The High Cost of Security

World business has long had to grapple with the damaging consequences of terrorism by investing in expensive security measures, personnel and technology. Following this month's bombings of underground trains and a bus in London, those costs could shoot up even further, according to the German Federation for Foreign Trade (BGA).

In Berlin on on Thursday, the group published a report in which they estimate that worldwide foreign trade spends about 100 billion euros ($120 billion) yearly on anti-terrorism measures -- a figure it expects will double over the next few years. "We have to reckon with the fact that terrorism will increase," BGA president Anton Börner said.

Shortly after the Sept. 11, 2001 attacks in the US, the OECD predicted that additional security measures would cost a maximum of 3 percent of the total value of all internationally traded wares -- around 14 billion euros. "Those figures have been completely exceeded," said BGA spokesman Andre Schwarz.

Rising costs for Germany

As the world's leading exporter, Germany has a special interest in the costs of safeguarding its products when they are shipped abroad.

For Germany's export-driven economy, the increasing cost of investing in anti-terrorism measures means an additional hike of 10 percent or some 10 million euros yearly. "The increasing costs affect all," Börner said, adding that small and medium-sized firms are especially hard-hit as they have to pay for the installation of computer systems to handle customs formalities.

The BGA pointed out that the rising cost of preventing terrorism is especially reflected in increased security fees at German airports, which doubled between the years 2000 and 2004 and amounted to 310 million euros in 2004.

At the same time Börner underlined that terrorism wouldn't inflict lasting damage on the world economy. "I don't believe that the terrorists will manage to put a brake -- even fleetingly -- on the world economy's dynamism," Börner said.

The price of security

The BGA's report on terrorism's detrimental impact on world business highlights the dilemma that foreign trade and industry often find themselves in when it comes to terrorism prevention. On the one hand, export-led businesses are eager to implement security measures since they see securing transport routes for the movement of goods as having the highest priority. But on the other hand, exaggerated and highly-expensive preventive measures often cost companies loads of time and money in dealing with the ensuing bureaucracy.

"Security has its price," said Börner. "But it shouldn't lead to unreasonable financial and administrative burdens … It is always a question of finding the right balance between security demands on one side and the legitimate interests of trade on the other."

EU anti-terror rules under fire

The BGA criticized in particular "exaggerated and costly security measures which add no extra security to the flow of international trade" and pointed to the less-than-perfect security cooperation between European member states in their fight against terror.

The group also warned that the differing degrees and speeds with which EU member states implement security plans agreed on by the bloc could distort competition. "To this date, a balance between security needs and economic reality is hardly recognizable in the so-called anti-terror directives of the EU," said Börner.

At the same time, the report emphasized that the solution couldn't lie in go-it-alone security initiatives by individual governments, but rather in international security standards, adding that the German economy needed sensible and practical regulations which could prove as a point of orientation.

A silver lining

Börner said, however, that German companies were often the first to implement security measures, causing them to suffer -- in contrast to their less eager foreign competitors -- each time new measures were introduced.

But, by the same logic, there was also a bright spot in the BGA's bleak report: "German firms are very strong when it comes to security technology. They will profit from the development (of good security measures)."