Since the early 1990s, The European Union’s railroad has experienced major restructuring and deregulation processes. These reforms have been necessitated by high subsidy requirements; the falling market share of the sector compared to other modes of transportation; and the need for an efficient integrated railway system throughout Europe. The need for an integrated railway system across Europe has been justified by the need to facilitate cross-border freight traffic within a unified European market. In a similar turn of events, the United States rail freight industry has since the 1990s experienced an increase in its modal share, productivity, and profitability. Nonetheless, there are significant differences between the two regions’ freight transport. These include structural and natural disparities, train characteristics, and policy answers to the crises both regions during the Second World War. The purpose of this paper is to conduct a comparative analysis of the intermodal transportation in the two countries, with special reference to the impact that regulation and deregulation has had in influencing the two countries’ transport systems. It will be seen that, although the European Union has made significant strides towards creating an open and integrated railroad system, it has done little compared to the United States, whose deregulation practices are responsible for the revival of the country’s railways.
The European Union Rail freight transport has experienced low levels of absolute growth in the past two decades. During this period, the share of rail freight has significantly declined at the expense of road freight. These statistics, however, fail to highlight the discrepant nature of the member states’ freight volumes. For instance, during the period, Germany and the Baltic member states have experienced strong growth, while France, Slovakia and Bulgaria have experienced a sharp decline (Wetzel, 2008). The shippers’ decision on which mode of transport to use is determined by such conditions as past experiences, the attributes of the carrier, distance, and time requirements (Wetzel, 2008). In the United States, rail has a larger market share compared to Europe, mainly because it is the recognized mode for long distance transportation, with the ability to generate economies of scale. Moreover, the United States prides itself in double-stacked capacity, which in addition to train lengths exceeding 10,000ft, account for capacities of up to 650 TEU (Clausen & Voll, 2013). In most cases, trains in Europe reach between 80-90 TEU. Rail road transport in the United States is therefore a profitable business which greatly benefits from privatization.
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The greatest contributing factor to the recent progress in the United States’ rail road transport is the country’s policy practices. As Furtado (2013) observes, the United States’ railway system was privatized but it was heavily regulated. The problems of the railway system culminated in the Northeast rail crisis of the 1970s, when a large number of the country’s railways filed for bankruptcy. The response to these was a series of reforms, starting with The Rail Passenger Service Act of 1970 (Furtado, 2013). This act relieved freight railroads of the losses associated with providing passengers services for inter-city transportation. This was followed by the Regional Rail Reorganization Act of 1973. This act consolidated the bankrupt railways into the Consolidated Rail Corporation. Moreover, the Railroad Revitalization and Regulatory Reform Act of 1976 allowed for extensive funding from the federal government (Furtado, 2013). This ensured the survival of the Consolidated Rail Corporation and secured capital investments. The corresponding changes reduced federal regulations on railroads marked the beginning of the deregulation process.
Among the policies implemented during this period, the Staggers Rail Act of 1980 proved to be the most impactful to the railway sector (Furtado, 2013). This permitted railways to decide which route to use, the range of services to offer, and the fees to charge. The result of these practices was the revival of the U.S. railways sector, facilitated by a radical reduction in costs, which led to increased productivity.
Policy changes aimed at revolutionizing the European Union’s railways industry began in 1991. The focus was to move towards a single and open market, which would be made possible by ending state-owned monopolies. Another strategy would be separating infrastructure and operations – either full separation or creation of holdings where different divisions of the group are tasked with infrastructure or holdings. A single market was imperative in ensuring that countries could not block companies from other companies from operating within their boundaries. A single market would also be beneficial to railways as they would facilitate the removal of technical and operational barriers. Nonetheless, implementation in the E.U has not been as aggressive as it was in the United States. In fact, railway packages only began being rolled out in 2001, with the second and third being rolled out in 2004 and 2007, respectively (Clausen & Voll, 2013). These packages were all aimed at achieving the E.U’s primary goals of creating an open and integrated market.
It should be noted that, in spite of the changes being implemented, the process is far from flawless. For instance, the European Commission in 2012 made a proposal for full separation between infrastructure and operations (Clausen & Voll, 2013). This, however, stalled due to intense lobbying by Germany. It has also been noted that, while the rail modal share has stabilized thanks to these reforms, monopolies still exist in most E.U countries. As such, the result of the reforms are far from what was achieved by the U.S with its deregulation process.
Conclusion
The differences between rail transport in the United States and the European Union is highlighted by the two regions’ response to the crises that followed the Second World War. The United States took a proactive approach in the 1970s through a series of reforms which culminated in the Staggers Rail Act of 1980. The consequence of the United States’ deregulation practices was the revival of the country’s railways. On the contrary, the E.U’s less aggressive practices have seen the region’s railway sector lag behind. Although intended at creating an open and integrating market, policy changes have been slow and modest at best, leading to the slow growth of the region’s railways.
References
Clausen, U., & Voll, R. (2013). A comparison of North American and European railway systems. European Transport Research Review , 5 (3), 129.
Furtado, F. M. B. A. (2013, June). US and European Freight Railways: The Differences That Matter. In Journal of the Transportation Research Forum (Vol. 52, No. 2).
Wetzel, H. (2008). European railway deregulation: the influence of regulatory and environmental conditions on efficiency (No. 86). University of Lüneburg Working Paper Series in Economics.
