The choice for Europe : social purpose and state power from Messina to Maastricht 9781857281927, 1857281918, 1857281926

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The Choice for Europe

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The Choice for Europe S

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Routledge Taylor & Francis Group LONDON AND NEW YORK

Copyright © 1998 by C ornell University All rights reserved. No part o f this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, m echanical, photocopying, recording or otherwise, without permission in writing from the publisher. Published in the U K in 1999 by Routledge Routledge 2 Park Square, Milton Park, Abingdon, Oxon, 0 X 14 4 RN Transferred to Digital Printing 2005 T h e name o f Routledge is a registered trade mark used by Routledge with the consent o f the owner. A catalogue record for this book is available from the British Library Library o f Congress Cataloging-in-Publication Data are available on request is r n is b n

1-85728-191-8 cased 1-85728-192-6 paper

To my mother and the memory o f my father

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Contents

Acknowledgments

ix

Abbreviations

xi

Introduction: The Choice for Europe

1

1. Theorizing European Integration

18

2. Finding the Thread: The Treaties o f Rome, 1955-1958

86

3. Grain and Grandeur: Consolidating the Common Market, 1958-1969

159

4. Divergence and Convergence: Toward Monetary Integration, 1969-1983

238

5. Relaunching Integration: The Single European Act, 1984-1988

314

6. Economic and Monetary Union: Negotiating the Maastricht Treaty, 1988-1991

379

7. European Integration in Retrospect

472

Index

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vii

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Acknowledgments

T h is book, perhaps m ore than most, would have been im possible w ithout the en co u ragem en t, assistance, and criticism o f m any colleagues w ho o ffered m e the m ost valuable o f all scholarly gifts: serious intellectual engagem ent. I am grate­ ful to two m entors, R obert K eohan e and Stanley H offm ann, who always e n co u r­ aged m e to follow my scholarly instincts— even w hen they seem ed m anifestly to con trad ict g o o d sense. For com m ents on individual chapters o f the book, I am gratefu l also to Perry A nderson , T h om as B anchoff, Sim on Bulm er, M arc Busch, David C am ero n , Jam es C aporaso, C h arles C ogan , T hom as Diez, Jam es Fearon, Jeffry Frieden, G eoffrey G arrett, R ichard Griffiths, Stephan H aggard, Ernst Haas, D o ro th ée H eisen berg, Peter Katzenstein, Stephen Krasner, Markus Jach ten ­ fuchs, Beate K o h ler-K o ch , M argaret Levi, L eon L in dberg, C harles Lipson, Peter Ludlow, Piers Ludlow, G ian d o m en ico M ajone, Lisa M artin, K athleen M cNamara, A lan Milward, Joh n Peterson, Paul Pierson, A lberta Sbragia, Fritz Scharpf, D uncan Snidal, W olfgang Streeck, T hom as Risse, Jeffrey Vanke, D aniel Verdier, H elen W allace, Carolyn W arner, D aniel W incott, and three anonym ous referees. I rem ain in debted to countless others w ho w ere w illing to discuss specific issues with me; I can only hop e that they recall o u r intellectual engagem ent as clearly as I, and will accept this anonym ous acknow ledgm ent. For o th er excep tion al assistance, I thank Elie C o h en , A n n e D eighton, O livier D ebouzy, Karl Kaiser, Louise Richardson, G eo rge Ross, Patrick Weil, and Joseph W eiler. I reco gn ize the research assistance o f Leslie Eden Harris, Brian Portnoy, A lexan d ra Sam uel, Jeffrey Vanke, and especially Kip W ennerlund, w ho indefatigably ch e ck e d the footn otes and p repared the index; each provided valuable substantive suggestions as well. A n d w hat m ore could one ask from the editor o f a m anuscript this long than R o ger H aydon’s excep tion al com bination o f in telli­ g en ce and wit? For organ izin g and participating in co llo qu ia devoted to my work, I thank (in a ddidon to those a b o v e), Ernest May, Yves Mèny, and participants in sessions held at Stanford University, the University o f C alifornia at Los A ngeles and at San D iego, the M an n h eim er Zentrum für E uropäische Sozialforschung, the Euroix

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pean University Institute, H arvard University, E din burgh University, C o p e n ­ hagen University, the C o n feren ce o f Europeanists, and the E uropean C o m ­ m unity Studies A ssociation. I am also grateful to the C en tre fo r European Policy Studies in Brussels, the International Institute fo r Strategic Studies in L on don , the C e n tre d ’Etudes et R elations Internationales an d the Institut des Sciences Politiques in Paris, and the D eutsche G esellschaft fü r Auswärtige Politik and the A tlantik-Brücke in B on n fo r logistical sup port d u rin g shorter research visits. I received invaluable outside fellow ship support from the G erm an Marshall Fund o f the U nited States, the Institute fo r the Study o f W orld Politics, and the Morris A bram s Fellowship program . T h re e excep tio n al academ ic institutions provided m e with ch allen gin g yet com fortable academ ic hom es fo r exten d ed periods. T h e European University Institute— in particular its R obert Schum an C e n te r— provided m e num erous o p portu nities to visit Fiesole, presen t my w ork in its singular pan-European environm en t, and m ake revisions in a room with a view. A t the University o f C h icago , the D epartm en t o f Political Science and the Program on International Politics, E conom ics, and Security (PIPES) provided extraord in ary logistical sup­ port and w elcom ed m e as an interm ittent m em ber o f a unique intellectual co m ­ m unity over a four-year period. At H arvard University, the O lin Institute Program on E con om ics and N ational Security provided initial support; the W eatherhead C e n te r fo r International Affairs supported a sem ester o f leave and organ ized an a u th o r’s colloquium ; and the M inda d e G u n zbu rg C e n te r fo r European Studies o ffered research support, supported a study gro u p on E uropean integration, and provided m e — as it has so m any o th ers— with an un paralleled interdisci­ plinary environm en t in w hich to study m odern Europe. T h e d eep est debts are the m ost personal and therefore rem ain understated here. I dedicate this b o o k to my m other, Francesca de G ogorza Moravcsik, and the m em ory o f m y father, M ichael Julius Moravcsik, w ho first directed my at­ tention toward E urope and taught m e to believe in the power o f argum ent. T h e extraordin ary person by my side th rou gh o u t the w riting o f this book, A nn eM arie Slaughter, offered the en co u ragem en t, counsel, and criticism — and m uch m o re — w ithout w hich it w ould n ever have been com pleted. A.M. Cambridge, Massachusetts

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Abbreviations

ABCC BDI BIS CA P CBI CD U CE O CET CFD T CFSP CNPF CO REPER CSU DBV DG B DGIII D IH T DM EBRD EC ECB ECJ ECO FIN ECSC EDC EEC EFTA EIB EMF EMI EMS EMU

Association o f British Cham bers o f Com m erce Bundcsvcrband d er Deutschen Industrie Bank fo r International Settlements Com m on Agricultural Policy Confederation o f British Industry Christian Dem ocratic Union c h ie f executive officer com m on external tariff Confederation Française D ém ocratique du Travail Com m on Foreign and Security Policy Conseil National du Patronat Français Com m ittee o f Perm anent Representatives Christian Socialist Union Deutsche Bauernverband Deutsche Gewerkschaftsbund D irectorate G eneral 3 Deutsche Industrie- und Handelstag Deutsche mark European Bank for Reconstruction and Developm ent European Com m unity European Central Bank European Court o f Justice Econom ic and Finance Com m ittee European Coal and Steel Com m unity European Defense Com m unity European Econom ic Com m unity European Free Trade Association European Investment Bank European M onetary Fund European M onetary Institute European M onetary System Econom ic and M onetary U nion xi

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EP EPC EPU ERM ERT ESCB ESPRIT EU FBI FDI FDP FNSEA FO FRG FTA GATT GDP GNP G -7 IG C IMF M AC M CA MEP MLF M NC MRP NATO NFU N IC N TB OECD OEEC QM V R&D SEA SFIO SPD TUC U N ICE VAT VSTF WEU

w ro

European Parliament European Political C ooperation European Payments Union exchange rate mechanism European Roundtable o f Industrialists European System o f Central Banks European Strategic Program fo r Research & D evelopm ent in Information T echnology European Union Federation o f British Industry foreign direct investment Free Dem ocratic Party Fédération Nationale des Syndicats d ’Exploitants Agricoles Foreign O flice Federal Republic o f Germany free trade area G eneral A greem ent on Tariffs and Trade gross domestic product gross national product G roup o f 7 intergovernm ental conference International M onetary Fund Mutual A id Com m ittee M onetary Com pensation A ccount M em ber o f the European Parliament multilateral force m ultinational corporation M ouvem ent Républicain Populaire North Atlantic Treaty Organization National Farmers’ Union newly industrializing country non tariff barrier O rganization for Econom ic C ooperation and Developm ent Organization for European Econom ic Cooperation qualified majority voting research and developm ent Single European Act Section Française de l’Internationale O uvrière Social Dem ocratic Party o f Germany Trades Union Congress Union o f Industrial and Em ployers’ Confederations o f Europe value added tax very short-term financing West European Union W orld Trade Organization

The Choice for Europe

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In t r o d u c t io n

The Choice for Europe The study o f regional integration should be both included in and subordi­ nated to the study o f changing patterns o f interdependence. — Ernst Haas, The Obsolescence of Regional Integration Theory, 1975

T h e con struction o f the E uropean Com m u nity (EC) ranks am ong the most extraord in ary achievem ents in m odern w orld politics, yet there is little agree­ m en t abou t its causes.1 E C rules in flu en ce m ost aspects o f E uropean political life, from the regulation o f the habitat o f wild birds to voting within the World T rade O rgan ization . T h e E C ’s co m p lex institutions in clude a sem i-autonom ous legal system, parliam ent, and bureaucracy as well as detailed norm s, principles, rules, and practices governin g d irect relations am ong national governm ents. T h ese institutions resem ble those o f a m odern nation-state as m uch as those o f a con ven tion al international regim e. Today the E C is a un ique, m ultileveled, transnational political system.2

T h e Q u e s t io n : E x p l a in in g M a jo r T u r n in g Po in t s

T his b o o k addresses the m ost fundam ental puzzle con frontin g those w ho seek to understand E uropean integration, nam ely to exp lain why sovereign govern ­ m ents in E urope have chosen repeatedly to coordin ate their core econ om ic policies and surrender sovereign prerogatives with in an international institution. In the history o f the E C, the m ost im portant such choices are five treaty-amending sets o f agreem en ts that p ro p elled integration forward. Variously term ed constitutive, constitutional, history-m aking, o r gran d bargains, they punctuate E C history at a rate o f rou ghly o n ce p er decade. Each grand bargain, three 1 Since the ratification o f the Maastricht Treaty, the organization has been referred to as the European Union (EU). This book deals with major interstate bargains up to and including Maastricht, so the older term European Community is used throughout. 2 For theoretical overviews of the EC as a political system, see Helen Wallace and William Wallace, eds., Policy-Making in the European Union, 3d ed. (Oxford, 1996); Robert O. Keohane and Stanley Hoffmann, eds., The New European Community: Detrition-Making and Institutional Change (Boulder, Colo., 1991); Markus Jachtenfuchs and Beate Kohler-Koch, eds., Europäische Integration (Opladen, 1996); Fritz Scharpf, Optionen des Föderalismus in Deutschland und Europa (Frankfurt, 1994); ]. H. H. Weiler, The European Constitution (Oxford, 1997).

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aim ed at trade liberalization and two at m onetary coop eration, set the agenda fo r a p eriod o f consolidation, h elp in g to defin e the focus and pace o f subsequent decision -m akin g.3 T h e E C has evolved, as som e have said o f global econ o m ic in ­ stitutions m ore generally, as a “sequen ce o f irregular big bangs.” 4 A t the co re o f this b o o k is a series o f structured narratives o f these decisions or, m ore properly, bun dles o f decisions. T h e accoun t focuses prim arily on G erm an, F rench, and British policies. C h ap ter 2 analyzes the n egotiation in 1957 o f the Treaty of Rome, w hich established basic policies and institutions, in cludin g a cus­ toms un ion, com m on agricultural policy, and coop eration on transport, as well as a set o f quasi-constitutional institutions and a parallel organization fo r atom ic e n ergy coop eration. C h ap ter 3 exam ines the consolidation of the Common Market in the 1 960s, a set o f linked decisions focused aroun d the creation o f the Com m on A gricultural Policy, the im plem entation o f the C om m on M arket, the veto o f British m em bership, and, after F ran ce’s tem porary withdrawal from the EC, the L u x em b o u rg C om p rom ise o f 1966 regulating the cxercise o f national vetoes. C h ap ter 4 considers the fo u n d in g o f the European Monetary System aim ed at the stabilization o f intra-European exch an ge rates. C h ap ter 5 investigates the Single European Act, n egotiated in the m id-1980s, w hich exp an d ed the use o f qualified m ajority voting and established the “E urope 19 9 2 ” agen da for the rem oval o f n o n tariff trade barriers and the creation o f a “single m arket.” Finally, chapter 6 assesses the Treaty on European Union, signed at M aastricht in 19 9 1, which set forth a schedule for E con om ic and M onetary U nion (EM U) with a single cu r­ rency. T o geth er these five decisions have dictated the main lines o f European in tegration over the past forty years. My aim is n eith er to duplicate textbook overviews o f these decisions n o r to re­ capitulate narrative treatm ents o f their diplom atic history.5 I aim instead to test alternative exp lan ation s o f these decisions and, in doin g so, to advance a re ­ visionist explan ation o f my own. T his b ook advances propositions about the u n derlying causes o f integration that are gro u n d ed in gen eral social-scientific theories o f state p referen ces, interstate bargaining, and institutional choice. It eschews ad h o c exp lan ation and seeks instead to discover what is generalizable abou t E C history. T h e analysis rests, accordingly, on the testing o f a series o f standardized hypotheses across a structured com parison o f all five m ajor d eci­ sions in E C history, n ot an isolated case study. T his m ethod, I believe, provides reason to be m ore co n fid en t in the generalizability o f the conclusions across EC history and, ultimately, beyon d Europe. ’ Gerald Schneider and Lars-Erik Cederman, “The Change of Tide in Political Cooperation: A Limited Information Model o f European Integration,” International Organization 48 (Autumn 1994). 633-662. 4 Peter Katzenstein, “International Relations Theory and the Analysis o f Change," in Ernst-Otto Czempiel and James N. Rosenau, eds., Global Changes and Theoretical Challenges (Lexington, Mass.,

»989 ). 296-

5 Most informative are Desmond Dinan, An Ever Closer Union? An Introduction to the European Community (Boulder, Colo., 1994); Stephen George, Politics and Policies of the European Union, 3d ed. (Oxford, 1996); Richard McAllister, From F.C to F.U: A Historical and Political Survey (New York, 1997); Michael O ’Neill, The Politics of European Integration: A Reader (Now York, 1996); LoukasTsoukalis, The New European Economy, 2d ed. (Oxford, 1996); Wallace and Wallace, Policy-Making.

