Wednesday 21st Oct 2020 - Logistics & Supply Chain

Off the rails

From the beginning of this year, ‘open access’ applies, at least in theory – any potential operator can, subject to meeting safety and compatibility requirements, demand the right to run their own freight trains on any route crossing European borders (liberalisation of purely domestic traffic is not in place yet, except in the UK). Open access has applied for some years to designated routes on the Trans European Rail Freight Network between specified ports and hubs, but other than a few operations out of the Dutch ports, take-up has been low and it’s not hard to see why this further liberalisation may also turn out to be a damp squib.

But why do we need ‘open access’? It is generally agreed that the combination of environmentalism, higher fuel costs, increased road congestion, and measures such as the Working Time Directive are increasing the theoretical attraction of rail freight, at least over longer distances (the tipping point is typically put at 300-400km but can be much lower for some traffic). In theory governments, who own or control most of Europe’s rail networks, want to encourage rail freight.

But in practice the present vertically integrated monopolies such as SNCF in France (the French are always held up as the prime example here, but all the state or quasi-state railways are guilty to some extent) have little incentive to encourage efficient cross border rail freight. If SNCF, say, has successfully hauled a load across France to the German border, it’s earned all the money it is going to: if DB is left with just a 50km drag that conflicts with more lucrative passenger services, it is in no hurry so border delays can run into days.

The miracle of the market
Open access operators would of course be paid on the success of the entire journey, paying suitable access charges to the infrastructure operators in each country (who are already required to separate out infrastructure costs to form the basis of a fair and transparent charging regime, although that is easier said than done – just think of the problems independent telephony providers have experienced in the UK getting fair access to BT telephone exchanges). Open access would force state rail operators to address their costs, remove much of the potential for hidden cross-subsidy (whether between different freight users or between freight and passenger), improve their own service if they wish to compete, and thus through the miracle of the market pull freight off the roads and onto rail.

Well, that’s the theory. In reality, the monopolies can and will raise almost insuperable barriers, often with the tacit approval of their government owners.

The bar for meeting technical and compatibility standards is raised ever higher. Despite UIC standards it is in many ways harder to run rolling stock across Europe now than it was before the Great War. But politics, not technology, is the real killer. Fundamentally, passengers, and public sector union members, have votes – freight containers do not.

The unions are right to be concerned about job losses. An open access operator doesn’t need a new locomotive and crew at every border, nor an army of clerks to hand over the traffic to the next rail administration.

Passenger rail use is growing (spectacularly so in the UK, which is already hitting serious capacity constraints) and such public money as is available for rail naturally follows the voters. Often, the cheapest way of increasing capacity for passengers is to pre-empt capacity and infrastructure hitherto used by freight. Sidings and sorting yards typically are used for commuter car parking and if you can build a supermarket on top, so much the better. Planning policies across Europe place new distribution centres and industrial parks at motorway intersections, not potential railheads, while what passes for public accountancy deems that a 10km branch line that generates just a couple of trainloads a week is uneconomic. Even if those trains are going on for 1,500km, the parent rail network sees relatively little of the revenue.

None of this makes sense by governments’ and the EU’s own criteria for economic efficiency and sustainable development. But such are the obstacles in the way of open access operators it is probable that in a few years, Europe will turn round and say, ‘Well, there’s no demand for increased rail freight,’ and the dismantling of freight infrastructure will continue unabated.

A sign of the political will? A 2004 proposal for a Europe-wide regime to compensate rail freight users for failures by rail network operators never made it through the relevant European Parliament committee (by no coincidence that committee is Transport and Tourism), and is not even on the agenda for the Council of Ministers. By contrast, there is great enthusiasm among MEPs for a compensation regime for rail passengers, applying even to local commuters who are hardly a priority at the European level.

If logistics providers and users do not make every effort to exploit the open access provisions and create merry hell when they are unreasonably frustrated, there will be nobody to blame when the rail freight option disappears and we are left hostage to a high-cost, low hours, congestion-ridden road transport system.

Key points

  • The legal regime now exists under which anyone – manufacturers, logistics firms, freight forwarders – has the right, if they can meet safety and technical criteria, to operate their own cross-border railfreight services across the EU.
  • In theory this will give operators better control of transit times, security, and other issues, and will also force a more transparent and competitive approach to pricing and service delivery by the (largely state-owned) infrastructure operators.
  • In practice, there is little incentive for the incumbent monopolies to co-operate or facilitate the entrance of new players. Moreover, there appears to be little political will to ensure that the potential benefits of the new regime are realised.
  • If potential independent operators do not fairly quickly make reasoned cases to exploit the new rules, European politicians will turn their priorities elsewhere.
  • This suggests that for long-term benefit to all potential freight rail users, the European logistics industry must be mutually supportive, even of competing proposals – difficult, but necessary.

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