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353

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342

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340

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358

359

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364

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314 315 317 318 321
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Coordination in Brussels, but decisions in national capitals ' From Iraq to the European Security Strategy

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REFERENCES
Z

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INDEX

E

s

S E E F

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438 440 441 444 . 448

451

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I LIST OF BOXES
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Council configurations

F3E E E A , H a € F f i3 + + r = R ; . i € B g + - ; E 1 3 E d 3 e 6 g ; E3= r q , B r +g : EI 5E# H a a9

g d f e l R qd s 3 d s g F q d F d Fi l f4 gd d H F = 3ff q s { t r ifl d g 1

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= 6 :i 3 =F f 6 c fj . l+ q: E = ; ,@3 ci r: =8Rf ;[,Y3 r 1 -7 . ; d i F , o =

77
83 109 124
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76
5 is

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Powers of the European Parliament

@.@

91
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126 138
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122
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= . q . + g E . t xd i

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91
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185
l
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Dec. 2008
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167
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S

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85

195
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243
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240

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The internalization of external pressure: the EU climate change package

+ E

324
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28 proceedings 369 14.2
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The making of the REACH chemicals package

=

320
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338

negotiations prior to the
d
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345
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ements
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The EU climate change and energy agreements of December 2008 The dirnensions of EU trade policy Accession conditionality Treaty basis for EU enlargement

o * H

a

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393 395 16.1
i

377
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372
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@ :.

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475
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Common European asylum system
<

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472

3

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Changes to JHA in the Treaty of Amsterdam and the Treaty of Nice
@ o

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461
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Treaty of Lisbon provisions for CFSP

1*

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4

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EU battlegroups
@ ;$

446
.

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Maastricht

17.1

406

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gainst member states
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322

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Key treaty changes and associated characteristics of environmental policy
;

311

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at,

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I ABBREVIATIONS AND

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1.1
N r

The main treaties including treaty revisions and enlargements
72
1;:1

6

M ~
ACER Agency for the Cooperation of Ener

E A

+

4.1
N O

4.2
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The organization of the European Commission, 2008 92
-

8 ,<
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+
c!

EU policy modes in brief
T r

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The White Paper on the single market: a taxonomy 117
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114

ACP

African, Caribbean, and Pacific cou
:

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.t.
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t1 }!.

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. O

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7.3 Gross domestic product at 2000 market prices
F

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The significance of different modes of market integration 143 160 162 164 168
N O

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area of freedom, security and justic AP accession partnership
O

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7.4 Overview of ECB Governing Council rotating voting system
<

7.5 From market support to decoupled payments: twenty-five years of CAP reform

8.1 Basic agricultural structures in the EU15, new member states, EU25, and USA

F E

W
8.2 Flexible implementation within a common framework: the case of the 2003 midterm review's Single Farm Payment Scheme (SFPS) in the EU27
=

8.3 The main elements of the fina ncia l perspectives between 1988 and 2013

-

I

N S @ O F @ @ @ @

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APEC

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Asia Pacific Economic Cooperation
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Summary of the cDnvergence criteria (Art. 121 TEC)

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:

Association of South East As ian Na Benelux
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Belgium, The Netherlands, and Lux BEPGs

Broad Economic Policy Guidelines

r
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169 191 197
r O N

5

BKA

Bundeskartellamt
5.

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H
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BRIC

Biotechnology Regulation Inter-Ser

at
m

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201
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Biotechnology Steering Committee

~
218
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bovine spongiform encephalopathy
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9.1 10.1 10.2 10.3 11 .1
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I
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233
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CAP if 234
S N @

common agricultural policy
@

CARDS CATS
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Community Assistance for Reconstr

S :

Structural fund objectives: progressive concentration

Coordinating Committee for Police in Criminal Matters
e

H E f i E + 5 8 - . E E sF $S€ E 8 , 3 - a E E E .

; E 3

Evolution of the structural fu nds in relation to spending on the CAp, 1975-2013

~ ~
246
n N n T @ J N

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EU member states, regi ons, and share of structural funds, 2007-2013
E

q
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CCP

common commercial policy

€E €EEEggFEgEEEEFE 5g E55E ss* eEsEEH; ; s E
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255
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European integration transforms national welfare states: processes, key actors, and examples
j
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CEAS

common European asylum system CEECs

!l (u >

countries of central and eastern Eur

c

-Y <
E

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Assignment of explicit social policy mandates to the EU up to the Treaty of Lisbon
:
.

.= ^

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258
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E#i €$ E- PF€EEE=78 es: x * 3 E
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CEEP

B

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Distribution of ECJ judgments on social policy by functiona l subcategories, 1954-2007
N

='= ,=' Hs 6 6 9

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9 ,

11.3
B
=
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11.4
l + = 4

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N

European Centre of E nterprises with and of Enterprises of General Econo
Z . c

266
=

CEER
k
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Council of European Energy Regulat
= l H F ! Y
G

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268
: r o N
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CEFIC
@ @ N

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12.1
9 0

ECJ ru lings on social policy by functional subcategories and EU member states, 1954-2007
e t6

European Chemical Industry Council CEN 297
'I

Committee for European Norms (Sta

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The European Employment Strategy: key characteristics
?

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.gE€EE€EC€E

s F E e E a

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E H E sP E . cR ' E ? 3 ;E C E= #Bd g E EEE e Fg H F E ; : 3; H f. i- ; !g rgs f : iE , F . E E r u =e E g ; ? S F

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s $ + @ o r < € N + ( o Q O O + o O e m m $ $ { s n b n

E F FE 5 ts s 6 F F E E g FF E g*= :s A fs E F :F E is € F 'F tsE E F E E 5-! F F € € F ; E T E E e E { T g E d 3 b 9 E B;i fi c 5 F F RE E EE <,A H E E 5 S -F EE 5 E E . E 5 55 E SE E g : "

g € € € E" E 6 s $ E " $ F ;E € EF gE aq E E * E= EE F e t F g {EE E! { E F F ' FEiE 8 , F . Eapx 3 € s . E € E: F E€ € e f

r N i. r r i i l r - N . t { d ;

FE gEa*F€E,E EE i re B{.; ; EH EesEe{ r EE € # s E rg aC E # , H F F F€St s g € S ;EF H€ F E E i E q

* Eg€ - u €i g : E ;n g € g g Ea E ' g *E$ f F€E €gEE E € g g E

o o u 6 A = q : ; u a i =, : 8 - 8 - g

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r R e = i E x F ? A A 5 = t

F e * . E = g E S s E E " | 5 ' 3 3 - s ; E S E E

" € " E € E F P F € E€ i H

E E , ; ; E ; = E EEE E F E E EJ e: € .€ E EF # e f E s p E E ; .FE

eaErE4eH*HHHEEg EerEso=sftE s BEE E

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CENELEC
o C c

Committee for European Electrical N
i

14.1
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15.1
a

17.1
F

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EU legislation governing GMOs and GM products as of June 2009
a
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344 364
x e 2
H

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404
6

CEPOL

European Police Co llege CET
>

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Re-regulating energy

common external tariff CF Cohesion Fund

r

History of EU enlargement: overview
'

li i , 1 H
rl
g
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g E j E

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17.2 17.3 lB.l A.l A.:t
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SDP missions E
=

New caseload of the European Court of Justice by subject matter, 1953- 1991
6 I

o E . ! i = - : :

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A.2

N

Key stages of the accession process
-

408 Formal decision rules for EU enlargement policy
o E

CFI
r

Court of First Instance

=

409 6

H

a

g

a

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f

C FP
>

common fisheries policy 447
: o

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11
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504
=

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CFSP

common foreign and security policy

:-

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He e . ; o

New caseload of the European Court of Justice by subject matter, 1953-2007
I

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E g E

8 3 F :

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Number of new cases at the Court of First Instance, 1992-2007

= ;

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N

CHODs
6

Chiefs of Defence Staffs of the mem
5 E

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ation No 384/96 on protection ers of the European Community idized imports from countries

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Council Directive 2003/109/EC concerning th who are long-term residents (OJ L 16/44, 23

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European Parliament and Council Directive 99/45IEC concerning the approximation of the laws, regulations, and administrative provisions of the Member States relating to the classification, packaging, and labelling of dangerous preparations (OJ L 200/1 , 307.1999) ............. 321

Council Directive 99/70lEC concerning the framework agreement on fixed-term work concluded by HUC, UNICE, and CEEP (OJ L 175/43 , 10.7.1999) .................. .... 292, 293

European Parliament and Council Directive 99195IEC concerning the enforcement of provisions in respect of seafarers' hours of work on board ships calling at Community ports (OJ L 14/29, 20.1.2000) ....... ......... ....... ,.... ......... ...... ...... .... ....... ..... .. 292

Commission Directive 2000/21IEC concerning the list of Community legislation referred to in the fifth indent of Article 13(1) of Council Directive 67/548IEEC (OJ L 103170, 28.4.2000) .......................... .... ...... ... ... ..................... .............. ............. .... 321

Council Directive 2000/43/EC implementing the principle of equal treatment between persons irrespective of racial or ethnic origin (OJ L 180/2, 19.7.2000) ......................... 264

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Council Directive 2000/78IEC establishing a general framework for equal treatment in employment and occupation (OJ L 303116 , 2.12.2000) .... ........................................ 264

Council Directive 2000179/EC concerning the European Agreement on the Organization of Working Time of Mobile Workers in Civil Aviation concluded by the Association of European Airlines (AEA) , the European Transport Workers' Federation (ETF), the European Cockpit Association (ECA), the European Regions Airline Association (ERA) and the International Air Carrier Association ([ACA) (Qj L 302157, 1.12.2000) ... ... ....... ...... ................ ............................... ..... .......... .............. 292
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A number of problems of dating, numbering, and nomenclature should be noted. Generally in this volume for convenience we use the term European Union (EU) to embrace the family of arrangements under different treaties, even though it was not formally introduced until 1992. Where specifically relevant we refer to individual Communities or the European Community (EC). Table 1.1 sets out the main treaties, including treaty revisions and enlargements. Treaty reforms are dated to their year of signature by member governments, rather than to the completion Of negotiations (often the year before), or ratification (often the year after). The well-intentioned renumbering of treaty articles, agreed as an afterthought to the Treaty of Amsterdam (ToA), has created immense difficulties for all students of European Union. This Consolidated Treaty on European Union (CTEU), agreed in 1997, confUSingly contains the Consolidated Treaty establishing the European Community (TEC). We generally quote treaty articles under this new numbering, but special care is needed to follow the two parallel Sets of numbering that cover the common foreign and security policy and justice and home affairs. For the Treaty of Lisbon (ToL), ratified as we went to press, we identify potentially relevant amendments. The Treaty of Lisbon, in turn, should not be confused with the so-called 'Lisbon Agenda' or 'Lisbon Strategy' for economic reform, adopted at the March 2000 lisbon European Council with the aim of making the EU 'the most competitive and dynamiC knowledge-based economy in the world', and whose impact, and variable successes, are discussed in a number of the chapters of the volume. As regards terminology, readers will notice that we frequently refer to 'member government' rather than 'member state'. Although, strictly speaking, it is 'states' that sign and are parties to treaties and conventions, it is the member 'governments' which negotiate poliCies and legislation, or implement them at home, acting not only as representatives of states, but as the domestically accountable executive authorities. There is also an issue about how to refer to the twelve member states that jOined the EU in 2004 and 2007. While we appreciate that these states are very different, a central issue for this volume is how policy-making in the EU has been affected by the accessions of these states. It is therefore useful to have a shorthand for referring to them collectively. We are not aware of a more succinct way of referring to these states collectively than as the 'new' member states, even though at the time of writing Oune 2009) those states that joined in 2004 have been members for five years.

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Gross domestic produc-t (GDP) is the most commonly used measure of the value of production in the area concerned (a country-or a region). Gross national product (GNP) is GDP plus net transfers of factor incomes, Le'- the repatriated profits of member-state multinationals overseas, and less the profits of non-national multinationals operating in the member state. In most countries the difference between the two may be insignificant, but in countries such as Ireland the difference between - the two may be as high as 25 per cent. Recently, gross national income (GNI) has become the more commonly used name for GNP. Until September 1999 Directorates-General (DGs) of the European Commission were generally kl}own by their numbers, e.g. DGYl for Agriculture. N1,Imbers have latterly' been replaced by functional names. The two nomenclatures are set out in Table 4.1, since for earlier material the numbers remain relevant. The ecu, or European currency unit, referred to in some chapters was the unit of account adopted for certain EU transactions or statistical comparisons. It has been replaced by the eurp with the advent of economic and monetary union.

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on the other, or between theoretical tem one hand, and international relatiop.s, on approaches, draWing on diverse theoretic polities and intermitional relations, in ord the EU by linking EUpolicy processes to processes, particularly in multi-layered pol particular theory, but to use all available t making in all its complexity.

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modes of policy-making, as the case studies reveal. Moreover, the same EU institutions, and the same national policy~m~kers, have different characteristics, exhibit different patterns of behaViour, -and produce different kinds of outcome, depending on the policy domain and depending on the period. Thus, as we shall see, there is no single and catch-all way of capturing the essence of EU policy-making. All generalizations need to be nuanced, although, as will be seen in Chapter 4, five main variants of the policy process can be identified. Fourthly, this volume goes to press at a moment when the EU is facing important challenges. The implications of eastern enlargement are only just becoming clear, which the contributions to this volume explore. The questions hang in the air as how, the Treaty of Lisbon will be implemented. The contributions to this volume consider what impacts Lisbon would likely have on the policy-making process of the EU. In addition, the financial crisis in 2007-8 has precipitated the sharp contraction of the real economy; transformed public finances as revenues have shrunk and government expenditure has increased, in some cases dramat ically; and potentially altered the balance between state and market. At the time of writing it was unclear how deep or how protracted the economic contraction will be, although a number of contributions to the volume reflect on the EU's preliminary response to (he crisis. There are also broad changes in the nature of EU policy-making. The proliferation of patterns of policy-making identified in the previous volume has continued and, if anything, accelerated. A striking feature of these patterns of policy-making is that they are constructed to a large extent outside the classical Community framework. Some EU institutions, so far at least, have been on the margins of the main developments. In particular the Commission, the European Court of Justice (EC)), and the European Parliament (EP) have been l~ss central actors, while the main dynamics have been foun.d in the intensive interactions between national policy-makers, with both new agencies, such as the European Central Bank (ECB) (see Chapter 7) or Europol (see Chapter 19), and new consultative forums, notably to pursue the lisbon Strategy o~ economic refonn (see Chapter 12). The investments being made in new institutional arrangements have been designed to underpin this structured transgovemmentalism rather than to incorporate them within the traditional Community procedures (communitarization). The case siudy chapters suggest that this may be a sustained pattern, not a mere staging post in the transition from nationally rooted " policy to 'communitarization'. Tempting though it is to interpret this as the triumph of 'intergovernmentalism' (a process in which traditional states predominate) over 'supranationalism' (a process in which new European institutions enjoy political autonomy and authority) , we argue that the story is more nuanced, with the emergence of new, varied, and hybrid policy modes emerging across our fifteen issue areas. Chapters 2 and 3 therefore take a broad and eclectic approach in identifying a deliberately wide range of theories and concepts with which to examine and to explain EU policy-making. We argue that care should be taken to avoid overly sharp dichotomies between supranationalism, on the one hand, and intergovernmentalism,

Most studies of the EU concentrate on des special institutions of the EU, located in B European Commission; the Council of the Parliament (EP); and the European Cou tutions, and others, is introduced in deta careful not to regard these EU institutio policy-makers who devise and operate EU ber states themselves. They are people wh national policy-makers, for whom the Eu arena, not a separate activity. Indeed, mu out by national policy-makers and agents Brussels. Instead, what they do is conside their regular activities, and apply the res their nonnal daily work. If we could calc that in practice something like 80 per cen domestic preoccupations and constraints. economic groups, or political representati ment and content of EU policy. On the face of it, it might appear that i 80 per cent of the member states' socio-e while 80 per cent of the policy context " dom estic concerns. Yet preCisely what dist it rests on a kind of amalgam of these tw policy demands and policy capabilities ar generate collective policies, most of which tries concerned. Moreover, as we shall se volume, how those European policies ope member state and another. In other words differentiated outcomes, with significant just as important to understand the nation

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the EU policy process as a whole the relatively informal (such as in the past have enabled national police forces to develop cross-border cooperation). Then we can consider with more nuance why the EU process is especially important in some policy domains, but not in others, just as we can examine how experiences in other kinds of European policy regime might be changing the character of the EU policy process. In short, the EU policy process needs to be viewed through several sets of spectacles. Different lenses may be needed depending on the division of powers and influences between these different levels and arenas of policy development. Certainly, we then need to focus squarely on what happens in and through the EU institutions. But we need peripheral vision to take in the country-level processes (both national and infranational), the global level, and the alternative European frameworks . And we need to be aware that policy-making shifts between these in a fluid and dynamic way.

scribe the whole story. In all EU vernment, that is local or regional ying extents shaped by EU regimes. contacts with the EU institutions, mplementing speCific EU policies ional policy processes in Europe , which lie between the public and character from one country to ane past decade or so , an experience s been the proliferation of bodies governments. This is especially so ive domain of EU policy activity. onomous agencies, or to forms of e inherited heavy-state version of What the EU policy process does dination one of its key features, as

The EU as a unique arena-or perhaps not
Most accounts of the EU policy process, as we have noted, concentrate on the EO's own institutions. Their main features and characteristics are set out in Chapter 4, and their roles in the policy process will be a recurrent theme in this volume. We shall observe general features that are present in most areas of EU policy, as well as features that are specific to particular sectors, issues, events, and periods. But how far do the particular features of the EU's institutional system produce a distinctive kind of policy process? It has been commonplace for commentators on the EU to stress its distinctive features, and indeed often to argue that they result in a unique kind of politics. Whether such an assertion is warranted is a question to keep in mind in reading subsequent chapters. In forming an answer to the question it is important to reflect on what other political arrangements might be appropri~ ately compared with those of the EU. Some would say loose-knit states, such as Canada or Switzerland , mostly confederal in character, or a federal state like the United States of America, Belgium, or Germany. Others would say some multilateral regimes, especially those which focus on the political economy, such as the Organization for Economic Cooperation and Development (OECD), or the various regional customs unions and free trade areas elsewhere in the world. Depending on which comparators are chosen, different 'b~nchmarks' will be useful for evaluating the EU institutions and their performance. As we shall see in Chapter 2, this issue has been one of the longest-running sources of controversy among political analysts of the EU. On one side of the debate are ranged those who see the EU as one example, perhaps a particularly richly developed example, of a transnational or international organization. On the other side of the debate are those who view the EU as a kind of polity-in-the-making, and, in this sense, statt;-like. The analyses of the EO's institutions conducted in these two
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pass the whole story. The EU arena beyond the nation-state. In many h the EU is active, there are broader ry a great deal in their robustness policy-making that spreads from the global level. Many of the same els, and policy development connment of different segments of a f our policy case studies illustrate salience. One important question tutions provide the main junction n the country level and the global

e. Most accounts of the:EU policy ng from the policy powers explicand then considering extensions wers. Such accounts place the EU EU appear the fulcrum of policygimes~and there are many-tend forms of policy cooperation. This ue that the EU is only one, even if an policy regimes. Hence we need r policy regimes, both the highly anization (Nato) for defence) , and

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A goo<;!. understanding of the recent h (2004) provides a straightforVl,'ard over offers a robust critiqu_ ()fmuch of th e Moravcsik (1998) submits the history sights into the deeper history Mazo usefully complemented by the more collected writings are drawn together succinctly many of the contemporary of which are also interestingly surveye (2003) addresses the EU governance ropean integration in both its global an Smith (1999). For the link to 'pan-Euro melfennig and Sedelmeier (2005al. Dinan, D. (2004), Europe Recast: A H Macmillanl. Flora, P(1999) (ed.). StateFormation, Theory of Stein Rokkan (Oxford: Oxf

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camps differ considerably. A third camp argues that contemporary politics in Europe are changing anyway, with traditional fonus of politics and government being transformed in quite radical ways. The net result, it is argued, is that it is more appropriate to talk of 'governance' than of 'government'. The EU has, ..according to this view, emerged as part of a reconfigured pattern of European governance, with an evolution of institutional arrangements and associated processes that have interestingly novel characteristics. This volume starts out closer to the third camp than to -either of the first two. However, subsequent chapters ~ill reveal some policy sectors in which the EU has powers as extensive as those normally associated with country-level governance, while other chapters will describe much lighter and more fragile European regimes. The institutional patterns vary between these two kinds of cases. Chapter 4 provides an anatomical overview of the institutions together with a broad characterization of five main policy modes that vary across issue areas and across time. Subsequent case studies identify many of the variations of institutional patterns that are observable in specific areas of policy, along with the organic features of the institutional processes. These variations make the EU policy process a challenging one to characterize and hence the subject of lively argument for both practitioners and analysts. However distinctive and unusual the EU institutions might be argued to be, we should not forget that the people, groups, and organizations which are active within these institutions are for the most part going about their 'normal' business in seekingpolicy and political outcomes. There is no reason to suppose that their activities have different purposes simply because the institutional arena is different from the others in which they are involved. The politics of the EU are just that-normal politics, with what~ver one thinks are the normal features of domestic politics, and by extension policy-making, in European countries. Nonetheless, we need to be alert to differences in behaviour, in opportunities, and in constraints that arise from being involved in a multi-level and multi-layered process. It is around this feature of the EU that much of the most interesting analytical debate takes place, to which we turn in Chapters 2 and 3.

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This chapter sketches the theoretical background for the book, by surveying theories of European integration, comparative politics, and governance, laying out clearly 1 the analytical concepts that will subsequently be employed by our contributors. The chapter does not seek to come up with a single theory to explain European integration, or even the policy process within the EU, a project beyond the scope of this volume. Indeed, a consistent theme of this book from its first edition onwards has been the need to guard against overgeneralizing about 'the' EU policy process, but instead being open to the prospect that policy-making may differ considerably and systematically across issue areas. Nevertheless, theories of European integration and p~blic policy-making are useful in providing us with the analytical tools with which to chart and explain variation in EU policy-making both across issue areas and over time, and these theories inform the language and the categories of analysis used in the subsequent chapters of the volume. This chapter is organized in four parts. The first provides a brief overview of the most influential theories of European integration, namely neo-functionalism, intergovernmentalism, institutionalism, and constructivism, paying particular attention to the implications of each theory for our specific focus on EU policy-making. The second section looks beyond the integration literature, drawing on rationalist theories of comparative public policy for a set of analytical categories that can be used to analyse the participants, processes, and policies that we observe in the EU. In doing so , we pay special attention to the concept of the EU as a political system, characterized by a v~rtical and a horizontal separation of powers, which, we argue, has implications for the nature of policy-making and the key actors in the EU policy process. The third section examines the recent development of a 'governance approach' to the European Union. The governance approach emphasizes a series of interrelated concepts, including: the non-hierarchical or 'network' character of EU policy-making; the emergence of 'multi-level governance' implicating sub-national, national, and supranational actors; the challenge to the governance capacity of national governments and the limited governance capacity and legitimacy of the EU; and the prospect for 'deliberative supranationalism' as a partial response to the challenge of democratic legitimacy beyond the nation-state. The fourth section concludes

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For many years, the academic study of the were then called, was virtually synonymous The initially modest and largely technocrat significant than the potential that they rep the countries of western Europe into somet the integration process was going well, as functionalists and other theorists sought to integration proceeded from modest sectora more ambitious . When things seemed to be early 1980s, intergovernmentalists and othe process had not proceeded as smoothly as it differences among these bodies of theory w on the EC sought to explain the process of policy-making), and that in doing so it drew of international relatioris. In the first edition of this volume, Car among the then-dominant schools of Eur and intergovernmentalism, drawing from e hypotheses about the nature of the EC po nea-functionalism and its views about t intergovernmentalist response, as well as the ism' by Andrew Moravcsik in the 1990s. In ies of integration theory-institutionalism different views of the integration process policy-making.

Neo-functionalism
In 1958, on the eve of the establishment o (EEC) and European Atomic Energy Co lished his seminal work, The Uniting of E theory of regional integration. As elabora other scholars (e.g. E. Haas 1961 ; Lindberg neo-functionalism posited a process of 'fun decision by governments to place a certai the authority of central institutions create

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y, such as currency exchange rates, edicted, sectoral integration would uence of promoting further integrawhen the intergovernmental aspects of the Community were strengthened by the creation in 1974·of the European Council, a regular summit meeting of EU heads of state and government. In addition, the Committee of Permanent Representatives (Coreper) , an intergovernmental body of member-state representatives, emerged as a crucial decision-making body preparing legislation for adoption by the Council of Ministers. Similarly, empirical studies showed the importance of national gate keeping institutions (H. Wallace 1973). Even some of the major advances of this period, such as the creation of the European Monetary System (EMS) in 1978 (see Chapter 7), were taken outside the structure of the EEC Treaty, and with no formal role for the Commission or other supranational EC institutions.

aracterized EEC deciSion-making inal six member states met alongial elements of the EEC customs de Gaulle, the French President, isis', insisting on the importance e implicit procedural code of the n scheduled to move to extensive ued to take most decisions de facto ned from its confrontation with de easserted itself. These tendencies e 1970s, when economic recession de among EC member states and

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The period from the mid-1960s through the mid-1980s has been characterized as 'the doldrums era', both for the integration process and for scholarship on the EU (Keeler 2005; Jupille 2005). While a dedicated core of EU scholars continued to advance the empirical study of the EU during this period, much of this work either eschewed grand theoretical claims about the integration process or accepted with minor modifications the theoretical language of the neo-functionalistlintergovernmentalist debate. With the 'relaunching' of the integration process in the mid-1980s, however, scholarship on the EU exploded, and the theoretical debate was revived. While some of this scholarship viewed the relaunching of the integration process

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e spill-over process, which he calls l actors (such as the Commission) thers within the member states) on. At the sub-national level, Haas integrated sector would have to harged with the management cif me to appreciate the benefits from demands, expectations, and even a new centre, thus becoming an pra national level, moreover, bodies a transfer of loyalties, promoting ong the member states so as to ch sectoral and political spill-over, on would become self-sustaining, with its centre in Brussels. important contribution of neong was their conceptualization of Webb pointed out, this ideal-type bservation of a few specific sectors hapter 8, and the customs union, the Community, and presented a ess driven by an entrepreneurial liberation among member-state y method in this view was not just procedural code' conditioning the ion and the member governments

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Reflecting these developments, a new 'intergovernmentalist' school of integration theory emerged, beginning with Stanley Hoffmanns (1966) claim that the nation-state, far from being obsolete, had proven 'obstinate'. Most obviously with de Gaulle, but later with the accession of new member states such as the UK, Ireland, and Denmark in 1973, member governments made clear that they would resist the gradual transfer of sovereignty to the Community, and that EC deciSion-making would reflect the continuing primacy of the nation-state. Under these circumstances Haas himself (1975) pronounced the 'obsolescence of regional integration theory': while other scholars such as Paul Taylor (1983) , and William Wallace (1982) argued that nea-functionalists had underestimated the resilience of the nation-state. At the same time, historical scholarship by Alan Milward and others (Milward and Lynch 1993; Milward 2000) supported the view that EU member governments, rather than supranational organizations , played the central role in the historical development of the EU and were strengthened, rather than weakened, as a result of the integration process. And indeed, the early editions of Policy-Making in the European Communities found Significant evidence of intergovernmental bargaining as the dominant mode of policy-making in many (but not all) issue areas.

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Overarching the three steps of this model is cooperation. The relevant actors are ass wealth, power, etc. ), and act systematically constraints posed by the institutions within Moravcsik and Schimmelfennig 2009). During the 1990s, liberal intergovernme theory of European integration, yet its basic t by international relations scholars coming group of scholars, collected under the rubric historical institutionalism, accepted Moravcs his spare, institution-free model of interg description of the EU policy process. By con ing from sociolOgical institutionalism and c objections to the methodological individual of an approach in which national preference part, by EU norms and rules.

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as a vindication of earlier neo-functionalist models (Sandholtz and Zysman 1989; Tranholm-Mikkelsen 1991), Andrew Moravcsik (1993a, 1998) argued influentially that even these steps forward could be accounted for by a revised intergovernmen- _ tal model emphasizing the power and preferences of EU member states. Moravcsik's 'liberal intergovernmentalism' is a three-step model, which combines: (1) a liberal theory of national preference formation with (2) an intergovernmental model of EU-level bargaining, and (3) a model of institutional choice emphasizing the role of international institutions in providing 'credible commitments' for member governments. In the first or liberal stage of the model, national chiefs of government (COGs) aggregate the interests of their domestic constituencies, as well as their own interests, and articulate their respective national preferences towards the EU. Thus, national preferences are complex, reflecting the distinctive economics, parties , and institutions of each member state, and they are determined domestically, not shaped by participation in the EU, as some nea-functionalists had proposed. In the second or intergovernmental stage, national governments bring their preferences to the bargaining table in Brussels, where agreements reflect the relative power of each member state, and where supranational organizations such as the Commission exert little or no influence over policy outcomes. By contrast with neo-functionalists, who emphaSized the entrepreneurial and brokering roles of the Commission and the upgrading of the common interest among member states in the Council, Moravcsik and other intergovernmentalists emphaSized the hardball bargaining among member states and the importance of bargaining power, package deals, and 'side payments' as determinants of intergovernmental bargains on the most important EU decisions. Third and finally, Moravcsik puts forward a rational-choice theory of institutional choice, arguing that EU member states adopt particular EU institutions--'-pooling sovereignty through QMY, or delegating sovereignty to supranational actors like the Commission and the Court-in order to increase the credibility of their mutual commitments. In this view, sovereign states seeking to cooperate among themselves invariably face a strong temptation to cheat or 'defect' from their agreements . Pooling and delegating sovereignty through international organizations, he argues, allows states to commit themselves credibly to their mutual pr- mises, by monitoring o state compliance with international agreements and filling in the blanks of broad international treaties, such as those that have constituted the EClEU. In empirical terms, Moravcsik argues that the EU's historic intergovernmental agreements, such as the 1957 Treaties of Rome and the 1992 Treaty on European Union (TEU), were not driven primarily by supranational entrepreneurs, unintended spillovers from earlier integration, or transnational coalitions of interest groups, butrather by a gradual process of preference convergence among the most powerful member states, which then struck central bargains among themselves, offered Side-payments to smaller member states, and delegated strictly limited powers to supranational organizations that remained more or less obedient servants of the member states. The rise of institutionalist analysis of the E flected a gradual and widespread re-introduc theories (such as pluralism, Marxism, and n been either absent or considered epiphenom or processes such as the distribu tion of pow national system. By contrast with these insti dominated much of political science between 'institutionalisms' developed during the cou with a distinct definition of institutions and a the study of politics (March and Olsen 1984, Rational-choice institutionalism began scientists to understand the origins arid effe legislative behaviour and policy outcomes. models of US legislative behaviour, which de simple-majority votes among ' CongreSSional as Kenneth Shepsle (1979, 1986) argued th particular the committee system, could shap outcomes durable in the face of subsequent ch this view, could produce 'structure-induced e as permissible or impermiSSible, and by stru power of various actors in the decision-maki others turned their attention to the problem how actors choose or design institutions to institutions change or persist over time.

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existing institutions, adapting them only incrementally in response to changing circumstances. Thus, politics should be characterized by certain interrelated phenomena, including: inertia, or 'lock-ins', whereby existing institutions may remain. in equilibrium for extended periods despite considerable political change; a critical role for timing and sequencing, in which relatively small and contingent events at critical junctures early in a sequence shape events that occur later; and path-dependence, in which early decisions provide incentives for actors to perpetuate institutional and policy choices inherited from the past, even when the resulting outcomes are manifestly inefficient. In recent years, these insights have been applied increasingly to the development of the EU, with various authors emphasizing the temporal dimension of European integration (Armstrong and Bulmer 1998). Pierson's (1996b) study of path-dependence in the EU, for example, seeks to understand European integration as a process that unfolds over time, and the conditions under which path-dependent processes are most likely to occur. Working from essentially rationalis t assumptions, Pierson argues that, despite the initial primacy of member governments in the design of EU institutions and poliCies, 'gaps' may occur in the ability of member governments to control the subsequent development of institutions and poliCies, for four reasons. First, member governments in democratic societies may, because of electoral concerns, apply a high 'discount rate' to the future, agreeing to EU policies that lead to a long-term loss of national control in return for short-term electoral returns. Secondly, even when governments do not heavily discount the future, unintended consequences of institutional choices can create additional gaps, which member governments may or may not be able to close through subsequent action. Thirdly, the preferences of member governments are likely to change over time , most obviously because of electoral turnover, leaving new governments with new preferences to inherit an acquis communautaire n ego tiated by, and according to the preferences of, a previous government. Finally, EU institutions and poliCies can become locked-in not only as a result of change-reSistant institutions from above, but also through the incremental growth of entrenched support for existing institutions from below , as societal actors adapt to and develop a vested interest in the continuation of specific EU policies. In sum, for both rational-choice and historical institutionalists, EU institutions 'matter', shaping both the policy process and policy outcomes in predictable ways, and indeed shaping the long-term process of European integration. In both cases, however, the effects of EU institutions are assumed to influence only the incentives confronting the various public and private actors-the actors themselves are assumed to remain unchanged in their fundamental preferences and identities. Indeed, despite their differences on substantive issues, liberal intergovernmentalism, rational-choice institutionalism, and most historical institutionalism arguably constitute a shared rationalist research agenda-a community of scholars operating from similar basic assumptions and seeking to test hypotheses about the most important determinants of European integration.

-choice approach to institutions th potential applications to both le, rational-choice institutionalists etting' power of Congressional e floor that is often easier to adopt of the US Congress have developed ation to regulatory bureaucracies onditions under which legislative ir respective agents (Moe 1984; pstein and O'Halloran (1999), and a 'transaction-cost approach' to the tors deliberately and systematically nsaction costs associated with the

the context of American political hts 'travelled' to other domestic and by students of the EU . Responding rules, such as the cooperation and t purely intergovernmental models al importance of formal EU rules on of rational-choice theory to the t the inefficiency and rigidity of the to the EO's intergovernmentalism, animous deCision-making and the states failed to agree on a common ge Tsebelis, Geoffrey Garrett, and d the functioning ofEU institutions all essentially into the comparative s, and are therefore reviewed in the

and constructivist approaches s much more broadly to include mal rules. They argued that such g their identities and hence their aches could not capture (see next

between these two camps, fOCUSing ular on the ways in which a given ce or constrain the behaviour of the and Steinmo 1992) . In perhaps the g, Paul Pierson (2000) has argued what economists call 'increasing tors to stick with and not abandon

24
q

Mark A. Pollack

the process agents' identity and subsequentl While ·this a'spect of change can be theorized remain largely invisible in approacb.es that neg or assume interests to be given exogenously.

Constructivism, and reshaping European identities and preferences

}
it is probably most usefu l to describe co nstructivism as based on a social ontology wh ich insists that human agents do not exist independently from their social environment and its collective ly shared systems of mean ings ('culture' in a broad sense). This is in contrast to the methodologica l individualism of rationa l choice according to which '[tlhe elementary uhit of social life is the individual human action'. The fundamental

Constructivist theory, like rational choice, did not begin as a theory of European integration, but rather as a broader 'metatheoretical' orientation with potential implications for the study of the EU. As Risse (2004: 161) explains in an excellent survey:

insight of the agency-structure debate, which lies at the heart of manysocial construc-

t ivist works, is not only that structures and agents are mutually co-determined . The

crucial point is tfiat constructivists insist on the constitutiveness of (social) structures

and agents. The social enviro nment in which we find ourse lves, 'constitutes' who we

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are, our identities as social beings.

1 1

Not surprisingl), such arguments were forc resulting in a major 'metatheoretical deb Moravcsik 2001). In recent years constructivist scholars hav seeking rigorously to test hypotheses about lective preference formation in the EU, usin tive research methods. The results of these st scholars finding evidence of socialization am 2005) andlor new and candidate members finding has been thatEU sociahzation of b national officials has been less far-reaching studies, for example, students of EU enlarge cies of new and candidate members of the socialization, and arguing that EU 'conditio than socialization, provided the strongest e (Kelley 2004; Schimmelfennig and Sedelmeie on intemational socialization in Europe , led similar findings, concluding that, 'while th expecting a predominance of intemational s cases instead suggest that effects of socializa dynamics at the national level' (Ziim and Ch

Integration theory today

1

For constructivists, institutions are understood broadly to include not only formal rules but also informal nomlS, and these rules and norms are expected to 'constitute' actors, i.e. to shape their identities and their preferences. Actor preferences, therefore, are not exogenously given and fixed, as in rationalist models, but endogenous to institutions, and individuals' identities shaped and re-shaped by their social environment. Taking this argument to its logical conclusion, constructivists generally reject the rationalist conception of actors as utility-maximizers operating according to a 'logic of consequentiality', in favour of March andOlsen's (1989: 160-2) conception of a 'logiC of appropriateness'. In this view, actors confronting a given situation do not consult a fixed set of preferences and calculate their actions in order to maximize their expected utility, but look to socially constructed roles and institutional rules and ask what sort of behaviour is appropriate in that situation. Constructivism, therefore, offers a fundamentally different view of human agency from rational~choice approaches, and it suggests that institutions influence individual identities, preferences, and behaviour in more profound ways than those hypotheSized by rational-choice theorists. Consistent with these hypotheses, a growing number of scholars have suggested that EU institutions shape not only the behaviour, but also the preferences and identities of individuals and member govemments. This argument has been put most forcefully by Thomas Christiansen, Knud Erik j0rgensen, and Antje Wiener (1999: 529):

A significant amount of evidence suggests that, as a process, European integration has a

transformative impact on the European state system and its constituent units. European

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European integration theory is far more comp edition of this volume was published. In plac intergovemmentalist debate, the 1990s witnes in EU studies, pitting rationalist scholars ag 1990s, it appeared that this debate might wel of the deaf, with rationalists dismiSSing con ists denounCing rationalists for their obses formal models. The past several years, howe a more productive dialogue between the tw Checkel 200}), and a steady stream of empir between the competing claims of the two ap neo-functionalistlintergovernmentalist debate study of European integration, the contempor EU studies mirrors larger debates among thos

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Theorizing EU Policy-Making
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re EU studies relevant to the wider ways the vanguard of international oratory for broader processes such ation. e literature on European integration direction of the integration process. heorists tend to be drawn from the ho point to the potential for further cal spill-overs, and the latter through eferences and identities. Rationalist tend to be sceptical regarding claims e strains of EU enlargement and the reaty and the subsequent Treaty of esent an 'equilibrium polity', one in re-essentially spent, and in which the s unlikely to change substantially for ce, while the lite,ature on European t decade, a consensus on the causes elusive as ever. who issued a call to arms to compara tivists. Previous studies of the EU, Hix argued, had neglected the. politics of the Union, as well as its characteristics as a political system. The EU, he contended, was clearly less than a Weberian state, lacking in particular a monopoly on the legitimate use of force; yet he echoed Lindberg and Scheingold by suggesting that the EU could be theorized as a political system, with a dense web of legislative, executive, and judicial institutions that adopted binding public poliCies and hence influenced the 'authoritative allocation of values' in European society. Furthermore, Hix suggested that EU politics takes place in a twodimensional space, with integration representing one dimension, alongside a second dimension spanning the traditional left-right divide over the extent and nature of government intervention in the economy. Hence the EU could, and should, be studied using 'the tools, methods and cross-systemic theories from the general study of government, politics, and policy-making. In this way, teaching and research on the EU can be part of the political science mainstream' (Hix 1999: 2) . Hix's call to arms among comparativists has not escaped criticism, with a number of authors arguing that the aim of EU scholars should not be to rej ect international relations in favour of comparative politics, but rather to understand the interactions between domestic and international politics (Hurrell and Menon 1996). Nevertheless, comparative political scientists have moved increaSingly into EU studies, in part because the EU has intruded increaSingly into what had previously been seen as excluSively 'domestic' arenas, and in part because an increasing number of scholars accepted Hix's claim that the EU could be theorized as a 'political system' Oupille 2005) . Although such comparative work on the EU is extraordinarily diverse, much of it can fairly be characterized as comparative, rational-choice, and positivist in nature. First, much of the work on EU politics proceeds from the assumption that the EU is not a sui generis system of governance, but is a variant on existing political systems. It can therefore be studied and understood with the aid of 'off-the-shelf' models of policy-making in other (primarily national) contexts. In recent years, a growing number of these theories have drawn from American politics , since the EU arguably resembles the US in possessing both a vertical and a horizontal separation of powers. Secondly, most of the work reviewed in this section is either impliCitly or explicitly rationalist, taking the assumption that actors (be they states, individuals, or supranational organizations) have fixed, exogenously determined preferences, and act systematically to maximize those preferences within the constraints of the EU's institutional system. A growing subset draws not only on the language of rational choice (i.e. 'soft' rational choice) , but also elaborates formal and game-theoretic models of EU deciSion-making. Thirdly and finally, much of the work discussed here can be characterized as implicitly or explicitly 'positivist', adopting and adapting the standards of tlle natural scienceS, seeking to test theory-driven hypotheses systematically, and often (though by no means always) using quantitative as well as qualitative methods (see e.g. Gabel, Hix, and Schneider 2002 on EU studies as 'normal science'). A complete survey of this literature would take us beyond the remit of this chapter, although many elements of it are addressed by

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ne concerned overwhelmingly with tion as a process, with its theoretinational relations. However, many ly, as a polity or political system dency was most pronounced in the ed the EU to federal and confederal Pinder 1968; C. J. Friedrich 1969; 1988; Burgess 1989; Sbragia 1992a, orists like Lindberg and Scheingold characterized by political demands es (outputs). At the same time, an itors and authors of the first (1977) deliberately sought to bracket the ation, fOCUSing instead on a better complexity and diversity. onal relations came under serious ng expliCitly to understand the EU as ped in the study of domestic polities. by Simon Hix (1994, 1999, 2005),

28
MarkA. Pol lack


Alasdair Young in Chapter 3. In this section, I focus narrowly on two dimensions that are most relevant to the study of policy-making, namely the vertical or 'federal' division d powers between the EU and member-state levels, and the horizontal separation of _ powers among the legislative, executive, and judicial branches of the Union.

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The contemporary EU is far narrower and weaker a federation than any extant national federation - so weak, indeed, that we might question whether it is a federation at all . .~ The EU was designed as, and remains primarily, a limited international institution to coordinate national regulation of trade in goods and services, and the resulting flows of economic factors . Its substantive scope and institutional prerogatives are limited accordingly. The EU constitutional order is not only barely a federal state; it is barely recognizable as a state at all. (Moravcsik 2001: 163-4)

The vertical separation of powers: the EU as a federal system
The EU did not begin life as a federal union, nor, in the view of most analysts, does it constitute a fully developed federation today. In political terms, the very term 'federal' was contentious and referred to obliquely as 'the f-word'; and in analytical terms some scholars question whether the EU can or should be accurately described as a federal state:

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a constitutionally guaranteed separation of state levels , and a dual system of represent (EP) and the Council of Ministers. Hence t provides a useful toolkit for thinking about Perhaps the most difficult issue, as in othe distribution of powers among the federal an vary both across issue areas and over time ( powers between the two levels may be con tutional assignments of authority are often federal and state governments frequently e jurisdiction in most issue areas. Both the U for example, feature broad and flexible clau ture to regulate interstate commerce or indee 'necessary and proper' in achieVing the funda see cycles or rhythms of federalism in which and authority, followed periodically by backl or devolution of power back to the states. In viewed as a series of centralizing initiatives and the relaunching of the integration proc of retrenchment or devolution (e.g. th,e Gaul post-Maastricht backlash of the 1990s) (Don gle over European integration, in this view; is tutionally structured process of oscillation b familiar from other federal systems.

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Nevertheless, federalism was a powerful normative ideal motivating many of the founders of the European movement and much of the early scholarship on the EU. Recognizing the strong resistance of national governments to directly federal proposals, Jean Monnet and his colleagues opted instead for a more sectoral and incremental approach, more accurately captured in neo-functionalist theory than in traditional federalist approaches. By the 1980s, however, the EC had developed features with analytical similarities to those of existing federations. Theories of federalism therefore took on greater importance, not just as a normative ideal motivating European integration, but as a positive theoretical framework, capable of explaining and predicting the workings of the EU as a political system. The term federalism has been the subject of numerous overlapping definitions, but most rely on the three elements emphasized by R. Daniel Kelemen (2003: lS5), who defines federalism as 'an institutional arrangement in which: (a) public authority is divided between state governments and a central government; (b) each level of government has some issues on which it makes final decisions; and (c) a federal high court adjudicates disputes concerning federalism' . In most federal systems, moreover, the structure of representation is twofold, with popular or functional interests represented directly through a directly elected lower house, while. territorial units are typically represented in an upper house, whose members may be either directly elected (as in the US Senate) or appointed by state governments (as in the German Bundesrat) . In both of these senses , the EU already constitutes a federal system, with

Students of comparative federalism have, pect of the EU, namely the absence or at least the dominance of 'regulatory federalism' (Bar eral systems engage in substantial fiscal transf budget has been capped at a relatively small 1. devoted to agricultural and cohesion spending therefore unable to engage in substantial redi tion through fiscal policy (see Chapter 7) , and of European welfare states, which remain pre In contrast, the Union has engaged primarily 11-15 ), earning it the moniker of a 'regulator regulatory output of the Union, in Majone's v and supply factors. On the demand side, the nal market has put pressure on EU member st EU-wide regulations, most notably on product of goods, services, labour, and capital through entrepreneurial European Commission has enhance its own policy competence despite th strict budgetary ceiling .

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Theorizing EU Policy-Making
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vast EU-wide project of economic ntenance of the internal market, ording to a 'regulatory mode' of tems, the adoption of far-reaching of regulation not originally envisficant controversy and increasing nciple of 'subsidiarity' , the notion the citizen and therefore that it y to ensure the completion of the he treaties. Even in the regulatory not fixed but fluid, and the result e, in which EU and member-state ntly in flux .

pe, but like the US, the EU has a distinct branches of government and judicial functions of governne institution enjoys sole control Kreppel (2002: 5) points out, the ers 'requires to a certain extent a e, legislative, and judicial)'. In the on is today shared by the Council e for the Commission; the execuember states, and (in some areas) function is shared by the EC] , the national courts bound directly to ure (see Chapter 4) . ve-politics scholars have over the eorizing, predicting, and explainusing off-the-shelf theories drawn itics. Many of these theories are vides comparative analysis of the implementation: We focus here ysis to the legislative, executive, fly the promise and limits of such

t literature, most relevant to our nd growing literature on the EU of legislative behaviour (Le. the

ways in which legislators vote) and legislative organization (the ways in which legislatures organize their business), scholars have sought to understand the legislative process in the EU, fOCUSing on three major questions: legislative politics within the European Parliament; voting power and voting patterns in the Council of Ministers; and the respective powers of these two bodies in the EU legislative process (McElroy2007) . The European Parliament (EP) has been the subject of extensive theoretical modelling and empirical study over the past two decades, with a growing number of scholars studying the legislative organization of the EP and the voting behaviour of its members (MEPs) . Early studies of the Parliament emphaSized the striking fact that, in spite of the multinational nature of the Parliamerit, the best predictor of MEP voting behaviour is not nationality bu t an MEP's 'party group', with the various party groups demonstrating extraordinarily high measures of cohesion in roll-call votes. These MEPs, moreover, were shown to contest elections and cast their votes in a two-dimensional 'issue space', including not only the familiar nationalism! supranationalism dimension but also and especially the more traditional, 'domestic' dimension ofleft-right contestation. Perhaps most fundamentally; these scholars have shown, the EP can increasingly be studied as a 'normal parliament' whose members vote predictably and coheSively within a political space dominated by the familiar contestation between parties of the left and right (Tsebelis and Garrett 2000; Kreppel 2001; Hix, Noury, and Roland 2007). By contrast with this rich EP literature, the rational-choice literature on the Council of Ministers until recently focused on the relatively narrow question of memberstate voting power under different decision rules. In recent years, however, the study of the Council has undergone a renaissance, driven in part by the increasing public availability of Council voting records and data-sets such as the DeciSion-Making in the European Union (DEU) project (R. Thomson et al. 2006). This thriving literature has produced new theoretical conjectures, and new qualitative and quantitative empirical tests, on issues such as the relative power of EU member states in the Council; the coalition patterns among member states within the Council (which appear to break down largely on geographical or North-South lines) ; the Council's tradition of consensus deCiSion-making, rather than minimum-winning coalitions; and the as-yet uneven evidence for the socialization of national officials in the Council and its subSidiary committees and working groups (see Mattila 2004; Hayes-Renshaw and Wallace 2006; and Naurin and Wallace 2008) . Third and finally, a large and ever-growing literature has attempted to model in rational-choice terms, and to study empirically, the inter-institutional relations among the Commission (as agenda-setter) and the Council and Parliament, under different legislative procedures. Over the course of the 1980s and the 1990s, the legislative powers of the EP have grown sequentially, from the relatively modest and non-binding 'consultation procedure' through the creation of the 'cooperation' and 'assent' procedures in the 1980s, and the creation and reform of a 'co-decision procedure' in the 1990s. This expansion of EP legislative power, and the complex nature of the new

att

32
Mark A. Pollack

The anSwer
to

this question lies primarily in

legislative procedures, has fostered the development of a burgeoning literature and led to several vigorous debates among rational-choice scholars about the nature and extent of the EP's and the Council's respective influence across the various procedures. Such studies have shown that the institutional power and impact of the EP on legislative outcomes has grown substantially over time with the move from consultation to cooperation to the two different versions of co-decision in the Maastricht and Amsterdam Treaties (see e.g. Tsebelis et a1. 2001; Hix, Noury and Roland 2007; and the review in McElroy 2007). Today, the powers of Parliament vary by issue and by the treaty basis for any particular policy, ranging from the limited influence of the consultation procedure to the revised co-decision procedure in which 'the Council and the Parliament are now co-equal legislators and the EU's legislative regime is truly bicameral' (Tsebelis and Garrett 2000: 24) . Several case studies in this volume illustrate the r01e of the Ep· in the legislative, as well as the budgetary, processes of the EU.

p~incipals may establish to define ex ante the s

Executive politics: delegation and discretion

overSight procedures that allow for ex post ove Applied to the European Union, principal-age esis that agency autonomy is likely to vary acr tion of the preferences of the member states, t principals and agents, and the decision rules g the adoption of new legislation. By and large, e the EU have supported these hypotheses, poi decision rules as a crucial determinant of exe Tallberg 2000; Tsebelis and Garrett 2001; Fran Finally, students of executive politics in t study of relatively new phenomena, notably th agencies at the EU level. The ECB, now the c is without doubt the most spectacular exam hiStory of the EU. Indeed, both rational-choi referred to the ECB as the most independent long and non-renewable terms of its members mandate, which can be altered only by a unan (see Chapter 7). At the same time, the EU's number of regulatory agenCies, such as the and the European Food Safety Authority (EF each with their own rules and their own powe process (see e.g. Chapter 14 on the regulator

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Judicial politics and the ECJ

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Thestudy ofEU executive poli tics,and especially the role of the European Commission, is a perennial issue in European integration theory, with neo-functionalists and intergovernmentalists debating the causal role of the executive Commission for decades. Nevertheless, rational-choice and principal-agent analysis have emerged over the past decade as the dominant approach to the study of the Commission and other executive actors such as the European Central Bank and the growing body of EU agencies (Tallberg 2007). These studies generally address two specific sets of questions. First, they ask why and under what conditions a group of (member-state) principals might delegate powers to (supranational) agents , such as the Commission, the European Central Bank, OT the Court of Justice. Simplifying considerably, such transaction-cost accounts of delegation argue that member-state principals, as rational actors, delegate powers to supranational organizations primarily to lower the transaction costs of policymaking, in particular by allowing member governments to commit themselves credibly to international agreements and to benefit from the policy-relevant expertise provided by supranational actors. Despite differences in emphasis, the empirical work of these scholars has collectively demonstrated that EU member governments do indeed delegate powers to the Commission, the European Central Bank and the Court of Justice largely to reduce the transaction costs of policy-making, in particular through the monitoring of member-state compliance, the filling-in of framework treaties ('incomplete contracts'), and the speedy and efficient adoption of implementing regulations that would otherwise have to be adopted in a time-consuming legislative process by the member governments themselves (Pollack 1997, 2003; Moravcsik 1998; Majorie 2000a; Franchino 2004, 2007) . In addition to the question of delegation, rational-choice institutionalists have devoted greater attention to a second question posed by principal-agent models: what if an agent- such as the European Commission, the Court ofjustice, or the European Central Bank- behaves in ways that diverge from the preferences of the prinCipals?

