Chapter 21: Why Interest Groups Dominate the EU’s Foreign Economic Policies

Andreas Dür (University of Salzburg)

1. Introduction In a report on the negotiations for a free trade agreement between the EU and India that have been ongoing since 2007, two nongovernmental organizations, the Corporate Europe Observatory and India FDI Watch, denounce the EU’s “corporate-driven trade agenda” and “incestuous relationship with vested interest groups” (Corporate Europe Observatory and India FDI Watch, 2010: 37). Is this portrait of the EU’s foreign economic policies, and here especially the EU’s trade policy, as dominated by business interests correct? This chapter’s argument is that interest groups representing concentrated interests indeed have a large influence on the EU’s foreign economic policies. By lobbying decision-makers, they often manage to shape policies to their advantage. I back this argument empirically by showing that interest groups have excellent access to EU decision-making, highlighting the coincidence between preferences and policies adopted, and drawing attention to groups’ self-assessment of their influence. In defending the argument of interest group dominance, I make a case against studies that suggest that the delegation of trade policy competencies from the national to the European level has undermined the influence of societal interests (Meunier, 2005; Zimmermann, 2007). The main idea behind this “collusive delegation argument” is that the delegation of trade policy competences from the national to the EU level insulated decisionmakers from interest group pressures, and in particular from lobbying by interests that demand greater protection of domestic markets. Delegation may have this effect for several reasons: it increases the number of actors that have a stake in trade policy decisions and thus aggravates free rider problems; it increases the heterogeneity of interests that take opposing 1

stances on trade policy decisions and thus gives decision-makers more leeway to create coalitions in support of their policies; and it exacerbates information asymmetries that favour public to the detriment of private actors. My argument about interest group dominance does not rely on the assumption of highly effective and resource-rich business associations. Clearly, many EU level peak associations (these are groups such as the European Association for Mining Industries or the European Engineering Industries Association) lack the resources and internal decision-making procedures that are necessary to pro-actively influence the agenda of EU policy-making (Gerlach, 2006). Often, they only have few full-time staff members, and even fewer employees that focus on foreign economic policies. Moreover, the need to gain and maintain members distracts them from their objective of influencing public policies. Given these constraints, my argument is that most lobbying on the EU’s foreign economic policies is reactive, namely in response to either foreign policies that hurt European economic interests or policy proposals formulated within Europe that are likely to impose concentrated costs on economic actors. Only few groups will be able to pro-actively influence EU foreign economic policies; nevertheless, the reactive lobbying is sufficient to ensure that few EU policies run counter to concentrated economic interests.

2. Access to EU decision-making Groups aiming to influence EU trade policy have excellent access to decision-makers. They can direct their lobbying effort at several different political actors, including national governments, the European Commission, and the European Parliament. Given the important role that they play in determining EU trade policy, I expect most lobbying to be channelled through national governments. In the EU’s institutional framework, national governments have the final say over most aspects of trade policy-making, with consensus (in cases in which qualified majority voting applies) or unanimity (at the end of major trade negotiations 2

that cover topics that require unanimity) decisions prevailing in the Council of Ministers. The available evidence suggests that interest groups have excellent access to national governments. Many ministries that are responsible for formulating trade policy have established formal or informal dialogues with societal interests with a stake in trade policy. In the United Kingdom, this dialogue is known as the Trade Policy Consultative Forum and in Denmark the “Beach Club process”. Also through indirect channels, interest groups may influence the positions adopted by national governments. These indirect channels include attempts to shape public opinion (which in turn should influence government positions), lobbying of legislators and parties, and the provision of information and expertise to public officials. Societal actors can also strive to influence the European Commission. The Commission plays a key role in decision-making, as it both has the right of initiative and represents the EU in negotiations with third countries. Contrary to claims made in some studies, I suggest that even though the European Commission does not face elections, it has ample incentives to listen to societal interests. A key interest of the Commission is to avoid situations in which its proposals fail to get passed in the Council of Ministers (Woll, 2009). Knowing that societal interests can influence the position of member state governments, this interest ensures that the Commission will try to integrate the position of European industry and service providers at an early stage, thus allowing it to present member states with proposals that are “‘pre-approved’ by European industry” (Cowles, 2001: 171). For that reason, the European Commission has been proactive in searching for input from interest groups of all shades (Gerlach, 2006: 178). The resulting ease of access to the Commission is illustrated by the fact that nearly 900 groups from all over Europe (and a few from beyond) were registered with the Civil Society Dialogue (a series of meetings between Commission officials and stakeholders on specific topics) organized by the Directorate General for Trade in 2009. 3

