principal–agent analysis with one agent and two principals: european union trade negotiations with...

Principal–Agent Analysis with One Agent andTwo Principals: European Union Trade Negotiations

with South AfricaMagdalena Frennhoff Larsén

University of Westminster

This article explores the utility of using principal–agent analysis—bothat the level of the Commission and the European Union (EU) as awhole—to explain EU decision making in the negotiations between theEuropean Union and South Africa that led to the Trade, Developmentand Co-operation Agreement of 1999. The article argues that theinternal Commission negotiations, which are often overlooked inanalyses of EU trade negotiations, need to be analyzed. It demonstratesthat both the initial EU agenda and the final agreement with SouthAfrica were heavily influenced by those Directorates-General (DGs)most affected by these policy decisions. Moreover, the EU negotiators,who had developmental interests because of their location within DGDevelopment, were particularly influential.

Because of its complex internal structure, the European Union(EU) is often seen as a rigid negotiator, one that presents its negotiatingopponents with a “take it or leave it” position (Bretherton and Vogler2006, 79). Political scientists who have researched EU trade policymaking have found that this stance can be explained by usingprincipal–agent analysis. Meunier (2000), Nicolaïdis (1999), Pollack(2003), and Woolcock (2005) have all demonstrated how the preferencesof the EU Member States (the principals) have been combined throughcomplex and often lengthy processes into a joint EU position, or a“single voice,” represented by the Commission (the agent), which hasbeen delegated the power to represent the EU and to conclude tradeagreements with third parties.

The main focus of these analyses is the extent to which theMember State principals are able to control the negotiatingCommission agent during the course of negotiations with a third party,and the extent to which the Commission is able to act autonomously;that is, to stretch its delegated powers, push through its ownpreferences, and thereby escape controls sought by the MemberStates (e.g., Bilal 1998; Kerremans 2004; Meunier 2000; Meunier and

Politics & Policy, Volume 35, No. 3 (2007): 440-463. Published by Blackwell Publishing Inc.© The Policy Studies Organization. All rights reserved.

Nicolaïdis 1999; Pollack 2003; Woolcock 2005). The Commission isthus treated as a rational, unitary actor with fixed preferences,generally in favor of further integration and liberalization. Whilerecognizing that the Commission cannot be a unitary actor in reality,these studies argue that the Commission acts with enough unity vis-à-vis the third party that it is appropriate to treat it as such.

If, however, the focus shifts to the internal workings of theCommission, a second principal–agent relationship may be detectedinside the Commission, between the Directorates-General (DGs) andthe Commission negotiating team, who in turn are seen as rational,unitary actors with fixed preferences. Thus two principal–agentrelationships may be hypothesized when the EU is negotiating with athird party; one at the level of the Commission and the other at the levelof the EU as a whole, even though the agent is in fact the same in bothrelationships. Consequently, this analytical framework presents asituation in which there is one agent (the Commission negotiating team)and two sets of principals (the DGs in the Commission, and the MemberStates in the Council).

The analysis of the tensions between the DGs and the Commissionnegotiating team helps to determine the actual preferences of theCommission, which reduces the problem of rational anticipation oftenconnected with principal–agent analyses. By knowing the truepreferences of the agent, in this case the Commission negotiating team,it is possible to avoid the pitfall of assuming that whenever it is able topush through an agenda, it is a result of rational anticipation of theprincipals’ preferences rather of the agent being successful in pursuingits own interests.

Although principal–agent analyses have been used in differentways, most make four basic assumptions.

1. The principals delegate power to an agent to act on their behalf.2. The relationship between the principals and the agent is characterized

by conflicting preferences and informational asymmetries.3. The principals are able to control the behavior of the agent through

various mechanisms.4. This control by the principals is incomplete, which may cause the

agent to act according to its own preferences rather than those of itsprincipals.

Frennhoff Larsén EU Trade Negotiations with South Africa 441

This article tests these four assumptions in the context of the EU’strade negotiations with South Africa, which led to the Trade,Development and Co-operation Agreement (TDCA) in 1999. TheTDCA was, at the time, the most ambitious trade agreement the EUhad concluded with such a geographically distant party. It was also thefirst agreement negotiated by the EU to establish a free trade areaincluding agriculture—a sector which previously had been excludedfrom the EU’s free trade area agreements. The agreement was thusseen as setting a precedent for future negotiations with other countries,such as Chile, Mexico, and the Southern Cone Common Market(Mercosur).

The central argument of the article is that the Commission did notemerge as a unitary actor in the TDCA negotiations, and in order tounderstand the EU position, the relationship between the DGs and theCommission negotiating team needs to be analyzed in addition to thatbetween the Member States and the Commission. In other words, EUdecision making in this case is better conceptualized as involving twoprincipals and one agent.

