European Union External Trade Policy: Multilevel Principal–Agent Relationships

Download European Union External Trade Policy: Multilevel Principal–Agent Relationships

Post on 20-Jul-2016




2 download

Embed Size (px)


  • European Union External Trade Policy: MultilevelPrincipalAgent Relationships

    M. Shawn Reichert and Bernadette M. E. Jungblut

    This article examines the potential political inuences on European Union (EU) external trade poli-cymaking. Given the EUs volume of international trade and its extensive involvement in bilateral andmultilateral trade arrangements, a better understanding of how the EU makes external trade policy isincreasingly important. It is an extremely complex processinvolving the EU public, the 25 memberstates parliaments and governments, and the institutions of the EU, including the Council of Minis-ters, the European Parliament, and the European Commission. It is a system of multilevel governancewith overlapping jurisdictions with numerous potential access points for societal interests to inuenceEuropean external trade policy. In this article, we evaluate the probable political channels that societalinterests could use to inuence EU external trade policy. We employ the principalagent (PA)framework to examine ve of the more important PA relationships that are likely to inuence EUexternal trade policymaking. We conclude that EU policymaking as it pertains to external trade is quiteinsulated from general public pressures. The primary institutions involved in external trade policy-making are the EU Council of Ministers and the Commissionboth of which are largely insulated fromthe public. Future empirical work should focus on this relationship between the Council of Ministersand the Commission.

    Trade policy throughout the developed countries is increasingly characterizedas an area of contentious politics. One need only think of the numerous antiglobal-ization protests and vociferous calls for more transparent policy to see that there isa transnational movement to make trade and other areas of international economicpolicy move amenable to democratic pressures. Other than taking to the streets, whatare the other avenues for exerting democratic inuence on trade policy? We thinkthat principalagent (PA) theory is especially useful as a means to assess avenuesfor democratic inuence and the likelihood of success in inuencing policy. Othershave assessed European Union (EU) external trade policy in terms of political legiti-macy in more detail (see Meunier, 2003; Meunier & Nicoladis, 2000).1 We are notevaluating legitimacy as such, but rather paths of democratic inuence. Our assess-ment is more aligned with that of Lords (2004) comprehensive democratic audit ofthe European Union than it is of the democratic legitimacy of a specic policy area.

    EU is, by many measures, one of the most important players on todaysinternational trade scene. The EU is the largest trader of both goods and

    The Policy Studies Journal, Vol. 35, No. 3, 2007


    0190-292X 2007 The Policy Studies JournalPublished by Blackwell Publishing. Inc., 350 Main Street, Malden, MA 02148, USA, and 9600 Garsington Road, Oxford, OX4 2DQ.

  • servicesaccounting for approximately 19 percent of world trade in goods andabout 24 percent of world trade in services (Europa, 2006).2 In addition to the sheervolume of EU trade with the rest of the world, EU has numerous bilateral andmultilateral trade arrangements with scores of other states across all regions of theglobe (Europa, 2006).3

    Given its volume of international trade and its extensive involvement in dyadic,regional, and global trade arrangements, an improved understanding of how the EUmakes external trade policy is increasingly important. Some may argue that tradepolitics lies outside the normal concerns of citizens and thus does not need to beanalyzed in terms of democratic politics. We think that the demonstrable effects oftrade on groups within countries, the obvious attempts by such groups to inuencepolicy, and the sheer volume of political pressures from the public clearly demon-strate that EU trade policy is a politicized area of policy and that it is therefore usefulto examine what are the channels by which the public can inuence the content oftrade agreements.

    EU external trade policy is an extremely complex processinvolving the EUpublic, the 25 member states parliaments and governments, and the institutions ofEU, including the Council of Ministers, the European Parliament (EP), the EuropeanCommission, and the European Court of Justice. It is a system of multilevel gover-nance with overlapping jurisdictions with numerous potential access points for soci-etal interests to inuence European external trade policy. The conventional wisdom,however, is that EU has a democratic decit, namely, that policymaking at the EUlevel is insulated from societal pressures. In this article, we evaluate the probablepolitical channels that societal interests could use to inuence EU external tradepolicy. We employ the PA framework to examine ve of the more importantrelationships that potentially inuence EU external trade policy decisionmaking.

