The ongoing migration crisis in Europe keeps pushing policymakers on the continent to new lows. Many are now calling into question the Schengen agreement—the linchpin of integration that has maintained a borderless area within the European Union since the late 1980s. Late last month, European interior ministers held a meeting that could precipitate the unraveling of this borderless area. Arguing that Greece has failed to protect the external borders of the EU, they discussed suspending Athens from the Schengen group of countries. According to EU regulations, Greece now has three months to respond; if the group determines that the problems have not been effectively tackled, those member-countries will have the right to introduce border restrictions.
The Schengen area includes 22 of the 28 EU member states (it doesn’t include Bulgaria, Croatia, Cyprus, Ireland, Romania, and United Kingdom), as well as non-members Norway, Liechtenstein, Iceland, and Switzerland. It guarantees freedom of movement to more than 400 million people, who undertake approximately 1.25 billion journeys annually within this zone. European businesses, meanwhile, conduct 57 million transnational trips through the Schengen area each year.
Fortifying borders, a new rallying cry of right-wing populist leaders across the EU, may well cut down the number of migrants that reach the EU. But it would also deal a severe blow to the European economy. At a time when the EU is still struggling to come out of a recession, introducing measures that could set the brakes on recovery would run counter to European and U.S. interests.
Schengen is losing luster
The viability of maintaining open borders has been a hot topic on the EU’s agenda since the Paris attacks last November, when it was discovered that two of the perpetrators had slipped into Europe by disguising themselves as refugees. Furthermore, assaults on women in Cologne and elsewhere during New Year’s Eve celebrations by asylum-seekers of Middle Eastern and North African origin have increased these concerns. These events have provided fodder for populist leaders to demand tighter border controls.
- Denmark, Norway, and Sweden have already introduced entry restrictions, and for the moment, admission of refugees has been put on hold in Finland.
- Austria and Slovenia, along with non-member Macedonia, have also erected razor-wire fences on parts of their frontiers to stem the flow of migrants.
- After ordering fences to be built on Hungary’s borders with Serbia and Croatia last fall, the Hungarian Prime Minister Viktor Orbán has now unified the “Visagrad group” (Hungary, Poland, Slovakia, and Czech Republic) behind the need to seal their borders, too. Orbán has also devised a plan with his Slovenian counterpart Miro Cerar to build “a new European line of defense” along the Greek-Macedonian border.
- Poland’s incoming minister for European affairs under the conservative government, Konrad Syzmanski, recently announced that Poland would no longer uphold the previous cabinet’s decision to admit 4,500 refugees as a part of the EU-wide agreement.
- In December 2015, Robert Fico, the prime minister of Slovakia, called Brussels’ approach to the crisis “ritual suicide,” and his Czech counterpart Milos Zeman rejected refugee quotas, asserting that Muslims are impossible to integrate into European society.
It’s the economy, stupid
All of these measures will hamper Europe’s economic vitality. The Schengen regime—formed alongside the Single European Act of July 1987—transformed the EU into an important economic hub by ensuring the unrestricted movement of people and merchandise. According to the latest assessment of the “single market” published by the European Commission in 2012, economic integration has yielded an additional 2.13 percent gain in GDP (or 233 billion euros) and a 1.3 percent increase in jobs (or 2.77 million). The same study also reveals that, while intra-EU trade in goods was valued at 800 billion euros in 1992, it was 2.8 trillion euros in 2012—that’s around 22 percent of the EU’s overall GDP.
Meanwhile, exports to non-EU countries also grew, making up almost 13 percent of GDP in 2012—an increase from around 8 percent in 1991. Removal of national barriers has also generated greater flows of foreign direct investment (FDI) between EU countries, increasing from 64 billion euros in 1992 to 730 billion before the financial meltdown of 2007. Partly as a result of the single market, U.S. FDI in the European Union also grew from less than 15 billion dollars in 1992 to over 141 billion in 2012.
Why businesses say “no”
While border guards won’t hinder legitimate trade or tourism, it doesn’t mean that they would not roll back the trade zone’s benefits. Due to the Greek and the Ukrainian crises, investments are already being deferred. Studies warn that reintroducing permanent border controls risks setting back the economies of Schengen countries by over 100 billion euros a year. Such measures would have the same impact as placing a 3 percent tax on the merchandise being transported. According to estimates by the European Commission, the cost of each additional hour of delay at an internal border would furthermore come to roughly 3 billion euros, and in the long run could amount to a decline of 10 to 20 percent in intra-EU trade.
Studies warn that reintroducing permanent border controls risks setting back the economies of Schengen countries by over 100 billion euros a year.
Any amendment to Schengen would also complicate labor mobility for the roughly 1.7 million workers who cross borders within the EU every day. This would undermine production and conflict with the much-commended peace-building aspect of the EU, which has brought together the children of generations that fought bloody wars against each other. As the Vice-Chancellor of Germany Sigmar Gabriel underlined in his speech at Davos, restricting mobility would result in higher rates of unemployment, less economic growth, and thus a decline in overall prosperity.
The few restrictions that were imposed late last year have already taken their toll on some economies. Due to security measures implemented along Germany’s southern border in September, sales in the retail and tourism industries in Bavaria have dropped by 20 percent. In Calais—the control point for the traffic in goods between England and France—massive delays have in some cases caused production to come to a standstill.
The United States should be worried, too: Its total trade with the EU amounted to half a trillion euros in 2014—almost double the figure at the start of this century. The two-way trade currently supports 13 million jobs overall: European companies constitute the largest source of “onshored” jobs in the United States, while many foreigners working for European companies outside Europe are Americans. And the foreign direct investment flow across the Atlantic is a further significant source of employment on both sides—supporting, for instance, 7 million jobs in both Europe and the United States in 2014. There is thus enormous economic significance to relations between the United States and a borderless EU.
The break-up of the Schengen would not only disrupt these trade relations, but would resurrect market unease after years of attempts to restore confidence following the euro crisis. If long-term economic stagnation prevails across the EU, it will slow U.S. growth as well. This would also put the Transatlantic Trade and Investment Partnership into jeopardy. If Schengen falls apart before the partnership is finalized and ratified, Washington may have to pursue, negotiate, and conclude separate agreements with European countries—which will drain considerable economic value from transatlantic relations.
Schengen and the borderless Europe it created cannot be left to the vagaries of populism and anti-immigrant feelings.
Keeping the fabric together
Schengen and the borderless Europe it created cannot be left to the vagaries of populism and anti-immigrant feelings. It would not only jeopardize more than three decades of gains in European integration in geostrategic terms, but would also deal a shattering blow to economic and commercial interests. Europe and the United States both have an interest in making sure the Schengen area remains intact.