globalEDGE Blog: The Economic Impact of European Border Checks

The Economic Impact of European Border Checks

In Freilassing, Germany, the traffic along one of Europe’s most busy expressways backs up many miles due to a newly installed checkpoint, where German police screen vehicles for hidden migrants. The traffic used to flow unaffected, but now, Austrians who work in Germany are having a harder time than ever simply traveling to their workplaces. Companies in Germany also must wait days longer to receive food and other goods deliveries. In addition, shoppers no longer travel across the borders because it has become too much of a hassle. These border controls are already causing a negative economic effect on all European countries involved, and this could only become worse as more border checks are implemented.

Over two decades ago, the vast majority of European countries agreed to abolish border controls under the Schengen Area agreement. Many even attribute the success of the European Union to Schengen, as it allowed products and people to move more freely across country borders. Unfortunately, as the trade bloc deals with the largest migration crisis since World War II, checkpoints are becoming more common and commerce is being threatened after Europe has finally begun recovering from its six-year economic slump. 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.” Of the 28 countries in the European Union, 22 have passport-free arrangements, with the United Kingdom as one of its notable exceptions. However, since the fall, Austria, Denmark, France, Norway, and Sweden have joined Germany in imposing and extending temporary border checks. Just last week, Belgium temporarily shut its borders with France. These border checks could lead to up to an 18 billion euro loss, or $19.6 billion U.S. dollars, as 57 million vehicles a year and 1.7 million workers a day cross Europe’s many borders. These losses would come in the form of lost business, steeper freight and commuter costs, interruptions to supply chains, and government outlays for augmented border pricing, according to a recent report by the European Commission.

In a separate study conducted by the French government, the long-term cost of reverting to permanent border checks to slow Syrian, Afghan, and Iraqi migrants traveling through Greece and the west Balkans toward Northern Europe could exceed €100 billion. Especially for the European Union, its Schengen Area agreement has driven growth, economic efficiency, and jobs. Although the border checks implemented thus far have been considered temporary, it is not clear that the EU wants to abandon Schengen just yet. Europe’s officials are pressing Greece, which constitutes Europe’s southern frontier, to sharply strengthen its refugee controls by mid-May. Should Greece fail to comply, border controls like the one mentioned previously at Freilassing could be imposed through 2018 or beyond.

Major companies such as Ikea have worked closely with transportation services to ensure that deliveries are kept on schedule, but some smaller companies are seeing major issues with the increased security. Copenhagen offices of Ferring Pharmaceuticals have started providing buses to take home employees to Sweden so they would not have to endure lengthy train delays. The Dutch company Fleura Matz, which delivers various types of flowers throughout Europe and North America, has already faced backups of at least 12 hours at Calais, France, near the road entrance to the Eurotunnel that links the continent to Britain. As a result, their trucks have not been able to reach the Heathrow airport in time, so the company has decided to fly the flowers directly to the airport to catch connecting flights. This logistical decision has raised the costs of deliveries to New York by 25%. As many workers cancel their tickets and opt to drive, the Danish Rail Company has lost €1.2 million a month.

Near Treilassing, police say they are working diligently to ensure that the damage is limited, but are focused upon getting the migrant situation more under control. It is unclear when borders will be entirely reopened, or if the Schengen Area might be renegotiated.  

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