European Union Trade Policy after Enlargement - Princeton University

RJPP486975 Queries Manfred Elsig Dear Author Please address all the numbered queries on this page which are clearly identified on the proof for your convenience. Thank you for your cooperation

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Please provide reference details for the sources cited for Table 1. Please provide reference details for this citation (World Bank) or remove the citation. Please provide reference details for the source (Eurostat) cited for Table 2. Please indicate the significance of the italicised and emboldened data in Table 2. Please expand this acronym (IO) here on its first use.

RJPP486975

Techset Composition Ltd, Salisbury, U.K.

5/13/2010

Journal of European Public Policy 17:6 September 2010: 783 –800

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European Union trade policy after enlargement: larger crowds, shifting priorities and informal decision-making

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Manfred Elsig

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ABSTRACT The article focuses on the effects of Eastern enlargement on EU trade policy-making. On interest constellation, the article makes a case that protectionist forces have been strengthened relative to liberal forces. This slight protectionist turn is mostly witnessed in the area of anti-dumping and with respect to the Doha trade round. On preference aggregation, guided by a principal – agent framework, it is argued that the growth in the number of actors (principals and interest groups) has not constrained the role of the European Commission (agent). However, it has led to an increase in informal processes and has empowered large trading nations vis-a`-vis smaller and less ‘comitology-experienced’ member states. KEY WORDS Business groups; comitology; decision-making; enlargement; principal – agent theory; trade policy.

INTRODUCTION 30

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Ahead of the July 2008 ministerial negotiations of the World Trade Organization (WTO) in Geneva, a group of ministers called for the European Union (EU) to push for a Doha trade deal.1 The letter indicated a split within the Union on the degree of concessions to be offered (mainly on agriculture) and on the importance of opening markets through the use of the multilateral trading regime. Interestingly, four of the six signatories were representing new member states (NMS). Is this an indication that NMS are more supportive of the multilateral trading system than others? Put differently, have liberal forces been strengthened in relation to protectionist forces as a result of the newest waves of enlargement? Surprisingly, the academic literature has paid barely any attention to the ways NMS shape EU trade policy. This article discusses effects of Eastern enlargement on balance of trade interests and on preference aggregation, and thus attempts to take a step towards closing this research gap.2 The study of EU trade policy has attracted increasing interest in recent years, merging the preoccupation of scholars working on political economy and Journal of European Public Policy ISSN 1350-1763 print; 1466-4429 online # 2010 Taylor & Francis http://www.informaworld.com/journals DOI: 10.1080/13501763.2010.486975

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European integration. The question of ‘who governs’ has sparked energetic debates among EU trade scholars. Three camps stand out: first, pluralists who focus on the role of interest groups (in particular business); second, intergovernmentalists who attribute dominance to the leading trading nations; third, supranationalists who associate significant influence to Community institutions, such as the European Commission (hereafter Commission) (De Bie`vre and Du¨r 2005; Du¨r 2008; Elsig 2007; Meunier 2005; Young 2002). This article addresses two research questions. First, what has the impact been on the balance of preferences among member states? The article shows that, on aggregate, protectionist voices have received more support than liberal forces. The impact is mostly witnessed in relation to the reform process of the EU’s anti-dumping (AD) policy. At the same time, the overall reliance of NMS on intra-EU trade explains reluctance by a large group of NMS to offer and demand better market access in farm trade and traditional industry sectors in the Doha trade round. The second research question addresses the effects of a growing number of member states on the politics of preference aggregation. In analysing aggregation effects, the article relies on a principal –agent (PA) framework. It is argued that the growth in the number of principals has not constrained the role of the Commission (agent), but has led to an increase in informal processes (to the detriment of more genuine debates in more formal processes). This process is likely to have empowered large trading nations vis-a`-vis smaller and less ‘comitology-experienced’ member states. The article is structured as follows: first, trade data and economic indicators are presented. This is followed by an analysis of revealed preferences of NMS. Second, introducing a PA framework, the focus turns to policy preference aggregation in an enlarged EU. Third, the article discusses the effects of the ‘new crowd’ on the business –government relations and on the PA relations at the EU level. The final section concludes.

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THE NEW ACTORS

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The most recent rounds of accession are comparable to the accession of former European Free Trade Association (EFTA) countries (Sweden, Finland and Austria) in the mid-1990s when measured in terms of gross domestic product (GDP). However, if other indicators are included (e.g., potential market size or voting power), Eastern enlargement promises to transform the political economy of the EU more substantially. This section focuses on the effects of the newest rounds of accession on the existing balance of interests among member states in relation to trade policy. In the trade policy literature, some attempts have been made to categorize member states either as liberal (‘liberal-north’) or as protectionist (‘club-med’ or ‘protectionist-south’) (Elsig 2002).3 This section shows that the NMS are not a homogeneous group when it comes to trade policy preferences; yet, on aggregate, they strengthen the protectionist camp.