Delegation

Commission LevelNormally, when the EU initiates negotiations with third parties, a

temporary task force is set up within the Commission and is assignedoverall responsibility for the negotiations. Its tasks include coordinatingand translating the interests of the different DGs into a Commissionproposal, representing the Commission before the Council, andrepresenting the EU in its negotiations with third parties. Thus,following South Africa’s formal acceptance of the EU’s invitation towork toward a comprehensive long-term relationship, in January 1995the Commission appointed the so-called Task Force South Africa(TFSA), i.e., the agent, to lead the negotiations with South Africa.TFSA was comprised of four officials from DG Development,1 togetherwith the Director-General for Development (the EU chief negotiator),and the Commissioner for Development. The Director-Generalfor Development represented the negotiating team for the otherDirectors-General within the Commission, Committee of Permanent

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Representatives (Coreper) in the Council, and the South AfricanAmbassador to the EU (also South Africa’s chief negotiator). TheCommissioner for Development represented the negotiating teambefore the College of Commissioners, the General Affairs Council, andhis South African counterpart, the Minister for Trade and Industry.However, both the Director-General and the Commissioner forDevelopment were fully supported by TFSA, which was responsible forthe running the actual negotiations. It was the four members of the taskforce that prepared all the briefing notes, and they were present at allnegotiating rounds. Consequently, the Commission negotiating teamand TFSA are used interchangeably in this article.

By 1995 the responsibility for South Africa had been moved fromDG Trade to DG Development during an overall restructuring ofthe Commission, and consequently TFSA was set up in DGDevelopment. By delegating the task of agenda setting, the DGprincipals expected the task force to come up with the initial proposalaround which they could then express their preferences. AlthoughTFSA was based within DG Development, it was supposed to act asa neutral entity, representing the Commission as a whole, preparinga balanced proposal to the Council, and incorporating the differentinterests of the DGs. The reason for delegating the task ofrepresenting the DGs during the negotiations with the Member Statesin the Council and the negotiations with South Africa was to ensurethat any Commission position taken within either negotiation wouldbe acceptable to all DGs.

EU LevelIn the 1957 Treaty of Rome, the Member States granted the

European Community exclusive competence in the area of trade policymaking. Through this delegation of trade policy, the Member States arerepresented by the Community in international trade negotiations withthird parties, and the Community consequently speaks with a “singlevoice” (Meunier 2000, 103). The Common Commercial Policy thusmeans that the Member States cannot act individually in this area.Neither can they enter into separate international agreements with thirdparties (Macleod, Hendry, and Hyett 1996, 61). In addition to thedelegation of trade policy to the Community, there is a second level ofdelegation in which the Council delegates the agenda-setting and


negotiating power in third party negotiations to the Commission(Meunier 2000, 107). Thus, as in other trade negotiations, the MemberState principals in the Council delegated the power to the Commissionagent to represent the EU and lead the trade negotiations with SouthAfrica.

To reiterate, the assumption concerning delegation pertains to boththe Commission and the EU as a whole. The TFSA agent was delegatedthe power to set the agenda and lead the negotiations with South Africaby both the DG and Member State principals.

Conflicting Preferences and Informational Asymmetries

Commission LevelAlthough the TFSA agent had been delegated the task of setting the

agenda for the EU–South Africa negotiations, it did have its ownpreferences, separate from those of its DG principals. The main dividinglines within the Commission were between TFSA, DG Trade, DGEnterprise, and DG Agriculture. In line with the assumption that thepreferences of the DGs depend on the sector or function they represent(Egeberg 2002, 8; Peters 1992, 115-6), TFSA’s own preferences weredevelopment-oriented, given its location within DG Development.Ideally, TFSA would have wanted to offer South Africa fullmembership in the Lomé Convention,2 as this would bring a strongactor into the African, Caribbean, and Pacific (ACP) family and thusstrengthen Lomé, a core area of responsibility of DG Development.(Interviews, Commission officials, DG Development, April to May2004).

DG Trade is usually seen as adopting a liberal economic approachand favoring free trade (Bretherton and Vogler 1999, 51). In line withthese preferences, it sought to establish a free trade agreement withSouth Africa based on Article XXIV of the General Agreement onTariffs and Trade (GATT), which establishes that a free tradeagreement (FTA) should “eliminate duties and other restrictiveregulations of commerce . . . on substantially all trade between theconstituent territories in products originating in such territories”(GATT, Article XXIV, paragraph 8:a). Although DG Trade realizedthat the difference in size of the respective economies needed to be taken


into account, it was very clear in its commitment to reciprocal tradeliberalization. At the same time, however, DG Trade stressed theneed for the EU to adopt a tough stand in certain areas, such as textilesand clothing (Interview, Commission official, DG Development, June2004).

