FAIR ROAD FREIGHT TRANSPORT – identifying the model of the transport company disturbing European competition

Dear Members of European Parliament,

Just think few seconds and consider what you have done in recent period, last year, to increase the competitivity of EU in front of other significant economic global players?

I am sure you did a lot related to internal oganisation of EU, or at least you tried.

Talking about road transport within EU, in my opinion we should look to the issue of competition from above and not from West, as is mainly today spirit with this frenetic approach of “social dumping”

Looking from East we can talk about “financial dumping” of West companies.

In my opinion, The problem lays in a different area. The EU economy does not perform, it is slowing down, small and medium companies have different expectations and ask support from governments – i think it is a wrong way to move forward on long term.

Which is the ultimate goal of each road transport association, the dream, the vision of road transport in EU? Is the Utopic society where everything will be identical from Portugal to Romania? Same labor cost, same everything? We lived that in communism and we can see it does not work. There are differences in wages, house pricing in every country, even within various areas of the same city.

The problem is that, despite everybody agrees for long term dream: liberalisation, but for tomorrow each requires some protective/restrictive measures.

It is true that a solution to a problem will generate over time another problem. But comfort or easy solutions today will make more complicate and difficult future solutions.

At the end of the day, decision in EU will be taken based on votes, but even so the paradox continue to exists: West EU consumers are asking more for less, demanding better products/services for less money. Suppliers are trying to satisfy these demands. For example Renault is offering to its customers better cars at lower prices. In order to make this possible, Renault moved some of production capacities to Romania, Russia, Marocco. Result: increased satisfaction of French consumers and jobless workers from Renault production capacities located in France.

It is easier to blame Romanians and Maroccans for lower costs ? But is this the real cause? Who is stopping West EU consumers to buy more/only West EU products? Maybe exact The Price! Why to pay more when you can pay less?! It is the same with road transport: consumer is interested to pay less! German consumer would like to take home 12 beers for 10 euro and not 10 beers just because they were delivered by a German transport operator. Similar examples you can find in any country Mercedes and Audi from Germany open production facilities in Hungary, Porsche in Czech Republic and Slovakia. Valid for a lot of industries.

In my opinion we should split the issue in smaller pieces. To design a model of disturbing activities of certain type of companies and to identify all issues related to fair/un-fair competition. Social conditions are the most visible, but for sure these are not the only ones. Otherwise the treatment offered for the market, could be totally different from one needed, if we talk about the same market in reality.

 

1. WHERE ARE THE PROBLEMS IN EU COMPETITION? – Geographically in WESTERN EU:
   France – minimum wage?!
   Germany– minimum wage (2015)
   France – legislation against social dumping (2014)
   Belgium – legislation against social dumping (2014)
   Finland – national interpretations to the Regulation 1072/2009 in respect of international transport and cabotage (2013)
   Denmark – national interpretations to the Regulation 1072/2009 in respect of international transport and cabotage (2013)….who is coming next? Italy, Netherlands, etc
   
   2. WHO ARE THE COMPETITORS? (only legal competitors, any illegal action must be sanctioned)
   
   Western EU road transport companies

• Western SMEs
• Western multinationals

Eastern EU road transport companies

• Eastern branches of Western companies
• Eastern EU road transport companies – SMEs in majority

2.1. WHO ARE THE EAST COMPETITORS “DISTURBING” WESTERN EU?

• East branches of West companies are the main competitors of Western SMEs, as by subcontracting Eastern companies or employing Eastern drivers, these Western companies meet their clients’ demands while maximizing their profit by benefiting from both the advantages of cheaper costs of finance from Western EU together with the competitive advantage of labor cost from Eastern EU.(please see East-West cost comparison – below)

Western multinational companies are those using most frequently Eastern European drivers for transport operations within EU.

• Eastern EU road transport companies – SMEs in majority – have similar operation costs like their West SMEs competitors. As Eastern companies’ costs of financing vehicles and operations are three times higher than the ones of the Western companies, any Eastern labor cost advantage is cancelled. (please see East-West cost comparison – next slide)

3. 
   COST STRUCTURE COMPARISON BETWEEN WEST-EAST COMPETITORS ON West EU routes

COST ELEMENT	EAST EU COMPANY	WEST EU COMPANY
TRUCKS	7 brands manufactured in West EU -DAF, Mercedes, Iveco, Volvo/Renault, Man/Scania- Bought at Western price +	7 brands manufactured in West EU -DAF, Mercedes, Iveco, Volvo/Renault, Man/Scania- Bought at a slight cheaper price and better quality
TYRES	Same price for East and West EU
INSURANCE	Slight higher price than West EU competitors	Slight cheaper price than East competitors
DIESEL	Slight higher price than EU competitors	Slight cheaper price than East competitors due to better local knowledge
LABOR COST	East EU drivers have lower total cost of the jobs, but similar income with other drivers – considered as social dumping by West competitors compared to their own Western reference system	Higher labor cost correlated with higher social standards and also higher cost of living
FINANCING COST	Higher cost for Eastern companies (4.5%) than for their West competitors	Cheaper cost for Western companies (1.2%) than for their Eastern competitors – considering Eastern EU financing system as reference, Western Europe is making Financial Dumping based on the interest levels – 4 times smaller than in East EU

Good to know: professional drivers no matter which country are employed, as far as they work on West EU area, they get the same amount of net income in their pockets at the end of the month.

