Europe View: Getting down to business

Europe View: Getting down to business

LONDON -- The new European Commission looks like it's about to get serious about transport, raising hopes for a rush of initiatives over the coming year that promises to radically reshape key sectors.

This is quite a turnaround from just a few weeks ago when the two regulators most closely linked to transport were mired in controversy. Transport commissioner Jacques Barrot's future was in doubt after he failed to disclose during his confirmation hearings in the European Parliament that he was given an eight-month suspended jail sentence in 2000 for illegal financing of a political party in his native France. Nellie Kroes, the Dutch competition commissioner, was given a rough ride by lawmakers who complained she wasn't up to the job and feared her objectivity would be compromised by her longstanding ties to big business before she arrived in Brussels.

Both commissioners eventually survived the awkward start to their five-year terms are now free to focus on in-trays bulging mostly with left over business from their predecessors that was snared in Brussels' labyrinthine legislative process. Few of the dossiers will command much attention outside the affected industries and companies, but taken together they are critically important. Deregulation of transport, energy and postal services, is at the heart of the EU's plan to overtake the United States as the world's most dynamic economy by 2010. Brussels admits that since the plan, known as the Lisbon Agenda, was adopted four years ago, the EU has actually fallen further behind the U.S., partly due to the fact that it has failed to create a single market in transport.

The commission will get down to business next week when its competition regulators embark on the final stages of a probe into liner shipping conferences that is almost certain to end up outlawing a controversial regulation allowing carriers to collectively set freight rates and regulate capacity, freedoms that are prohibited to almost all other sectors. The regulators have to sift through comments from shippers and other interested groups before they take a final decision, but there's little doubt that the days of the 130-year-old conference system are numbered.

Kroes won't be involved in the final decision as her 11 years on the board of P&O Nedlloyd, the world's fourth-largest container carrier, raised potential conflicts of interest and prompted her to stay away from the case. But she will have plenty of other opportunities to lock horns with the transport industry as she ponders whether to run with a proposal to subject tramp shipping and coastal shipping services to EU anti-trust laws.

Meanwhile, competition regulators continue to probe into related maritime sectors that were a no-man's land only a few years ago. Most recently, they ordered Dutch tug boat owners to return hundreds of thousands of dollars in illegal state aid.

The commission continues to vet state handouts to other sectors such as trucking and rail almost on a weekly basis, a low profile but crucially important task that ensures governments are not distorting competition in the EU's supposedly single market.

The new commission is facing an early test of its resolve to suffocate the subsidy culture in the airline business as it prepares to rule on the legality of the third government-financed rescue package since 1997 for Alitalia, Italy's perennially troubled national airline. Its predecessor made history by refusing state aid to Belgium's Sabena which became the first flag carrier ever to go bust but Alitalia is a much tougher proposition. It will be a tough call with several large EU carriers, including privately owned British Airways and Lufthansa, warning Brussels that further aid to Alitalia would "severely hinder the much-needed consolidation of the European airline industry [and is] a major distortion of competition."

Brussels also is gearing up to resume negotiations with Washington on an aviation accord to free up passenger and cargo services on the $18 billion-a-year trans-Atlantic market. The talks were inching toward a deal that would, among other things, ease foreign ownership curbs and nationality-based traffic limits before Washington's negotiating freedom was constrained by the U.S. election campaign.

With talks likely to resume early next year, Barrot must decide soon whether to revert to the EU's original radical aim of a establishing a single trans-Atlantic aviation market or trust Washington's offer of a limited deal coupled with a promise of a more comprehensive accord to follow. His task has been made more difficult by recent allegations by EU carriers that failed U.S. airlines are using Chapter 11 bankruptcy protection to undercut their more successful rivals. This is akin to propping up the " the walking dead", according to British Airways which alleges its Chapter 11, including United Airlines, are slashing fares on the North Atlantic to generate cash regardless of profitability.

Barrot's other big imminent decision will be how hard to push his predecessor's revived plan to deregulate port services in the face of growing opposition across the industry. The original proposal was thrown out by the European Parliament just over a year ago after massive protests by longshoremen, and the new plan is attracting even more flak with port operators claiming it will scare off potential investors and the British government alleging its privately-owned ports will be put at a disadvantage to the mostly public ports on the continental mainland.

The commission also must find time to focus on several other dossiers affecting competition across the entire transport chain. Key priorities are ensuring that member states honor agreements to open up the rail freight industry to cross-border competition to reverse its near-terminal loss of market share to trucking; aggressively promoting short sea shipping to take cargoes off Europe's congested highways, and radically reforming the outdated system for allocating take-off and landing slots at leading hub airports.

The prize for taking on the vested interests that infest the transport industry is faster economic growth across the EU; the penalty for caving in to them is an ever-widening gap with the U.S.

Bruce Barnard is the European correspondent for The Journal of Commerce Online.