Rational-choice institutionalists have also e research into the nature of EU judicial politics tion process. Geoffrey Garrett (1992) first dre that the Court, as an agent of the EU's member wishes of the most powerful member states. had established the ECJ as a means to solv and monitoring compliance with EU obligati jurisprudence, even when rulings went agai interest in the enforcement of EU law. In such 189) argued, the EC] might identify 'construc librium outcomes, but the Court was unlik powerful EU member states, as Burley and M article drawing on nea-functionalist theory. Other scholars have argued forcefully that G mechanisms available to powerful member stat ist Court, which has been far more autonomo suggest that the Court has been able to purs

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overnments, in part due to the high mply with EC] decisions, and in part of individual litigants and national ECJ via the 'preliminary reference' Weiler 1994; Mattli and Slaughter e Sweet and Brunell1998a, 1998b; o (1998: 129), 'the move to supremus acts of agency' by the Court. out, the literature on the EC] and e traditional question of the ECl's the study of the ECl's other interrts that bring the majority of cases use EU law to achieve their aims oblematized and sought to explain n the EC] and national courts, as hot' litigants and 'repeat players' er 2001; Conant.2002). These and of EC] legal integration, the interd sub-national political and legal ontexts. research about the process of European integration, the workings ofEU institutions, and the EU's role in the global order (see Chapter 18). Just as importantly, these approaches now co-extst with a third approach, typically labelled the 'governance approach', which draws on both IR and comparative politics and considers the EU as neither a traditional international organization nor as a domestic 'political system', but rather as a new and emerging system of 'governance without government'. The governance approach is not a Single theory of the EU or of European integration, but rather a cluster of related theories emphaSizing common themes Oachtenfuchs 2001, 2007; Jachtenfuchs and Kohler-Koch 2004). Hix (1998) has usefully contrasted the governance school to its rationalist/comparativist/positivist alternative, arguing that the governance approach constitutes a distinctive research agenda across four dimensions. First, the governance approach theorizes EU governance as non-hierarchical, mobilizing networks of private as well as public actors, who engage in deliberation and problem-solving efforts guided as much by informal as by formal institutions. Secondly, the practitioners of the governance a~proach are suspicious of 'off-the-shelf' models, advocating the need for a new vocabulary to capture the distinctive features ofEU governance (Schmitter 1996; Eriksen and Fossum 2000 : 2; Bache and Flinders 2004: 2). Thirdly, students ofEU governance often (although not always) emphaSize the capacity of the EU to foster 'deliberation' and 'persuasion'-a model of policymaking in which actors are open to changing their beliefs and their preferences, and in which good arguments can matter as much as, or more than, bargaining power (Risse 2000). Fourthly, governance theorists frequently express a normative concern with the 'democratic deficit' in the EU, with manyemphasizing the potential for the EU as a 'deliberative democracy' Ooerges 2001a) . The literature on 'governance' thus defined has exploded in recent years Oachtenfuchs 1995; Scharpf 1999;Jachtenfuchs 2001; Hoogheand Marks 2001;1achtenfuchs and Kohler-Koch 2004; Bache and Flinders 2004; Jachtenfuchs 2007). I focus here on five key issues: Cl) the concept of 'governance'; (2) early applications to the EU, in the literatures on 'multi-level governance' and policy networks; (3) the growing literature on the 'Europeanization' of both existing member states and new and candidate members; (4) a substantial literature on the governance capacity of member states and of EU institutions, and the problems of legitimacy faced by the latter; and (5) a new and novel set of claims about the EU as a process of 'deliberative supranationalism' capable of resolving these normative dilemmas.

study of policy-making employcs, formal and informal models mmitment to systematic empirical mes highly abstract and inaccesvanced our understanding of EU nce of the Commission, Council, ationship between EU institutions . Furthermore, with the creation e scope for systematic testing and years to come, making the EU an ormal science'.

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proponents o( the multi~level governance varied, nuanced influence of EU poliCies on how national governments have maintained such as the UK and Greece , while other co shift of authority' from national government national, regional governments ina substant Italy, Spain, and Belgium (Hooghe 1996; H Flinders 2004).

1

Other scholars have focus ed on the horizo integration, drawing on network theory to d transnational and transgovernmental networ closed 'policy communities' of public and priva - technological development to the more open a in areas such as environmental regulation (Pe 2009). This network form of governance, mo over the past decade by the creation of formal a ulators, in areas such as financial regulation an for a general discussion of policy networks in t

1
Multi-level governance and EU policy networks

Within the field of comparative politics, the term governance has appeared with increasing frequency, but with different definitions and different emphases-indeed, Rod Rhodes (1996) identifies at least six distinct uses of the term in the literature. At their most far-~eaching, however, theorists of governance put forward the radical claim that contemporary governments lack the knowledge and information required to solve complex e~onomic and social problems, and that governance should therefore be conceived more broadly as the negotiated interactions of public and private actors in a given policy arena. In this view, modern society is 'radically decentred', and govemment features as only one actor among many in the larger process of socio-economic governance (Kooiman 1993). Hence, in Rhodes' (1996: 660) terms, governance-as distinct from government- takes place through organized networks of public and private actors which 'steer' public policy towards common ends. International-relations scholars have also increaSingly embraced the notion of 'governance wit.hout government' with Rosenau (1992: 4) and others suggesting that international affairs may be 'governed' by various different types of networks, including 'transgovernmental' networks of lower-level government or judiCial actors interacting across borders with their foreign counterparts .(Slaughter 2004), and 'transnational' networks of private actors forming a sort of 'global civil society' (Wapner 1996). This approach to governance, emphasizing networks of public and private actors 'steering' EU public policy, has gained widespread acceptance in EU studies, most notably in the study of 'multi-level governance' and policy networks.

Europeanization

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By most accounts Oachtenfuchs 2001; Bache and Flinders 2004: 3), the governance approach to the EU can be traced, at least in part, to Gary Marks' (1992,1993) work on the making and implementation of the EU's structural funds. Writing in opposition to intergovernmentalists, Marks argued that the structural funds of the 1980s and 1990s provided evidence for a very different image of the EU , one in which central governments were losing control both to the Commission (which played a key part in designing and implementing the funds) , and to local and regional governments inside each member state (which were granted a 'partnership' role in planning and implementation). In making this argument, Bache and Flinders (2004: 3) point out, Marks and his colleagues placed a dual emphasis, first on the 'multi-level' interdependence of territorial governments at the European, national, and sub-national level, and second on the development of new public-private policy networks transcending all three levels. Later studies of the EU structural funds questioned Marks' far-reaching empirical claims, noting in particular that EU member governments played central roles in the successive reforms of the funds, and that these member states remained effective 'gatekeepers', containing the inroads of both the Commission and sub-national governments into the traditional preserve of state sovereignty _ (Pollack 1995 ; Bache 1998; see also Chapter 10) . Following these challenges,

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An increaSingly Significant offshoot from the m ines the phenomenon of 'Europeanization', the policies influence national institutions and polic In general terms, such studies date to the 197 examined how EU membership had influenced n lic policies (see e.g. H. Wallace 1973). During th became a cottage industry, with a growing num the process of EuropeaniziJ.tion and the signifi across both member statesand issue areas. In on Cowles, Caporaso, and Risse (2001 ) suggested should be the dual product of: (1) adaptational 'goodness of fit' between EU and national instit tic intervening variables, including the number and political cultures embedded in existing nat turn, have informed a growing literature on the i ground' in the various member states, which re topic (see e.g. Falkner et aI. 2005; Hartlapp and Subsequently, scholars have sketched altern mechanisms whereby the EU might influence n by constraining national choices, in the secon reshaping national identities and preferences ( More recently, Frank Schimmelfennig and Ulric

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the weakness of the EP and the second-order nature of its elections; and the bias in the treaties in favour of market liberalization over social regulation (Williams 1991 ; Scharpf 1999; Greven 2000). Furthermore, even if these institutional flaws in the EU treaties were to be addressed, joseph Weiler (1995) has suggested that Europe lacks a demos , a group of people united by a sense of community or 'we-feeling' that could provide the constituent basis for an EU-level democracy. Other scholars, writing from the perspectives of critical theory (Manners 2007) and feminist theory (Prugl 2007) , raise additional challenges to the EUs legitimacy, questioning the locus of public power in the Union, the inclusion of the concerns of peoples of various classes , genders, and ethnicities, and negative as well as the positive impacts of the EUs public policies. For all these reasons, governance theorists argue, the EU faces a 'democratic deficit' and a profound crisis of legitimacy. Much of the governance literature is given over to proposals for increasing the democratic accountability and the governance capacity of the Union. Whereas in the past EU institutions had relied primarily on 'output legitimacy' (i.e. the efficiency or popularity of EU policy outputs), today there are increased calls for reforms that would increase the 'input legitimacy' (i.e. the democratic accountability of EU institutions to. the electorate). We can identify three distinct reform tracks in the literature: constitutionalization, parliamentarization, and deliberation. The first and most modest of these proposals is 'constitutionalization', the creation of overarching rules and procedural controls that would ensure minimum levels of transparency and public partiCipation in EU policy-making. Andrew Moravcsik (2002), for example, has suggested that the EUs existing treaties (as opposed to the proposed Constitutional Treaty that was rejected in 2005) already contain sufficient checks and balances to address concerns about the EUs democratic legitimacy within the circumscribed limits of its powers. Critics of the EUs democratic legitimacy, however, argue that such procedural safeguards are insufficient to produce an EU that is open and responsive to its citizens . In this context, the second proposed reform track, parliamentarization, would involve inter alia the strengthening of the EP's legislative and budgetary powers; a strengthening of EU party groups; the increased salience of EU (rather than national) issues in European elections; and the subordination of the Commission to the Parliament as in the natIonal parliamentary systems of Europe (Hix 2008b). Others, however, have cast doubt on the parliamentary model, suggesting that such an approach could exacerbate, rather than ameliorate, the EUs crisis of legitimacy by subjecting national communities, or demoi , to a long-term minority position in an EU of twenty-seven or more members (Weiler 1995) , and by threatening the independence and neutrality bf the European Commission (Majone 2000b) For these reasons, an increasing number of authors have suggested a third model for the EU , namely a 'deliberative democracy' in which citizens, or at least their representatives, would collectively deliberate in search of the best solution to common problems.
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s and EC] decisions have increasal regulations, thereby thwarting references of national electorates egislation and EC] jurisprudence rogrammes untouched, it is often Union may set in train a process rnments face pressures to adjust e attractive to mobile capital. This al governments compete to lower esses threatening to move to other the limitations on national budget Pact, have arguably constJ:?ined. iscal policy tools that have proven ' goals (see Chapter 7) . In the words the body of rules and legislation ionale of strong liberal democracy character of this purported race to pf (1999) and others acknowledgpears to vary systematically across dermining of national regulations as normative challenges. econd question: whether the race egained, at the EU level. On this mistic, pointing to: the distant and role of indirectly elected officials als in the' European Commission;

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This emphasis on deliberation as a characteristic feature of EU policy-making derives largely from the work of Jurgen Habermas (1985, 1998), whose theory of communicative action has been adapted to the study of international relations and to the study of EU governance. The core claim of the approach, as popularized by Risse (2000) in the field of international relations, is that there are not two but three 'logics of social action', namely: the logiC of consequentiality (or utility maximization) emphasized by rational-choice theorists; the logic of appropriateness (or rulefollowing behaviour) associated with constructivist theory; and a 'logiC of arguing' derived largely from Habermas's theory of communicative action. In Risse's (2000: 7) logic of arguing, political actors do not simply bargain based on fixed preferences and relative power, they may also 'argue', questioning their own beliefs and interests and being open to persuasion and the power of a better argument. In the view of many democratic theorists, such argumentative processes lead to the promise of a nomiatively desirable 'deliberative democracy', in which societal actors engage in a sincere collective search for truth and for the best available public policy, and in which even the losers in such debates accept the outcome by virtue of their participation in the deliberative process and their understanding of the principled arguments put forward by their fellow citizens (Elster 1998; Bohman 1998). Despite the purp~rted benefits of such deliberative democracy, Risse (2000: 19-20) concedes that genuine argumentative rationality is likely only under a fairly restrictive set of preconditions, including notably: • the existence of a common lifeworld provided by a high degree of international institutionalization in the respective issue area; uncertainty of interests ancIJor lack of knowledge about the situation among the actors; and " • international institutions based on non-hierarchical relations enabling dense interactions in informal, network-like settings.

of Coordination' (OM C). With regard to t Neyer (l997a, 1997b) argue that EU comit which national 'and supranational experts best or most efficient solutions to common of informal norms, good arguments, and a s question both the empirical basis of this dai in such committees remains partial and sket the normative value of committee deliberati public eye (Zurn 2000). A second EU arena often identified as a pr Convention on the Future of Europe, which EU treaties and proposed a draft Constitutio genuine deliberation, as opposed to bargaini a~d controversial (Maurer 2003a; Closa 200 Thirdly, the promise of deliberation has al OMC, codified and endorsed by the Lisbon is a non-binding form of policy coordination of policy gUidelines, targets, and benchmar 'peer review' in which member governme programmes for consideration and comment b The OMC remains controversial both politi (see Chapter 12). For many commentators, address common policy issues without encr sovereignty, representing a 'third way' bet national governance and a potential test case and Maher 2001; Scott and Trubek 2002). at least tempered the more far-reaching cla the OMC. A number of scholars have arg sensitive questions, national representatives r positions, engaging clearly in bargaining ra Jacobsson and Vifell 2003; Jobelius 2003; B and Nanz 2004; and Chapter 12).

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These conditions are by no means satisfi~d everywhere in international politics. Where they are present, however, constructivist scholars predict that international actors will engage in arguing rather than bargaining. The promise of deliberation has received extraordinary attention within the study of the EU in recent years, most notably among scholars looking for a new normative basis for a democratically legitimate EU (Joerges 2001a; Eriksen and Fossum 2000, 2003). Empiri" al studies of deliberation face significant methodological c hurdles in distinguishing between arguing and bargaining, or between genuine communicative action and 'cheap talk' (Checkel 2001; Magnette 2004: 208). Despite these challenges, EU scholars have identified the promise of deliberation in three EU-related forums: comitology committees, the Constitutional Convention of 2003-4, and the 'new governance' mechanisms of the EU's 'Open Method The governance approach to the EU draws o national relations and asks analytically and n the workings of EU policy networks, the vari tion of national institutions and politics, the political system, and the prospects for delib Certainly; the governance approach is not w proponents concede that it remains a cons

moreover, one can argue that the nance approach has outpaced the its claims. Nevertheless, students in formulating a research agenda ore nuanced claims about territoan enlarged EU.
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raditional states (Hurrell and Menon ). It is even more so in the European ux, the allocation of authority is more ge a multitude of actors (Hurrell and s chaptenchoes the central theme of g can be fruitfully studied using gen2a: Peters on and Bomberg 1999; Hix troduction to the wealth of literature it aims to introduce those analytical olitics and international relations that itly; to explain policy-making in the king in a broad comparative perspecand cooperation among them. 2 g stone between.the grand theories aches to studying the EU discussed g and roles of the key institutions the policy cycle. It then makes the mparative politics and international ertain aspects of the policy process. the different phases of the policy on-making, and implementationexamining policy feedback. It conining policy-making in the EU.

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Hurrell and Menon (1996) and Risse-Kappen (1996) have argued for drawing on insights from both comparative politics and international relations in order to explain policy-making in the EU. Both contributions highlight developments in the international-relations literature- notably with regard to the implications of complex interdependence for state behaviour, attention to the roles of non-state actors, and the consequences of increasing institutionalization of international· cooperation-that depict relations at the international level in ways increasingly analogous to those found at the domestic level (more generally see Milner 1998). The literature on international cooperation in particular is concerned with the central questions of policy-making: whether there should be cooperation (which conflates whether there should be action and by whom) and what form it should take, including in terms of substance (see, e.g. Rosenau and Czempiel1992; O. R. Young 1999; Keohane and Nye 2001). This chapter also points to changes in how policy-making within states is analysed, particularly the decreased emphasis on hierarchy; that increase the resonance with analyses of international cooperation. These analytical changes are in response to and in recognition of real-world changes. Beginning in the 1980s, privatization, administrative reforms inspired by the New Public Management, changes in territorial politics (such as devolution in the UK), increased economic interdependence, and the development of policy-making beyond the state (not least by the EU) contributed to governing \vithin European states being understoo9. as occurring less through hierarchical authority structures and more through negotiation and persuasion within more decentralized networks (R. Rhodes 1997; Peters 2001; Kahler 2002: 58; Goodin et aL 2006: 11- 12; Goetz 2008). As a result of both of these shifts, approaches to analysing aspects of international cooperation and domestic policy-making have become more similar.

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interaction of multiple actors that want differ and capabilities to'the policy process. The main actors in the policy processes bureaucrats, and interest groups. Politicians, government, are the key decision-makers. Bu ment, take some policy decisions, and imple promote poliCies and to influence politicians' play a role in implementing policy While politicians in government always ma tant legislators are depends on the distributi tions (see under decision-making below). Wi debates about how politicians do and should Baumgartner and Leech 1998; Grossman and highly responsive to societal pressures, constit lobbying. More typically, authors assume th ences, informed by their own experiences and enced by societal pressures (Derthick and Qu Coleman 1989; Evans 1993). Bureaucrats also tend to be depicted as ha purposive (concerned with achieving polic integration) or reflexive (concerned with enh particular branch of the bureaucracy) (Niska Dunleavy 1997). The tendency for bureaucra preferences is captured by the aphorism popul that 'where you stand depends on where you s Interest groups are non-profit, non-violent a ganizations that are independent of governme them into the policy process (Keck and Sikk 2001; Price 2003; Hawkins 2004). All interest collective action' (Olson 1965). That is, they that individuals or firms are able to enjoy the without incurring the costs of realiZing it. Th more actors are involved (it is harder to iclen and the more diffuse the benefits of action (t act). This imp}ies that it is easier for produce people concerned about the environment (fo 1998) . There are, however, ways for consumer the collective action problem, not least beca material considerations (G. Jordan and Malon groups tend to be fewer and more poorly reso over, many firms have the resources individual Politicians and bureaucrats generally welcome into the policy process because they provide

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epresent actors that are affected' by (and therefore policy effectiveness the process (Lindblom 1977; Beer ly well equipped to provide these eged position' in the policy process

are slightly different from those they eaucrats in the Commission have a ation and a lesser one in policy imtes. Members of the European Parole tends to be more circumscribed apter 4). National ministers sit toimportant role in adopting legislawn interests as well as those of their t groups tend to be associations of ms for agreeing common positions, an groups that hFlve direct memberroups enjoy privileged access to EU mission, which combined with their d many analysts to characterize the 2007: 335). n theory between neo-functionalism r 2) , there is also a vigorous strand rs the extent to which the EO's suopean Court of Justice (EC) , and olicy-making process. In this cony actors, although each of these is a itics (see Chapter 4).

ate engage in the policy process and societal actors vary with th e type ion also influences at what level of les apply at the EU level. Theodore etertnines politiCS', identifying three and redistributive-each charactere policies, for which there are no vidual costs are very small and are om the public purse, are characterups and policy-makers and mutual ory policy, including rules governing s concentrated winners and losers,

by contrast, lcads to interest-group competition. Redistributive policies, such as those associated with .the welfare state, which involve the transfer of resources from one diffuse group to another, are characterized by politics divided along class lines. Despite its prominence and popularity, Lowi's scheme has been extensively criticized, particularly because the typology is difficult to apply to the messy reality of policy-making (Heidenheimer 1985: 455) . Wilson (1980) developed a more nuanced analysis grounded explicitly in the distribution of anticipated costs and benefits. Where the distribution of both costs and benefits is broad, majoritarian politics is likely to occur. Where benefits are diffuse and costs concentrated, such as in consumer and environmental protection (see Chapters 13 and 14), policy will be blocked by the vested interests that benefit from the status quo, unless a policy entrepreneur can mobilize latent public opinion in favour of policy change. Where anticipated costs and benefits are both concentrated, such as in economic regulation in which some firms gain at the expense of others, interest-group competition is expected (see Chapters 5 and 15). Policies that have narrow benefits and diffuse costs, such as economic regulations that shield producers from competition , are likely to be characterized by clientelistic politics (see Chapters 5 and 15). The crucial insight to take away from this discussion, however, is straightforward-different types of policy are characterized by different types of politics, even if the precise contours are difficult to pin down Oohn 1998: 7). Foreign policy has tended to be treated as distinct from domestic policy-making. In particular, policies that concern the most basic concerns of the state (particularly security) are thought to be subject to 'high politiCS', in which heads of government are prominent and societal actors passive (see Chapter 18) . Other policies, such as trade (see Chapter 16) and international environmental poliCies (see Chapter 13), however, have been depicted as subject to 'low politics', in which societal actors engage actively and which are addressed lower down the political hierarchy (Keohane and Nye 2001: 22-3; Hill 2003: 4), and thus look more similar to domestic politics. Governments are thus thought to have more autonomy from societal pressures when pursuing some types of foreign policy than others. This high/low politics distinction is problematic, however. It assumes a hierarchy among issues that is not sustainable as non-military issues-including financial crises, pandemics, and environmental degradation (including climate change)- can have profound implications for states (Keohane and Nye 2001: 22-3 ; Hill 2003: 4). Moreover, foreign policy, even when its focus is security, often engages politicians, bureaucrats, and interest groups in ways similar to domestic polities (Allison 1971 ; Lowi 1972; Risse-Kappen 1991; Evans 1993; Hill 2003) , and arguably is coming increaSingly to resemble domestic politics (Hill 2003). Conversely, there are claims that issues, such as energy (see Chapter 15), traditionally thought of as domestic can be 'securitized'; that is, it can be 'presented as an existential threat, requiring emergency measures and justifying actions outside the normal bounds of political procedure' (Buzan et al. 1998: 24). It is, therefore, not easy and is probably unhelpful

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to designate certain issues as high or low politics a priori. This discussion, however, does draw attention to variation in h ow much autonomy the government has from societal actors when making policy choices. Policy has particularly profound effects on politics in the EU (see Chapter 4). W hether competence (authority) resides with the member states or the EU or is shared between them varies across policy areas. Moreover, the roles of the institutions differ between policy areas at the EU level, as can the decision rule in the Council. Consequently, it is essential to understand the institutional context within which a policy decision is taken.

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Deciding what to decide is a crucial part of the policy-making process and one that often takes place in a context where there is a great deal of uncertainty. Deciding what to decide actually involves two steps in the policy cycle: ,agenda-setting and policy formation. Whether an issue attracts political attention in part reflects the character of the issue- how serious the problem is; whether there has been a change in the severity of th e problem; wheth er it stands for a more general problem, such as the threa tened extinction of a specific animal as emblematic of diminishing biodiversity; and whether it has emotional appeal, as some issues, such as those involving children or bodily harm, are more likely to gamer sympathy from publics and policy-makers (Keck and Sikkink 1998: 26; Page 2006: 216). There is, however, a significant degree of agency in agenda-setting, with policy entrepreneurs, be they interest groups, politicians, or others, identifying and exploitingopportunities to push a policy and presenting ('framing') it in a way that res-

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onatespolitically (Kingdon 2003: 204-5; Price 2003 : 583; Page 2006: 215). Framing an issue is most likely to be successful if it can be linked with existing widely held ~,'l norms or concerns (Price 2003: 597; Hawkins 2004: 780). ~, An 'epistemic community' is a distinctive type of political entrepreneur. It is 'a net~: >¥ work of professionals with recognized expertise and competence in a particular do:,1l 7;,, main and an authoritative claim to policy-relevant knowledge within that domain or !IJ! issue-area' (P. Haas 1992: 3). The members of an epistemic community share a set of ,: normative and principled beliefs, causal'beliefs: notions for weighing and evaluating ~ knowledge, and,a common set of problems to which they direct their expertise. The imBefore policy decisions can be taken the ran As discussed above, this process does not nec pact of epistemic communities tends to be particularly acute in highly technical areas, such as with respect to the environment (P Haas 1992; Zito 2001 ; this volume, Chapter Whatever the sequencing, the formulation of 13) and economic and monetary union (Verdun 1999; McNamara 2005) . Epistemic set of actors from those who participate in a communities affect the policy agenda by articulating cause-and-effect relationships and depicted as the product of policy networks (P Policy networks are 'sets of formal institut in doing so help to specify problems and propose solutions (P Haas 1992: 14). Events can also be crucial for creating opportunities for policy entrepreneurs to governmental and other actors structured ar p,: m", polid~ (Downd9 ?U9; Kingdon 2003; 197 ; P,g<200Ul6l. Cri,~ "n .t~bili'" ,.d i""",~ in publi, poli,y-m,kin
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contribute to converting conditions that can be addressed (Kingdon 2003). For example, ing food safety in .Europe during the 1980s cephalopathy (BSE) , contributed to the adop to regulating food safety (Vogel 2003: 568; cance of events injects an important element process. The agenda-setting literature, however, h tioned by the US political system in which particular, the US political system is relativ can come from many directions. In parliame tive and executive branches of government t executive dominance, which means that th convinced if an i~ue is to get on the agenda ( The EU combines pluralism with execu tive divisions of power create a great many access p In those policy areas in which the European Co tiative, however, the Commission is the key au issue forward (Majone 2005: 231; Daviter 200 is highly fragmented with overlapping interna are available for a policy advocate looking for proposal (Peters 1994: 14). In addition, the C pean Council or the Parliament to advance a po legislation to have built-in deadlines for refor pre-eminent policy entrepreneur in the EU an order to construct political support (Garrett a 2007: 659) . The Commission, however, is con port from other EU institutional actors-eith EP, or the ECJ- if the agenda it is promoting i (Tallberg 2007: 204-5).

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ion policy (see Cha pter 6), e novel modes of implemenas well as with respect to the stematiC academic literature w and partial, focusing ~ver­ only a few policy areas, mos t . r of different types of actor and EU- such as setting interest ing fines for anti-competitive menting it are essentially the n are reqUired. There are other cts of justice and home affairs d Growth Pact (Chapter 7)-i n olicies, however, seek to influmember states. Although some pply directly within the mem. ly on directives. stances, mus t be transposed some of the characteristics of icant degree of overlap between ional-relations explanations of 08) and IR-compliance (Young mpact of domestic politics on ed into policy change. n (compliance) occurs depends overnment regarding the new heth er any of those opposed to reib 2008 ; A. R. Young 2009). tion is found only in som e EU some or accepted as appropriate, reover, whe ther imp lementation ed-w ith legislatioD being more ange (Steunenberg 2007)- and oung 2009 ). This broa d level of elative importance of rationalist 7; A. R. Young 2009). Moreover, U rules , but tP.ere is also the issue apaCity to do so effectively. explaining transposition (Treib onal bureaucracies have changed ong member states' administrative 2001; Jordan 2003 ; Falkner et al.

utes Judicial politics: adjudicating disp

differs mos t s with non- com plian ce that the EU It is with resp ect to how the EU deal estic political l orga niza tion s. In the EU the dom shar ply from mem ber inte rnat iona and abet ted by rvise d by the Com:mission , aided proc ess of imp leme ntat ion is supe tion before ents , and may be subj ect to adjudica societal acto rs and mem ber gove rnm tivist ac2003). Both ratio nalis t and construc natio nal or Euro pean cour ts (Tallberg create pres sure ion by thre aten ing legal actio n can coun ts reco gniz e that the Com miss (Barzel and outc ome s may be less than i~tended for poli cy adap tatio n, alth ough the lapp 2007). how it perf orm s this role, see Hart Risse 2007: 492 ; for an analysis of thre at ntat ion occurs thro ugh (or with the As muc h of the overSight of imp leme rstan ding l orde r func tion s is essential to unde of) legal actio n, how the EU's lega European legal by no mea ns all, EU policies. The the imp leme ntat ion of many, but ng states, d than thos e com mon ly found amo orde r is muc h mor e high ly develope rnmentalists subj ect of deba te betw een intergove and cons eque ntly has beco me the 2). and neo- func tion alist s (see Cha pter

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Beyond the integration-centric question of the independence of the ECJ (see Chapter 2), there are a number of aspects of judicial polities that are more common to comparative politics than international relations (Conant 2007a). One concerns which actors are most able to take advantage of the opportunities to challenge national (and European) policies under EU law. Although even relatively disenfranchised actors have made use of the European legal system, more politically powerful actors have tended to make more and better use of litigation to challenge (predominantly national) policies that they dislike (Conant 2007a). The direct implications of court rulings tend to be quite narrow, requiring member state governments to accommodate only the specific requirements of the judgment (Conant 2007a), although governments may extend the implications to other similar circumstances. The implications of court judgments, however, may be developed and explOited by policy entrepreneurs, as the European Commission famously did in developing the concept of 'mutual recognition' on the basis of the ECl's Cassis de Dijon ruling (Alter and Meunier-Aitsahalia 1994; and see Chapter 5). Even the narrow implications of the ECl's rulings, however, can be significant, at least with respect to specific policies. On several occasions, such as on the EU's agreement with the U5 about providing the names of transatlantic airline passengers (see Chapter 19) , the ECJ has ruled, usually at the request of the European Parliament, that an EU rule was adopted using an improper procedure and that a different decision-rule should apply. The ECl's ruling against the Council for failing to adopt a common transport policy raised the spectre of court-imposed deregulation'of road haulage, which raised the cost-of-no-agreement for those oppos~d to liberalization and sU'engthened the hands of those that wanted more far-reaching liberalization (A. R. Young 1995). ECJ rulings have also had significant implications for member states' social and employment policies (see Chapters 11 and 12). Conversely, the ECJ has had an important impact on EU regulatory politics as a result of upholding the legitimacy of national environmental and consumer regulations (Vogel 1995;Joerges and Neyer 1997b; A. R. Young and Wallace 2000; and see Chapter 5). Thus even though the EU's legal system formally only adjudicates on how the EU's treaties and rules are applied (implemented), its rulings can have Significant implications for other phases of the policy cycle by pushing issues up the agenda, generating new concepts, or changing bargaining dynamics by foreclosing options, particularly that of not acting.

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The process of implementing poliCies, therefore, generates outcomes that feed back into the policy process , 'completing' the policy cycle. There are three distinct, but not unrelated, ways through which policy implementation feeds back into the policy cycle: evaluations of effectiveness , political feedback loops, and spill-over.
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The European Policy Process in Comparative Perspective 67 although· how the poliCies are actually translated into practice is the purview of comparative politics, even if the existing literature is rather underdeveloped, with the notable exception of judiCial politics. Comparative politics also prOvides the most extensive discussion of the dynamics of policy feedback. Thus, which subdiscipline is more appropriate depends on what one is trying to explain. Crucially, moreover, there are lively debates within each sub-discipline-primarily between rationalism and constructivism- about how poliCies are made. Despite the need to tailor analytical tools to subjects of enquiry, several general implications can be drawn from the preceding discussion. First, every aspect of policy-making is contestable, from whether a condition is a problem that needs to be addressed to how it might be addressed to how it will be addressed to how that decision will be carried out to whether that choice should be revisited. Second, therefore, attention to actors is essential: agency is central to policy-making. Third, ideas matter. What actors want is shaped by ideas, at the very least in the sense of ends-means understandings, and actors use ideas to pursue their objectives by trying to persuade others. Fourth, institutional settings at the very least have implications for which actors are most likely to prevail and arguably shape what those actors want. Consequently, this chapter helps to explain why policy-making in the EU varies across issue areas.

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I would like to thank Maurizio Carbone, Kelly Kollman,john Peterson, Mark Pollack, Anke Schmidt-Felzmann, Myrto Tsakatika, Steve Woolcock, and Helen Wallace for comments on earlier versions of this chapter. This chapter draws upon and contributes to research funded by the Economic and Social Research Council (RES-062-23-1369). 2 Drawing on both comparative politics and international relations approaches to explain policy-making is a strong , if largely implicit, theme of Moran et al. (2006). 3 In his 1972 article Lowi includes a fourth type of policy 'constituent', which includes setting up new agencies , propaganda, but this is less commonly used. 4 Sabatier and Jenkins Smith (1993: 17) use the term 'policy subsystem' to capture the same political phenomenon.
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S This inference, however, is based on the analysis of only roll-call votes, which are used only about a third of the time, and on inferring MEP's ideological preferences from specific votes, which might be strategic or contingent (McElroy 2007: 180). 6 For a fuller discussion of the literature see Hayes-Renshaw and Wallace (2006: 314-17). 7 In the context of external policies , implementation often means getting others to accept the EU's preferences (as in multilateral trade or environmental agreements) or change their behaviour in line with the EU's preferences (as with regard to human rights). The EU's ability to influence others , which Laatikainen and Smith (2006) have dubbed its 'external effectiveness,' has received relatively little scholarly attention 00rgensen 2007), except with regard to its 'near abroad' (see Chapter 17).

8 Although these authors are formally discussing 'institutions', their definitions cover most policies save one-off decisions (Streeck and Thelen 2005: 10; Hall and Thelen 2009: 3).

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63 2005; Toshkov 2007; ' Falkner and Treib 2008). A particular strand of this research examines the proliferation of (quasi-)independent agencies within the member states . (Majone 2000b; Thatcher and Stone Sweet 2002; Kelemen 2002, 2004; Coen and Thatcher 2005) and how they are integrated into European networks (Eberlein and Grande 2005; Egeberg 2008). This literature, therefore, has been more concerned with the EUs impact on national institutions than with how national institutions actually implement and enforce EU policies (see Tronda12007: 966-8 for a review) . .The EU implementation literature, therefore, has largely neglected enforcement and implementation within the member states, how policy translates into action on the ground (Falkner et al. 2005: 17; Treib 2008: 14; an exception is Versluis 2007) . In part this reflects the general neglect of implementation by political science (Goodin etal. 2006: 17; Hague and Harrop 2007: 382). A compounding cause is the difficulty of establishing systematically whether an EU law has been properly applied (see Falkner et al. 2005: 33-5 for a disCUSSion) , let alone what explains that outcome. There is, however, extensive variation among member states and across policy areas concerning which and how many branches of the bureaucracy are involved, whether central, regional, or even local government is responsible, and whether enforcement is carried out by the state or private actors (Falkner et al. 2005: 35-6). Despite the disagreements and limited answers, three crucial implications emerge from the analysis of policy implementation in the EU. First, the impact of EU decisions, in terms of both costs and associated political and administrative challenges, varies among member states (Heritier eta!' 2001: 9; Barzel and Risse 2007). Second, member states- due to differences in both legislative and executive politics, as well as local Circumstances-adopt very different national policies in order to implement 'common' EU poliCies. Third, member states, whether intentionally or not, do not always comply with EU rules.

competition policy (see Chapter 6), , and the novel modes of implementer 12) , as well as with respect to the more systematic academic literature en narrow and partial, focusing ~ver­ s and in only a few policy areas, most ib 2008). ehaviour of different types of actor and tional or EU-such as setting interest or imposing fines for anti-competitive d im:plementing it are essentially the decision are required. There are other 9), aspects of justice and home affairs ility and Growth Pact (Chapter 7)-in st EU policies, however, seek to influin the member states. Although some which apply directly within the memprimarily on directives. circumstances, must be transposed share some of the characteristics of a Significant degree of overlap between nternational-relations explanations of reib 2008) and IR-compliance (Young o the impact of domestic politics on ranslated into policy change. ntation (compliance) occurs depends the government regarding the new lly whether any of those opposed to see Treib 2008; A. R. Young 2009) . mentation is found only in some EU cal in some or accepted as appropriate, ). Moreover, whether implementation qUired- with legislation being more ve change (Steunenberg 2007)-and . R. Young 2009). This broad level of the relative importance of rationalist e 2007; A. R. Young 2009) . Moreover, nt EU rules, but there is also the issue ive capacity to do so effectively. d on explaining transposition (Treib w national bureaucracies have changed among member states' administrative KniIl2001;]ordan 2003; Falkner et al.

Judicial politics: adjudicating disputes

It is with respect to how the EU deals with non-compliance that the EU differs most sharply from member international organizations. In the EU the domestic political process of implementation is supervised by the Commission, aided and abetted by societal actors and member governments, and may be subject to adjudication before national or European courts (Tallberg 2003). Both rationalist and constructivist accounts recognize that the Commission by threatening legal action can create pressure for policy adaptation, although the outcomes may be less than intended (Barzel and Risse 2007: 492; for an analysis of how it performs this role, see Hartlapp 2007) . As much of the oversight of implementation occurs through (or with the threat of) legal action, how the EU's legal order functions is essential to understanding the implementation of many, but by no means all, EU policies. The European legal order is much more highly developed than those commonly found among states, and consequently has become the subject of debate between intergovernmentalists and neo-functionalists (see Chapter 2) .

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common, institutional positions (McElroy however, illustrate how actors within par have been able to use the positions of th wards their preferences (Tsebelis 1994; A. The formal powers of the EU's instituti matter because the more actors there are t the harder it is to reach an agreement (Tse it must be acceptable to all veto players, the concerns of the actor that is least enth . a great many veto players: the Commissi under co-decision either the EP or the Co ity each member state is a veto player; and decisions. The need to accommodate so m led Simon Hix (2008a: 589) to characteri government'. In such a highly consensual policy proc coalition across the key decision-makers. levels of governance: among the EU's in Constructing such coalitions is difficult link officials and interest groups across th sion, and epistemic communities, through tions, can play vital roles in constructing Thus cooperation among policy actors wit be decisive to the adoption of policy

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In contrast to rationalist bargaining, constructivists contend that deliberation, argument, and persuasion- the 'logic of arguing'--<::an produce a reasoned consensus that is superior to a lowest-common-denominator outcome even in international negotiations (Risse 2000; and see Chapter 2). The policy-making literature in general now recognizes that reason-giving is important at all stages of the policy process (Goodin et al. 2006: 7). A key question is whether actors are simply trying to persuade others to change their positions by appeals to principle ('rhetorical action') or if they are genuinely open to being persuaded to change their own positions ('argumentative rationality') (Risse 2000: 7) . Argumentative rationality is thought to be most likely to occur under particular conditions (Risse 2000: 10-11; and see Chapter 2), which are particularly intense in the EU. The likelihood that argumentative rationality will apply also depends on the issue under consideration. It is most likely to occur-actors are most likely to be open to persuasion-under situations of uncertainty, where actors are not sure about their preferences and/or those of the other actors or a~ uncertain about the appropriate norm or how to resolve tensions among rules Ooerges and Neyer 1997b; Risse 2002: 601). Rationalists also accept that persuasion, albeit of a more limited kind, can occur through exposure to new causal ideas (Goldstein and Keohane 1993; Sabatier and Jenkins-Smith 1993). New causal ideas can help to clarify the nature of problems confronted and/or introduce actors to new ways of realizing their objectives, including through presenting new policy alternatives ('policy learning') . Uncertainty is most likely to occur when issues are first identified, that is during agenda-setting and policy formulation. Once the parameters of the problem have been agreed and responses formulated, the distributional implications of the alternatives become clearer, and even advocates of cons tructi vis m concede that bargaining may replace arguing Ooerges and Neyer 1997b; Risse 2000: 20, 2002: 607). Theories of international negotiation, therefore, appear to capture decision-making in the Council better, even when QMV is permitted, than do theories developed to explain legisla tive behaviour.

Implementation: national l and executive politics

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Although there are a few policy areas, such as foreign and security policy (Chapter 18) and aspects of justice and home affairs (Chapter 19), in which the Council is essentially the sole decision-maker, in most areas of EU policy the Commission and EP have roles in deCision-making. Most of the existing literature on interaction of the EU's institutions in decision-making, which is rooted in rationalist modelling, finds that the EP's influence is much greater under the co-decision procedure than under the cooperation procedure, arguably to the extent that it is a co-legislator with the Council (Schneider et al. 2006: 303; McElroy 2007: 186). The Commission, by contrast, is widely considered to have lost influence as the EP's has increased (Thomson and Hosli 2006: 414; see Chapter 4). The existing literature on inter-institutional politics, however, tends to treat the institutions as unitary actors, neglecting the competing preferences behind the

Once a decision has been taken, further st into effect. The difficulty of reaching agr particularly important because decisions vague language, which leave Significant ro put into practice (Treib 2008) . In addition the form of directives- must be incorpo national law before they are translated int Chapter 4) . Thus there is a very Significa implementation phase of EU policy-makin The analysis of implementation in the primarily with the EU's internal policies, The literature on implementation includ

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Riker 1962) is particularly commonly -winning coalition, by involving the e victory, means that there are fewer bers of the coalition, particularly those er influence over the policy. It is more imum-connected-winning' coalitions references that are relatively closely rems such coalition-building is less likely iCS are evident in the creation of coalind Machover 2004). Contrary to these dency to form oversized voting coalirelative to the Council. Recent studies, rom oversized coalitions toward more tions on the left or the right (Kreppel

lature, in which electoral connections id to what motivates parliamentarians' ikingly, the best predictor of MEP vot'party group', with the centre-left Party pean People's Party, and other smaller high measures of cohesion in empirical MEPs, moreover, contest elections and space,' including not only the familbut also a more traditional, 'domestic' 01; Hix et al. 2007; McElroy 2007).5

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il takes decisions. Theories of coalition o the Council of Ministers, at least when ed i~creasingly elaborate fonnal models gaining power of various member states i 1994; Felsenthal and Machover 1997). tive preferences of member governments se to the centre of the range of preferences ing majority independent of their formal e 'preference oudiers', and therefore more ere is also evidence that the member state uence;-through its capacity to shape thp·-~;'t-'-­ perior information about the positions of n is taken (Schalk et al. 2007; R. Thomson ore closely its own preferences.

It is worth noting, however, that only a minority of legislative decisions are taken by ministers in the Council, with most reached by consensus among officials (Hage 2008; and see Chapter 4). Moreover, even when QMV applies, the Council tends to seek consensus whenever possible (see Chapter 4), so that models of procedures, such as minimum-Winning coalitions, appear to provide a poor guide to understanding day-to-day practice in the Council even in those policies in which voting occurs (Hayes-Renshaw and Wallace 2006; Schneider et al. 2006). Bargaining models, which have been extensively developed and applied to international negotiations, appear to perform better at predicting decisions (Schneider et al. 2006). In bargaining, policy is agreed through a process ofidentifying an outcome that makes none worse off~producing 'lowest common denominator' outcomes- or through the use of issue linkage, inducements, or threats (Putnam 1988). Bargaining outcomes, whether among states, among coalition partners, or in industrial relations, are expected to reflect the relative power of the actors, which, in turn, is shaped, by their 'best alternatives to negotiated agreement' (BATNA) (Fisher and Ury 1982; Garrett and Tsebelis 1996). The best alternative can involve being content with the status quo or having the capacity to realize objectives unilaterally or through cooperation with an alternative set of actors (Moravcsik 1998; Keohane and Nye 2001 ). The implication is that the actor that has the best alternative to an agreement will have the greatest say in the outcome. A particular variant of bargaining analysis is Fritz Scharpf's (1988: 239; 2006) JOintdecision trap' in which there is no solution that all veto players prefer to the status quo. Scharpf (2006: 847) has stressed that the Joint-decision trap' is not a general condition of EU policy-making, but applies when institutions create an 'extreme variant of a multiple-veto player system' and where transaction costs are high, notably where the Commission does not have the right of initiative. Scharpf (2006: 851) argues, however, that agenda-setting by the Commission does not imply much softening of the pessimistic implications of the jOint-decision trap because the diversity of the member states' preferences may still mean there is no solution acceptable to all (or a qualified majority of) member states. The implication is that the 'logic of the joint decision trap' is 'strong' in an EU of twenty-seven member states (Scharpf 2006: 851). Arguably, side-payments or package deals ('log rolling') are ways of overcoming the jOint-deCision trap (Peters 1997) , although Scharpf (2006) is sceptical about the availability of such bargaining techniques within the EU's fragmented policy-making process. In international negotiations in highly institutionalized settings, of which the EU is a prime example, however, cooperation is facilitated because the participants are aware that they will be interacting repeatedly in the future and as their experience of successful cooperation accumulates (Axelrod 1984; Peters 1997). This can generate 'diffuse reciprocity', in which governments acquiesce in the short run in the expectation of-favourable consideration onheir concerns at some point in the future CKeohane 1986: 4). Being able to accommodate diffuse reciprocity may be one of the key reasons why bargaining models are better at predicting policy-making in the EU than procedural models, which are blind to iteration (Schneider et al. 2006: 304-5).

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1999; Peters 1999; Pollack 2004; and see Chapter 2). The historical and rational choice variants have tended to be applied more frequently to studies of policymaking (Nugent 2006) , particularly with regard to executive politics , primarily in the Commission, and legislative politics, focused on the EP Both sociological and rational-choice institutionalist approaches, hQwever, have been applied to analyses of decision-making in the Council of Ministers.

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Where decision-making is delegated, tw making prevail. One view, rooted primar tory agencies in the US, stresses the im mandates and sees value in insulating de that decisions can be taken for the great ful. Giandomenico Majone (1994: 94) ha is pan-European and not democratically pressures and is therefore more likely to t captured than national regulators. A much messier view of bureaucratic p of US foreign policy, not least Graham A (Allison 1969, 1971; Allison and Zelikow as bargaining among different sections o (for a rare application to the EU , see Rose compromise and consensus among the p the European integration literature has tr actor and focused on its influence relative literature has pointed out vigorous diffe Chapter 13) . An important implication of the princi bureaucratic agent is not completely free t principals' preferences. How constrainin how able they are to monitor the agent's sanction behaviour they dislike, which i principals approve of what the agent is doi In this view, any analysis of Commissi authority has been delegated to it and how ber states on the issue in question.

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Executive politics is most often associated with providing political leadership, such as through agenda-setting and policy formation, and overseeing the implementation oflegislation. Our focus here, however, is on the delegation of decision-making responsibility to 'executive bodies. Both comparative-politics and internationalrelations literatures consider the decision to delegate responsibilit~s, but it is the comparative politics literature, particularly that on delegation by the US Congress to independent regulatory agencies, that focuses on the delegation of decision-making,. rather than of agenda-setting or monitoring compliance (for a review see Pollack 2003: 20-34; and see Chapter 2). This literature is rooted in rationalism, particularly principal-agent analysis. A key insight is that the principal(s) and agent have different preferences and that the act of delegation gives the agent scope to pursue its own preferences , rather than those of the principal(s). The benefits of delegating decision-making are considered to be particularly pronounced under certain circumstances, such as a significant need for policyrelevant expertise due to the technical or scientific complexity of a policy area (see Chapter 2). In the EU the specialized agencies-such as the European Medicines Evaluation Agency and the European Food Safety Authority (see Chapter 14)-have been given the task of providing expert advice to the Commission, which formally takes decisions (at least under certain circumstances) (Krapohl 2004 ; Eberlein and Grande 2005). The delegation of decision-making is also more likely where doubts about politicians' commitment to a policy can undermine its effectiveness. The problem of commitments not being credible is likely to be pronounced when there is a conflict between short-run costs and long-run benefits (time inconsistency) , such as in monetary policy (see Chapter 7) , or a when policy delivers diffuse benefits, but imposes concentrated costs and therefore generates strong political pressure to abandon the policy, such as in competition policy (see Chapter 6). Decision-making may also be delegated in order to make it harder for successors to reverse the policy. Alternatively, SOCiological institutionalists contend that delegation occurs not necessarily because it is efficient, but because it is perceived as a legitimate and appropriate institutional design. Thus, institutional designs are copied through processes of emulation and diffusion. In this view, the creation of a European Central Bank (ECB) was shaped by the acceptance of monetarist ideas and the view that independent central banks were appropriate (McNamara 2005).

Because of the separation of executive and of the EU, especially in the EP, is arguably than to those of most EU member states ( authors seeking to understand EU legisl theories developed to explain decision-m House of Representatives. Care, however, sons, not least because the connection be weaker in the EP than in the House of R Council and EP are not as equal as are thos the executive-legislative division of powe US (McElroy 2007: 176). Moreover, despi to operate in many respects like an intern

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Decision-making: choosing what (not) to do .

