Cost of delays, lost business, policing: $27 billion

FREILASSING/AALSMEER/ GENEVA • With 57 million vehicles a year and 1.7 million workers a day crossing Europe's frontiers, the European Union could face up to €18 billion (S$27.4 billion) each year in lost business, steeper freight and commuter costs, interruptions to supply chains, and government outlays for augmented border-policing, according to a recent report by the European Commission, the bloc's administrative arm.

Should the EU revert to permanent border checks to slow Syrian, Afghan and Iraqi migrants travelling through Greece and the west Balkans towards northern Europe, the long-term cost could exceed €100 billion, the French government calculated in a separate study.

Open borders drive growth, economic efficiency and jobs, said Mr Vincent Aussilloux, the director of France Strategie, the French government's economic planning agency.

"That is what we would put in danger," he said, "if we abandoned Schengen indefinitely."

In many corners of Europe, border checks are already having a costly impact. At the Oresund bridge, a 13km span that carries lorry, car and train traffic between Sweden and Denmark, more than 15,000 commuters now contend with two identification checks daily because both countries are requiring frontier inspections.

The delays are costing the Danish Rail Company (DSB) €1.2 million a month in lost business as trains are cancelled and commuters opt to drive, said Mr Tony Bispeskov, a spokesman for DSB.

This month, the Copenhagen offices of Ferring Pharmaceuticals started providing buses to take employees home to Sweden so they would not have to endure train delays. Weekend shoppers heading from Copenhagen to Malmo, Sweden, "have been scared away", Mr Bispeskov added.

The Netherlands, home to some of Europe's biggest exporters and importers, is also feeling vulnerable. While the Dutch have not yet ordered border checks, companies warn that costs would surge if Germany blocked their common border or if roadblocks continued elsewhere.

Dutch company FleuraMetz, which delivers roses, tulips and orchids to shops elsewhere in Europe and in North America, has already faced backups of at least 12 hours at Calais, France, near the road entrance to the Eurotunnel linking the Continent to Britain.

The company sends trucks through the tunnel to reach Heathrow Airport near London for shipments to the United States. At one point, the bottlenecks were so bad that FleuraMetz decided to fly flowers to Heathrow to catch connecting flights, raising costs on deliveries to New York by around 25 per cent.

The car industry's lean manufacturing system is extremely vulnerable to any tightening of Europe's border controls in the wake of the refugee crisis, the chief executives of Opel and Daimler said on Tuesday. The prospect of dismantling Europe's Schengen free-travel agreement to stem the flow of refugees and migrants worries car executives gathered at the Geneva motor show as tighter border controls could also interfere with goods traffic.

"A breakdown of Schengen would be horrific for us," said Mr Karl-Thomas Neumann, chief executive of Opel, the European division of General Motors, which depends on the free transport of goods and components from factories in Germany, Spain, Poland, Britain and Italy. "We have huge logistics operations in southern Europe. Any disruption would have an immediate impact on the bottom line."

Daimler chief executive Dieter Zetsche said his company is already struggling at the limits of its production capacity, thanks to demand for its luxury vehicles. Parts need to arrive at the factory to ensure its lean production system functions seamlessly.

"Our factories are running with one or two hours of time buffer," Mr Zetsche said.

NEW YORK TIMES, REUTERS

A version of this article appeared in the print edition of The Straits Times on March 03, 2016, with the headline 'Cost of delays, lost business, policing: $27 billion'. Print Edition | Subscribe