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The Choicefor Europe T h e A r g u m e n t : E c o n o m ic In t e r e s t , R e l a t iv e P o w e r , C r e d ib l e C o m m it m e n t s

My central claim is that the broad lines o f European integration since 1955 reflect three factors: patterns o f com m ercial advantage, the relative bargaining pow er o f im p ortan t governm ents, and the incentives to enhan ce the credibility o f interstate com m itm ents. M ost fun dam en tal o f these was com m ercial interest. E uropean integration resulted from a series o f rational choices m ade by na­ tional leaders w ho consistently pursued econ o m ic in terests— prim arily the co m ­ m ercial interests o f pow erful econ o m ic p roducers and secondarily the m acroeco n o m ic p referen ces o f ru lin g governm ental coalitions— that evolved slowly in response to structural incentives in the global econom y. W ie n such interests con verged, integration advanced. T h e fact that e co ­ nom ic interests did consistently con verge reflected fundam ental trends in post­ w ar in tern ation al political eco n o m y — in particular, a fifty-year boom in trade and investm ent am ong industrialized countries. T h e resulting expansion o f intra-industry trade both predated the E C and in d u ced policy changes regardless o f w hether the coun tries in question were EC m em bers. Similarly, rising capital m obility u n d erm in ed the autonom y o f national m acroeconom ic policies, creat­ ing greater pressures fo r m onetary coop eration. At its core, I argue, European integration has been dictated by the n eed to adapt throu gh policy coordination to these trends in tech n ology and in econ o m ic policy. T his exp lan ation o f national preferen ces fo r integration is gro u n d ed in p o ­ litical econom y, n ot econom ics. Despite the im portance o f econ o m ic benefits, econom ists them selves were skeptical of, if n ot o utrigh t op posed to, m any o f the m ajor steps in E uropean integration. C onstruction o f a custom s un ion, a co m ­ m on agricultural policy, m on etary u n io n — alm ost all were, from the perspective o f an econ om ist, “second best” policies. P references for such policies em erged from a process o f dom estic political co n flict in w hich specific sectoral interests, adjustm ent costs and, som etim es, geopolitical con cerns played an im portant role. Con sistent with m odern theories o f foreign econ o m ic policy, I argue that the specific con dition s u n d er w hich governm ents w ere w illing to liberalize trade reflected their in tern ation al econ o m ic com petitiveness; the con dition s un der w hich they accep ted m on etary integration reflected prevailing m acroeconom ic p olicies and preferences. Yet the E C was shaped by m ore than the con vergen ce o f national preferen ces in the face o f econ o m ic chan ge. T h e re were im portant distributional conflicts n ot ju st w ithin states b ut am ong them . T h ese interstate conflicts were resolved only throu gh hard interstate bargaining, in which credible threats to veto p ro ­ posals, to w ith hold financial side-paym ents, and to form alternative alliances e x ­ clu d in g recalcitrant governm ents carried the day. T h e outcom es reflected the relative pow er o f states— m ore precisely, patterns o f asymmetrical in terd ep en ­ d en ce. T h o se w ho gain ed the m ost econ om ically from integration com prom ised the m ost on the m argin to realize it, w hereas those who gained the least o r for w hom the costs o f adaptation were highest im posed conditions. To secure the substantive bargains they had m ade, finally, governm ents delegated and p ooled

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sovereignty in international institutions fo r the express purpose o f com m itting on e a n o th er to coop erate. W h ere jo in t gains w ere large, b ut each governm en t faced a strong tem ptation to d e fe ct from agreem en ts— as was the case fo r the C o m m o n A gricultural Policy an d fo r E con om ic and M onetary U n io n — govern ­ m ents ten d ed to establish qualified m ajority votin g and delegate tasks to the Com m ission. In short, I argue that a tripartite explan ation o f in tegration — econ o m ic in ter­ est, relative power, cred ible com m itm ents— accounts fo r the form , substance, and tim ing o f m ajor steps toward E uropean integration. C h ap ter 1 o f this b ook elaborates these three theories, introduces their m ajor com petitors, and derives hypotheses that perm it us to test them in the case o f the EC. C hapters 2 through 6 presen t structured narratives o f the five decisions designed to test the co m ­ p etin g theories. C h ap ter 7 concludes. T h is explan ation o f in tegration breaks with the bulk o f existing scholarship on the EC. It rejects the view that integration has been driven prim arily— as Jean M on n et and his social-scientific counterparts, the neofunctionalists, long m ain­ tain ed — by a tech nocratic process reflectin g the im peratives o f m odern e co ­ n om ic plan nin g, the u n in ten d ed con sequences o f previous decisions, and the en trep ren eu rsh ip o f disinterested supranational experts. T h e integration p ro ­ cess did n o t sup erced e o r circum vent the political will o f national leaders; it reflected their will. N o r— as the most prom in en t critics o f neofunctionalism co n ­ ten d — can we acco u n t fo r integration prim arily as the result o f a coincidental postwar link betw een the “low p olitics” o f fo reign econ o m ic policy and g e o p o ­ litical “h igh politics.” T h e prim ary m otivation o f those w ho chose to integrate was n ot to prevent a n o th er Franco-G erm an war, bolster global prestige and power, o r balan ce against the superpowers. N o r— as num erous historians, polit­ ical scientists, and m em bers o f the E uropean m ovem ent con tin ue to m aintain— does in tegration represen t a victory over nationalistic opposition by p ro p o ­ nents o f a widely shared, idealistic vision o f a un ited E urope, an interpretation known in the classical lexico n as the “federalist” theory o f integration. To be sure, tech n o cratic im peratives, geopolitical con cerns, and European idealism each played a role at the m argin, b ut n on e has consistently been the decisive force be­ hind m ajor decisions. N or, finally— alth ou gh this b o o k shares m uch with recent studies o f E uropean in tegration in the 1950s by econ o m ic historians such as Alan M ilw ard— was integration prim arily an effort to preserve a system o f social w el­ fare provision u n ique to postwar W estern E urope o r any o f its member-states. All such explan ation s treat the E C as un ique, an excep tion in w orld politics that requires a sui generis theory.6 T h is assum ption led the study o f regional in­ tegration to d evelop over the past forty years as a discipline apart, o n e divorced from gen era l studies o f international coop eration . T h e paradoxical result: today n o claim appears m ore radical than the claim that the behavior o f E C m em ber 6 This was true o f neofunctionalists, whose self-criticism on this ground is reviewed below. It is also true o f some critics o f neofunctionalism. Milward, for example, argues in favor o f a specific “European” theory o f integration, as opposed to prevailing “American” theories. Alan S. Milward, The European Rescue of the Nation-State (I-ondon, 1993).

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The Choicefor Europe governm en ts is normal. T h e revisionist quality o f the argu m en t in this b o o k lies precisely in its effort to norm alize the actions o f E uropean governm en ts— to treat them as a subset o f gen era l ten dencies am ong dem ocratic states in m o d ­ ern w orld politics. G overnm ents co o p erated when in d u ced o r constrained to do so by eco n o m ic self-interest, relative power, and strategically im posed com m it­ ments. Far from dem onstrating the trium ph o f technocracy, the power o f ideal­ ism, and the im p oten ce o r irrelevance o f the m odern nation-state, E uropean in tegration exem p lifies a distinctly m odern form o f power politics, peacefully p ursu ed by dem ocratic states fo r largely econ o m ic reasons through the e x ­ p loitation o f asym m etrical in terd ep en d en ce and the m anipulation o f institu­ tional com m itm ents. I f the m otivations o f postwar E uropean leaders were dis­ tinctive, it was because their coun tries w ere to uch ed m ore intensely by econ o m ic trends com m on to all advanced industrial dem ocracies, m ost notably the rapidly increasing potential fo r industrial trade am ong industrialized nations since W orld W ar II, disorder in the international m onetary system after 1970, and w idespread pressures fo r liberalization and disinflation in recen t decades. T h ro u g h an analysis o f E C history, this b ook also seeks to advance a distinctive theoretical position in cu rren t debates in international relations theory. T h e exp lan ation o f European in tegration sketched above is form ulated as a distinct series o f answers to three questions central to m odern theories o f com parative and in tern ation al political econom y. In a w orld in w hich governm ents are, b roadly speaking, rational and instrum ental, integration can be seen as a p ro ­ cess in w hich they d efin e a series o f un derlying objectives o r preferences, bar­ gain to substantive agreem ents co n cern in g coop eration , and finally select ap­ p ropriate international institutions in w hich to em bed them . Any explanation o f rational state choices to coordin ate policy through international institutions m ust th erefo re address three questions. First, what best explains national p ref­ eren ces, the fun dam en tal m otivations un derlying support fo r or opposition to e con o m ic integration? Second, given a set o f national preferen ces, what best e x ­ plains outcom es o f interstate bargain ing within the EC? T h ird , given a set o f substantive bargains, w hat best explains state choices to construct European in­ stitutions and transfer sovereignty to them? T h is b o o k suggests a distinct answer to each question. L et us con sider each in turn. Patterns o f national p referen ces, the focus o f the first stage, vary greatly over E C history. France, Germ any, and Britain p rom oted and o p posed integration in differen t substantive areas and to differen t ends. T h e ir respective positions also shifted, if usually only in in crem en tal fashion, over tim e. In exp lain in g foreign e con o m ic policy, international relations theorists con cern ed with national p ref­ e ren ce form ation have lo n g debated the relative w eight o f security and political e co n o m ic m otivations. O n e theory holds that w orld politics contains a hierarchy o f issues head ed by security con cerns. Foreign econ o m ic policy is driven, therefore, n ot by its direct econ o m ic con sequen ces but by its in d irect con sequences for national security, term ed “security extern alities.” Th is is the dom in an t view in the study o f the EC, w here diplom atic historians, E uropean foreign policy specialists, and those w ho

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study th e ro le o f id eas in fo re ig n p o licy have lo n g a rgu ed that E u ro p e an e c o ­ n o m ic in tegratio n has b e e n p u rsu ed n o t p rim arily fo r its own sake b u t to co u n ter g e o p o litica l threats an d realize g e o p o litica l goals. Postw ar E u ro p e an lead ers w ho co n stru cted and e x te n d e d th e E C so u g h t to tie down the G erm an s, balan ce the Russians, establish a third fo rc e against th e A m erican s, o verco m e right-w ing and C o m m u n ist extrem ism at h o m e , o r suppress n ationalism to realize a distinctive vision o f E u ro p e an federalism . G eo p o litica l in terest an d id e o lo g y e xp lain tradi­ tional British sem id etach m en t fro m E u ro p e , G erm an federalist sym pathies, and F ren ch vacillatio n betw een th e two poles. I co n clu d e in stead in favo r o f an altern ative th eo ry o f fo re ig n e co n o m ic p o l­ icy that h o ld s that th ere is n o h iera rch y o f interests; n atio n al interests ten d in ­ stead to re fle c t direct, issue-specific co n seq u en ces. N ation al p re fe re n ces c o n ­ ce rn in g in te rn a tio n al trade a n d m o n etary p o licy can th e re fo re be u n d erstoo d as a re fle ctio n o f the e co n o m ic in cen tives g e n e ra te d by patterns o f in tern atio n al e co n o m ic in te rd e p e n d e n c e — the co re o f so -called “e n d o g e n o u s ” th eories o f ta riff an d ex ch a n g e -ra te policy. T h e d o m in a n t m otivation s o f govern m en ts in th e E C d ecisio n s studied h e re re fle cte d n o t g e o p o litica l threats o r ideals but pressures to co o rd in a te p o licy respon ses to risin g o p p o rtu n ities fo r p ro fitable e co n o m ic e x ch a n g e , in p articu lar gro w in g in tra-in dustry trade and capital m o ve­ m ents. W h ile m o re strictly co m m e rcia l in its fo cus, this view is con sisten t with those o f e co n o m ic historians w h o have studied E C history. T rad e liberalization fo llo w ed e x p o rt o p p o rtu n ities. In m o n etary policy, p re fe re n ces fo r in tegratio n r e fle cte d th e relative m a cro e co n o m ic p erfo rm a n ce and p re fe re n ce o f n ational g o v ern m en ts a lon gsid e co m m e rcia l co n sid era tio n s.7 T h e p rim acy o f e co n o m ic in terests d o e s n o t releg ate g e o p o litica l id e o lo g y to in sig n ifica n ce. T ak en by them selves, n ak ed e co n o m ic p re fe re n ces w ou ld p ro b ­ ably have led to a h ig h ly in stitution alized p an -E u ro p ean fre e trade area with fla n k in g p o licie s o f re g u lato ry h a rm o n iza tio n an d m o n etary stabilizatio n — som ew h at m o re in tensive arra n gem en ts than those p u rsu ed by the E u ro p ean F ree T ra d e A re a (EFTA) an d E u ro p e an M o n etary System (EM S). T h e se activi­ ties w o u ld h ave b e e n e m b e d d e d in w eaker, less overtly co n stitu tio n al, b u t still a u to n o m o u s in tern a tio n al in stitutions, such as those fo u n d in EFTA, the W orld T ra d e O rg a n iza tio n (W T O ), an d the N o rth A tlan tic Free T ra d e A re a (N A F T A ). E x p la in in g th e e m e rg e n ce an d e xp a n sio n o f a g e o g ra p h ica lly m o re lim ited, in stitution ally m o re d e v e lo p e d , an d substantively m o re diverse institution re ­ qu ires a tten tio n to g e o p o litica l ideology. Yet e co n o m ic interests re m a in e d prim ary. Pressures fro m e co n o m ic interest 7 Unlike neofunctionalist theories o f the early 1960s, however, which saw support for economic integration as a reflection o f a broad postwar consensus on the desirability o f technocratic plan­ ning and slate intervention, or more recent works by historians, which attribute them to the em er­ gence o f a social welfare stale, I argue that it was the existence o f a postwar trade boom among all developed countries, a massive expansion and redirection o f trade from colonies to other industrial nations— a trend focused particularly in Europe— which powered European econom ic integration. This explanation, unlike that o f the neofunctionalists or econom ic historians, also explains the strik­ ing variation in econom ic interests across issues and countries, which accord with the position o f na­ tional producers in international markets.