Although there is convergence between comparative-politics and international-relations approaches regarding agenda-setting and policy formulation, there is much less common ground with regard to decision-making. This is due in large part to decision-making within domestic coiuexts taking place through highly institutionalized procedures, including voting, while decision-making in international relations- as in examples of international cooperation-usually takes place by consensus. Even in those international organizations in which binding decisions are taken by votes- such as the International Monetary Fund and the United Nations Security Council-decisions require super-majorities and powerful actors retain vetoes. Thus the two sub-disciplines generally seek to explain deCision-making in very different contexts.

f the policy network approach that are cy-making is too fluid-with different ations of actors involved in individual cy area-to be captured by the network cause implementation of most EU rules Commission has a limited direct role in .engagement with societal actors and its

These differences, however, are a boon when it comes to explaining decision -making in the EU because the context of policy-making varies extensively across policy areas (see Chapter 4), from unanimous decision-making among the member states, for example in foreign and security policy (Chapter 18), to decisions taken on the basis of qualified majority voting (QMV) amongst the member states in conjunction with the EP on a proposal from the European Commission, for example with regard to the single market (Chapter 5) and the environment (Chapter 13 ), with many combinations in between, Thus some aspects of EU decision-making have features similar to the executive and legislative politics of domestic policy-making, while others are more similar to international negotiations . The analysis of decision-making in the EU is rooted primarily in the 'new institutionalisms': historical institutionalism, rational-choice institutionalism, and SOciological institutionalism (Hall and Taylor 1996; Aspinwall and Schneider

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ork literature focuses on domestic policy, icy (Risse-Kappen 1991; Hocking 2004) ink 1998; Reinicke 1999-2000). Policy oices by shaping which groups partici7: 9; Peterson 2004). The term 'policy pes of relationship between public and y communities' to loosely affiliated 'issue mmunities"':""which have stable members who depend heavily on each other for mpacts on policy formulation and tend s of the participating incumbents. Issue ble memberships, which tend.to contain 04: 120), n policy networks that warrant special s, and advocacy coalitions. The resource k analysis are usually seen as privileging behaviour that has to be changed, which n about the costs and likely success of their feet on implementation or can lend Lindblom 1977; Beer 1982). Epistemic enda-setting, but also advance solutions 04; R. Rhodes 2006: 425). Sabatier and nd that policy networks tend to contain , 'each composed of actors from various ho both (a) share a set of normative and ial degree of co-ordinated activity over ions are thus networks within networks, olicy solutions. by many as providing nothing more than an an explanation of how policy is made Dowding (1995: 137) contends that the y value, as the nature of the network and termined by the power relations among 3) 'policy streams' approach implies that ow an issue being put on the agenda, as dependence on them, Moreover, because there are public and private participants from twenty-seven member states as well as the EU-level partiCipants, actors involved in the policy process have very different value systems and often have very different views of problems and possible solutions, which makes it difficult for groups to agree common positions that can be injected coherently into the policy process, Thus it is relatively rare to find policy communities at the EU level, with the most notable exception being in agriculture, but even that policy community is eroding as agriculture is re framed as a trade and budgetary and environmental issue (see Chapter 8). Policy formulation, therefore, is a relatively open process in the EU (Richardson 2000: 1013), but, as with agenda setting, the Commission is the pivotal actor in policy formation in those policy areas where it has sole right of initiative (Kassim 1994: 23) . Crucially, its central role in agenda-setting and policy formulation give the Commission a significant say in many EU policies even if its role in deciSion-making is limited (Hix 2005: 74).

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to designate certain issues as high or low politics a priori. This discussion, however, does draw attention to variation in how much autonomy the government has from societal actors when making policy choices. Policy has particularly profound effects on politics in the EU (see Chapter 4). Whether competence (authority) resides with the member states or the EU or is shared between them varies across policy areas. Moreover, the roles of the institutions differ between policy areas at the EU level, as can the decision rule in the Council. Consequently, it is essential to understand the institutional context within which a policy decision is taken.

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Deciding what to decide is a crucial part of the policy-making process and one that often takes place in a context where there is a great deal of uncertainty. Deciding what to decide actually involves two steps in the policy cycle: .agenda-setting and policy formation. Whether an issue attracts political attention in part reflects the character of the issue-how serious the problem is; whether there has been a change in the severity of the problem; whether it stands for a more general problem, such as the threatened extinction of a specific animal as emblematic of diminishing biodiversity; and whether it has emotional appeal, as some issues, such as those involving children or bodily harm, are more likely to gamer sympathy from publics and policy-makers (Keck and Sikkink 1998: 26; Page 2006: 216). There is, however, a Significant degree of agency in agenda-setting, with policy entrepreneurs, be they interest groups, politicians, or others, identifying and exploitingopponunities to push a policy and presenting ('framing') it in a way that resonates politically (Kingdon 2003: 204-5; Price 2003: 583 ; Page 2006: 215) . Framing an iss~e is most likely" to be successful if it can be linked with existing widely held norms or concerns (Price 2003: 597; Hawkins 2004: 780) . An 'epistemic community' is a distinctive type of political entrepreneur. Ii: is 'a network of profeSSionals with recognized expertise and competence in a particular domain and an authoritative claim to policy-relevant knowledge within that domain or issue-area' (P. Haas 1992: 3). The members of an epistemic community share a set of normative and principled beliefs, causal' beliefs, notions for weighing and evaluating knowledge, and"a common set of problems to which they direct their expertise. The impact of epistemic communities tends to be particularly acute in highly technical areas, such as with respect to the environment (P. Haas 1992; Zito 2001 ; this volume, Chapter 13) and economic and monetary union (Verdun 1999; McNamara 2005). Epistemic communities affect the policy agenda by articulating cause-and-effect relationships and in doing so help to specify problems and propose solutions (P. Haas 1992: 14). Events can also be crucial for creating opportunities for policy entrepreneurs to promote policies (Downs 1972: 39; Kingdon 2003: 197; Page 2006: 216) . Crises can _

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contribute to converting conditions that be addressed (Kingdon 2003). For exam ing food safety in Europe during the 1 cephalopathy (BSE) , contributed to the a to regulating food safety (Vogel2003: 5 cance of events injects an important ele process. The agenda-setting literature, howeve tioned by the US political system in w particular, the US political system is rel can come from many directions. In parli tive and executive branches of governme executive dominance, which means tha convinced if an i~ue is to get on the age The EU combines pluralism with exec divisions of power create a great many acce In those policy areas in which the Europea tiative, however, the Commission is the ke issue forward (Majone 2005: 231 ; Daviter is highly fragmented with overlapping int are available for a policy advocate lookin proposal (Peters 1994: 14). In addition, t pean Council or the Parliament to advance legislation to have built-in deadlines for re pre-eminent policy entrepreneur in the E order to construct political support (Garr 2007: 659). The Commission, however, is port from other EU institutional actorsEr, or the ECJ-if the agenda it is promoti (Tallberg 2007: 204-5).

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making in general. With respect to agenda-setting in the EU see Peters (1994). For a
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Ild

Yh, q

Fr

F n

E

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sympathetic discussion of the policy network literature in- the EU see Peterson (2004).

Zito (2001) provides a nice case study of an epistemic community's impact on EU policy-

making. For an overview of lobbying in the EU, see Coen and Richardson (2009). On

ITE

nn ry

F 5

"H 0t !t

LL G'

qJ

voting behaviour in the European Parliament see Hix et al. (2007) and McElroy (2007).

Schneider et al. (2006). For a review of the literature on implementation in the EU see
{

Treib (2008) On judicial politics in the EU see Conant (2007a). On political feedback loops

in general see Hal l andThelen (2009) and Streeck andThelen (2005).

1
Coen, D., and Richardson, J. (2009) (eds.), Lobbying the European Union: Institutions,
Actors, and Issues (Oxford: Oxford University Press).

Conant, L. (2007 a). 'Review Article: The Politics of Legal Integration', Journal of Common

; HE 3 E
CE
i
:

a*

and on decision-making in the Council see Hayes-Renshaw and Wallace (2006) and

An Institution and Five Poli
,
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He/en Wallace

6

E c 3 U

F U I

MarketStudies, 45/s1: 45-66.

The insti tutional design of the European Union

70
C ) I \

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1
Hall, P A., and Thelen, K. (20 09), 'Institutional Change in Varieties of Capitalism', SocioEconomic Review, 7/1: 7-34.

The European Commission The Council of the European Union

70
O N

U

h T

5

o

Hayes-Renshaw, F., and Wallace, H. (2006). The Council of Ministers, 2nd edn. (Basing-

75
The European Council

d

stoke: Palgrave Macmillan).

81
The European Parliament
_

i N t \ € O O

U -

Hix, S., Noury, A., and Roland, G. (2 007). Democratic Politics in the European Parliament

82
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e

ul U ur ul u..l 3 9q ! * 9 9 9 u o 9 ,

McElroy, G. (2007), 'Legislative Politics', in K. E. Jorgensen, M. A. Pollack, and B. Rosa-

The wider institutional setting
=

.. 8 :

(Cambridge: Cambridge University Press).

The European Court of Justice

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86
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H E t r F F F F r - Z

mond (eds.l. The Handbook of European Union Politics (London: Sage). 175-94.

National institutions
5 =

89

Moran, M., Rein, M., and Goodin, R. E. (2006) (eds.). The Oxford Handbook-of Public Policy

(Oxford: Oxford University Press) .

Peters, B. G. (1994). Agenda-Setting in the European Community: Journal of European

Public Policy, 1/1: 9-26.

Peterson, J. (2004). 'Policy Networks', in A. Wiener andT Diez (eds.). European Integration

Theory, 1st ed n. (Oxford: Oxford University Press). 117-35.

Schneider, G., Steunenberg, B., and Widgren, M. (2006). 'Evidence with Insight: What

Models Contribute to EU Research', in R. Thomson, F. N. Stokman, C. H. Achen, and

T Kbnig (eds.). The European Union Decides (Cambridge: Cambridge University Press).

299-316.

Streeck, w., andThelen, K. (2005), 'Introductio n: Institutional Change in Advanced Political

Economies', in W. Streek and K. Thelen (eds.). Beyond Continuity: Institutional Change

in Advanced Political Economies (Oxford: Oxford University Press). 1-39.

Treib, O. (2008). 'I mplementing and. Complying with EU Governance Outputs', Living

Reviews in European Governance, 3/5, available at: http://wwwlivingreviews.org/lreg-

2008-5 laccessed 3 March 2009).

Zito, A. R. (2 001 ). 'Epistemic Comrnunities, Collective Entrepreneurship and European

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An Institutional Anatomy and Five Policy Modes

71

e European Union

rate Communities (ECSC, EEC, and e were formally merged in 1967. The ive executive of sorts-the European atives of member governments-the ing arbitration and legal interpretaand a parliamentary chamber-the y'), with members drawn from. the y direct election. In addition the Ecoforum for consulting other sectors of e Regions (CoR) was created to allow ties. The powers and responsibilities cally revised (see Table 1.1). became the European Union, a term imply a stronge, binding together of hin a single framework the different ion that have emerged, in particular the two 'pillars' of 'intergovernmenn foreign and security policy (CFSP; e and home affairs OHA; see Chapter vember 2009, will draw these pillars ural framework (FCO 2008). The in, latterly with increasing contention. g the Commission, Council, and EP key elements of the institutional arith these can move on to the section olicy process.

o-executive in the EU's institutional Authority of the European Coal 51), it leaned more towards being nomy. This experiment generated ean Economic Community (EEC) ments had second thoughts about mous institution, thus altering the ouncil, endowing the Commission er powers in others. The onus was bility, expertise, and the bases for a

The Commission exercises its responsibili ties collectively, in that the Commissioners, from 2007 one from each of the now twenty-seven member states, constitute a 'college'. Their decisions and proposals to the Council and EP have to be agreed by the entire college, voting, if necessary but rarely; by simple majority, at its weekly meetings. The Commission is chaired by a President, chosen under the Treaty of Nice (ToN) by qualified majority vote (QMV) in the European Council and subject to approval by the EP. Five other commissioners act as vice-presidents. Commissioners, each responsible for a policy portfolio , are nominated by member governments, endorsed by the Council, and subject to approval by the EP as a body, which can lead to names being withdrawn. Those chosen are senior politicians or high officials from member states, but they swear an oath of independence on taking office for a five-year term to coincide with that of the EP. The College of Commissioners is accountable to the Er, which has the power to censure the College with a two-thirds vote. In March 1999 the College, presided over by Jacques Samer, was forced into resignation by the EP on a charge of financial mismanagement (see Chapter 9). The ToN envisaged a reduction in the size of the College, which the ToL specified will be two-thirds of the number of member states on a rotation system on the grounds that enlargement risked producing too large and too segmented a Commission. This provision, which provoked strong opposition in the Irish referendum campaigns is set to be revoked. The Commission as an institution is organized into Directorates-General (DGs) , named after their main areas of policy activity, and historically known by their numbers. Table 4.1 illustrates the structure under the Barroso Commission (2004-2009). The staffs of the DGs form the European civil service, recruited mostly in competitions across the member states, and supplemented by seconded national experts and temporary staff. Since May 2004 the emphasis has been on recruiting people from the new member states. The powers and 'personalities' of the DGs vary a good deal, as do their relationships with 'their' commissioners. New DGs have been added as new policy powers have been assigned to the EU, not always tidily. The commissioners have their own private offices, or cabinets , which act as their eyes, ears, and voices, inside the 'house' and vis-a-vis other institutions, including those of the member states. One DG leads on each policy topic, as chef de file, but most policy issues require coordination between several DGs, sometimes mastenninded by the Secretariat-General and often by the cabinets. Though the Commission is supposed to operate collectively, in practice there are sometimes disagreements among commissioners and their DGs, such that contradictory lines of policy can be observed. Specialist services provide particular expertise, most importantly the Legal Service, and the linguistic and statistical services.! The Commission's powers vary a good deal between policy domains. In competition policy (see Chapter 6) it operates many of the rules directly; in many domains it drafts the proposals for legislation, which then have to be approved by the Council and the EP; it defines, in consultation with the member governments, the ways in which spending programmes operate; it monitors national implementation of EU rules and programmes; in external economic relations it generally negotiates on behalf of the EU with third countries or in multilateral negotiations;

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Partnership between the national and the European levels of governance has become one of the marked features of EU policy-making. One key mechanism for this is the clumsily-named system of 'comitology'. In essence this is very straightforward . Both to prepare policy proposals and to implement agreed policies the Commission needs regular channels for consultation and cooperation with relevant national officials. A dense network of advisory, regulatory, and management committees has grown up to provide these channels, much the same as happens in iJ1dividual countries. In the case of the EU these committees are the subject of procedural, legal, and political debate. Most of the committees are governed by legally speCified arrangements, which vary according to the policy, and which strike different balances of influence between national representatives and the Commission. Insights into the workings of these committees appear in several of our case studies (see e.g. Chapters 6, 14). The Commission has had several high points of political impact, especially in the early 1960s and the mid-1980s, under the presidencies of respectively WaIter Hallstein and Jacques Delors. It has also had low points, after the 1965-6 Luxembourg crisis (when President de Gaullewithdrew French ministers from Council meetings) , in the late 1970s, and the late 1990s. More recently the Commission has been the subject of criticism, as regards weak internal management and coordination, overstretched staff, and lacklustre leadership. The Prodi Commission (1999-2004) embarked on an administrative reform programme, led by Vice-President Neil Kinnock The Barroso Commission (2004-9) came into office pledged to improve the perforn1ance of the Commission by emphasizing the aim of doing 'less but better'. The Commission has continually to compete for influence with other EU institutions and the member governments.

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The Council of the EU is both an institution wim collective functions and me creature of me member governments. In principle and in law mere is only one Council, empowered to take decisions on any topic, though its structures are more complex (see Figure 4.1). Its members are usually ministers from incumbent governments in the member states, but which ministers attend meetings depends on the subjects being discussed, and on how individual governments choose to be represented. Time and practice have sorted this out by the Council developing specialized configurations according to policy domains, each developing its own culture of cooperation. Historically foreign ministers comprised the senior configuration of the Council, reflecting the prominence of foreign ministers as coordinators inside the member governments. However, in practice foreign ministers cannot always arbitrate and prime ministers ' have become much more involved at home and through the European Council. In recent years foreign policy as such has become the priority for foreign ministers, although on some cross-cutting issues foreign ministers remain leading decision-makers (see Chapters 9, 10, 16, and 17). Reforms implemented in 2003 introduced a General Affairs and External Relations Council (GAERC) with

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preparation of agendas, ~ well as the conduct of meetings. The presidency speaks on behalf of the Council in discussions with other EU institutions.and with outside parmers on issues other than CFSP. Often the Council and the Commission presidencies have to work closely together, for example in external negotiations where policy powers are divided between the .EU and the national levels. In the legislative field the Council and EP presidencies have to work together to reconcile Council and parliamentary views on legislative amendments. A recurrent question is how far individual governments try to impose their national preferences during the presidency or whether the experience pushes them towards identifying with collective EU interests. As EU policy cooperation has developed 'directly between governments, rather than at the promptings of the Commission and through formal procedures, so it has fallen to successive presidencies to act as the main coordinators. This has historically been a particular feature of CFSP andJHA. There are some doubts as to how well the rotating presidency can continue to function within an EU27, and the ToL gives more emphasis to 'team' presidencies. The important point to bear in mind is that the Council is the EU institution that belongs to the member governments. It works the way it does, because that is the way that the member governments prefer to manage their negotiations with each other. Regularity of contact and a pattern of socialization mean that the Council, and especially its specialist formations , develop a kind of insider amity. Sometimes clubs of ministers-in agriculture, or dealing with the environment, and so forth-are able to use agreements in Brussels to force on their own governments commitments that might not otherwise have been accepted at the national leveL Nonetheless the ministers and officials who meet in the Council are servants of their governments, affiliated to national political parties, and accountable to national parliaments and electorates. Thus, generally their first priority is to pursue whatever seems to be the preferred objective of national policy: The Council spends much of its time acting as the forum for discussion on the member governments' responses to the Commission's proposals. It does so through continuous negotiation, mostly by trying to establish a consensus. The formal rules of deciSion-making vary according to policy domain and over time-sometimes unanimity, sometimes qualified majority voting (QMV), sometimes (albeit rarely) simple majority: The decision rules are a subject of controversy and have been altered in successive treaty reforms, in particular under the ToN and potentially the ToL to bring the voting weights more in line with the different population sizes of individual member states. Broadly speaking, QMV has become the formal rule in areas where Community regimes are fairly well established, while unanimity is a requirement either in areas in which EU regimes are embryonic or in those domains where governments have tenaciously retained more control of the process. In an average year some 30 per cent of Council decisions deal with topics subject to the unanimity rule, with 70 per cent subject to the QMV rule, and a tiny number of decisions subject to a simple majority rule (see Figure 4.2). There is a great deal of misunderstanding about how the process works in practice. Habits of consensus-seeking are deeply ingrained, and explicit voting is relatively rare, even when technically possible- votes are explicitly contested on only around cent of eligible decisions . Under QMV the knowledge that votes may be called

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often makes doubting governments focus on seeking amendments to meet their concerns, rather than on blocking progress altogether. Formally registered 'no's and abstentions seem mainly to besignals to domestic constituencies. Under unanimity rules governments are generally much more likely to delay or obstruct agreements, or to exercise blocking power until their views are accommodated, typically on major budgetary and spending decisions (see Chapters 9 and 10). In practice el-q)licitly contested votes at ministerial level are concentrated in a few areas of policy: around half are operational decisions on agriculture and fisheries; and the rest scattered on regulatory issues, especially the single market and public health (for further details see HayesRenshaw and Wallace 2006; Thomson et a1. 2006; and Naurin and Wallace 2008). The Council used to be the main legislator on EU policies. However, as the EP has acqUired powers over legislation, the.system has become more bicameral. Thus the Council now reaches 'common positions' which have to be reconciled frequently with amendments to legislation proposed by MEPs in a 'conciliation' procedure. This has meant that the Council is now more expliCitly req~ired to make a public justification for its collective preferences, which is an important change in the process. In some policy domains the Council remains the decision-maker of last resort. Interestingly this includes some established areas,.such as agriculture (see Chapter 8), where the EP still has little opportunity to intervene (although this would change under the ToL) , and some new policy domains- notably JHA and CFSP-where the member governments, through the Council, retain the main control of policy. EMU provides a different contrast-here the main control of the Single currency has been assigned to the ECB, leaving Ecofin and the Eurogroup (ministers only from member

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The European Council began life in the occa state (France and Finland have presidents w meetings) or government (i.e. prime ministe ings, in The Hague in 1969 and Paris in 197 makers for several succeeding years. From 19 Valery Giscard d'Estaing, then French PreSid a regular fo oting, meeting at least twice a year the European Council on a more formal basi outside the main institutional structure: it wo ToL. The European Council would then acquir chosen for a renewable term of two-and-a-half and drafting of its conclusions depend essentia Council, and its agendas are much influenced b in the chair. Historically one meeting of each se presidency but under the terms of the ToN sessi the 2004 enlargement. By custom and practice restricted to the preSident or prime minister a times finance ministers. IncreaSingly large coh

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at', the European Council became sues that departmental ministers ment within the member governat has been left to resolve the perienditure (see Chapters 9 and 10). the negotiations over the Single determining treaty reforms in the (IGCs). ncreasingly became the venue for ory-making decisions' in the EU, do with the core new tasks of the for collective action. Some of our nd 19, record European Council development of policy. The level of ng concern on the part of the most direction of the EU, including at ess with the Lisbon Strategy. Their within their national settings they an policies. Overall the European cit political leadership in the EU ns. The Tol aims to strengthen the a full-time president.
Commission proposals to Council are passed to EP for an Opinion. EP may suggest alterations, delay passing a resolution to formalize its Opinion, or refer matters back to its relevant committee(s).
Applies to: agriculture, and those (increasing in number) JHA topics that fall within the 'Community' framework.

Cooperation (Art. 252TEC, ex Art. l8ge EEC)

Commission proposals passed to Council for a 'common position' and to EP for a first

reading, in which it may propose amendments. The EP may at its second reading seek

to amend the Council's common position, or by an absolute majority reject it. Council

can override the EP's rejection only by unanimity. Alternatively, the EP and Council try to negotiate agreement in a conciliation procedure.

Applies to: limited aspects of economic and monetary union.

Co-decision (Art. 251TEC, ex Art, 189b EEC)

A bicameral legislative procedure in which the Counci l and EP adopt legislation by common

agreement. Council and EP may both agree a proposal at first reading (in 2008 almost threequarters of relevant issues). If they disagree at second reading, the EP may by an absolute

majority reject the proposal, which then falls. Or the EP may amend the Counci l's common

position by an absolute majority, in which case conciliation takes place between the Council

(usually Coreper I) and the EP. The results of conciliation must be approved in third reading

by both Council (OMV) and EP (majority of votes cast). Proposal falls if not agreed.

Applies since ToA to: most areas of legislation, unless otherwise specified as exempted, or falling under one of the other procedures; Tol extends its application .

Assent

m 2007 Bulgarian and Romanian ly on a basis of proportional repreates. Elections inJune 2009 under Tol) . Originally it was composed y amendment prOvided for direct ation, for reasons of member-state bourg, and Brussels ..MEPs vary in olitiCians, other bringing different he EP their primary career. The EP the largest and most important are ng, and the European Socialists on litions of liberal, Green, far-right, These groupings have gained in ith their party groups rather than ed out in its specialist committees, particular policy issues in detail,
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Applies to: certain internationa l agreements, enlargement treaties, and framework agreements on the structural funds.

Budget (Arts. 272-3, ex Arts. 203-4 EEC)

EP may try to modify 'compulsory' expenditure, or to amend 'non-compulsory' expendi-

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Installation of Commissioners (Art. 214(2)TEC, ex Art. 158(2) EEC)

Since the ToA EP has the right to approve nomination of the Commission President. It holds individual hearings with nominated comm issioners and whole college .

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in the early years of the EU the EP had a marginal role in the policy process, with only consultative powers, apart from its power to dismiss the Commission in a censure motion. During the 1970s the EP gained important powers vis-Cl-vis the EU budget, and especially over some areas of expenditure (although significantly not over most agricultural expenditure) (see Chapter 9) . In the 1980s and 1990s the ro le of the EPwas transformed, as it acquired legislative powers in successive treaty reforms . These were rationalized under the ToA into: co-decision with the Council across a wide range of policy domains; cooperation with the Council in some other domains, especially on EMU-related questions; and consultation in those areas where member governments have been wary ofletting MEPs into the process, including agriculture and ]HA. In addition the EP must give its formal assent on some issues: these include certain agreements with third countries and enlargement (see Box 4.2 on page 83 ). The ToL subjects more legislative domains (including some agricultural issues) to cn=.decision and streamlines procedures. The net result of these changes is that the EP is a force to be reckoned with across a wide range of policy domains . It is in important respects a necessary partner for the Council, although one with a contested electoral authority, because of the rather low participation rate in European elections in many member states. On many areas of detailed rule-setting the EP has a real impact, as some of the case studies in this volume show, and therefore it too is the target of those outside the institutions who seek to influence legislation (see, for example, Chapters 8, 13, 14, and 15). However, there are other areas- ]HA, CFSp, and oddly enough, so far the CAP-where its voice is muted. In 1999 the EP acquired greater political prominence as a result of its role in provoking the resignation of the European Commission on the issue of financial mismanagement. In 2004 the EP delayed the installation of th e new Commission , b ecause of criticisms of its composition. This increased political standing of the EP is likely to enable it to influence the policy process as a whole rather more in the future. In 2009 the EP took its time to endorse the Commission President.

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Early on it became clear to close observers of the EU that the role and rule of law were going to be critical in anchoring EU policy regimes. If the legal system could ensure a high rate of compliance, a way of giving authoritative interpretation to disputed texts, and a means of redress for those for whom the law was created, then the EU process as a whole would gain a solidity and a predictability that would help it to be sustained. The EC] was established in the first treaty texts; these have been virtually unchanged since then, except to cater for the increasing workload and successive enlargements of the EU membership .

..

The EC], sited in Luxembourg, is compos eight advocates-general, who deliver prelim somewhat like a supreme court, able to provi prudence, and to deal with litigation, both in and those brought directly before it. The SE the Court of First Instance (CFI) (the Gene now of twenty-seven judges, to help in handl specified areas, notably competition policy. force of their own rulings, backed up in some i on those (usually companies) found to have b power to fine member governments for non-a as a result of its own rulings (especially one Lequesne 2005) , damages can be claimed ag ment European law correctly. The Courts hea judgments in private by, if necessary, majority made public, and minority opinions are not is Since the early 1960s a series of key cases h European law, such as: the supremacy of EC l the direct effect of EC law in national legal ord another of non-discrimination on the basis o member states, In so doing the EC] has gone role of law than had speCifically been laid do jurisprudence challenges the poliCies of this o policy domains court cases have been one of t regimes (see Chapters 5, 6, and 11). Appendix 1 (at the end of this volume) su cases before the two Courts. This very thoroug volume, of cases before the ECJ by policy sector tern of litigation. The case load is impressive, re 1980s, and rising to over 500 from 1999 onwar well, though in both cases the volume of EU st appears to be an increase in the number of cas EU. Agriculture is in 'gold medal' position cum movement of persons, of establishment, and of do taxation issues, although with some variation cases remain important. Environmental and con more numerous, reflecting a growth of policy a mentary on the roles of the Courts follows in ou This strong legal dimension has a marked inf makers pay great .attention to the legal meanin advocates look for legal rules to achieve their these are favoured by the institutional system; cases to alter the impact of EU poliCies; and in

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-makers have to choose carefully l base to use, and to consider careconsumers, environmentalists, womens groups, and increasingly a range of other advocacy groups and non-governmental organizations (NGOs). Illustrations of the activities of these different kinds of groups can be found in many of our case studies. The TEU introduced a second consultative body, the Committee of the Regions (CoR), in response to the extensive involvement of local and regional authorities in seeking to influence those EU poliCies that impacted on them. The CoR provides regional and local politiCians from the member states with a multilateral forum , and an opportunity to enhance their local political credibility. At least as important, however, is the direct lobbying by infranational (local and regional) authorities, many with their own offices in Brussels. These same infranational authorities also engage in efforts to influence national policy positions and the implementation of Community programmes. Chapter 10 comments on this in relation to the structural funds.

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tions are directly applicable within institutions. Directives have to be lexibility to member governments, e limited legal instruments applied in competition policy (see Chapter the Commission (under delegated uncil and EP (under co-decision). nal and European courts. of the most distinctive features of ach of the EU process, although in tious in its judgments. We should overnments have gone to considerart of the reason for the three-pillar d JHA well away. from the reach of went some way towards incorpoin the system, it remains contested on of the EC]. The adoption of the claratory basis, adds an important disputed even under the ToL This European legal order, based on the d to the Council of Europe.

Control and scrutiny
In the mid-1970s concern started to be voiced that the EU policy process was subject to few external controls. The EP at the time had few powers, and national parliaments paid relatively little attention to EU legislation and programmes. It was the growing scale and scope of the EU budget and spending programmes that spearheaded the arguments about the inadequacy of scrutiny. This led to the creation of the European Court of Auditors by the 1975 Budget Treaty. Since 1978 it has, from its seat in Luxembourg, endeavoured to evaluate systematically both revenue-raising and spending (see Chapter 9). Both in its Annual Reports and in specific reports it has drawn attention to various weaknesses in the budgetary process, as handled by the Commission and national agencies. Around four-fifths ofEU budgetary expenditure is disbursed by national agencies. Many of its criticisms fell for many years on deaf ears-member governments that were reluctant to face up to some of the issues , an EP that had other preoccupations, and a Commission which repeatedly undervalued the importance of sound financial management. In late 1998 this situation was reversed by the row over alleged financial mismanagement by the Commission. Another new instrument of post hoc control is proVided by the European Ombudsman , attached to the EP, under the provisions of the TEU. The aim, borrowed from Nordic practice, is to prOvide a channel for dealing with cases of maladministration vis-a-vis individuals. This office has been responsible for modest improvements in the operations of the policy process at the micro level. Some control and scrutiny of policy depends on national institutions , both parliamentary and financial. National parliaments had no official recognition in the institutional system until the early 1990s. Each member state had developed its own, mostly rather limited, procedures for national parliamentary scrutiny of EU policy. The same discontent that had led to some strengthening of European procedures started to provoke a debate on national scrutiny. Both the TEU and the ToA mention the importa'n ce of encouraging this, and the ToL proVides a mechanism for national parliaments to hold up a 'yellow card' to proposals judged to be overly intrusive.

additional organizations that have iCies. Some are consultative. Some autonomous operating arms.

and Social Committee (and the t of access to the policy process for the corporatist traditions in some of , become an influential body in the found their own more direct points eral associations and through sectorcame even more active in the period rket. Individual large firms have also ns, again some since the 1960s, but 1980s. A more recent development bies representing societal interests,

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EU-level policy-makers, especially in the Commission, are under increasing pressure to pay increased attention to national parliamentary discussions and appear more readily before national parliamentary committees of inquiry. This heightened sensitivity to country-level preoccupations is becoming a more marked feature of the EU policy process. Indeed as of October 2009 national parliaments from all member states except Malta and Spain had established offices in Brussels to track EU policy. Some see more cooperation between the EP and national parliaments as a promising way forward. Others argue that to date experience, for example through COSAC (Conference des organes specialisees aux affaires europeennes), which twice a year brings together representatives from the EC scrutiny committees of national parliaments, has been disappointing.

in developing its OWn functional and operati of the ECB's autonomy will be in the long finance ministers have already made it clear the tiller. Thus, we note the proliferation of agenci and programmes. This diffuseness of arra programme delivery has increas ed in recent ent feature of the policy process, especially and thus likely to fragment the institutiona modify the notion of the Commission as a executive.

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The longest established autonomous agency is the European Investment Bank (EIB), established by the Treaty of Rome (EEC). Its task was, and is, to generate loans for agreed investments in support of EU objectives, both within the EU and in associated third countries. It operates like a private bank, with triple-A credit rating in money markets. Its work is to varying degrees coordinated with programmes directly administered by the Commission, such as the structural funds. It had its potential 'big moment' in the early 1990s after the breakdown of the communist system in central and eastern Europe. However, a decision was taken to establish a new and separate European Bank for Reconstruction and Development (EBRD), with the reforming post-communist countries and other western states as stakeholders. One other phenomenon should be noted. Over the past decade or so there has been a trend in the EU to contract out some policy implementation activities to agencies, mirroring practice that was becoming more common in many of the member states. One group of executive agencies has been set up to administer programmes for which the Commission lacked either the staff or the inclination, for example the Humanitarian Aid Office (ECHO) and the office which administers the Socrates programme for educational interchange. Another group of agencies handles regulatory functions, such as the European Food Safety Authority (EFSA) (see Chapters 8 and 13) , or operating functions, such as Europol (see Chapter 19). A third group provides direct services for the EU institutions, such as the translation centre. There has been some discussion on whether this process could be taken even further, for example by setting up a European Competition Office clearly separate from the Commission or through networks of national regulators (see Chapters 6 and 15). The most important example of a new and autonomous operating agency is the European Central Bank (ECB) in Frankfurt (see Chapter 7). The battle in 1998 over who should be its first preSident was an indication of the anticipated importance of an agency that was to exercise considerable independence in a crucial policy domain with high political salience. The ECB has made an impressive start

The institutions in the member states are also stitutional architecture and partners in the EU 2005). The European dimension is not just an ernments; in a real and tangible sense national and agencies, provide much of the operating li senses what the EU system does is to extend member states. The case studies in this volume this is so. Learning how to manage this extra has been one of the most important challenges f past fifty years. Much of that challenge has had to be faced member state, and the patterns of response h another. As a broad generalization we note tha different from what many commentators had so much a defensive adjustment to the loss o in most member states an increasingly nuanc encapsulating the European dimension. This h governments can operate as gatekeepers betw The points of cross-border access and opport networks and coalitions have steadily prolife private actors. Na tional actors play important the EU policy process. Opportunities for access and influence are, ho member states. Economic agents and non-go seem the most flexible in operating at both E authorities have become more adept, though ho open to question. Na tional parliaments have bee are among the national institutions most displ European dimension to policy-making.

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develop contemporary government and governance. Table 4.2 summarizes the key characteristics that delineate them. Most individual policy areas do not fall neatly within a Single policy mode and there is strong variation over time, both within policy sectors and in response to events and contexts. As we shall see across the case studies in this volume the variations persist and hybridization across these ideal types is prolific. We return to this in Chapter 20.

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An Institutiona l Anatomy and Five Policy Modes

the agricultural interests, by their offered them better rewards than

The EU regulatory mode
As the competition regime took root (see Chapter 6) and the Single European market developed (see Chapter 5), soan alternative policy modi: emerged. Its roots lay in the ambition of the Treaty of Rome to remove barriers between the national economies of the member states. Much of its driving force came from changes in the international economy, which began to induce new forms of regulation in some west European countries. It turned out that the EU arena was especially amenable to , the further development of a regulatory mode of policy-making (Majone 1996). The strength of the European legal process, the machinery for promoting technical cooperation, and the distance from parliamentary interference were all factors that encouraged this further, namely by removing national barriers to the creation, of the single market (see Chapter 5). The negotiation process, in and through the European Commission and Council of Ministers, and anchored by the EU legal system, helped national policy-makers to escape ;;me of the constraints of politics that had built rigidities into national policy-making. The EU was particularly well fitted for generating an overarching regulatory framework that could combine transnational standards with country differences. Indeed, so successful was its implantation that this European approach has sometimes been promoted as a model for the development of broader global regulation. Examples can be found in Chapters 13, 14, and 16. This regulatory mode provides the framework for numerous micro-level decisions and rules. It has shaped relationships with member governments and economic actors within the EU, and for those involved in relevant international regimes. It has been characterized by: • the Commission as the architect and defender of regulatory objectives and rules, increasingly by reference to economic criteria, and usually working with stakeholders and communities of experts, and often mobilizing the EU legal system;

subordinated operating arms of the

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basis, as an expression of sustained

onal' policy-making, in which powU level. It was structured by a funca particular policy sector could be s, but mediated by a form of politics to further their' various, and often Council, Scharpf (1988) identified a he revision of common policy once

eality, even in the case of agriculthat the-real story of the CAP may es determined rather more of the which was intended to imitate the ation of powers to manage quotas, uesne 2005). Aspects of EU trade given the considerable delegation ments and trade agreements (see years that this mode would apply alist character. This version of the e points for both practitioners and

common policies being introduced with a centralized and hierarchical wers, and aimed at 'positive integrat-fitting example. However, in this tutional powers are centred on the apply only to the monetary strand ion to function-specific agencies in classical Community method has

• the Council as a forum (at both ministerial and official levels) for agreeing minimum standards and the direction of harmonization (mostly upwards towards higher standards), to be complemented by mutual recognition of national preferences and controls, operated differentially in individual countries;

• the EC] and the CFI as the means of ensuring that the rules are applied reasonably evenly, backed by the national courts for local application, and enabling individual entrepreneurs to have access to redress in case of nonapplication or discrimination;

• the EP as one way to prompt the consideration of non-economic factors (environmental, regional, social, and so forth), with increasing impact as its legislative powers have grown, but little leverage on the implementation of regulation;

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• the important role of regulatory agencies, both European and national; and • extensive opportunities for stakeholders, especially. economic aClors, but sometimes other societal actors, to be consulted about, and to influencto, the shape and content of European market rules.

new quasi-independent regulatory agencie Au thority (see Chapter 14); steered partn with the Commission, notably in the case o transnational consortia of national regulat sector (see Chapter 15); and looser network the operation of financial markets or corpo much harder to identify the contours of a Pending issues include how this regulatory of member states with less advan ced econo widespread economic recession.

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The EU distributional mode

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PerSistently over the years the EU policy proce issues, that is, the allocation of resources to countlies, sometimes expliCitly and intentiona poliCies designed for other purposes. The frame elements of distribution in the policy repertoir from a collective base and for a long time ac budget. Farmers became both the clients of E of high prices, gaining transfers of resources fr to the early years of the EEC that the language 'Cohesion' was added to the policy vocabulary arena was used to protect social groups or regi domestic economy and rendered uncompetiti other social groups. Fierce arguments over the benefits of participation in the EU meant that highly politicized (se Chapters S, 9, and 10). E This distributional mode of policy-making • the Commission attempting to devise p and regional authorities or sectoral st financial incentives to gain attention an • member governments in the Council an pressure from local and regional authori fiercely over a budget with some redistri • some additional pressure from MEPs regions; • local and regional authorities benefiti as a result of engaging in the European offices in Brussels, with, from 1993 on modestly also articulating their concerns

1

EU regulation mode has been described by some commentators as a form of 'negative integration' CScharpf 1999), although case studies in this volume reveal regulation being used prolifically to promote 'positive integration'. This regulatory mode has shaped the development of the single market CChapters 5 and 15), and the application of competition rules (Chapter 6). EU industrial policy has been developed in recent years mostly by using regulatory prompts and the competition regime to leverage industrial adjustment. Insofar as the EU has a social policy (Chapter 11), it is mainly constructed through legal regulation and market-making. Employment policy (see Chapter 12) also uses some regulatory instrument~ Much of wha t the EU has done in the environmental domain (Chapter 13) has been by regulating industrial processes. Chapter 14 illustrates the case of biotechnology and food safety. Interestingly, Chapter 8 indicates the increasing impact of the regulatory mode on the operation of the CAP as reforms are introduced . The EU's interactions with the rest of the world, including with neighbours and membership candidates, mirror its internal approach to regulation and industrial adjustment, as is made evident in Chapter 16 on trade policy, and Chapter 17 in relation to central and eastern Europe. During the 1990s, regulation displaced the CAP as the predominant policy paradigm for many EU policy practitioners. It had the advantage of being focused on a modernization trajectory, through which the rigidities of the 'old' west European political economy would be replaced by more flexible , mainly legal, instruments of market encouragement, and through which different, and less corporatist, relationships could be forged with socio-economic actors. The literature emphasizes the role of interest groups, lobbying, and corporate actors (firms rather than trade associations) (Coen and Richardson 2009), and the networks, coalitions, and alliances that they form. Two decades of experience in developing the Single market reveal changes in and limits to this regulatory mode. Thus it appears to have been particularly successful in dealing with product regulation, and less robust in dealing with process standards, where difference either in levels of economic development or in societal preferences intervene, sometimes with sub-national as well as country variations (see Chapters 13, 14, and 17). The mode has also had rather less purchase on the regulation of services, financial markets , and utilities, where instead we see moves towards more decentralized, less hierarchical versions of regulation (see Chapter 15). Here we see across the member states, and indeed in the global economy, the emergence of more-or-Iess independent regulatory agencies at arm's length from governments, as well as emerging forms of selfregulation (Coen and Thatcher 200Sa). Within the EU there are experiments with:

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An Institutional Anatomy and Five Policy Modes In its early years the Commission used this technique to develop light forms of cooperation and coordination in fields adjacent to core EU economic competences in order to make the case for clearly aSSigned policy powers. Thus, for example, in the 1970s the Commission promoted increasingly systematic consultations among member governments on environmental issues, and eventually made a persuasive case for the SEA to give the EU formaUegislative powers. Similar efforts were made to develop coordination of macro- and microeconomic policies, as well as in domains such as research and development or aspects of education policy Policy coordination was intended as a mechanism of transition from nationally rooted policy-making to an EU collective regime. For the advocates of a strong EU, policy coordination might be a useful starting point, but it used to be seen as very much a second-best resting point. The typical features of policy coordination are: the Commission as the developer of networks of experts or epistemic communities, or of stakeholders and/or civil SOCiety, and accumulating technical arguments in favour of developing a shared approach to promote modernization and innovation; • the involvement of 'independent' experts as promoters of ideas and techniques; the convening of high-level groups of national experts and sometimes ministers in the Council and occasionally the European Council, in brainstorming or deliberative rather than negotiating mode; • the development of techniques of peer pressure, 'benchmarking', and systematic policy comparisons in order to encourage policy learning; • dialogue (sometimes) with specialist committees in the EP, as the advocates of particular approaches; and • outputs in the form of 'soft law' and declaratory commitments rather than 'hard law' and binding commitments , oriented at gradual changes in behaviour within the member states. Latterly we can see this coordination approach being developed not as a transitional mechanism, but as a policy mode in its own right. Some argue normatively (Scott and Trubek 2002) that there is a case for understanding this development as the emergence of a new form of postmodern governance. Three factors have served to emphasize policy coordination as a technique. One was the move to a form of EMU with a single monetary policy but only a 'coordinated' macroeconomic policy, with an effort being made to move on from the looser form of pre-EMU policy coordination to forms of more intense and more structured policy coordination through the Broad Economic Policy Guidelines and so forth (see Chapter 7). A second impulse came from the Lisbon Strategy adopted in March 2000, which specifically identified and elevated the 'open method of coordination' (OMC) as a distinctive policy technique, using 'soft' policy incentives to shape behaviour, rather

pted into the EU policy process; and

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he European and the infranational oped around them, that provoked e the EU process more generally on away from the Brussels-centred y, "the Community method and the ere the balance of the evidence lies: the member states have remained ding and that infranational activity so indicates that discussions about d membership are disturbing the blic budgets of the Maastricht criee Chapter 7) , accentuated by the

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boration has been drawn between shorthand might be described as nomic Cooperation and Developzed countries, has since the early s could appraise and compare each

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then EEC irito a firmly intergovernmental fra by some of the more integration-minded gov 1970s policy cooperation did develop on mon the EU institutional framework. In both domai important actors, and often their preferences than the whole EU membership. Franco-Germ moments an important catalyst of policy adv intensively in the 1990s, someEU countries c outside the EU framework so as to establish a c ized internal borders through the Schengen Ag EU parrners from the initial regime. The term 'intergovernmental' does not, how this policy mode in the EU. It resonates too m ments in many other international organization tion is quite limited. We therefore prefer the t the greater intensity and denser structuring o member governments have been prepared cu rather extensive engagement and diSciplines, tional framework to be inappropriate or unacce Intensive transgovernmentalism is characteri
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Throughout the history of the EU some examples of policy cooperation have depended mainly on interaction between the relevant national policy-makers, with relatively little involvement by the EU institutions. This has been especially so on issues that touch sensitive issues of state sovereignty, and which lie beyond the core competences of the Union for market-making and market-regulating. Generally such cooperation has been described as 'intergovernmentalism'-by both practitioners and commentators. Generally it has been regarded as a weaker and much less fruitful form of policy development. In the early 1960s General de Gaulle was instrumental in promoting the controversial Fouchet Plans, which aimed to shift delicate areas of cooperation well away from the

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The ECl's jurisprudence, however, began to bite at the heels of national policymakers. In 1974 the Dassonville ruling established a legal basis for challenging the -validity of national legislation that introduced new TBTs. The famous Cassis de Dijon judgment in 1979 insisted that under certain specified conditions member states should accept in their own markets products approved for sale by other member states (Dashwood 1983: 186; Alter and Meunier-Aitsahalia 1994: 540-1). There was cumulative frustration in the Commission and in the business community at the slow pace of progress and the uncertainties of reliance on the ECJ, whose rulings apply only to the cases lodged. The high level of economic interdependence within the EU made these TBTs costly and visible (Pelkmans 1984; Cecchini et al. 1988). In the early 1980s the governments of western Europe were facing an economic crisis. The poor competitiveness of European firms relative to those of their main trading partners in the US and, particularly; Japan contributed to large trade deficits (Pelkmans and Winters 1988: 6). Transnational companies proliferated and often squeezed the profit margins and markets of firms confined to national markets. The sharp increase in oil prices follOWing the revolution in Iran in 1979 helped to push western European economies into recession. Inflation and unemployment both soared during the early 1980s. Business confidence was low and investment, both foreign and European, began to turn away from the Community (Pelkmans and Winters 1988: 6).

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The emerging reform agenda
While the crisis was clear, the response was not (see e.g. Tugendhat 1985). Large trade deficits and high inflation constrained the ability of member governments to use expansionary economic policies to bring down unemployment. Economic interdependence further reduced the efficacy of national responses to the crisis and provided an incentive for a coordinated response to the region's economic problems. The prospects for a collective response were enhanced by changes within the member states. These are widely described in the political-integration literature as a convergence of national policy preferences during the early 1980s (Sandholtz and Zysman 1989: Ill; Moravcsik 1991: 21, 1998; Cameron 1992: 56). This convergence, it is claimed, reflected widespread acceptance of neo-liberal economic ideas, which stress that markets are better than governments at generating economic growth. Neo-liberal ideas thus advocate that governments should interfere less in economies by privatizing state-owned industries and removing regulations, particularly those governing economic competition. Although new government policies certainly did emerge in the early 1980s, closer examination reveals that these differed substantially between countries in terms of their origins, motivations, and intensities. Political parties advocating neo-liberal economic policies came to power in the UK, Belgium, The Netherlands, and Denmark, in part due to a rejection of the parties that had overseen the economic decline

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standards is delegated to CEN and CENELEC 'home country control', which sets minimum s cial service providers, but then alfows them t regulated by the government of the country (home country). A similar approach was adopt profeSSional qualifications once common mini In 1985, after consultations with the mem the Commission,Jacques Delors , decided tha was perhaps the only strategic policy objectiv sus. In his inaugural speech to the Europea himself to completing the single market by Council in June 1985 endorsed the White by Lord Cockfield, the Commissioner for th reduced to 282) measures (see Table 5.1) . During this same period, but outside the C German governments in 1984 agreed the M impact of border controls. In 1985 it was con governments, into the first Schengen Agreem

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ofthe late 1970s (Hall 1986: 100). The rejection was less marked in Germany, where the underlying strength of its economy preserved an attachment to the established 'social market' framework. In France the 'poliey learning' was explicit. Expansionary fiscal policies had led to increased inflation and unemployment, exacerbated the trade deficit, and swelled the public debt (Hall 1986: 199). By 1983 the French government had started to look for European solutions, reversing the threat it had made in autumn 1982 to obstruct the common market (Pearce and Sutton 1985: 68). The Spanish government sought to link socialist modernization at home with transnational market disciplines abroad. Convergence is thus something of a misnomer-European market liberalization served quite different purposes for different governments and different economic actors. New ideas about markets and competition thus started to be floated in response to the problems of the European economy. The appeal of these ideas was influenced by the wave of deregulation in the US in tli.f.late 1970s and early 1980s (Hancher and Moran 1989: 133; Sandholtz and Zysman 1989: Il2; Majone 1991: 81). Furthermore, the EC]'s 1979 Cassis de Dijon judgment provided the Commission with a lever with which to pursue greater market integration (Dashwood 1983). From the early 1980s European Council communiques repeatedly expressed concern about the poor state of the single market (Armstrong and Bulmer 1998: 17) and in December 1982 it created an Internal Market Council. Throughout 1983 support for reVitalizing the Single market continued to grow. In April the heads of some of Europe's leading multinational corporations formed the European Round Table of Industrialists (ERT) to advocate the completion of the single market (Cowles 1994). The Union of Industrial and Employers' Confederations of Europe (UNICE) added its voice to calls for greater market integration.

I

The single European market programme
Meanwhile the Commission began to look for ways to attack barriers to market access, both by systematically identifying them and by explOring ways of relaxing the constraints on policy change. It suggested the 'new approach' to regulatory harmonization, which advanced 'mutual recognition' of equivalent national rules and restricted much of harmonization to agreeing only 'essential requirements'. It thus built on the jurisprudence of the EC] , notably the definition in Cassis de Dijon of essential safety requirements (Schreiber 1991). It also built on British support for deregulation and French and German efforts to coordinate the activities of their national standards bodies (H. Wallace 1984). Towards the end of 1983 the Commission privately persuaded the British, French, and German governments to accept this new approach, which was formally adopted by the Council in May 1985 (Bulletin of the European Communities, 5/1985). The 'new approach' limits legislative harmonization to minimum essential requirements and explicitly leaves scope for variations in national legislation (subject to mutual recognition). Under the 'new approach' responsibility for developing detailed technical

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The development of the SEM programme coin of the European Community'S institutions si the meeting of the European Council in Font tional reform by resolving the question of Brit issues of the Iberian enlargement. At this me approach' and the British government tabled a the creation of a 'genuine common market' i The meeting established the Ad Hoc Comm Committee) to consider reforms to the Com with the Iberian enlargement in mind. Earlie pean Union, the EP had sought to focus atte inter alia for increased parliamentary powers voting (QMV) in the Council of Ministers (E By December 1985 a remarkably quick an ence (IGC) had agreed the terms of instituti addition to its important focus on accommoda endorsed the '1992 programme' to complete t decision rule for single-market measures (with ment of persons, and the rights and interests to qualified majority voting. It also enhanced the cooperation procedure for single-market velopment and institutional reform were link

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Establishing the single market

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The plans to complete the single market induced an explosion of academic interest in the European Union (EU). Before 1985 the theoretical debate on political integration had stalled, studies of EU policy-making were sparse, and few mainstream economists devoted themselves to the analysis of European economic integration. In the late 1980s all that changed, as competing political analyses proliferated and the economic consequences of the single market programme, which aimed to realize the free movement of goods, services , capital, and labour among the EU's member states by 1992, were examined. Indeed, many new theoretical approaches to the study of European integration have taken the single market as their main point of reference , just as man y earlier theorists had taken agricultural policy as their stimulus. For many the single European market (SEM) programme constitutes the critical turning point between stagnation and dynamism, between the 'old' politics of European integration and the 'new' politics of European regulation. This chapter re-examines the renewal of the single European market as a major turning point in European policy-making. In essence, it presents the argument that many of the analyses that proliferated in response to the Single European Act (SEA) and the SEM overstated their novelty and understated some of the surrounding factors that helped to induce their 'success'. Thus, accounts in the late 1980s emphasized the newness of the SEM programme, but in retrospect we can observe a significant degree of continuity with what had come before. Nonetheless, the incorporation of the SEM programme represents a very Significant redefinition of the means and ends of policy. It enabled the European integration process to adapt to new constellations of ideas and interests and produced a different policy mode that has permeated many other policy areas (Majone 1994). The SEM is also important for its impact on the European public policy model within the member states. Thus, market regulation at the supranationallevel of European governance jostles, often uneasily, with other issues on the political and economic agendas of the EU member states. There are also tensions between supranational regulation for transnational markets , engaging transnational regulators and large market operators, and encapsulated national politics, engaging those responsible for, and dependent on, the reduced domestic political space, smallerscale entrepreneurs, local regulators, and national or regional politicians. These repercussions have not been confined to the member states that accepted the SEA and the SEM. The formal and informal extraterritorial impact on neighbours, partners, and competitors has been powerfuL The SEM has been extended formally to neighbouring countries through the European Economic Area (EEA) and various forms of association with candidate and non-candidate countries and
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The ECl's jurisprudence, however, began to bite at the heels of national policymakers. In 1974 the Dassonville ruling established a legal basis for challenging the -validity of national legislation that introduced new TBTs. The famous Cassis de Dijon judgment in 1979 insisted that under certain speCified conditions member states should accept in their own markets products approved for sale by other member states (Dashwood 1983: 186; Alter and Meunier-Aitsahalia 1994: 540-1). There was cumulative frustration in the Commission and in the business community at the slow pace of progress and the uncertainties of reliance on the EC], whose rulings apply only to the cases lodged. The high level of economic interdependence within the EU made these TBTs costly and visible (Pelkmans 1984; Cecchini et al. 1988) . In the early 1980s the governments of western Europe were facing an economic crisis. The poor competitiveness of European firms relative to those of their main trading partners in the US and, particularly; Japan contributed to large trade deficits (Pelkmans and Winters 1988: 6). Transnational companies proliferated and often squeezed the profit margins and markets of firms confined to national markets. The sharp increase in oil prices following the revolution in Iran in 1979 helped to push western European economies into recession. Inflation and unemployment both soared during the early 1980s. Business confidence was low and investment, both foreign and European, began to turn away from the Community (Pelkmans and Winters 1988: 6).

