Europe’s transport sector: the engine behind the Single Market

2012 marked the 20 year anniversary of the European Single Market. Over these past two decades, European Union transport policy has been a central pillar of efforts to bolster the free movement of goods, persons, services and capital between the 27 EU Member States.

The transport sector should in many ways see itself as the enabler of the Single Market – the catalyst to the further deepening of trade and economic ties between EU members. Unsurprisingly therefore, transport is a hotly debated area in Brussels covering numerous policy initiatives across the different modes.

Mixed results for market liberalisation

The transport market liberalisation agenda remains high priority, although historically progress has been unequal across modes. Liberalisation of the aviation market in Europe in the 90s ushered in a period of unprecedented growth in air transport and introduced many new entrants and business models into the market. The low fares model has clearly been the major driver in this process. However, Europe’s airspace continues to be fragmented and the patience of EU regulators appears to be wearing thin with Member State reluctance to pool their airspace sovereignty within the Single European Sky process.

The road, port and rail sectors lag further behind. The recent Fourth Railway Package proposed by Brussels in early 2013 is yet another effort by the EU to break open the disconnected and oft protected national railway market. At the same time, the EU will be looking to extend cabotage rules in the road sector in the coming months, despite potential opposition from certain Member States wary of the impact on their own, fragmented, road haulage market vis-à-vis potential European competitors.

An ambitious frontrunner on environmental issues

In terms of environmental protection in the field of transport, Brussels has moved forward with (sometimes overly) ambitious policy goals. The automotive sector continues to be heavily regulated in terms of non-CO2 and CO2 emissions control, with increasingly stringent technological requirements set by Brussels periodically. Whether this stimulates innovation or restricts competitiveness of European producers remains the key open question.

Meanwhile, the EU’s efforts to bring international aviation within its cap and trade emissions trading scheme have been met with international outcry and threats of retaliation by its global trading partners. The move is currently on ice and has certainly provided food for thought for Brussels as it considers taking the same approach to the international shipping sector.

Passenger rights as a flagship

Most EU commentators would point to the passenger rights agenda as the bloc’s biggest success in the transport field – the topic that normally appears first in the table of contents for any European Commission-produced brochure on transport policy. The success of passenger rights legislation is perhaps debatable with significant cost concerns from industry and soon-to-be-addressed problems of implementation throughout the EU. However, it is likely that the rights afforded to EU citizens when, say, flying internationally, far outstrip those of travellers anywhere else in the world.

The changing global landscape

The EU’s detractors would argue that the focus on regulation over liberalisation has placed a net burden on Europe’s transport sector. European legacy airlines and automotive manufacturers continue to struggle faced with global competition, whilst the centre of gravity for the global logistics market seems to continuously shift eastwards.

At the same, the challenge of the EU’s transport agenda must always take note of the principle of subsidiarity. That is to say, the EU is wary of looking to regulate in the more localised aspects of transport policy which remain at the behest of individual EU Member States. Areas such as road safety, urban mobility and infrastructure development (outside of the power of the EU purse strings) have seen, and will continue to see, less influence wielded by the EU executive compared to the national capital.

Looking ahead

With European Parliament elections approaching and a new European Commission due to be appointed in 2014, it will be interesting to see what the future holds for the European transport policy agenda. Clearly the completion of the single transport market remains an enormous undertaking and the voice of industry will be critical as the new political regime gathers momentum over the next 18 months.

Many of the future priorities will undoubtedly be wrapped up in the EU’s position more globally, as it faces up to rapidly changing trade and transport flows and questions about the bloc’s own economic competitiveness. It is indicative that the world’s three fastest growing trade routes essentially bypass Europe altogether (Asia-Africa, intra-Asia, and Asia-South America).

So whilst there will be continued emphasis in Brussels on getting Europe’s own house in order, this will ultimately be a hollow effort without a firm eye on the external dimension of EU transport policy, and the continued engagement of industry and other stakeholders in the process.