Bank of Lithuania
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European Union (EU) institutions are finalising the Mobility Package – a set of initiatives concerning the governance of commercial road transport in the European Union that would make traffic safer, ensure proper social conditions for workers, support fair competition, increase efficiency and reduce CO2 emissions, air pollution and congestion. However, without any prior preparation, in the long run the new rules might cause financial problems for the currently booming Lithuania’s transportation sector, which generates more than a tenth of the country’s GDP. 

Comment by Mantas Vilniškis, Economist at the Macroeconomics and Forecasting Division of the Bank of Lithuania.

The package aims to improve drivers’ working conditions. For instance, it advocates that drivers should be ensured regular weekly rests outside the truck cabin. Another recommendation is to schedule trips in such a way that would allow the driver to return home at least every 4 weeks. The new rules also aim to introduce certain limits on transport operations. The rules for cabotage – transport companies’ operations carried out within a national market outside their own country – remain unchanged, allowing a maximum of 3 cabotage operations in 7 days. In an effort to prevent unfair practices, the European Commission proposes to introduce the so-called cooling off period of 5 days before further cabotage operations can be carried out in the same country with the same vehicle. More limitations would also apply to mobility and circulation between the country of destination and the country of origin. To ensure compliance with these rules, all vehicles would have to be fitted with smart tachographs by 2024.

The implementation of the new requirements could redirect investment from Lithuania. To retain a competitive edge, some companies could be forced to open branches in target locations. This would allow them to save considerable resources and avoid their trucks having to return to the country of origin. In turn, however, Lithuania would lose a chunk of its investments as the flow of funds, which could be used to further expansion, job creation and automation, would instead be diverted to other countries. The decision to establish branches in other countries would also weigh on tax collection. If some drivers were to be employed in foreign countries, the amount collected in payroll taxes would decrease. In fact, this is already the reality: expanding their business into new markets, some major Lithuania’s logistics and transport companies have opened branches in countries closer to western Europe, e.g. Poland.

For more information on domestic export dynamics, see the Lithuanian Economic Review which will be published on 27 March.