M. Elsig: European Union trade policy after enlargement

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Deriving interests

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The trade literature on deriving interests is well established. Classical trade theory predicts who should favour what type of liberalization strategy (Hiscox 2002; Rogowski 1989). Below, we present some economic and trade data that will assist us in deriving interests. It is assumed that the contribution of economic sectors to overall GDP and current trade patterns help to predict revealed positions vis-a`-vis liberalization strategies. A country with a relatively important agricultural sector and high market shares within the European single market is expected to be more critical about liberalizing markets for agricultural produce. In addition, current trade flow data can serve as a proxy for analysing preferences and positions on a variety of regulatory options in trade policy across the multilateral –unilateral spectrum. Table 1 presents selected data on the economic profiles of NMS. Of the 12 NMS, the big four economies are Poland, the Czech Republic, Hungary (all acceded in 2004) and Romania (acceded in 2007).4 Together, Table 1 Economic size, sectors and high-tech exports (NMS)

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Bulgaria Cyprus Czech Republic Estonia Hungary Latvia Lithuania Malta Poland Romania Slovak Republic Slovenia NMS EU-15

% of EU GDP

% % Industry Services % Share of % Highagricultural (of (of Agriculture (of country country country employment technology exports ∗ ∗ ∗ (2004) GDP) GDP) GDP)

0.23 0.12 1.03

6.3 2.7 4.1

32.3 19.2 37.6

61.4 78.0 58.3

– 5.1 4.4

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0.12 0.82 0.16 0.22 0.04 2.50 0.98 0.44

3.0 2.8 3.3 5.3 2.7 16.1 7.9 2.6

28.5 31.5 22.0 33.3 22.3 29.0 35.6 33.5

68.5 65.7 74.7 61.4 74.9 54.9 56.5 63.9

5.5 5.3 14.6 16.3 2.3 17.6 – 5.1

16.8 25.7 4.7 5.2 – 3.3 4.2 4.9

2.0 4.9

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0.27 6.99 (aggregate) 93.01 (aggregate)

9.7 8.6∗ / 9.8∗∗ 4.8

5.2 9.7∗∗ 18.0

Notes: ∗ NMS-10; ∗∗ NMS-8; ∗∗∗ % of manufactured exports, average 2000– 2006; all figures for 2007, unless otherwise indicated. Sources: Eurostat, CIA World Factbook, WTO Trade Policy Review 2007, World Bank Development Indicator, 135 Q1 own calculations.

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they represent 76.5% of total GDP of the NMS. In terms of the contribution to overall country-specific GDP shares, agriculture and industry, as sectors, are above the EU-15 average. Noteworthy is the contribution of the agricultural sector to GDP in Poland (16.1%), Romania (7.9%), Bulgaria (6.3%) and Lithuania (5.3%). In terms of the size of workforce in the agricultural sector, the share is particularly important for Poland (17.6%), Lithuania (16.3%) and Latvia (14.6%). Data from the World Bank further suggests differences between the Q2 NMS and old members in terms of reliance on high tech production and export. Yet, there is also notable variance among NMS in terms of high-tech export shares: Hungary (25.7%), Estonia (16.8%) and the Czech Republic (12%) are leaders among NMS. Additional information can be derived from the patterns of trade flows. Table 2 indicates the proportion of intra-EU and extra-EU export flows. The average of intra-EU trade for the EU-27 is 69.6% and the average of the big four (France, Germany, Italy and the UK) is 61.5%. This figure is significantly higher for the NMS-8 that joined in 2004 (75.5%). In particular, the four biggest NMS show high dependency on the EU internal market. This underscores the significance of the internal market (and thus internal market regulation) in relation to extra-EU export markets (and thus external trade policy). What are the current export markets beyond the EU-27 single market? The Baltic States exhibit significant trade relations with Russia. Poland and the Czech Republic have various important export markets ranging from Russia, the Candidate Countries, and the Mediterranean Basin, to the US. Hungary manifests strong trade links with the Candidate Countries and the Mediterranean Basin. The same applies to Slovenia and the Slovak Republic. The Slovak Republic has, in addition, important trade links with the US. NMS and the EU’s trade venue mix

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Current trade profiles are a first-cut proxy to predict the preferences of member states with regard to external trade policy and the positions vis-a`-vis various regulatory venues to liberalize trade.5 In particular, the above data suggests that external trade policy is not equally salient for NMS and for the largest EU exporters. This section discusses selected evidence with respect to the revealed preferences of NMS in using different trade policy venues. In the remainder of this article, we mainly focus on the NMS-8. The EU is a prime user of multilateral, regional, bilateral and unilateral venues to regulate trade. The overall priorities regarding the choice of venues changed with the incoming Jose´ Manuel Barroso Commission as reflected in the EU’s Commission Communication ‘Global Europe’ (Elsig 2007; European Commission 2006a). Inspired by the Lisbon competitiveness agenda, more attention is paid to gaining additional market access, engaging in new preferential trade agreements (PTAs) and tackling specific trade barriers to European business. New initiatives to negotiate PTAs in Asia have been pushed. In addition, Global Europe included an agenda for reforming trade defence