The Choicefor Europe groups gen erally im posed tighter constraints on policy than did security co n ­ cerns and the ideological visions o f politicians and public opin ion . W hen one factor had to give way, it ten d ed to be geopolitics. E conom ic interests, m oreover, d eterm in ed the circum stances u n d er w hich geopolitical ideology could in flu­ en ce policy. O n ly w here econ o m ic interests were weak, diffuse, o r indeterm inate co u ld national politicians in dulge the tem ptation to con sider geopolitical goals. Political econ o m ic interests p redom in ated even w here we would least exp ect them to. For exam ple, the vital interest beh in d G eneral de G au lle’s opposition to British m em bership in the EC, I argue, was not the pursuit o f French grandeur but the p rice o f French wheat. T h e secon d question con cern s the outcom es o f interstate bargaining. O f p ar­ ticular theoretical interest are the exten t to w hich n egotiated outcom es are efficient, exp lo itin g all possible jo in t gains, and the exten t to w hich resolution o f distributive co n flict over the division o f gains in specific cases has favored one o r a n o th er country. E C bargaining, I argue, is generally Pareto-efficient, but its distributive outcom es vary greatly. Som e bargains, such as the one struck over the institutions govern in g a single currency, favored Germ any; others, such as the creation o f the C om m on A gricultural Policy, favored France; and still others, such as the establishm ent o f region al policy, favored Britain. How is this varia­ tion best explained? International relations theorists have lo n g debated the relative im portance o f various factors fo r the outcom es o f non coercive interstate bargaining. T h e o ­ retical debates divide those w ho hold that international institutions— in partic­ ular, auto n o m o us supranational officials em pow ered by them — decisively in flu ­ en ce interstate bargain ing from those w ho believe that bargaining outcom es reflect the relative power o f states. T h e first theory, as app lied to the EC, focuses on the essential role o f “supra­ n atio n al” entrep reneurs in overcom in g the high transaction costs o f interstate bargaining, w hich prevent governm ents from n egotiatin g efficiently. T his view, w hich dom in ates the study o f the EC to this day, follows from neofunctionalist theory, w hich views the EC as a novel institutionalized realm , but it is also co n ­ sistent with distinct theoretical approaches to the study o f international regim es, negotiation , and law. M any scholars stress the role o f international officials, who initiate, m ediate, and m obilize societal groups aroun d international agreem ents. T h e E C Com m ission, Court, and Parliam ent are said to have em pow ered a par­ ticular b reed o f supranational political entrepreneurs, from Jean M onnet in the 1950s to Jacques D elors in the 1990s. T h e ir interventions, it is argued, have re ­ peatedly increased the efficiency o f negotiations and shifted the distributional outcom es in directions favored by international technocrats. I co n clu d e, by contrast, in favor o f a second theory, w hich m aintains that interstate bargain ing outcom es are decisively shaped by the relative power o f nation-states. T h is view, term ed “in tergovern m en tal” in the EC literature, draws on gen era l theories o f bargaining and negotiation to argue that relative power am on g states is shaped above all by asym m etrical in terd ep en d en ce, w hich d ic­ tates the relative value o f agreem en t to diffèren t governm ents. T h ese distribu­

7

T h e C h o ic e

for

Europe

tive results can be predicted to a first approxim ation through the use o f Nash bargain in g theory: the governm en ts that b en efit m ost from the co re agreem ent, relative to their best unilateral and coalition al alternatives to agreem ent, tend to o ffer grea ter com prom ises in o rd e r to achieve it. W here the threat to form an alternative coalition is cred ible, governm ents have exp lo ited threats to exclu de o n e another. B argaining tends to be issue-specific with cross-issue linkages re ­ stricted to balan cing out benefits am ong governm ents and gen erally taking the form o f cash paym ents o r institutional concessions. T h e entrep ren eursh ip o f supranational officials, by contrast, tends to be futile and redun dant, even som etim es coun terproductive. G overnm ents gen erally find it easy to act as their own en trep ren eurs and to im pose distributional bargains throu gh the use o f traditional nonm ilitary instrum ents o f power politics, in clud­ in g cred ible unilateral vetoes, threats o f exclu sion , and financial side-payments. T h e distributive outcom es o f n egotiations have reflected n ot the preferen ces o f supranational actors but the pattern o f asym m etrical in terd ep en d en ce am ong policy p referen ces. T his is n ot to deny the in flu en ce o f supranational en trep re­ neurs altogether, b ut their in flu en ce has been lim ited to helpin g im prove the efficiency o f on e o f five agreem ents, nam ely the Single E uropean A ct (SEA) o f 1986. T his acco u n t reverses the focus o f recen t E C scholarship. W hile most an ­ alysts gen eralize from a single case, nam ely the Com m ission u n d er Jacques Delors in the m id-1980s, and ask why the Com m ission was so effective, a com parative analysis invites us to pose the opposite puzzle: W hy is the SEA the only m ajor E C bargain ab ou t w hich a serious em pirical debate abou t supranational en trep re­ neurship can be conducted? T h e final step is to exp lain the choices o f governm ents to delegate and p ool sovereignty in international institutions. W hile the form al powers o f suprana­ tional officials and qualified m ajority votin g do n ot exten d to m ajor treatyam en din g n egotiation s— h en ce the skepticism abou t their in flu en ce over the bargains studied in this b o o k— the everyday legislative process within the Treaty involves p o olin g o f sovereignty in m ajority votin g arrangem ents and substantial delegatio n directly to supranational officials. H ere there is m uch variation. In som e areas extensive powers o f im plem entation and proposal have been d e le ­ gated to central authorities. In others, qualified m ajority voting governs inter­ state decision-m aking. In still others, national vetoes and unanim ity voting have b een retained. H ow are the varied choices o f governm ents to delegate and pool sovereignty to be explained? G en eral theories o f international relations and institutional delegation sug­ gest three reasons why governm en ts m ight p o ol and delegate sovereignty. First is com m itm ent to the ideology o f E uropean federalism . R ecent writings on in ­ ternational co o p eratio n stress the in d ep en d en t role o f ideas in shaping insti­ tutional p referen ces. N um erous historians and social scientists attribute the E C ’s quasi-constitutional institutions to pressure from federalists, particularly in G erm an y and the B en elu x countries, w ho favored them fo r ideological reasons. Seco n d is the n eed to econ o m ize o n the gen eration and analysis o f inform a­ tion by centralizin g tech nocratic fun ction s in an international organization. Som e international lawyers, regim e theorists, and econom ists m aintain that in8

The Choicefor Europe tem atio n al institutions are often m ore efficient than d ecen tralized governm ents at processing inform ation; the n ee d fo r centralized econ o m ic p lan nin g was a central e lem en t in the n eofun ction alist co n cep tio n o f integration. T h e histori­ cal reco rd suggests that the role o f ideolo gical com m itm ent to E urope was lim ­ ited to cases w here little de facto sovereignty was p o o led o r delegated, o r w here the substantive im plications o f do in g so rem ained u n clear and relatively m o d ­ est, such as transfers o f agenda-setting pow er fro m the Com m ission to the E uropean Parliam ent. T h e role o f tech nocratic inform ation was negligible. I co n clu d e, therefore, in favor o f a third explan ation . C h oices to pool and delegate sovereignty to in tern ation al institutions are best exp lain ed as efforts by governm en ts to constrain and con trol o n e a n o th e r— in gam e-theoretical lan­ gu age, by their effort to en h an ce the credibility o f com m itm ents. G overnm ents transfer sovereignty to international institutions w here potential jo in t gains are large, b u t efforts to secure co m p lian ce by fo reign governm ents throu gh d e cen ­ tralized o r dom estic m eans are likely to be ineffective. T his gen eral explanation lies at the heart o f fun ction al theories o f international regim es, the central strand o f w hich views international institutions as devices to m anipulate in for­ m ation in o rd er to p ro m o te co m p lian ce with com m on rules. Significant p o o l­ ing and delegatio n ten d to occur, I find, n ot w here ideological con cep tion s o f E urope co n verge or w here governm ents agree o n the n eed to centralize policy­ m aking in the hands o f tech nocratic planners, but w here governm ents seek to co m p el co m p lian ce by foreign governm ents (or, in som e cases, future dom estic governm ents) with a strong tem ptation to defect. It was in fact often the co u n ­ tries least com m itted in prin ciple to supranational institutions, such as Gaullist France, that im posed them o n p urportedly federalist governm ents. View ed, then, from the perspective o f m odern theories o f international p oliti­ cal econom y, this explan ation o f in tegration is distinctive in two ways. First, rather than assess co m p etin g unicausal explan ation s or present an am algam o f factors as necessary conditions, this exp lan ation distinguishes clearly betw een theories that are com p lem ents and theories that are substitutes— thereby gro u n d in g a m ulticausal exp lan ation in an exp licit fram ew ork consistent with rational state behavior. Such a fram ew ork must contain distinct explanations o f national p ref­ eren ces, substantive bargain ing outcom es, and decisions to d elegate and p ool sovereignty in international institutions. T his fram ew ork stresses the priority o f state preferen ces, w hich d efin e n ot only the goals states seek but to a very substantial d e g re e — via asym m etries in the intensity o f p referen ces— their rela­ tive power.8 T h is fram ew ork is gen eralizable to any international negotiation. S econd, w ithin this fram ew ork, the explan ation w eighs in on the side o f e co ­ nom ic interests rather than security externalities as fundam ental sources o f state p referen ces, the structure o f asym m etrical in terd ep en d en ce rather than the process-level in terven tion o f institutional entrep reneurs as a determ in ant o f b argain ing outcom es, and the desire fo r m ore cred ible com m itm ents, rather than id eolo gy o r tech nocratic inform ation m anagem ent, as a m otivation to d e l­ 8 Andrew Moravcsik, “Taking Preferences Seriously: A Liberal Theory o f International Politics,” International Organization 51 (Autumn 1997), 5 13 -5 53 .

9

T hf. C h o i c e

fo r E u rop e

egate an d p o o l sovereignty. In ch a p te r i , th e fram ew o rk and the th eories to be tested are p re se n te d in m o re detail.

T h e M e t h o d : E x p l ic it H y p o t h e s e s , D is a g g r e g a t e d C a s e s , P r im a r y S o u r c e s

W hy, the re a d e r m igh t w ell ask, sh o u ld we a cce p t a series o f assertions ab ou t E u ro p e a n in tegratio n that ru n c o u n te r to the w eigh t o f existing scholarship? T h e p rim ary answ er is m e th o d o lo g ica l. A historical revision is on ly as plausible as th e e vid en ce and m e th o d s em p lo y ed to evaluate it. T h is b o o k is based on m eth o d s w h ich , w h ile far fro m id eal, g e n era te m o re rigorous, transparent, o b ­ jective, and re p licab le tests o f c o m p e tin g th e o retica l claim s ab ou t E u ro p ean in ­ tegratio n than have h e re to fo re b e e n co n d u cted . T h e case studies o f m a jor d ecisio n s in this b o o k a d h e re to th ree m e th o d ­ o lo g ica l p rin cip les. In e a ch case, a con sisten t set o f co m p etin g hyp oth eses is d e ­ rived fro m g e n e ra l theories; the decisio n is d isag greg ated to g e n e ra te sufficien t o bservatio n s to test those hypotheses; an d, w h erev er possible, p o ten tially c o n ­ troversial a ttribu tion s o f m otive o r strategy are b a ck ed by “h a rd ” p rim ary sources (d irect e vid e n ce o f d ecisio n -m akin g) ra th er than “so ft” o r seco n d a ry sources (p u b lic statem en ts an d jo u rn a listic o r acad em ic co m m e n ta ry in w hich authors h ave less in cen tive to re p o rt m otivation s a ccu ra tely ). A d h e re n c e to these three m e th o d o lo g ica l p rin cip le s has disad van tages— it accoun ts fo r the len gth o f the b o o k , as w ell as its co n tin u o u s altern atio n betw een narrative an d analysis— but th e aim is to facilitate m o re reliab le causal in fe re n ce. Few existin g studies o f E C d ecisio n -m a kin g con sisten tly a d h e re to these p rin ­ cip les.9 T o o o fte n we fin d evid e n ce selected o n ly to su p p o rt a single exp lan a tio n , casual re co n stru ctio n o f sin gle cases, a n d citation s to seco n d a ry so u rces th e m ­ selves draw n fro m jo u rn a listic co m m e n ta ry o r still o th e r seco n d a ry sources. O f the m any reason s to be skeptical o f such studies, p erh aps the m ost fu n d am en ta l is th at E u ro p e a n in tegratio n has b e en a subject o f h e ate d p u b lic con troversy fo r n early a h alf-cen tu ry, th ereb y g e n e ra tin g an e n o rm o u s n u m b er o f co n jectu res a b o u t its u n d e rly in g causes. W ithin this seco n d a ry m aterial— based largely on official g o v ern m e n t statem ents, jo u rn a listic accoun ts, an d co n te m p o ra ry sp ecu ­ 9 Even the best historical work, to which I ain deeply indebted, does not always meet these stan­ dards. I'wo examples are Alan Milward’s pathbrcaking econom ic interpretation o f the Treaty o f Rome negotiations, which considers com peting theories, gathers primary evidence, and pays some atten­ tion to the social foundations o f national positions but fails either to formulate consistent hypothe­ ses or to consider a full (or carefully controlled) range o f confirming and disconfirming data; and Peter Ludlow’s unparalleled study o f the founding o f the European Monetary System, which assem­ bles a wide range o f remarkable primary evidence, including some attention to social foundations, but does not always consider com peting theories or consistent hypotheses. Both arc also, o f course, limited to single decisions. Although this book takes issue with some empirical conclusions o f such works, it would be impossible without substantial reliance on them. Milward, Rescue; Peter Ludlow, The Making of the European Monetary System (London, 1982). Cf. Andrew Moravcsik, “Review o f Alan Milward, Th e Rescue o f the European Nation-State,” Journal of Modem History 67 (March 1995), 12 6 -12 8 .

10

The Choicefor Europe la tio n — accurate statem ents o f fact coexist alongside the m ost casual o f obser­ vations and the m ost opportunistically partisan o f ex postjustifications. National decision-m akers often express o n e position in public and the opposite in p ri­ vate, even m any years after the events in question .10Journalists often rep eat the justifications o f governm ents o r the prevailing con ventional wisdom o f the m o­ m en t w ithout assessing their reliability. T h e result? O n e can find abundan t sup­ p o rt fo r any plausible con jectu re abou t the causes o f E uropean integration. O n ly by deriving co m p etin g hypotheses from gen eral theories, m ultiplying o b ­ servations, and paying attention to the quality o f prim ary sources can we tran­ scend such in determ in acy and bias. T h e m eth odology is presented in m ore d e ­ tail in ch a p ter 1. M eth o do lo gical argum ents notw ithstanding, som e readers— historians in par­ ticular— may object in p rin ciple to the n otion o f using the historical record to test alternative theories o f state interest, power, and institutional delegation. O th ers view such research as parasitic up on p rior historical analyses, adding little and perhaps subtracting subtlety. Joh n Lewis G addis has criticized this g en re o f international relations scholarship as a Procrustean attem pt to “boil things down to a few sim ple variables” o f co n cern only to social scientists.11 T his view is w idespread, n ot simply am ong historians b ut am ong political scien­ tists e n gaged in the study o f E uropean integration. Two leading specialists in com parative and in tern ation al politics w orking on E uropean integration dis­ parage “tests o f alternative exp lan ation s” as en gen d erin g a “false sense o f scien­ tism.” “In the e n d ,” they co n clu d e, “it is n ot a m atter o f w hich [explanation] is better.” 12 Such criticism w ould be m isplaced here, for four reasons. First, the range o f outcom es and explan ation s I con sider in each chapter is con textu alized by ref­ eren ce to the w ork o f lead in g historians and com m entators. T h eoretical consis­ tency dictates that each ch a p ter test the same hypotheses, yet som etim es im por­ tant alternatives do n ot fit the categories neatly. In such cases, I seek to err on the side o f com prehensiveness rather than o f concision. W hen counterfactual argum ents are p ro m in en t in existing accounts o f integration o r in the p ercep ­ tions o f participants, they are evaluated. C h ap ter 3, fo r exam p le, evaluates and disconfirm s the w idespread claim that the collapse o f the British accession n e­ gotiations o f 1 9 6 1 - 6 3 was due to M acm illan’s tactical errors, and chap ter 6 does the sam e fo r the p ro m in en t assertion that central bankers exp lo ited transna­ 10 Not only is public misrepresentation o f motives an oft-employed political tactic, but many statesmen, concerned about their place in history, are careful to cultivate a specific public impres­ sion. This was, for example, Monnet’s (substantially correct) interpretation o f de Gaulle. Bruno Bottai, “Jean Monnet Visto da Vicino,” LiMes Summer, 2/1997, 1 5 2- Many examples are cited in this book. 11 John Lewis Gaddis, “History, Science and the Study o f International Relations,” in Ngaire Woods, ed., Explaining International Relations since 1945 (Oxford, 1996), 38. 12 Wayne Sandholtz and John Zysman, “1992: Recasting the European Bargain,” World Politics 42 (October 1989), l 27. For a similar sentiment, seejanne H. Matlary, “Beyond Intergovernmentalism: The Quest for a Comprehensive Framework in the Study o f Integration," Cooperation and Conflict 28 (»993). 181-210 .

