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Siim Kallas

Vice-President and Commissioner for transport

Transport's role in keeping Europe competitive

Corporate breakfast at the Centre for European Policy Studies

Brussels, 30 September 2011

Ladies and gentlemen,

It is a pleasure to be here with you this morning. I would like to thank you for giving me this opportunity to speak about the policy challenges for transport in the years ahead.

Back in the late 1950s when Europe was setting up its common policies, transport was seen as key to fulfilling three freedoms of the future common market: the free movement of persons, services and goods. Later on, when we started the wider push towards a European single market, transport was singled out as an essential driver of economic growth. A lot of progress was made.

Then, 30 years or so later, the view began to prevail that nothing more needed to be done. Politicians and citizens almost took transport for granted. And the cash started to dry up.

We watched investments in inland transport enter a trend of steady decline. In 1975, they stood at 1.5% of GDP. By 2008, they had fallen below 0.8% — a record low.

Now, fortunately, transport has regained its rightful place on Europe's political agenda as a primary enabler of jobs and growth. We are backing that up with some hard cash.

Let's look at the funding proposed by the Commission for the next budget period, 2014 to 2020 – the Connecting Europe Facility. This will accelerate infrastructure development in energy, transport and information technology, to strengthen the backbone of the internal market.

And transport is due to be a major beneficiary: 21.7 billion euros, plus another 10 billion euros for transport projects in the Cohesion Fund. Although still a fraction of our overall financing needs, that is four times more money than now. It confirms the wide political acceptance of transport's importance for Europe.

We are putting money where there is clear 'value added': by creating jobs and boosting economic growth based on the more efficient use of resources. This also shows real value for money for the EU taxpayer.

Transport is just as important to the European economy and to the single market today as it was in the 1950s. Our transport industry employs around 10 million people, accounting for 4.5% of total employment in the EU and about the same percentage of GDP.

It is a sector where Europe remains a global leader, at a time when we are losing out competitively in other areas. We can truly boast some world-class manufacturers – Siemens and Alstom in high-speed trains, for example, Rolls-Royce in engine manufacture and also Wärtsilä, which powers every third ship on the seas.

Or the European aircraft industry: Airbus, which makes the world's largest passenger airliner, the A380, also known as 'Superjumbo'. Just a few months ago at the Paris Air Show, Airbus swept the board with a surge of new orders worth many billions of euros to European business. The list of successes goes on.

But how can we measure competitiveness? In short: by punctuality, quality and price of transport services. It's no coincidence that our research shows that these are also the three most important factors – and in that order, by the way – for passengers when they select a mode of transport.

Punctuality is the most important and is what people expect from transport. But it is greatly affected by the chaotic functioning of a railway network, for example, and particularly by congestion.

Congestion is one of the worst problems, especially on the roads and in the skies. It costs Europe about 1% of its GDP every year. Many of our cities are smoggy and smelly and our skies are saturated, causing heavy amounts of carbon and other unwelcome emissions. On prices, the major factor is the cost of fuel.

We are highly dependent on fossil fuel - too much so, when imports come increasingly from unstable parts of the world. Oil is likely to become scarcer in the years to come, demand remains strong and markets as volatile as ever. If world oil prices jump by 30 percent, that obviously has a huge impact on transport's competitiveness.

This is why we are looking into innovative (and cleaner) alternatives to fossil fuels and investing in research to develop new sources of energy. Today's new aircraft already burn 70 percent less fuel per seat than the early jets. With the help of research, we can expect more improvements in fuel efficiency in the coming decades.

Ladies and gentlemen,

We cannot underestimate the huge role that transport plays in keeping Europe competitive. But we risk losing out to global rivals, above all to low-cost competitors who are keen to innovate and invest.

Our transport operators must be able to absorb new business models which may have been created by others, outside Europe. In today's fast-moving commercial world, we cannot afford to lag behind. If we lose our global competitive edge by not keeping up, then European business is no longer sustainable.

There are a number of barriers which threaten that competitive edge and prevent us from completing the EU's internal transport market. Too much red tape, lengthy customs formalities, numerous 'missing links' across the transport network – to name a few. Technical incompatibilities on national railways like different track gauges. This hampers growth and prevents the development of efficient networks. It's also a drain on the economy that we can ill afford, especially during this major financial crisis.

I believe that with transport policy, we are standing at a crossroads - and this is no time for complacency. What we decide, and do, now will affect the sector for decades to come. We need to break down these barriers and keep Europe competitive in the world marketplace. So we need competitive transport systems - for economic growth, job creation and for the quality of people's lives. How do we do that? I would say - let's focus on "three I's": innovation, investment and infrastructure. These areas are crucial if we are to achieve our aim of completing the internal market.

We're moving forward on all three, I'm happy to say.

Innovation is vital. We need to develop intelligent solutions to make better use of the existing infrastructure and to make sure the connections between different modes of transport are seamless. 'Smart' technology will make transport cleaner, safer and more efficient.

As I mentioned, we are looking at developing new green technologies and alternative fuels to help reduce transport's carbon footprint. This is another high priority, which we are supporting by financing research and development to maintain Europe's competitiveness. Road transport is a simple example where innovative technology can help drivers to reduce fuel consumption, direct them to available parking places, avoid traffic jams - and collisions.

At the other end of the scale, in aviation we have the SESAR project which represents the technology dimension of the drive towards a Single European Sky. As SESAR moves towards deployment, it should triple capacity and raise safety by a factor of ten. It will also reduce carbon emissions by 10% for each flight and cut air traffic management costs by 50%.

As for investment, I have already mentioned the Connecting Europe Facility, which will give transport a much-needed injection of cash. That, in turn, should generate more needed funding from Member States and the private sector.

Naturally, for infrastructure, funding is paramount. We need hefty investment, especially from the private sector, to relieve congestion, remove bottlenecks and better 'knit together' the different modes of transport.

We know that the demand for mobility will continue to grow in the foreseeable future. At the same time, parts of our transport infrastructure are starting to creak with age and approach capacity limits. This is where we need to invest, to join up the missing links in our transport system and make sure it stays high-quality.

At the moment, transport infrastructure is unequally developed – the eastern part of the EU has poor roads and railways, for example. There are fewer than 5000 kilometres of motorways and no purpose-built high-speed rail links in the new Member States.

This is where the Trans-European Transport Network, or TEN-T, comes in. This longstanding and ambitious project has achieved some remarkable successes – look at the Øresund bridge between Malmö and Copenhagen, Europe's longest combined road and rail bridge. TEN-T is a tremendous example of the value the EU brings to its citizens. Every million euros we plough into TEN-T at European level generates five million euros in investment from Member States, and every million generates 20 million euros from the private sector.

But today's network is still a patchwork of national parts, for many of the reasons I mentioned earlier, and that is a problem addressed in our TEN-T policy review. We now need to improve, update and complete our transport infrastructure, as I have outlined in the Roadmap to a Single European Transport Area. If we can achieve that, it will have a very significant positive impact on economic growth and keep us competitive. It also takes us much closer towards completing Europe's internal market.

This recalls the original idea all those years ago of setting up a common transport policy for Europe:

  • to put in place the infrastructure and interconnections needed to underpin the internal market,

  • to ensure the free-flow of people, services and goods,

  • to help create jobs, boost economic growth and keep Europe competitive in the global marketplace.

The internal market cannot work at optimum efficiency without access to top-quality transport infrastructure for individuals and for business. That's how we stay efficient, competitive and, let's hope, prosperous.

Thank you for your attention.

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