If the trials are successful the European Rail Traffic Management System (ERTMS) will allow tilting trains to travel along the West Coast main line from London to Glasgow at 140mph.
The 135-mile long Cambrian line has been chosen for trying out the system between 2006 and 2008 because it is a single-track railway with trains travelling at the relatively low speed of 80 mph.
Once fully developed for the UK, the system will bring the benefits of greater network capacity, even safer journeys and European compatibility
David Waboso, SRA
This means the risk of a head-on collision is unlikely and will allow the Strategic Rail Authority (SRA) to iron out teething problems before installing the system on busier lines.
Following the introduction of the technology to the West Coast line, the East Coast and Great Western lines, will also have it set up by 2015.
The system is destined to become standard across all of Europe's mainline networks as existing systems are renewed.
It will cost £3.7bn to install the system across the rail network but efficiencies and savings would generate double that amount, according to the SRA.
ERTMS also includes an automatic braking system that will stop the train if the driver ignores warnings sent to the computer in the cab.
It is believed that rail crashes - like those at Southall and Ladbroke Grove in London which had a combined death toll of 38 - would have been prevented if this new system had then been in operation.
The new system is dependent on mobile phone technology which will let trains send and receive information about their positions to a control centre.
All eleven Wales and Borders trains on the Cambrian line will be fitted with the ERTMS technology which, in the long term, could save the rail industry hundreds of millions of pounds each year because thousands of line-side signals will be made redundant.
Although less signal workers will be needed, any job losses may be balanced by the creation of hundreds of engineering posts needed to install the system.
This could eventually result in trains being driven by the new technology rather than drivers.
"The work done by the ERTMS team has prepared the way for trials on the Cambrian Coast and earlier equipment field trials," said SRA executive technical director David Waboso.
"Once fully developed for the UK, the system will bring the benefits of greater network capacity, even safer journeys and European compatibility."
The two mid Wales lines incorporate the Cambrian Line between Aberystwyth and Shrewsbury with trains travelling between the two towns every two hours during the day.
The other line is the Cambrian Coast line between Machynlleth and Pwllheli which is mainly used by visitors travelling along the north Wales coast during the tourist season.
Glyn Jones, chairman of the Cambrian Line branch of the pressure group, the Railway Development Society, said the line was currently operated by a radio and computer system at Machynlleth.
"If successful I hope the new system will carry on being used on this line because it won't be worth the cost of taking it away again," he said.
1.A positioning device is placed on the track every one or two miles. The train is also fitted with a computer that constantly monitors speed and the proximity of the train in front.
2.The train passes over the device and makes contact with the control centre using the same technology as mobile phones.
3.The control centre processes information and if a train has become too close to the train in front the brakes will automatically be applied.