DG Enterprise’s main interest was for South Africa to offer higherlevels of market access in areas such as automotives, chemicals, woodand paper, precious metals, glass, transport equipment, and electricalequipment (Interview, Commission official, DG Enterprise, October2005).

DG Agriculture wanted to gain market access without exposingEU agricultural production to heightened competition from SouthAfrica. Although it was often mentioned during the negotiations thatSouth Africa’s agricultural production did not present a direct threatto EU products, DG Agriculture did not necessarily share this view.But the main reason for DG Agriculture to take a protectionistapproach in these negotiations was that the agreement with SouthAfrica was the first EU FTA to include the agricultural sector. Assuch, the EU–South Africa FTA was seen as setting a precedent forsubsequent negotiations with other third parties with morecompetitive agricultural sectors (Interview, Commission official, DGTrade, June 2004).

The informational advantage that principal–agent analysis oftenascribes to the agent was also seen, to a certain degree, in therelationship between the TFSA agent and the DG principals. Regardingthe developmental dimensions of the negotiations, and South Africa’spotential membership in the Lomé Convention in particular, TFSApossessed the necessary technical expertise. However, for othertechnical aspects of the trade negotiations, TFSA had to rely on theexpertise within the different DGs, in particular, DG Trade, DGEnterprise, and DG Agriculture. Consequently, it is not possible toattribute technical expertise as one of the reasons for the TFSA agent’sinformational advantage over its DG principals. Instead, it obtained aninformational advantage through its coordinating role. Certain DGshad a deeper and more detailed level of technical expertise than TFSA,but only the task force grasped the overall picture of the negotiationsand the interests of the different DGs (Interview, Commission official,DG Development, April 2004).


EU LevelIn the Council, the Commission negotiating team, i.e., the agent,

faced some Member State principals, including Denmark, Finland, theNetherlands, Sweden, and the United Kingdom, that were supportiveof its developmental approach and favored greater liberalization andan opening of the EU market for South African products. Others,including France, Spain, Italy, Portugal, and Greece, favored a moreprotectionist approach (European Parliament 1997). This response ofthe Southern European Member States is hardly surprising, given thatSouth African agricultural production, with its focus on citrus fruitsand wines, competes directly with these countries. But protectionistinterests were also evident in the northern Member States, especiallyfor such products as beef, milk powder, and cut flowers (Interview,Commission official, DG Development, April 2004).

The informational advantage of the agent is often seen in therelationship between the Commission and the Council in third partytrade negotiations (Hooghe and Marks 2001; Nugent 1997; Pollack2003). Given its technical expertise and extensive experience in the areaof Common Commercial Policy since 1957, the Commission has aclear informational advantage over the Council. In addition, while theCommission has fewer financial and human resources than theMember States, it is placed “at the centre of a wide-ranging networkincluding national governments, subnational governments, andinterest groups [which] gives it a unique informational base forindependent influence on policy making” (Hooghe and Marks 2001,11). In the EU–South Africa negotiations, this informationaladvantage of the Commission was seen and further intensified by thelong history of Community relations with South Africa, which datesback to 1977. Although the role of the Commission was limited in thebeginning, it became more active once the first moves toward ademocratic transition were made in South Africa in the early 1990s. Inaddition, once the FTA negotiations had started, the informationaldisadvantage of the Member States grew further, as they had to rely onthe information conveyed to them by the Commission.

This demonstrates how the assumption concerning divergingpreferences and informational asymmetry characterized theprincipal–agent relationship both at the level of the Commission andthe EU as a whole. The diverging preferences were clearer between the


TFSA agent and the individual DG principals, than between the taskforce and the individual Member State principals. This is becausenational positions changed according to the sector being discussed,and at times the task force had solid support from some of theMember States. The informational advantage of the agent vis-à-vis theprincipals was, however, greater in the relationship between TFSAand the Member States in the Council, than between the task forceand the DGs. The latter often had to provide their TFSA agent withthe necessary technical expertise regarding their respective policyareas.

Principal Control Mechanisms

The assumption concerning the principals’ ability to control theTFSA agent is tested during the two stages of mandates andnegotiations. These two stages, together with that of ratification, areoften used when analyzing the respective roles played by the Counciland the Commission at each stage of trade negotiations between theEU and a third party (Holland 2002; Meunier 2005). Althoughratification is one of the main ways in which principals are able toexercise control over the negotiating agent, as the agent knows thatany agreement it reaches has to be ratified by the principals (Meunierand Nicolaïdis 1999; Putnam 1988), this is often just a matter of“voting up or down” (Putnam 1988, 437), and hence does not exposeany tensions in the relationship between the principals and the agent.The TDCA agreement was indeed agreed and ratified by both theCommission and the Council.3