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84.6 15.4 2.6 8.7 11.8 16.2 1.4 2.7 2.7 1.7 17.8 16.2 3.7 6.9 4.8 2.8 1,528

73.4 26.6 11.7 1.4 27.8 18.6 2.2 6.0 1.7 0.4 4.1 15.7 1.4 1.8 3.4 3.6 12,498

76.5 23.5 1.2 4.3 8.8 12.0 0.6 3.4 2.3 0.7 30.1 22.2 1.9 6.7 3.2 2.6 799

75.0 25.0 10.7 7.2 45.6 12.4 2.2 1.4 4.2 0.3 1.9 5.2 2.3 3.0 2.0 1.8 2,600

64.9 35.1 6.7 6.1 40.0 16.5 7.2 0.4 0.4 0.2 6.0 5.6 0.8 0.6 8.0 1.4 13,743

77.8 22.2 10.4 3.9 22.5 11.2 2.3 3.7 1.1 0.4 16.4 13.7 3.0 4.2 3.3 3.9 3,887

85.2 14.8 1.5 5.3 10.5 25.1 1.6 2.9 2.0 0.7 22.0 16.5 2.5 3.7 3.2 2.4

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66.4 33.6 0.4 2.4 9.1 5.5 0.4 0.6 0.3 0.3 29.2 45.8 0.8 3.1 1.2 0.7

Notes: Trade in goods (average 2004–2006); ∗ % average NMS-8 (75.5), EU-25 (69.6), big 4 (DE, FR, UK, IT: 61.5); ∗∗ Candidate Countries: Croatia, Former Yugoslav Republic of Macedonia, Turkey; ∗∗∗ DAE: Dynamic Asian Economies; ∗∗∗∗ ACP: African, Caribbean and Pacific States; percentage shares over 10% in extra-EU exports in bold. Q3,Q4 Sources: Eurostat, own calculations.

Total EU-extra (in millions of EUR)

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EU-INTRA ∗ EU-EXTRA Norway Switzerland Russia United States Canada China Japan Hong Kong CC∗∗ Mediter. Basin Latin America OPEC DAE∗∗∗ ACP∗∗∗∗

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Czech Republic % Estonia % Hungary % Latvia % Lithuania % Poland % Slovak Republic % Slovenia %

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Key trading partners in trade in goods (NMS-8)

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Table 2

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instruments.6 In particular, the new embracement of bilateralism stands in sharp contrast to the approach followed by the previous Romano Prodi Commission orchestrated by the Trade Commissioner Pascal Lamy. During the period of the Prodi Commission, a moratorium on launching new bilateral trade negotiations (excluding the close neighbourhood trade relations) was imposed from 1999 onwards (Elsig 2007). Let us turn to three venues and discuss briefly the revealed preferences of NMS towards the Doha trade round, in relation to a new generation of PTAs, and in response to the Commission’s attempt to change the EU’s AD legislation. Interviews with trade officials suggest that the majority of NMS show only lukewarm support for the multilateral trading system as the backbone of the EU’s external trade policy. In particular, bigger NMS, such as Poland, Hungary and the Slovak Republic, as well as Lithuania, resist additional offers (in the form of reduction of internal support and border protection) in the field of agriculture.7 They are supportive of a growing group of EU member states led by France (called the G14), which closely monitor the situation to see that the Commission does not propose new concessions in agriculture.8 In this respect, a Hungarian trade official stressed that ‘the EU should not be acting as the only banker writing checks in this round’.9 In particular, the positions of Poland and Lithuania conform to expectations derived from Table 1. On the opposing side, three NMS have teamed up with Sweden and the UK to push the EU to take up more liberal positions during the Doha round. This group includes the Czech Republic, Estonia and more recently Latvia. They support the Commission’s negotiation strategy on farm policy.10 The positions of the Czech Republic and Estonia fit the expectations, as they have relatively low stakes in agriculture and above average shares of high-tech exports. Yet the strong liberal backing that is exhibited in Brussels is also supported by strong liberal preferences of the governing parties.11 In addition, in the case of Estonia, a liberal ideology has guided trade policy since the early 1990s.12 In the case of Latvia, its support for the Doha Development Agenda (DDA) resembles more a strategic move than a durable position backed by liberal ideology or trade interests. Latvia exports little to WTO (non-EU) members; its biggest shares of EU-extra exports are directed to Russia (45.4%). In terms of market access to emerging economies, no evidence could be found that NMS push for gaining new market shares. An analysis of existing reports from Agence Europe since 2004 indicates a lack of general EU-internal debate on market access (apart from agriculture). Given the relatively small value of exports in goods and services to emerging markets, it is not surprising that the opening up of these markets is not of strategic interest to many of the NMS (see Table 2).13 On the contrary, the absence of voices to push for market access relates to concerns about import competition and indirectly about a change in the patterns of foreign direct investment (FDI) outflows from the key EU member states. Improved market access to the European single market for emerging economies’ companies could divert FDI flows away from NMS and in turn weaken NMS’ overall competitiveness within the

