European Governance by The Emergence of a new Type of Package Deals.
| Verfasser | Bandelow, Nils C. |
Abstract
European integration is a fluent process which couples decision-making to power distribution between the political institutions. In this system it is of prime concern for the European Commission to find partners in order to accelerate European integration. Under these circumstances European integration provides grounds for a new type of governance. The article claims that within the institutional setting of the EU package deals which involve different policy domains are increasingly likely to occur between private (firms) and a specific type of public actors (European Commission). In two sample business sectors - biotechnology and electrical energy - the emergence of package deals between the Commission and large firms involving different policy domains can be described as an analogous form of governance in spite of conspicuous sectoral differences. The following expositions will show that package deals may have positive effects on the progress of European policies. Nonetheless, we will evaluate the welfare effects of package deals between the European Commission and large firms on the European level. Finally we suppose institutional reforms to keep package deal's risks within limits.
Introduction
Over the last decades, the dimension for policy-making in the European Community (EC) has immensely increased. The fact that the European Union yields legally binding decisions for member states and especially their industry sectors is no news. But the phenomenon that the European Commission is able to successfully regulate national industries, although there is no legal basis for any regulation in the respective policy fields, calls for further attention. Indeed, there exist many studies which deal with the reasons for the renunciation of strong legal powers by the Commission and which explain the relevance of weak forms of vertical governance for the EC's success in "governing without government". Yet, weak forms of vertical governance, such as co-operative or bargaining strategies between European institutions and member states, do not fully explain how the Commission manages to enforce basic changes of national policy-making in the face of strong resistance of member states and national interest groups and without any regulatory competencies. In our study we claim that the institutional setting of the European integration provides grounds for the emergence of a new type of package deals, i.e. package deals between the European Commission and large firms on European level. This type of package deals allows well known weak vertical governance to coincide with "hard" horizontal bargaining processes and also allows the Commission to invalidate the opposition of member states or interest groups.
The following expositions will show that, above all, two given facts of the institutional setting of the EC contribute to a probability of package deals: a low level of public control and a high degree of fragmentation in decision-making processes. Both give large companies room for political access. However, the emergence of package deals on European level essentially depends on the resources the partners can trade. The empirical examples of biotechnology and electrical energy we have chosen make clear that on both sides, on the side of the Commission and on the side of large firms, there are resources that are of interest to the respective trading partner. It will be shown that there are principal goals on both sides initiating the will to pursue particular interests through package deals. The examples also demonstrate that despite conspicuous differences in the biotechnology and energy sector, both sectors give reason to assume that package deals between public and private actors will increasingly emerge on the European level.
The Institutional Setting of the EU as a Structural Opportunity for Package Deals
The fast and uncertain process of institutional change within the European Union has the effect on political and economic actors that they have to endeavor to gain influence on policy outcomes and engage in the formation of new institutions at the same time. Within this process, each actor aims at both--at maintaining their decision-making power and at possibly gaining even higher influence (Schumann 1993). Thus the simultaneousness of policy-making and institutional change resulted in highly complex politics.
Furthermore, there is evidence that the decision-making process of the EU is being hampered by so-called "joint decision traps" (Scharpf 1988). They imply that decisions cannot be made by simple majorities or by power of hierarchies but are a matter of negotiations that require unanimity votes or at least qualified majorities instead. Negotiation systems of such kind are assumed to be an obstacle for progress in the process of positive integration within the Union because actors may make use of their veto right.
Consequently, public choice literature points out that within complex political settings and "joint decision traps" negotiations and their potential results can be modeled through the concept of package deals. Package deals can be defined as the exchange of losses in some issue area with benefits in another, resulting in a mutual overall gain for the actors involved. The basic idea behind such arrangements is to establish links between issue areas which are of different value for each "trading partner". Actors accept losses in fields of minor importance when they gain profits in others with higher preferential intensity. In other words, these arrangements allow the "traders" to express their preferences in different intensities. Normally, such preferences are ignored by separate decisions under majority rule (Stratmann 1995). Thus, the main advantage of package deals is to overcome decision blockades. Such decisions, however, might possibly increase the overall welfare of the group of actors while at the same time they might decrease the profit of individual actors. Hence package deals are only likely to occur, if there is a win set which does not only enlarge the overall profit but also grants a gain for individual actors (cf. Mueller 1989; Stratmann 1997).
The strategy of package deals is particularly useful for actors in a pluralistic and competitive environment. This can be demonstrated by supposing the extreme case: one actor is at the short end of an n-1:1 vote, so s/he needs to win over at least half of her/his opponents to get what s/he wants (this is what Shepsle/Weingast 1994, 154 call "heterogeneity"). This case may often occur in the EU because each actor has specific interests while natural partners are rare. Therefore, the only possibility to arrive at positive integration is to combine different elements or objects which are characterized by different preferential intensities. The precondition for package deals is that "traders" have resources their partners desire: each "trader" has to assess the partner's resources which are more valuable than their own. Empirical studies have shown that it is often difficult to agree upon joint decisions which include symmetrical benefits and losses for both partners.
We claim that there exist conceptual parallels between logrolling politics within the US Congress (Ferejohn 1986; Shepsle/Weingast 1994; Stratmann 1992) and package deals on the European level. Although in the majority of cases, logrolling is applied to analyze the behavior of legislative bodies (see Stein 1980; Sebenius 1983; Benz/Scharpf/Zintl 1992), we employ the concept of package deals rather to the decision-making process in the Commission than to the European Council or Parliament. We assume that the Commission still is the most important actor for initiating legislation in the EU and that it plays an extensive and significant role in bargaining processes with organized interests. Whereas in Washington interest groups gain influence through Congress, in the EU it is the fragmented structure of the Commission that provides room for interest groups to engage. We decided to investigate package deals as a specific form of bargaining between the Commission and big companies because the latter have emerged along the process of economic integration as important actors in EU policy making. However, the growing importance of big multi-national companies does not necessarily diminish the role of European business organizations. Their significance varies with the type of policy issue (sectorial or individual company interests at stake) and the structure of the sector (few big companies like in the automobile industry or a lot of small businesses like in mechanical engineering). As we have learned from Olson (1965), associations with a heterogeneous membership of relatively small companies are subject to a collective good problem. Furthermore, small companies are very often operating in limited market segments and are therefore not interested in deregulation policies leading to market enlargement and potentially higher economies of scale. Our plan to concentrate on the interaction between public and private actors clearly departs from the main stream of research on this topic which has been, up to now, overwhelmingly focused on public/political actors.
Also, the main thrust of research has been concentrated on bargaining processes within a certain policy area. This has to do with the nature of traditional policy analysis and its methodological focus on case studies of individual policy fields. Within the fragmented multi-level power structure of the EU the strategy of concentrating on a single policy field or sector would narrow the range of potential policy solutions or outcomes. In order to avoid misleading generalizations, it is therefore necessary to allow package deals to stretch over several policy areas (e.g. environmental policy and anti-trust policies) instead of restricting the analysis to single policy domains. However, package deals stretching over different...
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