The Economic Impact of European Border Controls

In this blog the following problem will be broad addressed and examined, refugee crisis causes a reintroduction of checkpoints. I have chosen this topic to be up for discussion because I was wondering what the actual economic consequences were of having so much security checks present nowadays at the highways.

In 1985, the European Union was able to establish a so-called Schengen Agreement which entails that from then on European citizens of various countries could travel without encountering any fuss of long traffic hours due to the disappearance of border controls at the EU’s internal borders. The border-free Schengen Area guarantees free movement to more than 400 million EU citizens, as well as to many non-EU nationals, tourists, or other legal persons present on the EU territory. It also entitles every EU citizen to travel, work and live in any EU country without special formalities. I am proud to be a EU citizen and to have this luxury of free movement throughout Europe. The Schengen zone is active for many years now and everyday people are passing through and crossing borders for all kinds of purposes. In Freilassing, Germany, the traffic along one of Europe’s most busy expressways backs up many miles due to a newly installed checkpoint. Germany introduced limited, temporary border checks in November. For now, they are set to expire in May.

It is just a question of using your common sense when thinking about the consequences of the reintroduction of border checks, it will obviously generate economic costs. Police at the border checking your vehicles, with lines of trucks waiting to be investigated before they are allowed across, causes friction in goods transport. Wares arrive late at their destinations, companies have to maintain bigger inventories in warehouses to make sure they don’t run out of stock; commuters take longer to get to work across borders; tourists decide not to go for a day-trip across the border. Currently, I am living in a small town in the south of the Netherlands. Normally, I should have taken my car and pass through a part of Belgium in order to get to the University in Maastricht as it is the fastest way possible but my routine travel plans have changed due to the risk of being stuck in traffic for hours. In general, a lot of Belgians and Germans come and visit the weekly Friday’s market of Maastricht. Last week I recognized a huge difference between before and after the implementation of border checks. The market was far less crowded than I was used to in the past.

In a study, the French government’s official think-tank indicated that a permanent return to frontier controls in Europe would cost countries about 110 billion euros over the next decade. France Stratégie, investigated the matter and concluded that the drop in cross-border tourism and trade brought on by a permanent end of the free-travel area would cost Europe 0.8 percent of economic output over 10 years. “Over the long term, the generalisation of permanent border controls would be equivalent to a 3 percent tax on trade between countries in the Schengen area, which would lead to a structural decline in trade of 10 to 20 percent,” they wrote. Half of the cost would be due to a drop in tourist visits, 38 percent because of the impact on cross-border workers and 12 percent to the additional cost on freight transport, they said.

Six members of the Schengen area including Germany have reinstated temporary border checks as hundreds of thousands of migrants try to reach at an unstoppable pace the most wealthy nations. However, the introduction of border controls isn’t only implemented because of the massive influx of refugees but also in order to combat terrorism. After the Wednesday’s attacks in Brussels, countries like the Netherlands increased even more airport and border security. Others like Tory peer (who is campaigning for Britain to quit the EU) argue that Schengen is like ‘’hanging a sign welcoming terrorists to Europe.’’ Since there is no end in sight for the current migrant problem in Europe, some national governments are fighting to increase the number of checkpoints and to extend their use for up to two years. This shift from no border control to many border checks is putting a strain on Europe not only politically, but also in terms of social cooperation. President of the European Commission, Jean-Claude Juncker, warned the European Parliament that “one after another, we close the borders, and once they are all closed, we will see that the economic cost is huge.” The most central question is; will Schengen remain or disappear for good? It all depends on the ability of Europe to afford these border controls.

We don’t know exactly how much re-establishment of border controls will cost, we can only make some estimations. Presumably that’s why the France Stratégie report ends with the boilerplate warning that border controls present a “risk to the future of the European project.’’ EU Commission President Jean-Claude Juncker made the same point in more vivid language a couple of months ago: “Whoever kills Schengen will effectively have carried the single market to its grave.”

 

If you would like to follow a controversial discussion about this topic, than it is very interesting for you to watch the video below:

 

 

-Maxime Helgers