Mandates

Commission LevelThe initial proposal for the first TDCA negotiating mandate was

prepared by the TFSA agent as soon as it was appointed in January1995. However, the structure of the negotiations, i.e., the decision tonegotiate an FTA, had to a great extent already been determined byone of its principals—DG Trade, which was responsible for SouthAfrica prior to 1995. In 1990, once it became clear that the apartheid


regime would come to an end, DG Trade engaged in a number ofexploratory missions to South Africa. The preference of DG Trade foran FTA with South Africa was presented as a “take it or leave it”proposition (Interview, Commission official, DG Development, May2004). This way, DG Trade was able to exercise control over the taskforce during this initial agenda-setting phase. The task force had tostay within the overall structure proposed by DG Trade, but hadsome leeway with regard to the developmental aspect of the mandateproposal. In particular, it pushed for making South Africa a qualifiedmember of the Lomé Convention. The participation of DG Enterpriseand DG Agriculture was very limited at this initial agenda-settingstage.

The first proposal for a negotiating mandate to be presented to theCouncil thus represented a compromise mainly between DG Trade andDG Development. It proposed a twin-track approach: making SouthAfrica a qualified member of the Lomé Convention, includingparticipation in the political institutions of the Convention and alimited number of financial provisions; and, establishing a bilateralagreement with provisions for the future negotiation of an FTAbetween the EU and South Africa (European Commission 1995a). Thistwin-track approach responded to the intermediate status of SouthAfrica—a country that was more developed than its counterparts, butfell short of belonging to the industrialized bloc. The legacy of apartheidand South Africa’s uneven distribution of wealth were huge drawbacks(Asante 1997, 1).

While it was relatively easy for the TFSA agent to secure approvalof its first mandate by the DG principals, its second mandate provedmore difficult. At this point, DG Agriculture and DG Enterprisebecame seriously involved in the negotiations. Given the overall aim ofensuring that the agreement would be in line with Article XXIV ofGATT (i.e., that the free trade area would cover substantially all thetrade between the parties after a transitional period of ten years), DGAgriculture pushed for a low percentage—around 50 percent—of SouthAfrican agricultural products to enter the EU market duty-free. It alsowanted to exclude a number of sensitive agricultural products, such ascertain fresh fruits and vegetables, from the FTA. As the South Africanegotiations were sure to become a template for EU FTAs with otherdeveloping countries, such as Chile and Mexico, DG agriculture was


unwilling to set the precedent for an extensive opening of the EUagricultural market. However, DG Agriculture did expect South Africato open up its agricultural market to EU products at a much higherlevel, as South Africa’s sensitivities were in the industrial, rather thanthe agricultural sector (Interview, Commission official, DG Trade, June2004).

Given DG Agriculture’s wish to concede as little as possible in thearea of EU agricultural products, DG Enterprise faced the prospect ofopening up considerably more in the area of nonagricultural productsin order to conform with the requirement of Article XXIV. Its mainemphasis therefore was on making South Africa reciprocate in theliberalization of its industrial market.

Following three months of intra-Commission consultations, TFSApresented a mandate proposal that outlined these negotiatingpositions, and this was adopted by the Commission in October 1995.The proposal laid out the objectives of the FTA, stating that it should“be gradually established, over a reasonable period of time, coveringsubstantially all trade, without excluding any specific sector.” Itfurther specified that at least 97 percent of all nonagricultural imports,and at least 55 percent of all agricultural imports from South Africawould enter the EU market duty free (European Commission 1995b).The low figure of 55 percent reflected the protectionist inclinations ofDG Agriculture.

EU LevelIn the Council there was general agreement among the Member

State principals concerning the need to support South Africa’sdemocratic transition, and in June 1995, the General Affairs Counciladopted the Commission’s proposal without any major changes. TheCouncil consequently responded to, rather than contributed to, theagenda for a future cooperative arrangement between the EU andSouth Africa. However, the Member State principals did engage moreactively in discussions around the second mandate that outlined thetrade aspects of the agreement. They expressed strong views concerningthe future FTA to be negotiated with South Africa, and were keento ensure that the task force acted in accordance with the EU’s bestinterests. The Member States expressed their general support for the


strengthening of trade relations with South Africa, but underlined theneed for caution given that the negotiations with South Africa would seta precedent for future EU negotiations with other developing countries(Council of the EU 1995).