M. Elsig: European Union trade policy after enlargement 14

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single market. This is supported by evidence in which even so-called liberal states, such as the Czech Republic and others, question tariff cut models (the so-called coefficients that apply for lowering tariffs across all sectors) in nonagricultural market access (NAMA) negotiations.15 In terms of the new generation of PTAs, the recently acceded member states (NMS-8) support the general approach towards selectively strengthening market access (European Commission 2006a).16 Yet, given current trade flows (see Table 2), NMS prefer a different prioritization of the choice of PTA partners. They are pushing for increased market access to Eastern and Southern European countries and the Commonwealth of Independent States.17 The inter-regional approach (e.g., with Mercosur, the Gulf Cooperation Council and the Association of Southeast Asian Nations [ASEAN]) has received only lukewarm support, as exporting a European model or creating a multipolar trade world is not of prime importance to these countries. NMS are not guided by particular geostrategic or other foreign policy-driven interests based on colonial history, nor are they driven by a particular development agenda (e.g., EU relations with African, Caribbean and Pacific [ACP] states). New members welcome a more economy-, less politics-focused approach to PTAs. They act strategically and engage in horse-trading, as witnessed by a Hungarian trade official: ‘we might support Spain in the EU–Mercosur negotiations, if Spain supports the opening of trade negotiations with Ukraine’.18 In relation to trade defence instruments, a majority of NMS question the need for, scope of and direction of reform. The reform discussions started when the incoming Trade Commissioner Mandelson pushed for the Commission’s discretion in cases of AD investigations to be applied in a ‘liberal way’. In response, many stakeholders lamented these administrative changes (coupled with appointment of new officials) as being an incremental reform step by the back door.19 In light of mounting criticism on the evolving practices, the Commission launched a consultation process to attract support for reform. The Commission’s Green Paper to reform trade defence instruments subtly suggests adapting current practices and design, given the changing global economy. While it addresses a number of instruments used for trade defence purposes (AD, anti-subsidies and safeguards), the key area of reform concerns AD. In particular, the Commission pledged to review the balancing of key interests, increasingly taking into account the fact that ‘EU companies now produce goods outside the EU for import into the EU, or operate supply chains that stretch beyond the EU market’ (European Commission 2006b: 3). The reform proposals suggested a more liberal treatment of AD cases, such as granting least-developed countries special status, consulting third countries prior to launching investigations, considering start-up costs for new exporters, changing the scheme for the calculation of damage, cutting application timeframes, and increasing certain thresholds for expiry reviews, among others. Most importantly, the Commission envisaged paying more attention to the community interests and the interests of EU exporters and retailers to counter the influence

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of specific protectionist industries. The majority of member states have been sceptical about changes in the actual AD design (European Commission 2007). Figure 1 provides an overview of the country positions taken during the Green Paper consultations.20 The figure shows that of the NMS, only Estonia (EE) favours a liberal reform. Latvia (LV) partially supports a reform and Slovenia (SI) and the Czech Republic (CZ) signal some support. The positions of the rest of the NMS, excluding Malta (MT) and Cyprus (CY), indicate great reluctance to change the status quo; (Bulgaria (BG), Slovak Republic (SK), Hungary (HU)). Lithuania (LT), Poland (PL) and Romania (RO) are most vocally opposed. The stance of many of the larger NMS is explained by past experience. They themselves had been regular users of AD against non-EU states and had been the target of AD measures by other trading partners prior to joining the EU (e.g., Poland and Lithuania).21 It is noteworthy that the Czech Republic is less liberal on AD than in other areas. It also gathered substantial experience with respect to AD investigations (in particular in relation to the EU). In addition, many industrial sectors face growing competition from emerging markets, such as China, Korea or India, thus making the option of access to AD measures more appealing.22 On aggregate the support from NMS towards a liberal reform is significantly lower than the support from old member states.

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Figure 1 Member states and anti-dumping reform Notes: The Commission has proposed a liberal reform (value 1); I have coded answers to the questions 4, 5, and 6 (on balancing of interests) and questions 10, 11, and 14 (on thresholds and procedures) as follows: 1, full support of a liberal reform; 0.5, partial support of a liberal reform; 0, status quo; 20.5, more protectionist application than currently applied. The above data points are average figures for the six answers; white-filled circles represent NMS; the dotted line (and the square) represents the average of the 25 member states that responded to the questionnaire (0.31). Ireland and Luxembourg did not react in written to the questionnaire. The average of the old member states is 0.35 and the average of the NMS-8 plus Romania and Bulgaria is significantly lower (0.2). Source: Member states’ reactions to the Green Paper Questionnaire (European Commission 2006b); on file with author.


