Article by John Blundell in The Business

IT’S good news that Spain is relaxing its inhibitions about Gibraltar. The border will be open, but if I were a Spaniard I would think it odd, and a little impertinent, that Britain holds the Rock as a colony.

It is not just a matter of national pride. It is a matter of bureaucratic uniformity. The UK and Spain are now provinces of the Belgian Empire – the European Union. Gibraltar and other small enclaves defy the bureaucrats in Brussels. We need more of these tiny territorial specks.

There are diverse curiosities scattered across Europe as debris of the process that made the bigger nations. Andorra, Liechtenstein, Monaco, San Marino and the Vatican City only pop into our awareness when their football teams get trounced or if a Pope expires.

Spain is always a little muted about Gibraltar as it has its own enclaves Melilla and Cueta on the Moroccan foreshore, plus Llivia, an island of Spain which is in France. There are island anomalies too. The Faroes, north of Scotland, are part of Denmark, but regard themselves as separate. The Channel Islands and the Isle of Man are British – but not quite – especially in their more relaxed tax regimes.

Our history is littered with territorial oddities. Calais was once an English enclave that was in neither France nor Burgundy. England held Calais for longer than we have held Gibraltar. Its neighbour Liques was held by Spain.

Most history books say the English abandonment of Calais in 1558 was the last British French territory. It is worth recalling Cromwell annexed Dunkirk in 1658. It served as a port during the Civil War but Charles II eventually ceded it to the French crown.

Charles II also abandoned Tunis which was a gift to him as part of the dowry of Catherine of Braganza.

The once vast British Raj in India is derived from the other enclave in Charles II’s dowry – Bombay, now Mumbai. It emerged as the great port of the East India adventurers.

This is not mere conquest. Little bits of territory subject to different laws and lower taxes lift off as they are devices for playing out the central mystery of international trade – “comparative advantage”.

When Lady Thatcher got to thinking about China and Hong Kong, Sir Keith Joseph, her most loyal colleague, suggested the People’s Republic be granted a reciprocal long-term lease on a bit of Merseyside or Clydeside.

As an enclave of liberty, West Berlin did a fine job of subverting East Germany. It was a living piece of colourful theatre in the middle of socialist greyness.

Perhaps the oddest territory in contemporary Europe is Kalingrad – a vast chunk of Russia enclosed within Lithuania and Poland.

Gibraltar’s minuscule economy will reawaken with the Spanish relaxations but would it not be great fun to give Madrid Portland Bill or the Mumbles? We could agree no warships or armed guards… just tapas bars, cheaper wines and countless tax free shops. If we are told the Excise men are opposed to the idea we know it’s a good one.

The two most dynamic communities on the planet – Singapore and Hong Kong – started as lands nobody wanted when the British annexed them for trading purposes. Sir Stamford Raffles was regarded as mad by his East India Company contemporaries. The mangrove swamp he selected was unwanted by the Malays. Raffles insisted on only one policy for his boggy island – “free trade”. That single principle converted the terrain into a bustling city.

When Prime Minister Palmerston was told Hong Kong island was now the Crown’s he was angered that such a useless piece of real estate had been selected. He could not have dreamt that Hong Kong could emerge as a beacon of capitalist virtue.

The sliver of British territory had the rule of law and freedom of trade. Naturally it boomed. Sir John Cowperthwait, the miracle-working Financial Secretary to the colony always enjoyed reminding people of the other British enclave on the Chinese coast – WeiHeiWei. It never ignited as it was preserved as little more than a coaling station for the Royal Navy. It did not trade.

I gather the English kings even created a financial enclave in the City of London – the Steelyard – where Venetian and Lombard bankers could ply their money-lending wares more adroitly than the regulated and taxed Londoners. I think only Lombard Street remains as a faint echo of this community.

At the other end of the Mediterranean is the UK sovereign base of Dhekelia but it is only put to military use rather than as a freeport.

The value in these little curios is that they are dissent from the EU monolith. They may be small but they are irritants to the European Commission.

Europe’s enclaves could be more than amusing anomalies – they could contain the seeds to subvert the European Union.

John Blundell is director general of the Institute of Economic Affairs