Finally, groups can lobby the European Parliament, which in most cases cannot veto decisions taken by the Commission and the Council of Ministers, but still has some influence over EU trade policy. The parliament’s role is likely to increase with the Treaty of Lisbon (which entered into force in 2009) that formally expanded the role of this institution in the trade policy field. The European Parliament is very accessible to groups representing societal interests. While most research has shown that non-economic interests have relatively better access to the parliament than to national governments or the European Commission, this does not mean that economic interests cannot wield influence over this institution. The upgrading of the parliament’s role resulting from the Treaty of Lisbon thus will not result in policy outcomes that run counter to the interests of concentrated interests. At most, it will introduce a further veto player – that is, an actor that has the formal power to block political decisions – that makes movement away from the status quo more difficult. The EU’s institutional set-up thus is designed to create many veto points for societal interests. The large number of veto points should favour groups that defend the status quo. After the creation of the European Economic Community in the late 1950s, the resulting bias benefitted protectionist interests. That protectionist interests were the beneficiaries of the EU’s institutional framework runs counter to what the collusive delegation argument suggests, which sees delegation as an attempt by decision-makers to keep protectionist pressures at bay. Only for a variety of exogenous reasons, including technological change and the incentives offered to European societal interests in international trade negotiations, did the EU’s status quo move towards freer trade over time (Dür, 2010). In the meantime, the EU’s trade policy status quo, with the notable exception of agriculture, is relatively close to the free trade end of the continuum, which in turn is locked in by societal interests benefitting from an open trading system.

3. Preference attainment 4

Given the excellent access that organized economic interests have to decision-makers, it is no wonder that they have seen their preferences reflected in policy outcomes, both with respect to major trade negotiations (Dür, 2008; 2010) and unilateral trade policy instruments such as antidumping duties. The EU’s negotiating position in the Doha Development Agenda (started in 2001, ongoing at the moment of writing), a major round of trade talks in the framework of the World Trade Organization, illustrates this point. The EU has been at the forefront in pushing for the launch of this round from the mid-1990s onwards. It has demanded a further reduction of tariffs on industrial goods, a liberalization of services trade, international rules covering trade facilitation, public procurement, competition policy, and investment (these were known as the Singapore issues at that time), and a limited liberalization of agricultural trade. On all of these aspects, the EU’s position has received substantial backing and only very limited opposition from business interests (for evidence backing the following claims, see Dür, 2008). All broad business associations, both EU-level and national-level ones, supported the launch of the negotiations. They also demanded a further liberalization of trade in industrial goods. The liberalization of trade in services was backed by a particularly broad alliance of societal interests, including both service providers and producers of industrial goods (many of which sell hardware together with complementary services). The only services sector in which European providers have taken a protectionist stance comprises cultural services. Given the argument made in this chapter, it is no wonder that the EU’s position was to ask for an exception to this service sector (maintaining the EU’s exception culturelle). Equally, the demands voiced by societal interests explain the Commission’s insistence on inclusion of the Singapore issues in its negotiation mandate. For example, the Foreign Trade Association, the European Round Table of Industrialists, the chemical industry, and the European Information and Communication Technology Industry Association all came out in favour of an agreement on trade facilitation. Only when the negotiations on these rules 5

threatened to derail the rest of the Doha negotiations did some societal interests shift position and support privileging tariff and services negotiations. In the negotiations concerning the liberalization of agricultural trade, the EU’s position – although a stretch between interests that want the EU to open this sector in exchange for foreign concessions and interests that support a protected European agricultural market – has been supported by a surprisingly broad coalition of societal interests. In short, across the full agenda of the Doha Development Agenda, the EU’s position reflected the preferences of economic pressure groups. Equally, European societal interests have consistently seen their interests reflected in bilateral trade negotiations between the EU and third countries. In fact, major agreements negotiated by the EU can mainly be seen as a response to lobbying by European exporters. For example, after the United States, Canada and Mexico signed the North American Free Trade Agreement, European exporters mobilized to ensure continued access to the Mexican market

(Dür,

2007).