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ommission in cooperation with secominated by member governments. on their drafts from European-level ning in 1973 with the 'Low-Voltage orated the work of private standardropean Norms (Standards) (CEN) ms (Standards) (CENELEC)-into Schreiber 1991: 99). nd the pressures on governments ng the status quo made delays and need for unanimity in the Council e a veto over harmonization. The mphasizing the details and paying f people to familiar ways of doing 7). As a result, only 270 directives 1991: 98). ld not keep pace with the proliferasingly adopted measures to protect bout consumer and environmental hwood 1983; Commission 1985b). n harmonization was undone, conive to total imports (Buigues and mber of EC] cases concerning the

The emerging reform agenda

While the crisis was clear, the response was not (see e.g. Tugendhat 1985). Large trade deficits and high inflation constrained the ability of member governments to use expansionary economic policies to bring down unemployment. Economic interdependence further reduced the efficacy of national responses to the crisis and prOVided an incentive for a coordinated response to the region's economic problems. The prospects for a collective response were enhanced by changes within the member states. These are widely described in the political-integration literature as a convergence of national policy preferences during the early 1980s (Sandholtz and Zysman 1989: Ill; Moravcsik 1991: 21, 1998; Cameron 1992: 56). This convergence, it is claimed, reflected Widespread acceptance of neo-liberal economic ideas, which stress that markets are better than governments at generating economic growth. Neo-liberal ideas thus advocate that governments should interfere less in gG0nomies by priva~izing state-owned industries and removing regulatiOns, particularly those governing economic competition. Although new government poliCies certainly did emerge in the early 1980s, closer examination reveals that these differed substantially between countries in terms of their origins, motivations, and intensities. Political parties advocating neo-liberal economic poliCies came to power in the UK, Belgium, The Netherlands, and Denmark, in part due to a rejection of the parties that had overseen the economic decline

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The SEM and SEA fundamentally changed the the European Community. First, the SEM revi removal of national rules that impede economi the mutual recognition principle, the abolition tion of exchange controls. Secondly, the SEA c for 'positive integration'- agreeing common extending and activating QMV and enhancing with respect to the 'new approach' and 'home the distinction between positive and negative i common requirements. These different modes cal implications as they both affect who the key shape their relative influence (see Table 5.2).

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Analysts who focus on the SEA, by contrast, stress bargaining among the member governments (intergovernmentalism), although their preferences were tnfluenced by domestic economic pressures (Cameron 1992; Moravcsik 1991, 1998). Moravcsik (1991, 1998), in particular, argues that the SEA was the product of interstate bargaining, principally between the British, French, and German governments, and that traditional tools of international statecraft, such as threats of exclusion and side payments , explain the final composition of the '1992 programme' and the SEA. Garrett (1992) argues that the member-state governments were willing to accept limits on their policy autonomy because they were engaged in an extended cooperative project and wanted to be able to ensure that their partners would comply with agreements. Parsons (2008), however, argues that proponents of the SEM, most notably the British government, accepted institutional reform only as the price demanded by those states less enthusiastic about _ liberalization, but more committed to integration, not because they considered institutional reform necessary for realizing the project. Thus, while there is broad agreement that the contours of the institutional bargain were defined by bargaining among self-interested governments, precisely why they accepted .the outcome they did is contested. As the neo-functionalist and intergovernmentalist approaches seek to explain distinct, albeit related, events, both may be broadly accurate. The Commission, transnational business interests, some member governments, and t.o an extent the EC] , played the lead role in shaping the SEM programme, while bargaining among the member governments primarily determined the outcome of the SEA (Armstrong and Bulmer 1998: 19). This account is consistent with different types of actors having different impacts on different types of policy (Cowles 1994; Peterson 1995). When it comes to 'history-making' decisions , such as the SEA, the member governments are the crucial actors. When dealing with policy-framing decisions, of which the SEM is a particularly weighty example, the supranational institutions , and their allies, tend to be important.

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The SEA in effect set the institutional framework for the Single market programme, and its broad parameters remain largely unchanged. The most significant subsequent change has been the introduction of the co-decision procedure in the Maastricht Treaty on European Union (TEU). The Treaty of Amsterdam established clearer guideliiles about when member governments might adopt national rules stricter than agreed common rules. The Treaty of Lisbon makes only modest changes to the single market programme by increasing the EP's role in legislation to liberalize specific services (Amendment 58) and by establishing a formal mechanism for establishing European intellectual property rights Ca new Article 97a). More strikingly, the institutional reforms- qualified majority voting, the cooperation and co-decision procedures- first introduced wi1h respect

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onal rules that impede economic eement among the member governsion, as was the case with eliminatontrols and the Commission's 2004 n such instances, negative integrae positive integration (see below). occurs as the result of a national es as the result of ajudicial process. nd the courts (ultimately the ECj)

replace differ~nt national rules with common European ones ('positive integration'). Given the relative importance of 'positive integration' in the EU's market integration project (see Table 5.2), it is more appropriate to describe the sai as reregulatory, than deregulatory.

The policy cycle and institutional actors
Formally the Commission is the agenda-setter for positive integration , as only it can propose new measures. The reality is somewhat more complicated. Member governments can request that the Commission develop proposals and, as noted above, can indirectly shape the agenda by pursuing policies that disrupt the free flow of goods or services within the single market. In addition, member governments, as part of compromises on legislation, often build in 'policy ratchets' requiring that an issue be reconsidered by some speCified time in the future. Lastly, the Maastricht Treaty gave the EP the right to request that the-Commission propose legislation. As discussed earlier, the SEA introduced two important changes to the legislative process on Single market measures: QMV and the enhanced role of the EP. According to data gathered by Hayes-Renshaw et al. (2006), none of the nineteen definitive legal acts concerning the Single market that were adopted during 1998-2004 was adopted unanimously. l It is difficult, however, to assess how Significant QMV has been to the Single market programme as measures are put to a vote only when they are sure to pass. Votes against measures might, therefore, be more to appease domestic constituencies or to Signal potential implementation problems than to express strong opposition. 2 By increasing the power of the European Parliament, the SEA and subsequent treaties have made the adoption of Single-market measures more complicated (Parsons 2008). Through the cooperation procedure, the SEA gave the EP the power to reject or amend proposals, but these could be ignored or overturned under most circumstances. The introduction of the co-decision procedure in 1993 under the TEU, particularly strengthening its ability to reject proposals, made the EP more of a co-legislator with the Council, and caused many more of its amendments to be accepted by the Commission and Council (Hix 1999: 96). The EP's increased influence, formally in decision-making and informally in proposal shaping, has affected policy outcomes by enhancing the representation of civic interests, such as consumer and environmental groups (Peterson and Bomberg 1999; A. R. Young and Wallace 2000). As the vast majority of the SEM legislative programme is in the form of directives, the member states have a central role in implementation. The transposition of directives into national law is a necessary, but not very visible, process, since in most cases it occurs through subordinate legislation that is not much debated. Criticisms of 'Brussels bureaucracy' often relate to rules that had been transposed into national law without debate and with little attention from national parliamentarians, but then 'Brussels' is always an easy scapegoat for unpopular changes.

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Although the Commission formally has a role in enforcing the single market, its staff is too small and its policy remit too broad for it to engage actively in policing-all nooks and crannies of the single market. Instead, the job of ensuring compliance is decentralized and relies heavily on firms and non-governmental organizations identifying issues and either bringing them to the Commission's attention or addressing them directly through the courts.

Although 'B~sselS' is much more import close contacts with their national governme . policy process. Rather than conSistently pre the SEM contributed to a rise in 'forum shop their policy objectives at whichever level is desired result.

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In this process the Commission plays a pi ensures that, but what really matters is how t Although reregulatory rather than deregulator eralizing markets and increasing competition states. In such circumstances, the costs of poli trated on the protected firms and the benefits wide range of actors (consumers and users), al firms are likely to benefit. Ih such circumstance champion change and galvanize support- a r with gusto.

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In addition to the institutional changes introdu tion of European policy-making also affected did so iri two principal ways: increaSing gover opening up existing policy networks. PartiCipa privileges governments with respect to societ 1993b). In particular, governments may be abl European) agreement or external pressure to forms that have been blocked by powerful dom In addition, the policy networks surroun involve actors from multiple member states a directly involved in implementing policy dec those in individual member states. As a result, interests have access to the policy process. Furt regulation , producers tend to want their nation a consequence, powerful business interests oft European policy process, thereby undermining vis-a-vis other, less organized actors.

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The SEM is about regulation, and, in keeping with Theodore Lowi's (1964) characterization of regulatory politics, interest-group competition characterizes the politics of single-market measures. 'Brussels' had for a long while attracted pressure groups and lobbyists from the 'cognoscenti' amongthe would-be influencers of Community legislation, but the SEM contributed to both a dramatic expansion of such activity and sO.!!le changes in its form. In part, the increase in the number of 'Eurogroups' was a simple reaction to the range and quantity of sectors and products affected by the SEM programme and the speed with which they were being addressed. Organizations (pressure groups, firms, local and regional governments, and NGOs) that had previously relied on occasional trips to Brussels started to establish their own offices there or to hire lobbyiSts on retainer. This shift to Brussels was in part a response to the looming shadow of QMY, which meant that firms and interest groups could no longer count on 'their' member government being able to defend their interests. Building alliances with like-minded groups from other countries, other member governments, and within the Commission became crucial, and that meant haVing a presence in Brussels. The Commission, with limited staff and pressed for expertise, readily opened its doors to these actors. Another change following the SEA and the launch of the SEM was the increase in the number of civic interest groups, although they found it much harder to exercise effective political muscle. The consumer and the purchaser had been the intended beneficiaries of the SEM programme and the 'minimum essential requirements' of harmonizing and liberalizing directives were often to help them or their assumed interests. However, it is easier to discern consumers as objects of policy than as partners in the process, although they are often sporadic participants (A. R. Young 1997; A. R. Young and Wallace 2000). In addition to changes in the volume and types of interest groups active in Brussels, the SEM also contributed to changes in the form of interest-group participation in policy-shaping. Individual firms and direct-member associations came to rival the previously dominant conventional peak and trade associations in the consultative processes. Another change was greater reliance on consultancy (an import from the United States), which started to erode the old distinctions between public policy-making and private interest representation. The Commission, member governments, and firms all found themselves relying increasingly on consultants to inject 'expertise'.

Hence , SEM regulations are usually contest often loose groupings of diverse proponents a (A. R. Young and Wallace 2000: 3). Such 'advoc nations of member governments, supranational civic interests. Thus, these alliances bridge the and policy-decision phases of the policy cycle.

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been governed primai'ily by the right of establishment and the freedom to supply cross-border services enshrined in the Treaty of Rome (see Box 5.1 above). As a consequence, the provision of services within the EU has been regulated primariGT by national rules (Langhammer 2005) . The provision of services between states, however, is particularly prone to barriers. Many services require (or are at least greatly facilitated by) physical proximity, which can be achieved through the establishment of a branch of the service provider (e.g. retail), the temporary posting of workers (e.g. construction) or the movement of the consumer (e.g. tourism). Moreover, services are often subject to more stringent regulations than goods because they are intangible and tend to be complex (Commission 2002e; Vogt 2005). Consequently, different national rules- such as quantitative restrictions, residency requirements, and multiple authorizations- even if not applied discriminatorily, can impede trade in services (see Commission 2002e: 14- 42). There are also cultural and language barriers, including consumer and firm habits and preferences (Commission 2002e: 42- 5). In part because of such barriers, intra-EU trade in services has only increased very slightly as a share of GDP since the launch of the single market (Ilzkovitz et al. 2007: 49), reaching only 5 per cent of GDP in 2007, compared to 17 per cent for intra-EU trade in goods (Commission 2009a: 8). Given the importance of services in the European economy and the shortcomings in the single market for services, the 2000 Lisbon European Council identified removal of barriers to services as a key component to boosting the EU's competitiveness. The 2006 Services Directive, which was the response to this challenge, pitted neolibe,ralism versus 'social Europe', saw the European Parliament play a major role, and essentially divided the old and new member states (see Box 5.2). Thus, the Services Directive (2006/123) , which was the first major piece of single-market legislation adopted after the 2004 enlargement, indicates how politically fraught liberalization within the EU can be. The financial crisis that deepened in mid-2008 prompted renewed attention to the regulation of financial services at the EU level, not least because of the implications of the failure of financial institutions with operations in more than one member state . These efforts coincided with the Commission monitoring public assistance to banks (see Chapter 6) and seeking to enhance banking supervision (see Chapter 7) . The Commission advanced proposals for approximating and raising the level of bank deposit guarantees and strengthening the regulation of banks' capital requirements in October 2008 (Commission 2008e) and for regulating credit rating agencies in December 2008. In January 2009 the Commission adopted decisions aimed at improving supervisory cooperation and convergence among the member states by clarifying and enhancing the roles of committees that supervise the securities , banking, and insurance sectors (Commission 2009b).} The financial crisis, therefore, gave a new impetus to European financial regula tion.
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under which a service provider would be able to operate throughout the EU in with the regulatory requirements of its country of origin. It was also potentially very broad in scope. Strikingly, the labour market implications were not f lagged in internal Commission con- . sultations or in preliminary discussions in the Council. It was only when the draft was leaked that the controversy erupted. The most controversial aspect of the proposal was that it might undermine enforcement of the 1996 Posted Workers Directive (96/71/ECl. which specifies that host-country labour and wage laws, where they exist, apply. This issue became much more sensitive after the 2004 enlargement because of the much larger wage differentials between the new and old member states. Playing on this aspect of the proposal, its opponents, notably labour unions in the old member states, managed to frame the directive as permitting

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The European Parliament responded to these concerns by adopting, over'the votes of many MEPs from central and eastern Europea n countries, a substantially modified version of the draft directive that replaced the concept of 'country of origin' with 'freedom to provide services' and exempted a number of sectors. Most of the central and eastern European member states, Finland, and t he UK preferred the Commission's proposal, but the Com-

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mission, in the face of entrenched opposition to radical liberalization, accepted most of the Parliament's amendments. The Council adopted this versi on w ith only minor, slightly liberalizing changes, w ith only Belgium and Lithuania abstain ing .The directive, which is due to be . implemented by the end of 2009, w ill therefore not create a true single market for services

increase competition among European firms, but mon rules (Sbragia 1993; Peterson 1997; Scharpf There are two keys to these different dyna While neo-Iiberalism has expounded the bene petition (Majone 1991), post-material values a cautionary principle' have supported more stri Weale 1992) . The second key concerns how t affects the bargaining power of the m ember go the shadow of QMV With regard to economic integration is pronounced, putting those memb weak position to do more than slow the pace ofl 1997; Schmidt 1998; A. R. Young and Wallace 20 however, the Treaty establishing the European right of member governments to adopt social re tion to putting such issues on the agenda, as not ard country in a stronger bargaining position; i are content, while foreign goods or services are therefore, falls more heavily on its partners. Un can hold out alone for stricter standards, but t of civic interest groups, stringent-standard prod the Parliament, and often the Commission in fa consequence, the SEM has tended to con tribute

Outputs and assessment

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Recognizing persistent problems with realizing the economic benefits of the SEM programm e, the maturation of the programme-the bulk of the legislative agenda has been adopted- and its outdated emphaSis on goods, the Commission (2007 a) launched an initiative in 2007 on 'A Single Market for 21st Century Europe', which was endorsed by the March 2008 European Council. This ren ewed initiative aims to place greater emphaSis on implementation and enforcement and to rely less on legal measures to remove cross-border barriers. The intention is to make use of a "'smarter" mix' of policy instruments (Commission 2007a: 12 ), including competition policy (see Chapter 6); self-regulation; and other nonbinding instruments, such as recommendations (i.e. 'soft law') (Commission 2007b ). The Commission also wants to enhance cooperation among and with national authorities responsible for single market rules. Where regulation is still considered necessary, it should be flexible enough to adapt over time and to accommodate differences among the member states (Commission 2007b). Thus the Commission (2007 a: 4) contends that this new initiative represents 'a new approach to the Single market'. This new approach builds on the 'better regulation agenda', which has its roots in the Commission's 2001 White Paper on Governance and became a particular concern of the BarrosoCommission following advocacy by the British, Dutch, and German governments and reflecting concerted pressure over six preSidencies of the Council- Ireland, The Netherlands, Luxembourg, the UK, Austria, and

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members of the European Economic Area, cur and states participating 'in the European Nei A. R. Young and Wallace 2000). Moreover, the vocates 'expanding the regulatory space of the that European norms are a reference for global

Conclusions

Finland-during 2004-6. The 'better regulation' agenda is an effort to reduce the adverse impact of regulation on the competitiveness of European firms. It involves efforts to 'modernize' existing legislation by making it simpler through consolidation, codification, or repeal (by the end of the 2005-9 simplification programme the acquis should be reduced by about 10 per cent; Commission 2009c: 3). There are also efforts to reduce administrative burdens (on which the Commission is advised by a High Level Group of Independent Stakeholders chaired by Edmund Stoiber), for example by reducing reporting requirements. Moreover, the Commission is required to conduct impact assessments of all proposed EU legislation and the Council and EP must do likewise for any substantive amendments they propose (see Commission 2008a). The new approach to the single market emphasizes that the EU should act where it will have the greatest impact, which will require more systematic monitoring of key goods and services markets; that proposals will go through rigorous impact assessment; and that the Commission will continue to 'roll back' legislation where it no longer achieves desired goals or has been superseded (Commission 2007a). Given its antecedents in earlier policy initiatives, the new . approach to the single market is more a shift in emphasis than a radical change. Nonetheless, it reflects policy learning and adaptation in the wake of assessments of the effectiveness and/or adverse consequences of previous legislative activities. It is also a response to the maturation of the SEM programme: with most legal barriers to trade amongst the member states removed at least formally, the emphasis has shifted to making sure they are eliminated in practice and to encouraging private actors-firms and consumers-to take advantage of the new opportunities .

The SEM programme represents an approach within the EU prior to the mid-1980s and fro It is an explicitly regulatory mode of policylationships have been established between p level and between actors operating at the nati tended to open up the policy process, althou firms, have a 'privileged position', as they do ever, more likely to be competition among suc states.

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The elimination oflegal barriers to cross-border exchange has also shifted attention to the processes and conditions under which they are produced and prOvided. Irrespective of other arguments for European policies on environmental and social issues (see Chapters 11 and 13) , the preoccupation of entrepreneurs with operating on a level playing field turned attention to the relevance of such rules for costs, competitiveness, and profitability. Moreover, the Commission seems to consider addressing the social and environmental impacts of increased competition as necessary for maintaining support for the single market project (Commission 2007 a: 10). In addition, the Single market was invoked to build support for the two big policy initiatives that followed it: economic and monetary union (EMU) (see Chapter 7); and justice and home affairs (see Chapter 19). It also has implications for the EU's external policies. It has affected the terms on which third-country goods and sen'ices enter the EU (see Chapter 16; A. R. Young 2004) and, as a consequence of the 'doctrine of implied powers', it has enhanced the EU's capacity to participate effectively in international trade negotiations (see Chapter 16; A. R. Young 2002). It has also provided a core framework for relations with the EU's 'near abroad,' the

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Moravcsik, A. (1991), 'Negotiating the Single European Act: Nationa l Interests and Conventional Statecraft in the European Comm unity', International Organization, 45/1 : 19-56.

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p://www.councildata.cergu.selcouncil%20 008).
Pelkmans, J., and Winters, L. A (1 988), Europe's Domestic Market (London: Royal Institute of International Affairs). Sandholtz, W ., and Zysman, J. (1989). '1992: Recasti ng the European Bargain', World Politics, 42/1 : 95-128.

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tage of measures not implemented in transport', 'environment', and 'social

Scharpf, F W. (1999)' Governing in Europe: Effective and Democratic? (Oxford: Oxford University Press).

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ber states- only Cyprus and Poland exof November 2008--underlines that the es well for membership.

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Young, A R. (2007 a), 'The Politics of Reg ulation and the Internal Market', in K. E.

J0rgensen, M. A Pollack, and B. Rosamond (eds.), The Handbook of European Union Politics (London: Sage), 373- 94.

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Young, A R., and Wallace, H. (2000), Regulatory Politics in the Enlarging European Union: Balancing Civic and Producer Interests (Manchester: Manchester University Press).

mme, see Cockfie ld(1994)a nd Pelkmans

ions, see Commission (2007 c), Ilzkovitz

ternal Market Scoreboard and website

troductionto the Commission's (1995)

and its development. Forthetheoretical

les (1997), Jabko (2006), Majone( 1996),

(1989). For discussions ofthe political

Bulmer (1998)' Scharpf (1999). Young

Governance of the Single European

ty Press).

Creating the Single Market (London:

ated Countries of Central and Eastern rket of the Union, White Paper, COM

ewofAchievements, SEC (2007) 1521,

oalitions: A Challenge for the Future?',

pation and Policy-Making in the Euro-

- 40.

(2007), 'StepsTowards a Deeper Eco-

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Commission) .

olitical Strategy for Uniting Europe,

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economic system to deliver welfare benefits. Those aspects of economic life which hinder competition-monopoly, oligopoly, cartels, restrictive practices, market'sharing, subsidies, and state protection-also prevent it from generating and distributing wealth efficiently. just as the European Central Bank (ECB) guarantees a sound currency and low level of inflation, so the EU competition rules guarantee a free market and economic efficiency, providing an 'economic constitution' for Europe. This emphasis placed upon the market and economic integration means that competition policy has been of central importance in the EU . The Commission has expanded competition policy as one of its key EU competences. It has drawn on powerful treaty provisions, received support from the European Court of justice (ECj) and the Court of First Instance (CFI; see below), and entrusted policy to DG COMp, one of the most effective Directorates-General (DGs) in the Commission, directed by a series of able commissioners, Competition policy has taken on constitutional characteristics, thus taking precedence over less developed policy areas (such as research and development (R&D) or environmental policy), or framing specific sectoral poliCies (such as media or telecoms). Indeed, competition policy has been used to discipline governments as well as companies, so that all economic actors must understand it and treat it with respect.

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fined fifty-six companies a tNal of €1,836 mil of all fines previously levied in the history of period 2005- 7 aemassive €5 ,863 million was cartels. The biggest fines were against compani and Escalators case, including the largest fine e ThyssenKrupp group (Commission 20080: 10) simply cannot be igriored. It is worth remembering that competition such approval, and competition was once re The use of cartels was widespread and not reg the late 1960s (Harding and Joshua 2003). T European countries rested upon nationalizati planning, encouragement of concentration an of 'national champions'. Although these indust still attract some support among trade union re-emerged in response to the 2008-9 recess between competition policy and company s encourage regional economic development, and medium-sized enterprises. In all these are governments for alternative.policy goals. The move from planning and intervention competition has a particular contemporary di the EU in 2004 and 2007. For over forty years, t had centrally planned economies in which co capitalism was c·o ndemned. These countries hav European economic evolution into ten years as t policy embodied in the acquis communautaire, Chapter 17). All these countries now have co and a commitment to competition. Competitio component for making enlargement work and e converge with the market prinCiples that unify t

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The impact of EU competition policy is evident on a day-to-day basis, as it increasingly affects how we do our jobs, how benefits are distributed, and how and what we consume, from football to cosmetics, the price of cars, and the proximity of supermarkets. This means that a policy area which was traditionally regarded as specialist and arcane makes the headlines. This applies to the big merger cases, such as Nest!e/Perrier in 1992, GEIHoneywell in 2001, and RyanairlAer Lingus in 2007,1 which also stretch beyond intra-EU cases to those with a global or extraterritorial dimension. In the GEIHoneywell case the European Commission prohibited a merger between these huge US companies due to an adverse impact on the EU market. The US was outraged and media coverage was intense. Competition issues also surface in some of the big state aid cases, such as the Commission's demand that the French electricity monopoly, EdF, be required to repay €900 million in unlawful tax breaks to the French government (Times , 17 October 2002) . 'Big name' cases also attract great public interest, such as the Commission's findings that Microsoft abused its near-monopoly and acted illegally in bundling its Media Player software into its Windows operating system. The Commission ruled that Microsoft share details of its software design with competitors and in March 2004 MariQ Monti, the then Competition Commissioner, announced a fine of €497 million, the highest ever against a Single company, which produced headlines such as 'Mario Monti's Broken Windows', and even The Full Monti' (Financial Times , 25 March 2004). Such headlines dramatize the key element in assessing the impact of competition policy, and the way in which it structures the business environment for companies across Europe. EU competition policy has a 'direct effect' on companies, but until the mid-1990s most compani~ treated competition policy as an afterthought, to be taken into account when drafting a major agreement, entering ajoint venture, or contemplat. ing a merger, burnot at the heart of decision-making. By contrast, today, the 'competition rules' are a dominant regulatory constraint when companies formulate their corporate strategy or consider their competitive behaviour. They employ legal expertise to advise on the impact of the rules and most big firms will have an in-house 'compliance programme' to train their staff to avoid breaching the competition provisions. This shift in corporate awareness is partly due to the steady refinement and expansion of the law and the activism of the competition authorities. For corporate executives European law does not yet allow prosecution of individuals, which is commonplace in the US. But the UK law does include a 'criminal cartel offence' and criminal penalties, including imprisonment, have been discussed as a possible European penalty In practice the most dramatic threat is the increasingly frequent 'dawn raids' when competition officials swoop in on factories, offices, and private residences across several countries to seize papers and computers in order to find evidence of secret agreements, or 'cartels' , to manipulate markets. Some raids arise from the successful adaptation by the Commission of a US-style leniency programme, . a system of exemptions for 'whistle-blowers' who prOVide information about a cartel in which their firms are involved. The intensification of action, in particular against 'hard core' cartels, has resulted in a huge escalation of fines. In 2001 , the Commission
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Policy on anti-competitive agreements, or restrictive practices, is specified in Article 81 which 'prohibits' all agreements and concerted practices between firms that affect trade between member states and 'have as their objective or effect the prevention, restriction or distortion of competition within the common market'. The Article also specifies exemptions from the prohibition in cases where an agreement 'contributes to improving the production or distribution of goods or to promoting technical or economic progress' (Art. 810) TEC, ex Art.-1l5(l) EEC; and Art. 81(3) TEC, ex Art. 85(3) EEC). These provisions raise extraordinary problems of interpretation. Taken literally, virtually every agreement will 'restrict or distort' competition: that is what agreements are for, and every business spends much of its time and energy in foiling its competitors. On the other hand, some agreements foster competition, although interpretation will often depend on the theoretical biases of the economic analysis involved. In practice, implementation has allowed extensive discretion to the case officials in DG COMP; their interpretations of the rules have usually been confirmed in appeals to the ECJ or more recently to the CFI, and only occasionally overturned. .

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On the basis of case law and accepted economic theory some practices are presumed to be illegal (Goyder 2003: 97). These include resale price maintenance, horizontal price fixing, export bans, and market sharing. Such practices tend to be administered through cartels among competitors in an industry so as to create or protect a collective monopoly and to make excess profits. · Cartels still proliferate across Europe and the Commission has put the attack on cartels at the heart of its enforcement effort. Evidence secured by the Commission reveals astonishing illegal practices by leading companies and senior executives meeting in secret, using codes and subterfuge to outwit the authorities, which in 2007 alone prosecuted cartels in calcium carbide, switchgear, beer, exotic fruit, and videotape (Commission 20080: 10). In 2002 the Commission also concluded its first cartel case in the world of banking when it found in the Austrian Banks case that Austrian banking was organized by a cartel known as The Lombard Club', which covered all banking products, services , and advertising 'down to the smallest village' (Guersent 2003: 55). Its action was largely upheld by the EC] in September 2009.

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'economic progress' . In order to provide certainty the Commission has issued about a dozen 'block exemptions', which define acceptable agreements in areas such as technology; R&:D, maritime transport, and insurance (Goyder 2003: 114- 15). Similarly, principles have evolved to define the legality of agreements relating to intellectual property (where it can be pro-competitive to cooperate) , and in respect of 'vertical agreements', that is, agreements between enterprises at different stages in the supply chain, which are now generally regarded as acceptable. This is in contrast to the horizontal agreements between competitors at th~ same level in the supply chain which often have cartel-like qualities and are regarded with suspicion.

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While the control of restrictive practices is regarded as a Commission success story, the same cannot be said of the second component of competition policy, controlling the abuse of dominance. This is covered by Article 82 (TEC) (ex Art. 86 EEC) which prohibits 'any abuse by one or more undertakings of a dominant position within the common market'. This prohibition is aimed at monopolies or, since full monopoly is rare, at oligopoly, where a small number of firms dominate a market. European governments are deCidedly ambivalent about the control of oligopoly, the law itself has several significant flaws , and the Commission has been hesitant about explOiting this aspect of its powers. Cini and McGowan (1998: 94) go as far as to assert that 'the Commission's monopoly policy has been largely ineffective'. This is an overstatement, but implementation is indeed impeded by the complex dynamics between the Commission and the member states. For member states large companies have several attractive features. They enjoy economies of scale, they have financial muscle, and are representative of national industrial prowess , but most of all they can fund high technology and may operate as powerful multinationals able to compete directly with Japanese and US multinationals in global markets. These are the classic features of 'national champions', and many governments, including those of France, Germany; Italy, and The Netherlands, have been loath to see these benefits eroded by active attack from the competition authorities, particularly since Article 82 (TEC), unlike Article 81 (TEC) , does not provide for an efficiency defence. This in part explains the hesitancy of the Commission. Article 82 (TEC) is, however, also unsatisfactory in that it requires that the authorities first establish dominance (usually taken as at least 40 per cent of the market as indicated in the 1978 United Brands judgment; Whish 2008: 177); and only then can they establish 'abuse'. The law is also weak in attacking oligopolies. The Commission has attempted to establish a principle of 'collective dominance' (several companies working together in an oligopoly), but it was not until the Italian Flat Glass case in 1992 that it received any encouragement from the CFI, and even ·noW the concept remains ambiguous (Clarke 2006: 44). If successful in establishing illegal abuse the Commission has powers to fine, to issue a 'cease and desist' order, and under the 2003 Modernization Regulation (see below) it now has

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The third component of policy is the control the potential to generate monopolies. This is t face of competition policy since its main targ attention and frenzied political lobbying so tha of Shakespearean proportions. They affect tho name companies, make or break fortunes in f stroy the reputations of captains of industry. I 'hostile' takeovers (i.e. without the agreement pany) are unusual and provoke acute opposi 2003, approved (with conditions) the PjizerlP pharmaceutical company in the world, and t conditions) to create the largest aluminium co a huge deployment of economic power and th stage. When it blocks an international merge conflict extends to the highest possible level. I was the largest proposed merger in history a authorities. The Commission's rejection resul but only after furious lobbying by US politicia of retaliation, and deterioration in US-EU relat The Merger Regulation (Regulation 4064/8 emerged as a result of a decade of pressure fro September 1990. It was regarded as .the crownin successful period as Competition Commissio influence of the DG, prompting the conclusion competition regime had become globally p 1996: 225). The Merger Regulation created a ' Commission to control the largest mergers ab the threshold continue to be dealt with und threshold is set at an aggregate turnover of which catches over 300 mergers a year. Compa which is rapid, transparent, and avoids havin in which they operate. Cases can, however, b during the passage of the Regulation introdu so called because it was demanded by the Ge opportunity to control large national mergers.

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TABLE 6.1 Merger regulation cases, 1998-2007
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rocess in which most mergers are cases are examined in more depth s to block or amend mergers which ght then be abused. The wording of mmission persuaded the Council to uced an adaptation to the wording ains the dominance test, which has (which both now use the 'substan02), but it now prefaces it by attackmpede effective competition'. This hough it will continue to be based t or non-economic considerations. d confidence, won court cases, and l very unusual for a merger to be twelve mergers were blocked outcreasingly normal to accept or imen divestiture of part of the merged to a crescendo of activity in 2007
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major setbacks. In 2001 the prohia torrent of criticism from the US conomics, outdated thinking, and n June 2002 when a CFI judgment e Airtours/First Choice merger, the was compounded by two further cases later in 2002. The CFI was , its use of evidence, its reasoning, at the Commission had committed : 184). This led US critics to renew ing 'competitors not competition', panies and not the interests of cone of US antitrust policy). ger regime and reinforced economic the creation of a new post of chief st Damien Neven(see Neven 2006). 2000-4 and himself an economist,

noted revealingly that 'to develop an economic interpretation of EU competition rules was ... one of my main objectives when I took office' (Monti 2003: 7) . Where the balance is struck between law and economics and, indeed, what sort of economics is employed, has a marked effect on the development of policy in mergers and across the entire policy area.

State aid

With the fourth component of policy, state aid, the style and focus of policy takes on a very different form . Here the treaty powers are less clear, the proc~sses of implementanon are less powerful, and the Commission typically enjoys less cooperation from national govemments, which are themselves the targets of control. In this area (as with the liberalization of utility regulation) the Commission is more than the agent of the member governments; it transcends national interests and aspires to be truly 'supranational'. Despite national hesitation the state aid regime has become a central plank in the EU competitiveness strategy launched in the 2000 Lisbon Agenda. Article 87 (TEC) (ex Art. 92 EEC) affirms that aid to business, whether private or stateowned, that distorts competition is 'incompatible with the common market'. This applies

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most blatantly to direct state subsidies to companies. However, the concept extends to all forms of assistance, including tax breaks, preferential purchasing, loans, and even loan guarantees. Some forms of aid, and especially large subsidies, were a major tool of industrial policy as recently as the 19S0s. Periodic crises in industries such as shipbuilding, coal, aerospace, and the motor industry persuaded governments to grant massive rescue subsidies. Until 200S these had virtually been eliminated under the tightening state aid rules, but other aspects of aid may, as Cini and McGowan (199S: 137) point out, 'be a very good thing' in areas such as R&D, small enterprise, or backward regions, where it may help create competition and guarantee social benefits. All aid must be notified to the Commission, which assesses its compatibility and has developed frameworks to examine sector-specific and regional aid. A particular problem exists with the new member states, where tlle use of state aid is still widespread, as has been the case vis-ilvis the eastern Uinder in Germany following reunification. The initial emphasis was on transparency rather than abolition. The intention was steadily to reduce aid levels, and it was recognized that, like drug withdrawal, it was dangerous to cut the dose overnight. In respect of all state aid there was no Council regulation until 1999 when Regulation 659/1999 was enacted to allow exemptions and -streamline monitoring. Thus, the Commission is still developing its enforcement apparatus through a 'State Aid Action Plan' launched in 2005 and culminating in a general block exemption in 200S (Regulation SOO/200S). The Action Plan introduces a series of elements which have become familiar on the antitrust side such as :

a more economic assessment of the competitive effects of aid;
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Lisbon Agenda through the creation of a state in 2001. The CommissiOn found itself frequen governments, especially the UK, made greater e 19S5 state aid accounted for about 10 per cent of GDp, in other words, a hugely distorting deg to industry By 2002 the figure had fallen to a and 0.6 per cent of GDP and by 2006 to 0.4 pe the DG CO MP website, http://europa.euJcomp although the figures are still large at €48 billion TheCommission is notified of over 500 aid sc sions granting approval, often after the negotia The 2007-8 'credit crunch' and the subsequ regime to the limits. State guarantees and subs the first 'of further national steps to protect and champions which the Commission found it im DG COMP approved the nationalization of the t but was then faced with a series of further resc the Commission to create a crisis regime. In Dec a 'temporary framework' allowing rescue aid, lo the two years to the end of 2010 (Europa Pr has approved substantial banking state aid wi broader aid to formerly healthy companies will
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The aim is for less and better-targeted state aid which pursues 'horizontal' objectives of common interest, such as environmental protection. But, although these aims are laudable, there are still crude politicai confrontations to be dealt with such as the Commission decision injuly 200S to reject plans by the Polish Government to grant over €2 billion in subsidies and guarantees to two unprofitable shipyards (Europa, press release, 15/7/200S). A useful technique, developed first when Peter Sutherland was Competition Commissioner in the late 19S0s, has been to 'name and shame' governments and reveal the sheer scale of state aid through periodic surveys. This was reinforced after the 2000

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The fifth and final component of competition public sector and the privatized utilities. As the national governments which may own nati powers to state or private utilities, or operate competiti on. The industries in question are th tors, such as telecoms, energy, water, post, tr issues of state control also extend to the financi State ownership of these industries had becom and the fa ct that they were often 'network' i them as 'natural monopolies', on the grounds th through a single network (as for electricity di single company. Moreover, since these industr were deemed to operate in the public interest, from competition law (see Chapter 15) . In incorporated into national legislation. In the 1 by technological change, by a shift towards ma dence that such industries were inefficient, infl McGowan 1998: Ch. 9).

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Competition Po licy
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in the interests of efficiency and single market programme of 1992 ere privatization also showed how ers under Article 86(3) (TEC) (ex beralize utilities, the Commission es could be in areas of such vital ited great public support and were ful. The Commission did not feel r states until the late 1980s, when es created mainly by governments progress towards liberalization was n the late 1990s and continues to ed complex packages of measures, merger cases, in order to liberalize and air transport. DG COMP has in the energy sector, where a new y of competition in the EU energy y illustrates both the dedication of ery setting, and the political limits businesswoman in the Barroso Commission. DG COMP is regarded as one of the most attractive postings both for the Commissioner and for the Director General, and the relationship between them is of key importance. In 2002, Philip Lowe (British) who had also been the first head of the Merger Task Force, became Director General (due to be succeeded by the Dutchman Alexander Italianer towards the end of 2009). Until Lowe's appointment all Directors General had been German, giving the DG a distinctively German feel and perhaps some influence with the traditionally powerful German competition agency; the Bundeshartellamt (BKA). The DG was reorganized in 2004 in a surprising move which abolished the Merger Ta~k Force and distributed merger control across five sectoral directorates . The current structure of nine directorates includes one dealing with state aid, one dealing with cartels, two with planning, strategy, and international links, and five organized to engage with sectors ofindustry (Morgan 2006: 100). The sectoral approach is usual amongst competition agencies and is the model used by the BKA and the British Office of Fair Trading (OFT). I t was argued that the reorganization would enhance staff flexibility and speed up the handling of cases by exporting the rapid response developed in the Merger Task Force to the rest of the organization, where severe delays have been routine (Financial Times, 23 February 2004). One feature of DG COMP is that many of its senior officials have spent their entire careers in its ranks. This brings benefits of continuity but at the same time carries the risk of insularity. The Commission does not practise the 'revolving door' exchange of lawyers between the private and government sectors so typical of the US (Cini and McGowan 1998). A key question when assessing DG COMP is its level of independence. Decisions affecting competition are made by the entire college of Commissioners, who are expected to reach agreement as a collective body. Nevertheless, the Competition Commissioner must expect opposition to controversial policies and decisions: member governments often press 'their' commissioner to influence policy and decisions can rest on political negotiation and compromise, and will- albeit rarely-go to a vote, especially in cases of state aid. Observers often therefore point to 'the politicized nature of European competition policy' (Cini and McGowan 1998: 214), and 'the lack of independence of the Community competition law enforcement mechanisms' (Laudati 1996: 230). This critique has prompted periodic calls for the creation of a more clearly independent European Cartel Office (Wilks 2005b: 128). The extent of its vulnerability to industrial lobbying is less clear, although Wigger (2007) argues that the European Round Table of Industrialists (ERT) has had a great influence on the development of policy. On the other hand, DG COMP is relatively free from control from the Council and the Parliament, for two main reasons. First, in implementing specific treaty articles it enjoys unambiguous legal authOrity. Secondly, in 1962 the Council delegated to the Commission extensive procedural powers to implement the relevant articles. These delegated powers were set out in Regulation 17/62 and effectively renewed through the Modernization Regulation 112003. Independence is far from absolute, but can be compared with the great independent regulatory agencies of the US,
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through a process of incremental dation of accumulation of jurisprution specialists in big international sessed against the economic cycle. d work decreases, and on the whole mpanies and governments feel more he Commission and its other DGs onomic theory and European compost-Thatcher neo-liberalism. In most important element lies in the sible agencies and their staff.

DG COMP
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petition policy is centred in the DG IV, now DG COMP. It is a small l 2009) of whom 429 are senior d contribute to policy. The senior ough economists are now playing a r, from 1999 to 2004 Mario Monti, 04 to 2009 Neelie Kroes, a Dutch
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such as the Federal Trade Commission ( FTC) (Wilks with Bartle 2002; Wilks with McGowan 1996), and is a prized feature of competition agencies the world over. It is regarded as essential to protect the absolute values of economic competition, to avoid improper influence by business, and to avoid self-interested influence by other government departments or agencies (and, in the EU, by national governments who

DG COMP in context

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are among the targets ofimplementation). The theme of independence serves to underline the claim that DG COMP is the most powerful competition authority in the world. There are now over 100 competition agencies worldwide and they are ranked annually on a peer-reviewed basis by the Global Competition Review. In 2007 the three 'elite' agenCies, ranked at a maximum of five stars, were the US Federal Trade Commission, the EUs DG COMP and the UK Competition Commission (which is smaller and more specialized). DG COMP was ranked above the US Department ofJustice (Do]) Antitrust Division; on this measure it therefore has a globally pre-eminent position. The scale ~ its competence is unique, embracing not only the standard competition areas, but also state aid and the liberalization of utilities. In the US there are two powerful authorities (the FTC and the Antitrust Division of the Do]) , and there much of the dynamism is due to private actions in the courts, which are still very unusual in the EU . The BKA and the OFT are also highly effective, but both are overshadowed by Brussels, and the BKA is losing prestige, while the OFT has yet fully to exploit its new powers under the 1998 Competition Act and the 2002 Enterprise Act. With a mere 429 senior administrative officials to police a market of 490 million consumers DG COMP was, and remains, acutely understaffed. The only plausible explanation for under-resourcing is that the member states see resources as one of the few pragmatic ways in which to restrain the ambitions of the DG. There has been repeated criticism of DG COMP from both businesses and legal firms for its lack of accountability. It is said that the Commission is 'prosecutor, judge, and jury' or, to extend the metaphor, it is 'policeman, arbitrator, prosecutor, judge, jury, and prison officer'. This criticism arises essentially from the Article 81 (TEC) restrictive practices procedure. A case is opened either following a complaint or as a result of an in-house investigation ('policeman'). The case is handled by one senior member of staff, the rapporteur, who investigates the abuse and often negotiates with the companies involved to change their practices ('arbitrator') . If this fails , the rapporteur constructs a case, argues it in the office, discusses it with the Legal Service, and presses for a decision ('prosecutor') . Senior staff of the DG decide ('jury'), and settle on a penalty ('judge') which is then imposed or negotiated with the companies ('prison officer'). Not all of this is done by the same person, but much rests in the hands of the rapporteur and the whole process takes place within one organization, albeit with attention to natural justice and arrangements such as access to the file and information meetings, as well as the involvement of a neutral 'Hearings Officer' to ensure fair play. Despite efforts to improve accountability, and despite the independent sanction of the courts, there is some truth in the accountability criticism. As DG COMP has become more powerful so the problem has become more acute.

How DG COMP operates has also to be seen as well as within its network of NCAs. These employed as sources of strength. No sector of tition rules, although there_ some exempti are all the sectoral DGs such as Transport or Ene As regards competitiveness and market inte Industry are key partners. HistOrically, DG loggerheads, but today relations are less ten argument that strong competition enhances Lisbon agenda, with its emphasis on growth, j acts as a vehicle for coordination and gives pr A constraint on DG COMP is the EU legal a Legal Service has to be consulted about all l constant contact with the DG. The Legal Serv the ECJ and the CFl, and is inherently risktension. The European courts themselves are created in 1986, prOvide the cement of Europ eral' of the European institutions . The EC] and appeals in competition matters, and issue only supported the Commission, but defined European competition policy (a goal unique t The overload of complex and detailed com CFI as a junior court under the 1986 Single E procedure and is more specialist; it hears the panels of five judges and in some cases (such a an 'expedited process'. The CFI has been less f accused of being too lenient to DG COMp, es In contrast, the CFl has been rigorous and h correctness over matters such as giving a fa be answered, and setting out key evidence. I challenged the substantive content of decisi interpretation of the evidence, and emphasize analysiS. Thus, we are seeing a shift to a more between the Commission and the Court. But tion policy is being taken forward through which policy developments are discussed, en ment and using a legal discourse. A third contextual factor in the Commission' lies in its relationship with the NCAs in the ecutive agenCies, courts, tribunals, or govern

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Competition Policy

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er states, making it easier for policy years every member state has crestem. Some member states, such as itrust traditions, embodied in laws hip. There is thus a pattern of longFT, followed by creation or reform states up to the late 1990s. In each nverged on the model of European and Drahos 2002). The twelve new acceptance of the competition rules ce as part of the acquis were condisonable resources to support active

gimes across the EU underlines the petition as a constitutive element of er-resourcing ofDG CaMp. In 2007 'A grade' staff (429 by 2009). In const member states (Germany, France, out €134 million and employed. 693 007). DG CaMP has therefore had the cooperation of the NCAs.

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ged radically since the introduction of usly, the enforcement of the antitrust n alone. By contrast, the new system make decisions, grant exemptions, ion reform which carried the risks of application of Articles 81 and 82 (see n has proved very successful from the placed national laws with EU law (for ates) and has established supervision ol by a remarkable exercise in policy ver the merits of competition, and opean Competition Network (ECN) at the heart of a distinctive regulatory competition agencies of the member ll-resourced agencies of France, the small and under-resourced agencies

such as those of Austria, Belgium, and Estonia (Wilks 2007). These agencies share information through the ECN , allocate cases, engage in cooperative enforcement, and develop policy options. This constitutes a striking model of regulatory cooperation by more-or-Iess independent agencies which converge around the economic and legal acceptance and enforcement of the treaty competition rules. The harnessing of the NCAs to implement antitrust has freed resources in DG CaMP to engage in defining and pursuing fresh priorities. It has given some priority to control over state aid but put its major effort into the attack on 'hard core cartels'. Here the Commission's rhetoric has been fearsome and Mario Monti referred to them as 'cancers' afflicting the economy (McGowan 2005). In 1998 the Commission created a dedicated cartel unit and has increased international cooperation with the US and Canada in particular to attack cartels globally. The key to success within Europe has been a US-style leniency programme which rewards whistleblowing companies by either exempting them from fines or imposing reduced fines in return for cooperation. First introduced in 1996, the leniency policy has been revised to make it more compelling. Through this route, and via international collaboration with the US authorities, the anti-cartel policy has become startlingly successful, to the point that the Commission has almost been overwhelmed. It has therefore pursued two further aspects of US antitrust: private actions and settlements. On private actions the Commission issued a Green Paper in 2005 exploring ways in which private parties injured by illegal behaviour could sue in the courts without the involvement of the authorities. This is the typical mode of enforcement in the US but is far less attractive in Europe owing, for instance, to the absence of class actions and triple damages. On settlements the Commission issued in 2008 a Notice allowing settlement of cartel cases through paying an agreed fine but avoiding a formal procedure or appeal. Here the Similarity is with the 'consent decrees' by which the majority of US cases are settled. In these initiatives we see a procedural convergence with American antitrust to complement the European convergence evident in modernization and the ECN. For some observers this procedural Americanization is a symptom of a deeperseated ideological Americanization. In fact, the shift of EU competition ertffireemeflt- towards US antitrust is no secret; it is a consensus among practitioners and is applauded by officials (Wilks 2007). What are more controversial are the implications of this shift. First is the proposition that Anglo-Saxon-style competition enforcement embeds neo-liberalism and threatens traditional German-style neo-corporatist or 'Rhenish' capitalism (Wigger 2007: 497- 500). Second is the suggestion that the move to US-style economic tests favours large transnational corporations and that this policy stance has been lobbied for by large European corporations. The result is that large corporations are tolerated and even encouraged by EU policy (Lowe 2006 ; Freyer 2006: 303) . This is an important emerging debate, which confirms European convergence in competition policy. but convergence on a model that in its principles, procedures , and effects is encouraging European industry to move towards an Anglo-Saxon liberal market economy.

