• Radu Dinescu• UNTRR Secretary

General

•Bucharest, 08 May 2015

1. WHERE ARE THE PROBLEMS IN EU COMPETITION?

2. WHO ARE THE COMPETITORS? (only legal competitors, any illegal action must be sanctioned)

2.1. WHO ARE THE EAST COMPETITORS "DISTURBING" WESTERN EU?

3. COST STRUCTURE COMPARISON BETWEEN WEST-EAST COMPETITORS

5. WHO IS AFFECTED? SOCIAL DUMPING VS FINANCIAL DUMPING

6. WHICH IS OUR VISION OF ROAD TRANSPORT MARKET IN EU?

7. QUO VADIS EU?

Identifying the Model of the Transport Company Disturbing European Competition

1. WHERE ARE THE PROBLEMS IN EU COMPETITION?

….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?

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.•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.

COST STRUCTURE: Cost of trucks

Same 7 companies like in West, but the prices in Eastern countries are a little bit higher compared to Western countries

COST STRUCTURE: Tyres

For tyres, there are the same prices also for West and East EU countries.

COST STRUCTURE: Insurance

East EU companies have western prices at insurance. Insurance for West EU companies are a slight cheaper than in East EU.

3. COST STRUCTURE COMPARISON BETWEEN WEST-EAST COMPETITORS on WESTERN ROUTES

COST ELEMENT

WEST EU COMPANY EAST EU COMPANY

TRUCKS 7 brands manufactured in West EU -DAF, Mercedes, Iveco, Volvo/Renault, Man/Scania -Bought at a slight chipper price and better quality

7 brands manufactured in West EU -DAF, Mercedes, Iveco, Volvo/Renault, Man/Scania - Bought at Western price+

TYRES Same price for East and West EU Same price for East and West EU

INSURANCE Slight cheaper price than East competitors Similar price with West EU competitors

DIESEL Slight cheaper price than East competitors Similar price with West EU competitors

LABOR COST Higher labor cost correlated with higher social standards and also higher cost of living

East EU drivers have lower total cost of the jobs, but similar income with other drivers – SOCIAL DUMPING?

FINANCING COST

Cheaper cost for Western companies (1.2%) than for their Eastern competitors – FINANCIAL DUMPING?

Higher cost for Eastern companies (4.5%) than for their West competitors

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 3 times smaller than in East EU countries.

6. WHICH IS OUR VISION OF ROAD TRANSPORT MARKET IN EU?

EU enlargement Existing EU Members

GDPper capita (US$)

1995 EU 15 16,831

2004 EU15 20,200

2007 EU25 26,217

• Utopic society where everything will be identical from Portugal to Romania? Same labor cost, same everything? Communism proved it does not work.

• 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):

…SO, 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?

RAISING OF NEO-PROTECTIONISM IN EU ROAD TRANSPORT

OR

GRADUAL HARMONIZATION AND FURTHER TRANSPORT MARKET LIBERALIZATION?

RAISING OF NEO-PROTECTIONISM IN EU ROAD TRANSPORT – THE WRONG WAY TO MOVE FORWARD

WHICH ARE THE FUNDAMENTAL CAUSES OF THE NEW APPROACHES WITHIN EUROPE?the real cause is not the unfair competition of Eastern EU, -but the fact that the Western economy does not perform and SMEs ask support from governments

HARMONIZATION OF OPERATIONAL COSTS IN EU ROAD TRANSPORT – not the real goal = increasing the cost of labor force from East to West values = decreasing cost of financing for East EU countries to West valuesbut ULTIMATE GOAL IT SEEMS TO BE INTRODUCING OF RESTRICTIONS ("RULES") FOR PERIPHERAL COUNTRIES ( EASTERN EU countries mainly) limiting the activity volume outside of establishment country territory through the new Regulation pack.WHICH ARE THE REAL VALUES OF THE EU ?

WHICH IS THE LIMIT OF FAIR COMPETITION BETWEEN EU MS AND WHEN STARTS PROTECTIONISM? Minimum wages with significant effects outside borders of originated states like Germany, especially in road transport industry, one with highly mobile labor force? Subsidiary particular initiatives on legislation related to working and driving time, it creates image of neo-protectionism measures for peripheral countries sensation of protection for most SMEs resident within respective countries (Western EU countries)IS EC FOCUSED ON EU INDIVIDUAL MEMBER STATE COMPETITIVENESS WITHOUT LOOKING AT EU EFFICIENCY IN THE GLOBAL CONTEXT ?

GRADUAL HARMONIZATION AND FURTHER MARKET LIBERALIZATION

PHASED HARMONIZATION OF MINIMUM WAGE IN EU OVER THE NEXT 10 YEARS - like it happened for excise duty, vat, etc - more realistic approachWhy not an EU approach instead of individualistic approaches of EU member states?

 CONTINUED MARKET LIBERALIZATION AS A PREMISE OF ECONOMICAL AND SOCIAL HARMONIZATION • removing protectionist barriers and opening of cabotage without time extension – EC Policy package 1 (10.2012)Why not eliminating the trouble making rules and better enforcing simple ones?

FULL LIBERALIZED MARKET = THE MOST NATURAL BALANCECan be liberalization an explanation for the fact that US GDP is 8% larger than prior to 2008, while EU GDP is still 2% behind the values from the same period?

Thank you for your attention!

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