The most heated issue within the Council was the coverage andexclusions under consideration with regard to the free trade area. Asmentioned previously, the Commission proposal stated that at least 97percent of all nonagricultural imports, and at least 55 percent of allagricultural imports from South Africa should enter the EU marketduty-free. Most Member States agreed with the 97 percent targetfor the industrial sector, but there was less consensus regardingagricultural imports. For example, Sweden and the Netherlandsthought 55 percent was too low, while Spain considered it to beexcessive (Council of the EU 1995). Others, such as Finland, France,and the United Kingdom, argued against setting specific percentagefigures. In response to these latter Member States, it was agreed thatthe percentages in the Commission proposal should serve as referencepoints and not be “interpreted as criteria for defining the conceptof an FTA” (Council of the EU 1996, 3). This meant that the MemberStates did not, through the mandate, restrict the task force any furtherin this area than the Commission DGs had already done. Yet, giventhe diverging interests between the Member States, with mainlythe Mediterranean countries being reluctant to open up theEU market, and the Northern Member States favoring greaterliberalization than that suggested in the Commission proposal, it wasclear that the decision not to specify liberalization percentages did littleto free up the autonomy of the task force in its negotiations with SouthAfrica. Instead, the decision not to specify the degree of liberalizationat this stage just meant that intense negotiations within the Councilaround this issue would continue in parallel with the negotiationsbetween the EU and South Africa.

A clear indication of the reluctance on the part of theMediterranean Member States, including France, Greece, Italy,Portugal, and Spain, to open up the EU market, was their suggestion toidentify sensitive products to be excluded from the agreement. TFSA,which had resisted DG Agriculture’s demand for specific products to beexcluded from the agreement, highlighted the importance of engagingin an open negotiation with South Africa. This meant a review and


determination of which products to exclude over the course ofnegotiations. However, in the end the insistence by the Mediterraneancountries was such that the TFSA had to agree to an exclusion listinvolving 39 percent of South Africa’s agricultural exports to the EU(European Parliament 1997).

Negotiations

Commission LevelThe negotiating directives, once adopted by the Council, provided

the broad guidelines for TFSA. However, the actual details of thetrade agreement had to be worked out between the task force and theSouth African negotiating team. In addition, as the negotiationsproceeded, new issues would appear. The Group Inter Service pour lesNégociations avec l’Afrique du Sud (GINAS) was set up for the taskforce agent to seek advice from the different DG principals concerningthe details of new issues that appeared during the negotiations withSouth Africa. The group consisted of all the DGs affected by thenegotiations with South Africa, and given the extensive scope of theagreement, most of the Commission DGs eventually participated in it.Through GINAS the DG principals were able to monitor theperformance of their task force agent. It met on a monthly basis withTFSA to review progress of the negotiations, and to offer their adviceor objections.

In addition to GINAS, the core group, consisting of those DGsmost closely involved in the negotiations (DG Trade, DG Enterprise,and DG Agriculture), met more frequently to ensure that their interestswere taken into account by TFSA, and to assist the task force informulating a Commission position. Their representatives were alwayspresent during the actual negotiation rounds with South Africa, andthey also led the bargaining with South Africa over the more technicalaspects of their respective areas of responsibility. In other words, DGAgriculture negotiated directly with its South African counterpart, theNational Department of Agriculture (NDA), and so on (Interview,South African government official, NDA, May 2005). This presence ofthe core group during the negotiations with South Africa allowed theDG principals to closely monitor the actions of TFSA, as well as control


the outcome of the FTA by directly handling parts of the negotiationsthemselves.

EU LevelThe most common way in which the Member State principals in the

Council are able to control the Commission during a trade negotiationis through the 133 Committee, which consists of senior trade officialsfrom the Member States. The 133 Committee maintains a regulardialogue with the Commission to ensure that it does not act outside ofthe mandate, and to agree on negotiating positions as new issues emergeduring the negotiations (Woolcock 2000, 382). The 133 Committeeplayed an important role in the EU–South Africa negotiations. The taskforce agent briefed the Committee on a regular basis concerning theprogress of the negotiations, and consulted with it concerning responsesto issues raised by South Africa. However, the bulk of the discussionsbetween the Commission and the Council took place in the SouthernAfrica Working Group (Council of the EU 1996), which met morefrequently than the 133 Committee, and this offered a way for theMember States to closely monitor and control the behavior of the taskforce.

An example of an issue that played a significant role in the SouthernAfrica Working Group and the 133 Committee, as well as inCOREPER and the General Affairs Council, was the protection ofgeographical denominations. In 1998 Spain and Portugal made ademand in the Southern Africa Working Group that South Africa stopthe usage of the terms “Port” and “Sherry” for its fortified wines. Theyargued that the terms were geographical indications of Jerez in Spain,and Oporto in Portugal. South Africa, wanting to protect its productionof Port and Sherry, disputed that these terms should be offeredprotection, and argued that they have become common to the Englishlanguage, and thus were not necessarily associated with the regions ofJerez and Oporto (Links 1998). Although the task force understoodSouth Africa’s concerns, it could not resist pressure from the MemberStates to protect Port and Sherry as geographical indications. France,Greece, and Italy supported Spain and Portugal on this issue. While theother Member States did not have a strong interest in protecting certainwines or spirits as geographical indications, they did not resist thesedemands made by Spain and Portugal. As one Commission official


highlighted (Interview, Commission official, DG Competition, October2005), there is general agreement between the Member States within theCouncil to respect each other’s sensitivities in international tradenegotiations, given that these sensitivities change depending on thestrengths of the third party. Consequently, although a majority of theMember States were unaffected by the Port and Sherry issue, they didnot object to Spain’s and Portugal’s demands. They knew that in thefuture their sensitive products may be under discussion, and that theytoo would need the support of other Member States (Interview,Commission official, DG Competition, October 2005).

