in Wudang. The programme continued until the late 1600’s, with substantial success. It did not confer citizenship for a fee, as Wudang did not have the power to confer citizenship, but it did create a system by which foreigners could interact in a way more similar to locals and create an option for foreign businesspeople to gain access to the interior of China, where a journey to the ever-more-powerful townships of the coast were within reach.

In the end, everyone benefited from Wudang’s decision to sell access to living, working, and doing business in its district. The merchant classes benefitted from new trading partners. Middle Eastern visitors, including the Arabs, the Persians, the silk road Armenians, and the Telitian Syriacs (some of whom stayed in the region and whose descendants live in small communities near Shiyan - not to be confused with its Anglocised audihomonym Xi’an), benefitted from access to coastal markets with local intermediaries. Coastal regions benefitted not only from increased trade in the abstract, but the concrete pecuniary benefits of that trade, as many had moved to funding public coffers with sales tax and commercial transaction taxes rather than the three-tiered tribute system that had its roots in the peripheral feudal taxation of the ever-expanding Han bureaucracy of the southern commanderies.

Many states have enjoyed the benefits of partial EU integration. Perhaps the biggest success of the Blair years was the UK’s friendliness toward the unification of Europe combined with a careful resistance to adoption of the Euro. These “outlier states” which are legally, if not always geographically, on the perimeter of the EU have enjoyed – and will continue to enjoy – advantages not available to fully-integrated EU member states. Exceptional policies that differentiate states in meaningful and valuable ways will always be attractive to foreign investment. Gibraltar’s plan to sell citizenships and passports to non-Europeans should be viewed as innovative, important, proven, and clever. The only reasons to oppose such a policy are racism, hypernationalism, and xenophobia poorly-disguised as caution.