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Following the above analysis of selected evidence on the positions taken by NMS vis-a`-vis EU external trade policy options, this section turns to the institutional setting of preference aggregation. Below, I outline a PA framework that guides the empirical discussion that follows. PA developed in microeconomics and was prominently applied to studying delegation and control processes within firms. Since the 1980s, PA approaches have been increasingly applied in political science to analyse the politics of legislative processes, in particular the relations between US Congress and regulatory agencies (Epstein and O’Halloran 1999; Kiewiet and McCubbins 1991). More recently, PA has started to cross-fertilize the study of the role of specialized international organizations and EU institutions (Hawkins et al. 2006; Pollack 1997). PA pays attention to the contractual relationships between a defined set of actors. Principals delegate a certain number of tasks to an agent and possess various instruments to control the behaviour of the agent. Agency costs are likely to develop when the agent pursues its own interests and control mechanisms are not effective. It is well established in the literature that principals may interact as a group (collective principals) or individually with the agent (Nielson and Tierney 2003). More recently, scholarship has started to focus on emerging principal costs (Gutner 2005). Principal –agency theory and autonomy by design

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In order to discuss the effects of Eastern enlargement on policy aggregation, I outline below key elements of a PA framework that focuses on agency autonomy (Pollack 2006; Elsig 2007). In the context of EU trade policy, the agent is represented by the Commissioner heading Directorate-General (DG) Trade.23 In terms of agent preferences, I assume that officials of DG Trade are more liberal than the median member of the collective principal body.24 Moreover, some evidence suggests that the ideology of the Commissioner in charge of external trade policy influences the extent to which liberal trade policy is actively championed (Elsig 2007).25 The principals are represented by the member states. They delegate many of their key oversight tools to a specialized trade advisory committee known as the Art. 133 Committee (Elsig 2002). The agent in the field of EU trade policy has more discretion than is usually the case for agents in IOs (Hawkins et al. 2006). This is largely due to the Q5 ‘autonomy by design’ (Elsig 2007). First, the Commission has received from the member states agenda-setting power, e.g., it submits proposals for the mandates to negotiate international trade agreements including the choice of trading partners and objectives. Second, it holds representational power as the Commission negotiates international trade agreements on behalf of the member states. Third, the Commission also benefits from implementation-related power as it manages processes and outcomes of various instruments such as trade defence measures. The delegation of agenda-setting and negotiating prerogatives, as

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well as various implementation tasks, were necessary steps to enable the community to improve efficiency and to act as a credible negotiator and enforcer of agreements – for a discussion, see Pollack (1997) and Elsig (2007). 410

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The logic of EU trade lobbying and the Commission’s management of access The ‘autonomy by design’ described above is further fostered by the distinctive logic of EU lobbying. Lobby groups usually pursue a two-channel strategy (Woll 2009). At the national level, they lobby politicians and regulators by appealing to national economic interests signalling the effects of trade measures on national politics, including employment and investments. At the European level they lobby the Commission, appealing to European interests. Lobbyists are expected to offer constructive solutions that fit in with EU-wide trade policy objectives when they interact with Commission officials. Lobbying governments directly at the European level is difficult. In particular, access to the Art 133 Committee is challenging. Thus, interest groups’ exchanges with governments occurs predominantly through access points at the domestic level.26 From the PA literature we know that agents can employ various tools to use the autonomy created by design, including filling gaps, exploiting information asymmetries, building buffers against expected principal sanctioning, or managing access (Elsig 2007). The last instrument is also known as ‘building permeability’. The agent gives more preference to some groups than to others by structuring ‘public input and information gathering in such as way as to favour outsiders with similar preferences’ (Hawkins and Jacoby 2006: 209). The agent applies this type of strategy vis-a`-vis individual member states and third parties (such as lobby groups). In relation to lobby groups, the Commission is in a strong position to administer access. There is systematic evidence that influence based on various forms of information has led to a peculiar system of lobbying insiders (Bouwen 2002; Broscheid and Coen 2007). The Commission is looking for support and information and gives favourable access to those actors with similar preferences. These actors are routinely consulted and receive invitations to information events and workshops (Broscheid and Coen 2007). If information by lobbyists is found to have been manipulated or doubletalk is uncovered, representatives of vested interests risk a loss of reputation (Eising 2007). One influential lobbyist representing the chemical industry noted that if the organization’s position differs from the Commission’s stated objectives, ‘we need to think carefully how to lobby the Commission in order not to be ignored’.27 Building permeability can go further when EU institutions actively encourage the creation and establishment of formal arenas for political debate (Mahoney 2004). The push for launching business alliances to support trade negotiations (Mercosur-European Union Business Forum [MEBF]) or the creation of the socalled Civil Society Dialogue in 1998, serve as illustrations of how DG Trade shapes interaction with interest groups and searches for support.