II

T he C

h o ic e f o r

Europe

tional alliances to im pose their p referen ces on the M aastricht T reaty— neither o f w hich, strictly speaking, belon gs to the hypotheses consistently evaluated in this book. S eco n d , the evaluation o f co m p etin g theories is n ot dichotom ous. H istory rarely defeats one theory o r fully vindicates another; it does n ot d o so here. T h e aim is n o t to prove o n e theory entirely co rrect o r in correct, b u t to assess the rel­ ative im portan ce o f various factors. A m easure o f m ulticausality is built in to the case studies, since each distinguishes three stages o f negotiation s— national p referen ce form ation , interstate bargaining, and institutionalization— each e x ­ p lain ed by a d ifferen t theory. W ithin each stage, m oreover, w here theories are in d eed tested against o n e another, the aim is n ot to prove o n e entirely correct o r in correct but to assess their relative power. If, as I argue, the p repon deran ce o f reliable evidence consistently confirm s the p reem in en ce o f com m ercial in­ terests, relative bargain ing power, and credible com m itm ents, this is a co n clu ­ sion, rath er than an assum ption, o f the em pirical analysis. T h ird , the m ajor theories tested in this b o o k (though not every conclusion) gen erally accord n ot ju st with the writings o f E C historians but also with the sub­ jectiv e co n cern s o f policy-m akers w ho participated in the decisions. C o n tem ­ p oraneous politicians, diplom ats, officials, and journ alists did not, o f course, e x ­ press them selves in social-scientific language, but they nonetheless posed sim ilar questions about p referen ces, bargaining, and institutions; w eigh ed sim i­ lar answers; and often cam e to similarly unam biguous conclusions. In their ret­ rospective analysis o f d e G a u lle ’s veto in 1963, fo r exam p le, G erm an Foreign M inistry officials sought to assess the relative im portan ce o f econ o m ic interest and geo p o litical id eolo gy in French p o licy— co n clu d in g in favor o f the form er. In p reparin g both the M aastricht Treaty and the recen t Intergovernm ental C o n feren ce co n clu d ed in m id -199 7, Com m ission officials debated w hether ac­ tive Com m ission leadership, as in 1985, o r m em ber-state leadership w ithout a strong Com m ission role, as in 1 9 8 9 - 9 1 , w ould be m ore effective. D uring p u b ­ lic controversy over ratification o f the M aastricht Treaty in 1992, French politi­ cians p ublicly disputed w hether d elegation o f power to a relatively non dem ocratic institution was justified by technocratic im peratives, the n eed fo r m ore cred ible com m itm ents to n on in flationary policies, o r pro-E uropean ideology.13 In short, the questions posed in this book, while derived from social-science the­ ory, rem ain true to the self-understanding o f participants. Fourth, w hile this b o o k is in debted to studies by historians, w ho have uncov­ ered m any o f the sources I cite, I also seek to assemble new types o f evidence ab ou t E C decision-m aking, m uch o f it based on prim ary-source materials. N ei­ ther textbooks n o r traditional diplom atic histories investigate the range o f in ­ form ation available to d ifferen t governm ents, the considerations in the m inds 15 These events are described in more detail in this book. See Karl Carstens, Erinnerungen und F.rfahrungm (Boppard am Rhein, 1993), 247-248; Sophie Meunier-Aitsahalia and George Ross, “Democratic Deficit or Democratic Surplus: A Reply to Andrew Moravcsik’s Comments on the French Referendum,” French Politics and Society 11 (Winter 1993), 57-69; interviews with four mem­ bers o f the Commission team preparing the Intergovernmental Conference, August-October 1997.

12

The Choice for Europe o f n ational leaders w ho agreed to delegate authority to supranational institu­ tions, and, above all, the nature o f societal support un derlying the positions o f the three m ajor E C govern m en ts— Britain, France, and Germany. Yet inform a­ tion, d elegatio n , and societal pressures are critical to a m odern theoretical u n ­ d erstan din g o f interstate coop eration . T h o u g h my prim ary m otivation is to test theory, such data are n ot o f co n cern solely to social scientists. In deed, m easure­ m en t o f preferen ces and inform ation is often overlooked in studies o f in tern a­ tional relations, precisely because it so often requires intensive prim ary-source analysis. Even p ro m in en t historians o f E uropean integration today, am ong them A lan Milward and Peter Ludlow, com plain that diplom atic histories have yet to provide a reliable “social history” o f E uropean integration. T his book seeks to take a first step in that d irectio n .14

T h e L it e r a t u r e : B e y o n d “G r a n d T h e o r y ”

B efore m oving to ch ap ter 1, w here the con crete theories and hypotheses are presented, let us take a final m om ent to consider the relationship o f this b o o k to existing theory. In d o in g so, o n e turns inevitably to “classical” theories o f regio n al integration, the most in fluen tial o f w hich is n eofun ction alism .15 D evelo p ed by Ernst Haas and others in the 1950s and 1960s, neofunctionalism rem ains a touchstone fo r scholarship on European integration. N eofu n ctio n ­ alists initially m aintained that the un in ten d ed consequences o f integration, o n ce la u n ch ed , would be self-reinforcing. This, they argued, assures the co n ­ tinuance o f in tegratio n — though this teleology was later heavily qualified. Such feed b a ck takes two forms. Initial steps toward coop eration bolster a technocratic consensus in favor o f fu rth er integration by expandin g, em pow ering, and e n ­ co u rag in g societal groups supportive o f fu rth er state intervention in the e co n ­ omy. T h e establishm ent o f international institutions also centralizes power in the hands o f supranational officials w hose political entrep reneursh ip prom otes fu rth er integration. T h is b o o k should n ot be read as an evaluation o f— let alone a w holesale re ­ je ctio n o f — neofun ction alism o r any o th er classical theory. To be sure, this book tests (and fo r the most part disconfirm s) som e narrow er propositions advanced by n eofun ction alists— the claims, fo r exam p le, that national interests are tech ­ n ocratic rather than reflect fun dam en tal dom estic conflict, that supranational en trep ren eu rsh ip decisively alters interstate bargaining outcom es, and that d e l­ egation to in tern ation al institutions reflects the n eed fo r centralized, expert ,'1 Peter Ludlow, “Recasting the European Political System, 1950 -1996,” CEPS Review 1 (Summer 1996), 25-33: Alan S. Milward, “Conclusions: The Value o f History,” in Milward et al„ The Frontier of National Sovereignty: History and Theory, 1945-1992 (Ix>ndon, 1993), 197-198. 15 For reviews o f neofunctionalism, as well as federalism, functionalism, realism, intergovernmentalism, and other grand theories, see O ’Neill, Politics, and Charles Pentland, International Theory and European Integration (New York, 1973).

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planners. In o th er ways, such as its reco gn ition o f the prim acy o f econ o m ic in­ terests, the b o o k supports traditional n eofunctionalist claims. In still others, such as the exten t to w hich som e national preferen ces fo r in tegration may b e e n d o ­ gen ou s to a p ath-d ep en den t process o f p rio r integration, it does n ot directly ad­ dress n eofun ction alist con cern s (though the final ch ap ter does draw som e p re­ lim in ary conclusions). T his b o o k is thus n o t yet a n o th er con frontation with n eofunctionalism but an ackn ow ledgm ent and response to criticisms o f the style o f “grand th eory” n eo ­ functionalism represen ts— criticisms that em erged in large part from the n eo ­ functionalists them selves. By the early 1970s it was evident even to its creators that n eofunctionalism required fundam ental revision. A t o n e level the failure o f neofunctionalism was em pirical. E uropean integra­ tion had n ot exp an d ed steadily but by stops and starts. Significant dom estic co n flict rem ained. Integration had focused n ot on areas o f state intervention and planning, such as atom ic en ergy and public transport, but on areas o f m ar­ ket liberalization, such as tariff policy. It had n ot gen erated uniform ly stronger centralized institutions b ut a curious hybrid still heavily d e p e n d en t on unani­ m ous consensus am ong governm ents. A n d governm ents did n ot always privilege region al over global m ultilateral coop eration. T h ese events seem ed to disconfirm early, teleological variants o f n eofun ction alism .16 Yet the m ost im portant weakness o f n eofunctionalism was n ot em pirical but theoretical. For on ce the sim ple teleology toward integration was abandoned, n eofun ction alism and o th er gran d theories lacked the resources to construct a positive response. N eofunctionalism proved at o n ce too am bitious, too vague, and too in co h eren t to gen erate precise predictions suitable fo r em pirical eval­ uation. To see why we n eed only turn to theoretical lessons neofunctionalists them selves drew from these failures. T h re e stand out. T h e neofunctionalists co n clu d ed that an explanation o f integration must be em b ed d ed in a m ulticausal fram ew ork com prised o f num erous narrow er th eo ­ ries. Scholars cam e to realize in the 1970s that any single un ified theory o f A m erican o r com parative p olitics— say, “structural-functionalism ”— was too ab­ stract and u n differen tiated to perm it co n crete theory testing and developm ent. Most neofunctionalists co n clu d ed that n o single theory co u ld satisfactorily ac­ co u n t fo r a p h en o m en o n as co m p lex as E uropean integration; m ore con crete theories were required. However, their response, nam ely to construct am algam s o f variables, failed to overcom e, as Haas observed, the “non-additive character o f theories [that] coexist on d ifferen t levels o f abstraction.” 17 In an influential critique, D on ald Puchala invoked the m etap hor o f the blind m en and the e le ­

16 Ernst B. Haas, “International Integration: The European and the Universal Process,” in International Political Communities: An Anthology (New York, 1966), 93-130; Haas, “The Study o f Regional Integration: Reflections on the Joy and Anguish o f Pretheorizing,” in Leon N. Lindbcrg and Stuart A. Sclieingold, eds., Regional Integration: Theory and Research (Cambridge, Mass., 1971), 23ff; Haas, “Turbulent Fields and the Theory o f Regional Integration,” International Organization 30 (Spring 1976), 173 -2 12 . 17 Haas, “Study,” 23-24, also 26-30.

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The Chokefor Europe phant: d ifferen t theories seem ed to exp lain different aspects o f the (elep han ­ tine) in tegration process.18 It follows that any gen eral explanation o f integration ca n n o t rest on a single theory, n eofun ction alist o r otherwise, but must rest on a m ulticausal fram ew ork that orders a series o f m ore narrowly focused theories— a con clusion e ch o ed to the presen t day.19 Variables in the m ulticausal fram ew ork m ust each be g ro u n d ed in a gen eral theory o f political behavior. T h eo ries that treat regional integration as a sui generis p h en o m en o n , H aas argu ed, co u ld be little better than “p re-theories.” T h e y breed theoretical insularity. W ith the E C as the sole m ajor success, regional integration theory in practice becam e an ideal-typical sum m ary o f factors that app ear to have in flu en ced the E uropean case. T h is focus on a sui generis Europecen tered theory cu t the study o f European integration o ff from revolutionary theoretical currents in com parative and international political econ om y over the three decades that follow ed. Sensing this, Haas prop osed that “the study o f region al integration should be both in cluded in and subordinated to the study o f chan gin g patterns o f in te rd e p en d en ce .” Consistent with this analysis, Stanley H offm ann, R obert K eoh an e, Joseph Nye, H enry Nau, and many others drew the con clusion that the EC should be viewed as an international regim e designed to m anage in terd ep en d en ce.20 Finally, each theory should be actor-oriented, that is, it should highligh t the purposive choices o f states and social actors w ithin constraints rather than the u n in ten d ed dynam ics o f broad structural processes. A fundam ental weakness o f n eofunctionalism lay in its aspiration to trace dynam ic e n d o gen o u s effects (in crem ental feed back, u n in ten d ed con sequences, and the resulting change over time) w ithout a baseline theory o f exo gen ou s constraints (state econ om ic interests, p olitical constraints, and delegation) throu gh w hich dynam ic change must take p lace.21 For exam p le, neofunctionalists m aintained (as I do in this book) that the pursuit o f econ o m ic interest is the fundam ental force underly­

18 Donald Puchala, “O f Blind Men, Elephants, and International Integration, "Journal of Common Market Studies 10 (March 1972), 267-285. Also I’entland, International 189-194; Carole Webb, “Theoretical Perspectives and Problems,” in Helen Wallace, W'illiam Wallace, and Webb, eds., PolicyMaking in the European Community, 2d ed. (Chichester, 1983), 32ff. 19 Matlary, “Beyond Intergovernmentalism," 181-208; Linda Cornett and James A. Caporaso, “‘And it still moves!’ State Interests and Social Forces in the European Community,” in James N. Rosenau and Ernst-Otto Czempiel, eds., Governance vnthout Government: Order and Change in World Politics (Cambridge, 1992), 248; Michael O ’Neill, The Politics of European Integration: A Reader (New York. 1996), 5. 20 Haas, “Study," 26; Haas, The Obsolescence of Regional Integration Theory (Berkeley, Calif., 1975), 86; Henry R. Nau, “From Integration to Interdependence: Gains, Losses and Continuing Gaps,” International Organization 33 (Autumn 1979), 119 -14 7 ; Robert O. Keohane and Joseph S. Nye, “International Interdependence and Integration,” in Fred Greenstein and Nelson Polsbv, eds., Handbook ofPolitical Science (Andover, Mass., 1975), 3 6 3 -414; Stanley Hoffmann, “Reflections on the Nation-State in Western Europe Today "Journal of Common Market Studies 21 (September-December 1982), 2 1-3 7. 21 James Caporaso and John T. S. Keeler, "The European Community and Regional Integration Theory,” in Carolyn Rhodes and Sonia Mazey, eds., The State of the European Union: Building European Unity? (Boulder, Colo., 1995), 43; Likke Friis, “Challenging a Theoretical Paradox: The Lacuna of Integration Theory,” CORE Working Paper 2 (Copenhagen, 1995), 2.

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ing in tegration, but they offered only a vague understanding o f precisely what those interests are, how conflicts am ong them are resolved, by what m eans they are translated into policy, and w hen they require political in tegration.22 T his in turn reflected the lack o f a gen eralizable m icrofoun dation al basis necessary to support p rediction s abou t variation in support fo r integration across issues, countries, and time. W ithout such m icrofoun dation s, the predictions o f neofunctionalism were indeterm in ate. Feedback, Haas co n ced ed in his later self-criticism, “ may trans­ form the system” b ut n eed n ot do so. A n entire taxonom y o f alternative o u t­ com es consistent with the underlying theory arose: “spillover,” “spillback,” “spill-arou nd,” “en cap su lation .” O n ce neofunctionalism drop p ed the optim istic n otion that in tegration was autom atically self-reinforcing and w ould evolve sm oothly to federal un ion w ithout triggering fundam ental distributive o r id eo ­ logical conflicts, it co u ld say “little abou t basic causes" o f national dem ands fo r in ­ tegration or interstate agreem ents to achieve it; so two leading neofunctionalists co n clu d e d .2* M ore concretely, n eofunctionalism lacked exp licit theories o f interest-group politics, interstate bargaining, and international institutions. With few o utcom es theoretically exclu d ed , a rule o f thum b em erged in the literature on the E uropean Com m unity: w hen integration stagnated, scholars criticized neofunctionalism ; w hen integration progressed, they rediscovered it.24 By the m id-19 70 s these three criticism s had inspired a d egree o f consensus co n cern in g the p ro p er theoretical direction forward. U n in ten ded consequences and feedback, the initial co re o f n eofunctionalism , should take a role secondary to the co n crete beliefs, preferen ces, and strategies o f political actors. As Haas said, “all political action is purposively linked with individual and gro u p p er­ ception o f in terest.” G reater attention should be focused on purposive behavior and strategic interaction: “the type o f dem ands that are m ade, the variety o f co n ­ cessions . . . exch an ged , and the d egree o f delegation o f authority to new central institutions.” 25 H offm ann, K eoh an e, and even, if to a lesser d egree, Haas him ­ se lf p rop osed studying the EC as an international regim e constructed throu gh a 22 This lies behind the criticisms o f Milward and Ludlow, mentioned above, that a “social history” o f integration is required. See note 14. The neofunctionalists did stress the role o f economic trans­ actions. Ernst B. Haas and Philippe C. Schmitter, “Economics and Differential Patterns o f Political Integration: Projections about Unity in Latin America,” International Organization 18 (Autumn 1964), 707, 7 0 9 - 7 to. 25 Leon N. Lindberg and Stuart A. Scheingold, Europe's Would-Be I’olity: Patterns of Change in the European Community (Englewood Cliffs, N. J., 1970), 284. Joseph S. Nye, Peace in Parts: Integration and Conflict in Ilegional Organization (Boston, 1971), 6 4 -75 ; Philippe Schmitter, “A Revised Theory o f Regional Integration," in Lindberg and Scheingold, Regional Integration, 232-264; Ernst B. Haas, “Technocracy, Pluralism and the New Europe," in Stephen R. Graubard, ed., A New Europe? (Boston, 1964), 62-88. Ncofunctionalism failed, Haas argued, to capture the real decisions facing govern­ ments, for example the choice— repeatedly critical in the evolution o f the EC— whether to engage in regional or global cooperation. 24 Characteristic is Jeppe Tranholm-Mikkelsen, “Neofunctionalism: Obstinate or Obsolete. A Reappraisal in the Light o f the New Dynamism o f the EC," Millennium go (Spring 1991); Wayne Sandholtz, High-Tech Europe: The Politics of International Cooperation (Berkeley, Calif., 1992); Paul Pierson, “The Path to European Union: An Historical Institutionalist Account,” Comparative Political Studies29 (April 1996), 123-164. 25 Haas, Beyond the Nation State, 3 4 -3 5, 81; Haas, “Turbulent,” 173.

