EU Cabotage: Pros, Cons, & Proposals
Cabotage is defined as the transport of goods or passengers between two places in the same country by a transport operator that is registered in another country, often referred to as “container transport”. Although the word was first used in regards to transshipment along coastal routes, within the EU it now mostly applies to on-the-ground container transport methods, such as trucks and railways.
The EU remains a single market that guarantees the free movement of goods, services, capital, and people. Yet as the EU has fully liberalized international transport and truck deliveries, only cabotage is still subject to certain restrictions, speaking to significant wage differences across the EU and the subsequent varying costs for transport services between states. In other words, while legalizing cabotage within the EU has certainly created a number of “economic winners,” it also requires regulation aimed at mitigating the negative affects on drivers from states with relatively higher wages.
Pros of Cabotage: Efficiency, Environment, Consumers, and True Integration
In 2015, 23% of all heavy-goods vehicles in the EU ran empty. Empty vehicles are not only wasted opportunities for transporters and freights, but are also unnecessarily harmful to the environment. Through legalizing cabotage, transport operators are able to optimize their routes so that the least number of vehicles are running empty, while companies needing transport services have an increased choice of service providers. Furthermore, cheaper and more efficient transport costs transfer to lower prices for consumers. Considering cabotage’s benefit to transporters, their clients, consumers, and the environment, it’s easy to understand the EU’s comparatively relaxed stance on cabotage.
Cons of Cabotage: Unbalanced Competition & the Transport Outsourcing
Yet the fact that cabotage requires at least some sense of regulation speaks to its darker sides. Its cons are simple: Why hire a German driver to transport within Germany when a Polish driver would do that same route for less pay?
The legalization of cabotage gives way to unbalanced competition between transport operators of different states. These differences in costs hurt both transport operators based in countries with comparatively higher minimum wage requirements, as well as drivers within those operators, replacing one truck driver with another who works the same route for less money. Indeed, despite the opportunities EU integration has created, the various economic situations within the EU single market can foster a number of issues such as brain drain, low-skill labor scarcity, the creation of isolated diasporas, etc. Yet cabotage hurts a specific group of workers within a particular industry, most of whom live in states with relatively high costs of living.
The EC has spoken: More Cabotage, Less Regulation
Surely, the European Commission imagined the potential downsides of allowing cabotage throughout the EU. As a result, a number of restrictions were put in place so as to prevent entire transport markets from being replaced by those of their neighboring states. As it stands now, current EU cabotage law consists of the following regulations:
Cabotage within a state must be preceded by an international transport operation – sending an empty truck to carry out cabotage is forbidden.
The 3-7 principle looks to limit the number of cabotage operations carried out within a certain time period. As such, after unloading an international freight in a foreign country, a maximum of 3 cabotage operations can be carried out with a period of 7 days.
In May 2017, however, the European Commission proposed amendments to current EU cabotage requirements, essentially looking to further relax regulations. Under the new proposal, the 3-7 principle would be replaced with unlimited cabotage operations within 5 days following the unloading of an international freight. This will make it so that cabotage operations that involve several loading and/or delivery points would be easier to enforce within EU law.
Furthermore, the amendments would allow cabotage operations to include “light commercial vehicles,” extending the number of businesses that could qualify for legal engagement in the occupation of road transport operators. Meanwhile, Member States will be required to carry out a minimum amount of checks of compliance with cabotage provisions (i.e. 2-3% of cabotage operations).
These changes are estimated to, through reducing enforcement costs, increasing flexibility, and reducing empty runs, generate savings for EU-28 businesses in the range of 2.7-5.2 billion euro between 2020-2035, as well as to reduce the number of cabotage regulation infringements by 62%, according to the European Parliament.
As such, while businesses, consumers, drivers, and the environment are likely to continue benefiting from cabotage at higher rates, an inverse affect can be expected to tar the experiences of transport services and drivers from states with relatively stronger bureaucratic systems and higher minimum wage laws.
If you’re looking to transport goods within the EU, or if you have cargo that needs transporting, Teleroute offers secure, efficient, and wide-reaching services in matching freights with transporters.
