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The costs of border controls

(London Post)   More and more EU countries are reintroducing long-abandoned internal border controls to try and stem the influx of refugees. What will be the consequences? Predictions differ. “Passport, please!” These words are being heard more and more often now in a Europe that has, for years now, been accustomed to travel without border controls. But travel is not the only issue at stake.

Many elements of business life operate as if Europe were a single state. Manufacturing facilities and delivery chains are scattered all across the EU; employees move from one country to another. The free exchange of people, goods and services existed before Schengen, but Schengen greatly simplified and sped up this freedom of movement.

That’s why politicians and experts say that if the system is now to be undermined, little by little, there will be serious economic consequences. More traffic jams at the borders, a greater administrative burden, more goods stored nationally in warehouses again, instead of Europe-wide just-in-time production.

Lobbyists and trade unions fear that all this would soon add up to additional costs of 10 billion euros ($10.8 billion) a year for German industry alone – with all the consequences that would have for the employment market, taxes, and the social security system.

Is it all going belly-up?

“If the Schengen system is destroyed, it will dramatically endanger Europe, both politically and economically,” Germany’s finance minister, Wolfgang Schäuble, told Spiegel Online. The president of the EU Commission, Jean-Claude Juncker, even said: “Whoever kills Schengen will effectively have carried the single market to its grave.”

Infografik ARD-Deutschlandtrend vom 7.1.2016 Wiedereinführung von Grenzkontrollen ENG

Martin Schulz, the president of the European Parliament, warns in German daily “Passauer Neue Presse” that the effects of border closures are “catastrophic.” If trucks had to wait for hours at internal European borders, he said, “some manufacturing would grind to a halt.”

Juncker calculates that the current situation is already costing transport companies an additional 3 billion euros a year. If border controls were reintroduced everywhere, the German Chambers of Commerce and Industry estimate that this would increase to 10 billion.

Anton Börner, who as president of the German Federation of Wholesale, Foreign Trade and Services is particularly affected, gives an even more dramatic assessment.

“If we no longer have a Schengen Agreement, or a common single market with the free exchange of goods, Germany can pack up its business model,” he told the German press agency DPA. Börner added that the monetary union would fall apart, too, a fear he shares with Juncker, German Chancellor Angela Merkel and others.

However, if Schengen did come to an end, it certainly doesn’t have to mean the end of the single market. The UK, for example, is part of the single market, but is not signed up to Schengen.

Deutschland Flüchtlinge in PassauAn influx of migrants has seen border controls reintroduced in several EU states

Social stability is also important

Not everyone agrees with these apocalyptic predictions – and not every expert, either. Among them is Clemens Fuest, the president of the Centre for European Economic Research in Mannheim. He told local state broadcaster SWR that he believed the economic consequences of border closures would be manageable. The effects, he said, could be contained – by mostly waving trucks through at the borders, and just checking individuals.

While others fear a chain reaction of border closures, Fuest is hoping for them. Perhaps in the end, he says, only the EU’s outer borders would have to be controlled, and the internal borders could open again.

Above all, though, Fuest hopes that this will be a way of saving social harmony. The economist also sees the consequences of a radicalization of society if massive influx continues: “With the third million, if not before, we will reach the end of our organizational possibilities,” Fuest prophesied on SWR.

Fear of competition is among the threats to social harmony. In the trade unions and the political left, for example, there are those who suspect that if business supports letting in more refugees, what it really wants is to put pressure on employees.

Hubertus Heil, the vice-chairman of the Social Democrats’ (SPD) parliamentary group, warned, “No one should try to exploit the refugee debate in order to squeeze wages.” But Christian Socialist (CSU) politicians also use the same argument. Bavaria’s finance minister, Markus Söder, warns that “competition for jobs, apartments and state benefits will take place primarily among the weaker members of society.”

Infografik Die Staaten des Schengener Abkommens Englisch Stand September 2015

Understanding border closures

It’s obvious that hardly anyone in Europe introduces border controls lightly; rather, they do so only as an emergency measure to limit the uncontrolled influx of refugees. This is why, for example, German Finance Minister Schäuble expressed understanding for such actions, in spite of all the warnings.

“We know,” he said, “that the EU countries’ capabilities are not endless. We have also all accepted that Sweden has introduced border controls, and for decades that was one of the most open countries for immigrants.”

In the end, everyone hopes that the controls will only have to be temporary, and that ultimately they will help save Schengen. Because as problematic as the limitations on Schengen are, overall, the predominant view – among opponents, too – is that both open external borders and having internal ones are untenable in the long term.

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