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The Choicefor Europe series o f purposive decisions by governm ents with varying preferen ces and power. H offm an n p ro p o sed a synthetic app roach that exam in ed first “the dom estic priorities and fo reign policy goals o f the m em ber states, then . . . the im pact o f the en viro n m en t [and] finally the institutional interplay betw een the states and the C om m unity.” 26 K eohan e and H offm ann co n clu d ed that spillover and u n in te n d ed con sequences required a p rio r intergovernm ental bargain am ong m em ber-states, thereby refocusing o u r attention on the exo gen ou s determ i­ nants o f m ajor decisions.27 Yet m ost scholarship on E uropean integration over the past two decades has ign o red these self-criticisms. Few scholars test gen eral theories or em ploy a m ulticausal fram ew ork. N early all con tin ue instead eith er to structure research aroun d a single variable (e.g., supranational in flu en ce, dom estic politics, p u b ­ lic o p in io n ), often linked to an ideal-typical “gran d th eory” o f integration or IR, o r to invoke a theoretically unstructured am algam s o f causes.28 As a result, decades o f analysis o f the E C have m ultiplied con jectures abou t integration but gen era ted few reliable em pirical conclusions about the relative im portance o f forces that have m ade the EC w hat it is today. “C o n firm e d ” determ inants o f in tegration and “necessary” conditions fo r its success proliferate unchecked. Som e scholars g o further, d efen d in g this ten dency on the gro u n d that in tegra­ tion is the result o f an in determ in ate, p ath -d ep en den t process.29 T h e p ro p er m easure o f o u r un derstan din g o f integration is n ot the m ultipli­ cation o f intuitively plausible claims; it is the developm ent, evaluation, and ulti­ m ately rejection o f testable hypotheses. W here hypotheses are rarely discarded, they are rarely con firm ed. T h u s the basic thrust o f this b ook runs con trary to the cu rren t literature on E uropean integration. Rather than em ploy n eo fu n ction al­ ism and o th er grand theories as interpretive lenses, it seeks to m ove beyond them by em ployin g narrow er and co n crete hypotheses drawn from gen eral the­ ories o f econ o m ic interest, interstate bargaining, and international regim es to support rigorous testing. T h e n ext chap ter introduces the m ulticausal fram e­ w ork, gen era l theories, and co n crete hypotheses required fo r such tests. 26 Hoffmann, “Reflections,” 31, 33-34; Ernst B. Haas, Beyond the Nation State: Functionalism and International Organization (Stanford, 1964), 23, 30, 3 2-3 5, 77. Ultimately Haas moved in a different direction, seeking to reconceptualize “learning” through a process o f trial and error and the appli­ cation o f expert knowledge, though he conceded a greater role for learning if integration “enhances the original purposes o f the actors.” 27 Robert O. Keohane and Stanley Hoffmann. “Institutional Change in Europe in the 1980s," in Keohane and Hoffmann, New European Community, 1-39. 28 Caporaso and Keeler, "European,” 36 -4 2 . 29 It is unclear whether Sandholtz and Zysman mean consistently to adhere to their view that the outcomes o f integration are “unknowable, dependent 011 the timing and dynamics o f a long series o f contingent decisions," but it is fair to say that disconfirmation o f hypotheses is not a focus o f their inquiry. Sandhollz and Zysman, “Recasting,” 128. For a theoretically more sophisticated and in prin­ ciple testable formulations o f the path-dependent view, sec Pierson, “Path to European Union."

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Theorizing European Integration To succeed, always choose the path o f least resistance. — -Jean Monnet (1978)

T h e central argum ent o f this b o o k is that E uropean integration can best be exp lain ed as a series o f rational choices m ade by national leaders. T hese choices respon ded to constraints and op portunities stem m ing from the econ o m ic in ­ terests o f pow erful dom estic constituents, the relative power o f each state in the international system, and the role o f international institutions in bolstering the credibility o f interstate com m itm ents. I test this accoun t across the five most salient n egotiation s in the history o f the E uropean C om m unity (EC): the negotiadon o f the Treaty o f Rom e signed in 19 57, the consolidation o f the customs un ion and C om m on A gricultural Policy (CAP) during the 1960s, the establish­ m ent o f the E uropean M onetary System (EMS) in 1 9 7 8 - 7 9 , the negotiation o f the Sin gle E uropean A ct (SEA) in 1 9 8 5 -8 6 , and the M aastricht Treaty on E uropean U n ion signed in 19 9 1. In this o p en in g chapter, I present the theoretical foundations o f my proposed explan ation and its m ost plausible com petitors. A theoretical introduction o f this kind is necessary because these com p etin g explanations are n ot simply em ­ pirical ju d g m en ts about the specific case o f E uropean integration. Each rests on a gen eral theory com m only em ployed to explain international econ o m ic co o p ­ eration. T h e use o f such gen eral theories perm its us to form ulate m ore detailed and consistent explanations, to test them m ore rigorously and in ways that are rep licable, and finally to gen eralize the results to o th er situations. In the first section, I present a rationalist fram ew ork o f international co o p er­ ation on w hich rest all the theories and explanations evaluated in this book. T h e assum ption that states act rationally o r instrum en tally in pursuit o f relatively stable and w ell-ordered interests at any given p o in t in time im plies a division o f m ajor E C n egotiations into three stages: national p referen ce form ation, in ter­ state bargaining, and the ch o ice o f international institutions. T his rationalist fram ew ork is o n e response to the criticisms o f earlier theories o f European in­ tegration outlined in the introduction. In the follow ing three sections, I present alternative theories and hypotheses to exp lain each o f the three stages. To explain variation in national preferences, I evaluate theories based on geopolitical and econ o m ic interests. To explain the

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Theorizing European Integration efficiency and distributional o utcom es o f interstate bargaining, I evaluate theo­ ries that stress supranational en trep ren eu rsh ip and interstate bargaining power. To exp lain decisions to delegate powers to international institutions, I evaluate theories that stress federalist ideology, the greater efficiency o f centralizing the gen era tio n o f technocratic in form ation , and the n eed to increase the credibil­ ity o f national com m itm ents. In the gen era l language o f international political econ om y, exp lain ed m ore fully below, this b ook poses three theoretical ques­ tions. How m uch do security externalities and e n d o gen o u s com m ercial policy con tribute to an exp lan ation o f national preferen ces for international e co ­ n om ic policy coordination? H ow m uch do political entrep reneursh ip and asym­ m etrical in terd ep en d en ce con tribute to the efficiency and distributional o u t­ com es o f interstate bargaining? H ow m uch d o national identity, inform ational econ o m ies o f scale, and the desire fo r credible com m itm ents con tribute to state decisions to d elegate o r p ool sovereignty in international institutions? To evalu­ ate each potential answer, I derive a series o f con crete hypotheses from each theory; all are tested in the em pirical chapters that follow. I co n clu d e with a b rie f description and defen se o f the m eth odology em ployed here, w hich, fo r the first tim e in the study o f the EC, em ploys three techniques e ith er reco m m en d ed in re ce n t works on qualitative m ethods in social science or em ployed as standard practice am ong historians. T h ese are the form ulation o f co n crete and falsifiable hypotheses from com p etin g theories, the disaggrega­ tion o f case studies to m ultiply observations, and the reliance w henever possible on prim ary sources.

In t e r n a t io n a l C o o p e r a t i o n : A R a t i o n a l i s t F r a m e w o r k

T h e study o f E uropean integration has lo n g rem ained the preserve o f “gran d ” o r “classical” theories o f in tegration, w hich seek to explain the EC with refer­ e n ce cith e r to a single overarch ing factor o r to an ideal type constructed from an am algam o f loosely related variables. A s a result “E C studies” has evolved as a discipline with its own sui generis term inology, theories, and em pirical gen era l­ izations, d evelop in g over the past quarter-century in isolation from rem arkable d evelop m ents in the gen eral theory o f international and com parative political econom y. My co n ten tio n is that m ajor integration decisions— and m ultilat­ eral negotiation s over international coop eration m ore gen erally— are better e xp lain ed with m ore narrowly focused yet m ore broadly gen eralizable “m id­ ra n ge ” theories o f econ o m ic interest, bargaining, and institutional ch o ice drawn from the gen eral literature o n international cooperation. To structure an inquiry based on such theories, I em ploy a “rationalist fram e­ w ork” o f international coop eration . T h e term framework (as op posed to theory or model) is em ployed h ere to designate a set o f assum ptions that perm it us to dis­ a ggregate a p h en o m en o n we seek to e xp lain — in this case, successive rounds o f in tern ation al n egotiation s— into elem ents each o f w hich can be treated sepa­ rately. M ore focused theories— each o f course consistent with the assum ptions

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o f the overall rationalist fram ew ork— are em ployed to explain each elem ent. T h e elem ents are then aggregated to create a m ulticausal explanation o f a large co m p lex outcom e such as a m ajor m ultilateral agreem en t.1 By positing in advance a particular relationship am ong aspects o f a n egotia­ tio n — that is, by disaggregating the process we seek to explain within an explicit analytical fram ew ork— and applying differen t theories to each aspect, we can distinguish m ore rigorously betw een those theories that are substitutes (those that com p ete to explain the sam e stage o f the negotiation) and those that are com p lem ents (those that exp lain d ifferen t stages o f the n egotiation ). T his dis­ tinction perm its the analyst to m ove beyon d simplistic, unicausal claims about the sources o f in tern ation al coop eration w ithout sacrificing rigor entirely and slipping in to an unstructured (and often untestable) am algam o r ideal type o f many plausible factors— the fate that befell, we saw in the introduction, n eo ­ functionalist theories o f integration. T h e rationalist structure p roposed here constrains the analysis and dictates the relationship betw een different factors throu ghou t. By exp lain in g less at each stage, we seek to explain m ore overall. T h e rationalist fram ew ork proposes that international negotiation be disag­ gregated into a causal sequ en ce o f three stages: national p referen ce form ation, interstate bargaining, and institutional choice. Each stage is exp lain ed by a dif­ feren t theory. First, governm ents form ulate a consistent set o f national p refer­ ences regard in g potential “states o f the w orld” that co u ld em erge from the n e­ gotiations. By preferences, I designate n ot simply a particular set o f policy goals but a set o f un derlying national objectives in d ep en d en t o f any particular interna­ tional n egotiation to exp an d exports, to en h an ce security vis-à-vis a particular threat, o r to realize som e ideational goal. In the secon d stage, states then d e ­ velop strategies and bargain with o n e another to reach substantive agreem ents that realize those national preferen ces m ore efficiently than d o unilateral ac­ tions. Finally, they choose w hether to delegate and p o ol sovereignty in in tern a­ tional institutions that secure the substantive agreem ents they have m ade. Each stage requires distinctive theoretical tools. T his rationalist fram ew ork avoids a tem ptation that bedevils scholarship on in tern ation al relations, nam ely to assume that state p referen ces are fix e d — w hether con flictual, con vergen t, o r arrayed so as to create a particular collective action problem . W hile useful for the lim ited purpose o f elaborating particular theories o f strategic interaction, the a priori assum ption that p referen ces arcfixed is less satisfactory as a postulate fo r exp lain in g particularly interesting and varied cases o f state behavior. T h e failure to take variation in state preferences seriously has introduced bias into and un derm in ed the viability o f many recent research program s, studies o f d eterren ce, hegem on ic in flu en ce, alliance fo r­ m ation, international negotiation , econ o m ic sanctions, and m onetary co o p era ­ tion as well as E uropean integration. Many scholars are now m oving toward what R obert K eohan e has term ed a “fallback” position o f systemic theory, whereby exo gen ou s variation in preferen ces defines a range o f outcom es within which

1 Andrew Moravcsik, “Disciplining Trade Finance: The OECD Export Credit Arrangement,” International Organization 43:1 (Winter 1989), 173-205.