    Figure 1 shows the chain of delegation in EU external trade policymaking andthe ve PA relationships assessed here. At the national level, these relationships are:(i) the Member State Publics (as principal) and the Member State Parliaments (asagent); (ii) the Member State Parliaments (as principal) and the Member State

    The public

    European parliament European commission

    National level

    European level

    National parliament

    Council of ministers

    National governments

    Figure 1. Chain of Delegation in EU External Trade Policy.

    396 Policy Studies Journal, 35:3

  • Governments (as agent); (iii) at the nexus between the national level and theEuropean level is the PA relationship between the Member State Publics (principal)and the EP (agent); (iv) at the European level these PA relationships are: theMember State Governments/the EU Council of Ministers (principal) and the EUCommission (agent); and (v) the EP (principal) and the EU Commission (agent).

    Specically, we assess these principals ability to screen and select agents, tostructure incentives for those agents, to monitor agents either directly or indirectly,and to sanction agents. Doing so enables us to specify more clearly the responsibili-ties forand the political inuences onthe EUs external trade policymaking.Before we can undertake empirical analyses of the political inuences over EUexternal trade policy, we need to understand better the opportunity structureslinking interests to policy. The PA approach is especially appropriate for illuminat-ing these structures.

    The article proceeds as follows. In the rst section, we specify our theoreticalframework. In the second section, we investigate the channels linking the publics ofthe member states to the institutions of those member states (parliaments and gov-ernments), and then to the EU institutions. In the third section, we examine the linksamong those EU institutionsthe Commission, the Council of Ministers, and the EP.Finally, we offer our conclusions and some suggestions for future research.

    Theoretical Framework

    Governance is the process by which society rules itself and since any society isa collection of individuals, this necessarily implies the delegation of authority fromindividuals to other individuals. Indeed, the very idea of a social contract is one ofdelegated authority. Put somewhat differently, governance is collective action, andcollective action necessarily implies organization, which in turn implies delegatedauthority.

    The concept of collective action also brings to mind a class of political phenom-ena known as collective action problems. According to Kiewiet and McCubbins(1991, pp. 2223), there are broadly three main types of collective action problems.The rst is some variant of prisoners dilemma in which an individual, or group,seeking the most benet from collective action with the least cost will often choosenot to contribute. Other individuals with similar preferences will likewise choose notto contribute, so the goal of collective action, a public good, is not produced. Thesecond type of collective action problem concerns the coordination of individualchoices into a single equilibrium collective choice. Often, more than one equilibriumchoice exists and it becomes necessary to have some process or mechanism in placethat is able to choose from among the different equilibria. Related to this is the thirdtype of collective action problem discussed by Kiewiet and McCubbins, collectivechoice instability. Instabilities arise because a decision rule, such as simple majority,may lead to cycling among different alternatives. A common example is that amajority prefers A to B, B to C, and C to A. The winner in this case is decided bythe order in which the alternatives are considered in pair-wise comparisons.

    Reichert/Jungblut: European Union External Trade Policy 397

  • All three types of collective action problems may be solved by organizationand/or institutional rules. For example, the problem of individuals not contributingfor the provision of a public good may be solved by contracting with a third partyto serve as an enforcer. Coordination problems and collective choice instability maybe solved by designating an agenda setter in advance who will determine the orderin which alternatives, and which alternatives, will be considered. Each solutionimplies the delegation of authority to a subset of the collective group or to a thirdparty.

    While delegation may help to solve problems of collective action and provide theopportunity for the gains from specialization of labor to be realized, delegation alsogives rise to a new set of problems. These are commonly known as PA problems.PA problems arise because the principal (the person or group who delegates)cannot absolutely guarantee that the agent (the person or group to whom authorityis delegated) will perform exactly as the princ


View more >