Make the foreigners pay

THE European Union is supposedly always enhancing its “four freedoms”: the untrammelled movement of goods, people, services and capital. For European motorists, however, life is becoming ever more oppressive. As it is, seven EU countries, along with Switzerland, levy “vignettes”, fees to use roads for a particular period that tend to favour local drivers over foreign ones.

In April Britain will start charging foreign lorries up to £10 ($16) a day to use its roads. Belgium and Latvia are considering similar levies. In Germany the leader of one party in talks on the formation of a coalition government says it will not join unless Bavaria is allowed to adopt higher tolls for foreign cars and lorries.

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Charging foreigners more tax than locals falls foul of EU rules. To get round them, most of these schemes involve taxing all cars or lorries, but in effect refunding domestic drivers by reducing vehicle taxes. The trick with vignettes is different: governments routinely charge a much higher daily rate for vignettes that last only a week compared with those that are valid for a year. Since the purchasers of the short-term vignettes tend to be foreign, they can end up paying eight times as much per day as locals do, according to the European Commission.

Recent research suggests that lorry tolls like these not only harm economic growth, but may also damage Europe’s competitiveness. ProgTrans, a transport consultancy, estimated in 2010 that if all European countries introduced the tolls suggested in a proposed 2008 EU directive, it would cost European businesses €34 billion ($45 billion) by 2030. Only Austria, the Czech Republic, France and Germany, as common transit points, would benefit; peripheral countries would end up subsidising these four by almost €5 billion a year. Italy, Portugal and Spain, in particular, would suffer from the charges.

Even smaller tolls are likely to take their toll, as it were. Britain’s Department for Transport calculated that its proposed £10 levy could increase haulage costs by up to 3%, not including the possible effects of reduced competition. The resulting £100m hit on haulers every year would inevitably end up being passed on to businesses whenever possible, according to Peter Cullum of the Road Haulage Association, an industry group.

Worse, once high administrative costs are taken into account, some forecasts suggest that Britain’s toll may not break even until 2015. After that, it is projected to yield net income of just £23m a year—not even enough to build a mile of new motorway. In short, like so many protectionist schemes, it is likely to do much more harm than good.