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Theorizing European Integration trad ition al facto rs such as relative capabilities a n d institutions e xp lain p articu ­ lar results.2 N o assum ption o f co n flictu a l o r co n v e rg e n t p re fe re n ces w o u ld ca p ­ ture the subtly varied p re fe re n ce s o f go vern m en ts c o n c e rn in g trade, a g ricu l­ tu re, m oney, an d o th e r issue-areas co n sid e re d in this b o o k . In particular, this trip artite fram ew o rk avoids th e ten d e n cy to p rivilege exp lan a tio n s that treat p re fe re n ce s as fixe d , o ften m isleadin gly term ed “system ic” exp lan atio n s, an d to em p lo y th e o ries o f state p re fe re n ce s on ly to exp lain anom alies. T h e sp ecific tripartite seq u en ce p ro p o se d h e r e — n ational p re fe re n ce fo r­ m ation , in terstate ba rga in in g , in stitutional c h o ic e — is the o n ly o rd e rin g con sis­ ten t w ith the rationalist assum ptions that u n d e rlie m ost m ajor in tern atio n al relatio n s th eo ries.3 It is a fo u n d a tio n a l p rem ise o f co n ven tio n a l th eories o f p o w er o r b a rg a in in g that in flu e n ce ca n n o t be analyzed w ith ou t first kn ow ­ in g w hat u n d e rly in g o b jectives actors seek to realize. Variation in p re fe re n ces d eterm in es the stakes o f strategic in teractio n on the basis o f w h ich any strate­ gic ca lcu la tio n o f m eans m ust p ro ce ed . In the case o f m o n etary in tegratio n , for e xa m p le, we ca n n o t assess o r p re d ict the cred ibility and im p act o f G erm an threats to veto EM U un less w e know how stron g a p re fe re n ce G erm an y (and o th e r go vern m en ts) have fo r e xch an ge -ra te stability an d w hat sort o f stability they favo r.4 M oving to the n ex t stage, the ch o ic e o f in tern atio n al institutions is th e o re ti­ cally u n in te llig ib le w ithin a rationalist fram ew o rk unless we first un d erstan d the sp ecific set o f substantive bargain s that go vern m en ts seek th ereby to secure. T h is is the cen tra l in sight o f m o d e rn regim e theory: the d ecisio n to d e lega te or p o o l sovereign ty in in tern atio n al regim es is analytically separate fro m (and sub­ o rd in a te to) b a rg a in in g o ver substantive co o p e ra tio n .5 G o vern m en ts d e b ate in ­

2 For examples, see Andrew Moravcsik, “Taking Preferences Seriously: A Liberal Theory o f International Politics,” International Organization 5 1 :4 (Autumn 1997), 5 3 8 -5 4 1; Robert O. Keohane, “T heory o f World Politics: Structural Realism and Beyond,” in Keohane, ed., Neo-Realism and lit Critics (New York, 1986), 183. s I leave aside the manifest bias o f assuming that any phenomenon explained by a “systemic” the­ ory cannot be explained by a corresponding theory based on varying state preferences. 4 In other words, preferences arc by definition independent o f strategic calculations, but in many cases, strategies cannot be predicted without extensive knowledge o f preferences. Variation in pref­ erences must therefore be explained (or at least controlled for) before testing other theories. To paraphrase Robert Dahl, one cannot know whether “A influenced B" (power) unless they know “what B would otherwise have done" (preferences). Stephen Krasner’s well-known metaphor captures this insight in terms o f international relations theory: if regime theory helps explain whether govern­ ments reach the Pareto-frontier and Realist theories help determ ine which point on the Pareto-fron­ tier governments select, liberal theories o f preferences define the shape o f the Pareto-frontier itself. Surely the last task is primary. Accordingly, in previous work I have labeled the approach to European integration employed here “Liberal Intergovernmentalist,” to distinguish it from regime theoretical or Realist accounts that take preferences as fixed. Moravcsik, “Taking,” 5 13 -5 5 3 . Also Robert O. Keohane, After Hegemony: Cooperation and Discord in the World Political Economy (Princeton, N.J., 1984), 6; Stephen D. Krasner, “Global Communications and National Power: Life on the Pareto Frontier,” World Politics 4 3 :3 (April 199 1), 3 36 -36 6 ; Lisa Martin, “Interests, Power, and Multilateralism,” International Organization 46 :4 (1992), 7 6 5 -7 9 2 ; Robert A. Dahl, “T h e Concept o f Power," in Roderick Bell, David V. Edwards, and R. Harrison Wagner, eds., Political Power: A Reader in Theory and Research (New York, 1969), 7 9 -9 3 . 5 Robert O. Keohane, “T h e Demand for International Regimes," and Stephen D. Krasner, “Structural Causes and Regime Consequences: Regimes as Intervening Variables,” both in Krasner, ed., International Regimes (Ithaca, 1983), 3 2 5 -3 5 5 , 1-2 3 .

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stitutions o n ly o n c e th ey strike a substantive b argain , w hich tells us the n ature o f the co llectiv e actio n p ro b lem that in tern atio n al co o p era tio n m igh t be m ean t to solve. It w o u ld be q u ixo tic, to retu rn to the m o n etary e xa m p le, to analyze the M aastricht n e g o tia d o n s o ver the a u to n o m y o f the E u ro p ean C en tral B ank w ith ­ o u t p rio r u n d erstan d in g o f the substantive bargain that go vern m en ts in ten d such a b a n k to secure. W h ile im p licit in m ost lea d in g theories o f in tern atio n al relation s and co m ­ p arative fo re ig n policy, this tripartite fram ew o rk is n o t th eoretically n eutral. It e m b o d ies im p o rtan t assum ptions that con strain possible exp lan atio n s. T h e fram ew o rk assum es, above all, that the p rim ary p olitical in stru m en t by w h ich in ­ dividuals an d gro u p s in civil society seek to in flu en ce in tern atio n al n egotiatio n s is the nation-state, w h ich acts extern ally as a un itary and rational acto r on b e ­ h a lf o f its con stituents. E C history p rovid es m u ch d irect evid en ce, I shall argu e, that the assum ption s o f un itary an d rational state action con stitute a useful first a p p ro x im a tio n to the way in w h ich govern m en ts have n eg o tia te d o ver the past fo u r d ecad es. T h e se assum ption s m erit b r ie f elabo ratio n . T h e assu m ption that states are unitary m aintains that each acts in in te rn a ­ tional n eg o tia tio n s “as i f ” w ith a single voice; we can analyze E C govern m en ts as p u rsu in g c o h e re n t n ational strategies. I d o slightly relax the u n itary-actor as­ su m p tio n in a few cases (at tim es n ational execu tives e x p lo it in tern atio n al n e ­ go tia tio n s to in crease their d om estic in flu en ce) b u t such instances are seco n d ary to the c o re fin d in gs o f this bo o k . G o vern m en ts can gen era lly be th o u g h t o f as p u rsu in g stable interests w ithin a given ep iso d e o f n egotiation s. T h is is a d ecep tively sim ple assum ption , a b o u t w hich two p o ten tial m isu n d er­ stan din gs d eserve m en tio n . First, I d o n o t assum e states are un itary in th eir in ­ ternal politics. N ation al p re fe re n c e s — th e u n d e rly in g “states o f the w o rld ” that states seek to realize th ro u g h w orld p o litics— are sh aped th ro u gh co n te n tio n a m o n g d o m estic p olitical gro u p s. T h e u n itary-actor assum ption m aintains only that o n c e p articu lar objectives arise o u t o f this d om estic co m p etitio n , states strategize as un itary actors vis-à-vis o th e r states in an e ffo rt to realize them . S e co n d , g o v ern m en ts n e e d n o t necessarily e m p lo y a single rep resen tative or m ech an ism s o f strict h ie ra rch ical co n tro l in in tern atio n al n egotiation s, th o u gh in m a jor E C n eg o tia tio n s this is in fact alm ost always the case. I assum e o n ly that po litical in stitutions p erm it go vern m en ts, even if d isaggregated , to act “as i f ” they w ere unitary.6 For e xa m p le, even i f a c h ie f exe cu tive and a cen tral bank

6 Some have sought or seek to “test” unitary, rational actor assumptions or “domestic policy” ex­ planations by examining whether domestic divisions exist. Yet formal m odeler Christopher Achen persuasively demonstrates that this tactic misrepresents the analytical assumption o f unitary rational behavior, which is quite consistent with the observation of domestic divisions. Some constellations o f domestic cleavages and institutions generate stable, ordered preferences; others do not. Among those that are consistent with rationalist premises is one, employed here, in which die “national in­ terest" reflects the “power-weighted preferences” o f influential domestic actors. O ne implication o f this model, Achen argues, is that many situations in which decisions are attributed to irrationality should be instead attributed to the rational pursuit o f varying national preferences. Christopher Achen, “How Can We Tell a Unitary Rational Actor when We See O ne?” paper presented at the Midwest Political Science Association Convention, April 1995.

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Theorizing European Integration have radically differen t views ab ou t p ro p er international m onetary policy, are rep resen ted separately in international forum s, and pursue contradictory goals, the unitary actor assum ption may still h o ld — i f divisions d o n ot significantly al­ ter their respective in flu en ce o n the national n egotiatin g position. We shall see, fo r exam p le, that Germ any, w here ju st such contradictory behavior has been the n orm fo r decades, has p ursued a rem arkably stable net national position in E uropean m on etary discussions. T h e assum ption that unitary states are rational m aintains that governm ents m ake internal decisions “as i f ” they w ere efficiently pursuing a w eighted, stable set o f un derlying p referen ces given a constrained ch o ice o f means. A gain, this assum ption should n ot be taken too far. It is a weak rationality assum ption. State p referen ces n ee d n ot necessarily be un iform across issues, countries, o r long period s o f time. T h ey vary in response to exo gen ou s changes in the econ om ic, ideological, and geopolitical environm en t within w hich European integration takes place; the most fun dam en tal task o f this b ook is to explain how and why. N or n eed p referen ces be gro u n d ed in m aterial incentives. Som e national p ref­ erences, we shall see, are gro u n d ed in ideas. Rather, the rationality assumption m aintains only that within each n egotiation , dom estic political systems gen erate a set o f stable, w eigh ted objectives co n cern in g particular “states o f the w orld,” w hich governm en ts pursue with the m axim um efficiency afford ed by available political m eans. T h e rationality assum ption takes no position on w hether states are fully in form ed, th ough a fram ew ork in w hich states are assumed to be in ­ fo rm ed gen erally perform s well. T h e resulting tripartite fram ew ork o f national preferen ce form ation, in­ terstate bargaining, and institutional ch o ice structures each o f the em pirical case studies in this book. It perm its us to disaggregate the broad puzzle o f w hat causes each m ajor decision into theoretically m ore tractable questions. A ccordingly, each chap ter poses three fundam ental questions: W hat were the fu n d am en tal determ inants o f national preferences? G iven those preferences, w hat factors best explain agreem en ts on substance? Given agreem ents on sub­ stance, w hat factors best exp lain choices to construct particular international institutions? T h e m arginal con tribution o f each stage in the causal sequence (within constraints im posed by previous stages) is exp lain ed by a distinct theory o r theories. T h is fram ew ork, the o n e most consistent with the assum ption o f ra­ tional and unitary state action and, therefore, with nearly all m ajor theories o f in tern ation al political econom y, is sum m arized in table 1. W h eth er w e turn to the testim ony o f participants, con tem p orary com m entary, retrospective histories, o r analyses by social scientists, the plausible answers to each o f the three central questions fall into a consistent and lim ited num ber o f categories. T h e central task o f this b o o k is to w eigh the relative im portan ce o f these co m p etin g answers. Specifically, in exp lain in g national preferen ces we as­ sess the relative im portan ce o f geopolitical interests and econ o m ic interests. In e xp lain in g interstate bargain ing we assess the relative im portance o f interstate bargain in g pow er and the in terven tion o f supranational entrepreneurs. In e x ­ p lain in g choices to delegate sovereignty to international institutions we assess

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T h e C h o ic e f o r E u ro p e Table 1.1. International cooperation: A rationalist framework

Stages o f Negotiation Alternative independent variables underlying each stage

Observed outcomes at each stage

National Preference Formation

Interstate Bargaining

Institutional Choice

What is the source o f underlying national preferences?

Given national preferences, what explains the efficiency and distributional outcomes o f interstate bargaining?

Given substantive agreement, what explains the transfer o f sovereignty to international institutions?

Economic interests or Geopolitical interests?

Asymmetrical interdependence or Supranational entrepreneurship?

Federalist ideology or Centralized technocratic management or More credible commitment?

Underlying national preferences

Agreements on substance

Choice to delegate or pool decision-making in international institutions

the relative im p o rtan ce o f fed eralist ideology, tech n o cratic in fo rm atio n m a n ­ a gem en t, an d the desire fo r cre d ib le com m itm ents. In the rem a in d er o f this ch a p ter, these co m p etin g th eo ries are elabo rated ; we b egin with those that seek to exp lain n atio n a l p referen ces.

E x p l a in in g N a t io n a l P r e fe r e n c e s

T h e first stage in e x p la in in g the o u tco m e o f an in tern atio n al n egotiatio n is to a cco u n t fo r n atio n al p re fe re n ces. National preferences are d e fin e d h ere as an o r ­ d e re d an d w eigh ted set o f values p lace d o n fu tu re substantive o u tco m es, o ften term ed “states o f the w o rld ,” that m igh t result fro m in tern atio n al p o litical in ­ teraction . P refe re n ce s re fle ct the objectives o f those d om estic gro u p s w hich in flu e n ce th e state apparatus; they are assum ed to be stable w ithin each position a d va n ced o n each issue by each co u n try in each n eg o tia tio n , but n o t n ecessar­ ily across n eg otia tio n s, issues, o r coun tries. T h e term distinguishes such u n d e r­ lying g o a ls — the “tastes” o f each state, as it w e re — fro m n ational “strategies,” “tactics,” an d “p o licie s,” that is, fro m the p articu lar transient ba rga in in g p osi­ tions, n eg o tia tin g d em an d s, o r p o licy go als that con stitute the everyday cu rren cy o f fo re ig n policy. P referen ces, u n like strategies and policies, are e x o g e n o u s to a sp ecific in tern a tio n al p o litical en viro n m en t. T h u s, fo r e xa m p le, the phrase

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Theorizing European Integration “C o u n try A c h a n g e d its p re fe re n c e s ” in respon se to an action by C o u n try B m is­ uses the term as it is d e fin e d h ere, im p lyin g less than con sisten tly rational b e ­ havior.7 O f p articu lar analytical im p o rtan ce fo r u n d erstan d in g in tern ation al n eg o tia ­ tions is the e x te n t to w h ich state p re fe re n ces are co m p atib le o r co n flictu a l— the b a la n ce o f co m m o n gain s an d distribution al trade-offs a m o n g coun tries. R ecen t sch o la rsh ip has ten d e d to fo rm u la te this q u estio n thus: A re state p re fe re n ces positive-sum o r zero-sum ? D o states seek absolute an d relative gains, efficiency, and d istrib u tio n ?8 T h e literatu re on E u ro p e an in tegratio n , in p articular, c o n ­ tains n u m e ro u s discussions o f c o m p e tin g “e fficie n cy ” a n d “d istrib u tio n al” e x p la ­ n atio n s o f m o n etary co o p e ra tio n .9 Yet such fo rm u la tio n s are w idely view ed as in ad eq u ate. Particularly im p ortan t fo r o u r p u rp o ses h ere, such d ich o to m ie s ca n n o t serve as a fo u n d atio n fo r even ele m e n ta ry a p p lica tio n s o f b a rga in in g theory. T o exp lain b a rgain in g o utcom es, w e m ust know the lo catio n an d shape o f the P areto-fron tier, that is, the b o u n d ­ ary o f th e set o f a greem en ts that im p rove w elfare fo r all govern m en ts and w ou ld th e re fo re secu re th eir vo lu n ta ry agreem en t. A cco rd in gly, m ost fun dam en tal p ro p o sitio n s o f b a rga in in g th eo ry assum e that absolute an d relative gain s d o n ot ju s t coexist; they interact. T h e relative size o f the absolute gain s available to each p arty (its reservation p rice, w in-set, o r best altern ative to agreem en t) is the m ost basic an d p arsim on io u s d e te rm in a n t o f b a rgain in g power. A ccordin gly, I assum e that th e p o litical p re fe re n ces o f states g e n era lly co n tain both positive-sum and relative-gain s co m p o n e n ts, w h ich in turn d efin e a b a rgain in g gam e a m o n g gov­ e rn m e n ts — the em p irical histories leave little d o u b t that such was p erceived to b e the case in m ajor E C n egotiatio n s. A n y e xp lan a tio n o f the p re fe re n ces o f E u ro p e an go vern m en ts sh o u ld th e re fo re exp lain n o t w h eth e r p re fe re n ces are positive- o r zero-sum b u t ra th er the mix o f positive- and zero-sum elem en ts in those p re fe re n c e s .10 7 A clear separation between preferences and strategies permits us to distinguish cleanly situations in which a state chooses outcom e X over outcome Y because it prefers X from situations in which strategic circumstances compel or induce it to contribute to the realization o f X, even though it prefers Y. This gets to the heart o f many current controversies: For example, did France accept an au­ tonomous European central bank at Maastricht becausc it had come to have a preference for m one­ tary discipline or because this was the strategic policy concession imposed by Germany for the achievem ent o f other French goals? 8 Joseph M. Grieco, “Anarchy and the Limits o f Cooperation: A Realist Critique o f the Newest Liberal Institutionalism,” International Organization 4 2 :3 (Summer 1988), 485-508; James D. Morrow, “M odeling International Regimes: Distribution versus Information," International Organiza­ tion 48:3 (Summer 1994), 38 7-4 23 . 9 E.g., Joseph M. Grieco, “State Interests and Institutional Rule Trajectories: A Neorealist Inter­ pretation o f the Maastricht Treaty and European Economic and Monetary Union,” Security Studies 5 :2 (Spring 1996), 261-306. 10 Fritz Scharpf, Games Real Actors Play: Actor- Centered Institutionalism in Policy Research (Boulder, Colo., 1997), chap. 6; Howard Raiffa, The Art and Science of Negotiation: How to Resolve Conflicts and Gel the Best Out of Bargaining (Cambridge, Mass., 1982), chaps. 1 and 2; Krasner, “Global”; James K Sebenius, “Challenging Conventional Explanations o f International Cooperation: Negotiation Analysis and the Case o f Epistemic Communities,” International Organization 4 6 :1 (Winter 1992), 323 -36 5; Robert D. Putnam, “Diplomacy and Domestic Politics," International Organization 42:3 (Summer 1988), 4 2 7 -4 6 1 ; Moravcsik, "Taking,” 5 38 -539 ; Robert Powell, “Absolute and Relative Gains in International Relations Theory," American Political Science Review 85:4 (December 1991),

