Informal Governance in the European Union

How Governments Make International Organizations Work

Mareike Kleine

• Publisher: Cornell University Press
• Year: 2014
• eBook ISBN: 9780801469398
• Topic: Politics & International Relations
• Subtopic: European History
• Index: Politics & International Relations

The European Union is the world's most advanced international organization, presiding over a level of legal and economic integration unmatched in global politics. To explain this achievement, many observers point to its formal rules that entail strong obligations and delegate substantial power to supranational actors such as the European Commission. This legalistic view, Mareike Kleine contends, is misleading. More often than not, governments and bureaucrats informally depart from the formal rules and thereby contradict their very purpose. Behind the EU's front of formal rules lies a thick network of informal governance practices.If not the EU's rules, what accounts for the high level of economic integration among its members? How does the EU really work? In answering these questions, Kleine proposes a new way of thinking about international organizations. Informal governance affords governments the flexibility to resolve conflicts that adherence to EU rules may generate at the domestic level. By dispersing the costs that integration may impose on individual groups, it allows governments to keep domestic interests aligned in favor of European integration. The combination of formal rules and informal governance therefore sustains a level of cooperation that neither regime alone permits, and it reduces the EU's democratic deficit by including those interests into deliberations that are most immediately affected by its decisions. In illustrating informal norms and testing how they work, Kleine provides the first systematic analysis, based on new material from national and European archives and other primary data, of the parallel development of the formal rules and informal norms that have governed the EU from the 1958 Treaty of Rome until today.

1

LIBERAL REGIME THEORY

Institutions serve a purpose for their members. To withhold compliance, thus to weaken them, means losing something valuable. Members have an incentive to care about institutional preservation and, as a result, institutions have force.

—Peter Gourevitch

Why do governments carefully design formal rules, and then jointly act in ways that seemingly contradict the rules’ purpose? What do practices of informal governance tell us about why and how international organizations work?

In this chapter I present a theory of informal governance. At its core is the argument that uncertainty about future political pressure against cooperation generates a demand for what might be called a norm of discretion among governments. This norm states that governments that face unexpectedly strong domestic pressure for defection ought to be accommodated when their noncompliance threatens to diminish the overall value of the institution. The norm antecedes formal rules in that it adds flexibility to the formal institutional design when member states need to resolve unexpected and potentially disruptive conflicts that their cooperation may suddenly generate at the domestic level. It manifests itself in practices of informal governance as governments collectively circumvent formal rules in order to exercise added discretion.

Because the norm emphasizes what has been called the “liberal” insight in International Relations—that for international institutions to be effective, they constantly have to be reembedded in the interests and values of the member states’ societies—it will henceforth be referred to as Liberal Regime Theory.

This chapter introduces the theory in five steps. The first step explains why states choose to cooperate within a formal institutional framework. The second discusses why these formal rules may suddenly prove inadequate and require added situational discretion. The third explains why this situational flexibility is provided by means of informal governance, rather than through formal mechanisms. The fourth discusses how, given that demands for added flexibility might be ambiguous, the member states delegate the authority to assess whether formal rules or informal governance apply in a specific situation to a trustworthy government. The final step considers alternative views and two rival explanations for informal governance—power-based institutionalism and classical regime theory—and explains how these theories can be tested against each other.

Why States Demand Formal Institutions

In situations of interdependence, where the realization of an actor’s interests is dependent on another actor’s behavior, institutions can help ensure that actors capture gains from cooperation. A key aspect to understanding how institutions operate is uncertainty about the future. If one suspects a cooperating partner will renege on the promise to reciprocate in the mutual adjustment of policies, cooperation becomes untenable even when keeping your promise today promises great payoffs tomorrow and even more the day after or, in Robert Axelrod’s terminology, when cooperation takes place under “a long shadow of the future” (Weingast 2002, 672; Axelrod 1984).