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sis of European regulation. The main alignment of competition policy with the traditional Community method lies in the strong role for the Commission in designing and enforcing policy, especially over the period in which policy has been highly centralized and dominated by DG COMP In competition policy the Commission has enjoyed exceptional freedom from the Council and the member governments. Its key partners are the courts, and so long as its actions are legally defensible the Commission has been able to act assertively and directly. In line with the Community method the Commission has pursued the goal of 'positive integration' with great determination. It has therefore sought to create a market without frontiers and has strongly attacked measures by firms (or governments) that segment markets, limit trade, or apply different practices in different geographical areas. Following modernization this strong version of

degree of equitable access to benefit from the has argued, subtly and provocatively, that regu by control through the institutions of popul through .d ebate and deliberation among exper ing objective standards of efficiency. His an about 'non-majoritarian' agencies, and abo expertise embodied in regulatory agencies. D the classic example of independent European perhaps as an extreme case of law-driven po discourse through a network of legal instituti EU. Indeed, the recent process of modernizati the mobilization of ideas through a legal com states. The modernization reforms have changed t icy and have created a new mode of policy fo form of the ECN. This invites an evaluation o of merger and state aid policy can be seen as a 'policy coordination'. The creation of indepe member states since the mid-1980s means tha will depend to a far greater extent on negotiati the coordination model both predicts and cele

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centralized policy has continued. Competition policy exhibits an even closer resemblance to the regulatory mode of policy-making. This draws on the exceptionally fertile theories advanced by Majone (1996: 55 , 287) about the position of the EU as a 'regulatory state', specifying behaviour in legislation and ensuring compliance through the legal system (Majone 1996: 63), where its ability to undertake regulatory policy is almost limitless. The legal process based on the treaty is enhanced by the legal apparatus of regulations and decisions, supplemented by the 'soft law' of guidelines, frameworks , opinions, and notices, and has been reinforced by supportive judgments of the ECJ which have provided the foundation of Community competence. The primacy of Community law and the supremacy of the European courts mean that, as long as the Commission can win appeals in them, its decisions become binding on companies and governments across the ·EU-and sometimes extraterritorially. Moreover, this process is extremely inexpensive, at least in terms of its burden on the EU budget. The administrative costs of regulation are borne by the courts, the legal systems of the member states , and the clients of law firms, whilst the substantive costs of compliance and alterations of business practices are hidden and borne by firms. The freedom of the Commission to regulate is enhanced by the weakness of the European Parliament, a feature shared in this field with national systems. Its legitimacy therefore rests on the acceptance of its market-economy approach and ultimately on how far it succeeds in creating greater efficiency and ensuring some

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agencies and especially DG CO MP. akes DG COMP doubly insulated tifies the deepening of a process of nsion of economic law which could e. The economic constitution prol process. Thirdly. and most specuhat certain market principles have ctice and constitutional provisions. what sort of market? Jabko (2006) have employed a brilliant market ket Europe was working towards. It on rules have moved towards a free urely market-oliented, than many es the political stakes and, in terms ggests that competition policy has of constitutional politics. rgues that the independence, cond DG COMP remain the key factor The Commission's power will be nies regard the modernized system y, and if neo-liberalism remains the future shape of policy will depend iance, cooperation, and economic
A good introduction can be found in Cini and McGowan (2009). An excellent introduction to the broader political context is provided by Amato (1997). Wilks (2010) offers a comprehensive Qverview of the subject area whilst further analysis of the Commission and modernization appears in Wilks (2005a and 2007). Wigger (2007) and Wigger and Nblke (2007) provide an excellent critical perspective. There is an extensive legal literature wh ich is accessible to the general reader. Especially valuable are the opening and closing chapte rs of Goyder (2003)' the study by Drahos (2001), and the more technical sixth edition of Whish (2008). The best introductions to the economic basis of policy can be found in Motta (2004) and Budzinski (2008). Amato, G. (1997)' Antitrust and the Bounds of Power (Oxford: Hart) .Budzinski, O. (2008)' 'Monoculture ve rsus Diversity in Competition Economics', Cambridge Journal of Economics, 32/2: 295-324. Cini, M., and McGowan, L. (2009)' Competition Policy in the European Union, 2nd edn.; 1st edn.1998 (Basingstoke: Palgrave Macmillan). Drahos, 1\71. (2001), Convergence of Competition Laws and Policies in the European Community (Duventer: Kluwer). Goyder, D. (2 003)' EC Competition Law, 4th edn. (Oxford: Oxford University Press). Motta, M. (2004), Competition Policy: Theory and Practice (Cambridge: Cambridge University Press). Whish, R. (2008)' Competition Law. 6th edn. (Oxford: Oxford University Press). Wigger, A. (2007)' 'Towards a Market-Based Approach: The Privatization and Microeconomization of EU Antitrust Law Enforcement', in H. Overbeek et al. (eds.), The Transnational Politics of Corporate Governance Regulation (London: Routledge), 98-11 8. Wigger, A., and Nbl ke, A. (2007), 'Enhanced Roles of Private Actors in EU Business Regulation and the Erosion of Rhenish Capitalism: the Case of Antitrust Enforcement', Journal of Common Market Studies, 45/2: 487-513.

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The 1957 Treaty of Rome (EEC) contained few references to macroeconomic policy and no reference to EMU . Its most Significant macroeconomic provisions 'were Article 105, which called on member states to coordinate their economic poliCies with a view to achieVing equilibrium in their balance of payments, and Article lOS, which allowed the Council to provide mutual assistance in the event of a balance-ofpayments crisis. One reason why the Treaty did not go further in the macroeconomic domain was that the Keynesian consensus that held sway among economists at the time stressed the need for national control of macroeconomic policy instruments. Specifically, governments were expected to trade off higher inflation for lower unemployment and, in the event of an economic downturn, to stimulate aggregate demand through a combination of tax cuts, expenditure increases, and interest-rate reductions. Also, at the moment of the EEC's creation, member states' currencies were not yet convertible, meaning that there were legal limits on the exchange of one currency for another (Eichengreen 2007: 73). Another relevant factor was that member states had little incentive at this time to challenge the Bretton Woods Agreement of 1944, which secured exchange-rate stability among industrial countries by linking the US dollar to gold and linking national currencies to the dollar (see Maes 2004). At a summit in The Hague in December 1969, EEC leaders agreed to work out a plan for EMU. The principal reason for this change lay not in shifting macroeconomic paradigms but in the decline of the Bretton Woods system, which had come under increaSing strain as the USA struggled to maintain the dollar's link with gold amid the spiralling costs of the Vietnam War. There were also concerns at the time that a switch from fixed to floating exchange rates would disrupt trade relations within the common market and add to the cost of financing the common agricultural policy (Commission 1969). The Werner Plan for EMU, which was presented in October 1970, fell at the first hurdle. Bretton Woods collapsed in August 1971 and was replaced four months later by the Smithsonian Agreement, which permitted wider bands of fluctuation vis-a-vis the US dollar. In March 1972, the Six (joined by the acceding Denmark, Ireland, and the UK) established th e 'snake in the tunnel', an exchange-rate system in which member states agreed to narrower bands of fluctuation for EEC currencies ('the snake') within the wider bands of the Smithsonian Agreement ('the tunnel') . After oil prices surged in 1973, EEC member states were divided on the question of whether to sacrifice the Keynesian priorities of growth and employment for low inflation. This lack of consensus led to macroeconomic divergences within the EEC, most notably between France and Germany, and dealt a fatal blow to the EEC's fledgling exchange-rate regime.

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Not more than 1.5 percentage points above the three bestperform ing member states Reference value: not more' than 3% Reference value: not more than 60%; if above th is reference value , government debt should have sufficiently diminished and must be approaching 60% at a satisfactory pace Not more than 2 percentage points above the three bestperforming member states in terms of price stability Participation in ERM 11 for two years without severe tensions

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spect than political scientists.about wing Mundell (1961) , the prevailopean countries would struggle. to se of the prevalence of asymmetifferent member states in different duct and labour markets. Of course,

the logiC of OCA theory is not undisputed. Mundell himself warned that floating exchange rates could be a cause of, rather than a cure for, macroeconomic instability when capital flows freely between countries (De Grauwe 2006). Furthermore, the macroeconomic costs of giving up national exchange rates must be weighed against the microeconomic benefits of monetary union, which include the elimination of exchange-rate uncertainty, the transaction cost savings of doing business in one currency, and the competitive gains from increased price transparency between countries (De Grauwe 2007). In the early 1990s, preparations for EMU hit a stumbling block when falling economic growth and rising unemployment generated significant strains within the EMS. This problem was compounded by the economic consequences of German unification, which created sustained inflationary pressures and forced the Bundesbank to increase interest rates. Other EEC members responded by raising interest rates, a move that helped to stabilize their currencies against the Deutschmark but worsened the effects of the recession. When Danish voters rejected the TEU inJune 1992, member states' commitment to EMU and, by implication, the ERM was cast into doubt. Following intense currency speculation, Italy and the UK were forced to suspend their membership of the ERM in September 1992. The EEC soon weathered this economic and political storm. Danish voters, assuaged by the guarantee of an opt-out from Stage 3 of EMU, voted for the TEU in a second referendum in June 1993. The ERM was effectively dismantled in August 1993, when the remaining member states adopted extra-large margins of fluctuation between their currencies. A sustained economic recovery during the remainder of the decade enabled member states to make significant progress towards meeting the convergence criteria. In May 1998, the Council of Ministers, meeting in the composition of heads of state or government, agreed that eleven member states-Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, The Netherlands, Portugal, and Spain~fulfilled the criteria and could proceed to Stage 3 of EMU. The inclusion of Belgium and Italy on this list was politically controversial since public debt in these countries, though it was diminishing in line with the treaty requirements, exceeded 100 per cent of GDP. The euro was duly launched on 1 January 1999 along with the ERM II, an exchange-rate regime in which member states aspiring to adopt th e single currency have agreed to minimize fluctuations between their currencies and the euro. Greece joined the euro area in January 2001, twelve months before the changeover to euro notes and coins. In January 2007, Slovenia became the first of the EU's 'new' member states to join the euro, followed by Cyprus and Malta in January 2008 and Slovakia in January 2009. The European Council took a number of steps around the time of the euro's launch to strengthen economic policy coordination, including the creation of an informal body of euro-area finance ministers, the Eurogroup, in December 1997 and the unveiling of an ambitious programme of product-, labour-, and financial-market reforms, the so-called Lisbon Strategy, in March 2000. Perhaps the most economically
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aggregates commensurate with the economy's long run potential to increase production, so as to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates' (Federal Reserve Act, sect. 2a). The ECB was broadly successful in achieving its objectives during EMU's first decade: The annual rate of consumer price inflation between 1999 and 2008 was 2.2 per cent, which is very close to the ECB's own definition of price stability (see Figure 7.1). Prices were relatively stable throughout this period, with the exception of a temporary surge in inflation in early 2008 due to high oil and food prices. The euro area's growth performance during this period was more disappointing. GDP growth averaged 2.1 per cent between 1999 and 2008, which is low by historical standards and compared with the performance of other industrialized economies (Table 7.4). The ECB has sought to distance itself from developments in the real economy, blaming the euro area's disappointing growth performance on member states' reluctance to embrace structural reforms that would, inter alia, make it easier to adjust to changing economic conditions and to reap the productivity gains associated with new technologies (ECB 2008a: 68). For the most part, political leaders in the EU have largely refrained from public criticism of the ECB out of respect for its political independence. A notable exception has been Nicolas Sarkozy; who courted controversy before and after his election as French President in May 2007 by repeatedly accusing the ECB of paying too much attention to price stability and not enough to the economic situation and the external value of the euro.

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Of the five modes ofEU policy-making set out in Chapter 4, monetary policy-making in the euro area is closest to the traditional Community method. The most striking . similarities lay in the delegation of significant policy-making powers to the EU level and the creation of a powerful supranational actor, the ECB. Like the Commission, the ECB has a legal personality and the right to formulate opinions, deliver recommendations, and make regulations on certain policies that fall within its sphere of competences. Even more so than the Commission, the ECB's political authority is closely linked to its credibility and technocratic expertise due, in part, to the intense scrutiny of monetary-policy decisions by financial markets. There are also some major differences between monetary policy-making in the euro area and the traditional Community method. The ECB is a different kind of supranalional actor from the Commission. In the first place, the importance attached to central bank independence in the Treaty means that there are fewer checks and balances on the ECB. The EP can force the resignation of the college of Commissioners but, as noted above, it can do little more than invite the ECB President to appear before its committees. In this sense, the EP's formal role in EMU is minor compared to some other areas of EU policy-making. Another distinctive feature of the ECB is its.comparatively decentralized decision-making structure, which allows NCB governors and members of the ECB Executive Board to decide on monetary policy in the ECB Governing CounciL A striking feature of the ECB's evolution as a political actor over the last decade has been its uneven and at times uneasy relationship with other EU institutions. A surprising development has been the ECB's dealings with the EP's 'monetary dialogue'. Under this informal arrangement, the ECB President (or other members of the Executive Council) appears before the EP's Economic and Monetary Affairs Committee four times per year to discuss the economic situation and policy challenges facing the euro area. Although expectations concerning the monetary dialogue were low, it has proved to be an institutional win-win, giving the ECB an opportunity to

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d chamber and the EP a chance to EU level under EMU. Instead, it falls to Ecofin (and, as discussed below, the Eurogroup) to build consensus on the priorities for economic policy in the euro area and to the individual member states to decide how they plan to meet these priorities. The Treaty's principal instrument of coordination is the BEPGs, which take the form of non-binding guidelines from Ecofin to member states on macroeconomic poliCies and structural reforms. The Commissions modest but nonetheless important role in this set-up is to evaluate member states' economic-policy plans and to monitor their implementation on behalf of Ecofin. In the event of non-compliance, the Commission can sound the alarm but it ultimately falls to Ecofin to issue legally non-binding recommendations for corrective action against the country in question. These recommendations can be understood as a form of peer pressure that is designed to name, shame, and blame the member state into reversing its economic policies. The Treaty prohibits member states from running excessive budget deficits (Art. 104 TEC), defined as annual government borrowing in excess of 3 per cent of GDP and general government debt in excess of 60 per cent of GDP (Protocol 20 TEC). The Commission has primary responsibility for monitoring member states' budgetary policies, although it ultimately falls to Ecofin to decide by qualified majority vote, on the basis of a Commission recommendation, whether an excessive deficit exists. As in the case of the BEPGs, Ecofin applies peer pressure iri the form of legally non-binding recommendations against member states that fail to correct an excessive deficiL In the case of euro-area members, Ecofin can also impose financial penalties and fines but such measures can only be used in extremis. The timetable for enforcing the excessive deficit procedure is set out in the 'corrective arm' of the SGP. The 'preventive arm' of this agreement encourages member states to pursue balanced budgets over the medium term.

tions occurred in 2000 when the own internal anti-fraud scheme nti-Fraud Office (OLAF), which ity bodies, offices, and agencies. had a legal personality that was Community and, secondly, that independence, as guaranteed by 03 rejected both arguments, continct from that of the Community related specifically to monetary ting it entirely from the European ommunity law'. As Goebel (2006) as it establishes the principle that not, as some have argued, legally l reinforce this point by including ToL) . s has also evolved during the first NCB governors will join the ECB out the voices of the ECB Execunew voting system for monetary t, which was ratified in May 2004 -area membership exceeds eighton the ECB Governing Council in their six voting rights permang rotated among NCB governors

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How can we explain member states' reluctance to apply the traditional Community method to economic policy-making under EMU? For some scholars, the explanation lies in the desire of the framers of the Treaty to protect the political independence of the ECB by keeping economic decision-making on a decentralized footing (Dyson 2000). Buti et al. (2003: 101) emphaSize sovereignty concerns, arguing that the EU's current provisions on economic-policy coordination reflect the limits of what can be achieved given member states' limited desire for deeper integration in this field. On a similar note, Hix (2005: 38) argues that 'if member states were serious about policy reform in a particular area, then the classic EU method would probably be the most efficient way of achieving the policy goals'. An alternative viewpoint is that new modes of EU governance may be functionally suited to EMU (Hodson and Maher 2001) . From an economic perspective, a decentralized approach to policy coordination may be desirable if it gives member states greater leeway to use national budgetary policy to adjust to country-specific shocks. Likewise, allOwing member states to tailor specific reform measures to the

tem will suffice. Making monetary less ideologically driven decisiond at which a central bank reacts to s, the ECB Governing Council will US Federal Reserve Open Markets with nine on the Bank of Englands Board of the Bank ofJapan.

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institutional specificities of national product, "labour, and capital markets may be preferable to a one-size-fits-all approach. From a legal perspective, soft law may be preferable to hard law when policy goals lack precision and when the probability of revising these objectives in the future is high (Hodson arid Maher 2004). How has EMU's experiment with new modes of EU governance fared over its first decade? From a bird's eye perspective, the early years of EMU coincided with a sustained improvement in the euro-area's public finances, with a budget surplus being recorded in 2000 for the first time since the early 1970s. In the structural domain, EMU has acted as a powerful catalyst for financial integration. As regards product- and labour-market reforms, member states implemented a series of meas C ures to make employment protection legislation less stringent, to raise average retirement ages, and to introduce greater competition insome sectors, most noticeably telecommunications (see Chapters 6, 11, and 16). These reforms contributed to rising labour-force participation rates, falling unemployment, and, in some sectors, falling prices (ECB 2008a) . Progress in product- and labour-market reform has also been matched by significant progress in financial-market integration. In spite of these achievements, serious difficulties were encountered with the implementation of the SGP and the BEPGs in their original incarnations. The problems with the SGP began when some member states failed to reduce their government borrowing sufficiently during the economic upturn of the late 1990s in spite of periodic pleas to do so by the Commission and Ecofin. As a consequence, several governments, including those of France and Germany, entered the economic slowdown of 2001- 2 without having first achieved medium-term budgetary positions of close to balance or in surplus. This deficiency in the preventive arm of the pact soon caused problems for the corrective arm, as rising expenditure and falling revenues brought government borrowing in these countries in excess of 3 per cent of GDP This put Ecofin in the awkward position of encouraging member states to reduce their government borrowing so as to comply with the SGP in the knowledge that such measures could prolong the economic slowdown by further dampening aggregate demand. The resulting tensions came to a head in November 2003 when Ecofin met to consider a set of Commission recommendations against France and Germany under Article 104 of the Treaty. The first recommendation noted French and German failure to take effective action to correct excessive deficit in spite of earlier recommendations (An. 104(8) TEC). The second recommendation called on Ecofin to 'give notice' to France and Germany to undertake specific deficit reductions within a specified time frame (Art. 104(8) TEC). These recommendations were significant because if adopted they would have raised the distinct possibility that the pecuniary sanctions set out under Article 104(11) of the Treaty would be employed for the very first time. After lengthy negotiatiOns, a group of mainly smaller member states with a reputation for fiscal discipline, including Austria, Belgium, The Netherlands, and Spain, that favoured the recommendations was outvoted by a coalition of mainly large member states, which included four countries that were themselves in a state

of excessive deficit, France, Germany, Italy; qualified majority in support of the Commi to leave diSCiplinary procedures against Fra time being. The ECl's Stability and Growth this decision, but the damage to the credibilit (Maher 2004). Member governments pushed through a n during the early years of EMU but the overall concerns about the adaptability of euro-are concerns were compounded by the slow re economic conditions in the euro area and th and growth differentials (Commission 2006 this slow pace of structural reform. Policy-m reluctant to y;;e the guidelines as an instrum laggards and the accumulation of an excessiv to establish clear reform priorities (Deroose The March 2005 reforms to the SGP and abandoned the EU's experiment with new m pact is a 'softer' version of the original agre importance of peer pressure over pecuniary ing Ecofin more time to issue non-binding r before resorting to financial penalties and fi financial penalties will be imposed on europossibility of a budgetary stand-off between t kind that led to the collapse of the original pa flexibility has been introduced into the pact' mon goal of achieving a budgetary position country-specific medium-term budgetary ob relaunched Lisbon Strategy promote a more d In the case of the former, the European Coun pay closer attention to member states' stabilit the European Council invited member state other relevant stakeholders in the preparatio programmes. Initial reports that the March 2005 refor were overstated (Feldstein 2005). France and ment in their fiscal positions in 2006, allowin procedure against these countries in the first undoubtedly played a role here but so too di tive arm of the pact, particularly in Germany in January 2007 in an effort to gets· its bud Lisbon Strategy also fared better than some 2007). In December 2007, the Commission

ce the mid-1980s as tentative beginning to bear fruit.

oup . This informal body brings to discuss the economic situaster and one adviser from each he President of the ECB and the Meetings are confidential and, oup produces few visible policy

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The euro is a major global currency that is second only to the US dollar. In 2007, for example, the euro accounted for 27 per cent of the foreign-exchange reserves held by the world's central banks compared with 64 per cent for the US dollar, 4.7 per cent for the British pound and 2.9 per cent for the Japanese yen (ECB 200Sb) . The euro also serves as anchor or reference currency for the exchange-rate policy of forty countries (Commission 2008e). Although economists are divided on whether the euro will ever overtake the dollar, the euro area has already become a major presence on the global economic stage (Cohen 2003; Menzie and FrankeI2008). The Treaty says little abou t the euro area's global economic role. Perhaps the most important provision concerns the formulation of exchange-rate policy, which is a

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n reflects a Franco-German rdination under EMU (Pisanimade the case for a gouvememcnt er EMU and provide a political any consistently opposed such t attack on the independence of December 1997, member states t informally among themselves s and have no decision-making een described by Puetter (2006) e argues that, in the absence of roup can exchange information l policy positions in a way that r such as Ecofin. ged as a powerful caucus within ogroup , not Ecofin, which takes pliance with the SGP. The EuStrategy, structuring its regular nd the European Commission's me circumstances Eurogroup dishole, thus adding to the political point is the March 2005 reform asis of a deal that had been brod 6

political profile of the Eurogroup thanks to his considerable political experience (he was a signatory of the TEU and combines the roles of finance minister and prime minister of Luxembourg). The Eurogroup's track record as a deliberative body is mixed. On some issues, such as fiscal responses to high oil prices, euro-area finance ministers have managed to pursue a relatively coherent line (Pisani-Ferry 2006) . On other issues, including the external value of the euro, policy lines have been agreed but not always adhered to by euro-area finance ministers (van den N oord et al. 2008). FurtherInore, periodic public criticism of ECB monetary policy by some euro-area finance ministers over the past decade shows that the Eurogroup has not always succeeded in its efforts to keep discussions of the macroeconomic policy mix behind closed doors. The enlargement of the euro area may also have reduced the intimacy of the Eurogroup by adding five new ministers (each with his or her own adviser) to the circle since 200l. There may also be a link between the formalization of the Eurogroup and its limitations as a deliberative body since, as Begg (2008a ) argues, the dynamics of debate and the value of peer pressure will change as the Eurogroup expands. The formalization of the Eurogroup is likely to continue for the time being. Under the ToL, the Eurogroup will be officially recognized, although its precise legal status will not be defined (Protocol on the Eurogroup, ToL). The Treaty will also recognise the role of the Eurogroup President, whose term of office will be extended from two to two-and-a-half years . The Eurogroup will also be given de-facto decision-making powers by allowing the finance ministers of member states whose currency is the euro to adopt those aspects of the BEPGs that relate generally to the euro area (Art. l39 (2) ToL). The fact that the ToL did not go further in this area is no surprise: its framers were content to 'cut and paste' the Constitutional Treaty's provisions on economic-policy coordination, which in essence sought to preserve the status quo in this highly sensitive area of policy-making (see Puetter 2007; and Hodson 2009).

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shared responsibility of the Ecofin and the ECB (Art. III TEC). This !Irrangement gives the ECB a more powerful role in exchange-rate policy than many other central banks; the US Federal Reserve and the Bank ofjapan must defer to their respective finance ministries on such matters. Interventions in exchange-rate markets have been a rare occurrence under EMU. In September and November 2000 , the ECB intervened to boost the euro following a sustained depreciation in the value of the currency, but it resisted attempts to take action in response to the euro's marked appreciation against the US dollar after mid-2002. In December 1995, the European Council in Vienna acknowledged the 'global responsibilities' of the euro and the necessity of speaking with one voice on international issues. In spite of this commitment, the euro area's representation in multilateral financial institutions remains fragmented and incoherent. A case in point concerns euro-area representation at the International Monetary Fund (IMF). Whereas economic giants such as the United States appoint a Single Executive Director to the IMF Executive Board, the body that runs the IMF on a daily basis, euroarea countries send national representatives only. This picture is further complicated by the fact that only France and Germany make direct appointments to the IMF Executive Board, with the remaining euro-area members represented by an Executive Director who speaks for a constituency of countries from both inside and outside the EU. The Netherlands, for example, belongs to a constituency that includes Ukraine and Israel, while Spain is grouped with Mexico, Venezuela, and several other Latin American countries . The complexity of these arrangements makes it difficult for euro-area countries to exert collective influence in the IMF in spite of the global significance of the single currency.

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The world economy experienced financial turmoil in 2007 and200S on a scale that had not been witnessed since the Wall Street Crash of 1929. The trigger for this turmoil was the collapse of the US sub-prime-loan market in August 2007 after borrowers who had been granted loans in spite of their poor credit ratings struggled to make repayments as house prices plummeted. Global losses from this crisis- around $1 .4 trillion according to the International Monetary Fund (200S: 14)-sowed the seeds for a global credit crunch as inter-bank markets froz e and loans to businesses and individuals dried up. These events took their toll on the real economy, with global growth experiencing a sharp slowdown in 200S while the USA, Japan, and, [or the very first time, the euro area entered recession. Although the global financial crisis had not run its course at the time of writing (summer 2009), the turmoil illustrated some of the strengths and weaknesses of the EO's system of economic and financial governance. Above all, it demonstrated Europe's vulnerability to global economic developments in an age of financial

globalization. The credit crunch that began number of European casualties, including N experience a run since lS66. Similarly, the b in September 2008 spread to the EU within a in Belgium, France, Germany, Luxembourg, distressed financial institutions. The crisis also laid bare the limitations of governments. In September 200S, the Irish g 100-per-cent guarantee of deposits in the co move helped to restore confidence in Irish b destabilized the British banking system after and Ireland transferred their deposits from benefit from the more generous guarantees. policies, several EU member states, includin enia, moved quickly to guarantee bank depo was especially controversial, coming as it di the leaders of the four largest EU economies that potential cross-border effects of national (European GS members 2008). In spite of these limitations, the EU showed relation to other aspects of financial crisis man state and government of the euro area invited t to an emergency summit to agree a rescue pla was later endorsed by the full European Counc and, if necessary; take shares in European ban early to tell whether the EO's bank bail-out pl praised at the time of its launch as an innova plan also emboldened the EO's efforts to find Within days of the European Council, Nicolas to Camp David to meet with US President Ge international summits on the future of the glo The EU was less sure-footedin its initial r the global financial turmoil. The European R Council in December 200S, committed the E ate budgetary stimulus equivalent to 1.5 per c Recovery Plan broke new ground in some res member states to stimulate aggregate deman fiscal stimulus is small when compared to t the United States, and it makes little attemp ment among member states). A source of Sig was Germany's reluctance to consider Signific Although such reluctance is understandable i government borrowing follOwing the breakdo

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The CAP was not set in stone from the beginning. It was born against a background of legal ambiguity and political fragmentation. A compromise nevertheless emerged in the 1960s in the course of protracted intergovernmental negotiations. It arose at the crossroads between ideas and power, where the modernizing ambitions of new European elites met the political and economic realities of post-war Europe. This compromise set the political parameters within which the Community method developed in agriculture, to become the foundation of fortress CAP.

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The 1957 Treaty of Rome (EEC) called for EEC policy-makers to establish a common agricultural policy with a view to ensuring fair incomes for farmers and reasonable prices for consumers, by establishing common market organizations (CMOs) and applying tlle principles of: market unity (i.e. Single agricultural prices within the
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ic Community (EEC) of only six post-war food shortages and were ion. l In its classic version, which the CAP was a system of market ommunity, and import levies and his system turned the EEC into a bred tremendous dissatisfaction; economically perverse impact on kets, and grew out of touch with umers. one since the 1970s have further appropriateness. The accession of c of the CAP to advocate reform n the EU agenda. Since the Eurot in 1995, it has received support iberalization. The enlargement to ve bias of the CAP (which is cenk) and raised issues of budgetary meet the needs of the new members ng today as the poorer central and recipients of EU regional-policy member states, whose agricultural conomic policy differ greatly. It is dge to bring the European peoples n the public debate as a monument n the enlarged EU. rstand the processes that make the Community method (see Chapter alls offortress CAP. Policy substance a view to highlighting how policy ffected the type of policy outputs. o widespread popular perceptions, steps, first in the McSharry reform dterm Review of the CAP (2003) , AP (2008). Today's CAP bears little ecause thecontroversial device of ayments to producers. Introduced payments now represent the bulk ingle farm payments. They are the on-farm world are channelled into

agricultural policy: whether to 'green the CAP', to 'decouple' farm support from production, or to 'simplify the CAP'. Under these farm payments, EU expenditure related to traditional farm concerns has been stabilized while the total EU budget has increased: total CAP spending (including newer rural development concerns) thus represented 43 per cent of the EU budget in 2008, down from over 70 per cent in 1980 (see Chaptt~r9),3 and CAP support has become less market-distorting. . Less obViously, but perhaps more important for the purpose of the present volume, the policy-making processes underpinning the CAP have changed too. Descriptions of the CAP as a closed policy community powered by a Single logic of market intervention are no longer accurate. The CAP has evolved into a complex policy regime driven by competing logics. Internally, policy-making is now bifurcated between traditional market concerns and emerging rural-development concerns (the latter represented about one-fifth of the CAP budget in 2008; see funding for pillar 2 measures in 2008 in endnote 3). Externally, an increaSing number of linkages teother policy domains urge CAP policy-makers to integrate, and respond to, an everbroadening variety of challenges. CAP issues, which once were agricultural in the narrow sectoral sense, have become tied up with trade issues (see Chapter 16) , environmental issues (see Chapter 13), health and safety issues (see Chapter 14), and more recently with energy issues (see Chapter 15). This means that the CAP now reflects a combination of heterogeneous policy-making processes, which only partly rely on the Community method and have altered the way in which the Community method itself is conducted in the core CAP concern areas.

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A policy regime nonetheless emerged in the c treaty requirements , a conference took place guidelines where the EC6 broadly reasserted lowing years, however, a series of intergover quite different course , whose essence is enca • first, a policy of price support: interg guaranteed European farmers high pr world competitors away from the Eu variable import levies and export subsi • second, a downgrading of structural p plan to develop an ambitious policy to watered down and structural policy re level with the exception of a handful of • third, a ring-fenCing of CAP guarante regard agriculture guarantee expendit expenditure' (i.e. expenditure necessar acts adopted in accordance with them) policy budget from the purview of the

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Community); community preference (Le. common market products protected against low-price importS); and financial solidarity (Le. collective responsibility of member states for the financial consequences of the CAP). The Treaty thus envisaged a combination of negative integration ('extension of the Common Market to agriculture and trade in agricultural products', An. 38.1 EEC), and positive integration (,establishment of a common agricultural policy among the member states', Art. 38.4 EEC). Observers have often noted the ambivalence and open-endedness of ,the parts of the EEC Treaty devoted to agriculture (e.g. Neville-Rolfe 1984: 194). On one point, however, the Treaty was dear: this concerned the institutional rules to be followed in agriculture. There was no doubt that member states would be the protagonists of the common agricultural policy. The Treaty called on member states to formulate the gUidelines of the common agriculture policy in a post-ratification conference to be convened by the European Commission (Art. 43.1 EEC). The legislative procedure applying to agriculture, consultation (Art.43.2 EEC) , also highlighted the preponderance of intergovernmentalism by making the Council of Ministers sole legislator. Potential competitors like the European Parliament (EP) or national parliaments were excluded from policy-making: the former was granted only a consultative role, while the use of regulations directly applicable in the member states deprived national parliaments of any role in the policy-making process. Beyond these procedural issues, ambiguity characterized treaty provisions on the substantive objectives of the CAP. The Treaty called on policy-makers: to restructure the farm sector in order to free resources for the rest of the economy while stabilizing markets; and to protect farm income while securing reasonable prices in supplies to consumers (Box 8 .1) . It further identified the need to take account of 'the particular nature of agri~ultural activity, which results from the social structure of agriculture and from structural and natural disparities between the various agricultural regions' (Art. 39.2). Two policy tasks were thus sketched out for the CAP: first, to organize common agricultural markets (market policy measures); and second, to promote modem farm structures, to support the professionalization of farmers, and to remedy regional disparities (structural policy measures). Yet, how these tasks should be accomplished remained a perplexing issue and reconciling competing objectives placed policy-makers in a situation where they had to square the circle. The authors of the EEC Treaty were not sloppy or badly informed; they just recorded the reality of political fragmentation in late 1950s western Europe. In a key country like France, the formidable farm lobbies that later became so intimately involved in European farm policy-making were embroiled in internecine conflicts (Wright 1953). Jealousies and conflicts regarding farmers' status, political ideology, commodity specialization, and specific market situations aroused scepticism. about the mobilization potential of peasantry. There was no consensus either among the founding member states as to what the EEC should do in agriculture. The EC6 differed greatly in terms of their export orientations, their degrees of self-suffiCiency, and the political clout of their national farm constituencies; and while all six founding members used market conttol, the forms, degrees, and objectives of national intervention

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An abundant literature has documented how the community method provided the foundation of fortress CAP It created joint-decision-trap effects (Scharpf 1988), entrenched agrarian worldviews (Fouilleux 2003) and closed policy networks (Daugbjerg 1999), strengthened the political clout of domestic farm interests (Roederer-Rynning 2002), and promoted rent-seeking (Vaubel 1986; Nedergaard 2006). This literature breaks away from a long tradition of research treating institutions as 'the resultant of economic, social and political interactions' (Scharpf 1988: 266). By contrast, this section highlights how the particular economic and political context specific to the agricultural sector coloured the way the Community method worked in practice.

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Whereas on paper the Community method grants the Commission a more important role compared with other policy modes, the case of agricultural policy shows that the role of the Commission cannot be appreciated on the sole basis of the formal rules of the game in isolation from politics. Indeed in a context of increasingly nationalized politics, the Commission worked very much as the alter ego of the Council of Ministers, thereby consolidating the grip of agrarian nationalism. The power of EU institutions in agriculture is specified by the consultation procedure (Art. 43.2 of EEC Treaty) , thus called because that grants the EP a merely consultative role. ·The Commission possesses the exclusive right of initiative, a prerogative that is key to setting the substantive agenda and that is difficult to trump . legally. The Council may request legislation, but it cannot draft concrete proposals; nor can it adopt any decision in the absence of a proposal from the Commission. The Council may modify the Commission's draft by a majority of its members, but the Commission still may oppose these modifications, necessitating the Council to act unanimously to override its opposition. In this way, it is not just 'formally, but also materially' that 'the Commission proposal is the basis of the subsequent negotiations' (Meester 1999: 2). The Council, as far as it is concerned, is sovereign in the decisionmaking phase. Competing law-makers are excluded by law, with the .EP having to
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complex compromises: between t also between policy ideals and under the banner of a high-price Europe: an agrarian pact between national lobbying groups; and an

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Many features of this closed policy proces of the agricultural sector. The use of a high policy) in a fragmented policy environme units did generate distinctive features at the

a density of social interaction among t making process (Council, Commiss unmatched in other policy areas. Here regional policy-another redistributiv very rare occasions, thus offering a v member governments, and between of the Commission (see Chapter 1 characterizing the CAP has prOvided among policy actors, exchanging in interests;

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• an unparalleled asymmetric repres the exception of fisheries policy not just reflect the fact that cou notoriously difficult to organize ( most environmental groups have bee fewer than thirty years; their staffs (see Chapter 13); finally, the foodmight have been a driver for reform, the technical character of the CAP' 1987), which almost by nature necess (Sheingate 2001); • a particular devotion to the consensu is enhanced in agriculture by the characterizing CAP policy-making as and consumers' concerns on an EU lev • a regressive form of redistribution disproportionate share of CAP paymen

deliver an opinion before legislation acquires the force of law, but the Council not being obliged to take this opinion into account. National parliaments have even less to say, for CAP legislation, once passed in the form of regulations, is directly applica- ble in the member states. Thus, on paper at least, Commission and Council enjoy a neatly symmetriC relation of power in the CAP, whereby Commission proposes and Council disposes. Yet, this relation must be evaluated in light of the context within which the CAP was consolidated in the 1960s and 1970s, a context in which member states secured extraordinary channels of influence beyond their treaty-enshrined prerogatives . This occurred first as a result of the six-month 'empty chair crisis' triggered by France on 1 July 1965 in response to a Commission proposal on the financing of the CAP. The Luxembourg compromise of 29 January 1966, which ended the crisis, led to the de-facto recognition of a veto power for the members of the Council, whenever 'very important interests of one or more partners are ~ stake'. Later, the institutionalization of the European Council secured member states further influence by giving them all the right of initiative (Meester 1999). These informal developments qualified the power of the Commission, I!0t only because they institutionalized the norm of consensus within the Council and introduced a competing right of initiative, but also because they induced a certain degree of nationalization of the Commission itself (Averyt 1977: 88). Thus, in reality, Council-Commission relations in the age of the classic CAP were symbiotic rather than competitive, and failed to reveal the full potential of autonomy that the treaty granted the Commission. Member states influenced legislation already at the agenda-setting phase. The Commission anticipated national positions. Many of its proposals were thus already agreed in sub-formations of the Council when reaching the Council proper (so-called 'A items'). Farm interests were locked in within this policy tandem in both formal and informal ways. Formal segmentation in EU institutions shielded agricultural policy from the pressure of counter-interests. A separate formation of the Council-the Council of Agriculture Ministers-discussed agricultural affairs from the beginning, assisted from May 1960 by the Special Committee on Agriculture (SCA) (a sub-formation of the Council composed of senior civil servants of member states) (Pearce 1981; Swinbank 1989). Furtllermore, the 1970 decision to regard guarantee expenditure as compulsory expenditure effectively removed the CAP from the scrutiny of MEPs, paradoxically at a time when the EP began to acquire more substantive powers. On a less formal basis, the routine consultation of farm groups to the exclusion of other interests reinforced institutional closure at all levels and phases of policy-making. At the supranationallevel, the Comite des Organisations Professionnelles Agricoles (COPA) was the main device for channelling ~. the input of farmers, a Euro-farm lobby created at about the same time as the EEC with I the active support of the Agriculture Commissioner, Sicco Mansholt. Agricultural interests made themselves felt again at the implementation stage at the national level, where . " farm groups often received important delegated powers and seats in the myriad national agencies and commissions set up to implement the CMOs. _ _ (; :'

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present a baffling picture to the eneral Agreement on Tariffs and ) trade negotiations (see Chap(see Chapter 9), and the serial xerted considerable pressures on ssed in the past twenty-five years nt in terms of their own premises. gnificant and lasting change with also durably changed the policy
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rural development becomes second pillar of the CAP:
• modulation enables member states to strengthen pillar 2 funds by up to 20% of the total amount of direct payments to which they are entitled • parTly decouples farm income support from production by replacing direct farm payments to producers with a single farm payment (SFP) • compulsory 5% modulation of the single farm payment with a franchise of €5,000: savings generated by compulsory modulation are to a large extent retained in the source country; where they can be used to increase rural development funds; sing le farm payment subject to compulsory cross-compliance, now extended in respect of EU rules on the protection of animal welfare, and pub lic, anima l, and plant healthbesides the environmental criteria;

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the existence in the agricultural of reform-minded officials willalternative policy-making venues themselves who sponsor (in the ocess, change comes in the guise ing in their policy consequences, l context of CAP policy-making. mises. of farm policy-makers. s of change for this type of process s of international negotiation (by mentation in the Council to steer ible for the EU to adopt a radical 2) , and to follow it up in the 2003 Check of the CAP (2008) (Table ory of the CAP by phasing out the ng farm payments into the main
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rable. Support has become decouless market-distorting (although ). It has also become 'greener' as eting environmental criteria. The velopment programmes (the CAP forms have failed to transform the work of institutional segmentation. mmunity', change is sponsored and rategic entrepreneurship of actors e does not lead to CAP reforms, t rather to a reconfiguration of the olicy-making. Crises or quasi-crises levers of such change. These levers obilize non-farm constituencies for e problems. s the 'mad cow crisis'5 provide rwo ormer case, change materialized in institutional budgetary procedure) CAP through the establishment of In the case of the mad cow crisis, the divestiture from the CAP policy cy competences (now lodged in the (DG SAN CO) in the Commission and the adoption of the co-decision ng 2003b). The point is that change the European Parliament, perceived

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196

Christilla Roederer-Rynning

TABLE 8.2

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This interpretation leaves open the question of the impact of the various enlargements. As a 'composite policy', enlargement cuts across all policy areas while calling for negotiated compromises between policy-makers at the sectoral and at the macrolevel (see Chapter 17). Enlargement may trigger agricultural change in two main . ways: before accession, by tightening the grip of finance ministers on the CAP (as in the 'bypassing the policy community' path); after accession, by introducing a new range of policy preferences in the Agriculture Council (as .i n the 'breaking the policy community open' path) . As mentioned above, the Mediterranean and the eastern enlargements undeniably tightened the budgetary grip on the CAP through the establishment of the agricultural guideline (see Chapter 9). Likewise, the accession of the poorer CEECs (Table 8.2) went hand-in-hand With the freezing of 2000-6 pillar 1 farm expenditure at the 1999 level (€40.5 billion yearly). Though haVing little impact on the first pillar of the CAp,6 these constraints have highlighted the political salience of structural and rural development policy measures. Regarding the political impact of EU enlargement on fortress Europe, both arguments can be made. There is a striking contrast, for example, between Sweden, which had embarked upon an ambitious deregulation of its agricultural policy in the 1990s and was forced to backtrack upon accession, and Hungary, a pro-free-trade member of the Cairns group of agricultural exporters before its accession to the EU. Since accession Sweden has vigorously advocated agricultural liberalization while Hungary has adopted a more status-quo-oriented outlook, having received unhindered access to the EU market. On the whole, however, evidence suggests that majOrities for CAP reform are more difficult to assemble in an enlarged EU.
New member states (NMS)

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Assessing the impact of change remains a debated question (Garzon 2006; Swinbank and Daugbjerg 2006). Considered in tenns of policy mode, the discussion must take account of two aspects: first, the trends that are making the Community method in agriculture a more competitive and politicized process; and second, the institutionalization of a parallel policy mode in the so-called rural development pillar of the CAP es tablished in Agenda 2000. In pillar 1, devoted to market policy, the Community method persists, albeit in a modified version. Six trends are particularly noteworthy and likely to become more pronounced in the future: the consensual style is under strain; the character of national farm administrations is changing; the cohesion of traditional [ann clients has

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under strain, because reforms have in the Council of Ministers. Until simple cleavage between pursuing ngdom, Sweden, Denmark, and The ty preference (France and the Latin many of the CEECs). roponents of market liberalization on of the CAP, while the 'countries ally from the policy' (Ackrill and highly politically charged and has into consensual decision-making, me the least consensual EU policy

nologies , such as genetically modicomplicate this picture (see Chap: technology; regulatory pressures of global market outlooks fuelling t dilemmas await the EU: for example or abandon the production and available? Such issues often pit the y generate alliances that cut across roponents of a strong community The Netherlands on sanitary issues

farm payments, the pursuit of pragmatism is threatened on two fronts: within the farm community, visible disparities of support across sectors are pitting commodity sectors against one another; in the broader public,the more transparent budgetary consequences of direct payments are challenging policy-makers to articulate clear objectives that can stand the test of public scrutiny This means that the political clout of farmers' peak organizations has diminished. While the 1960sand the 1970s featured a 'nationalized' Commission (Averyt 1977: 88) , which worked in tandem with the Agriculture Council and national farm interests, the CAP reforms of the 1980s and 1990s have bequeathed a legacy of political activism in the Commission, which has demonstrated greater autonomy. With Commissioner McSharry the Commission substituted in the early 1990s a more selective and ad-hoc consultation of interests for the once closed consultation of farmers ' peak organizations. But already in the 1980s, commodity groups negotiating outside of umbrella farm organizations W€re able to influence CAP reform (Culpepper 1993: 311; Petit et al. 1987). The more selective and ad-hoc consultation of societal interests has increased the Commission's room for manoeuvre in preparing CAP reforms; it also explains how it has been possible to pass complicated reforms in a relatively short time. In the years to come, however, the Commission might have to negotiate this new-gained freedom with the EP and to open up the phase of preparation follOwing ratification of the Lisbon Treaty (Box 8.2). The Commission has sought to institutionalize a more transparent and confrontational style of consultation. These efforts are responses to two main developments in the 1990s: first , the 'mad cow' crisis, which highlighted the negative consequences of institutional segmentation; and, second, the lack of progress in institutional reform, which lent appeal to the idea ofimprovingregulation within existing institutions. This

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ltural policy instrument, large and strumentation of agriculture policy eaker and redistributional conflicts ced' (Rabinowicz 1999: 405), cons has weakened. Under a policy of

Under ·the Lisbon Treaty, co-decision wil l replace the consultation procedu ... 'bigger' political issues of the CAP whi le consultation will continue to govern the· 'technical' farm issues. This means that the EP will have a greater say in agricultur~, ::. although it is unclear what type of division of labour this distinction implies and whether · it is realistic and feasible to uphold such distinction in practice. Co-decision will affect the politics of agriculture within the EP and between the EP and other EU institutions. New rules can be expected to bring new people into the EP's committee on agriculture (COMAGRll. until now perceived as a conservative forum welded to the defence of vested interests; they might also lead to reinforced EP control over COMAGRI. The broader CAP policy process will likely become more open but also more protracted due to the technical and political requirements of co-decision. The paradox is thus that, while ntially making the CAP accountable to a wider constituency, co-decision might also down the pace of reform by placing new technical and political constraints on the ssion's right of initiative.

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resulted in the 'impact assessments' (lA Commission to ensure that important pol in the economic, environmental, and socia of the advantages and disadvantages of eac policy proposals are subject to inter-servic to secure the involvement of all affected int tested the method in the sugar-regime refor CAP reforms. Talk of the renationalization of the CAP ha and this theme has permeated the two dimens sion, with its discussion of the partial or total expenditure, and the regulatory dimension, competences. The budget debate exploded d

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uce co-financing of the CAP. In the of the CAp, a renationalization of he development of the 'rural develThe fact that pillar 2 has developed legitimacy in the EU attests to the expenditure in todays Agriculture t the regulatory aspects of renationpractitioners that the development ould create market distortions. The implementation of reforms repate 8.3). Yet, the adminisu'ative and ntiated strategies, sometimes within case for pursuing simplification of flat payments (see Health Check of

Conclusions
The CAP long conjured up images of medieval strongholds. Traditionally in the hands of a closed policy community, it invariably took on the guise of an impenetrable fortress built by farmers for farmers on the promontory of national sovereignty. This chapter has shown that the CAP today more fittingly summons up images of early modern European fortified cities. SOCiety has moved inside the walls while becoming ever more connected to the outside world by a dense web of ties. This new construction must find its place in changing patterns of political consolidation at the local, regional, national, and global levels. The walls are still there-but they are lower. Production surpluses, blatant income gaps among farmers, and repeated food scares eroded the foundations of the old regime. Budget diScipline and the emergence of new policy priorities on the EU agenda depleted the resources available for the defence of traditional farm concerns. Global trade talks and successive enlargements provided venues for change. These developments contributed to shedding the outdated system of price support and asserting direct payments as a pivotal instrument of support, linking farmers' concern for income support to changing public expectations regarding global trade liberalization, foo d safety, environmental protection, animal welfare, or balanced regional development. As EU negotiations approach on the post-20l3 financial perspective, proponents of change have been concerned that current energy pressures, the fashion for bio-fuels, and the rash of food price rises might help status-quo players reverse the changes of the last decades. Yet as this chapter shows, it is not just policy that has changed, but also the very machinery through which CAP regulations and directives are produced at the national and the EU levels. In todays complex setting, some CAP policy areas have shifted hands and are now regulated by non-farm actors operating under completely different institutional rules. Core agricultural concerns have become so tied up with issues larger than the CAP that they are lOSing their narrow sectoral character. Sometimes, the very core CAP players have changed character, as illustrated by the opening up of traditional agriculture ministries in several EU member states- and all of this makes rather implausible a return to the old days of price support and generalized market intervention. Today's CAP is always under pressure from new developments and changing hierarchies of issues, and this challenges deterministic views of a CAP caught in an institutional straightjacket. Various versions of path-dependency arguments have highlighted the independent impact of institutions. The CAP indeed provides vivid illustrations of the power of institutions to create 'sticky legaCies' that place a premium on the status quo once procedures are established and policy is decided. Even so, institutions cannot be praised or blamed for everything. The CAP originated in a mix of sector-related strictures, political realities, and modernizing ambitions, and its evolution cautions us, again and again, against downplaying the role of national interests and the ability of member states to control the supranational delegation of powers.

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pillar devoted to rural developCAp, much more akin to the 'dishe policy process is decentralized l and regional authorities specify al development programmes. Pilmber states. This policy mode has cietal concerns and economic ine cases, regions have also become y target of European programmes nd a close planning partner of the onal style of policy characterizing Europe of agricultural regions, it lever of political negotiation vis9; Genieys et al. 2000; Ward and entation within a Simplified policy

petition for resources within the must be shared even as the size asures cannot grow unless more d 'modulation'of payments) . This er the raison d'ttre of CAP subsicome in the twenty-first century' rience from previous budget rows llar 2 payments are the first to be described above suggest, the batthe broader public as the eventual

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Fennell, R. (1997), The Common Clarendori Press).

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Grant, W. (1.997), The Common Agric

Greer, A. (2005). Agricultural Polic Press).

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Knudsen, A. C. Lauring (2009)' Far Agricultural Policy (Ithaca, NY: Co

Milward, A. (1992), Th e European Re

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Moyer, H., and Josling, T. (2002), Agri EU and in the US in the 1990s (Ald

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Orden, D., Paarlberg, R., and Roe, T. ( sis and Prognosis (Chicago, IL: Uni

4 5

Sheingate, A. (2001), The Welfare Sta

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in the United States, France, and J

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Tracy, M. (1989)' Government and Harvester Wheatsheaf).

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7

Thoma.s Falslund Johansen provided fine research assistance. I would like to thank the persons I interviewed at the European Commission and in various national permanent representations in spring 200S. Robert Ackrill, Carsten Daugbjerg, Wyn Grant, Johannes· Michelsen, Mogens N. Pedersen , and Rob Peters read an earlier version of the chapter. I would like to thank them, together with the editors of this volume, for their helpful comments. With a population representing 30 per cent of that of the EU15, the ten CEECs generated a GNP of only 5 per cent of that of the EU at the time of accession. In 200S, CAP expenditure represented €52.5 billion (€4.3 billion devoted to market measures; €36. S billion devoted to direct payments measures, and €1L4 billion devoted to pillar 2 measures) in a total EU budget of €120.3 billion (Official Journal of the European Communities L71-200S). This section builds in large part on Rieger (2005: 1S9) The 'mad cow crisis' took place in 1996 in connection with the epidemic development of bovine spongiform encephalopathy (BSE)- a fatal,brain-wasting disease leading to the mass destruction of cattle in several member states. The main impacts were: the abandonment of market intervention for rye and maize and a very gradual introduction of the direct payments in the new member states. See e.g. the Commission's web page on impact assessment:

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Zwanenberg, P. van, and Millstone, E. Oxford University Press) .

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For a detailed history of the CAp, see Tracy (1989). Grant (1997). and Ackrill (2000). Milward

1

(1992: Ch.5) provides the best account of the prehistory. Fennell (1997) offers the most de-

tailed, historically oriented policy analysis of the CAP. For a view of US ag ricultural politics

and policies, see Orden et al. (1999) and for a comparison of agricultural policy reform in

t he EU and in the US, see Moyer and Josling (2002). Greer (2005) offers a detailed account

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of how national governments influence the CAP at all levels of the policy cycle. Daugb-

jerg and Swinbank (2009) provide an up-to-date and detailed account of the impact of

WTO trade liberalization on the CAP. On the BSE crisis and its regulatory implications, see

Zwanenberg and Millstone (2005). For an account of the CAP as a 'welfare state of farm-

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should consult The Agricultural Situation in the European Union, an annual publication by

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ers' see Sheingate (2001) and Knudsen (2009). Those interested in current developments

the Commission (Commission 1977- ).