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Finally, the Commission uses ‘permeability’ as a strategic tool when it interacts directly with individual member states beyond formal settings. It will seek information bilaterally and give more access to those members that support its trade policy strategies. In addition, the Commission exploits information asymmetries building on its expertise and large network of missions and official representatives around the globe. This information asymmetry mostly exists vis-a`-vis smaller members.28 THE NEW CROWD AND PREFERENCE AGGREGATION In light of the above framework, what is the impact of Eastern enlargement on policy aggregation? How does the new crowd influence outcomes? It is surprising how little attention the PA literature has paid to studying the effects of a sudden increase in the number of principals. Most existing explanations suggest that the agent is losing influence. While not using PA as a framework of analysis, Moravcsik and Vachudova (2003) conjecture that the Council will be empowered vis-a`-vis the Commission. Another prominent argument from the veto literature predicts a weakening of agents and a decrease of winsets for international negotiations (Tsebelis 2002). Put differently, it becomes more difficult for the Commission to gather support from large majorities to ratify international agreements. I argue that none of these predictions easily fit the observed changes in trade policy-making that resulted from enlargement. This article posits that an increase in the number of principals does not automatically constrain the autonomy of the agent. On the contrary, an increasing number of diverging interests provide the Commission with opportunities to apply permeability strategies and use agenda-setting in strategic ways. This is fostered by the unintended effects of increasingly relying on informal processes as opposed to formal processes. Lobbying at the domestic and European level Given the above conceptualization of business –government – Commission relations, how has an increase of business groups affected lobbying processes? Interviews with trade negotiators indicate that many business associations of the NMS are still in the process of building up their capacities at home and in Brussels. Evidence further suggests that business influence on trade policy matters is limited in most of the NMS.29 Business associations have not yet become fully acquainted with a new mode of state – business relations. Many actors have been socialized in a setting dominated by a command and control market system.30 In addition, business groups need to build up their organizational structures in order to effectively lobby national decision-makers. Governments often formulate national positions without proper consultation with their stakeholders. One trade official lamented that ‘we organize information events, but we get so little feed-back . . . and at the end of the day, we need to formulate a position’.31 Moreover, there is little input from many

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foreign-based multinationals with stakes in NMS. A business lobbyist of the German industry affirmed that many multinational corporations (MNCs) count on small public policy units in their subsidiaries in NMS, whose primary priorities do not lie in lobbying on external trade matters.32 MNCs’ trade policy lobbying is largely conducted at the national level where the headquarters of the companies are domiciled and at the European level. This confirms the intuition of government officials that absence of domestic lobbying in the country of production is compensated by lobby activities via other channels and other capitals.33 In other words, an increasing number of access points are used, albeit selectively, by large multinational firms. The above evidence suggests that country representatives enjoy significant discretion as to the definition of priorities on external trade policy. Where there is insufficient information from the affected business groups or an absence of lobby activities by vested interests, governmental actors define the positions based on a reading of a variety of economic indicators, including sector interests and impact on employment. Lack of voice from business groups also allows for strong ideas held by elected politicians to influence the positions taken by the bureaucracy. Interviewees have hinted at such an effect in the case of the Czech Republic, where the free-market orientation of the governing party coalition, in particular the Civil Democratic Party (ODS), has impacted significantly on revealed preferences. This explains why a number of positions advocated by diplomats in Brussels markedly depart from the anticipated positions derived from an analysis of the industrial structure and rent-seeking by domestic firms.34 Potential access points at the European level are even less frequently used by firms and business associations from NMS. While important EU-wide business associations have invited NMS business representatives to join their lobby activities (e.g., BUSINESSEUROPE, COPA-COGECA, EUROFER), they are still largely absent in Brussels.35 One trade official from a large NMS expressed disappointment that the efforts of the government had been unsuccessful in encouraging parts of the services industries to join the European Services Forum (ESF), a lobby group to represent the interests of the European service sector.36 Similarly, the interaction between the Commission and NMS business groups is still modest. Changes in the decision-making apparatus in Brussels? As few exchanges between NMS business groups and the Commission occur, a greater impact from enlargement is expected within the comitology system. Interview data suggests two notable effects as a result of the last rounds of accession. First, a growth in principal size potentially increases divergence of interests among member states. ‘There are many more views on how to make trade policy work,’ as one lobbyist put it.37 Second, interviewees reported that the process of enlargement has led to an increase in informal processes. One longserving trade official observed that ‘133 discussions have become more cumbersome, before it was more of a dialogue, now it’s rare to have a genuine exchange of