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T h e r e is b ro a d a g r e e m e n t a m o n g p articip a n ts, c o m m e n ta to rs, a n d sch o lars th a t tw o b ro a d c a te g o r ie s o f m o tiv a tio n m ig h t a c c o u n t fo r u n d e rly in g n a tio n a l p r e fe r e n c e s fo r a n d a g a in st E u r o p e a n in te g ra tio n o v e r th e p ast fo u r d e c a d e s — a n d , th e re fo r e , fo r th e sh a p e o f th e P a re to -fro n tie r. T h e s e a re g e o p o litic a l a n d e c o n o m ic in terests. G e o p o litic a l in te re sts r e fle c t p e r c e iv e d th reats to n a tio n a l s o v e re ig n ty o r territo ria l in tegrity, w h e th e r m ilita ry o r id e o lo g ic a l; e c o n o m ic in ­ terests r e fle c t th e im p era tiv es in d u c e d b y in te r d e p e n d e n c e a n d , in p articu lar, th e la rg e e x o g e n o u s in cre a se in o p p o r tu n itie s fo r p ro fita b le cro s s -b o rd e r trade a n d ca p ita l m o v e m e n ts in th e p o stw ar p e r io d . E ach serves as th e basis fo r p la u ­ sib le, in te rn a lly co n sisten t, a n d w id ely a c c e p te d a rg u m e n ts a b o u t th e so u rc es o f E u r o p e a n in te g r a tio n . W e ca n th e re fo r e restate th e ce n tra l a n a lytica l q u e stio n a b o u t n a tio n a l p r e fe r e n c e s in m a jo r E C n e g o tia tio n s as follow s: W h at is th e p r e ­ cise n a tu re a n d re la tiv e w e ig h t o f g e o p o litic a l a n d e c o n o m ic m o tiva tio n s in th e fo rm a tio n o f n a tio n a l p r e fe r e n c e s c o n c e r n in g E u r o p e a n in te g r a tio n ? 11 T h e s e c o m p e tin g e x p la n a tio n s fo r n a tio n a l p r e fe re n c e s a re n o t sim p ly d iffe r­ e n t e m p ir ic a l assessm en ts o f m o tiva tio n s fo r E u r o p e a n in te g ra tio n ; th e y rest o n d istin ctiv e g e n e r a l th e o rie s w id ely e m p lo y e d to e x p la in in te rn a tio n a l c o o p e r a ­ tio n . A t th e m o st fu n d a m e n ta l lev el th e y d iffe r in th e ir view s o f th e re la tio n sh ip a m o n g v a rio u s n a tio n a l p re fe re n c e s . A g e o p o litic a l e x p la n a tio n o f in te rn a tio n a l e c o n o m ic c o o p e r a tio n assu m es th a t secu rity issues sit a to p a h ie ra rch y o f fo re ig n p o lic y c o n c e rn s ; h e n c e th e in d ire c t secu rity im p lica tio n s ( “secu rity e x te r n a li­ tie s ”) o f e c o n o m ic c o o p e ra tio n d o m in a te th e d ire c t e c o n o m ic im p licatio n s. By co n trast, an e c o n o m ic e x p la n a tio n assu m es th at n a tio n a l p r e fe re n c e s re fle c t is su e-sp ec ific in terests. T h e costs a n d b e n e fits to p o w e rfu l d o m e stic e c o n o m ic g r o u p s d o m in a te lin k a g e s to o t h e r c o n c e r n s , w h erea s g e o p o litic a l in terests d rive p u re ly p o litico -m ilita ry p o lic ie s. S im ila r issues a re a t th e c o r e o f s c h o la r­ sh ip s e e k in g to e x p la in p h e n o m e n a as d isp arate as B ritish im p erialism , th e c r e ­ a tio n o f th e B re tto n W o o d s e c o n o m ic re g im e a fte r W o rld W ar II, a n d th e level o f c o m m itm e n t to in te rn a tio n a l h u m a n rig h ts re g im e s .12

7 0 1 -7 2 6 ; D uncan Snidal, “Relative Gains and the Pattern o f International Cooperation,” American Political Science Review 8 5:3 (Septem ber 1 9 9 0 ,7 0 1 - 7 2 6 . 11 T h e distinction may strike som e as artificial. True, the two types of preferences are often com ­ bin ed and the goal o f this book is thus to determ ine the relative im portance o f the two factors across an im portant set o f cases, not to isolate a sole m otivation for econom ic cooperation. Som e may in­ sist that the two cannot be separated because econom ic growth is often sought primarily because it enhances national power and prestige. T h is may be true, but it is extrem ely difficult to think o f o b ­ servable im plications that would perm it us to distinguish cleanly w hether a statesman (say General d c G aulle) seeks to prom ote international econom ic interests for “econ om ic” or for “geopolitical” reasons. In this boo k I am therefore con cern ed to distinguish between imminent econom ic and g e o ­ political motivations: Did governm ents prom ote econom ic objectives (for whatever reason) or did they divert, im pede, or suppress the pursuit o f such interests in the direction justified by im mediate geopolitical interests o r ideas? T h e evidence suggests that this is the distinction that was in the minds o f the participants; it is certainly the distinction that has captured the im agination o f subsequent com m entators, and the question that lies at the heart o f cu rrent debates in international relations theory. 12 For cautions con cern in g potential pitfalls in assuming that pluralist incentives and pressures are translated into outcom es, see A chen, “H ow”; James E. Alt, Jeffry Frieden, M ichael J. Gilligan, Dani Rodrik, and Ronald Rogowski, “T h e Political Econom y o f International Trade: Enduring Puzzles and an A gen da fo r Inquiry,” Comparative Political Studies 2 9 :6 (D ecem ber 1996), 6 8 9 -7 1 8 ; Peter J. Katzenstein, “Conclusion: Dom estic Structures and Strategies o f Foreign E conom ic Policy,” in

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Theorizing European Integration C o m p etin g hypotheses are derived co n cern in g five observable im plications o f each theory. T h re e co n cern the pattern o f state behavior: variation in state p referen ces across coun tries an d issues, the tim ing o f policy shifts, and the c o n ­ sistency o f E C policy and n egotiatin g dem ands with b ro ad er foreign m ilitary and econ o m ic policies. Two co n cern the process o f decision-m aking: the id en ­ tity o f the main dom estic actors and cleavages, and the salient considerations m entioned in con fiden tial policy debates. T h e hypotheses discussed at the close o f the section presenting each theory are sum m arized in table 1.2.

Geopolitical Interest and Ideology: Security Externalities Most interpretations o f national preferen ces for and against European inte­ gration em phasize geopolitical interest o r ideology. Analyses o f the 1950s stress British Prim e M inister H arold M acm illan’s visceral antifederalism and his co n ­ cern to m aintain the A nglo-A m erican “special relation ship,” the desire o f G er­ m an C h a n cello r K onrad A d en au er to integrate G erm any into the West, and the geopolitical lessons drawn by French President G uy M ollet from Suez. Similarly, the 1960s are traditionally portrayed as a clash betw een two gran d ideological alternatives sym bolized by C h arles d e G aulle and Jean M onnet, o n e stressing a geopolitical strategy' g ro u n d ed in nationalism , the o th er a view akin to collective security. E uropean co o p eratio n in the 1970s is generally seen as a by-product o f W illy B ran dt’s Ostpolitik, G eorges P om p id o u ’s desire to restrain Germ any, and later in the decade, H elm ut Schm idt and Valéry G iscard d ’Estaing’s suspicion o f Jim m y C a rter’s foreign policy. T h e Single European Act o f 1986 and the M aastricht Treaty on E uropean U nion five years later are often seen as trium phs o f the personal federalist com m itm ents o f H elm ut K ohl and François M itterrand over the idiosyncratic ideolo gical opposition o f M argaret T hatcher. O th ers point to M aastricht as the result o f a co n cern to lock a newly reun ified G erm any into Europe. T h e essence o f geopolitical explan ation s for national p referen ces con cern in g e con o m ic coop eration lies in the linkage betw een econ o m ic policies and u n ­ derlying politico-m ilitary goals. T h e focus is on in direct con sequences o f e co ­ n om ic in tegration, term ed by Joan ne Gowa “security externalities.” 13 Econom ic in tegration is n ot an en d in itself but a m eans to m anipulate “high politics.” T h e goals o f high politics may be objective, such as defen se against an overt military threat to territorial integrity and political sovereignty, or subjective, as w hen a threat to territory or sovereignty is p erceived as an affront to national identity. W hatever the security externalities, the co re o f the argum ent rem ains the same: governm ents are m ore likely to co o p erate econ om ically with those states with w hich they are “allied ” in pursuit o f a particular geopolitical goal. T h is theory

Katzenstein, ed., Between Power and Plenty: Foreign Economic Policies of Advanced Industrial States (Madison, Wise., 1978), 295-336. 13 Joanne Gowa, Allies, Adversaries and International Trade (Princeton, N.J., 1994); Joseph M. Grieco, Cooperation among Nations: Europe, America and Non- TariffBarriers to Trade (Ithaca, N.Y., 1990). Gowa stresses such dynamics in bipolar systems but similar arguments have been advanced about multipolar Europe 27

Table 1.2. National preference formation: Theories and hypotheses

Dimensions Variation across issues and countries

Geopolitical Ideas and Interests (“ Security Externalities” )

Positions vary by coun try as a fun ction o f id eolo gical co m m itm en t to federalism o r perceived p olitico-m ilitary th r e a t Foreign policy a n d defen se coop eration arc particularly im p ortan t issues. G en erally G erm an y m ost favorable to integration, France less so, Britain least so

Economic Interest (“Endogenous Policy Theory” ) E n d o gen o u s policy theories predict that positions vary by both country and issue. In trade and agriculture, positions vary by p ro d u cer concerns, with m ore region ally com petitive p ro ducers favoring liberalization. In regulatory harm onization, positions vary' by com petitiveness and also w ealth, with rich er coun tries favoring h igh standards. In m on etary policy, positions vary by country, with countries favoring co o p eratio n w hen consistent w ith dom estic inflation rates. In fo reign and defen se policy, predictions are the same as those o f the geopolitical explanation.

Timing of shifts in preferences

Shifts in p referen ces and policies follow the onset and p re ccd c the resolution o f m ajor ge o p o litica l events that reveal new in form ation . G en erally we exp ect o ver tim e that co n cern ab ou t the U SSR o r co lo n ies declines; co n cern abou t G erm an y rem ains constant; co n cern a b o u t federalism may d eep en .

Shifts in p referen ces and policies follow the onset and p reced e the resolution o f m ajor eco n o m ic problem s. P referen ces fo r in tegration slowly intensify over tim e with rising trade flows, capital mobility, and policy con vergen ce.

Policy consistency and negotiating demands

E C p olicy is consistent with co n cu rren t geo p o litical p olicies in o th er forum s. M ajor bargain in g dem an ds are geop olid cal, w hereas m ajor concessions m ay b e econ o m ic.

E C policy is consistent w ith co n cu rren t fo reign eco n o m ic policy. M ajor bargain ing dem ands are econ o m ic, w hereas m ajor concessions may be geopolitical.

Domestic cleavages

K ey actors are fo reign and defense m inistries, perhaps elite o p in io n , ruling parties, and c h ie f executives. M ajor cleavages reflect d ivergen t threat assessm ents o r fun dam en tal ideolo gical beliefs (e.g., nationalist vs. in tern atio n ­ alist, Com m unists vs. centrists).

K ey actors are sectoral and factoral interest groups and econ o m ic officials, p erhaps elite o p in io n , ru lin g parties, and c h ie f executives. M ajor cleavages reflect con cerns ab ou t com petitive­ ness. G roup s interested in regulation m ay b ecom e involved, particularly w hen w ell-organized o r represented.

Content o f domestic deliberations

A clear issue hierarch y leads officials to a cco rd p riority to efficient achievem en t o f geo p o litical goals. E fficient adaptation to security situation is seen as “necessary.”

L ack o f a clear hierarch y leads officials to accord priority to achievem en t o f econ o m ic goals in econ om ic issue-areas and geo p o litical interests and ideas in fo reign , defen se, and som etim es institutional issue-areas. A daptation to econ o m ic situation is seen as “necessary.”