As a prove of the self leveling labour market of the professional drivers, it is the lack of drivers for long distance transport operations on West EU market. If the net income would be so different between West and East companies, than West companies should not talk about driver shortage.

Therefore it is only about the total cost of the job, and not about the net income of the drivers.

German scam on minimum wage in international road transport: Germany is the country pushing two years ago for giving the right to have temporarily tachygraph driver digital cards for non-residents. Today German companies using Philippino drivers hired in Baltic countries, but driving German trucks, as far as they do not enter German territory MiLog (law of minimum salary adopted by Germany starting with 01.01.2015) it is not applicable! These drivers are 3 times cheaper than the cheapest East EU driver!!!! Therefore Germany ask increases the cost of labour of everybody going in Germany, but keeps the advantage of extreme low cost labour force from outside EU to be used on competition outside Germany.

You would say any company from every EU country can hire Phillippinno drivers through most permissive labor import country.

But you can say equally any company from every EU country can establish in West EU and obtain access to cheap money – which is extremely seldom.

But you can say equally any company from every EU country can establish in East EU and obtain access to cheaper (total cost of) labor force – which is extremely often.

 

5. 
   WHO IS AFFECTED? SOCIAL DUMPING VS FINANCIAL DUMPING
   
   Western SMEs could be affected by the competition from Western multinationals which are using cheaper total labor cost Eastern drivers.
   
   But
   
   Can it be defined as SOCIAL DUMPING of Eastern EU?
   
   Dumping means to sell a product or service below the cost of production.
   Eastern drivers they do not work under their cost of living, by contrary they make better money than at home.
   Ro driver earning 2000euro/month will be able to build nice house at 30km outside Bucharest in 5 years, while a Dutch driver will just pay the rent for the house.
   
   The problem of dumping is the reference system: which country rules should be observed – country of establishment or country where the activity is performed?

• by comparing the total cost of the job for same net income of a Ro driver and NL, F, D driver – the cost is bigger for West companies
• by comparing the total cost of Ro driver and total cost of West EU driver – this is how West EU considers the dumping having as reference for the payment of an Eastern employee its own (Western) system

THEN, what about the FINANCIAL DUMPING of Western EU?
interest levels for financing West companies are 4 times smaller than in East EU countries.

6. Which is our vision of road transport market in EU?

• Is the Utopic society where everything will be identical from Portugal to Romania? Same labor cost, same everything?

Communism proved it does not work.

• Is the market economy, where there are differences in wages, house pricing in every country, even within various areas of the same city?

These differences make our world more dynamic and attractive for trade.
Each EU enlargement increased EU GDP/capita for the existing members of the EU (source – wikipedia):

EU enlargement	Existing EU Members	GDP per capita (US$)
1995	EU 15	16,831
2004	EU15	20,200
2007	EU25	26,217

What do the Western citizens and consumers want?
Products and services at a reduced price for the same quality. Consequently, the consumers and forwarders are interested in lower costs.

7. QUO VADIS EU?

Although everybody would agree for the long term dream of liberalization, for tomorrow each requires some protective/restrictive measures.

Protectionist measures – the wrong way to move forward on long term
– the real cause is not the unfair competition of Eastern EU,
but the fact that the Western economy does not perform, it is slowing down and the companies ask support from governments
– But comfort or easy solutions today will make more complicate and difficult future solutions.

OR

Gradual harmonisation and further market liberalisation

– phased harmonisation of minimum wage in EU over the next 10 years – like it happened for excise duty, vat, etc – more realistic approach

– continued market liberalisation as a premise of economical and social harmonisation

• removing protectionist barriers

 

Easy way in present is not always the long term sustainable solution!

 

THE KEY POINT IS TO MAKE EU ECONOMY MORE COMPETITIVE IN FRONT OF OTHER GLOBAL PLAYERS!

 

IF WE WILL FOCUS ON HOW TO SLICE EXISTING EU ECONOMIC (DECREASING?) PIE AMONG MEMBER COUNTRIES, WE WILL LOSE FOCUS ON HOW TO INCREASE THE EU ECONOMIC PIE.

 

AND THIS MAY BE THE START OF THE END OF EU DREAM. IT CAN BE A NEW BEGINNING (TOWARD EU FEDERAL APPROACH) BUT IT DEPENDS ONLY ABOUT US!

 

LARGER ECONOMICAL CONGLOMERATES LIKE FORMER HISTORICAL EMPIRES COLLAPSED FROM INSIDE!