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views, some only read out their statements that have been cleared at the capital’.38 Lack of debate within formal bodies increases the attractiveness of informal decision-making processes. Increasingly, ‘agenda points are pre-cooked, and you need to make sure that proposals that are discussed can be influenced prior to tabling . . . once they are on the agenda, then it’s too late’.39 This is consistent with empirical findings on the functioning of implementation committees in the EU, where actors increasingly ‘search for prior agreements behind the scenes in view of the limitations of the committee meetings’ (Alfe´ et al. 2008: 16). With regard to the role of the Commission, some evidence from interviews suggests that the growing number of principals and a move towards more informal processes have not weakened the Commission (see also Alfe´ et al. 2008). Informal processes help the Commission to actively use permeability strategies and discretely apply agenda-setting powers. Through agenda-setting powers the Commission controls the agenda, shapes the content of proposals and uses informality as a strategic instrument to gather support from key members. Part of this power consists of deciding the order of issues to be discussed and the timing of tabling (or withholding) certain proposals. Interview partners observed that documents indicating the points of the agenda for Art. 133 Committee meetings are usually sent out very late.40 The Presidency (Chair of the Art. 133 Committee) often receives this information just prior to the deadline for sending the agenda to the rest of the Committee members.41 This constrains the chair’s and the members’ abilities to influence the course of action. In addition, while interview material is not conclusive on this point, divergence of interests among principals enables the agent to pursue positions closer to its own interests and allows the agent at times to engage in ‘gap-filling’.42 Sanctioning is constrained by collective action problems which automatically increase with the number of principals. In relation to WTO negotiations, the Commission ‘will tell the member states that the EU cannot afford to have no position in the current DDA, so they put something on the table in Geneva’.43 Thus, more principals is not bad news for the Commission’s use of permeability strategies (coalitionbuilding) and selective gap-filling (when principals cannot agree). With regard to the move towards more informal processes, interview evidence suggests a shift of influence among principals. This applies not only to trade policy. Anecdotal evidence suggests that the increasing reliance on informal decision-making empowers larger member states. An ambassador from a medium-sized member state lamented that ‘too often, we are getting squeezed out of the debate. Issues tend to be decided by the big ones outside the Council chamber’ (quoted in Peel 2008: 11). Similarly, in the area of trade policy, the increase of informal processes has strengthened larger trading nations vis-a`-vis smaller and less comitology-experienced members. As member states’ representatives attempt to influence the tabling of trade issues and colour Commission proposals at an early stage of the policy process, larger member states are generally best equipped in terms of information and resources. They are well organized in their interaction with national constituencies, can lead ad hoc coalitions with like-minded members, and are more often

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granted access to the Commission and its services. A long-serving trade diplomat puts it as follows: ‘Bigger states have more opportunities to make besidethe-table deals. Smaller nations need to engage more in coalitions . . . and they need to bring more often high officials from the capital to Brussels to attempt to influence the Commission’s position’.44 CONCLUSION

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The article contributes towards filling a research gap on the impact of Eastern enlargement on conducting EU trade policy. Analytically, it has relied on a PA framework and has discussed preference aggregation in an enlarged EU. Three main findings have been put forward. First, on balance of interests among member states, the article presents evidence of a moderate protectionist turn, in particular witnessed in relation to reforming AD legislation. As Romania and Bulgaria will increasingly engage in intra-EU debates, and based on their revealed preferences on the AD reform and farm trade, we might expect this to translate into more support for the protectionist camp. However, more work is needed to allow for a more fine-grained analysis of industry structures and competition pressures within the EU and third markets in order to predict national policy reactions. Second, the article presents some evidence of unintended effects on EUinternal preference aggregation as a result of a larger crowd (additional principals). The dynamics within the comitology system have changed in as far as informal processes have increased. This does not per se lead to a weakening of the Commission; however, it affects the distribution of influence among member states. The article suggests that more powerful (and comitology-experienced) member states might benefit from the turn to informal processes, while less powerful ones will need to invest more resources to influence the course of EU trade policy. These findings call for additional research and may motivate new efforts towards theory-building as variance in informal processes and change of influence among principals has not received sufficient attention in the PA literature. Third, on the influence of business groups, evidence based on interviews suggests that neither the Commission nor the member states’ representatives have been faced with an increase in lobbying activities from private actors based in NMS. As a result, country representatives from NMS continue to enjoy substantial discretion as to the definition of external trade policy priorities. These findings on lobby group activities do not fit easily with pluralist models of interest representation. Finally, how will the current financial crises impact on the findings presented in this article? There is increasing evidence that the crises have strengthened protectionist dispositions which seem to translate into demand for additional AD investigations and defensive posturing in the ongoing Doha round. Yet, given the institutional design, it is expected that the Commission will most likely act as a buffer and will absorb some of these pressures.


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Biographical note: Manfred Elsig is Assistant Professor in International Relations at the University of Bern, Switzerland. 635

Address for correspondence: Manfred Elsig, World Trade Institute, University of Bern, Hallerstrasse 6, CH-3012 Bern, Switzerland. email: manfred.elsig@ wti.org ACKNOWLEDGEMENTS

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An earlier version of the paper was presented at the Annual Meeting of the American Political Science Association, Boston, 28– 31 August 2008. The author acknowledges support of the NCCR International Trade Regulation of the Swiss National Science Foundation (http://www.nccr-trade.org). I wish to thank Ewa S´wianiewicz for research assistance and Susan Kaplan for editorial assistance. Thanks also go to Eugeńia da Conceiçaõ-Heldt, Andreas Du¨r and Jappe Eckhardt for valuable comments. NOTES

