It’s estimated that 40% of EU territory consists of border regions, with 1.3 million crossing borders to work on a regular basis. The potential of these cross-border regions is substantial but largely untapped. Research from the University of Finland explores border regions, such as the area of Cascadia that connects Seattle in the United States and Vancouver in Canada.

The area has seen precious little economic cooperation, despite policymakers on both sides of the border promoting it, and numerous initiatives existing to support cooperation. It’s an outcome that’s by no means confined to that particular region.

For instance, the Öresund region connects Sweden and Denmark, and is often cited as a perfect example of international cooperation, but even this region produces relatively few innovation-based results, bar a few notable exceptions, such as in medicine.

“Although cross-border cooperation in the European Union and in its adjacent areas is supported by, e.g., the Interreg and ENI programs, the outcomes have remained modest in terms of cooperation in science, research, and product development,” the researchers explain. “For instance, patents filed as a result of cross-border cooperation are rare.”

Rhetoric and reality

The authors believe their work highlights the often yawning chasm between the rhetoric of cross-border cooperation spouted by policymakers, and the reality in terms of clear and concrete outcomes. Research from the European Commission outlines five key barriers to effective cross-border cooperation:

1. Availability of information, with this being a problem both in terms of the information that’s available to employers and employees, but also in terms of the languages that information is available in.
2. Labor law is typically national, with little harmonization between countries meaning that it can be difficult to operate across borders.
3. Skills and credentials aren’t recognized, which is a particular problem, as while a growing number of employers are adopting skills-based recruitment, most policy efforts are aimed at ensuring official credentials, such as degrees, are recognized internationally.
4. Taxation often doesn’t work across borders, and while there have been efforts made to simplify taxation so that people are only taxed once on their income, it can remain challenging, especially for workers on permanent contracts outside of their country of residence.
5. Accessing welfare internationally, is a related concern as access to welfare often requires a taxation record, especially in areas such as healthcare and pensions, which presents obvious problems for people operating across borders.

“We need closer cooperation among border regions to tackle the challenges and remove the obstacles,” Elisa Ferreira, European Commissioner for Cohesion and Reforms said at a recent event discussing the challenges for cross-border workers. “The European Commission is committed to working hand-in-hand with border regions to fulfill its enormous potential and make sure no one is left behind.”

Improving links

Improving transport links between border regions might be equally beneficial. Research from the Vienna University of Economics and Business suggests that simply improving road quality can significantly enhance trade and cooperation between regions.

The researchers suggest that one of the reasons for high trading costs when crossing borders is the often underdeveloped infrastructure in border regions. They highlight that despite many developing countries spending around 3% of their annual budget on transport, this rises to around 10% in many developing countries. They cite research showing that the volume of trade between regions depends heavily on the quality of the road network, and this is especially problematic in border areas as the quality can differ significantly between interior regions and border regions.

The researchers examined data on the distances between over 200 cities across Europe, using either the formal “straight-line” distance (whether or not such a direct road actually exists); the road distance, taking into account the fact that people and goods travel over existing roads of adequate quality; and the travel time.

Most of the time the first measure is lower than the second, and often significantly so when suitable roads aren’t available and detours are required. The research shows that the road distance between cities within the same country is often significantly less than between cities in different countries, even when the straight line distance between them is similar.

Easy access

For instance, the road distance between cities in the same country is around 9% higher than the straight-line distance, but this grows to 30% greater when connecting cities in different countries. What’s more, travel times are also 28% longer when driving between countries than within a country.

“Empirical studies show that the volumes of trade between regions in different countries are substantially lower than those between ‘identical’ regions within one country,” the researchers explain. “This is the so-called ‘border effect.’ It cannot be explained only by customs regulations. For instance, it takes place in Europe, where the borders are open. In some cases, it is even observed in trade within a country, when inter-regional trade is lower than that within a region, other things being equal.”

This difference can largely be explained by the fact that national governments often try to optimize investment in national infrastructure, but there is seldom sufficient coordination of cross-border investment.

This results in more being spent on roads to connect interior regions than on roads to connect regions across borders. This epitomizes the so-called “free-rider problem” whereby few want to invest because they would prefer others do so for them. This increases the travel time between locations and acts as a barrier to trade.

The researchers note that even in the EU, where borders are frictionless in so many ways, most funds for road maintenance are allocated on a national level, with just 1% of EU infrastructure spending allocated for cross-border projects. By not making this investment, the researchers believe that it increases the “border effect” by around 21%, which reduces international trade by 18%.

“Increasing investment in cross-border transport infrastructure requires international coordination,” the researchers conclude. “Without it, countries will naturally invest less than is necessary, and this will affect the time, cost, and volume of trading.”

Historically this lack of cooperation between nations is something that has emerged in a wide range of areas, and having attended the European Commission’s event on cross-border labor markets, I do fear that where cooperation does emerge it emerges far too slow to keep pace with the rapid changes in the labor market, leaving those at the forefront of the future of work looking to bootstrap workarounds rather than rely on government support.