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Commission (1977-), The Agricultural Situation in the European Union, DG AGRI (previ-

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Ackrill, R. (2000). The Common Agricultural Policy (Sheffield: Sheffield Academic Press).

ously The Agricultural Situation in the Community).

P E
Daugbjerg, C., and Swinbank, A. (2009)' Ideas, Institutions and Trade: The WTO + 9 ; H O

et

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and the Curious Role of EU Farm Policy in Trade Liberalizaiion (Oxford: Oxford University Press).

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Historically, budgets have been of immense importance in the evolution of the modern state and they remain fundamental to contemporary government. This chapter enters th e labyrinth of EU budgetary procedures in an attempt to unravel the characteristics of budgetary politics and policy-making. Where EU money comes from, how it is spent, and the processes by which it is distributed are the subjects of intense political bargaining. Budgets matter politically, because money represents the commitment of resources to the provision of public goods and involves political choices across sectors and regions. The politics of making and managing budgets has had considerable salience in the evolution of the EU because budgets involve both distributive and redistributive politic~Budgetary issues have inevitably become entangled with debates about the nature of the EU, the competences of individual EU institutions and the balance between the European and the national levels of governance. Budgetary flows to the member states are highly visible so that 'winners' and 'losers' can be calculated with relative ease. As a result, budgetary politics are more likely to become embroiled in national politics and national electoral competition than rule-making. Questions about the purpose of the budget and the principles that govern the use of public finance in the Union are linked to wider questions about the nature of the EU and its evolution as a polity that goes beyond the set-up of a traditional international organization. In that context, the budget is also a useful yardstick with which to measure a type of integration that differs from the creation of a single market and the harmonization of rules and regulations. The size and scope of the EU budget have implications for the operation of a vast range of policies.2 The existence of the EU budget has often been justified and explained by its different functions: (a) as a means of side-payments that are necessary to gain the overall consensus and political cement on further economic, particularly market, integration; (b) as the source for finanCing European public goods that benefit not only individual member states but European citizens at large; or (c) as the basis for redistribution from richer to poorer parts of the Union which- following the value of European solidarity-fosters economic convergence· towards a higher standard of living across the EU; and (d) as a means of financing Europe's role in the world. The process of managing, rather than just formulating, budgets raises questions about the management capacity of Commission, but also about that of national authorities. All EU institutions and bodies, in particular the Court of Auditors, are paying increasing attention to the impact of fraud on the budget and searching for better ways to protect the financial interests of the EU.

In the early years of the Community; the bu to those found in traditional international 1970 and 1975 led to a fundamental change and policy-making. These treaties establish finances of the Union in a number of imp ties created a system of 'own resources' whi of revenue, consisting of three elements: c a proportion of the base used for assessing states, up to a ceiling of 1 per cent. The subsequently altered a number of times . On base should apply to all member states, reg of EC expenditure, or their ability to pay. T the years to come.3 The 1970 and 1975 Budgetary Treaties reaching decisions on the budget. The EP wa including the rights to increase, to reduce, classified as 'non-compulsory' expenditure to adopt or reject the budget; and to give a proval, to the Commission for its implemen purse' gave the EP leverage in its institution and allowed it to promote its autonomous p Treaty provided for the creation of the inde accountability in the budgetary process. After 1970, the emergence of the budget a policy was constrained by a basic factor w budget was , and remains , small in relation (GNI), and to the level of public expenditu spending amounted to around €130 billion. thus, much less than domestic budgets whic of GNI in Europe. However, although the bu cance for the Union as a whole, it is very imp ceive extensive transfers from the structural the EU budget amounted in 2007 to 2.95 p cent for Latvia and 2.43 per cent for Greec constituencies within the member states, su gional groups (see Chapter 10), which have of their receipts. The small overall size of th

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ocal governmental agencies in the y for establishing the draft budget 'grand bargains'. The Commission dget in order to fund policy integrantion to managing EU spending. In honest broker in budgetary battles, reports on sensitive issues, such as

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of relative budgetary calm as member governments succeeded in negotiating the four big budgetary bargains, known as Delors-l, Delors-2, Agenda 2000, and the 2007-13 framework, and the Council and the EP cooperated closely in annual budgetary decisionmaking. Both phases correspond to a specific set of rules and procedures, and a distinct budgetary paradigm.

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ntral role in budgetary negotiations. om finance ministries who approve g procedures and decision-making ouncil (GAERC), the Economic and ural Council each play a key role in . ttempts to coordinate across differhe Agricultural CounciL Ecofin tries t role in monitoring the Maastricht ricultural Council has tended to be nd generally favours higher agriculnfiguratiOns that develop spending money when their programmes are ncil, where heads of state or governg' bargains, still provides the most als. Agreed by unanimity, these big a seven-year period-thus, limiting tial conflict in the deciSion-making

, the EP has regarded EU finances e Councit'The EP has tried to inmicro levels. As was seen in March financial management, which proe college of commissioners. In the ns, the EP frequently intervenes to and projects. For member governcy

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The first enlargement disturbed the budgetary bargain established by founder member governments. In particular, between 1979 and 1984 the member governments and EU institutions were locked into a protracted dispute about revenue and expenditure, which contributed in no small way to a wider malaise and lack of political impetus in the Union during the early 1980s. The 1970 treaty was designe~ to fix the rules before the UK became a member. The revenue sources suited the six founder countries , and the main spending would flow 'au tomatically' to support the common agricultural policy (CAP) (see Chapter 8). The package was essentially a French achievement, won in return for starting accession negotiations with the UK and the other applicants. The rules of the budgetary game were fixed to the advantage of the incumbents , above all France, making confrontation with the UK more or less inevitable (see H. Wallace 1983) . Moreover, with the 1970 budgetary treaty member states half-heartedly delegated budgetary powers to the EP, introducing a complex annual procedure with a number of ill-speCified rules. The mismatch between the limited desire of member states to involve the EP and the high expectations from the use of their newly acqUired political powers on the part of members of the EP (MEPs) soon became apparent. The considerable scope for interpretation left open by the vaguely defined treaty prOvisions intensified this tension. In short, both the UK and the EP entered a budgetary stage that was characterized by a 'de Gaulle budget'. After accession, successive British governments struggled to get the budget issue onto the agenda and slowly managed to alter th e terms of the debate to ensure that distributional issues were taken seriously. Despite being one of the 'less prosperous' member states, the UK was set to become the second largest contributor after Germany In trying to address the problem, a key concern of British governments was the dominance of CAP expenditure (constituting 70 per cent of the EC budget), from which the UK with its small agriculture sector benefited very little. The European Regional Development Fund, which was set up in 1975 to stimulate economic development in th e least prosperous regions (see Chapter 10), brought only little relief. Agains t this background, it became clear to the British government that the UK problem was structural rather than the result of chance consequences. Hence in 1979, the new British Prime Minister, Margaret Thatcher, began to demand a rebate system, which would guarantee the UK a better balance between

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how it was spent, a priority reflected in the i and the aSSignment of budgetary control to a

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contributions and receipts. The Commission and the other member governments were loath to concede the British case at the outset. The Commission had always been reluctant to engage in discussion of the net financial flows to th£:. individual member states , lest this encourage too narrow a calculation of the benefits of Community membership, and lead states to seek juste retour, i.e. to extract from the Community budget more or less what they put in. The key 'orthodoxy' regarding the budget at this time was that receipts flowed from EU policies and were thus automatic. This orthodoxy was challenged by the problem of UK contributions. Although Mrs Thatcher's confrontational approach was regarded as non-communautaire, she finally succeeded. At the Fontainebleau European Council inJune 1984, the British government traded its consent to an agreement for increasing the VAT ceiling from 1 to 1.4 per cent against the establishment of a 'rebate' mechanism for dealing with excessive British contributions on a longerterm basis. The mechanism was deSigned to deal with the British problem and could not be generalized to other member states, even though otherstates became significant net contributors. While the member governments were engaged in restructuripg the budget, the EP and the Council were involved in a continuing struggle over their respective powers on budgetary matters. The EP rejected the 1980 and 1985 draft budgets, and the annual budgetary cycle was characterized by persistent struggle between the two institutions , the 'twin arms' of the budgetary authority. The EP actively explOited the broad scope for interpretation that the ill-specified treaty provisions offered. By contrast, the Council sought to limit the level of power-sharing with the EP as far as it legally could. In 1982 (case withdrawn), and again in 1986 (Case 34/86), the Council of Ministers brought an action in the European Court of Justice (EC]) to annul the budget Signed by the President of the Parliament as it disagreed with the EP's interpretation of the treaty provisions on the classification of expenditure (compulsory versus non-compulsory expenditure). Repeated attempts to solve the disputes over the interpretation of the treaty provisions through joint declarations and agreements failed. Against a Council that displayed little willingness to take the EP seriously, the Parliament was determined to use the budgetary powers which it had acquired in 1975 to enhance its position in the Communitys institutional landscape and to further its policy preferences. This was done in three ways. First, the Parliament attempted to use its budgetary powers to gain some leverage in the legislative field by introducing expenditure lines in policy areas where no legal bases existed. Secondly, the Parliament used its amending power to increase expenditure in order to promote Community policies of interest to it, notably regional policy, transport, social policy, and education. Thirdly, the Parliament used the annual budgetary cycle to expand the areas considered as non-compulsory expenditure, which meant it had a larger volume of expenditure where it could apply its margin for manoeuvre (see Box 9.1). In view of these priorities, the EP tended to pay more attention to authOrizing expenditure than to monitoring

The year 1988 marked a turning point. After Spain and the adoption of the Single Europe clear that the intense budgetary battles and not continue. FollOWing a proposal by the Delors, the EC embarked on a far-reaching budgetary field. On the institutional side, i perspective, which balanced revenue and ex ing CAP by dividing the budget into differe for spending categories across a five- to-sev member states in the European Council, the ing nature from the inter-institutional agre pean Parliament, and the Commission. Th budgetary decision-making, because of the The new financial perspective guaranteed established regional spending as the secon standing EP priorities. Overall, the 1988 reform changed the budget treaty with a set of superior soft-la actors. Annual decision-making lost its pl and became the domain of budgetary exper oped a routine of adopting annual budget Moreover, the 1988 reform transformed th the 'Delors budget' that, due to its strong redistributive and less CAP-oriented . In su spective and inter-institutional agreement, structure established in 1988 perSisted. T change. The Delors-l package and subsequ ment of all member states. The veto made i budgetary gains such as the British budge agriculture. The introduction of the multi conflict and disputes disappeared. Howeve tween the EP and the Council were kept at procedures and channelled towards the re packages every five to seven years. At thes assured that the unanimity requirement wo would run contrary to their fundamental i pre-1988 times : key players, such as the

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hard until their distributive co n cerns were addressed, and budgetary disputes · continuously prevented the orderly adoption of annual budgets.

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The budgetary agreement reached in February 1988 was a classic EC package deaL The fact that, for the first time, all the different elements of the budget were addressed in one reform was instrumental for the agreement. Moreover, the link to the ambitious internal-market project and related institutional reforms (in the form of the SEA) motivated in particular the German Chancellor Helmut Kohl to secure an agree"ment, even though it meant a Significant increase in German net contributions to the budget. Not only was budgetary peace needed to set the Union again on a more integrationist path, for the poorer member states, such as Greece, Spain and Portugal, that did not benefit so much from CAP expenditure, a significant strengthening of cohesion spending was a prerequisite for agreeing to an internal-market project that would put more challenges to their economies than to those of wealthier member states (see Chapter 10) .

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The pattern established by Delors-l was replicated in the negotiations on Delors-2. The political link between the SEA and Delors-l was followed by a similar link between the Treaty on European Union (TEU) and the Delors-2 package. Again, poorer member states es tablished the link between an increase in cohesion spending (Le. the creation of a new cohesion fund) and further economic integration (i.e. the introduction of EMU). The debate on Delors-2 was as tortuous and controversial as the earlier debate on Delors-l. The member governments grappled with their desire to reach agreement, on the one hand, and wi th their determination that the terms of the agreement b e as favourable as possible to their own Viewpoint, on the other. At the 1992 Edinburgh European Council an agreement was reached (see Table 9.1 for main elements).

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In the mid-1990s, the balance of forces in the Union on budgetary matters began to change radically. The sizeable expansion in the size of the budget led to the emergence of a 'net contributors' club, art austerity camp concerned about the level of their financial commitments to the EU budget. At the Copenhagen European Council in 1993, the member governments had accepted the principle of an eastward enlargement of the Union. The accession of so many comparatively poor states would generate pressure for more redistribution and a larger budget. Against these developments it is surprising that the institutional setting and the distributive character of the budget proved so robust. The status quo was

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deemed excessive in relation to any country' would modify and extend the 'UK rebate' to ot Finding an agreement was again not easy nated the debate. First, net contributors wer spending level, while governments from be and Portugal, endorsed the Commission's p pursuing the objective of 'economic and soc eficiaries of regional expenditure, 'old' ben ending of transfers and demanded compen feared that these compensation payments w to the east. Third, the UK government stron UK rebate through replacing it with a genera favoured by all the other net contributors. Si to strengthen expenditure for public goods f for Parliament. There was little space left fo such as innovation and technology given the excluded from the negotiations (under a Fr 2002) and that regional expenditure was do the new and old member states. An agreeme Table 9.1 for the main elements).

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The negotiations of the next financial perspective took place against the background of three developments. First, at the Lisbon European Council in 2000 the EU set itself the strategic goal of becoming 'the most competitive economy in the world' by the end of the decade. Heads of state or government committed to take measures that would increase the competitiveness of their economies and raise investments in research and technology The Lisbon goal was taken up by a report of an independent group of high-level experts headed by the Belgian economist, Andre Sapir (Sapir et al. 2004). Mandated by the Commission President, Romano Prodi, the group itkntified a number of measures that would help the EU overcome its problem of sluggish growth. The report criticized the dominance of the CAP spending and suggested refocusing the budget on European public goods, most importantly research and technology. Although fiercely c-riticized by some in the Commission, the report clearly established a link between the Lisbon goal and the EU budget. Second, mos t member states, in particular the large euro-area members, Germany and France, were experiencing a period of low growth rates and strong pressures on their national budgets. Their failure, in three subsequent years (2002-4), to meet the terms of the Stability and Growth Pact (SGP), which commit members of the euro area to compliance with the Maastricht criteria (see Chapter 7), further limited their willingness to accept increases in the EU budget. Third, for the first time the ten new member states sat at the negotiation table with high expectations of budgetary transfers and a full veto-right. None of these states had received any mitigation of their budgetary contributions at the moment of accession (see Chapter 17). The negotiations for the new financial perspective began in early 2004 with a proposal by the Commission. Romano Prodi, then President of the Commission, emphaSized the need to give the EU the resources to matchits politi~al priorities. Rather than fighting over details of future budget allocations, the Commission sought to engage member states in a debate over the priorities of the EU and wanted to transform the redistributive 'Delors budget' into a more distributive 'Lisbon budget' that would strengthen expenditure for public goods and reduce the focus on redistribu tion resources to poorer regions/member states or farmers. For the first time since the inception of the financial perspective in 1988, the Commission envisaged an overhaul of the expenditure headings so as to reflect the new policies and priorities of the enlarged EU. The Commission proposed an average spending level of 1.14 per cent of the EU's GNI over the period covered. This was a significant increase compared to the existing spending level of about 1.0 per cent of GNI, but still below the 'own resources' ceiling of 1.24 per cent of GN1. 4 Moreover, the Commission presented a proposal for a generalized correction mechanism, establishing a more transparent and eqUitable method to correct a budgetary burden

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etween the EP and the Council emingly innovative features are hat are in place for the current is de fac to adopted in a conciliahortly before the second reading liation meeting cover all areas of y and non-compulsory expendiCouncil and EP both use their ions of the budget as bargaining der the provisions of the Treaty n agreement in the Conciliation posal by the Commission. The he Council upholds the existing

The budget review
When adopting the new financial perspective for 2007-13 , member states seemed keen to demonstrate that they were, in principle, open to considering more farreaching reforms of the budget. This was relevant in particular for those member states that complained about the very incrementalist nature of the agreement. The European Council mandated the Commission to undertake in 2008-9 a review of the EU expenditure and revenue sides, covering all issues including CAP and the UK rebate. The European Council could then take decisions on the basis of the review. The inter-institutional agreement of 2006 confirmed this plan and associated the EP to it. When starting the review process in 2007, the Commission emphasized that the main objective of the review was to initiate a broadly based public debate on the longer-term challenges facing the EU. This debate should translate into reform proposals for how the EU budget could better help EU poliCies to address these challenges. The Commission stressed that the review was not aimed at preparing a proposal for a new financial perspective. In line with the focus on public debate and open reflection, a large number of public presentations and conferences, as well as a public consultation, took place. Although the Commission's initiative did not really lead to a large public debate on the budget and the challenges of th e Union, it did spark a number of academic and political contributions advanCing new or already known reform proposals (BEPA 2008). On the expenditure side, there were numerous calls for shifting the budget more towards the finanCing of public goods, such as defence, security, and research and development. Some also recognized the link between CAP and the UK rebate and hoped that reform of the one could lead to the abolishment of the other. On the revenue side, proposals for Union-wide tax based on, for example, air traffic, CO 2 emissions, oi' financial transactions, gained some momentum, with the former Austrian Chancellor Wolfgang Schussel, as well as the EP, presenting this as a way to establish a direct link between European taxpayers and the EU budget (Le Cacheux 2007; Schussd 2007; European Parliament 2007a). Many analyses criticized the strong status-quo bias of the existing institutional arrangement for budgetary deciSion-making. Some new proposals on how to address this resistance to change without Significantly altering the institutional set-up were made. For example, the concept of 'constraint flexibility' fores ees the loosening of the constraints set by the categories and annual ceilings of the financial perspective for annual deCiSion-making (Bu ti and Nava 2008). Sunset clauses for spending programmes sought to prevent the automatic and incremental renewal of expenditure lines (Gros 2008). Despite these interesting reform proposals it seemed unlikely that the European Council would take concrete decisions that alter the existing budgetary order of the Union. First, it was unclear how much political weight the outgOing Commission and

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r the Treaty of Lisbon will leave h the new provisions largely inmove from soft to hard law might er the Treaty of Lisbon, the bindhe arrangements between the EP o longer be based on the political force of the Treaty. Under the pren renounce the inter-institutional ich entail-an increase in flexibility rgely unconstrained by spending g them). This threat has been a n the treaty proviSions would have expenditure than foreseen in the e Treaty of Lisbon, the EP will no ancial perspective. Once adopted, ng law. Moreover, if the EP does the last financial perspective will were adopted by unanimity. This framework of financial perspectates in the Council that want to Significant reductions in the CAP e public-goods budget, extremely

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its President really wanted to put behind the budget review given that there wauld be Eurapean elections in 2009 after which Mr Barraso sought and won reappaintment as Commissian President. Secand, in view of the immediate problem stemming from the financial crisis beginning in 2007 and the uncertain econamic autlaok, member states wauld be less interested in entering into discussians on the longer-term challenges of the Unian and the need to. adjust the EU budget accordingly. Third, the institutianal set-up of the multi-annual budget plan made Significant reforms half-way through the seven-year term unlikely. Although in the past CAP reforms accurred outside the framework af the big budget bargains such as the 1992 and the 2003 refarms (Ackrill and Kay 2006) , the pressure to. adopt a new package deal wauld not aurweigh the incentives for the member states to wait until 2012- l3, i.e. the regular end of term af the financial perspective. Moreover, the budget review could nat be linked to significant integration projects that in the past had been instrumental for large-scale distributive refarms.

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which can be explOited by those who are in sheer number af agricultural subsidy payme able oppartunities far abuse. Reports of frau fish, running in som~ cases into millians of Cammunity's policies. Press reparts and inv Anti-Fraud Office (OLAF) have highlighted documents in order to claim expart refund payment of excise duties, switching labels claiming headage payments for non-existent into interventian storage. No one knaws w fraud affecting the EU budget: estimates of b are often cited, but have never been convi suggest that same member states are dilator the EU budget, as this wauld, paradoxical resources in arder to obtain less maney fram Financial management in the Union has b tution-building, beginning with the 1975 agr In its first report (1978) the Caurt raised the i so in all subsequent reports . The Court's rep cal af the Commissian's financial managem was given additional responsibilities in rela the need to make a Statement of Assurance ( EP to demonstrate that the financial transacti regular. The Court's report in 2006 on the 2 year that the Court failed to give a positive S The Commissian's management of EU fi ary 1999. The battlegraund was a classic pa prompted in part by allegations, in bath the E the EU budget and financial irregularities. A sian was tabled in th e EP, but was voted down a commitment from the Commission that it The repart of the five 'Wise Men' (lawyers a the Commission in March 1999, highlighte pragrammes. The report (Committee ofInde that mismanagement in the Commissian was

tantamount to. an admiss ion of a lass af cant admin istration they are suppased to. be running a heavy responsibility far bath the commissian a whole.

iiiiiiiiEiss{isiiiiisisg,giigEiiig iEi i$FfiFgiii$iEiitaFiiiiiigFgiiE Iii IA E rE r i$ggiEii a$E s*?E IgEEgEEE;IFiIiiEigEEEiE gi {iE5gEE BE:EiAE E *EAgreeing the overall size of the EU budget and haw it should be spent is the stuff of distributive and redistributive politics. Managing the EU budget invalves a different kind of politics, namely, executive politics and multi-level administratian. The struggle far budgetary resources in the Community and the inter-institutianal battles about budgetary power initially avershadawed questions of 'value for money' and the quality of the Commission's financial management. These became an increasingly important facus of budgetary politicS as the financial resaurces of the budget grew. In the 1990s the first attempts were made to. improve financial management, but they proved insufficient to prevent financialmismanagemenl becaming an explOSive palitical issue in 1999 when the Santer Commission was farced to resign. Time and time again the Court of Auditars drew attention to financial mismanagement in the Cammission and in the member states, and rwo senior Commission financial-control staff, Paul van Buitenen and Marta Andreasen, went public about their auditing concerns in 1998 and 2002 respectively.6 Managing a budget that involves around 400,000 individual autharizations of expenditure and payment each year is a major challenge, particularly as the management of the EU budget is characterized by a fragmentatian of respansibility between the Commission and public autharities in the member states: 80 per cent af the budget is managed an behalf af the Unian by the member states. There is a great diversity of public management and public finance cultures across Europe and limits to the auditing capacity of a number of states. The camplexity af European rules, particularly in agriculture, the customs union, and regional policy, creates laopholes, It went on to say that 'it was becoming diff slightest sense of respansibility' (Committee

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afted and its tone left the Santer tion but to resign. mn 1999 was given a mandate to ean Council. Vice-President Neil ministrative reform, proposed a 2000 (Commission 2000e). Not and control systems was one of mentation of the White Paper led L 248, 16 September 2002) and ion services. The Commission is r states, taking the unprecedented €500 million to Bulgaria because ed the regulatory framework and inancial management, but the EU ed across so many countries and perspective , which in turn reduced the dangers of acrimonious arguments and inter-institutional conflicts. The system of .multi-annual finanCial-planning and big budgetary agreements endured, notwithstanding the Significant increase in the number of member states. Since 2004, the new members states have benefited from cohesion expenditure and funds have been shifted away from the 'old' to the 'new' cohesion states (see Chapter 10). FollOwing accession in 2004, the new member states played a very active role in the budgetary negotiations on the 2007-13 financial perspective. Poland, as the largest of the new member states, was particularly Significant, siding with Spain at the early stages of the negotiations, then with the UK, and at the end of the negotiations interacting closely with Germany. It also maintained close relations with the other new member states which were more willing to compromise in the closing stages of the negotiations. In the end, even for Poland getting agreement became a priority as it would enable it toil-raw down additional funds from 2007. The increase in the economic diversity in the Union as a consequence of enlargement suggests that there will be a strong 'cohesion club' in the Union for the foreseeable future. The net contributors' club, however, remains very resistant to endowing the Union with significantly larger financial resources. Hence, there are limits to EU solidarity and to potential transfers to the east. The small size of the EU budget persists as a key characteristic of the finances of the Union. A strong status-quo bias in EU budgetary politics, in terms of both institutional structures and the preferences of the major actors, makes Significant changes in the distributive order of the Union unlikely. This creates a mismatch between the expenditure priorities of the EU budget and key policy priorities faCing Europe. The 2008 financial crisis and fears of a large-scale global economic recession brought back some of the macroeconomic arguments in favour of a European stabilization policy and a burden-sharing arrangement for the financial and economic crisis. It will be interesting to see whether these arguments may create momentum for new budgetary policies.

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n European integration because policy. Moreover, analysis of the t of the governance approach to g to the 'multi-level governance' national governments are losing mission and to regional and local

mission and sub-national governon stage of the structural funds, n by a series of intergovernmennds have been used to facilitate tion with respect to both widening omic and monetary union (EMU) , ce these grand bargains have been ure embedded in the EU's multie Commission has used its own e detail of cohesion policy. In part has been described as multi-level the participation of sub-national tatives of civil SOciety in detailed ation. years from the 1970s and then et. The original rationale for the es, with EU regions defined and nce. This regional 'logic' gradually ance to regions remained impormember states, with the Cohesion se member states striving to meet ation in the euro (see Chapter 7). as part of the means towards the oals set out in the Lisbon Agenda, mpetitive economy in the world by es have also been associated with e years, they have been linked to sustainable development, subsidig the participation of civil society, ns'. ome of the older member states keeping role' (Bache 1999) , whilst ed structural fund expenditure in

a decentralized manner. Since the 2004 and 2007 enlargements some of the older member states, such as Sweden, The Netherlands, and the UK, have also questioned the need for continuing to provide EU-level funding for regional assistance (Ujupan 2009: 12). They have argued that, in the short term, structural-funds finance should be restricted to new member states; and that, in the longer term, structural funding to deal with regional disparities should be renationalized, with the role ofEU institutions confined to the coordination of national programmes. The 2008 financial crisis will place serious strains on future EU expenditure. It may lead to an increased emphasis on the coordination of essentially national solutions to the problem of regional disparities rather than on the further development of EU-level policies. Nevertheless it seems likely that the structural funds will continue to be an important part of the EU budget, even though their expenditure may be directed at a more diverse set of objectives than is currently the case with cohesion policy. It is likely therefore that the structural funds will continue to play an important role in facilitating the preservation and continuing development of the EU regardless of the fate of cohesion policy as currently construed.

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In the early days, structural funding for a regional policy developed partly because the 1957 Treaty of Rome provided for it, but mainly because, following the 1973 enlargement, there was a determination to reduce the dominant role of the common agricultural policy (CAP) (see Chapter 8) in the evolving European Economic Community (EEC) budget (see Chapter 9) by developing other areas of expenditure (see Box 10.1). In particular it was judged necessary to develop poliCies from which the UK, a major net contributor to that budget, might be able to benefit through the creation of the European Regional Development Fund (ERDF) (H. Wallace 1977). Thus from the outset regional policy was related to enlargement and was perceived as playing a Significant fa cilitating role when it came to trying to establish a balanced and equitable budget. In these early days , regional funds were allocated to the member states using a quota system rather than one informed by the comparative evaluation and weighting of specific regional needs. During the 1980s this intergovernmental logic remained Significant, even though it was accompanied by moves to impose at least the veneer of economic rationality through the development of principles such as additionality; concentration, programming, and partnership (see below). From 1986 onwards regional policy was rationalized in terms of economic and social cohesion and the reduction of regional disparities was to be achieved predominantly by structural-fund expenditure. In addition, loans from the European Investment Bank (EIB) would
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improve the working of the single market and member states' regional policies would be coordinated, even though not every member state possessed a national regional-policy framework. It is from this period onwards that 'cohesion' was embedded as a core EU objective, buttressed by its inclusion in the 1986 Single European Act (SEA).

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Regional funding also came to be used to facilitate further EU developments, as first illustrated by the Integrated Mediterranean Programmes (IMPs) (Allen 2005: 218) , and repeated with the complex bargain of 1988 that saw the supposed financial 'costs' of the single market programme 'compensated' for in the first financial perspective (see Table 10.1 and Chapters 5 and 9). This doubled the structural funds available to support regional/cohesion poliC)( A similar development occurred in the early 1990s, when the package on economic and monetary union (EMU) (see Chapter 7) was agreed in Maastricht in December 1991 as part of the Treaty on European Union (TEU). This was

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Throughout this period, both the primary 'historic' decisions about the financial perspectives and the secondary 'distributive' arrangements about the various cohesion objectives (see Table 10.2) were dependent on high-level bargaining among the member gove~nments, in essence an intergovernmental process. It was only subsequently, as the implementation process began, that other actors began to play a role. From 1988 onwards the process of implementation of structural fund expenditure prOVided some scope for a challenge to the powers of the central governments of the member states, thus opening up a form of multi-level governance. . Some care, however, needs to be taken in specifying how and to what extent state powers were being challenged by the development of multi-level governance. Some member-state governments may have had little interest in the implementation stage once they had secured guarantees of a certain level of structural funding. The member governments that are net contributors to the EU budget may have an interest in a degree of Commission oversight over the sp~nding performance of those that are net recipients. It may also be the case that the member governments are able to control, manipulate, or even cooperate with newly enfranchised sub-national actors so as to consolidate, rather than weaken, their central authority. Thus, the intergovernmental perspective best explains how decisions are made about the overall size of the structural funds and how they are distributed among the member states. The multi-level governance perspective, on the other hand, is a useful way of understanding preCisely how the funds are subsequently spent within the member states. By imposing operating prinCiples (see below) and by empowering sub-national actors the European Commission was able to use structural fund expenditure in order to establish a distinct and common 'Community' approach to regionaVcohesion policy.

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The accessions of Sweden, Finland, and Austlia in 1995 did not disturb the cohesion funding arrangemen ts, other than to stimulate the invention of what was then known as objective six (see Box 10.2) in order to ensure that these new members would be eligible for regional benefits. The prospect of further enlargement to the east and south necessarily led to a more extensive debate about the future of the structural funds and EU cohesion policy. Decisions on this were postponed while the member governments negotiated the ToA , but immediately afterwards the Commission delivered, as requested, its proposals for managing further enlargement (see Chapters 9 and 17). The Agenda 2000 documents (Commission 1997) made proposals for the third financial perspective and recommended that overall structural funding, in both the EU15 and. the enlarged membership , be frozen at 0 .46 per cent of EU GDP. This led the Commission to propose structural funding to talling €275 billion, at 1997 prices, for the 2000-6 period. This sum was broken down into €230 billion for the EU I5 , with an additional €45 billion, to be ring-fenced, for pre-accession aid for all the candidates and post-accession aid for the 'Luxembourg' six states that were assumed at that time to be likely to

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_ Objective 1 as above but with stricter application of eligibility criteria, although it also includes regions previously eligible for Objective 6 and phasing out funds for those eligible before 2000 for Objective 1 funding.

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_ Objective 3 covers those regions not covered by other objectives. It is specifically aimed at encouraging the modernization of systems of education, training, and employment.

_ Convergence Objective: to support growth and job creation in states using the cohesion criteria and regions using the Objective 1 criteria (above). In addition, th iS objective provides 'phasing out' funds for those states and regions which would have remained eligible if the cohesion th reshold had been set at 90% of the EU 15 average GDP per capita and the regional threshold at 75 % of the EU15 average GDP per

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join the EU by 2006 (see Chapter 17). In pr remain a high priority, but that its growth was constrained by those member states overall budget at a maximum of 1.27 per ce 9), with little prospect that they could agr areas of expenditure such as agriculture (se The Commission proposed that the co structural funds, should be further conce should be Simplified. To this end it suggeste just three (see Table 10,2) and reducing co cent of the EU population to between 35 an unemployment should become the major cri created objective-2 regions. The new rules fo and the proposed stricter application of the mean that many regions that had received longer be eligible in the period up to 2006. After tough negotiations on these proposa in March 1999 which reduced the Commiss billion (at 1999 prices) to €258 billion, wi cession aid and post-accession benefits (fo secure agreement the Commission had to a for those regions likely to iose outso that no r ing for more than one-third of its previousl of the Cohesion Fund for the 'poor four' (Gre though three of them had apparently 'conver (see Chapter 7) . The 1999 Berlin agreement was facilitate established principle of structural funding everybody-or, more preCisely, for every principle seemed to leave the member govern stronger position than before. The Berlin agre advanced by Bathe (1999) that, since the there has been a consolidation of member g expenditure, and a subsequent weakening of contested by Bachtler and Mendez (2007), a (concentration and programming) rather tha The 1999 reforms, which formally dealt wi etary implications of enlargement, had little Politically the new proposals served mainly t ber governments, and the Commission may atmosphere with its proposals to simplify t step back from some of its contacts with su implementing structural fund expenditure m
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er to the modified intergovernmenended gatekeeping'. were devolving budgetary control mber-state governments, the Compre-accession funding-the Phare estructuration des economies), the ion (ISPA) , and the Special Acceselopment (SAPARD) (see Chapter ers for 2004. Similarly, whilst efin the prospective new members, nstitutional capacity being turned le before enlargement (Bailey and

Programming
After 1988 structural fund expenditure was allocated to specific programmes drawing on one or more of the available funds (see Box 10.1) rather than individual projects. The programmes were mainly (90 per cent) initiated by the member states, which were required to consult with their regional authorities where they existed. These programmes are approved by the Commission after each member state has produced a National Strategic Reference Framework (NSRF) in which it has to demonstrate to the Commission's satisfaction how it intends to implement the priorities established by the Commission in its Community Strategic Guidelines on Cohesion (Commission 2005), Between 1988 and 1999 the remaining 10 per cent of the funding supported 'Community Initiatives' (see Box 10.3). However, after 2006 this category was renamed 'European Territorial Cooperation' and reduced to just 2.5 per cent of overall expenditure. In the 2007-13perioa. there are 455 operational programmes.

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The Commission used the objectives it had esta blished for the structural funds after 1988 to impose consistent criteria for their management and thereby to concentrate spending on the most needy regions and states. It thus directly confronted the member governments' preference for maximizing their national 'takes' from the structural funds. As Box 10.2 demonstrates, the number of cohesion objectives has been steadily reduced over the years, thereby increasing the degree of concentration by reducing the percentage of the EU population eligible for structural aid .

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This principle is designed to preserve the integrity of EU policy by preventing the member governments from reducing national expenditure by the amount gained from the EU structural funds. Bache (1998; 2004) has documented the battles that the Commission, actively supported by many local and regional authOrities, has had over this. For Marks (1993) this alliance between the supranational and sub-national institutions supports his thesis that structural fund expenditure has advanced the development of multi-level governance in the EU, although this is disputed by Pollack (1995). The Commission's problem is that additionality is particularly difficult to verify given the varying methods and degrees of transparency in the ways that member states manage and report their expenditure. The Cohesion Fund was used between 1993 and 2006 to promote and to maintain the economic convergence of the poorer member states seeking to qualify for EMU by helping to reduce their public debt (see Chapter 7). This logically reqUired that the additionality principle be suspended.
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turn is intended to deliver growth, competitiveness, employment, and sustainable development, the Lisbon and Gothenburg objectives (see Chapters 7 and 12). There has also been some discussion in response to the 2008 financial crisis of using the structural funds in support of efforts to provide a short-term financial stimulus to the EU economy (Council of the European Union 2009: point 9) _The sums allocated to the structural funds for 2007-13 are , in addition, intended to address the impact of recent enlargements, partly by compensating for the concerns of the EU15 and partly by including the allocations deemed appropriate for and acceptable to the states that joined in 2004 and 2007. Achieving this consensus regarding the future of the structural funds and EU cohesion policy required, as previously, that all member states receive something tangible from the funding allocation.

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with themuld-Ievel governance perspective. thIS VIew and warns agaInst the danger of c actors with the notion of multi-Ievel~overn Blom-Hansen argues that as a weak and pooi: loses out to the 'agents', the member states, f With EU-formulated goals when it comes to s The context for planning the fourth f nated by the 2004 and 2007 enlargements increased the population of the EU by 20 pe With the result that the EU's overall per capit twenty-seven member states more than onestate with an average income less than 90 p pared with just one-sixth in the EU15. In t population earn just 31 per cent of1.he EU2 the EU15 average income earned by the poo For the first full post-enlargement peri financial perspective the member states ev total of €308 billion, having rejected the m of around half that sum be allocated to only represented an 11.5 per cent increase in str prevIOUS period to be divided among just th 10.2). The Commission produced indicative three objectives, leaVing each to decide how In thIS penod the new member states will enj the funds that they received when they first j will receive 30 per cent less.

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Day-to-day financial control of structural fund spending is now said to be more proponionate and devolved downwards as much as possible to deal with the charge of excessive bureaucracy against the Commission. The decision to continue funding for all member states has prevented an intensification of the concentration principle. There is currently an increased emphasis on partnership with an enhanced decentralization to partnerships on the ground, underpinned by tripartite contracts among the member states, the regions, and local authorities, all of which will be certainly studied in detail by those seeking evidence for the multi-level governance perspective. European Territorial Cooperation, the third, sparsely funded, objective of the 2007-13 period, has also recently attracted a growing academic interest (Mirwaldt et al. 2009), with new formal arrangements to promote cross-border, transnational and transregional cooperation. This new conso~ated programme that has evolved from the INTERREG Community Initiative has given rise to a new legal entity, the European Grouping for Territorial Cooperation (EGTC), whose members can be representatives from member states, regional or local authorities, associations, orotherpublic bodies. The EGTCisdesigned to enable thegroupingtogetherof authorities from various member states without the need for prior international agreements ratified by national parliaments. It remains to be seen whether this new body 'takes off, but its establishment confirms the view that the Commission remains interested in any institution that serves to blur the sharpness of national boundaries within the EU. It is likely that the process of renationalizing and simplifying the means of delivery, financial management, and evaluation of cohesion funding will continue. In addition, some member states already see the pursuit of best practice and benchmarking with regard to national regional policies as being an attractive alternative to a more interventionist EU-Ievel cohesion policy. The Commission has already made concessions to this tendency with its proposals for the coordination and standardization of national regional programmes as part of its recent regional policy reforms. On the other hand, the regions, in the new member states as well as the old, that benefit from EU financial support may, as suggested above, come to value the role of the structural funds in regional support and financing partly for its mediumterm economic reliability, when, espeCially in the current economic climate, national expenditure might be more likely to be cut at short notice:
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been Europeanized over the years. Involve has impacted on the way that the member s 2006) and it'has also led to a greater awaren to pay attention to regional divergence. E visibility of the EU in those regiOns and loca funding, but this does not necessarily consti popularity of the EU in the public imaginati Opinion also remains divided about the ing on regional and national convergence; programmes, other national macroecono easily measurable (House of Lords 2008: of EUpolicy to date have not produced cl of economic modelling and survey-data g any outstanding evidence of structural fun nomic impact. At the member-state level, original cohesion countries-Ireland, Gr more rapid than the EU average, although lagging regions that qualified for objectiv qualified in 2004, and five additional regio decade (House of Lords 2008: 26). Further 2005 significant regional disparities remai the new members. Even the Commission struggles to find cl rectly enhances EU cohesion, although rece on structural fund expenditure remain posi optimism conflicts with other assessments those commissioned by the British Parliam mons 2004; House of Lords 2008), which s in the richer thember states is now prodUCi value added over what might be achieved b Lisbon Agenda criteria to provide further r also prove premature for those new member before they progress to becoming more com The Sapir Report (Sapir et al. 2004) noted fund expenditure on cohesion, but could fi the argument that the funds had made a Sig lagging regions or that they had not. The Sa money only to the new member states and to their regions (more of a macroeconomic would be more effective. This was politically take on board in the current period. It remai crisis will prompt a rethinking of whether, w funds as a short-term fiscal stimulus.

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to dominate the fundamental decisions about structural fund expenditure, it is the supranational Commission which has been mainly responsible, via its brokering . role among the meniber states, for crucial reform measures. This has been in particular so when it comes to the implementation of the two coheSion-policy principles of concentration and programming. Nevertheless it is argued here that over the years the Commission has been forced to accept a growing and increasingly decisive role for the member states both in decision"making about and in the implementation of the structural funds (Pollack 1995; Hooghe and Keating 1994; Bache 1998; Peterson and Bomberg 1999; Alien 2000; Hooghe and Marks 2001 ; Pollack 2003; Alien 2005; Manzella and Mendez 2009), even if this does not amount to a full scale 'renationalization'. It seems likely that the structural funds will, in the future , be directed at much wider and more diverse objectives than the removal of regional inequalities and the encouragement oLoverall EU competiveness and growth (House of Lords 2008; Baun and Marek 2008: 268-9; Bachtler et al. 2008; Ujupan 2009). Insofar as the structural funds have encouraged the member states to value their participation in the EU, they are likely to continue to absorb a significant percentage of overall EU budgetary expenditure beyond 2014. That expenditure may well, however, be in pursuit of broader objectives, such as increased R&D, the low-carbon economy, or energy security, rather than those currently associated with EU cohesion policy in the current period.

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For an excellent overview of the early development of the EU structural funds and regional policysee Bache (199S) and Hooghe(1996)and for the current situation, as well as a useful summary of reform proposi3ls, see UK House of Lords (200S)and its accompanyipg oral and written eVidence. Fora recent discussion of the relationship between EU structural fu~d expenditure and the multi-Ieitelgovernance perspectivese~Bache (2008). Balm and Marek (200S) contslnsagood overview bf the impact of the most recent enlargeme~tson EU cohesion policy and Bachtler etal...(200S)comprehensiveIYsllmmarize the contemporary debate about the future' role of the structural funds in the ongoing EU budgetary review. Commission (20071) provides ~tarting point for the next r8"evaluation .. of cohesion policy.

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. Bachtler,J., Mendez, C ., and Wishlade~ E(200S;, Ideas forBudget and Policy Reform: Reviewing Debate on Cohesion Policy2014+, European Policy~esearch ~aper .' " 08/04(Glasgow : University of S1:rathClyde;European Polici~s Researchqentrel.

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port a minimalist EU involvement as 'market-building', leaving an ts sovereignty formally untouched, c interdependence. 'Welfare states 3), and, at first sight, the European s granting individual entitlements no real funding of a 'social budget' ls welfare bureaucracy. Territorial However, an alternative view has oded both the sovereignty (legal of member states to conduct their niverse turned into a Single cones remain the primary institutions nto an increaSingly constraining
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Direct policy pressures of integration -> positive initiatives to develop uniform social standards at EU level Old politics: national and gender Commission, expert equality; health and safety; Social committees, ECJ, and since 1992 institutionally Protocol 'corporatism' since 1992, generalized 1997. with expansion entrusted corporate of competences and of QMV; 1989 actors (UN ICE, CEER EC Socia l Charter, 'incorporated' in ETUC) (background ToA; extending notion of European actors: ER ESC; diverse lobbies) citizenship
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an explicitly collective European s of the single market have made rom the EU's agenda. The emergfrom the ambitions of Eurocrats from the single market process, (Falkner 1998). In the 1980s the ure the free movement of goods, ersion of regulation that assumed ulated from social policy issues, er states. This assumption runs cal economy, wllich stress that networks of social and political eparation between supranational ustainable. To be sure there have strengthen treaty provisions on t is rather the movement towards nal welfare states' autonomy and a complex, multi-tiered web of

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freedoms (Barnard 2007)- especially free movement of labour and of servicesthat restrict member states' social policies. Both positive and negative initiatives create direct, mostly de jure , pressures on national welfare states through new instruments of European social policy. Finally, European integration creates an escalating range of indirect de facto pressures that encourage adaptations- convergence (see Starke et a1. 2008)-of national welfare states. These pressures strongly affect national welfare states, but they are not directly derived from EU social policy instruments. Positive initiatives from the centre have generally prompted major social con-. flicts , and have been attempted since the foundation of the European Community. The 1957 Treaty of Rome, for instance, met stiff resistance in the French National Assembly in part because weak social clauses were seen to endanger the welldeveloped French welfare state, making French industry less competitive. Negative integration efforts were, at first, less visible, but are just as old. The coordination of rules governing labour mobility was enshrined in one of the earliest EC legislative acts (1958), whereas similar action on services dates only from the mid-1980s, reaching a high plateau at the end of the 1990s. Indirect pressures are more recent in response to the development of economic integration. Under the ascendance of centre-right parties the primacy of economic integration was locked firmly into the EU policy-making level from 1957 onwards. In contrast, the social democrats in their two phases of ascendance in the 1970s and late 1990s, were unable-and often unwilling-to lock in a Similarly effective social integration perspective (Manow et a1. 2004); they invented OMC instead. With eastern enlargement these trajectories seem frozen into place, though this may be challenged in the course of the financial and economic crisis that began in 2007.

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The limited success of activist social policy

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Discussions of social policy generally focus on prominent actors like the Council, the Commission (and the responsible Directorate-General (DG» , and increasingly the EP (and its committees), and the representatives of business and labour interests in an emerging corporatist policy community. The Commission has been a central actor in attempting to construct a 'social dimension' for its 'European social model' (Commission 1994, 2000d, 2003c, 2008j)- areas of European social policy with uniform or at least minimum standards. These attempts have occurred in fits and starts during the past decades, with high aspirations and modest results, marked by plenty of cheap talk, produced in the confident knowledge that unanimous-or even qualified-majority-voting in the Council would block all ambitious blueprints (Streeck and Schmitter 1991 ; Lange 1992) . The main point here is that the focus on the efforts of Euro-federalists to foist a social dimension on a reluctant Council has been somewhat misleading. European integration did indeed

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The EU process makes it much easier to b market-related openings for social legislat and reform requires at least a qualified m gatekeepers for initiatives requiring Cou tives. Since the second world war the sco diminished. The welfare state remains on governments have usually resisted losses o electoral Significance of most social progra Until the early 1990s legislative refor Treaty of Rome, or the single-market pro gender-equality provisions and health an the Council unanimously agreed to a nu treatment provision some content. Over t crucial activist role, turning Article 119 ( set of requirements and prohibitions relat sionally male, workers (Ostner and Lewis 2005 ; Costello and Davies 2006). These r reforms. The Single European Act (SEA) voting (QMV) on health and safety and 1990s (now all gender directives are recas policy-making has produced neither stale regulations in health and safety, but rather regulators moved beyond regulating prod 1997, 2000).

The shifting balance of power a

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The 'social democratic' forces most interes tively weak and often Euro-sceptical (Man unions and social democratic parties had second half of the 1990s, social democrac 'new' employment policy ('activation')-h did not. Meanwhile, business power had European- and OECD-wide capital markets. hindered efforts to deal with institutional widely divergent and deeply institutionaliz

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OMV OMV 137 ( i (1) 137 1) OMV OMV 137 l1l 137(1) a OMV 137 (1) b

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b Between the original Treaty of Rome and the 1992 Social Protocol, the ECJ had interpreted gender equality ever more widely. Art. 119 EEC (now Art. 141 TEC) contained no express enabling clause; respective directives were based on Art. 100 or 235 EEC, which required unanimous decisions, In the end Art. 141 (3)TEC in 1997 brought the first special mandate and OMV.

'From 1992 to 1997 this OMV-mandate excluded the one for funding, where unanimity was required according to Art. 213) of the Social Protocol and then Art. 137(3)TEC, thus maintaining anti-poverty spending programmes as highly veto-prone.

'The term 'open method of coordination' is not mentioned in any of the treaties, Source: Falkner (1998: 821. supplemented by the author, with special thanks again to Josef Falke, University of Bremen, for his continuous help in updating and legal advice.

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blic policy fights since the 1980s, msterdam (ToA) in 1997, to a slow century; though with new frontiers annexed to the Maastricht Treaty ritish opt-out, UK opposition rend Piachaud 1992), leaving member oups free to make rhetorical com95a, 1995b; Streeck 1995). Since se EU social policy mandates had he proposals made and the results n the 1980s was typical (Falkner munity Charter of the Fundamental n Social Charter of the Council of 997 ToA through a reference in the ice (ToN). These rights reappeared proclaimed in Nice on 7 December the Treaty of Lisbon (ToL) would states. The obstruction that had met the 1989 Social Action Programme (Falkner 1998) had been: made impossible. Several directives were passed (\Norking Time 931l041EC, Young Workers 94!33IEC, European Works Council 94/45/EC, Parental Leave 96/34IEC, Part-time Work 97/811EC, Burden of Proof in Sex Discrimination Cases 97/80IEC , Fixed-term Contracts/Temporary Work 99/79/ EC; see Falkner et a1. 2005) and became su ccesses for a form of Euro-corporatism endowed with legislative powers. The social partners seemed ready to negotiate, now 'in the shadow of the [Council] vote', and based on their own experi ence. Bu t no other major directives followed; instead, the social partners Side-stepped this with a 2002 Framework Agreement on Teleworking. For the first time the social partners committed their own members to direct implementation, and sought no ratification through the Council of Ministers; this was seen as having greater political promise-but also the risk of having little effect (UNICE et a1. 2006). All these directives belong to the acquis communautaire and thus are also becoming legally effective in the twelve countries that joined the EU in 2004 and 2007. As yet little is known of how effective they are on the ground (Kvist 2004; Falkner et a1. 2008; Maydell et a1. 2006), though we know that large differences in wages, atypical employment, hours worked, and in the role of the informal economy plus the collective bargaining situation may make implementation a problem (VaughanWhitehead 2007). Also, twelve additional member states with less interest in Social Europe have made QMV harder to achieve on new legislation. While most aspects of the Social Charter have moved forward , further initiatives have been modest and 'consolidating', as the Social Action Programmes since 1998 indicate. From the early 1990s the Commission has continued to engage in intensive soul-searching on its proper social policy role (Ross 1995b). Efforts to combat stubbornly high levels of European unemployment moved centre stage during the mid-1990s (Commission 1994, 2003a, 2003c), as reflected in the ToA in 1997, and combined in the 2000 ToN with efforts to 'modernize social protection systems' and to 'combat social exclusion' (Art. 137(1) (k, j))- these two QMV mandates were the only new ToN contributions to social policy. The Commission seemed to have accepted at least some of the British case for the need to promote 'flexibility' (Commission 1993b: 116ff). This trend has intenSified, with 'slimming down' of national welfare states now a regular and prominent topic on the agenda of Ecofin, the European Council, and the Commission-and with the Employment and Social Policy Council and the corresponding Commission DGs mostly on the defensive_ Member governments seem unlikely to allow the Commission to take the lead here, thus leaving the immediate prospect as consolidation, with the completion of some current agenda items, but few new initiatives. Less noted has been the silent revolution to promote anti-discrimination in the treaties. While the 1992TEU held to the old politics of prohibiting labour discrimination by nationality and gender, the 1997 ToA Article 13 added 'racial and other origins, religion or belief, disability, age or sexual orientation', and Article 21 of the 2000 EU Charter of Fundamental Rights amplified this by adding 'any' further

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Social Policy

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1997 ToA with its Social Chapter, nal' achievement. Two mandatesnd gender equality 'in pay'-were ons' and the second to all 'labour or gender equality. Two additional information and consultation; and market, but without EU financing. imous deCiSion-making: social sekers when employment contract is ployment of third-country nationluded. Three topics were declared rike or to impose lock-outs. Agreethe powers of the 'social partners' Si-legislative agreements. The ToA 125-30, based on a Swedish initiaent initiatives via OMC Oohansson n OMC has been extended to pend in 2005 was 'streamlined' beyond ly 2008; this volume, Chapter 12). s. 136-45 ToN) facilitates efforts apacity to obstruct legislation has s-Greece, Ireland, Portugal, and o block reform under QMY. This er the northern expansion to the zed economies with strong welfare

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Stephan Leibfried

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'ground such as' colour, social origin, genetic features, language, political or any other opinion, membership of a national minority, property, birth, and disability. There followed the 'Article 13 Package' of two Directives (Anti-Racism 2000/43, . Framework 2000/78) , and an Action Programme in 2000 (Eichenhofer 2004), also ratcheting up gender equality standards by feedback (Gender Directive 2002173; Costello and Davies 2006: 1567f; Husmann 2005). In a more heterogeneous and veto-prone EU this may well become the regulatory route for social policy in the twenty-first century. US experience may be relevant here. After the 1960s civil rights reforms there was a burst of anti-discrimination regulatory politics which burdened third parties only, promised well-being whilst by-passing burdens on public budgets, and relied mainly on legal strategies (Kochan et al. 2001; Nivola 1998). Similarly, anti-discrimination might also develop into an apparent European panacea for a welfare-guaranteeing state, especially in an increaSingly heterogeneous EU (Franzius 2003) , especially given eastern enlargement (Heidenreich 2003). One example is the struggle over unisex private insurance tariffs with repercussions across all branches of insurance (Schwark 2003; House of Lords 2004; Boecken 2005; Rothgang 2007). Such a transformation would emphasize employment with a 'citizenship-consumer' focus , which might accommodate the very different welfare traditions in Europe as well as echo US consumer welfare (Rieger and Leibfried 2003) . A slow legal convergence and harmonization might emerge, with anti-discrimination leaders like the UK and The Netherlands taking the lead (House of Lords 2000). To sum up , to focus on the highly politicized and widely publicized struggles in the EU over positive, centre-imposed social poliCies is to miss the point. Devices such as the Social Charter in the 1980s and the Social Protocol in the early 1990s are probably much less pertinent than measures such as the 1992 Maternity Directive 92/85IEEC,or directives under the Social Protocol (1992) and the 'constitutionalized' Social Chapter of 1997. EU legislative activity is now at least as extensive as fed eral social policy activity was on the eve of the US New Deal in the 1930s (Robertson 1989; Pierson 1995a; Leibfried and Obinger 2008)--.,.and it moves in great strides to match the US anti-discrimination era dating since the 1970s.