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1 International Herald Tribune, 14 July 2008, Action on a Doha Trade Deal (signed by responsible ministers from the Czech Republic, Estonia, Latvia, Slovenia, Sweden and the UK). 2 The dominant literature on post-accession and NMS has largely focused on compliance; see Sedelmeier and Epstein (2008). 3 This categorization has been prominently used in relation to trade in agricultural products and in textiles and clothing. Yet generalizations need to be treated with caution, as countries may manifest different positions even within sectors (e.g., services) as a function of competitiveness of sub-sectors (e.g., financial industry, energy services). 4 NMS-8 is defined here as the eight Central and Eastern European countries that acceded in 2004 (Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovak Republic, Slovenia). NMS-10 includes Malta and Cyprus. NMS-12 refers to the NMS-10 plus Bulgaria and Romania. 5 The above data needs be supplemented by a more detailed analysis of competitiveness of various sectors. In addition, a closer examination of border protection (e.g., tariffs), non-tariff barriers to trade (e.g., standards) and internal support (e.g., subsidies) would allow a more precise prediction of the positions taken with respect to liberalizing strategies; see World Trade Organization (2007). 6 Trade defence instruments include AD, anti-subsidies and safeguard measures by importing countries. The most important instrument is AD where the Community takes border measures (raising tariffs) against alleged practices of dumping by foreign firms. 7 Hungary was part of the Cairns Group that pushed for further liberalization of agricultural markets during the Uruguay Round. Since its accession, Hungary’s position on agricultural support has markedly changed. 8 Interview, trade official, 133-Deputy, 25 June 2008; Agence Europe, 14 June 2007. 9 Interview, trade official NMS, 133-Deputy, 17 May 2006. 10 Agence Europe, 18 October 2005, 19 June 2006, 17 July 2006, 19 February 2008, 11 March 2008. 11 Interview, trade official, 133-Deputy, 25 June 2008.

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12 On Estonia’s liberal trade policy reforms in the 1990s, see Feldmann and Sally (2002). 13 Current trade flows to China, other dynamic Asian economies and Latin America represent a small part of their extra-EU exports; see Table 2. 14 Interview, trade official NMS, 133-Deputy, 17 May 2006. 15 Agence Europe, 18 July 2008. 16 Trade official NMS, 133-Deputy, 24 June 2008. 17 The development of EU exports from 2000 to 2005 underscores the growing importance of markets of the Commonwealth of Independent States (increase from 3.8 to 7.5%). During this period, other export markets have remained stable (Asia: around 23%; Africa: 8%) or have declined (US from 37 to 31.6%), WTO (2007). 18 Interview, trade official NMS, 133-Deputy, 17 May 2006. 19 Interview, business lobbyist, 2 July 2008; interview, lawyer specialized in AD cases, 24 June 2008. 20 In order to measure the positions, I selected three key questions that suggest a more liberal approach to balancing interests (the interests of European companies that have moved some parts of their production, interests of importers, consumer interests and other EU foreign policy objectives). I added three procedural questions where the Commission seeks additional obstacles to using AD (minimal market shares to accept claims, prior consultation with foreign countries and the thresholds for dumping and injury assessments). Responses were coded without knowing the name of the member state that submitted the response; with the exception of the submissions of Estonia and the Slovak Republic which were written in the national language. 21 See Global Antidumping Database, http://people.brandeis.edu/~cbown/global_ad/. 22 In particular, the competition from China has been felt (interview, business lobbyist, UNICE [today BusinessEurope], 16 May 2006). 23 For the purpose of this article, I do not consider various PA relations within the Commission and within DG Trade. 24 This assumption needs some qualification, as trade officials’ interaction with interest groups might affect previously held positions, e.g., an AD official might increasingly internalize the concerns of the business alliances that favour protectionist measures. 25 In particular British Trade Commissioners have pushed for liberal reforms in recent years, including Leon Brittan (1995– 1999) and Peter Mandelson (2004 – 2008). 26 Interview, business lobbyist, UNICE [today BusinessEurope], 16 May 2006. 27 Interview, business lobbyist, chemical industry, 3 July 2007. 28 Interview, trade official, DG Trade, 16 May 2006; interview, senior trade official, DG Trade, 25 June 2008; interview, trade official NMS, 133-Deputy, 23 June 2008. 29 Interview, trade official NMS, 133-Deputy, 17 May 2006; trade official NMS, 133Deputy, 24 June 2008. 30 Not to forget the historical role of state-owned companies; interview, trade official NMS, 133-Deputy, 23 June 2008. 31 Interview, trade official NMS, 133-Deputy, 24 June 2008. 32 Interview, business lobbyist, national federation, 2 July 2008. 33 Interview, trade official NMS, 133-Deputy, 23 June 2008. 34 Ibid. 35 Interview, business lobbyist, national federation, 2 July 2008. 36 Interview, trade official NMS, 133-Deputy, 24 June 2008; no service provider from the NMS-12 has yet joined the ESF, http://www.esf.be, accessed 13 August 2009. 37 Interview, business lobbyist, chemical industry, 13 October 2006. 38 Interview, trade official, 133-Deputy, 25 June 2008.


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39 Ibid. 40 Interview, trade official NMS, chair and 133-Deputy, 25 June 2008. 41 The chair can remove or add issues. Chairs from small member states do not have large resources which puts them at a disadvantage; interview, trade official NMS, chair and 133-Deputy, 25 June 2008. 42 Interview, trade official NMS, chair and 133-Deputy, 25 June 2008. 43 Interview, business lobbyist, national federation, 2 July 2008. 44 Interview, trade official, 133-Deputy, 25 June 2008.

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