This problem is particularly acute if we allow for state preferences changing over time. Following public choice theory, domestic political support determines the welfare of incumbent politicians. Governments consequently choose the policy that maximizes their political support measured as the weighted sum of electoral support for welfare gains (e.g., lower consumer prices in response to economic liberalization) and rents from interest groups in exchange for protection from change (e.g., protection from more competitive foreign imports) (Grossman and Helpman 1994, 836). Rents in that context are resources spent in order to increase one’s share of existing wealth, instead of using these resources to create wealth, and they can range from illegal bribes, campaign contributions, to public endorsements of incumbents or other forms of political support.

The politicians’ opportunism subjects a government to constant pressure from various social groups to pursue the policy that most closely matches their diverse interests. The strength and composition of this pressure depends on a variety of factors that affect actors’ economic opportunities, the politics of their collective action, and the responsiveness of political institutions to special interests. In any case, its result is time-inconsistent preferences as governments respond to changes in public demands for economic integration or special interests’ demands for protection from market forces. The fact that governments know that each of them is tempted to give in to varying societal demands renders their pledges to cooperate with one another dubious. Cooperation becomes untenable and all governments consequently end up worse off.

For governments to reap joint welfare gains under conditions of time-inconsistent preferences, they need to bolster the credibility of their commitments. In other words, for a government to begin making adjustments to cooperation, it needs reassurance that their cooperating partners will stick to their part of the bargain too. They do this by means of formal institutional rules that reduce uncertainty about one another’s future behavior. Precise rules that specify conduct in contingent situations enable states to discriminate more clearly between what constitutes cooperative behavior and what can be considered a violation of the agreement. These rules lend credence to commitments to cooperate, because they enable the monitoring of compliance and the punishment of defection (Abbott et al. 2000, 412–15). Rules that delegate authority to international organizations to make and enforce common policies enhance the credibility of commitments as well. They insulate decision makers from domestic ad hoc pressure (Hawkins et al. 2006, 18–19), and they limit the range of policy instruments available to governments to renege on cooperation.1 The codification of these rules signals this commitment widely beyond the circle of cooperating governments to markets and third states, which allows these actors to plan ahead and allocate resources more efficiently.2

Both types of formal rules—those that specify conduct and those that delegate authority to international organizations—align otherwise time-inconsistent preference ex ante in favor of cooperation. Crucially, common knowledge about the rules’ effects allows all states to form stable expectations about one another’s future behavior and, thus, to engage in cooperation at the outset. Because it removes governments’ temptations to defy the rules unilaterally, the institution can be said to be in equilibrium.

Why States Demand Flexibility

Lacking a monopoly of violence, international institutions have to be self-enforcing to be sustainable. An institution’s effect therefore has to be such as to constantly reproduce states’ interests in adhering to it. Yet exactly because governments are unable to predict what societal groups will want and lobby for in the future, which gives rise to a demand for formal commitment, they are also unable to predict how precisely their institution will affect the future patterns of their societal interdependence.3 As Ken Shepsle (1989, 141) puts it, “What can be anticipated in advance is that there will be unforeseen contingencies.” This gives reason to doubt that international institutions have a lasting, independent effect on state behavior. Once they are set up, institutions experience changes in their environment that may suddenly alter their effect on the costs and benefits of international cooperation both among and within countries. The reasons for this environmental change are manifold, complex and not predictable in their entirety. They range from technological innovation, shifts in consumer preferences and other shocks to supply and demand, to broader changes in political institutions. Therefore, once an institution has begun operation, situations inevitably arise in which a strict adherence to the formal rules, even if beneficial for the society as a whole, generates a distributional shock in which a segment of society bears much of a country’s costs of adjusting to cooperation.

In situations like these, where a domestic group suddenly shoulders the concentrated adjustment costs of economic integration, formal rules fail to reproduce states’ interest in adhering to them. The reason lies in the politics of collective action. Groups who incur concentrated losses have political advantages over larger groups with diffuse benefits—like the general public—since the marginal gains from collective action are much higher for members of small groups than for members of large ones (Olson 1965, chaps. 1 and 6). A domestic group that suddenly faces concentrated costs from cooperation therefore unexpectedly overcomes initial barriers to mobilization.

