Schengen Agreement Trade

Felbermayr, G, J Gruschl and T Steinwachs (2016) „The trade effects of border controls: Evidence from the European Schengen Agreement,“ Ifo Working Paper No. Davis, D and T Gift (2014) „The positive effects of the Schengen Agreement on European trade,“ World Economy, 37 (11): 1541-1557. We conducted a gravitational regression analysis on data from the World Input Output Data (WIOD) project (Felbermayr et al. 2016). This separates trade in services from trade in goods and international trade from intra-domestic trade. The data are available for 40 countries (including 27 EU members) and have been described by Escaith and Timmer (2012). The econometric model follows the recommendations of Head and Mayer (2015). Chart 2 shows that, depending on membership of the EU, the euro area or other regional trade agreements (and provided that the usual severity controls and a multitude of couples` wages and time) the removal of internal border controls amounts to a reduction in tariffs of 0.7 percentage points. This effect is estimated precisely for goods, but less for services.

Numerous robustness tests in our paper confirm this general finding. Chart 4. Schengen`s average trade cost savings for intracontinental trade from different countries, Chart 3 2011. Total EU-28 trade, in billions of euros, along the number of borders exceeded by Schengen, 2011 In December 1996, two non-EU countries, Norway and Iceland, signed an association agreement with the countries that signed the Schengen agreement. Although this agreement never entered into force, the two countries were part of the Schengen area following similar agreements with the EU. [9] The Schengen Agreement itself was not signed by non-EU states. [10] In 2009, Switzerland officially concluded its accession to the Schengen area by adopting an association agreement by referendum in 2005. [11] What if identity checks were restored at all internal borders? In this scenario, our calculations indicate that EU-28 trade in goods and services decreased by an average of 4.2% in 2011 compared to the status quo; This corresponds to an annual decrease of EUR 221.34 billion in the volume of trade compared to a counterfactual situation without border controls within the Schengen area.