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Railways on track for a brighter future

The outlook for Europe's railways is sunnier following recent legislation which will allow European rail companies to ply their trade across the EU's internal borders, thereby increasing competition and improving services. Goods traffic is the first market segment to be affected but passenger services are expected to follow later. The European Parliament has warmly supported greater competition in the rail industry, since MEPs hope improved rail services will encourage traffic to shift away from road and air.

In the case of both freight and passenger services there are sound reasons for promoting railways over road and air transport: to relieve congested road and air space and to benefit the environment, since rail generates less pollution than either of its rivals. However, Europe's railways have been losing ground to road and air transport for some time: between 1970 and 1998 the share of the goods market carried by rail in Europe fell from 21.1% to 8.4%. Yet while rail haulage was declining in Europe, it was flourishing in the USA, where railways now transport 40% of total freight. The decline of rail would therefore not seem to be inevitable.

To boost rail traffic in a European market fragmented into national networks is not a simple business. Barriers include the technical incompatibility of different rail systems and the reluctance of some governments to expose their rail operators to outside competition. The European Community has been advancing by stages towards granting rail operators increased access to networks across the continent. A degree of liberalisation was introduced in the early 1990s and was followed in 2001 and 2003 by two major legislative packages.

First steps - competition in international freight traffic

The first rail package, adopted in 2001, took a step towards liberalising international freight traffic. National governments meeting in the Council of Ministers wanted to limit liberalisation to the Trans-European Rail Freight Network (TERFN), which consisted only of certain major terminals and ports. Under pressure from Parliament, however, the ministers agreed to restrict liberalisation to the TERFN only up to 15 March 2008, after which rail companies wishing to operate international goods services would have access to the entire European network.

This legislative package also tidied up the patchwork of differing national rules on granting licences to rail companies, allocating access to rail infrastructure and issuing safety certificates to rail companies. Without standard Europe-wide rules on such matters, free market access would be a dead letter.

Domestic freight liberalised, plus earlier date for international freight

However, champions of rail transport regarded the achievements of the first package as too timid. Developments in the rail world seemed to support the idea that even faster liberalisation was needed. For example, new alliances between operators in Italy, Germany, Austria and the Netherlands were springing into life to operate in international corridors, especially through the Alps. The Commission argued that the first rail package had created a dynamic on the market, with new expectations from shippers, operators and investors. It added that these expectations had been fuelled by Parliament's call for full opening up of the freight market at the time of the last round of legislative negotiations in 2000.

The Commission therefore put forward a second rail package in 2002 with the aim of speeding up liberalisation of freight traffic. Again, some governments, particularly those of France, Belgium and Luxembourg, resisted faster liberalisation. The first major point to be settled was a fresh date for liberalising international freight traffic. Under the first rail package this had been set at 2008 but the date was now brought forward to 1 January 2006, although it was Parliament which made sure a precise date was set. Parliament also wanted domestic freight services to be liberalised from 2006 but, faced with resistance from national governments which preferred 2008, MEPs compromised on a date of 1 January 2007.

Passenger services next?

Passenger services are an even more sensitive issue than goods traffic, with certain governments digging in their heels against opening up their passenger networks to competition from foreign rail companies.

For international passenger traffic, the vague sounding compromise agreed in the second rail package is that 2010 has been set as "an objective" for liberalisation, i.e. nothing specific is guaranteed. However, the issue is far from being shelved, as the Commission is now proposing 2010 as the date for liberalising this category of traffic in its third rail package, which is already in the pipeline.

Domestic passenger services are the final redoubt of national rail companies and some governments would prefer to put off as far as possible the day when they are finally liberalised. Proposals to open up these services to EU-wide competition are only expected at a later date.

Safety and interoperability

Apart from the high-profile question of dates for liberalisation, the second rail package, like the first, contained a range of accompanying measures on safety and technical issues.

National safety rules will be harmonised, and here Parliament persuaded the governments that the introduction of new national safety rules should be kept to a minimum. Since train accidents can be caused by poor communication, MEPs insisted that staff who perform key safety tasks must have an adequate command of the codes and language used for operations on the routes on which they work. Interoperability, aimed at defining an optimal level of technical harmonisation, was another area covered in this legislative package. Thanks to Parliament, a mandatory recording device (black box), similar to those used on planes and ships, will be installed on trains and will use harmonised data collection and processing methods.

Lastly, a European Railway Agency has been set up to oversee safety and interoperability. The board of the agency will have members from every EU country and the Commission. As a result of pressure from MEPs, employers and employees will also be represented on the board and on the working parties dealing with work conditions, health and safety.

Working with market forces - if they deliver the best results

The aim of the EU's recent rail legislation is not to expand the market share of rail by fighting against market forces but rather to use market forces to enable the rail industry to compete. And liberalisation does not necessarily mean privatisation, since both state-owned and private rail companies will be able to compete for business in newly opened markets.

Finally, an interesting comparison can be drawn between the European Parliament's attitudes towards liberalisation of postal services and of the rail industry. In the former case, MEPs opposed what they saw as excessive liberalisation and successfully fought to preserve a universal service, such as rural mail deliveries, at affordable prices to all customers. In the case of rail, Parliament has been far more eager for liberalisation than national governments, believing that any disadvantages are outweighed by the benefits to society from a more efficient rail industry.

Opening to competition of Community postal services: Markus Ferber (EPP-ED, D)
Official journal - final act
Opening to competition of Community postal services



  Publishing deadline: 2 April 2004