EC single market in transportation creates openings for U.S. firms - European Community

Business America, Oct 21, 1991 by Bob Straetz

The development of a single market program in transportation is necessary in order for the European Community to achieve one of the main goals of its 1992 program: the free movement of goods. The EC needs an integrated, modern transportation system to handle the expected increased business activity in the EC.

Transportation accounts for 7 percent of the EC's gross domestic product. A liberalized transportation program will provide the basis for quick delivery times at a low cost. The liberalization of the EC transportation market will lead to more competition among transportation companies, the offering of better and quicker services, and a reduction in shipping costs to customers estimated at 10 to 15 percent.

EC Commissioner of Transport Karel van Miert is intent on overseeing the successful completion of the 1992 single market program in transportation. This program involves opening rail, air, road haulage, ocean cargo, and inland waterways. The single market in road haulage is under way. Air passenger services will be fully liberalized by 1993 and air cargo has already been deregulated. The EC considers its high-speed rail network to be one of Europe's most exciting projects. Proposals for privatizing part of the railroad system are being considered. The EC is balancing the interests of environmentalists in developing this new transportation system.

The EC's new transportation program should create opportunities for U.S. firms. For example:

* U.S. truck companies, already used to a single market, can take advantage of the EC's new road haulage rules to carry freight in the EC.

* The EC's plans for the construction of a highspeed rail network should lead to opportunities for U.S. companies.

* The EC's expected infrastructure requirements to meet increased demand in air travel will open opportunities for U.S. companies in areas such as air traffic control.

* New market forces in the EC should create demand for the services of U.S. distribution firms. U.S. distributors have the experience of operating a single market.

Road Haulage. The EC program in road haulage is pretty well set in place. The Commission projects that road haulage is set to grow by 60 percent by the year 2000 with a resultant increase of vehicles of some 20-40 percent. This traffic could not move smoothly in a highly regulated system with lengthy border delays. The goal of the EC's road haulage program is to create a single market enabling trucks from licensed companies to travel freely throughout the EC, without regard to nationality. As a first step, the Community adopted in 1988 a regulation allowing trucks to pass freely from one member state into another without being restricted by quotas. Previously, a quota system limited the number of trips trucks could make between member states.

Secondly, the Community adopted a regulation in 1989 allowing nonresidents of one member state to provide transport services in another member state. This regulation allowed nonresident carriers to offer transport services involving pickup and delivery functions within an EC member state. This is known as cabotage. This practice will increase transportation and distribution efficiency significantly in the EC. It was estimated that previously, up to 35 percent of the trucks that crossed into the border of one EC country returned to their home base empty.

The Community plans to increase the number of cabotage licenses by 40 percent annually from 1990 to 1992. The concerns of member states about possible excess capacity have also been addressed in part by the adopting of a final regulation that gives the EC Commission authority to limit and resolve excess capacity situations should they occur. The EC still has not proposed a cabotage regime for trucking for the post 1992 period.

Besides setting rules guiding market access, the EC has passed laws for technical requirements and environmental concerns in forming the single market in transportation. The EC passed legislation setting the length of truck trailers and the number of hours each driver is allowed to drive. The EC has also set rules for noise and air pollution.

U.S. trucking companies complying with these rules will have full access to the new liberalization of the EC program. Large U.S. firms polled run the gamut from showing high interest in the EC market to showing very little interest in it. One U.S. firm has aggressively expanded its operations in the EC. Other major U.S. trucking firms are either seeking to buy a company in the EC or link up with a partner as a way of establishing a presence in the EC, rather than investing in their own equipment for use in the EC market.

The removal of border control is the final aspect of the liberalization of road haulage services. The EC has eliminated the requirement to submit a transit advice notice to the customs office at the border of each member state through which a shipment is transported. Spot checks are replacing systematic halts at customs posts and multiple customs forms have been replaced by a single administrative document (SAD). After Jan. 1, 1993, the SAD will be eliminated within the EC so trucks will only have to stop at borders for checks on such things as illegal immigration. Also after that date, trucks will report the value and origin of their goods at the point of destination for statistical purposes. EC officials say that the removal of border checks by 1993 is a realistic goal.