In

particular,

the

automobile,

chemical,

pharmaceutical,

telecommunications, and textile and footwear sectors were active in lobbying both member states and the European Commission. Not least responding to this lobbying effort, the EU concluded a far-reaching free trade agreement with Mexico in 2000. Similarly, there has been a strong mobilization of export interests in favour of the negotiations between the EU and South Korea (partly driven by a previous agreement signed between South Korea and the United States), which resulted in a free trade agreement in 2009. Other trade agreements, such as the Economic Partnership Agreements between the EU and a large number of developing countries in Africa, the Pacific, and the Caribbean, while not being pushed by European economic interests, did not run counter to their interests either. Importantly, my argument is not that all societal interests are equally able to shape the EU’s trade agenda. Non-governmental organizations that defend positions that do not directly and in a concentrated manner affect the economic interests of their supporters (such as groups working in the fields of environmental protection, poverty eradication, and human rights) in 6

most cases are not able to counter the influence wielded by concentrated economic interests (Dür and De Bièvre, 2007). This is so even though they, just as the economic interests, avail themselves of good access to decision-makers. Rather, the reasons for their limited influence are to find in the lack of resources that groups need to sustain a long campaign and the fact that the positions that they are forced to defend for reasons to do with sustaining membership often are far from those that the European Commission considers to be in the (international and intra-European) win set.

4. Self-assessment of influence By itself, a coincidence between preferences and outcomes is not proof of influence. Such a coincidence could also be a result of either luck or “reverse lobbying” that leads groups to adopt the positions pushed by public officials (Woll, 2009). The above discussion of interest group access and the level of interest group activity already partly responds to the concern that preference attainment may only be a result of luck. Also supportive of the causal argument that sees societal interests influencing EU trade policy is the observation that many groups assess themselves as having considerable influence. This self-assessment of influence can be witnessed in groups’ statements praising the EU’s negotiation position and portraying the European Commission as a service institution to European business. A survey of a random sample of groups registered in the Civil Society Dialogue database of the European Commission also backs this point (Dür and De Bièvre, 2007). Asked to assess the extent to which their activities affect European trade policy (with the possible responses being to a large extent, to some extent, not really, and not at all), 95 percent of respondents representing business and agricultural interests replied “to a large extent” or “to some extent”.

5. Conclusion

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I have argued that societal interests dominate EU foreign economic policy making, and especially trade policy, under most circumstances. In fact, this finding is not particularly astonishing. Trade policy has had low public salience in the EU for a long time. Its aggregate economic effects are not particularly large either, at least when compared to fiscal policy or the setting of interest rates. According to most estimates, a successful conclusion of the Doha Development Agenda, for example, would only have minor consequences for the gross domestic products of most EU member states. At the same time, trade policy can have very large (and in many cases easily predictable) distributional consequences for individual producers and providers of goods and services. These are ideal pre-conditions for pressure groups to influence policy. The available evidence suggests that they indeed make ample use of this opportunity.

Bibliography Corporate Europe Observatory and India FDI Watch (2010) Trade Invaders: How Big Business Is Driving the EU-India Free Trade Negotiations. Cowles, M. G. (2001) ‘The Transatlantic Business Dialogue and Domestic BusinessGovernment Relations’, in M. G. Cowles, J. Caporaso, and T. Risse (eds), Transforming Europe: Europeanization and Domestic Political Change (Ithaca: Cornell University Press): 159-79. Dür, A. (2007) ‘EU Trade Policy as Protection for Exporters: The Agreements with Mexico and Chile’, Journal of Common Market Studies 45(4): 833-55. Dür, A. (2008) ‘Bringing Economic Interests Back Into the Study of EU Trade PolicyMaking’, British Journal of Politics and International Relations 10(1): 27-45. Dür, A. (2010) Protection for Exporters: Power and Discrimination in Transatlantic Trade Relations, 1930-2010 (Ithaca: Cornell University Press).

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Dür, A. und D. De Bièvre (2007) ‘Inclusion without Influence? NGOs in European Trade Policy’, Journal of Public Policy 27(1): 79-101. Gerlach, C. (2006) ‘Does Business Really Run EU Trade Policy? Observations about EU Trade Policy Lobbying’, Politics 26(3): 176-83. Meunier, S. (2005) Trading Voices: The European Union in International Commercial Negotiations (Princeton: Princeton University Press). Woll, C. (2009) ‘Trade Policy Lobbying in the European Union: Who Captures Whom?’, in D. Coen and J. Richardson (eds) Lobbying in the European Union: Institutions, Actors and Issues (Oxford: Oxford University Press): 277-97. Zimmermann, H. (2007) Drachenzähmung. Die EU und die USA in den Verhandlungen um die Integration Chinas in den Welthandel (Frankfurt: Nomos).

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