EUROPE
Fear of change is Europe’s transport roadblock
Autumn 2006
Europe’s transport sector with all its associated industries is a world-beating success story. Yet as Transport Commissioner Jacques Barrot reports, it is an area where diehard public sector conservatism across the EU is blocking reforms that would streamline road and rail links
The world has changed dramatically since the Prodi Commission published its White Paper on Transport in 2001. The globalisation phenomenon has gathered pace, European growth has been slower than hoped, terrorists have twice targeted European transport infrastructures and oil prices have soared. Crucially, we can now see that global warming may become as serious a constraint on our future prosperity as any shortages in fossil fuels.
Against this background, I had to go back to the drawing board as EU Transport Commissioner when preparing the mid-term review of the White Paper. It came out mid-year as a Communication to the Council and the European Parliament and is intended to chart the future course for Europe’s transport systems. It recognises that the world has changed, and that Europe’s transport policies must be adapted too. Mobility is essential for European citizens’ freedom of movement and for economic growth, so the EU will continue its efforts to boost rail and waterways for long distance connections, and we need to step up our efforts to make road transport and aviation both more efficient and greener. That is why I want to focus on logistics, green propulsion and intelligent transport systems that use the latest technology.
In my view, it is vital that a number of major transport initiatives move forward rapidly, for two reasons; first because it is now obvious that we in Europe can no longer tolerate the choking exhaust fumes that pollute our countryside and inner cities. Secondly, without structural reform in the transport sector we will be unable to achieve the economic efficiencies that a fully integrated transport network can bring.
The Commission’s estimates are that transport bottlenecks cost the EU-25 as much as 1% of gross domestic product each year. Congestion is when the volume of traffic exceeds the transport infrastructure’s capacity, and we defined its costs as both environmental costs and direct costs such as journey time lost, as well as the opportunity costs suffered by third parties like delayed goods deliveries.
We are therefore pushing a number of transport projects like the creation of a genuinely pan-European rail system and “motorways of the sea” that would take freight off the roads and transport people and goods in a more environment-friendly way. These are projects that will also help to promote the integration of the new central European member states into the EU.
Mobility is at the heart of the competitiveness of the European economy. In a world of increasingly specialised industrial sectors and global supply chains, the costs of transporting goods has become a very significant part of total production and distribution costs.
By combining different modes of transport more effectively – road to rail, and rail to air or sea – and by making maximum use of the technological advances in transport and distribution systems, we have the know-how to develop far more efficient logistical chains than before. At the same time, we can reduce the environmental damage caused by transport systems. Look at the benefits in terms of traffic management we will be able to achieve through the Galileo satellite navigation system or through the SESAR project to integrate and modernise air traffic control.
But it will be no use having a 21st century satellite navigation capacity if we are still operating, with mid-20th century transport infrastructures and 19th century distribution and production patterns. We should aim for step-by-step progress rather than revolution, but we need demonstrable progress to convince all concerned with transport – users and providers, unions and employers – to overcome their fear of change.
Yet when we look at the reality of the extraordinary technical and economic capacities of Europe’s transport companies, whether it be cargo integration, at sea or in the air, we can see there is no reason to be afraid of change. You just have to tick off the names to see this. Quite apart from Galileo, there is Airbus which with Boeing, is now co-leader of the aviation industry worldwide. European companies are also global leaders in high-speed trains, both in terms of making them and using them. Yet sadly, these trains remain unable to operate as effectively as they might. In spite of years of effort, we still do not have fully integrated cross-border signalling systems, and a number of EU governments have yet to fully implement the directives that call for open cross-border competition in both the passenger and freight rail businesses.
More than 20 different signalling and speed control systems are today in use across Europe, which means that most international passenger and goods trains still have to stop at border stations to change locomotive. Thanks to an interoperability measure adopted by the Commission earlier this year, these different systems will over time be replaced by a single system called ERTMS (Electronic Rail Traffic Management System), which aims to create the technical conditions needed for a genuine European railway area. But now it is up to member states to take advantage of the new system and deploy it. Otherwise, its potential will be wasted, and Europe can no longer afford such waste, either economically or environmentally.
The same is true of the Eurovignette Directive, which was also approved at the end of March. Its significance is that we now have a common foundation on which member states can introduce road toll systems that could ensure that private motorists and freight haulers pay a fair price for using the infrastructure and also to meet some of the societal costs like pollution and congestion. The resulting behavioural changes (such as fewer empty trucks), will benefit all citizens alike. Europe has provided the tools, and now the member states must use them.
The broader point I want to make is that we in Europe have the technical capacity to meet our goals. We must not hesitate to deploy it for fear that this would risk destroying jobs or other economic opportunities for our citizens. Reforming our transport infrastructure and transport markets will increase not reduce our transport industries in terms of size, complexity and technical capacity, and will therefore help to strengthen Europe.
The international marketplace for transport equipment is nowadays worth over €550bn a year, or about one tenth of all global trade. The EU is the world’s leading exporter of transport equipment, which accounts for around 16% of all exports from the Union. The EU’s trade surplus in transport equipment is currently some €55bn. The transport sector accounts for 7% of the EU’s gross domestic product and employs around 10m people directly, 7.5m of them in transport services. Of these, just under two-thirds work in road, rail and inland waterways services, one third in cargo handling, storage, warehousing, travel agencies and tour operators, 5% in air transport, and about 2% in maritime transport. So as far as investment is concerned, for 2000-2005. transport accounted for just over 9% of total capital spending in the EU.
Maintaining the competitiveness of our transport sector is vital to the EU’s economic health. But that means change, and one major change that can no longer be postponed is to bring more private capital into the construction and operation of transport infrastructure. The Commission had hoped that its 2007-2013 budget would enable it to put as much as €20bn into financing transport infrastructure, mainly rail. But the Financial Perspectives agreement reached at the end of last year allows only €8bn for spending on transport and energy. Although it’s twice as much as in the current 2000-2006 EU budget, it falls far short of what we had originally envisaged for the EU-25. Inevitably, Europe will have to call on the private sector, in large part through Public-Private Partnership agreements But these are complex, especially when they involve more than one member state. The EU can, however, contribute to them through guarantee mechanisms.
To promote private investment in Trans-European Networks (TENs), we are working on a possible TENs Guarantee Instrument to make it easier to finance the early years of projects before revenues like tolls start to roll in. It is envisaged that around €500m for the guarantee instrument will come from the EU itself and another €500m from the European Investment Bank.
Throughout Europe, we have to press ahead with the consolidation and restructuring of longstanding, incumbent operators. All transport enterprises need to be assured of a level competitive playing field that allows innovative new entrants to enter the market. The private sector as well as EU member governments will have to commit firmly to this, as it is also in the national interest of member states to have viable and efficient transport services. Once the rules are in place, I will have to ensure their enforcement, if necessary by resorting to the European Court of Justice.
Competitive pressures are becoming more and more intense for the European economy, and therefore for the crucially important transport sector. By embracing rather than resisting change, we in Europe have the capacity to build a better, fairer, healthier and more prosperous life for our citizens.