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1992: Recasting the European Bargain

Published online by Cambridge University Press:  13 June 2011

Wayne Sandholtz  and
John Zysman
Wayne Sandholtz
Affiliation:
Scripps College
John Zysman
Affiliation:
University of California
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Abstract

Under the banner of “1992,” the European Communities aim to remove all barriers to the movement of persons, capital, and goods among the member countries. The 1992 movement comprises a set of bargains among European elites. Structural change (relative U.S. decline and Japanese ascent) provoked a rethinking of European roles and interests. The 1992 project emerged as a response because of: (1) the policy leadership exercised by the Commission of the European Communities, with support from a transnational business coalition; and (2) a changed domestic political context in several key countries—specifically, the failure of previous national economic strategies and the transformation of the left. The changes under way will alter regional business competition and politics and will affect the world economic system.

Type
Research Article
Information
World Politics , Volume 42 , Issue 1 , October 1989 , pp. 95 - 128
Copyright
Copyright © Trustees of Princeton University 1989

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References

1 See Centre for Business Strategy, 1992 Myths and Realities (London: London Business School, 1989)Google Scholar.

2 Signoroni, Clemente, “The ECU, a Success Factor for the 1993 Community Market,” address in Madrid, January 12, 1989, p. 6.Google Scholar

3 Baron, Enrique, Europe 92: Le Rapt du Futur [Europe 92: Kidnapping the future] (Paris: Editions Bernard Coutas, 1989), 88.Google Scholar

4 This is the problem aptly identified by Puchala, Donald in “Of Blind Men, Elephants and International Integration,” Journal of Common Market Studies 10 (March 1972), 267–84CrossRefGoogle Scholar.

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6 Haas, Ernest B., The Uniting of Europe, 2nd ed. (Stanford, CA: Stanford University Press, 1968)Google Scholar. It would be impossible to do justice, in this short article, to all the contributors to the development of integration theory and to the variety of integration theories. Our intent is simply to capture the central notions. We begin with the formulations of Haas because his seminal works launched neofunctionalism.

7 Nye, Joseph S. Jr., Peace in Parts: Integration and Conflict in Regional Organization (Boston: Little, Brown, 1971)Google Scholar.

8 See Schmitter, Philippe C., “A Revised Theory of Regional Integration,” International Organization 24 (Autumn 1970)CrossRefGoogle Scholar; and Lindberg, Leon and Scheingold, Stuart A., Europe's Would-be Polity (Englewood Cliffs, NJ: Prentice-Hall, 1970)Google Scholar.

9 On the first point, see Haas, Ernst B., “International Integration: The European and the Universal Process,” International Organization 15 (Autumn 1961)CrossRefGoogle Scholar. To explain the failure of the incremental model of integration, Haas identified the policy “turbulence” brought on by adding “post-industrial” issues to the agenda and the effects of “externalization” (significant economic interdependencies outside the region). See Haas, , The Obsolescence of Regional Integration Theory, Institute of International Studies Research Series No. 25 (Berkeley, CA: Institute of International Studies, 1975)Google Scholar.

10 Lindberg and Scheingold (fn. 8), 23.

11 Ibid., 179.

12 In succeeding sections, we will look more closely at the changing international structure and the domestic European political context.

13 We have no intention of providing a detailed history of the EEC; that story has been well told many times. We seek only to show that the major elements of that history fit the analytical framework we are proposing here.

14 Many of the early students of European integration recognized that structural changes caused by the war were crucial in triggering the process. See, for example, Lindberg and Scheingold (fn. 8), especially chap. 1.

15 See Yondorf, Walter, “Monnet and the Action Committee: The Formative Period of the European Communities,” International Organization 19 (Autumn 1965), 885–912CrossRefGoogle Scholar.

16 The regional development funds had a precursor in development programs created at Italy's insistence in 1956. They acquired more importance after the accession of Britain and Ireland, and have become vital elements of the EC bargain since the addition of Greece, Spain, and Portugal.

