The trouble with borders

 by Peter Sharple

A recent economic study has forecasted that the disappearance of the Schengen area would cost 9bn€ to The Netherlands by 2020. The country, that largely depends on European exports, would be affected more severely than other members of the Union.

Reintroducing border checks between the members of the Schengen area would costs the Netherlands 9bn by 2020. This is according to the CPB, Netherlands Bureau for Economic Policy, which has forecasted in its latest Central Economic Plan 2016, published on the 21st of March. These costs would be equivalent to a 1,3% drop in GDP (gross domestic products), which would be one of the highest loss in the EU.The time when annulling Schengen was simply inconceivable has gone, and what is now seen as a response to the ongoing infl ux of asylum seekers in Europe has become a real possibility. But closing the borders between the countries would also lead to a 110 billion cost for the EU as a whole over a 5 years period according to the CPB. This would equal a 0,7% point cut in its GDP.

An uncertain future for the borderfree area

The Schenghen Agreement, which was signed for the fi rst time in 1985 and took effect in 1995, gave life to what we know as the Schenghen area: 26 countries (four non-EU) who abolished their internal borders, allowing for passport-free movement between the countries.
Having such an agreement allows for faster and easier movement of goods and people to and from the countries who signed, therefore making it easier to trade and export products from one country to another.
But the current migrant crisis in Europe as well as the recent terrorist attacks that shattered France and Belgium has urged governments and politicians to rethink the border-free area.
While some countries, like Austria, have already re-instated controls to their borders, the future of the Schenghen area is still looking very unclear.

An economic dependance on foreign trades

While the Dutch economy is recovering from the Great Recession and the euro crisis with a 1.8% growth projected for this year and 2.0% for 2017, the CPB ensures that a discontinuation of the Schengen Agreement would have a negative impact on the Dutch economy. Slowing down free movement of people and goods in Europe would affect the Netherlands more severely than other countries because it largely depends on foreign trades, according to the document. It will restrict trade fl ows via the higher costs related to trade, and longer waiting times at the borders » details the government macro-economic policy unit. Although exports of products manufactured in the Netherlands to other European countries has considerably decreased over the past 10 years, it still accounts for two-third of the Dutch exports. Thus, EU-oriented exports are still vital for the economy of the country.
In 2015, exports accounted for about 68.2% of total Dutch economic output. Asia represents the second biggest exports region for The Netherlands, however it only represents about 10% of the total exports of the country.

Brexit, another threat for the Dutch economy

In the event of Britain leaving the EU, The Netherlands would be the second European country to suffer the most of it on an economic basis, just behind Germany. It is estimated that the country would lose an annual 4.3% of its € 36.7 billion exports in case of a Brexit, according to the Dutch trade insurance company Euler Hermes.
According to the same researchers, the loss would only hit four countries: Germany, The Netherlands, France and Ireland. Although Britain is not part of the Schengen area, it benefi ts from trade agreements that allow for easier exports and imports with the rest of the European union.

In case of a Brexit, import tariffs and custom forms would have to be implemented, making it harder but also more expensive to trade with the kingdom. While the disappearance of the Schengen area remains a possible future threat for the Dutch economy, the fate of its trade and exports with Britain will be sealed soon enough. The referendum for the Brexit will indeed take place on the 23rd of June. The entirety of Britain and many of its expats will anxiously await the outcome of the referendum as will a growing number of E.U. Citizens that fear a detrimental effect on their lives should Brexit become a reality. The main argument of those who want to see Brexit happen is controlled migration and with Europe considering a move to put back its borders, this only adds fuel to an already raging fire.
The reasons for staying always boil down to trade and jobs, energy, farming and the National Health Service. Only time will provide an answer, with weeks to go before the big day, both camps will be out in force to win their argument but it will be the people of the U.K. Even though a Brexit will affect the economies of the big European it’s not going decide the fate of them. The rest of Europe will wait and see what complications arise from a possible Brexit with the Netherlands particular interested due to its strong trade links and large expat community. The Dutch economy is on track at the moment but there are things that could happen to derail it very soon.

source: CBS