Wednesday, June 4, 2014

Potential post-independence isolation of Catalonia

There seems to an almost religious faith here in Catalonia that the world would beat a path to our door if we were only independent. I think this is a very naïve way of looking at geopolitics and you don’t need to look far to see how miserably countries can get treated if some other country decides to make life difficult.

For example, Greece has been blocking entry of Macedonia into the EU, NATO and any other organization purely because they don’t like their name. (Somehow the people living in what was historically part of Macedonia are too Slavic and thus are too racially impure to be considered real Macedonians).

Similarly, Spain (or any other country in the EU) would be perfectly within their rights to block entry of Catalonia into the EU. Most EU countries have separatist movements, and perhaps Catalonia could serve as a good example for why separation is a bad idea. For example, Spain has already said that it might block entry of Scotland into the EU (to serve as an example) and expect the UK to return the favor. The EU has already shown the willingness to impose extreme suffering on members such as Portugal and Greece.

Tax treaties are another big area where Catalonia would be in a difficult situation. Spain currently has very favorable tax treaties with many countries in the world, including South America. It would take several years to negotiate new treaties, and in the meanwhile, it would be extremely difficult to do businesses in Catalonia. (American citizens or dual nationals would likely be forced to move away, since they would have to pay double taxes).

Just in case you are wondering, despite the US having signed new tax treaties with several countries over the last couple years (including one from Spain in 2013), the US Senate has not ratified a new tax treaty in the last four years, due to a US single senator (Rand Paul) basically holding the entire process hostage his crazy right wing demands.

Exactly what would happen to corporations is difficult to know. Since Spanish corporations are creatures of the law of Spain, they become foreign corporations in Catalonia. If Spain and Catalonia didn’t have a tax treaty, companies would be essentially forced to move their headquarters to Madrid.

The bottom line is that if being treated badly by Madrid is the motivation for independence, a new Catalonia would be at an even worse bargaining position and pretty much at the mercy of Spain. At least in the current situation, Catalonia has enough votes to influence policy in Madrid. As a separate country, Spain would have the incentive to drive the hardest bargain possible.


Anonymous said...

It's funny how VERY SMART people I know, disregard any of these serious caveats from Catalan Independence.

Anonymous said...

It is called tunnel vision, they don't know what they don't know...