The Southern Africa Working Group and the 133 Committee thusfunctioned as control mechanisms for the Member State principals.The Member States were able to raise new issues in these fora andensure that TFSA acted according to its mandate.

This section demonstrates how the assumption concerning principalcontrol operated both at the level of the Commission and the EU as awhole. The two mandates provided ways for the DGs and the MemberStates to control and set the parameters for the TFSA agent in itsnegotiations with South Africa. It is also clear that it was within theintra-Commission negotiations that most of the structure and contentof the mandates were developed. The Member State principals thenresponded to these proposals and thereby further restrictedthe autonomy ceded to TFSA by the DG principals. During thenegotiations with South Africa, the TFSA agent then continued to bemonitored by the DG principals, through GINAS and the core group,and by the Member State principals, through the Southern AfricaWorking Group and the 133 Committee. Here the ability of the DGs tocontrol the task force was greater than that of the Member States, as theDGs of the core group were present and participated in the negotiationrounds with South Africa. This is different from most principal–agentrelationships, in which the principals are not able to directly observe theagent’s actions (Arrow 1985).

Agent Autonomy

Principal–agent analysis assumes that the control mechanisms ofthe principals are incomplete, which allows for the agent to pursue itsown interests, rather than those of its principals. This section explores


the ability of TFSA to act autonomously during the same stages asthose analyzed previously, i.e., mandates and negotiations.

Mandates

Commission LevelThe mandate proposals offered a way for the DG principals to set

the parameters for the behavior of the TFSA agent in the negotiationswith South Africa. However, it was the responsibility of the task forceto come up with the initial proposal for the mandate around which theDG principals then expressed their views. This gave the taskforce a considerable amount of autonomy to develop the mandateproposal according to its own interests. Given its location withinDG Development, TFSA was therefore able to ensure that itsdevelopmental interests were included in the mandate proposals. Asargued by Holland (1995, 88), the DG that oversees South Africa affairshas a great impact in defining policy, and pushing through.Consequently the agenda-setting abilities of TFSA offered it aconsiderable amount of autonomy to advance its own interests.

The way in which TFSA put together the initial proposal for the firstmandate and managed to get it adopted by the Commission highlightsthree ways in which the task force was able to use its autonomy andobtain an advantage over its DG principals. First, the fact that the morecontentious trade aspect of the negotiations was left to be worked outin an additional mandate ensured that TFSA could get its keydevelopment issues adopted relatively quickly by the DG principals.The proposal for the first mandate mainly represented thedevelopmental interests of TFSA and South Africa, and although theseissues were relatively uncontroversial given the general agreementamong all DGs concerning the need to support South Africa’stransition to democracy, it meant that TFSA managed to obtainapproval for these issues by its DG principals prior to the negotiationsconcerning the more controversial trade issues. This meant that thesedevelopment issues would not be used as trade-offs against certain tradedemands advocated by the DGs.

Second, by quickly preparing the proposal for the first mandate, onthe grounds that it wanted to show its commitment to South Africa,TFSA offered its DG principals little time to debate the issues and thus


limited their engagement in the agenda-setting process. In addition,TFSA’s swift action helped limit the number of DGs that were able toexpress their views on the agreement. In line with the hypothesis that theinvolvement of principals, or domestic constituencies, increases overtime (Evans 1993, 404), this is exactly what occurred with the DGprincipals. At the time when the proposal for the first mandate wasadopted by the Commission in March 1995, 13 out of a total of 26 DGswere identified as “associated” with the proposal, which meant that inaddition to DG Development—which was the primary responsible forthe proposal—they were part of the intra-Commission negotiations(European Commission 1995a). At the time of the conclusion of theagreement in 1999, this number of associated DGs had increased to 23(European Commission 1999). Thus, by acting quickly at the outset,TFSA successfully limited the number of potential objections to itsproposal.