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Lost amidst the noiSY fights has been the quiet accumulation of constraints on national social policy by market integration. The last four decades have witnessed a gradual expansion of EU-generated regulations and court decisions that have seriously eroded the sovereignties ofthe national welfare state and overlaid it with a new
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mobility- and competition-friendly regime. 1998; Falkner et al. 2005; Hantrais 2007; politics'- let alone the judicial politics- o en tranced by the 'high politics' in treaty ba labour and welfare lawyers and the scholar Mattli 1993; Shapiro and Stone 1994; Stone Chalmers 2004; Eichenhofer 2006; Barnard Since the 1960s the ECJ has delivered on social policy topics (see Table 11.3), wi (plus third-country migrants') social secur other social policy matters to one-third (wit Also, the Commission brought to court . tre concerning social policy. The social-polic Appendix 1) was second only to agricultur consumer issues, which puts social policy i Sions-staying firmly in the ECJ's major lea dom of services cases, and those of all other upon national welfare states. There have been in addition many law s EC] serves as a labour and social security c huge demand on EC] resources, which wa the Court of First Instance (CFI) in 1989 ( EC] now serving only as a court of appeal. does not serve as a welfare model for EU citi such as Germany and France- so these ca national social poliCies. Nor do the statistics on social policy issues (see Appendix 1, Tab over distributive criteria in the European So from 1971 to 1991 social policy cases were overtaking them almost to double the casel on the free movement of goods. The thousand or so SOCial-policy cases ( states (see Table ll.4). The most active hav persons), Belgium and The Netherlands (o and the UK (on workers' protection and eq conSistently produced few cases (Stone Swe with few cases may nevertheless trigger big Decker cases from Luxembourg show (see b appeal to the ECJ directly, the national legal critical intermediary role in feeding cases to t The EU's social dimension is often advoca but in practice seems to have been part of competition have prompted court cases an

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Sum Total ECJ Freedom of SumTotalEGI Freedomof 'judgments movement for judgments movementfor workers workers AIITEC AII TEC articles afticles Arts. 39-41TEC (ex Arts. 39-41TEC(ex Arts. 48-50 EEC) Arts.48-50EEC)

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dealing with European citizenship egitimate residency (Eichenhofer ate from market-building. We can nship (An. 17 ToN), as the heated (C-184/99) indicate (Hailbronner nted access to Belgian welfare benec University of Louvain-Ia-Neuve C] in its jurisprudence increasingly , or adjusting secondary European

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like Viking (C-438/05) and Laval (C-341/05), and in 2008 from Germany like Ruffert (C-346/06), in which national wage minimums were undercut by the free movement of enterprises, have had major political reverberations in a time where Europe's social dimension came under additional stress due to the economic crisis of 2007 and beyond; the court kept to its course in Commission v. Luxembourg (C-319/06) in 2008 (see Chapter 12). Thus, the state has lost some of its exclusive power to determine how the people living within its borders are protected, though there have been successful attempts since the 1990s (Directive 96!71IEC) to contain such losses through obligatory minimum wages and holidays (see Streeck 1998; Eichhorst 1998, 2000; Menz 2003 ; Boeri and Brucker 2006) . • Member states have no exclusive right to administer claims to welfare benefits from migrants. Instead, the authorities of other. states may also have a decisive say in adjudicating benefit status- as controversial cases that seemed to imply unstoppable receipts of fraudulent benefits as in the Paletta cases of 1992 and 1996 (C-45/90, C-206/94) (stating that a doctor's certificate from the country of abode entitled a worker to sickness benefit in the country of employment) revealed repeatedly in Germany and elsewhere.

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of regulations) and court decisions ocial policy in pursuit of European hter et al 1997; ]orens and Schulte onstrain national capacities to limit dell199l: 231; Maydell et al. 2006) trajectories (Conant 2002):

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st social benefits to its citizens. As U, the state of legal residence no ther they are entitled to benefits. held from all. This development is h social benefits-demarcating the of state-building on the continent, s restriction encourages attempts us, discrimination mechanisms at he EC] in due course (as does the C-269/07 in 2009).

ts rights and benefits only apply to, tory. Today states can exercise such efit consumption to only a limited or universal means-tested benefits, mann 1998) , though the latter may ification of coordination regulation 4 replacing EEC 1408/71).

ree to prevent other social policy wn territory. This is a problem for orted across the EU (D0lvik 2006) other EU countries, who work for vel, while covered by many of their arising in 2007 from Scandinavia

Compared with the US, intra-EU migration has been small, and member states have quite different migration profiles (see Chapter 19). Prior to the 2004 enlargement only about five million workers in the EU, including their dependants, exercised this freedom, far outnumbered by third-country migration into the EU (Angenendt 1997; Mau and Verwiebe 2009: llHf; Recchi and Fave1l2009). Eastern enlargement has changed this situation, a factor that could generate a good deal of EC] litigation. For the law to bite does not require a quantum leap in the volume of intra-EU migration, but only a few individuals as litigants and national courts which refer cases to the EC], as has been the pattern since 1959. Similarly, third-country migrants have prompted important cases, and concerns about irregular labour migration has been one of the driving forces behind the development of justice and home affairs (see Chapter 19). Complete national legal authority has ceased to exist in the EU. Supranational efforts to broaden access to social policy and national efforts to maintain control go hand in hand, are recalibrated from conflict to conflict, and are moving piecemeal into a new, albeit sketchy; system. Member governments have resisted this transformation. Individually, they have baulked at implementing some facets of coordination, although the ECJ has often taken them to task for this. Collectively, they sought to roll back some aspects of coordination in the early 1990s, unanimously agreeing to revisions that would allow them to restrict portability in a somewhat broader range of cases following proper 'notification' (Schuler 2005). Arguably the resultis an incremental, rights-based homogenization of social policy Neither supranationalization nor harmonization describes this dynamic: each implies more policy control at the centre than currently exists. The ECJ is central to this process by applying a light, but far-reaching, hand, reshaping the boundaries

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of national autonomy The process structures the interfaces between twenty-seven national SOCial-policy systems with potentially far-reaching implications for the range of national policy options available.

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The EO's agenda on market integration has covered the freedom to provide services since 1957 (now Arts. 49-55 ToN). The Treaty's signatories were aware that an explicitly coordinated social policy would affect their national welfare states (Romero 1993), butsawno connection between this and thefreedom of services, for which they only had the financial-services markets in mind (see Chapter 5) . But developments since the mid-1980s under the 1986 SEA have shown that implementing this freedom could entail far-reaching consequences for national SOCial-policy regimes. Several EC] judgments, notably Kohll , a case about a Luxembourg citizen who obtains dental treatment in Germany without prior authorization (C-158/96) , and Decker, a case about a Luxembourg citizen buying his prescription glasses in Belgium without authorization (C-l20/95), have ruled that freedom of services .includes both the freedom of movement for consumers 'of social policy' to shop in other EU countries and the right of service providers to deliver their services 'across the border' in another country, redrawing the demarcation line between the national welfare state and the EU-wide market (Becker 2004b, 2005a; Kingreen 2007)4 Notably, since 1998 this spill-over has generated European conflicts over social policy- especially healthreform (Maydell1999; Becker 1998, 2005b) , though its precise effects are disputed (Obermaier 2008). These developments have potentially wide ramifications , not least since 5- 10 per cent of the national labour forces are involved in the delivery of national social poliCies, a growing sector in an ageing continent. This understanding of a free market for services has three general implications for the sovereignty of national welfare states. First, the treaty provisions set up a tension between 'economic' activity and 'solidaristic' action, which now frames the welfare state but contains two polarized trajectories (Schulz-Weidner 1997). They protect some core components of the 'old' welfare state (redistribution, pay-as-you-go, etc., which belong to the 'social security prOvider monopoly'); but, as redistribution measures contract, the welfare state (in whole or in part) moves over the borderline into tl1e sphere of 'economic activity', thus becoming subject to the freedom of services and establishment (see Chapter 5) and the competition regime (see Chapter 6). Thus, slowly a single European 'social security' market is emerging, with a level playing-field for private actors (Giesen 2005) ; for example, several member states already allow for private competitive provision in accident insurance. There is no general exemption from the treaties' market freedoms for welfare state activity per se (Becker 1998, 2007 a). This continuous redrawing of the fine line between 'economic' and 'solidaristic' action is what much of the legal conflict is about, as evidenced by Sodemare 1997 (C-70/95) and many other cases: that is, whether the state may allow non-profit-making private operators to participate in running its social welfare system by concluding contracts whioch entitle only tl1em to be reimbursed by public autl10rities for the costs of their

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healthGare serviceS. Only at the end of a lon this interface between European law and n Second, consumer andl'rovider rights i mid-1990s, also challenging the closed sh ments may no longer exclusively decide They may no longer exclusively organi mutual recognition of degrees and licenc And their capacity to protect their nationa tive inroads of service organizations in ot Third, the health area has become a cr turf battle between national welfare states a priva~e insurance, producers, ete. (Mossial section 4.4; Mossialos et al. 2002; Thoms pensions, health insural}i:e has more 'mark fragmented by provider groups already op pharmaceuticals), or quasi-markets (doctor tionally exposed to substantial private pro are more likely to take the European route t service organizations involved in hospitals, of medical equipment (Bieback 1993: 171). the EU level, vis-a-vis the Commission or in increaSingly to 'market cures', opening the Single drug market (Woolcock 1996; Schwa is a general concern for Europeans, a Europe in 2006 and is seen by some already as the h The single market for private insurance national private insurance has been drawn Commission has actively sought to establis among others with a Pension Funds Directi (see decisions Danner (2002) and Skandia ( eration of cross-border mergers and acquisi surance sector operating at the Europe-wide 105- 10; Klumpes et al. 2007). Integrated greater differentiation of policy-holders by r with lower operational costs. This integrate national, internally segmented, public insu up in spirals of deregulation and thus already markets. Insurance providers with the opti states will gain a growing influence over nati the clash between particular national regula competing insurers from other member state For some time there has been considerabl fare states that the reform of private-sector .._~"+".......__ provision of public services (Rein and Rainw

pensions (Pochet 2003; Pedersen urance (Thomson 2007; Thomson m likely concerning where 'basid vate) insurance begin. Private (or mselves with the 'economic action' ly been important for demarcating be affected by such a redrawing of • Social dumping: this refers to the prospect that firms operating where 'social wages' are low may undercut the prices of competitors, forcing higher-cost firms out of business, or to relocate to lOW-SOCial-wage areas, or pressure their governments to reduce the social wage. The surge of Polish plumbers into France, alleged to have happened just before the French referendum on the EU Constitutional Treaty, epitomizes this expectation. In extreme scenarios, still trendy in countries bordering on the eastern enlargement, these actions fuel a downward spiral in social provision, eventually producing rudimentary, lowestcommon-denomimitor, welfare states. These kinds of pressures may have restricted social expenditure in the US, where labour-and capital-mobility is traditionally far greater than in the EU (PE. Peterson and Rom 1990) . The evidence that European integration will fuel such a process remains limited (Majone 2005) . The 'social wage' is only one factor in investment decisions, and firms will not invest in low-social-wage countries unless worker productivity justifies such investments. Even in eastern enlargement a huge wage disparity only leads to a relatively small productivity disparity to the advantage of the east (Vaughan-Whitehead 2003; Guillen and Palier 2004). Neo-classical trade theory suggests that high-SOcial-wage countries should be able to continue their policies as long as overall conditions allow profitable investment. A sign of the ambiguous consequences of integration is that northern Europe's concerns about 'sunbelt effects' are mirrored by southern, and now eastern, Europe's concerns about 'agglomeration effects' in which investment flows towards the superior infrastructures and high-skilled workforces of Europe's most developed regions.

policies significantly, as the economic policies of the EU, and the responses of social actors to those policies , restrict national welfare states. Indirect effects are hard to measure; nonetheless they exert supranational influence on the design of national social policy. While, as shown by the Services Directive, so-called social dumping may generate greater fears than current evidence warrants (see Chapter 12) , the opposite could hold for the many other ways in which economic and monetary union (EMU ) (see Chapter 7) creates pressures on national social policy systems:

reedom of movement for workers arket-compatibility requirements, sions impact on the design and the ther welfare-state effects of singleg. restrictions related to subsidies -Weidner 2004) or to state aid for ear: a whole range of social policy are states-and belong to the tradiore costly, to member states within

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• EMU and Maastricht criteria: EMU, with its tough requirements for budgetary discipline, may also encourage downward adjustments in welfare provision (see Chapter 7) , although the economic crisis has led to a (temporary?) relaxation of these tough requirements. To participate in EMU, [or example, Italy had to reduce its budget deficit from 10 to about 3 per cent of GDP by the end of the 1990s (Ferrera and Gualmini 2004; dell a Sala 2004). This legitimated efforts by successive governments to make cuts in old age pensions and other benefits in 1994/95. Although not all would-be euro members have faced such radical adjustments, the Maastricht convergence criteria present formidable problems for most of them and have increased the level of refortn pressures (Martin and Ross 2004: 316-21; Townsend 2007: 270-3) . These constraints are of particular weight in the context
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of the current economic recession and bear heavily on the economies of central and eastern Europe, described by some as a 'bill that could break up Europe' (Economist, 2 February 2009: 13). Governments would have-faced austerity pressure anyway (see Pierson 2001) and this has simply become more acute. The convergence criteria do not require budget reductions, as tax increases could also reduce overall budget deficits-but they strengthened the hand of those seeking cuts. A backlash against the Maastricht criteria , however, has built up since 2002, and this can be read under the heading 'national welfare states strike back'. EMU could prod the EU into a more active role in combating unemployment (see Chapter 12). HistOlicaHy the prospects for EMU were seen as coupled with the need for social policies to address emerging regional imbalances (Ross 1995b). EMU would strip national governments of macroeconomic policy levers, and an EU-wide macroeconomic stance would create Significant regional unemp!2yment. Flexible exchange rates allowed national adaptations to economic conditions. Once these instruments were dismantled, combating pockets of regional unemployment at the national level became more difficult (Eichengreen 1992). What the global economic clisis will do to reconfigure this general constellation is still unclear.

the levelling of the playing field for diff in radically increased competitive press (see Chapter 6). Private, multination public service that had been national o is the last domino of the public-servi most other dominoes already did, the now shifted to the last fully standing o of the public-service state and a nat (Leibfried and Zurn 2005)-and thus t outer skin (Leibfried 2001). The princi applied to the welfare state proper.

What are the consequences of these indirect the potential problem areas lie in the future, measure. One has to weigh the reform pressu resilience (Pierson 2001). The picture that e diminished control over many of the poliCie welfare states-the currency, macroeconomi the public services, and also industrial-relati

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• Harmonization of tax systems: the single market is encouraging a movement towards a nanowing band of value-added tax rates (Uhl 2008); in March 2009 additional exemptions from the minimum standard rate of 15 per cent were allowed for labour-intensive services at the minimum reduced rate of 5 per cent, a step which encourages the downward movement in harmonization. In theory, governments whose VAT revenues are lowered can increase other taxes. Because -it is politically easier to sustain indirect taxes, however, this movement may create growing constraints on member-state budgets, with clear implications for some national social poliCies (Hibbs and Madsen 1981). This is a problem for countries like Denmark, which relies on high indirect, rather than payroll, taxes to finance its generous welfare state (Petersen 1991, 2000; Hagen et al. 1998) and resists 'upper limits' for value-added taxes.

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• Dispensing with the 'publiC utilities state': a further pressure on national welfare states stems from the consequences of the dismantling of the 'public service state', which happened partly for EU reasons, but partly for purely national, endogenous rationales. Trains, mail, air transport, electricity, gas and other utilities, together with local services, used to be public enterprises, financed by tariffs that ensured equal service across the nation, urban and rural, often cross-subsidizing poor with rich services. Since the mid-1980s, branch after branch of these public structures has been privatized (Schneider et a1. 2005; Tenbucken 2006). Supranational prodding via EU regulation based on competition law (S.K. Schmidt 2004a, 2004b) and privatization/deregulation in the UK and US were exacerbated by domestic cuts in state spending and

Attention has focused on the Commission's These efforts have modified na tional social po law (see e.g. Burley and Mattli 1993; Stone S and Bercusson 2007). But the expansion of E 'activist' threshold may have been reached. the policy effects of the Single market's deve directly, as the Commission, national courts, policy autonomy with the creation of a unif rectly, through contextual pressures on natio We are living through an epoch of transfor and an increaSingly global market system ( et al. 2008; Leibfried and Mau 2008; Castle formation is hastened in unforeseen ways by ening the nation states' hands for the time sovereignty and autonomy have diminishe with eastern enlargement having greatly enh ably lastingly so (Heidenreich 2003), espec crisis. The process is subtle and incremental

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and immobility: European policys scepticism, dense social-policy d fiscal or administrative capacities. ms the EU's social policy-making eibfried 1995; Obinger et al. 2005). ial policy is limited. Policy evolves ommodation. The centre generates pment, rather than producing clear states' capacity to design their own y (Pierson 1995b), and authority, vitated towards the EU level. Loss hout member governments paying aly pushed for iabour mobility in erosion of sovereignty. Resistance s jostles with fears of jeopardizing urther checked by a ratchet effect. by all ECJ rulings , and can pursue procedures. Diminished member, weakness at the EU level restricts overnments still choose, but from rol over social policy increasingly ernments are sometimes happy to owards a multi-tiered system opens e avoidance' (Weaver 1986). This tives against domestic opponents scaping from domestic constraints, n-makers at both levels face serious ce they have 'locked themselves in' n. • An unusually tight coupling to market-making: the EU system of social policy is tightly connected to a process of market-building. Social poliCies intersect in a variety of ways with market systems. In the past, social policy had generally been seen as a spontaneous 'protective reaction' against market expansion (Polanyi 1994), as an outcome of politics against markets. In the EU case, however, even in areas like gender where the EU has been activist, poliCies have been directly connected to labour-market participation. As the centrality of decisions on labour mobility and free service markets reveals, EU social policy has been an integral part of the process of market-building itself. Never before in the world has the construction of markets so viSibly and intenSively shaped the trajectory of social policies.

therefore places the EC] centre stage. Attempts at corporatist policy-making generated much drama surrounding Europe's social dimension, but un til recently (Falkner 1998) businesses and unions had little direct involvement in making legally binding requirements for member states' policies. Today, the ECJ's backsliding on balanced corporatism (in Laval etc. ) delegitimizes that whole policy-making effort. Generally, legal strategies have the advantage of leaving taxing, spending, and ' administrative powers at the national level-even more so, as they are regulatory in nature. But a courtled process of SOCial-policy development has its own logic. Legal decisions reflect demands for doctrinal coherence more than substantive debates about policy outcomes. The capacity of reforms built around a judicial logic to achieve substantive goals is limited. Furthermore, courts heed political constraints in prescribing solutions less and may exceed the tolerance of important political actors within the system. In this sense the scope for a more explicit form of EU policy-making was made difficult because ECJ activism may generate resentment. This is one aspect of the disquiet over the 'democratic deficit'.

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The overall scope of EU influence has been crucial: national welfare states are now part of a larger, multi-tiered system of social policy. Member governments influence this structure, but no longer fully control it. Such governance occurs at multiple levels , although the EU processes differ from classical federal states: a weak policy-making centre , court-driven regulation, and strong links with market-making-a pattern radically different from any national European welfare state (Streeck 2000). One stalemate increaSingly needs breaking: 'the policy-making capacities of the union have not been strengthened nearly as much as capabilities at the level of member states have declined' (Scharpf 1994: 219 ; Offe 2003) . While the latter process is a permanent feature of globalization and Europeanization, the former process is an optional one, one which can be shaped politically. Perhaps the current economic crisis will be a catalyst for a reconfiguration of this constellation.

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Bercusson, B. (2007), European Labou Castles, F. G., Leibfried, S., lewis, J" Handbook of Comparative Welfare S Eichenhofer, E, (2006), Sozialrecilt d Schmidt), Falkner, G, (1998), EU Social Policy in t (London: Routledge). Fuchs, M , (2005) (ed,), Nomos Kom (Baden-Baden: Nomos), Hantrais, L (2007)' Social Poiicy in the Macmillan), Kleinman, M, (2001), A European Welfa (Basingstoke: Palgrave Macmillan), Kvist. J, (2004), 'Does EU Enlargement among EU Member States in Socia 301-18. Leibfried, S" and Pierson, P (1995) (eds. and Integration (Washington, DC: Th Leibfried, S., and Starke, P (20 08), 'Tran of Public Services and the Restructu Review, 6/1: 175-82, Mossialos, E" and McKee, M. (2002)' (Brussels: PIE-Peter Lang), Mossialos, E., Dixon, A., Figu eras, J" Options for Europe (Buckingham: Op Offe, C. (2003), 'The Europea n Model Integration?', Journal of Political Philo Scharpf, F. W. (1999), Governing in Eu University Press). Schulte, g, (2008)' 'Supranationales Re

.

This chapter is based on, but substantially revises and updates, Uibfried and Pierson (2000) and the more elaborate Leibfried (2005). I am indebted to the editors and to Eberhard Eichenhofer, Bernd Schulte, Dieter Wolf, and especially to Josef Falke, for their help.

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2 Recommendations 92/441 (Common Criteria Concerning Sufficient Resources and Social Assistance in Social Protection Systems, 24 June 1992), and 921442 (Objectives and Policies of Social Security Systems, 27 July 1992) reflect these difficulties and point to social policy convergence (Maydell 1999). In contrast, in the 1970s harmonization was still the major focus (see Fuchs 2003). 3 The first regulations were EEC 3/58 and 4/58; later EEC 1408171 and 574172. These were extended to third-country nationals in Regulation EC 859/03. After 29 April 2004 , all coordination regulation was modernized under Regulation EC 883/04.

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4 Much welfare state activity falls under 'services' in the terms of the treaty, not only 'social services'. Private insurance is a matter of financial services. So is the (monetary) 'transfer state', when considered as 'economic' activity rather than 'true welfare state activity', as, for example, when public pensions are shorn of all their redistributive elements in welfare state reform.

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chapters provide a guide to theoretical explanations, and the second chapter details the core contours of social policy, For more recent analyses see Castles et al. (forthcom-

ing), Hantrais (2007), and Offe (2003), For an outspoken UK view, see Kleinman (2001), For a broad 'continental' view, see Scharpf (1999: Ch, 4). On eastern enlargement

expectations see Kvist (2004). For an overview of the legal dimension on labour law

see Bercusson (2007), on welfare law see the comprehensive German contributions by Eichenhofer (2006), Sd,ulte (2008)' and Fuchs (2005): On health law, see Mossialos

rechtshandbuch (SRH), 4th edn. (Bad

and McKee (2002), and on health policy, see Mossialos et al. (2002). On the withering

away of the services (public utilities) mantle of the welfare stat e due to EC competition law, see Leibfried and Starke (2008), Recent ECJ cases may be consulted on the web

under http://wwwcuria,eu.int/ For a comprehensive analysis of the new corporatist perspectives, see Falkner (1998). Both the Journal of European Social Policy (1991-)'

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regu lar policy news is reported monthly in the German, bulletin, Eureport social (until

Feb. 1995 entitled Eureport), published by the European representation of the German social insurance (http://dsv@esipcorg) in Brussels, which is a member of the network

European Social Insurance Par1ners (ESIP; http://wwwesip.org). No equivalent English source exists.

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In recent years, employment policy has moved close to the centre of EU policy preoccupations, after several decades of policy initiatives, institutional and treaty innovations, and experimentation with negotiated and 'new' modes of governance. Employment policy is not, as is sometimes assumed, coterminous with the European Employment Strategy (EES)-a rather recent innovation, with as yet unclear potential-but consists of a massive corpus of European law and legislation. Employment policy is actually formulated and implemented via several parallel policy modes, including the Community method of legislating and the case law of the European Court of Justice (Eq); a unique hybrid of the Community method and the regulatory approach in the post -Maastricht method of 'making law via collective agreement'; and softer modes of intervention through po!i.cy coordination and benchmarking in the EES. Their coexistence reveals the instability and frequent renovation of the EU's employment policy architecture, triggered by the changing nature of the employment 'problem', the diversity of European labour-mar-ket organization and industrial relations, and the 'essentially contested' nature of employment regulation. Innovation and contestation come from three directions. First, the European employment policy-making agenda has shifted over time, following the end of full employment after the 19705, the emergence of a crisis of 'welfare without work' in the 1990s, and newer challenges created by post-industrial, service-sector employment creation. As many countries have discovered, if service-sector employment is to be generated in the private sector, then labour-market regulations may have to be more flexible than hitherto. This has complicated policy-making, producing new national strategies that seek to rebalance flexibility for firms and security for employees (Hemerijck et al. 2006) . It has also provided a maj.or impetus in the late 1990s and 2000s for the European Employment Strategy and the EU's adoption of the so-called 'flexicurity' paradigm, which seeks to facilitate more temporary and part-time work by loosening employment regulation, while mitigating the income insecurity that might result with tax and social-policy innovations. Second, the, diversity of European industrial relations and labour-market regulation complicates and frustrates attempts to tackle both employment protection and its promotion at the EH level. Employment regimes are coupled closely with national social security, pensions, and unemployment benefit arrangements (see Chapter 11), and employment-regulation and industrial-relations rules differ conSiderably across countries. They range from those in which the state plays a central role through the constitutional provision of workers' rights and comprehensive labour-market legiSlation (for example, in Belgium, France, Germany, The Netherlands, Luxembourg, Italy, Spain, and Greece) , through those where the state has traditionally abstained from regulating industrial relations (the UK and Ireland), to those where many rules have been and are still set by corporatist-type agreements between employers and

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Employment Policy 287 the European and national levels. This is a flexible form of governance, but one still potentially conducive to effective implementation. Nonetheless, the impact of directives produced in this pillar has been rather weak, owing to political opposition to upward harmonization and the institutional fragility of this form of law-making. The third mode-the EES and the open method of coordination-uses non-binding and flexible instruments. This is a 'voluntarist' form of governance with still weaker implementation capacities, and uncertain links between policy inputs and outputs. Open-ended experimentation, in both the form and substance of policy-making, takes priority over the search for efficacy as such (Citi and Rhodes 2007). Over time, the second and third modes of policy-making and governance have been added to the first, due largely to the efforts of the European Commission and pro-integration elites to work around member-state vetoes and to neutralize the operation of the double cleavage between 'federalists' and 'subsidiarists' and socialists/social democrats and market liberals. However, 'new' and experimental modes of governance and policy instruments have not even begun to replace the old. As a result of an ongoing process of experimental 'venue-shopping' CBaumgartner andJones 1993) by the pro-integration employment advocacy coalition, searching for the best institutional venue, with the least powerful vetoes, for policy innovation, each of the three policy-making and governance modes remains important in different ways in promoting and implementing European employment initiatives.

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and their opponents who invoked the second. Article 118 (EEC) simply required the Commission to promote cooperation between the member states through stud-ks, opinions, and consultations. Given the market-oriented nature of the Treaty of Rome, social and employment poliCies were to be used for correcting obvious market failures, not for creating a supranational welfare state (see Chapter 11) . National welfare states, it was assumed by the founding philosophy of the European Community, would 'embed' the new economic area in systems of social protection that would remain distinct from one another. But there was early conflict among member governments over whether and when European rule-making could be used to defend national systems from regulatory competition. Whereas the French believed that social security harmonization would protect their high social charges from creating competitive disadvantage, and that gender-equality provisions in the French constitution should be transferred to the Treaty; the Germans were opposed to any legal competence for the supranational authorities in this area (M. Rhodes 1999). The only substantial concession made to the French position was Article 119 (EEC) on the principle of equal pay. As a result, many of the employment-policy advances from the 1960s onwards were based on alternative articles. In the early 1970s, for example, the Council of Ministers made use of Articles 100 (EEC), the internal market provision, and 235 (EEC), the 'flexible clause' that allowed the Council to adopt by unanimity any provisions directly rela ted to the aims of the Community These empowered the Council to issue directives and regulations for the 'approximation' of national regulatory systems, including laws, insofar as they directly affected the establishment and functioning of the common market, and led to directives on dismissals (in 1974) and workers' rights in the event of mergers (1975) . Subsequent treaty revisions sought to strengthen the basis for employment policy, but only meagre steps were taken, and each time only after major clashes and compromises between member states. In the SEA, CommunitY'competences were bolstered, but only for health and safety issues where regulation could be justified as preventing potential market distortions. Article 118a (EEC) thus granted the Commission the right of initiative in health and safety legislation after consultation with the Economic and Social Committee, gave the EP a second reading of proposals through the new cooperation procedure, and allowed the Council to act under QMV Yet such directives were constrained by the proviso that small and medium-sized firms should be protected from excessive regulatory burdens. Elsewhere in the SEA, although Article 100a (EEC) introduced QMV for measures essential for the construction of the single market, British and German opposition ensured that those relating to the free movement of persons and rights and interests of workers were expliCitly excluded (M. Rhodes 1992; Majone 1993). By the time of the TED , there was a broader coalition of member states in favour of European employment rules· to prevent a regulatory 'race to the bottom' as the single market deepened and the prospect of currency union came closer. Yet opposition from the British government placed a major constraint on any new supranational transfer of powers, as did the reinforced subsidiarity principle in the
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rect effect with the supremacy of s (Van Gend & Loos, 1963; Costa, on equal pay and equal treatment solid Article U9 (EEC) (now Art. uncil. ECJ jurisprudence on equal mplementation .of these directives cle 118a (EEC) (now part of Art. 07) on health and safety at work ecific hazards, plus the 'soft-law' and four weeks' annual paid holictive) . A second framework direceral objectives and obligations on varied application at the national er directives and a series of action

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One of the key innovations of the Maastricht TEU regarding social policy was its creation of an alternative mode of law-making-an 'inter-professional social dialogue'-involving the European social partners, employers, and trade unions. Several forces converged behind this reform. For European unions, especially the powerful German unions, it would strengthen the weak European Trade Union Confederation (ETUC), and bolster their influence after their defeat in the dilution of the 1989 Social Charter. For the European Commission and a number of member states, it would proVide an alternative means for counteracting obdurate British opposition to further EU employment legislation. And for those seeking to defend national sovereignty, a shift to directives produced at EU level, but implemented via negotiation in the member states, would better accommodate the diversity of European industrial relations. Europes employers, acting through the Union of Industrial and Employers' Confederations (UNICE; since 2007 Business Europe: The Confederation of European Business) and the European Association of Craft, Small and Medium-sized Enterprises (UEAPME) had tried to keep the social dialogue in check, and consistently opposed both EU-Ievel collective bargaining and any legislative enhancement of workers' participation rights in transnational companies. But by 1991 , even they had accepted the procedural importance of rule-setting at the EU level through the social dialogue, and had discovered a potentiai channel for diverting Commission initiatives away from the standard legislative path. The role of Commission entrepreneurialism and institution-building in gaining this concession was central. Article 118b (EEC) obliged the Commission to promote dialogue between management and labour, and it worked hard to promote discussions between UNICEIUEAPME, the public employers' associationthe European Centre of Enterprises with Public Participation and of Enterprises of General ECOnomic Interest (CEEP)-and the ETUC through jOint union-employer working parties on the economy, employment, social dialogue, and new technologies. Originally launched in the Val Duchesse talks in 1985, after 1989 this process became more focused, prioritizing education and training, and producing four joint opinions on the promotion oflabour mobility, education, vocational gUidance, and management-labour partnerships, which, in turn, provided the groundwork for
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m the Social Action Programme of Art. 94 TEC) , designed for singlew Art. 308 TEC), which provided y in the Treaty, the Council proer collective redundancies, Direcof ownership of undertakings, and nsation to employees of insolvent ra of extensive industrial restruce worker representation clauses of adition of UK industrial relations

industrial relations from the original six), and to Greece (1981) and Portugal and Spain (1986). However, they did succeed in placing a floor of minimum standards under national systems to prevent a process of competitive deregulation, creating conditions for the further consolidation of such regulations dependent on the political dynamics of individual member states-a form of what EU lawyers refer to as 'reflexive law' and aspired to in slightly different form in the second mode of employment policy-making and governance: 'law via collective agreement'.

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two key agreements : the September 1990 framework agreement, signed by the CEEP and the ETUC, on improving vocational training and health and safety via social dialogue; and, most importantly, a joint submission to the Intergovernmental Conferences, which in 1991 negotiated the TEU, proposing a new role for the social partners in maki~g and implementing EC policy (M. Rhodes 1995; Falkner 1998). This submission was inserted. almost verbatim into the Social Protocol of the TEU (later integrated into the ToA), creating a complex set of procedures for the pursuit of law via collective agreement: all directives, whether adopted by QMV or by unanimity, could henceforth be entrusted to 'management and labour' at their joint request for implementation via collective agreement; the Commission was now obliged, before submitting social-pol·icy proposals to the Council, to consult management and labour on the possible consequences of Community action, to which the social partners could respond with an 'opinion' or a 'recommendation'; and, most importantly, the social partners could now negotiate directly the content of Commission proposals, proceeding, given consensus, to a collective agreement. Such agreements could then be implemented by a further negotiation in the member states in accordance with their own procedures and practices, or via a Council decision on a proposal from the Commission. The negotiation procedure was first used in 1993, when the Commission presented a modified version of a legislative proposal on the creation of European works councils that had previously failed by the normal legislative route. In the event, the social dialogue channel also failed, and the directive- under which management must institute forums for informing and consulting employees in all companies with more than 1,000 employees and more than 150 in at least two member states-was finally passed under the Social Protocol, using the standard legislative process, in 1994 (Directive 94/45/EC) and then extended to the UK (97174JEC) in 1997. But several otherproposals were successfully translated into social framework agreements, also after failing under the standard legislative route, including t:hree intersectoral agreements, which led to Directives 96/34 on parental leave, 97/81 on part-time work and 99170 on fixed-term work, and two sectoral agreements which led to Directives 99195 on working-time provisions in maritime transport and 2000179 on the working time of mobile workers in civil aviation. The limited use of this new channel prior to the Treaty of Amsterdam has been described by some as "a derisory outcome" for those who worked hard to break the EU SOCial-policy impasse at Maastricht (Kenner 2003: 291) . The legislation does provide real regulatory added value, but its critics argue that its minimal standards and flexibility have limited its impact to the least well-regulated countries. The directive on parental leave has been criticized as a 'lowest common denominator' agreement; the directive on part-time work has been regarded as weak, consisting of a series of non-obligatory provisions unlikely to remove discrimination against this category of workers; and the directive on fixed-term work has been called a

'missed opportunity' to regulate one of the most member states little or no change was 290). Cross-sectoral accords on Joint opin EU-Ievel social partners in March 2005 on a areas of gender equality in the workplace, defining 'flexicuriry'-are really statements even weaker. A more optimistic interpretation argues t a catalyst for mutual learning' (Deakin 2007 of 'soft' policy influence based on the notio ance' and usually reserved for the OMC (s part-time and fixed-term work directives h have strengthened contract requirements i highly regulated Germany, while in both co created the parameters for a new debate on t consensus. Nevertheless, even if the gradual shift t framework agreements facilitated political opposition to European employment-policy government, and other member states-suc enhanced subsidiarity, at its best negotiated unpredictable effects from one country to th Importantly, however, such legislation do quent 'hardening' by EC] case law as, for e Adeneler (Case-212/04) and the April 2008 r of which bolstered the implementation of work (follOwing the social partners' frame tion of successive fixed-term employment co private-sector workers and the importance of such contracts. But the relative weakness of the social p determination of employers to dilute the im clearly prevented a major leap forward (S and regardless of a commitment by the soci Laeken in 2001 to a new and more autonomo a Commission Communication on the futur ated in the presentation of the social partne reaffirmed in 2005 at the twentieth-annivers is still heavily dependent on the Commissi mover, typically by threatening (and taking) social partner agreement (Keller 2008; Smis

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ent Strategy (EES)-a broad, multinding, soft-law instruments of peer d a radical departure from the existon to European policy ambitions and ded areas of national sovereignty. o-social dimension elites and interEMU) , which prevented individual nd fiscal policies to boost employts critics, represented a major threat 11). But importantly it was also a lockages in the two existing policy during 'double cleavage' in the poli-

thatetid 'by encouraging cooperation between member states and by supporting, and if necessary complementing, their action'. The gUidelines are not binding-an essential feature for the compromise that eventually brought all member states on board. Bu t by its inclusion in the ToA, the EES became part of the processes in which member states are obliged to participate. The process of policy deliberation envisaged was put into effect at the Luxembourg European Council in November 1997, since when it has been repeated on a yearly basis. The first set of (nineteen) European Employment Guidelines (EEGs) was also adopted, based on four 'pillars': employabilit), entrepreneurship, adaptabilio/, and equal opportunities, each containing between three and seven guidelines. The 2000 Lisbon European Council confirmed its support for the EES and committed the member states to striving for 'full employment', coupled with new quantitative objectives: a 70 per cent overall employment rate and a 60 per cent female employment rate by 2010. At Lisbon, and then at the N..!:ce and Stockholm European Councils, successive Council preSidencies, held by social-democratic governments, acted closely in alliance with the Commission and the EP to sustain the coalition, propel the EES forward, and extend the 'open method of coordination' (or OMC) to other areas of policy such as social exclusion (van Riel and van der Meer 2002). Nevertheless, the EES remained contested terrain, both ideologically and in power games between the Council and the Commission.

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cy for employment promotion arrive essence, the Commission, operating d to explOit a new political opportue-minded social-democratic governan Riel and van der Meer 2002). earlier, following the Delors Commisd Employment in 1993 (Commission Attempting to blend the priOrities of and liberals, the tactical aim of this een notions of solidality and competiue to counter-pressures from several ere was little real progress at the time tronger interpretation of the Delors European Council meetings in Madon spurred progress along by striking st importantly the Party of European most reluctant member states. mployment Strategy was reached at e goals and procedures of the EES Arts. 125-30 TEC) on employment. yment, to be achieved by promotand labour markets responsive to e Community should contribute to
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When first launched, the EES had a relatively low profile. It was only after the OMC was formally endorsed and given greater political weight by the European Council at Lisbon in 2000 , and extended beyond the EES to other areas of policy-making, that it became a topic of intense interest and debate as a 'new mode of governance' different in its core characteristics from both the u'aditional Community method and older hard- and soft-law procedures: the heterarchical participation of actors; a 'new' problem-solving logic based on deliberation and 'policy learning'; and the use of benchmarking and reference to 'best practice' (Scott and Trubeck 2002; Cohen and Sabel 2003; Bomi.s and Jacobsson 2004) . All are considered advantages over traditional modes of policy-making by the advocates of the EES/OMC:, in addition to its purported capacity to neutralize the conflict over national versus European, and flexibl e versus more rigid forms of labour-market regulation by allowing national policy-makers to interpret European guidelines, and by promoting 'flexicurity' in employment regulation. But regardless of these theoretical advantages, ultimately, the EES is a political strategy and its success or failure is determined by hard political realities. We can assess those realities first by considering the formal EES policy system and second by examining the ways in which the tensions and political conflicts found in the other two modes of European employment policy have also emerged in this new mode of policy-making and governance. Formally, the roles of the EES actors and relations between them can be set out in terms of the EES 'policy coordination' cycle. This cycle was reformed substantially . at the Brussels European Council in June 2003 , not only to 'mainstream' the EES

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within the Lisbon Agenda, but also in response to complaints from the member states over the excessive complexity and high level of detail in EES gUidelines, the considerable overlap between the EES and other processes, and .the duplication of work for national officials (seeJacobsson 20.0.4). From 1997 to 20.0.2, the annual policy cycle began with agenda-setting, in which both the rotating preSidency of the Council and the Commission have considerable influence, the latter providing the 'support team' as well as analytical and preparatory documents. The Commission draws up the guidelines, which are then endorsed by the Council via QMY. Policy objectives are then decided: before 20.0.2 they took the form of twenty or so guidelines, organized around the four pillars of employability, entrepreneurship, adaptability, and equal opportunities, but thereafter were reduced to ten 'results-oriented' priorities structured around three objectives: full employment, quality and productivity at work, and social cohesion and inclusion. In 20.0.4-5 those objectives were further reformed ul2...der member-state pressure via the 'European Employment Taskforce' (EET), chaired by Wim Kok, to focus more closely on 'jobs and growth' and the Commission's new 'flexicurity' agenda (see below). In parallel, the Commission makes individual recommendations, endorsed by the Council, to each member state. The recommendation tool, as defined in the ToA, is a key element of influence distinguishing the EES from other OMCs. Member governments then prepare their National Action Programmes (NAPs) in response to the recommendations. These are then 'peer reviewed' in the so-called 'Cambridge process'- a closed two-day meeting of the Employment Committee (EMCO) , which has two delegates from each member state and two members from the Commission, followed by bilateral meetings on the NAPs between the latter and government representatives. In theory, this process is given an important infusion of democracy and legitimacy by involving political and interest-group representatives. According to the ToA, the EP has to be consulted on the EES, although in practice its role was somewhat marginal during the first five years due to time constraints. However, the timetable of the EES was modified in 20.0.3 , creating additional time for the EP to prepare its opinion for the annualJune European Council where the EES is discussed (Table 12.1).
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I t was hoped that the EES would reduce political conflict over employment policy, given its soft-law character and acceptance of member-state diverSity. Indeed, much literature on the EES has focused on its deliberative, consensus-seeking qualities. But a closer analysis reveals ongoing contestation reminiscent of the history· of the other modes of EU employment policy-making: conflict between the Commission's 'competence-maximizing' aspirations and the concern of member states to contain them; related sovereignty disputes within the EES policy-making system; and tensions between the EES's deliberative 'network governance' pretensions and its tendency in reality to replicate traditional top-down policy hierarchies .

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facto extension of Commission inh instance was evident in the 2003 on had fragmented and right-wing ployment priorities: liberal market -pillar approach to the three 'core tortured EES policy discourse that with liberal market flexibility. vident in 2004-5 when the 'Eurook, radically shifted the 2003 core aising the quality and productivity usive labour markets) in a liberal, asis on the adaptability of workers arrangements. From 2005 , the EES uidelines, and in 2006 the 'renewal' ion downgraded social protection
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As ·for the supposed experimental-'heterarchic' and 'network-governance'character bf the EES, the partiCipation of labour and management has been Widely recognized as weak (Smismans 2008b). The EES policy cycle is actually rather closed, elitist, andarguably much less democratic and accountable than the standard Community method of legislating (Syrpis 2002). In particular, parliamentary influence (whether national or European) is very limited (though see Duina and Raunio 2007), and there is no form of judiCial review. The Council and the Commission are in practice the key decision-makers. Nor is the EES especially effective as a means of shaping policy reform. The most authoritative accounts conclude that NAP procedures have been insufficiently integrated into national decision-making structures and budget allocations to make them matter Oacobsson and Vifell2003). Less a deliberative process of policy-learning or best-practice diffUSion, the EES can best be described as a 'double standards game' in which governments endorse European guidelines, but frequently fail to take responsibility for their implementation at home. For Deakin (2007) , the danger of the EES is that its deliberative, soft-law pretensions provide little defence against the risks of regulatory competition and little in the way of counterweight to the forces of negative integration-especially at a time when the EC] has begun to prioritize market access rules over national social protection regulation (see below). At best, it seems, the EES has encouraged better coordination among certain government ministries, as well as between administrations and interest groups, in a limited number of member states Oacobsson and Vife1l2007). But even that conclusion is qualified by evidence that such influence is limited to a small group of actors, leading to little byway of institutional innovation, and figuring hardly at all in public discourse or inter-party competition (Meyer and Kunstein 2007). Moreover, as demonstrated above, there is no real political support base for a hardening or upgrading of the rules for employment-policy coordination, as evident in fierce divisions in the discussions of the Economic Policy Workt1g Group of the Convention on the Future of Europe in 2002-3, and in the more general opposition to constitutionalizing the OMC. Further changes in 2004-6 revealed a steady shift away from socialdemocratic federalism towards a more liberal-and 'subsidiarist'- member-state-led labour-market strategy In sum, far from neutralizing the 'double cleavage' generating political conflict in European employment policy, the EES has clearly fallen victim to it.