17 Padoa-Schioppa, Tommaso, Efficiency, Stability and Equity (Oxford: Oxford University Press, 1987)Google Scholar.

18 Wallace, Helen and Wessels, Wolfgang, Towards a New Partnership: The EC and EFTA in the Wider Western Europe, Occasional Paper No. 28, European Free Trade Association, Economic Affairs Department (March 1989), 4.Google Scholar

19 San Jose Mercury News, January 4, 1988, p. 2C.

20 International Herald Tribune, April 1, 1987.

21 Borrus, Michael, Competing for Control (Cambridge, MA: Ballinger, 1988), 176–77Google Scholar.

22 Again, we are not the first to suggest that external, international forces trigger changes in regional integration politics. Joseph S. Nye, Jr. proposed that “outside actors or events” could act as “catalysts” in regional integration efforts, and that drastic changes in the international environment had been crucial in bringing about European integration. See Nye, , “Patterns and Catalysts in Regional Integration,” International Organization 19 (Autumn 1965), 870–84CrossRefGoogle Scholar, at 882–83.

23 Strategic games are useful heuristic devices that can help us reason about structured situations by clarifying the logic of interaction. In this instance, whatever the general methodological case, substantial investment in specifying and manipulating a multiplayer, multi-issue game will have limited payoffs in our understanding of 1992. Indeed, the crucial analytic issues must be resolved long before a set of games can even be devised. Games of strategic interaction require preference functions for each player. With 1992, decision makers do not possess the intellectual means to foresee alternative outcomes, much less rank them. Game theory, as even its most enthusiastic proponents recognize, cannot yet deal with changing preferences. Given all of these lacunae and uncertainties, game models of the international interactions involved in 1992 cannot possibly capture the political dynamics that matter. Behind the games are the crucial factors: political strategies, constraints, and leadership.

Nor is this really a problem for theories of collective action as traditionally conceived in political science. The problem is not one of inducing actors to contribute to the production of a collective good (i.e., avoiding free riders). The institutional structure of the community compels participation and shared leadership. At issue are the areas that should be opened to joint policy making and the institutional arrangements that might prove acceptable to the parties. Not only are there substantial risks and costs for all, but imposing European decisions on domestic politics requires domestic political action by the national executive, not just acquiescence in the European Commission and Council of Ministers. There are, in other words, multiple layers of politics.

24 This is not a matter of elite learning that can be explained by theories of learning. Our proposition would clearly be that what has altered behavior is changed circumstances, not increased knowledge. By knowledge we mean formally specified relationships (information and theories about it) that suggest what outcomes will result from what causes. It is not a better understanding of an existing situation, but the discovery of a new situation that is at issue. The necessary ingredient for adaptation is therefore vision and leadership, an image of arrangements or relationships that will respond to new tasks, and the skill to mobilize diverse groups to construct that future. Rather than greater technically rooted knowledge, it is politically founded insight that is called into play.

25 We have attempted (without fully succeeding) to distinguish between the politics of coalitions and the role of institutions in shaping the present response. In the first European movement that established the Coal and Steel Community and then the EEC, there were no European institutions shaping and activating the players. Now there are, and the game is consequently quite different. The most important “spillover” probably lies in the creation of a permanent advocate of more extensive integration as well as a permanent location for it.

26 Cohen, Stephen S., “Informed Bewilderment,” in Cohen, Stephen S. and Gourevitch, Peter, eds., France in a Troubled World Economy (London: Butterworth, 1983)Google Scholar. Cohen makes this point here in a particularly clear and jargon-free fashion.

27 See Zysman, John, Governments, Markets, and Growth (Ithaca, NY: Cornell University Press, 1983)Google Scholar, chap. 1.