Third, by proposing the use of a two-track approach thatsimultaneously sought for South Africa to be a qualified member of theLomé Convention, and negotiated an EU–South Africa FTA, TFSAembarked on a new format for third party negotiations. Given theprerequisite that the two sets of negotiations proceed in parallel, thetask force ensured that a broad range of issues would be discussed, andthus that there would be significant opportunities to form issue linkages.In addition, this new approach enabled the task force to set the agendafor the structure of the negotiations; as argued by Peters (2001, 82),whoever controls the initial definition of the agenda is likely to besuccessful throughout the policy-making process. This proved to be thecase with the greater autonomy granted to TFSA.

Although the task force was able to exercise a significant amount ofautonomy and push through its own developmental preferences duringthe agenda-setting process of the first mandate, this was not the case inthe development of the second mandate. As demonstrated previously, inthis second stage the TFSA agenda was compromised by the moreprotectionist demands of DG Agriculture and DG Enterprise.

EU LevelAlthough it is the Council that provides the Commission with

mandates, the Council responds to a proposal presented to it by the


Commission. Generally, the final proposal adopted by the Councilcontains at least 80 percent of the original Commission draft (Hull 1993,83). As mentioned before, TFSA’s proposal for the first mandate wasmainly a combination of the preferences of DG Development and DGTrade. Given the relative indifference among the Member Stateprincipals regarding South Africa’s Lomé membership, the task forceagent had no problem in pushing through this aspect of its two-trackproposal. However, when it came to establishing a bilateral tradeagreement between the EU and South Africa, there were a few areaswhere the Member States in the Council tried to push through their ownpreferences. For example, Germany, supported by Austria, Belgium,and Denmark, requested a “readmission clause” that would commitSouth Africa to take full responsibility for the outflow of undocumentedmigrant workers to the EU (Interview, Commission official, DGDevelopment, April 2004). The result was a joint declaration in the finalTDCA that emphasized the importance of cooperating for theprevention and control of illegal immigration. However, the task forcemanaged to postpone the decision around this issue until the very end ofthe negotiations with South Africa, so that it would not form part of thenegotiating mandates. Given the Member States’ competence in thearea of immigration, the task force wanted to prevent a situation inwhich it would have had to more closely involve the Member States inthe negotiations with South Africa. To this end, TFSA managed toobtain a mandate which foresaw a Community agreement, which thenallowed the task force to lead the negotiations as if it were a Communityagreement rather than a mixed one, thus restricting the involvement ofthe Member States.

While the first mandate was characterized by flexibility and aconsiderable degree of autonomy for the Commission negotiators, thesecond mandate was much more rigid. The Council discussions aroundthis mandate went on for almost five months as a result of the difficultyof crafting a proposal that was attractive both to South Africa and tothe Member States, especially in light of the long list of products thatthe latter wanted to exclude from the agreement. Although the endresult was a protectionist mandate, with 39 percent of South Africa’sagricultural exports excluded from the envisaged agreement, the taskforce had still managed to get the Member States to agree with certainconcessions.


Negotiations

Commission LevelDuring the TDCA negotiations, there was a general perception

among the DG principals that despite their ability to monitor theperformance of the TFSA agent both before and during thenegotiations with South Africa, the task force had a significantamount of autonomy. After all, the representatives of the DGprincipals understood that they had to compromise at certain pointsin order to reach a common Commission position (Interview,Commission official, DG Trade, June 2004). For example, TFSA putpressure on DG Enterprise to ensure greater access for South Africannonagricultural products in the EU market. Although DG Enterprisehad agreed to an opening of the EU market for 97 percent of SouthAfrican nonagricultural products in the first mandate proposal,TFSA and South Africa successfully pushed for 99.98 percent ofthe industrial sector to be liberalized during the course of thenegotiations.

Given the convergence of preferences between TFSA and SouthAfrica, the task force would encourage South Africa to put directpressure on the DGs during the official negotiation rounds between theEU and South Africa. It was generally recognized that, despite DGAgriculture’s longstanding protectionist preferences, its South Africancounterpart, the National Department of Agriculture, managed toconvince it to open up the EU agricultural market more than it hadinitially wished (Interview, South African government official, NDA,June 2005). This is an important point, as the control exercised by theDG principals over their TFSA agent as a result of their presence duringthe negotiations with South Africa was somewhat balanced by directpressure from South Africa, which had similar preferences to those ofTFSA. Consequently, the TFSA could use South Africa’s support toensure that its own developmental preferences were pushed with theDGs. Similarly, South Africa benefited from negotiating with aCommission negotiating team based within DG Development, as it, inthis case, facilitated third party influence on the EU decision-makingprocess.


