How Deregulation Has Led to Better Transportation in Europe

by Yiping Duan

Before I moved to Europe, my expectation of the much hailed European integration had been that I could take my bag and travel with a bus or train freely and easily throughout Europe. But when I arrived and eventually  first travelled by train from the Netherlands to Germany, I was surprised that it was actually quite complicated and inconvenient – even inside of Germany, I still had to transfer lots of times. After more than sixty years of European integration, transport connections are still not properly connected across the 28 (or soon-to-be 27) member states. There is still a lot that needs to been to promote the free movement of goods, capital, services and labor, i.e the Four Freedoms, inside the European Union.

However, I have also had more enjoyable experiences, for instance last month, when I travelled from Budapest to Vienna. The bus was operated by a private company called RegioJet: it was cheap and provided high-quality service on board. In fact, liberalization efforts for transportation, having been followed through in several European countries in the last years, made this happen.

A strong and competitive transport market can drive economic growth in Europe. According to the EU statistical pocketbook in 2016, transport and storage services sector included around €633 billion in Gross Value Added (GVA) at current prices, accounting for about 5.1% of total GVA in the EU-28 in 2014. This industry has around 11 million employees, accounting for 5.1% of the total workforce in 2014.

Historically, the European transport market has been severely regulated. Those regulations included fixing tariffs, quantity restrictions for market entry, quality control, working conditions and standards for vehicles. Over the past 60 years, the EU has put forward a set of rules and tried to guarantee a fair and open environment for competition in the transport market. In 1985, the European Court of Justice initiated some liberalization policies and unveiled the liberalization process. Till now the bus transportation market is widely liberalized in most of Member States. Among these liberalization policies, tariff regulations abandonment and free market access plays an important role.

This reduced the administrative burden, which can improve efficiency and promote productivity. In December 2011, EU Regulation 1073/2009 came into force, and provided a list of common rules for access to the international market for coach and bus services. The purpose of this regulation was to clarify and simplify rules, remove the many technical and administrative barriers, and to avoid unnecessary bottlenecks in Europe’s transport system.

The deregulation process also reduced entry barriers in transport markets and promoted independent competitive pricing among transport service providers. Moreover, it allowed the free entry, exit and pricing in transport markets. As the regulation made clear:

“Freedom to provide services constitutes a basic principle of the common transport policy and requires that carriers from all Member States be guaranteed access to international transport markets without discrimination on grounds of nationality or place of establishment.”

After the EU’s enlargement in 2004, new member states gained full access to the transport market in Europe. RegioJet, for instance, is a bus company from the Czech Republic, and was thus also one of the beneficiaries of this policy.

Nonetheless, despite transport markets having been liberalized in Europe recently, there are still lots of barriers in place. Therefore, to keep Europe transportation market competitive and productive, deregulation efforts should be continued.

Yiping Duan is an intern at the Austrian Economics Center and a student at the University of Groningen.