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30/09/2016

New study plays down economic impact of Schengen border controls

Trade & Society

New study plays down economic impact of Schengen border controls

The study found that the relative low impact of increased transportation costs would lessen the effect of border controls on economic output.

[Craig Wyzik/Flickr]

The reintroduction of border controls could cost Europe up to €15 billion a year, according to a team of Munich-based economic researchers. But unlike other experts, they report that this figure is manageable, however unwieldy it might seem. EurActiv Germany reports.

Since the reintroduction of temporary border controls on account of the refugee crisis, the ultimate consequences of systematic checks at Schengen borders on Europe’s economy is still the subject of much debate.

In a new report, the Ifo Institute, a think tank, has now calculated that this would reduce the economic output of the EU member states – but in comparison to previous studies its tone is markedly less apocalyptic.

According to recent calculations, border crossings between two Schengen countries take place on average 20 minutes faster than other crossings. Doing away with these time savings would amount to a loss of between €26 and €66 billion per year, according to the Ifo.

“These costs account for only a small part of those sums that could arise though uncontrolled mass immigration”, said Gabriel Felbermayr, head of the Ifo Centre for Foreign Trade and one of the study’s authors.

The research team compared trade data from before and after the entry into force of the 1995 Schengen agreement. The result: transportation costs would rise on average by 7%, but because these costs only make up about 10% of product value, the researchers suggest that it would only have a relatively minor impact.

Felbermayr added that a complete collapse of the Schengen area is not on the cards and that checks at the borders along the refugee routes is the far more likely scenario.

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The Munich team also estimated how much countries that have reintroduced border controls under Article 23 of the Schengen agreement would be liable for, arriving at a figure of €15 billion per year.

French think tank France Stratégie recently calculated that more comprehensive controls would reduce the economic performance of the 22 EU Schengen countries by more than €100 billion per year.

Another study conducted by Prognos on behalf of the Bertelsmann Foundation forecasted higher costs if Schengen were to collapse. One pessimistic scenario had their experts estimate a rise in import prices by 3% and an loss of up to €1.4 billion for Europe. However, according to Ifo-expert Felbermayr, this figure was based on the “unrealistic” assumption that the transport costs would be upped by 30% by increased border controls.

However, the Ifo analysis failed to take into account that not all trade is conducted via roadways or that border checks between Schengen states could have a knock-on effect on global trade, a factor the research team acknowledged.

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In particular, smaller companies’ business could be drastically cut and tourists could be deterred from travelling, experts fear.

The German Chamber of Commerce (DIHK) has already estimated that costs of around €10 billion will be incurred annually by the Federal Republic on account of the border controls that have so far been reintroduced.