Warning Bells Ringing Over Tightened Border Controls for Trade, German Businesses Worry
Trade organizations caution about potential drawbacks of tighter border regulations for commerce - Trade organizations issue alerts about potential setbacks from tighter trade border regulations
It's all about keeping that economic engine roaring! The chief economist of the German Chamber of Industry and Commerce (DIHK), Volker Treier, told the "Handelsblatt" that even the Coronavirus crisis didn't put a damper on the economic importance of border traffic. In the face of curbing irregular migration, politics should remember the crucial role of smooth import-export operations and cross-border trade. A thriving European internal market and Schengen area are like oxygen for Germany's super connected economy.
Treier also raised a red flag about the consequences of stricter checks. These would, undoubtedly, crank up the costs for companies to store goods—and forget about those just-in-time deliveries! "All that is an additional economic strain in tough economic times," Treier said.
The DIHK expert also shook his finger at potential limitations for cross-border commuters and service workers, like regional retail, border dining, and healthcare and care services. Free movement of goods and people is their lifeblood, Treier told the newspaper.
Dirk Jandura, president of the German Association for Foreign Trade, called for these restrictions to be short-lived, "Cast-iron controls are necessary to protect the population, of course, but only temporary."
The logistics industry is pinning its hopes on close collaboration with the Interior and Transport Ministries to sidestep potential pitfalls: "Green Lanes" could be the way forward, said Dirk Engelhardt, chairman of the Federal Association of Goods Transport, Logistics, and Disposal, to the "Handelsblatt". Green Lanes are like express lanes for trucks, allowing them to zoom past the not-so-friendly border checks without much hassle.
The CSU's Alexander Dobrindt announced the border controls will be amped up and rejects increased. The numbers will have to fall, he declared over the weekend. Chancellor's Office chief Thorsten Frei (CDU) shared the sentiments in "Welt am Sonntag", believing in "intensive checks in a swift period of time, because we don't wish to permanently restrict freedom of movement in the EU nor shred the Schengen Agreement." Stationary border checks will merely serve as a "temporary solution."
Potential economic disadvantages of tighter border controls:
- Trade Volumes Decrease: Tightened border controls lead to increased trade barriers, slowing down economic growth by restraining the availability of goods and services, thereby limiting consumer choices and bumping up costs for businesses [1][4].
- Increased Expenses and Inflation: Enhanced border checks can drive up the prices of goods due to higher tariffs and administrative costs. This can lead to inflation as businesses pass these excesses onto consumers, potentially eroding purchasing power and destabilizing the economy [1][4].
- Supply Chain Disruptions: Pandemic-era supply chain interdependence underscores the difficulty in managing disruptions originating from tighter border controls, causing supply shortages and delays in delivering critical goods [1].
- Protectionism and Trade Wars: Greater protectionism through tougher border controls can spark retaliatory measures from trading partners, potentially igniting trade wars. Such a global economic downturn can stem from trade restrictions that straitjacket economic interdependence and cooperation [1][4].
- Employment and Real GDP Hits: Heavier trade restrictions resulting from tighter border controls can lead to job losses, particularly for businesses heavily reliant on international trade, while also stifling real GDP growth as the economy loses efficiency and competitiveness globally[1].
- The tightened border controls could potentially lead to a decrease in trade volumes among EC countries, causing economic strain by limiting the availability of goods and services, intensifying costs for businesses, and encroaching on consumer choices.
- Stricter border checks may also cause an increase in expenses for companies, due to raised storage costs for goods and escalating administrative costs, potentially leading to inflation as these excesses get passed onto consumers, eroding purchasing power and destabilizing the economy.
