British Truckers Fear the Worst as EU Ends Cabotage Restrictions

By Michael Babb -- Logistics Management, 8/1/1998

London--Already profoundly unhappy with high diesel-fuel taxes, British truckers have something new to worry about since July 1, the date the European Union lifted cabotage restrictions.

Cabotage allows a truck from one country to pick up and deliver cargo while it is operating in another country. Under cabotage, a French truck, for example, can carry goods from France to Manchester in the United Kingdom, then use its empty trailer to pick up a load in Birmingham and drop it off in London before crossing the Channel back to France. Cabotage in the European Union has been legal, though limited by quota, since 1994.

According to Geoff Dossetter, a spokes- man for the United Kingdom's Freight Transport Association (FTA), fears of continental fleets invading the U.K. after July 1 are overblown. For one thing, he says, there never was a shortage of cabotage permits before that date. And the French truckers' presumed advantage of lower operating costs may be offset by other factors. "You have to pay a fare to get across the Channel, and the French have taxes that we don't have," he reports.

Predictions of a vast increase in cabotage in Britain are not supported by the facts, agrees Reg Dawson, a Brussels-based transport consultant. "Nearly three-quarters of all cabotage operations are carried out in Germany, the EU's largest and most profitable market," he says. Yet even at that level, he reports, cabotage costs German motor carriers less than 1 percent of their traffic.

The vast majority of those German operations involve carriers from Denmark or the Benelux countries, which merely have to drive across a land frontier, says Dawson. That situation is unlikely to change much after July 1, he believes. "[Truckers] are likely to continue to concentrate on Germany after abolition of the quota," he says. "Cabotage in Britain is much less tempting. It involves a foreign carrier in an expensive trip through the Channel Tunnel or on a ferry."

Despite policymakers' reassurances that they have little to worry about, U.K.-based truckers say they already are losing business to competition from the Continent. Brenda Taylor, who manages a small trucking firm in Kent, thinks it's no coincidence that business from one French customer dropped off 70 percent over the last six months. "It's cheaper for them to bring the goods over the Channel themselves," she says. With the end of the cabotage quota, she believes, it will be more lucrative for a French truck that has arrived in the U.K. to stay around and work for awhile. French trucks can tank up on 1,400 liters (370 gallons) of diesel fuel in Calais--enough to operate for a week in the U.K.--for (pound)350 (US$580) less than what it would cost at a British gas station.

Another Kent-based operator, Martin Husk of Coon Valley Transport, says this fuel-cost differential alone has decreased his French business by 30 percent since the beginning of the year and the end of cabotage restrictions will only make things worse. Already, he says, the French are showing up in Dover on Monday mornings with tractor and trailer ready for the first delivery. But instead of going back home at the end of the day, the tractor spends the rest of the week shuttling newly arrived trailers from Dover to various U.K. destinations. "The tractor and trailer together pay the same fare--(pound)150 (US$249)--it costs to ship a trailer by itself across the Channel, so the driver and tractor come over Monday morning for free. And they go back home for free on Friday night," Husk contends. Volume shippers pay ferry operators as little as (pound)100 (US$166) per trailer, he adds.

Exactly how much of the British truckers' woes may be ascribed to cabotage is in dispute. But all agree that high fuel taxes are escalating operating costs and hurting business.

The main culprit, says Geoff Dossetter, is the U.K. government's "fuel-tax escalator," an environmentally based policy introduced in 1993 that regularly increases the national fuel tax. "Excessive taxation on goods-vehicle operation, supposedly designed to reduce mileage, makes U.K. industry uncompetitive with European rivals and sucks out so much revenue from the transport sector that little is left to invest in cleaner and greener equipment," he says. "The escalator is a failed policy, other than as a means to raise revenue for the government."

David Green, director general of the FTA, puts his finger directly on the problem. "The government is severely hurting U.K. industry by its remorseless attitude to road-freight fuel duty," he says. "Eighty-five percent of the price of diesel fuel is now tax," he continues. "Fuel costs represent some 30 percent of the cost of operating a 38-tonne vehicle, which now pays over �22,000 (US$36,520) in tax per year. Current diesel prices ... in the U.K. are 70 percent above the average of other EU member states," he says.

Although fuel costs are a legitimate problem, truckers shouldn't confuse the public by mixing worries about cabotage with concerns over high fuel taxes, advises Dawson. "The protesters have used the cabotage 'threat' as a vehicle for justified protests about the gross discrepancy between rates of truck and fuel tax in Britain and in most EU countries," he says. But that maneuver may misfire, he warns. "That discrepancy certainly needs tackling, but by making palpably false claims about cabotage, the protesters have devalued their case," he says.