Now, recall that governments are expected to adopt policies that maximize their domestic political support. When groups unexpectedly mobilize to voice their interests in the political arena, they are increasingly able to affect their government’s policy toward delaying, obstructing, or even openly withholding compliance with international law or the decisions of international organizations.4 This problem is henceforth referred to as political uncertainty (Downs and Rocke 1995, 130; Rosendorff and Milner 2001, 831; Howse and Teitel 2010, 132–33).5

Crucially, political uncertainty is problematic not just because the sudden defiance of a formal commitment means that the defiant government and its cooperating partner forego the potential gains of cooperation.6 More important than that, an unexpected noncompliance with the formal rules is costly for all member states, because unauthorized defection creates doubts about the credibility of states’ commitment to cooperation. As established above, it is the credibility of one another’s commitment to cooperation that motivates governments to make adjustments to cooperation to begin with. Unauthorized defection consequently sets off a process that all governments would rather avoid: the credibility of mutual commitments sustains damage, the stability of states’ expectations about one another’s future behavior crumbles, and mutually beneficial cooperation unravels. The institution is no longer in equilibrium, since governments are increasingly motivated unilaterally to defy the rules. It is worth citing the chapter-opening quote by Peter Gourevitch on this topic at length:

The power of an institution arises not just, or even principally, from its capacity to use physical force. Rather, it emerges from the benefits members derive from participation in them. Institutions do things for members that they cannot obtain without them. Members acquire incentives to preserve institutions. The test of the power of an institution is thus its utility, not its coercive force. Institutions serve a purpose for their members. To withhold compliance, thus to weaken them, means losing something valuable. Members have an incentive to care about institutional preservation and, as a result, institutions have force. (Gourevitch 1999, 138)

Put differently, because unauthorized defection, be it in the form of delay, obstruction, or outright noncompliance, damages the general value of the institution, all governments have an incentive to prevent it. If all of them attach high value to the international institution, they prefer to add situational flexibility to the formal rules in order to prevent or resolve situations in which governments are tempted to defy an agreement even in the face of punitive sanction. This flexibility allows them to uphold a highly beneficial level of cooperation that they would otherwise not be able to sustain.

Why Flexibility Remains Informal

Why would governments refrain from codifying the use of flexibility in these situations? Some institutions do officially authorize departures from formal rules in the event of unforeseen developments. For example, Article XIX of the General Agreement on Tariffs and Trade (GATT) authorizes temporary protection when “as a result of unforeseen developments” a sudden surge in imports causes or threatens “serious injury to domestic producers.” Also, the EU treaties contain a number of derogations on grounds of public morality, public order and safety, and the like (e.g., Article 36, Treaty of Lisbon).

However, none of these formal measures captures the situations that constitute the aforementioned threat to the institution’s balance. Such a threat arises not because public goods are in jeopardy, per se, or because domestic groups require temporary protection from exogenous shocks.7 It is rooted in political factors that are endogenous to the domestic situation (Pelc 2009, 354). Thus, the same import surge can prompt unmanageable political pressure in one country, while in another country domestic producers adjust to it smoothly. Damage to the institution is imminent—and flexibility, therefore, is pertinent—only in the first scenario.

In short, flexibility is necessary not on grounds of economic efficiency, or equity, or because a public good is considered worth protecting. States find it necessary to provide flexibility when the imminent damage to the value of the international institution is considered more severe than the collective bending of rules for political reasons.

The political roots of political uncertainty explain why governments refrain from codifying the provision of flexibility in these situations. Putting into writing mechanisms that allow for the provision of flexibil...

Table of contents

• List of Figures and Tables
• Introduction
• 1. Liberal Regime Theory
• 2. Formal and Informal Governance in the European Union
• 3. The Commission’s Agenda-Setting Power
• 4. Decision Making in the Council and the Parliament
• 5. The Implementation of EU Policies
• 6. Knowing the Limits
• 7. The Council Presidency as an Adjudicator
• 8. Adjudicatory Authority in Practice
• Conclusion and Extension
• Notes
• Glossary of Institutions, Treaties, and Procedures
• References