Changing Trains

An inevitable consequence of the economic downturn has been a demand for trade barriers and the protection of home markets. Politicians spending taxpayers' money to stimulate the local economy and create or protect jobs want to see the benefits accruing to their constituencies. 'Local jobs for local people' is the rallying cry.

At the behest of Congress, the US$787bn stimulus bill signed by President Obama on February 17 includes a clause to strengthen the 'Buy America' procurement rules, although he insisted that it will be consistent with international trade agreements. 'One of the most important things during a worldwide recession is that each country does not resort to "beggar thy neighbor" policies, protectionist policies, that can end up further contracting world trade', he said.

The rail industry has moved a long way from the days of national suppliers - or even local as in Australia where rolling stock builders had to have assembly plants in each state. Last year's UNIFE/Roland Berger study of the global market found that around 70% was 'accessible'
to inter-national competition, and the proportion was growing steadily.

Open markets provide more than just a competitive supply environment; they encourage the exchange of ideas and the spread of technology. The past 20 or 30 years has seen a welcome 'convergent evolution' between once-distinct North American, British and European railway practices. Europe's drive for interoperability is not just about overcoming differences in cross-border operation, it is also about opening up a competitive single market for suppliers no matter where they are based.

The biggest question about protectionism is where it would end. Should 'Buy America' be limited to US suppliers, or the North American Free Trade Area? For many years the US transit sector has been dependent on Japanese and European suppliers, but conversely most locomotives in Australia use US technology. Most countries no longer have home suppliers with the capacity for complete production. Fortress UK would not be sustainable, but what about Fortress EU? Mergers in the supply sector and a focus on standard modular products have seen the bigger firms developing integrated supply chains with centres of excellence in many countries.

Some commentators in the UK were quick to criticise the announcement on February 12 that the new Super Express Train fleet would be supplied from Japan, albeit with the promise of a new local assembly plant (p12). This ignores the reality that the UK's only remaining 'traditional' rolling stock plant in Derby is run by a Canadian group with its rail business headquartered in Berlin. And it relies on components sourced from other plants and sub-suppliers across the world.

Earlier this year, EU Transport Commissioner Antonio Tajani called for opening of the Japanese rail market as Japanese suppliers were competing in Europe. By contrast Alstom Transport President Philippe Mellier suggested that western markets should be closed to Chinese companies because the local market was being closed to international firms - a claim that the Ministry of Railways strongly denied.

Mellier's concern focuses on a different problem. In recent years, China has developed a strong domestic industry through localisation and technology transfer, requiring international suppliers to work through subsidiaries, joint ventures or partnerships. The companies accepted this requirement to break into the Asian market. But they also recognised the challenge of protecting their intellectual property rights in countries where issues such as patents are not so clearly understood or enforced.

In recent weeks we have heard reports, from other sectors as well as rail, of transferred technologies being offered for sale in markets not covered by their licence agreements, sometimes in competition with the original supplier. And of public-sector bodies seeking technical assistance to re-engineer proprietary systems. Such practices are clearly unacceptable, and play into the hands of the protectionists.

Railway Gazette International has long supported the exchange of technologies across the world, as this can only help to strengthen the rail mode and its contribution to a sustainable transport mix. But a true exchange of technology demands that intellectual property rights are fairly respected by all parties, or suppliers may legitimately refuse to co-operate, and users will not get the benefits of the technologies on offer. Rail will become less competitive, and the whole world will suffer.