EU LevelDespite the rigid nature of the second mandate, and the control

exercised by the Member State principals through the Southern AfricaWorking Group and the 133 Committee, the TFSA agent was, at times,able to exercise its autonomy vis-à-vis the Council. One example was thetask force’s framing of conflictual issues as a matter of “balancedburden sharing” between the Member States in the Council (Interview,Commission official, DG Development, April 2004). The eventualagreement negotiated between the EU and South Africa was of limitedeconomic importance to the EU, as South Africa accounted for only 1.9percent of EU imports and 1.3 percent of its exports (Sudworth and VanHove 1998). The Member States nevertheless attached great importanceto the FTA because it would set a precedent for future agreementsbetween the EU and third party developing countries, especially in thearea of agriculture. The stakes were highest for the Southern EuropeanMember States, as their agricultural production is similar to that ofSouth Africa and other developing countries in the queue to negotiatewith the EU (like Chile and Mexico). However, the task force managedto achieve a balanced burden sharing between the Member States byensuring that significant concessions were also required by the EU’sNorthern Member States for such products as beef, cheese, milk, andcut flowers (Interview, Commission official, DG Development, May,2004).

This section demonstrates that agent autonomy was operativeboth at the level of the Commission and the EU as a whole. As themain agenda setter, the TFSA agent managed to get its developmentalpreferences reflected in the first mandate in particular. Thisdevelopmental aspect of the agreement can only be explained byexploring the intra-Commission negotiations and by the fact that theCommission negotiating team was based within DG Development.During the negotiation stage the task force was also able to exercisea significant amount of autonomy. In the intra-Commissionnegotiations, it could use the support of South Africa to push itspreferences vis-à-vis the DGs as South Africa interacted directly withthese principals during its official negotiating rounds with the EU. Inthe Council discussions, the task force took full advantage of theabsence of the Member States during the negotiations between the EUand South Africa, and chose when and in what format to present the


demands made by South Africa so as to ensure issue-linkages and abalanced burden sharing between the Member States. Placing theanalysis at the level of the Commission, and focusing on theCommission negotiating team as the agent, thus helps to account forthird-party influence, an area that has so far received little, if any,attention from principal–agent analyses of EU trade negotiations(Nicolaïdis 1999, 88).

Conclusions

By testing the four assumptions of delegation, conflictingpreferences and information asymmetries; principal controlmechanisms, and agent autonomy, this article has demonstrated thatprincipal–agent analysis can be useful for explaining EU decisionmaking in the TDCA negotiations. In particular, it has shown howprincipal–agent analysis can help explain the internal Commissionnegotiations, which are often overlooked in analyses of EU tradenegotiations. This use of principal–agent analysis highlights thatthe Commission did not play the role of unitary actor in thenegotiations with South Africa, and that the difference in preferencesbetween the DGs and the Commission negotiating team werereflected in the initial EU agenda and in the final agreement withSouth Africa.

The conceptual framework of one agent and two principals not onlyhelps to explain the EU decision-making process theoretically, but alsocorresponds closely with the perceptions of both the European andSouth African negotiators involved in the TDCA negotiations. Indeed,one of the South African negotiators highlighted how “the Commissionfor its part is itself not a unified force, but in some departments a strongreflection of powerful vested interests. The negotiation team of theCommission then has the arduous task of negotiating within itself, andwith its opposite number, the Council, and its various substructuresin Brussels” (Smalberger 2000, 49). Another South African negotiator(South African government official, DTI Interview, May, 2005)described how, before the Commission negotiators could initiatenegotiations with South Africa, they had to seek their mandate byworking through both the Commission and the Member States. The


members of TFSA also expressed how they saw themselves involvedin a “two-step race” in which they had to work through both theCommission and the Council before being able to agree upon anythingwith South Africa (Interview, Commission official, DG Development,May 2004).

To explore whether the conceptual framework of one agent andtwo principals is useful beyond the case of the EU–South Africanegotiations, further case studies should be carried out. The TDCA hasserved as a model during several other trade negotiations between theEU and third parties, including Chile, Mexico, Mercosur, and the ACPcountries. There is thus a vast and rich research agenda on which tofurther apply this explanatory framework involving one agent and twoprincipals.

Notes

The author wishes to thank John E. Owens and the anonymous referees for their editorialcontributions to this article, and Richard G. Whitman for his useful comments on earlier drafts.

1 Although DG Development was called DG VIII at the time, the short textual names that replacedthe Roman numerals in 1999 are used throughout this article.

2 The Lomé Convention was a trade and aid agreement that regulated the relations between the EUand the ACP countries between 1975 and 2000. In 2000 the Cotonou Agreement replaced the LoméConvention, which is a new trade and aid agreement between the EU and 71 ACP countries(including South Africa’s qualified membership).

3 Given that the agreement turned out to be classified as an Association Agreement of a “mixed”nature, including competences of both the Community and the Member States, it also had to beratified domestically within the 15 Member States.

About the Author

Dr. Magdalena Frennhoff Larsén is Visiting Lecturer at the Centre forthe Study of Democracy at the University of Westminster. Her mainresearch interests include the external relations of the EU, development,and trade policy.

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