Competition: La Bataille du Rail

To hear the Gilets Jaunes tell it, you’d think the government has nothing on its mind but how to squeeze the last centime out of the harried taxpayer. But every once in a while one is reminded that the government in fact has bigger–or at least other–fish to fry.

There is China, for example. To combat the Chinese rail juggernaut CRRC, Alstom and Siemens want to hook up to keep Europe in the high-speed rail game. But the European Commission seems to think that Alstom and Siemens are actually less interested in battling the Chinese dragon than in warding off competitors on their home turf. Hence a battle royal has shaped up, with Germany and France pushing to portray the merged Alstom-Siemens as a “European champion,” the “Airbus of rail,” while the Commission, in the person of the redoubtable competition commissioner Margarethe Vestager, may put a hex on the tie-up.

If the purpose of the Airbus of Rail is to beat the Chinese, it does seem rather odd that China’s own competition watchdog has approved the merger, as have regulators in Chile, New Zealand, and India. In fact, the clash points up one of the ambiguities at the heart of the Single Market, and the many complexities that are glossed over when the EU is described by its enemies as “neoliberal.” On one view the Single Market is intended to underpin the creation of economies of scale enabling European firms to compete in global markets where scale determines winners and losers. On another view the Single Market is the guarantor of that “free and undistorted competition” which is supposed to guarantee economic efficiency, dissipate rents, and keep firms scrambling to capture and hold the technological frontiers, where growth is most robust.

Meanwhile, of course, there are stockholders and managers making money, profits to be won and lost, and industrial prestige to be maintained or frittered away. Bruno Le Maire took to the airwaves last weekend to defend the merger. Both French and German leaders are taking the strategic view of the competition: this is industrial warfare, with China as the adversary. Meanwhile, the Commission is dragging its feet and seemingly clinging to the view that monopoly is bad, always and everywhere, even when survival seems to require at least monopolistic competition in an arena where small fry are doomed to be gobbled up by rapacious leviathans. But perhaps there is more to this decision than is likely to be revealed to the public eye.

Photo Credit: David Monniaux, TGV train in Rennes station, via Wikimedia Commons, CC BY-SA 3.0.