Unintended effects of deregulation in the European Union: The case of road freight transport

Abstract Road freight transport (haulage by truck) within the European Union has been totally deregulated and fully open to competition without any quotas or restrictions since July 1, 1998. This has raised problems, namely due to delay in harmonizing the different EU Member States’ tax and labor legislation, roadside check arrangements, and sanctions for companies that violate regulations or the law. Unscrupulous companies have been using this legal vacuum to falsely outsource their activities, intensify the use of subcontracting, and dodge national tax laws and labor and welfare regulations. The result is worsened working conditions in a sector where entry barriers are low. Worker turnover is by definition high in this activity. Truck drivers are semi-skilled and have become interchangeable on the European Union market. They can readily be replaced by drivers from Eastern Europe (Poland, Romania, Bulgaria) who are much less costly in terms of wages and social protection. The spread of these practices has caused concern among labor organizations in Europe. The trucking transport sector is a textbook case for analyzing how the EU is working to counter the unintended effects of deregulation in this sector of the economy.