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jurisprudence and by striking down numerous challenges to the Commission's broad interpretation of sometimes ambiguous treaty foundations. More generally; the ECl's case law has largely.reinforced the view that stems from the Treaty of Rome and justifies the provision of a floor of minimum EU social policy provisions, rather than an extended upward harmonization of member-state social and employment policythat the pursuit of the four freedoms (the free movement of goods, persons, services, and capital) should not undermine national social and employment protection. Nevertheless, the position of the ECJ regarding the balance between freedom of movement and national social and labour market regulations has shifted over time, as it has sought to respond to political pressures from other Community institutions and the member states in interpreting the treaty and refining its earlier jurisprudence (see also Chapter 11) . In a neo-liberal phase that followed the landmark free-tradepromoting judgments in Dassonville (1974) and Cassis de Dijon (1978) that radically reformulated t~ prohibition of quantitative restrictions on imports in Article 28 TEC (formerly Art. 30 EEC) to include domestic regulations, the Court struck down a series of national laws that it deemed to impede free trade, including (in Macrotron, 1990) the German Federal Employment Office's monopoly of job placement (Eliasoph 2007-8). Yet in light of the broader developments in EU social policy discussed above, both prior to and after the Maastricht Treaty; the Court's deregulatory enthusiasm was dampened by the prospects of a major political clash over state sovereignty that threatened to undermine the ECl's legitimacy. In 1991, in both Keck (regarding a French law prohibiting the resale of commercial goods for lower than their purchase price) and Poucet and Pistre (in which a French insurance fund for the self-employed was claimed to contravene Community competition law), the EC] sided with the national regulators, and applied the principle of 'solidarity' to protect social welfare schemes from competition law. In 1999, in Albany, the Court took a cue from the new social provisions in the Amsterdam Treaty to exclude from competition Article 81(1)-which prohibits agreements that restrict or distort competition- a supplementary pension scheme negotiated by Dutch social partners in the textile industry. In all of these cases, the protection of national social regulations was privileged above competing claims on behalf of market freedoms (Eliasoph 2007- 8; Barnard 2008b). However, it would be wrong to imagine that the balance of EC] case law sided with national regulation in all cases. In 1990, in Rush Portuguesa, the Court ruled against a requirement imposed by the French state on a Portuguese service provider that it obtain work permits for its Portuguese employees. But at the same time it reassuringly stated that Community law does not prevent member states from extending their legislation or collective labour agreements to any person employed-even temporarily-within their territory, no matter in which country the employer is established. This seemed more consistent with Keck and Poucet and Pistre (and their accommodation of national regulations) than with the free trade judgments made in Cassis and Dassonville (Syrpis 2007). But in 1991 in Sager-the source of current controversy in recent employment-related ECJ rulings-the Court ruled that only an 'i interest', could justify a 'proportionate' di vider of services based in another member in the early 2000s-extended the market cross-border services to the sphere of e business wishing to set up in another m complying with that state's employment l ment (Barnard 2008b). It is precisely this claim that 'has trigg ments. Together they threaten a new clas over the balance between economic freedo concerns regarding the legitimacy of Cou employmen t laws and practices of membe Much recent EU legislation has in fac employment regulation from deregulat freedom of movement, in large part in re endanger such regulations. Thus, at the the Posted Workers Directive (96/71IEC) another member state in the framework are guaranteed the working conditions a collectively agreed provisions and arbitrati Equally, ten years later, when the Services was adopted by the Parliament and the C the controversy that led to the removal fro principle (under which service providers their own would only be subject to the law under the Posted Workers Directive were stated that the Services Directive does not legislation, or the exercise of fundamental And yet, between 2005 and 2008, thr resurrected the market-access priority and t an 'imperative' reason relating to 'the publ .discrimination or restriction against a prov state. As such they have renewed the debat national systems of employment regulatio from Single-market pressures. In Viking (2007) a strike by the Finnish S that flagged a ferry operating out of Hel interference with the company's rights und on the freedom of establishment. 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and, via a process of'venue-shopping', by seeking alternative institutional channels conduci~e to the integrationisl project in employment policy, including a creative interpretation of the treaty base, transferring legislation to the 'inter-professional dialogue', and, finally, by shifting emphaSiS to the wholly soft-Iaw-based EEs. Each mode of policy-making and governance remains firmly in place, however, creating what could be considered either a barely legitimate layering of institutional innovations (Wendler 2004) or a multi-layered opportunity structure, holding out the possibility of a complementary or integrated use of policy instruments and governance modes. In contrast to claims made on behalf of a major shift to the soft-law, voluntarist EEs/OMC, the Community method of legislation remains highly active and is far from being replaced by non-binding instruments (Arnold et al. 2004) . Recent employment legislation includes the framework equal-treatment directive to combat employment discrimination on the grounds of religion, disability, age, or sexual. orientation (2000); the regulation governing the creation of a European Company Statute (200l) and an accompanying directive on worker involvement (2001); a controversial directive on national information and consultation rules, under which firms over a certain size must put in place mechanisms for informing and consulting employees (2002); agreement on a directive implementing equal treatment between men and women outside the workplace (2004); the merging of seven directives on equality for men and women in employment into a single coherent instrument (2005); and the approval of a directive to regulate temporary agency work, and agreement in the Council to amend and strengthen the Working Time Directive, in the second half of 2008. The EC] continues to play a critical role in enforCing such directives, as when in December 2004 five member states-Austria, Finland, Germany, Greece, and Luxembourg-were referred by the Commission to the ECJ for failing to transpose the 2000 framework equality directive. The second mode-the more experimental social dialogue-has appeared to weaken over time. With the exception of more limited sectoral dialogues and related directives, such as the 2008 agreement and directive to improve working conditions in the maritime industry, the transfer of draft directives from the first legislative mode has dried up and the focus of the social dialogue has shifted to 'new generation' framework agreements. The latter include agreements on 'teleworking' (2002), 'work-related stress' (2004), and 'harassment and violence at work' (2007). These agreements are well-intentioned but (very much in line with Europe's employers' associations' preferences) do not have the force of a directive, are not subject to threats by the Commission to proceed with directives, and their implementation is heavily shaped by ongoing national power games between social partners and the state (Larsen and Andersen 2007; Keller 2008). However, the Commission has not become any less entrepreneurial in promoting this and related forums for exerting influence in employment policy; espeCially in using unions and employers as a sounding board for future legislative proposals, to help set its agenda for future policy initiatives, and to police the implementation of

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existing legislation. Examples include the Commission's 2005 call on social partners to begin negotiations on promoting and monitoring best-practice guidelines for industrial restructuring and the operation of European Works Councils, which helped in the adoption of a recast Works Councils Directive in December 2008 (2009138IEC); the Commission's consultation of the social partners after 2007 on the issue of the cross~ border transfer of undertakings; its use of unions to report on the implementation of employment guidelines in member states; and the mobilization of social partners across Europe behind the new (post-December 2006) integrated Commission programme for employment and social solidarity, Progress. Progress replaces previously separate action programmes on anti-discrimination, gender equality, the fight against social exclusion and employment measures, and promotes network creation, projects, and partnerships between governments, NGOs, employers' and workers' organizations to help bring national policy reforms into line with European guidelines. Such initiatives that foster the creation of national advocacy coalitions provide the Commission with a degree of access to and influence over member-state policy-making that it would not otherwise enjoy As for the EES, as observed by Jacobsson and Vifell (2003), it has had three prinCipal aims: cooperation among actors, the coordination of national employment poliCies, and convergence in outcomes. However, as noted above, there is no clear consensus or institutional commitment to any bf these goals across the EU member states, or to developing further more effective means for achieving them. One should note in this context the narrowing of employment objectives to 'flexicurity' in recent Commission documents- such as the 'Strategic Report on a Renewed Lisbon Strategy for Growth and Jobs' (Commission 2007h) that was presented to the 2008 Spring European Council-a trend that mirrors the parallel narrowing of priorities in the EES noted above. Both the ETUC and the European Parliament have lobbied against such developments , seeking a more 'balanced' approach that would strengthen the 'social dimension' of EU employment guidelines within the Lisbon strategy. 'Flexicurity' has become the leitmotiv of European employment policy-making in recent years, the core elements of which were defined in a Commission communication in June 2007 (Commission 2007 g) and placed alongside the notions of 'decent work' and the 'reconciliation of economic competitiveness with social justice'. A similar discourse appears in the Commission's Green Paper on modernizing labour law (Commission 2006d), which has been criticized for its vagueness, obsession with non-standard fonns of employment, and lack of attention to core labour standards (Sciarra 2007). Such critiques reinforce the view of other critics (e.g. Raveaud 2007 and Deakin 2007) that the danger of the EES/OMC lies precisely in its potential shift of policy attention away from 'hard' to 'soft' governance, based on imprecise policy goals, at a time when developments elsewhere (as in the EC)'s Viking, Laval, and Ruffert judgments) demand a new emphaSiS on treaty-based legislation, both to underpin existing forms of employment protection and the exercise of fundamental rights, and to finnly establish the boundaries between the freedom of movement and national systems of employment regulation.

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We can now look back at half a century of environmental policy-making in the EU, during which time the- olicy has become solidly institu tionalized. Since the adoption p of the Treaty of Amsterdam (ToA) most environmental policy decisions are taken by qualified majority voting (QMV) in the Council and with co-decision rights for the European Parliament (EP). During that period, the environmental-policy activities of the Commission, the Parliament, and the Council have grown dramatically, and . EU environmental policy itself has grown from its initially marginal status to become one of the most active areas of EU policy-making. This chapter will begin by briefly tracing the hiStory of this institutional 'success story'. It will continue by providing a deeper understanding of the role of the primary policy actors in the EU , highlighting their role in the environmental-policy process and in the expansion of the policy over time. The chapter will proceed by illuminating some challenges that emerged with the rise of the EU's regulatory agenda, on the one hand, and with the development of an international role for the EU in environmental policy, on the other hand. With the growth of the regulatory output, questions about the effectiveness of the policy gained in saliency. The EU has responded to this challenge by increasing attention to the implementation process, addressing the issue of better policy coordination (both horizontally across policy fields and vertically across levels of governance), and diversifying its portfolio of policy instruments . The enlargement of the Union is introducing new issues and triggering new dynamicS in these ongoing reforms. While there is little evidence of a slowdown or of a lowering of environmental standards so far, the financial burden of regulatory policy and the issue of adequate administrative capacities acquired new weight in recent debates. Over the years, the EU has become an important actor in international environmental policy. After a period of establishing the EU as a formal participant in international organizations and environmental regimes, the EU is now claiming a leadership role for itself. The challenge of giving credibility to this claim will be discussed in this chapter. Focusing on the issue of climate change, I note that international commitments have introduced new dynamiCS on regulatory policymaking inside the EU.

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The evolution of environmental policy in deepening in institutional terms as well as Many authors (e.g. Zito 1999; Knill and in order to point to some characteristic i evolution. The first phase (1972- 87) follo in the environmental field (Hildebrand 1 and normative core for a' fast-growing ne states. Environmental policy during this motivations and was legally based on the Common environmental standards for pr processes in order to protect air, water, hazardous waste during industrial activity field for economic actors and to remove n different regulatory practices at the nation Generally, in the 1970s the timeforenviro European, and international levels, and pi 1997) pushed for an increasing range of protection. These leading states, supporte began establishing a new policy field at C market-building task of the Community of environmental pollution. Despite the environmental protection policy agreed t to secure market access- and to maintain international discourse. The Single European Act (SEA) initiate 1992, codifying EC competence in this po principles, and decision-making procedur explicit legal basis for environmental regula in the Council for some areas of environ of the EP in decision-making. During the rise in activities in this field. Its third Envi out the general objectives and strategies o period, declared 'high levels of protection' the role of prevention as well as the need to protection in other policy areas . This perio and emission-oriented regulation aiming a the source Oohnson and Corcelle 1989;Jo The third phase of EU environmental on European Union (TEU) coming into fo tence still further. Knill and Liefferink (200

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• Article 2 (TEC) introduces the • Substance: Formal commitment to a high level of concept of 'sustainable growth protection and the integration of environmental respecting the environment' policy objectives into other policy areas • Article 2 (TEC) and Preamble • Decision rules: Co-decision (Art. 175 TEC) for establish concept of meas ures adopted under Art. 174TEC (ex Art. 130r TEC) sustainable development and strengthened commitment to integration principle 2003:Treaty of Nice (ToN) 2009:Treaty of Lisbon • Decision rules: Adjustments to' OMV raise the threshold for reaching qualified majority
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vironmental policy-making, namely il of Ministers, and Court of Justice U, environmental interest groups. It g the conflicts between proponents standards within each institutionon the inter-institutional relations

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therefore highlight some of the specific challenges characterizing environmental policymaking, namely the challenge of horizontal policy coordination and the balancing act of establishing a European profile for a policy field that emerged as a flanking policy to the core economic functions of the Community, on the one hand, and responding to member-state preferences (i.e. acting as their agent), on the other hand. First, part and parcel of the development of a European environmental policy was its institutionalization as a more or less discrete sector, with its own legal basis Cafter the SEA), a dedicated Directorate-General (DG) within the Commission, a specialized 'Environment Council' within the Council of Ministers, and so on. Yet environmental policy is also a 'horizontal' policy, affecting economic sectors ranging from agriculture to transportation and requiring coordination among a diverse set of DGs within the Commission. The often conflictual relationship among DGs poses problems for coordinated and coherent policy formulation. These conflicts became Widely acknowledged with the ~doption of the fifth EAP in 1993, which introduced a new consensual rhetoric pointing to win-win solutions and joint responsibility for environmental and economic objectives. Specific coordination arrangements were decided, responding to the principle of environmental policy integration laid down in the treaty, such as the deSignation of 'environmental correspondents' in various sectoral DGs, a Consultative Forum for Sustainable Development and a (now suspended) 'Green Star' system to identify proposals with likely environmental impacts. However, these initiatives went against a tradition of respecting 'turf' boundaries in the Commission (A. Jordan et al. 2008: 166). They both underestimated their organizational implications and lacked high-level political support (cf. A. Jordan and Schout 2006), and especially in the presence of potent ec'o nomic interests inside the Commission or among the policy addressees they proved rather ineffective. The regulation of automobile emissions has been such an area, where cross-DG turf battles and even conflict within the College of the Commissioners prevented coordinated and effective environmental policy. In th e 1990s the problems of divided responsibility were the reason for an interesting regulatory experiment in the car industry-the so-called Auto-Oil Programme. In this exercise, DG Environment and DG TREN (responsible for energy), against the initial opposition of DG Industry, invited the car and the oil industry to think jOintly about the most cost-effective solu tions for tackling air pollution from cars by combining measures to improve fuel quality and to advance motor technologies. Based on such coordinated industrial input the leading DGs hoped to be able to introduce an innovative-and cross-sectoral-solution for the problem of rising auto emissions after internal fragmentation and opposing preferences between DG Environment (in charge of environmental motor technology) and DG Industry (controlling the fuel issue) had previously prevented the preparation of such a cross-issue proposal. The attempt to effectively delegate coordination functions to industry, however, proved to be of limited success, not least due to coordination problems between the two different industries, each of which understandably hoped to shift the adaptive burden to the other (Friedrich et al. 2002) . More recently, in 2008 , conflicts between the Commissio and the Commissioner for Enterprise, G emissions of greenhouse gases became full control of the dossier, h e (and the down significantly the initial proposal d a public fight between two Commission challenge of complying with the princi even inside the Commission. Second, the Commission needs to balan with the need to be responSive to the mem successful decision-making and impleme 1980s, when the institutional and normat still weak at the EU level, the Commission advance its role as a supranational actor a exceeding the status quo in the member st tive, this role put the Commission in al states and the Council. While developing a long-winded negotiations and poor imple even during the early phases of EU envi scription risks being a caricature. As indic states began developing an interest in env in order to reduce the risk of competitive d regulation to the Community level. Hen to national demands for European policy small staff of about 500 A-grade officials, tional expertise and regularly sought the o the feasibility of its proposals and to anti hamper deciSion-making. This attentiveness to the member states the last decade due to a re-ordering of the mentation led the Commission to improv the ground', namely the relevant agencies design stage. Beginning with the fifth EA member states as partners; formal and inf put this cooperative approach into practi national entrepreneurship seemed more pr within a confrontational modus operandi. Latest evidence of the Commission's p in climate policy It has framed the climat tive project of the Union-relevant for job protection as well as its credibility as a 'w ronmental measures related to the climate verve and with demanding standards, som

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on, is characterized by segmentavironment Council and the various al of the Council and the pyramid ector-specific approach. This 'insuescape from domestic constraints. charge of the economy, finance , or e opportunity to give support to an ally, although this depends also on across ministries. Back home, conrussels' or a too-powerful alliance sparency of Council negotiations, nments as regards their previously eway of national policy-makers in s sometimes rather unpredictable

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ders from environmental laggards, ply put, the leaders appear to be den, and Denmark , i.e. the richer, oorer, southern states like Greece, s , which have other investment hing for tougher environmental sular location (protecting it from of its heavy industry sector, was hough this has changed in the past s north-south, rich-poor cleavage nt. The southern enlargements in tial increase and re focusing of the vironmental investments. In 1993 nt of its monies on environmental ntries which joined in 1995 , in hem to exceed EU environmental

against financial burdens imposed on them. The negotiations over the climate change package, which was agreed in Parliament and among the EU leaders in December 2008 , with the final legislation being adopted in April 2009 , were such an example, where special treatment of the new member states has been successfully fought for in the context of EU-internal 'effort-sharing' arrangements as well as within the emissions trading scheme (see Chapter 15). These countries justified such speCial treatment by pointing to the massive transformation processes in the past two decades which inadvertently had led to Significant reductions in greenhouse gas emissions (EurActiv 2008). Demands for additional conciliations were successfully voiced in the final stages of the negotiations in the light of the financial crisis. Yet, th e kind of slowdown in environmental policy that can be attributed to the financial crisis shows no clear-cut east-west pattern as so-called environmental-leader states like Germany or the UK also shy away from imposing extra costs on industry In fact, the cleavage 'structure in the Council has n ever been quite as twodimensional as suggested above. Three reasons ac co unt for this greater complexity. In the first place, member states face different environmental problems. Highly industrialized countries are likely to be more concerned with air quality, waste treatment, and noise, while countries wi th a larger rural sector and dependence on tourism place greater value on the quality of soil, nature protection, and sufficient quantities of water. Second, countries differ in their regulatory philosophies and styles (Richardson 1982; Vogel1986). Hence, their governments argue not only about the level of standards, but also about the type of policy instrument, the amount of administrative or regional fleXibility, and the reqUired scientific certainty before agreeing to EU measures. Third, member governments alter their positions over time , if either the economic and environmental conditions change or a new government with different policy priorities comes to power.

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As indicated above, the EP has gained deciSion-making power over the years. Today the co-decision procedure applies to most aspects of environmental policy-making the EP the equal partner of the Council. But even earlier the EP had left its mark. Traditionally, the EP has been the 'greenest' of the three main environmental policymaking bodies. In the case of the 1979 Wild Birds Directive, for instance, the EP had been petitioned by several animal rights groups concerned with the hunting of migratory birds, and in 1971 requested the Commission to take up this issue. The Commission responded in the first EAP and, after consulting numerous experts, presented a draft directive in 1976 (Haigh 2004: 9.2). In the 1990s, the EP brought the issue of implementation in environmental policy to the fore and pushed the Commission to engage more systematically with societal and administrative actors on the ground (Collins and Earnshaw 1992; European Parliament 1996); regular Commission

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characterized 't he operations of this commit chairmanship of KenColiins (1979- 99),4 a His successors, CarolynJackson (1999- 200 members of the EPP and politically less pro as long-time active members of the committ expertise in its work, ensuring its influence subsequent chairman of the committee (2 Czech Republic, gained this position not d but due to the complex and therefore unpre to party and member-state delegations in t assignment of posts in the EP revealed a nu observers. Ouzky led this large committee in ally sceptical when it came to developing n measures. For instance, he was one of the change package, questioning the scientific b against adopting the Interim Report on the s pointed to its man-made origins (Europea temporary committee on climate change. Ch again, however, inJuly 2009 follOwing the MEP J0 Leinen was named as the incoming c regional environment minister in his native proactive role as chair (EUobserver.com , 16 J The climate package-as many other l shaped by complex inter-committee relati Hughes procedure (and its 'enhanced' varian committees-such as the Industry, Resear Internal Market and Consumer Protection procedural solution for lengthy internal co by redUcing the number of amendments pr plenum. While the procedure tackles commi does not (intend to) silence party politics wi

The European Court of Justice

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reporting and modifications of implementation strategies (see below) were initiated under EP pressure. More directly, the EP contributes to implementation in passing on citizens' petitions to the Commission and in regular implementation meetings with the Commission. In 2007, the EP sent 146 petitions related to the field of environment to the Secretariat General of the Commission; this was around one-third of all the petitions sent by the EP, up from 25 per cent in 2006 (Commission 2008m: 16) . The effects of co-decision on the nature of environmental policy decisions are hard to generalize. While a 'green' EP may push the passage of stringent rules, some argue tha·t conciliatory behaviour may replace previous vigorous advocacy because the EP can now be held accountable for decisional failure (Holzinger 1994: 114- 16). It is important to note that the EP committee on the environment is one of the committees most involved in legislative procedures (Maurer 2003b), creating an enormous workload on the committee members and increasing the incentive to reach early compromises. Also, the often technical and presumably apolitical nature of environmental proposals, especially if they are effectively amendments of earlier legislation, may lead to a moderation in the negotiation style and to agreement in first reading. However, a study by Anne Rasmussen (200n-though not focusing on environmental policy-making specifically- highlights two other, seemingly more significant, factors influencing the nature of co-decision-making: working relationships with the other institutions and party politics. Regarding the working relationships, especially with respect to larger policy dossiers, such as the climate package, chemicals, or waste regulation, the informal trilogue between EP, Commission, and Council plays an important role for identifying and agreeing on compromises outside the formalized 'ping-pong' during the official readings and reconciliation procedures. With regard to the overall political composition of the EP, compared to most national parliaments the green faction is quite large and despite the dominance of the Socialist and the European People's Party (EPP) groups it has contributed to the green image of the EP in playing a strong environmental advocacy role. Yet, compared to the fifth term (1999-2004) when 7.7 per cent of the seats went to the Group of the GreenslEuropean Free Alliance (EFA), this proportion dropped to 5.4 per cent after the 2004 elections (forty-two members, including two independents), not least due to the arrival of the ten new member states, with different political preferences (only Latvia elected one EFA MEP). While this may have contributed to a certain moderation in style, the European Parliament is still considered 'environmental' in its overall orientation, although this does not apply across the board and is issue-dependent (author interview, EP, May 2008). Here, it certainly matters that the ME Ps in the European multi-level governance system are some steps removed from the operational level (and demands of accountability) and hence prone to articulate more general programmatic ideas. Finally, bargaining style is also related to personalities 2 and committee relations. The policy driver inside the EP has been its Committee on the Environment, Public Health and Food Safety (ENVI)-' A proactive and often uncompromising attitude

In the history ofEU environmental policy, th crucial role in establishing the legitimacy of and in insisting on participatory procedures the principle of free movement of goods can common environmental objectives (Commis 4607) . The ruling confirmed a Danish recy of containers that could be used to bottle b (C-300/89 Commission v. Council [1991 ] E towards delineating the decision-making pro

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ent. Here the Court found that the entually eliminate waste from the with Article 100a (single market) eaties and ruled that under such hich best reflects the fundamental ake part in the exercise of power sembly It thereby legitimated the ons as it provided for cooperation e medium term this ruling induced al policy-making. later, legally consolidated phase of enforcement. First, in infringement sion against member states (Art. U law. Under the Article 228 TEC cases of prolonged non-compliance of cases initiated under Article 228 amounts to the largest share across the procedure, with three steps each er states to reach compliance before ve been three environmental cases tates; in the latest, against France, n the deliberate release of genetically ed a fine of 10 million euros. ues before a national court that a national court may seek guidance eference. This procedure operates individuals or groups are able to t have failed to transpose or comply t made 108 preliminary rulings in l cases being introduced by Italian The otherwise low numbers seem miliarity of the national judiciaries
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nge of interest groups representing Among the environmental groups, he longest history in Brussels. It was mmission, which had an interest in n competencies to the environmental rong industrial associations. Today om thirty-one European countries. Greenpeace International, and the
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World-Wide Fund for Nature (WWF), which established their Brussels offices in the late 1980s, the EEB founded the 'Gang of Four' in 1990, an informal coalition of leading environmental NGOs active at the European levei":-5ince then this coalition has expanded to ten and has been joined by Climate Network Europe (CNE), the European Federation for Transport and Environment (T &:E), BirdLife International, Health and Environmental Alliance, International Friends of Nature, and, as the latest addition, the CEE Bankwatch Network. Both enlargement and the adoption of new policy priorities by the EU have led to new arrivals. For instance, the CEE Bankwatch Network, founded in 1995 and joining the group of environmental NGOs in 2005 , consists of central and eastern European NGOs concerned about unsustainable practices sponsored by international finance institutions. Given the volatile nature of membership and public campaigning contributions, nine of the 'Green Ten' also rely on Commission funding for their regular operations 6 Based on Decision No 466/20021EC layin~own a Community action programme promoting non-governmental organizations primarily active in the field of environmental protection, an annual amount of €8.4 million has been made available to Brussels-based as well as member-state- or candidate-country-based environmental NGOs. This decision has formalized and made transparent 7 previous regular contributions from the Commission to environment groups. In addition, other budget lines of the Commission such as those focusing on development assistance or the build-up of civil society have been tapped by these NGOs as they match some of their goals and activities. The relative dependence on EU funding varies greatly between zero (Greenpeace) and more than 60 per cent (EEB) ; it depends on both the philosophy and the organizational structure (e.g. membership) of the groups. Differing philosophies become visible also in the activities of the NGOs. Generally, the Brussels-based staffs concentrate activities on the policy formulation phase. Yet, some emphaSize their role as pressure group while others operate also as advisors, offering expertise and information to the Commission. With the exception of Greenpeace, the Green Ten seek to be consulted in this phase, while during the decision-making phase all NGOs resort to the classical tools of the environmental movement and use public campaigns to create awareness and seek direct contacts with member governments and MEPs to ensure the desired majorities. The range of activities is reflected in today'S professional operations and the increasingly diversified environmental policy expertise present in Brussels. Compared to national industrial federations or firms , which may also get involved in the policy-formulation and deCiSion-making stages, national NGOs (which may also be members of the Brussels-based groups) are crucial during the implementation and enforcement phases of policy-making. In addition to national legal action, environmental groups can use the complaints procedure to inform the Commission of any gap in implementation that is found in the member states. 8 Especially to detect the non-application of EU legislation this procedure can offer valuable information to the Commission given the absence of an EU inspectorate in the member states. In 2006-7, the Commission introduced a 'pilot problem-solving mechanism', which transmits citizens' inquiries concerning the application of EU environmental legislation

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back to the late 1960s and covered over 100 pieces of EU legislation. The tnitial
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existing chemicals)' and (c) the lack of guidelines or incentives for the substitution for

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hazardous chem icals of less·harmful substances. Policy initiation was dominated by 'green states' (Austria, Denmark, Germany, The Netherlands, Sweden, and the U K), hoping to export their ambitious national goals to the European level (Selin 2007: 78) and leading the Environment Council in 1999 to request the Commission to develop a new chemicals policy. These green states were join ea by DG Environment in the Commission (and the new Swedish Commissioner Margo! Wallstrom), which presented a White Pa per on a Strategy for a Future Chemicals Policy in

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improve acceptance of regulation among industria l actors. Furthermore, decision-making

was exemplified by a high degree of institutional 'depillarization' (Hey et al. 2008: 439f) .

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Commission, (b) the Council negotiations taking place in the horizontal Competitiveness

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position agreed in December 2005 under the British presidency departed from the earlier

demands formulated in the Environment Council in acknowledging the need to protect the competitiveness of European chemical industry.

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some justified concerns about the own data (Borzel 2001), EU enimplementation deficit exceeding arket, industry, and consumer afment proceedings as well as court Kramer 200S: 3- 5), environmental hough the proportion seems to be
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to the 'rationa l handling' as well as to changes in the treatment of complaints (see above) under Commissioner Dimas, i.e. to an apparent turn towards the management approach to implementation (Tallberg 2002), focusing on building states' capacity and expertise to implement policies, rather than punishing lack of implementation; these numbers should not be mistaken as an indication of better implementation. Second, the Commission has started reforms in the choice of prcposed policy instruments. Since the turn of the century the EU has adopted a number of environmental Jrameworh directives that aim both to avoid overregulatio n and to generate greater coherence of EU legislation. The Water Framework Directive of 2000, for instance, consolidates previous regulatory output by replacing seven of the 'first wave' water directives. By requiring all member states to cooperate in the management of river basins, the EU brought the hitherto n eglected cross-boundary and cross-media effects o(water pollution into focus (Grant et al. 2000: 167-75). The so-called waste framework direc tive (20061l2/EC) merely serves to consolidate the waste directive of 1975 with its numerous amendments. The new Air Quality Directive (200S/50/EC), which entered into force in June 200S, merges four existing directives and one Council decision on air quality and adds new standards and targets on fine particles while giving the member states more flexibility in .complying with these rules. Though not presented as a framework directive, the climate and energy 'package' proposed in January 200S by the Commission also aimed to achieve an overarching goal, namely to cut carbon dioxide emissions in the EU by 20 per cent by the year 2020 (see Box 13.3) .

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scussed above-implementation, eastern enlargement had been mited fina~cial and administrative civil society in the new member wever, suggest that the implemenaverage 'old' member state, which the new member states to shamcapacity during the pre-accession on threat of the Commission to unding from the structural funds, t change with regard to the actual orly reflected in the Commission elated infringement proceedings, ive ca~cities, poor coordination enforcement in order to protect cietal environmental groups have sion phase both. through financial edural instruments, These NGOs ensure compliance on the ground

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d as being largely internally motideal with European transboundary measures, however, can be traced , the atmosphere, waste, wildlife, r forty multilateral environmental ts neighbourhood policy to bolster al, and national levels. As internaamong sovereign states, and as the d the establishment of new procein the EU, challenging traditional

unity as a party to a convention at controversial both internally and accept the EU as a signatory, unless ations will be implemented interEndangered Species (CITES) from g, while the Vienna Convention on ntreal Protocol (1987) included-

after heated arguments-both the Community and the member states, This form of a 'mixed agreement' has also been chosen for the United Nations Framework Convention on Climate Change (UNFCCC), which entered into force in March 1994, But also within the EU; the form of representation is controversial, since it has to be clarified whether the EU has the legal competence to deal with the problem under consideration. Prior to the SEA and the establishment of a legal base for European environmental policy this was eVidently contested, But even now the exact policy competences are never quite clear, and hence the practice of mixed- member-state and EU- representation, A second and related issue is who should speak on behalf of the EU-the Commission or the presidency of the Council of Ministers? Despite these persisting ambiguities, EU member governments have become increasingly willing to coordinate their positions and act collectively, while international partners have come to expect 'the Union' in some formation at the negotiation table (Sbragia 1998; Bretherton andVogler 2006), During this process of institutionalization, the EU evolved from a 'Vienna laggard to a Kyoto leader' in global environmental negotiations (Sbragia and Damro 1999: 53), By the time of negotiating the Kyoto Protocol, in 1997, the EU's member states had not only got used to complex representation structures-in this instance most of the negotiating was done by'the Council preSidency- but, more importantly, they had become quite used to accepting national restrictions due to European, and now global, rules and even to agreeing on differential treatments among themselves. In the case of Kyoto the intra-EU burden-sharing agreement allocated different commitments for the reduction of greenhouse gases to the member states; this strengthened the EU's negotiation position as it was able to commit itself to the toughest (collective) target of an 8 per cent reduction,lo This target (together with the burden-sharing agreement) became binding when the Protocol came into force on 16 February 2005. With the Kyoto targets expiring in 2012, international negotiations are now taking place under the UNFCCC with the goal of reaching a global agreement governing action beyond that date. With its 'independent commitment' of March 2007 to reduce by 2020 the greenhouse gas emissions of the EU by 20 per cent from the 1990 baseline and a promise of a 30 per cent cut if other countries joined in, the European Council 'was a major driving force behind the launch of negotiations on a global post-2012 climate agreement that was agreed by the parties to the UNFCCC in Bali in December 2001' (Oberthur and Roche Kelly 2008: 2), In order to conclude these negotiations successfully in Copenhagen in 2009 the EU had to strengthen its claim to be a credible leader, Hence, it needed to show its capacity to meet its Kyoto commitments. With the CO 2 emission reductions stagnating and the implementation of crucial policies, such as the emissions trading scheme, the renewable energy directive, and the voluntary agreement with the automobile industry, showing serious problems, doubts had been getting louder (see Chapter 15), Furthermore, the EU needed to present concrete proposals for how to achieve

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The new member states have received bet transitional arrangements; the transition per sectors (the longest periods apply to industri the Commission website: http://europa.eu.in 2 Besides the committee chairmen, the rappo also play an important role in shaping the di 3 Its earlier name was Committee on the Envi tion . Consumer protection has now moved t Committee (IMCO). 4 Ken Collins was chairman from 1979 until from 1984 until 1989 . 5 For both individuals and environmental NG action against the breach of EU law unless th of access to the EC] , which depends on the public and legal controversy over the years, 6 The Commission relies on the expertise of n in developing its policy proposals. In order influence it has actively contlibu ted to the p tion groups at the European leveL 7 See the Commission's website at: http://ec.eu 8 The process of implementation can be desc legislation (in the case of a directive) , C n b) application of the law 'on the ground'. 9 A complete list, dated 27 October 2006, can b europa.elllenvironment/intemational_issueslpd 10 Compared to 7 per cent for the US (albeit still and 6 per cent for Japan.

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What-in a nutshell-are the key features of EU environmental policy-making? Empirically, it is a story of policy expansion, deepening, and institutionalization, which has been traced back to pragmatic and adaptive policy-makers in the Commisgon, a competitive dynamic between the member states, and the facilitating role of the Court, the EP, and societal intereSts. Processes of gradual institutionalization moved environmental policy principles from the status of programmatic statements into the formal acquis and finally into prominent treaty provisions. This prevents a rolling back, even at times of little political enthusiasm for new initiatives and rising criticism about high degrees of interventionism, excessive costs, and poor records of implementation espeCially during periods of economic recession. In this field, which is dominated by a regulatory policy mode, not contraction but adaptation and some experimentation with new or softer regulatory formats appear as the pattern of change, with the critics of yesterday becoming the reformers of tomorrow. While the 2000s were not characterized by great enthusiasm inside the EU for environmental protection in general-not least due to the cautious approach adopted by the new member states-the climate change issue has the potential to rise to the next big idea in the Union. Not only in environmental policy, but also in areas such as energy, transport, agriculture, industry, international development, and neighbourhood policy, climate change has been responsible for enormous mobilization. In the issue area of climate change, EU environmental policy has become embedded in a larger project of policy coordination. Policy coordination across issue areas, which otherwise continues to be an unresolved problem in environmental policy; is helped by the presence of overarching policy targets and politiCal will to act on at least one of the many dimensions of the climate issue-be it the implications for the environment, energy security, industrial modernization, or the EU's international profile. With regards to the latter, the EU now faces the challenge of providing credibility for its status of international 'actor' and its claim to leadership. Although the threat of economic crisis and negative competitive implications are proving to be a serious constraint to developing-and mainstreaming-environmental policy, the impact of the Union's reputational interest has been remarkable in both internal and external negotiations over the climate change package.

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Few issues of European law and policy excite as much attention and concern as the creation and marketing of genetically modified organisms (GMOs) . Lauded by many scientists, policy elites, and members of the biotech industry as a scientific and economic step forward, GM foods and crops have also been rejected as unsafe or undesirable by many environmentalists and consumer advocates, and by the greater part of the European public. Into this controversy have stepped the institutions of the EU, which increasingly play the leading role in establishing the regulatory framework for the growing and marketing of GM foods and crops in the EU's twent);-seven member states. In this chapter, we examine EU policy and policy-making in the area ofbiotechnology, with a specific focus on agricultural biotechnology-namely, the development and marketing of GM crops and foods. More specifically, the chapter summarizes both the content of the EU's rapidly evolving regulations, and the process whereby these regulations have been promulgated, disputed, comprehensively reformed, and imperfectly implemented over the past two decades. EU policy in this area is predominantly regulatory in character, setting the increasingly detailed regulatory framework within which GM foods and crops may be developed, introduced into the environment, and work their way into the food supply. This chapter begins by examining the specific challenges of regulating biotechnology. It then provides a historical background to EU biotech policy, followed by a section on the problems of implementing the EU's early regulations. The chapter next examines the reform of the EU regulatory framework after 2000, the impact of international pressures from other states and from international institutions such

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• With respect to the internal market t of GM seeds, crops, and food within internal market was claimed by the much of the EU's GMO legislation (s • From the perspective of industrial sought to secure a regulatory enviro European biotech industry able to c • In terms of the EU's research biotechnology has long been a prio scientific research.

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Biotechnology Policy

nsects and birds. Largely for this General for the Environment has of EU biotech policy, which has ntly by the Environment Council. part in galvanizing the European ue.

ions of food safety and consumer y about the safety of GM foods or r the foods they buy are genetically safety have played a key role in the marketing of GM foods.

cultural policy (CAP; see Chapter 8) fect which crops can be grown and e production of GM crops.

ns affect imports as well as local ional trade polioy dimension to the iCies within the legal framework of of EU biotech policy over the past hether these changes constitute a ulations (A. R. Young 2003).

M Os raises the challenge of coordirge number of actors with diverse regulation. Not surprisingly, it has other EU institutions to coordinate e Commission has established, and oups to coordinate policy across all oral nature of GM Os has also rallied rganized opposition to GM Os from safety, and anti-globalization). From g has emerged as a volatile issue.

Prior to the adoption of the first EU regulations in 1990, biotech research and development (R&D) in Europe was regulated entirely at the national level. These national regulations varif:!d across the member states, with countries such as Denmark and Germany imposing tight restrictions on genetic engineering research, with others, such as the UK and France, being more permissive, and relying mainly on self-regulation, and a large third group which had not yet adopted any regulations (Cantley 1995). The first binding EU directives on the contained use and deliberate release of GM Os featured substantial roles for the member governments, playing an important part in the initial approval of GM foods and crops, and retaining the ability to impose national-level safeguards against GMOs authorized at the EU level. National and EU regulation of biotechnology, while aiming primarily at environmental protection, consumer protection, or food safety, also has important implications for international trade, since these regulations can serve as non-tariff barriers impeding the import oLGM foods and crops into the EU. The question of biotech regulation as non-tariff barriers became an important political and legal issue from the late-1990s when USfarmers rapidly adopted GM foods and crops only to find themselves unable to export them to the EU, where many fewer varieties had received regulatory approval (see below) . The US placed increasing pressure on the Commission to rectify the situation, culminating in a WTO legal dispute and a judicial ruling against the EU in 2006. Within Europe, however, US pressure prompted a backlash from environmental, consumer, and agricultural groups, and from some member governments, further politicizing an already sensitive issue. Caught between these conflicting national and international pressures, the Commission sought, albeit with limited success, to reconcile the political demands of European citizens and national governments, on the one hand, with the legal obligations and political pressures from the international arena, on the other.

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Risk regulation and legitimacy

arked by a multi-level process which g regulations promulgated at the natherefore, face not only the challenge t also the vertical coordination ofEU et of national policies, and a growing law governing GMOs. In fact, as we d legal challenges from below (in the individual GM foods and crops) and r countries within the WTO).

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The regulation of biotechnology also intersects with two broader, vitally important, and interrelated questions for the EU, namely the regulation of risk and the legitimacy of EU governance. In particular, risk regulation raises fundamental normative questions about the roles of science and politics in the management of risk, calling into question' the legitimacy of EU deciSion-making in a context in which democratic control of EU institutions is widely considered to be inadequate (Scharpf 1999; Greven 2000). In modem societies, governmental actors are frequently called upon to adopt regulations regarding the acceptable degree of risk posed to society by products or by industrial processes. Risk, in this context, refers to 'the combination of the likelihood (probability), and the harm (adverse outcome, e.g. mortality, morbidity, ecological damage, or impaired quality oflife), resulting from exposure to an activity (hazard)' (Wiener and Rogers 2002: 320, emphasis in original) .. In principle, regulators faced with a novel product or process-such as the genetic modification of foods and crops-need to ascertain the potential harm caused by such activities, as well as the probability of such harm, before deciding on the legality or illegality of a product or process.

336

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In practice, risk regulation frequently requires regulators to act in the face ofuncCltainty regarding the nature and extent of the risks posed by new products and processes. Frequently, regulators take precautionary measures, regulating or even banning products or activities, in the absence of complete information about the risks posed (Majone 2003). Risk regulation in Europe took place largely at the nationallevel'until the 1980s, when EU institu tions began to play an increasing role in harmonizing risk regulation across the member states. The EU's approach to risk regulation has evolved quite differently from that of the US (Vogel 2001). Whereas the former began with highly precautionary legislation in areas such as the environment, consumer protection, and worker health and safety, only to adopt scientific risk assessment and costbenefit analysis more recently, regulators in the EU have become more precautionary and more risk-averse over time. Vogel and others argue that a key cause has been a series of European regulatory failures and crises over the past decades, including the BSE or 'mad cow' crisis, which have weakened public trust in EU regulators and scientific risk assessments, increased support for highly precautionary regulations, and called into question the legitimacy of EU regulations and EU institutions in European public opinion. Responding to this crisis of legitimacy, EU institutions have moved aggreSSively to overhaul EU risk regulation across a range of areas (see e.g. Commission 2000c; Wiener and Rogers 2002; and Majone 2002). Other scholars dispute Vogel's characterization, noting that the purported 'flip-flop' in US and EU approaches to risk regulation draws disproportionately on a few controversial issue areas, of which the regulation of GMOs is one (Wiener and Rogers 2002). Crucially for our purposes here, the issue of risk regulation in general- and the regulation of GMOs in particular-poses serious challenges to the EU's regulatory capacity and legitimacy (see e.g. Neyer 2000; Vos 2000; Joerges 2001b ; Vogel 2001; Chalmers 2003; and Majone 2003 ).

Mark A. Pollack and Gregory C. Shaffer

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Europe and elsewhere focused primaril and the development of a competitive bi Research and Development (then DG XII in molecular biology, together with a dra authorization by national authorities fo was withdrawn by the Commission in 1 cil Resolution calling for notification of r mission concerns about the competitive however, and in 1983 it incorporated b work Programme for research and techn EU GMO regulation, see Box 14.1). By the mid-1980s, with the rapid devel efforts to regulate biotechnology among t began to explore more actively the devel tech regulation. The Commission create notably the Biotechnology Steering Com ulation Inter-service Committee (1985), (Patterson 2000: 324-32). Within these shifted away from DG XII, and towards XI) , which became involved in the late 1 out of the laboratory and toward release of GM foods and crops. With DG Envi in 1986 released 'A Community Frame which laid out the Commission's rational plans for specific EU regulations (Commi

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The 1957 Treaty of Rome (EEC) made no explicit mention of environmental protection or food safety, let alone biotechnology. Since the late 1970s, however, the EU has developed de facto policies on biotechnology as poliCies on R&:D , agriculture, food safety, and the internal market have 'spilled over' into the regulation of the content and labelling of GM foods and crops. Genetic engineering is a technology used to isolate genes from one organism, manipulate them in the laboratory, and inject them into another organism. This technology, also known as recombinant DNA (rDNA) research, first emerged as a concern for national and international regulators in the 1970s, as biological scientists began making crucial advances in rDNA research (Cantley 1995; Patterson 2000). During this period, from the 1970s through to the mid-1980s, the development and marketing of GM foods and crops was a distant goal, and regulators in

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In May 1988 the Commission proposed t Directive 90/219 on the Contained Use of Directive 901220 on the Deliberate Release i Organisms (Commission 1988). The form for laboratory research involving genetic m release of GMOs from the laboratory into th cultivation and marketing of GM foods an because it emerged during the 1990s as th legislation governing the approval and mar Under Directive 90/220, a manufactur or release it into the environment had t national authority of an EU member st assessment for the GMO in question. The either rejecting or accepting it. In the cas forwarded to the Commission and to the

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could raise objections. If no objection was raised, then the member state carrying out the original evaluation formally approved the product, which could be marketed throughout the EU. If one or more member states raised an objection, however, a decision would have to be taken at the EU level. The Commission, acting on the basis of an opinion from its scientific committees, adopted a draft decision. This draft decision was forwarded to a regulatory committee of member-state representatives, who could approve the . decision by a qualified majority vote. If the committee did not approve the decision, however, it would be sent to the Council of Ministers, which could approve the Commission decision by QMV or rej ect it by a unanimous vote. If the Council failed to act within three months , the directive proVided that 'the proposed measures shall be adopted by the Commission' (Art. 21). Finally-and Significantly in light of later developments-the directive provided that a member state could, on the basis of new evidence about risks to human health or the environment, 'provisionally restrict or prohibit the use and/or sale of that product on its territory'. The member state in question would be required to inform the Commission, which could approve or reject the member-state measures, again after consulting a regulatory committee of member-state representatives. Such restrictions, referred to as 'safeguard bans', would later·become an important, and controversial, feature of EU regulation in this area.

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In 1997 Directive 90/220 was supplemented by Regulation 258/97 , the so-called Novel Foods Regulation, which created an authorization procedure for 'novel foods', similar to that of Directive 901220. It defined 'novel foods' as all foods and food ingredients that had 'not hitherto been used for human consumption to a Significant degree within the Community', which included foods that were genetically modified and foods produced from, but not containing, GMOs (e.g. oils processed from GM crops, but no longer containing any traces of GM material). The regulation also imposed requirements for novel foods that were au thorized for marketing, including the lal;:>elling offoods containing GMOs or derived from GMOs, provided that the latter were deemed 'no longer equivalent' to their conventional counterparts. Significantly, however, the regulation created a Simplified procedure for foods derived from , but no longer containing, GMOs, provided these remained 'substantially equivalent' to existing foods in terms of 'their composition, nutritional value, metabolism, intended use and the level of undesirable substances contained therein' (Art. 3). In practice, this provision would prove important, as member governments would approve a number of products derived from GMOs as being 'substantially eqUivalent' to their conventional counterparts. Finally, and significantly in terms oflater developments, the regulation (like Directive 90/220) contained a safeguard clause allowing member states, 'as a result of new information or a reassessment of existing information' to

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environmenuil concerns, and anger over th rules to attempt to force 'unnatural' foods secto.ral movement organized to oppose environmentalists, consumers , and small f products 'Frankenstein' foods , playing on cies could not control the release of GM p toward GM crops and foods rose rapidly. respondents opposed GMOs, a figure that r cent in 2002. Similarly, over 80 per cent of about GMOs by late 1998 (Gaskell et a1. 20 In the midst of the fray, in January 1997, another GM food crop (Bt-maize), overthe the then fifteen member governments (Com be~governments did not, however, simply a undermined its implementation, invoking th Austria was the first to act, promptly prohibiti GM maize variety in February 1997. Luxem state deployment of safeguard bans grew, und tive 90/220 to create a single market for GM system. By January 2004, Austria, France, G UK had invoked nine safeguard bans. Italy i dure under Article 12 of the Novel Foods Re sale of food products containing ingredients f Opponents of GMOs no t only worked th battle to the market-place. Under pressure fro foods, many large European retailers, such a their foods would be GM-free. Thus , althoug legally authorized for marketing throughout by both consumers and retailers and were ba This widespread resistance to the approval ments and civil society underlines that any acc address the politics of implementation as well case of agricultural biotechnology, member-st the implementation of Directive 90/220 for a p 1999, responding to the popular backlash ag Italy, and Luxembourg declared the need to i GM products, pending the adoption of a new
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To understand successive attempts to regulate agricultural biotechnology in the EU, and the subsequent difficulties of implementation, we need to place these in the context of other developments in the mid-1990s. Central to this political context was the BSE food-safety scandal, which struck in 1996. In March 1996, the British government revealed a possible connection between the human illness, CreutzfeldtJakob's disease, and bovine spongiform encephalopathy (BSE), known as 'mad cow disease'. BSE infected some 150,000 cattle in the UK, triggering a wide-scale slaughter of cattle. a European ban on the export of British beef, the collapse of beef sales throughout Europe, and a loss of consumer confidence in regulatory officials. While the ban on British beef was eventually rescinded, the BSE scandal raised the question of risk regulation 'to the level of high politics, and indeed of constitutional Significance' (Chalmers 2003: 534-8), generating extraordinary public awareness of food-safety issues and widespread public distrust of regulators and scientific assessments. It was in this political context that GM crops were first commercially introduced in the US and Europe. In April 1996, within a month of the ban on British beef, the Commission approved the sale of GM soya products over the objections of many member states. In November 1996, GM soy was imported from the US to the EU, spurring widespread protest by environmental groups. Media coverage and public debate about GM foods , therefore, began just as the BSE food crisis struck. Two other critical events occurred in late 1996. In December, a Scottish scientist announced to the world the first successful reproduction of a cloned mammal, a sheep named 'Dolly'. The announcement spurred ethical challenges to biotechnological research. Also in December, the US and Canada lodged complaints with the WTO challenging the EO's ban on hormone-treated beef, on the grounds that it constituted a disguised barrier to trade and was not justified on the basis of a scientific risk assessment. The WTO subsequently ruled against the EU, and, when the EU failed to comply with the ruling, authorized the US and Canada to retaliate with trade sanctions equivalent to their trading losses. which they did, imposing trade sanctions worth US$116.8 million and CND$1.3 million per year. The close succession of these events illustrates how the popular understanding of GM products in Europe became associated with consumer anxieties related to food-safety crises, distrust of regulators and scientific assessments, disquiet over corporate control of agricultural production, ethical unease over GM techniques,

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Biotechnology Policy risk assessments, and proVide food-safety information to consumers and operate a rapid-alert system in conjunction with member-state authorities to respond to food-safety emergencies . Risk management , concerning what level of risk is acceptable, in cont~ast, would remain under the control of the EU's political bodies. In an annexed 'action plan', the Commission listed over eighty proposed foodsafety-related measures to adopt, including amendments to Directive 90/220 and the Novel Foods Regulation. The follOwing month, the Commission (2000c) issued a Communication on the precautionary principle, indicative of a more risk-averse approach in an increaSingly politicized domain. The Commission declared that the 'precautionary prinCiple' would be applied whenever decision-makers identify 'potentially negative effects resulting from a phenomenon, product or process' and 'a scientific evaluation of the risk ... makes it impossible to determine with sufficient certainty the risk in question [on account] of the insufficiency of the data, their inconclusiveness or imprecise nature'. It stressed that 'judging what is an "acceptable" level of risk for society is an eminently political responsibility' (Commission's emphaSiS). In 1998 the Commission proposed a directive to replace Directive 90/220, which was eventually enacted in 2001. In the wake of the BSE crisis, the Commission had in 1997 reorganized its internal handling of food-safety matters within a recast (and renamed) DG for Health and Consumer Protection (known by its French acronym, SANCO) (Skogstad 2003). Once more, the Commission was divided between those who desired less-restrictive authorization and labelling requirements (DG Industry, DG Research, and DG Trade) and those who sought stricter controls (such as DG Environment and DG SANCO) (Stewart and Johanson 1999: 273) . The leading players were DGENV and DG SANCO, both of which favoured a precautionary approach to risk regulation. Both the EP and Council pressed the Commission for further regulatory controls. The majority of members of the EP insisted on tighter labelling requirements and lower thresholds for acceptable levels of trace amounts of GMOs in products sold in the EU. The member governments varied in their views, with some determined that no GM crops would be grown in their territories (such as Austria and Luxembourg) and others torn between the demands of GM opponents and those of the biotech sector (such as Germany and the UK) . The resulting legislation, Directive 2001/18 , was adopted in March 2001 by co-decision. The need to reassure those member governments that desired stringent regulation led to a ratcheting up of EU regulatory requirements (A. R. Young 2004) . The directive tightened requirements on commercial applicants and member governments, requiring more extensive environmental risk assessment, further information concerning the conditions of the release, and monitoring and remedial plans. Although touted by the EP's rapporteur David Bowe as 'the toughest laws on GMOs in the whole world,' the directive did not satisfy the most GM-sceptical member governments, which insisted on continuing the moratorium and maintaining national safeguard bans, pending still more stringent EU regulations.
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re centralized framework for traCing ously been left to the member states. ablish a system of unique identifiers oducts produced from GMOs at all e production and distribution chain'. ain data on the GM content of foods wnstream in the distribution chain ments have been bitterly criticized opean producers. The Commission, the EU labelling system and for any

ory framework for GMOs had been aborted Constitutional Treaty nor 009 , was expected to result in any e again , however, implementation ontroversial, both domestic and

enced, at least in part, by external rted bilateral pressure in the shadow on Sanitary and Phytosanitary (SPS) based on scientific risk assessments ng in 1998-when the EU tightened ed approving new GM varieties, and es that had been approved- the US O. The US government hesitated for backlash against GMOs and against Bush Administration's forbearance

gave way, and the US, joined by Argentina and Canada, brought a WTO complaint against the EU, alleging that its de facto moratorium on new approvals, as well as the national bans on approved varieties, constituted a violation of WTO law and specifically of the SPS Agreement. Significan·tly, the US and other complainants did not challenge the EU's legislative framework for GM approvals as such, nor did they challenge (despite loud complaints from producers) the EU's labelling and traceability provisions. Instead , the complaints focused on the EU's implementation of its own regulatory framework, challenging three specific actions: (1) the EU's de facto 'general moratorium' on new approvals; (2) 'product-specific moratoria', or failure to approve particular GM varieties found to be safe by the relevant EU scientific bodies; and (3) the persistent use of 'safeguard provisions' by some EU member states to ban GM varieties that had been approved as safe by the EU's own scientific experts. In all three cases, the complainants argued, the EU had failed to base its regulatory dec~ions on scientific risk assessments as required under Article 5.1 of the SPS Agreement, and those decisions were therefore inconsistent with EU obligations under WTO law. The EU, by contrast, denied the existence of any moratorium, maintaining that new approvals needed to wait until after the completion of the EU's regulatory framework. It further argued that the SPS Agreement did not apply (or applied only in part) to the regulation of GMOs, since the EU was concerned with the protection of its environment which fell outside of the SPS Agreement's scope. In September 2006 , the WTO dispute-settlement panel issued its decision (see Pollack and Shaffer 2009: 177- 234) . The panel expressly avoided examining many controversial issues, and most particularly 'whether biotech products in general are safe or not' and 'wh ether the biotech products at issue in this dispute are "like" their conventional counterparts'. On the specific questions raised in the complaints, the panel found in favour of the complainants, although largely on procedural rather than substantive grounds. It held that the EU had engaged in 'undue delay' in its approval process in violation of Article 8 and Annex C of the SPS Agreement, which increased pressure on the EU to proceed with specific decisions on the many GMO approval applications already in the pipeline, even though it had resumed approvals prior to the ruling (see below). Regarding safeguards enacted by EU member states, the panel again found in favour of the complainants, ruling that all of th