28 There is both a European and an American school of discussion. In the United States, the debate is led by Charles Sabel and Michael Piore. Their book, The Second Industrial Divide (New York: Basic Books, 1984)Google Scholar, brought many of the issues into the public arena, though the scholarly work underlying it is much more important. In Europe, the group is diverse, including Robert Boyer, Benjamin Coriat, Giovanni Dosi, and Jacques Mistral. A particularly interesting version of the debate is found in Hall, Peter, ed., International Journal of Political Economy: European Labor in the 1980s 17 (Fall 1987)Google Scholar.

29 Boyer, Robert makes this point particularly well. One interesting collection of these arguments is Boyer, ed., La flexibilité du travail en Europe [The flexibility of labor in Europe] (Paris: Editions La Découverte, 1986)Google Scholar.

30 There was a another twist as well: David Flannagan at Stanford has argued that companies hesitated to invest in training new workers, and that when they had to expand, they tended to hire back those that had been laid off, thus creating a substantial pool of young unemployed.

31 There is a parallel story in Britain some fifteen years earlier. In the early 1960s, the British Labour party had refused to devalue the pound sterling, even though it meant in effect abandoning a growth strategy. The debate on sterling was suppressed within the party; it was settled only when there was truly no choice left. See Blank, Stephen, “Britain: The Politics of Foreign Economic Policy,” in Katzenstein, Peter, ed., Between Power and Plenty (Madison: University of Wisconsin Press, 1978)Google Scholar; Howard, Anthony, ed., The Crossman Diaries, Selection from the Diaries of a Cabinet Minister 1964–1970 (London: Methuen Paperbacks, 1979)Google Scholar.

32 Hall (fn. 28).

33 Revzin, Philip, “Italians Must Change Their Business Style in Integrated Europe,” Wall Street Journal, November 21, 1988, p. 1Google Scholar. Italian businessmen quoted in the article expressed the same sentiment.

34 Borrus, Michael et al. , Telecommunications Development in Comparative Perspective, BRIE Working Paper No. 14 (Berkeley, CA: BRIE, 1985), 38.Google Scholar

35 This is a radical simplification, but it captures the essence of events. For more detail, see Sandholtz, Wayne, “Crisis and Collaboration in European Telematics” (Ph.D. diss., Department of Political Science, University of California, Berkeley, 1989)Google Scholar, chaps. 7–8.

36 Wallace and Wessels (fn. 18).

37 Michael Emerson, “1992 and After” (EEC, Brussels, Summer 1988). The White Paper proposals can be grouped into sets, as follows:

1. Liberalization of government procurement; essentially opening national procurement to outside bidders.

2. Technical norms, by which the largest number of proposals set technical standards that otherwise preclude movement of goods through Europe.

3. Transport services.

4. Agricultural border taxes and subsidies.

5. National restrictions in the community's external trade relations; these matters are not strictly an element of the “internal bargain,” but are included here for the sake of completeness.

6. Abolition of fiscal frontiers, there being no longer a need to assess taxes at the border.

7. Financial services, including banking, stock markets, and related services and insurance, with the bold aim of creating a European capital market.

38 Padoa-Schioppa (fn. 17); Emerson (fn. 37); Cecchini, Paolo, The European Challenge, 1992: The Benefits of a Single Market (Hounslow, U.K.: Wildwood House, 1988)Google Scholar.

39 “Europe's Internal Market,” The Economist, July 9, 1988, pp. 6, 8.

40 This view is sometimes expressed in EEC materials lauding 1992. Not everyone would agree; they would cite budget initiatives in 1970 and 1975 and the direct election of the European parliament. We cite the single European Act because it rejects the national veto.

41 “Europe's Internal Market” (fn. 39), Survey, p. 6.

