Liberalisation of Rail Freight Markets in the Old and New EU-Member States

Abstract

This article examines whether the European Commission succeeded in reducing the negative socio-environmental externalities of road transport in Northern, Central and South-eastern Europe by introducing the First Infrastructure Package and Interoperability Directive that opened rail freight markets to competition. Using results from the EC-sponsored REORIENT project, the article searches for causal links between the completeness of legislative adherence and the occurrence of market rivalry. In so doing, it draws on the New Public Management (NPM) theorem which provided conceptual underpinnings for liberalisation policy and the notion of path-dependency warning that effectiveness of any public policy is contingent on the features of its implementation context. The article contrasts the adoption of rail deregulation directives by the old and rich EU-states in the Nordic region with the newly liberated, more recent EU-members in Central and South-eastern Europe in order to expose how the political, economic and cultural features of these countries affected the quality of legislative compliance and market rivalry. This method unearthed a clearly polarised picture of inter-country compliance and competition pattern. Norway, Sweden and Finland exhibit high levels of legal adherence without however, much intra-rail competition. Cut-off from the government subsidies, these countries’ state railways compete today with road operators, without however facing much rivalry from truckers. On the other hand, the new EU-members still lag on legislative conformance, but their licensing authorities granted operating permits to quite many private entrants. These carriers compete fiercely with the national incumbents, but the rail service quality they provide does not as yet threaten the dominance of truck in national freight transport. As a result, no inter-modal competition exists there. These findings indicate that liberalisation of rail freight market has not as yet reduced the road-rail imbalance in European freight markets nor curbed the negative socio-environmental externalities associated with motorised transport. Methodologically, this article exposed the analytical shortcoming of the NPM theorem and the strong empirical relevance of the path-dependency hypothesis.