42 Europe 1990 (Brussels: Chez Philips S.A., no date), 5; emphasis in original.

43 Tulder, Rob van and Junne, Gerd, European Multinationals in Core Technologies (New York: John Wiley & Sons, 1988), 214–15.Google Scholar

44 Based on interviews and discussions.

45 Quoted in van Tulder and Junne (fn. 43), 215, n. 8.

46 Axel Krause, “Many Groups Lobby on Implementation of Market Plan,” Europe (July/August 1988), 24.

47 Another business group collaborating with the Commission and actively promoting the 1992 process is the Union of Industrial and Employers’ Confederations in Europe (UNICE), which includes over thirty industrial associations from throughout Europe. The secretary general of UNICE, Zygmunt Tyszkiewicz, described the union's working groups and lobbying as follows: “Nine-tenths of our work comprises the regular, invisible interchange of ideas between our experts and the E.C. Commission's civil servants.” Krause (fn. 46), 24.

48 See Forman, Craig, “European Firms Hope Swapping Stakes Gives Them 1992 Poison-Pill Protection,” Wall Street Journal, October 18, 1988, p. A26Google Scholar.

49 Michael Emerson, “1992 as Economic News,” (EEC, Brussels, 1988), 5.

50 Perigot, François, “L'Europe ardente obligation,” [Europe's burning obligation], Politique industrielle 10 (Winter 1988)Google Scholar.

51 This information is taken both from Bureau d'Information et Prévision Economique, Europe in 1992 [Europe in 1992] (Paris: BIPE, October 1987)Google Scholar and from Lafay, Gerard and Herzog, Colette with Stemitsiotis, Loukas and Unal, Deniz, Commerce international: la fin des avantages acquis [International trade: The end of acquired advantages] (Paris: Economica, 1989)Google Scholar; figures are taken from diverse charts and tables in Section 1.

52 These conclusions are drawn from a map of global GDP developed by the BIPE, and relabeled with their permission by BRIE, BIPE, the Bureau d'Information et Prevision Econo-mique, calculated these numbers from OECDfigures.The map is in “La France dans l'Europe de 1993,” [France in the Europe of 1993] (Paris: BIPE, n.d.), Vol. 1, pp. 8 and 9.

53 Herzog, Colette, “L'ouverture du marché européen: une autre vision,” [The opening of the European market: Another view], Economic Prospective Internationale: Revue du CEPII, Premier Trimestre 1988, pp. 81–89Google Scholar.

54 Ibid.

55 Lafay and Herzog (fn. 51), from diverse charts and tables in Section I.

56 Wallace and Wessels (fn. 18).

57 It has often been said that, at the moment of its economic and political dominance, the U.S. structured the global trading system around these principles and embedded them in its own legal practice. The reality, of course, has been more complicated: it involved a series of exceptions to these principles. One set of these exceptions, made from a position of economic strength, was made for reasons of foreign policy objectives. The United States—at least in its conception—opened its market to Japan, the developing economies, and Europe, and tolerated trade discrimination. The second set of exceptions, made from a position of sectoral weakness, has involved bilateral bargains to contain imports in specific sectors: autos, textiles, steel. Such sectoral bargains were often made to accommodate those who would challenge the general principles of trade policy. Significantly, the level of imports that triggers substantial protectionism has been quite high. The delicate hypocrisy has been more difficult to maintain as the coalition in support of open trade has narrowed. The balance between principles of multilateralism and a reality of bilateralism has slowly tilted toward bilateralism as a growing number of sectors has achieved protection; with the growth of the deficit, that tilt has become more pronounced.

58 For the differences between general and specific reciprocity, see Bhagwati, Jagdish, Protectionism (Cambridge: MIT Press, 1988)Google Scholar.

59 Tyson, Laura and Zysman, John, “Developmental Strategy and Production Innovation in Japan,” in Johnson, Chalmers, Tyson, Laura, and Zysman, John, eds., Politics and Productivity (Cambridge, MA: Ballinger, 1989)Google Scholar.

60 Buchan, David, “Brussels Not to Seek Backdated Banking Pacts,” Financial Times, October 20, 1988, p. 1.Google Scholar