Theorizing European Integration seem s plausible because the in tern ation al system is believed to be an anarchic and p otentially dangerous place; h en ce threats to security an d sovereignty re ­ m ain at the top o f a hierarchy o f state m otives, even w hen n egotiatin g the price o f w heat o r the size o f truck taillights. Studies o f trade liberalization and m on e­ tary un ions have co n clu d ed that geopolitical factors— a com m on security threat, shared interest in diffusing con flict, a “sense o f solidarity”— are often decisive.14 T h e central p rediction o f this app roach is that w hen econ o m ic integration is p erceived to gen erate positive geopolitical externalities, governm ents tend to favor in tegration, w hereas w hen integration is p erceived to gen erate negative geopolitical externalities, they are m ore likely to oppose it. W ithin this broad ap p roach, there rem ains considerable disagreem ent on the precise theoretical relationship betw een security threats and econ o m ic cooperation. Plausible g e o ­ p olitical explanations o f European integration fall into fo u r theoretical cate­ gories. Each stresses the n eed to respond to a perceived geopolitical threat by m anipulating the security externalities o f econ o m ic integration, but the precise nature o f the threat and response vary. Such explanations em phasize, respec­ tively, responses to the Soviet threat, percep tions o f global prestige and position, collective security vis-à-vis Germ any, or E uropean federalist ideology. T h e first explan ation , essentially neo-Realist, stresses the balance of power. In this view, integration is a m eans o f strengthening coop eration am ong alliance partners against a com m on threat; in C o ld War E urope, the p reem in en t threat stem m ed from the Soviet U n ion and dom estic Com m unist parties allied with it. Scholars have argued that w here there is clear bilateral con flict, governm ents are m ore likely to consider geopolitical externalities; integration should co rre­ late with the intensity o f bilateral con flict. T h e simplest argu m en t consistent with this view is that each governm en t, particularly those o f front-line states, em ­ p loyed econ o m ic coop eration to assure the assistance o f allies in a crisis and to p reven t any unilateral com prom ise with the adversary. West G erm any was w or­ ried about abandonm ent; o th er E uropean governm ents were co n cern ed about the possibility that G erm any w ould turn unilateralist or neutralist. A subtler vari­ ant, n otin g that alliances involve the exch an ge o f policy concessions fo r support against threats, begins from the observation that all postwar G erm an govern ­ m ents, regardless o f their varied partisanship and ideologies, were critically d e ­ p en d en t on allied support (or, at the very least, the absence o f allied opposition) to realize specific goals vis-à-vis the USSR. T hese goals ranged from the res­ toration o f sovereign equality and the defen se o f Berlin u n d er A d en au er and E rhard to Ostpolitik u n d er Kiesinger, Brandt, and Schm idt, and finally to re­ unification u n d er K ohl and G en scher. B oth variants see support for integration as a fun ction o f the im m ediacy o f p erceived politico-m ilitary threats and o p ­ portunities. T h e p rediction follows that G erm any is likely to be obliged to e x ­ chan ge econ o m ic policy concessions fo r geopolitical sup port.15 14 Benjamin J. Cohen, “Beyond EMU: The Problem o f Sustainability," Economics and Politics 5:2 (* 993 ) ’ 187” 203; Daniel Verdier, Democracy and International Trade (Princeton, N.J., 19 9 4 ),chap. 1. 15 Robert J. Art, “Why Western Europe Needs the United States and NATO,” Political Science Quarterly 1 1 1 : 1 (Spring 1996), 1-39; Timothy Garton Ash, In Europe’s Name: Germany and theDivided Continent (New York, 1993). For a more general formulation consistent with this position, James D. 29

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A secon d explan ation , w hich com bines Realist and ideational elem ents, stresses a differen t superpow er balan cing strategy. In this view, integration aim ed to bolster the pow er and autonom y o f E urope in a w orld dom inated by super­ pow ers— a line o f reasoning, as we shall see, that M onnet, A den au er, d e G aulle, and others often invoked rhetorically. T h e un derlying purpose o f integration was to support com m on fo re ign and defen se policy-m aking throu gh endeavors like the Fouchet Plan in the 1960s, E uropean Political C oop eration (EPC) in the 1970s, and the C o m m o n Foreign and Security Policy in the 1990s. Joseph G rieco has exten d ed this argum en t, co n ten d in g that trade am ong potential ad­ versaries is a zero-sum gam e. R ecen t steps toward integration, he maintains, “may in part be exp lain ed as an elem en t o f a Franco-Italian balancing strategy against Japan . . . and perhaps the U n ited States.” 16 Yet Realists co n ced e that in a m ul­ tipolar w orld and am ong m iddle powers, the ch o ice o f balancing strategies may be indeterm inate: governm ents may seek to com bine against the superpowers, as G rieco claim s France and Italy did against the U nited States; they may ban d­ w agon with a superpow er, as the postwar British sought to do; o r they may play both options against each other, as did postwar Germ any. T h e precise outcom e may well reflect ideological rather than structural factors. From a Realist perspective it is therefore unsurprising that most analysts o f postwar E uropean foreign policy, most notably Stanley H offm ann, have argued that the geopolitical interests o f individual states m ust be traced to national val­ ues, historical analogies, and “lessons o f history” distilled in the m inds o f leaders, p olitical elites, and the mass public. Critical in such an explan ation are histori­ cal attachm ents to form er colonies, traditional relations with the superpowers, and salient exp erien ces in W orld War II. Britain, w hich had survived the war w ithout defeat and was d e co lon izin g smoothly, sought to preserve “great p ow er” status th rou gh m aintenance o f C om m onw ealth links and the special relationship with the U n ited States. W hen this aim failed, British policy cam e to be driven by the diplom atic im perative o f rem aining “close to the heart o f E u ro p e.” France, by contrast, sought to overcom e its “historical m em ories” o f wartime defeat and hum iliation at Suez by p rom oting an in d ep en d en t E urope in w hich France co u ld play a m ajor role and by rein forcin g links to the French U nion. De G au lle ’s rep eated vetoes o f British m em bership were designed to block entry o f a Trojan horse fo r A nglo-A m erican geopolitical interests. Germ any, lacking an overseas colonial legacy, focused alm ost exclusively on E urope. G erm an leaders sought to overcom e the legacy o f rep eated G erm an aggression, w hich en co u raged close coop eration with its Western allies, n ot least the U nited States.17 Morrow, “Alliances and Asymmetry: An Alternative to the Capability Aggregation Model of Alliances,” American Journal of Political Science 35:4 (November 1991), 904-933. 16 Grieco, “State,” 286, also 291-293; Grieco, “The Maastricht Treaty, Economic and Monetary Union and the Neo-Realist Research Program,” Review of International Studies 21; 1 (January 1995), 21-40; Wayne Sandholtz and John Zysman, “ 1992: Recasting the European Bargain," World Politics 42 (October 1989), 103-106. While Grieco speaks also o f economic interest, his underlying theory suggests that “relative gains" ultimately reflect security threats. Grieco, Cooperation, 222-223. 17 Stanley Hoffmann, “De Gaulle, Europe and the Atlantic Alliance,” International Organization 18:1 (Winter 1964), 1-2 , 16 -19 ; Hoffmann, “Obstinate or Obsolete? The Fate o f the Nation State and the Case o f Western Europe," Daedalus 95 (Summer 1966), 892-908. For a more general for-

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Theorizing European Integration A third exp lan ation , Institutionalist rather than Realist, treats integration as a region al arran gem en t— akin to but d eep er than a collective security agree­ m e n t— aim ed at p reventin g co n flict am ong its mem bers. E uropean govern ­ m ents have n ot balan ced against such threats but have sought to engage threat­ e n in g states and subsum e them w ithin a supranational institution. From the activities o f wartim e resistance group s and the rhetoric o f the Schum an Plan to recen t statem ents by H elm ut K ohl, integration has been presented to European publics as a way to “a n ch o r” o r “b in d ” an increasingly powerful G erm any into western E uro pe throu gh ties o f econ o m ic interest and legitim ate institutions. Such tics, it was argu ed, w ould dam pen any G erm an interest in pursuing uni­ lateral aggression or, at the very least, reassure G erm an y’s neighbors. Proxim ity gave France and the B en elu x countries a particularly strong reason to favor in­ tegration, but certain dom estic groups in G erm any may also support efforts to bin d them selves to cooperative institutions. A leitmotif am ong G erm an ch a n cel­ lors since A d en au er has b een the role o f E uropean integration in protecting G erm any against itself.18 T h e theoretical un derpinn ings o f this view lie in the b e lie f that integration nurtures shared econ o m ic interests, bolsters inform ation flows, generates shared ideological norm s, and im poses international institutional con trol over critical state activities. O n this basis leadin g G erm an scholars have p roposed a law o f in ­ ternational relations, parallel to the widely accepted claim that dem ocracies do n ot wage war against o n e another, that governm ents em barked on a “process o f federal un ion ” do n ot fight wars.19 Accordingly, the conviction that integration has been necessary to prevent an o th er Franco-G erm an war is often cited as a factor distinguishing region al integration in E urope from similar, less success­ ful efforts elsew here in the world. A n idiosyncratic variant o f this perspective has lo n g enjoyed p ro m in en ce in Britain: it sees British policy as directed at the disruption o f a Franco-G erm an alliance. T h is view is deeply in flu en ced, the Economist recently observed, by the centuries-old “instinctive b e lie f in the need to prevent the rise o f a co n tro llin g pow er in E u ro p e.” 20 A fourth and final geopolitical explan ation , based o n “ideational L iberal” or “Liberal constructivist” theory, stresses the relative strength o f “E uropean” and “nationalist” ideologies am ong elites and populations.21 In this view, the relative

mutation consistent with this position, Dan Reiter, “Learning, Realism, and Alliances: The Weight of the Shadow o f the Past," World Politics 46 (July 1994), 490-526. 18 Ash, Europe’s. 19 For a debate, see Emst-Otto Czempiel, “Kants Theorem oder Warum sind die Demokratien (noch immer) nicht friedlich?" and Andrew Moravcsik, “Federalism and Peace: A Structural Liberal Perspective,” Zeitschrift für internationale Beziehungen 3:1 (Spring 1996), 7 9 -10 1 , 123-132 . This as­ sertion suffers from the obvious difficulty that all EC members are already democratic, hence the ef­ fect o f federalism is redundant. See also Andrei Markovits and Simon Reich, The German Predicament: Memory and Power in the New Europe. (Ithaca, N.Y., 1995); Altiero Spinelli, “The Growth o f the European Movement since World War II,” in C. Grove Haines, ed., European Integration (Baltimore, 1957), 48 -4 9 . Walter Lipgens, “The Major Political Consequences o f the Second World War," in Lipgens, A History of European Integration, vol l, 194 5-19 4 7 (Oxford 1982), 44ff. 20 “A Question o f Balance,” The Economist, 3january 1998, 57. S1 Kjell Goldmann, “Nationalism and Internationalism in Post-Cold War Europe,” EuropeanJournal ofInternational Relations 3:3 (September 1997), 259-290, especially 269; Peter Katzenstein, “United

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legitim acy o f nationalist and E uropean federalist thin kin g varies in depen dently across coun tries and dictates the willingness o f national politicians and publics to a ccep t coop eration w ithin fed eral E uropean institutions. G erm an, Italian, and B en elu x leaders and citizens have traditionally been m ore favorable. French leaders and citizens have traditionally taken a m iddle position, exh ib itin g both strong opposition and strong support fo r E uropean integration. I include this a m ong geo p o litical explan ation s because it is often im possible to distinguish this view from the secon d and third views exam in ed just above. U nderneath the surface, m uch ideolo gical support for integration from Jean M onnet to H elm ut K ohl rests on the co m p lex, institutionally m ediated calculation o f its pacific e f­ fects. A n d rei Markovits and Sim on Reich rem ind us that the historical m em ory o f m ost m odern E uropeans rem ains fixed on the “G erm an p ro b lem ”; postwar “G erm an y’s actions have a particular im m ediacy [and its] actions are subject to unusual scrutiny.” 22 Such historical m em ories may be m ediated in o th er ways. Som e argue that the willingness to accept E uropean exp erien ce reflects analogies drawn from d o ­ mestic political traditions: a sem isovereign, federal, corporatist, legalistic, m ili­ tarily d e p e n d en t coun try like G erm any accepts EC institutions m ore readily than voluntaristic, centralized, adm inistratively discretionary, and militarily m ore in d ep en d e n t coun tries like France and Britain. Britain and Scandinavia are o ften viewed as distinctive by virtue o f their strong com m itm ent to parlia­ m entary sovereignty.23 O th e r analysts ascribe such cross-national differences to varying wartim e exp erien ces and (in parallel with the Realist argum ent) efforts by Christian D em ocratic parties to com bat dom estic com m unism (or co m m u ­ nism w ithin a divided state) by constructing an alternative form o f po pu lar in ­ ternationalism . In this view centrist parties are likely to support integration, w hereas parties o f the extrem e right and left were likely to oppose it. At the o p ­ posite extrem e from G erm any, such claim s are com m on ly advanced with respect to Britain, the “awkward p artn er” o f E urope, w here many leaders and, though to a lesser extent, citizens rem ain skeptical o f federalist schem es.24 To assess the em pirical validity o f these fo u r widely accep ted geopolitical e x ­ planations, it is tem pting to red u ce each to an objective m easure o f structural p o sitio n — proxim ity to the Soviet U n ion o r Germ any, colonial legacy, Christian Germany in an Integrating Europe,” in Katzenstein, ed., Tamed Power: Germany in Europe (Ithaca, N.Y., 1997), 1 1 -1 5 , 24-29, 4 1-4 5 . Also Walter Lipgens, Die Anfänge der europäischen Einigungspolitik (Stuttgart, 1977), 36; Thomas Risse, “Between the Euro and the Deutsche Mark: German Identity and the European Union,” Georgetown Center for German and European Studies Working Paper Series PS 1.3 (Washington, D.C., 1997); Karl W. Deutsch, “Supranational Organizations in the 1960s,” Journal of Common Market Studies 1 (April 1963), 2 12 -218 ; Spinelli, “Growth," 4 4 -45. 22 Markovits and Reich, German, 26, also 16 —19, 2 6 ,3 6 -3 7: “Collective memory [is a] social bond among people whose shared experiences and contemporary experiences o f the past form a crucial foundation o f their com munity.. . . [It] loves to dwell on the negative. . . . We assert that in the for­ mulation, conceptualization, and implementation o f virtually every country's foreign policy, that country’s collective memories will play a significant role." 23 Katzenstein, “United,” 3 3-4 5; Alberta Sbragia, “Maastricht, Enlargement and the Future o f Institutional Change,” Ridgeway Vieu>points no. 93-3 (Pittsburgh, 1993). 24 For an overview from this perspective, see Stephen George, An Awkward Partner: Britain in the European Community (Oxford, 1990).

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Theorizing European Integration D e m o cra tic in flu e n c e , w artim e m ilitary success— an d test e ach in turn .25 Yet to d o so a n d , in p articular, to test g e o p o litica l exp lan a tio n s against id eatio n al e x ­ p lan atio n s w o u ld lea d to the q u ick d isco n firm atio n o f strawm en w ith ou t d o in g ju s tic e to existin g g e o p o litica l in terp retation s. L e a d in g co m m en tators have lo n g m a in ta in e d th at E u ro p ean go vern m en ts d o n o t face u n am b igu o u s security threats. In stead threats are view ed th ro u gh filters o f id e o lo g y a n d historical m e m ­ o ries o f salient geo p o litica l events. Postwar E u ro p e an p o litical id e o lo g ies have b e e n so closely lin k ed to o b jective g e o p o litica l co n sid era tio n s— n otably a n ti­ co m m u n ism , the G erm an P ro b lem , the desire to avoid a n o th e r p an -E u ro p ean war, a n d distinctive g lo b a l ro le s— as to be n ea r in distin guish able em pirically. D etailed historical d eb ates c o n c e rn in g the m otivations o f lead ers such as A d en au er, d e G au lle, an d M o n n e t have failed to separate the two conclusively; a b o o k o n E u ro p e an in tegratio n is n o t the o p tim al p lace to re o p en such d e ­ bates. T h e co n v e rg e n ce o f o b jective a n d subjective assessm ents is con sisten t with co n te m p o ra ry th eo ries a b o u t the ro le o f ideas in fo re ig n policy, w h ich treat ideas as m echan ism s fo r rational ad ap tatio n u n d e r un certain ty.26 I th e re fo re treat the fo u r argu m en ts as variants o f a single exp lan atio n . E vid en ce fav o rin g any o n e co u n ts as su p p o rt fo r the ro le o f geo p o litics. A t first g la n ce, this fo rm u la tio n m ay a p p ea r vagu e, th ereb y u n d e rm in in g the validity o f the fin din gs. B u t the reverse is true. It ultim ately strengthens o u r co n fid e n ce in the validity o f th e causal in fe re n ces draw n h ere, becau se b u n d lin g geo p o litica l e xp lan a tio n s m akes it easier to fin d e vid en ce fo r the im p o rtan ce o f geo p o litica l factors. In short, I d elib era tely bias the study against the idea that co m m ercia l in ­ terest drives n ational p referen ces. T h e synthesis o f these fo u r exp lan a tio n s is facilitated by very substantial co n v e rg e n ce o f th eir p red ictio n s a b o u t the process a n d o u tco m e s o f n atio n al p re fe re n ce fo rm a tio n , in clu d in g the tim ing o f in itia­ tives, the n atu re o f do m estic d iscourse, an d the n atu re o f the cleavages. T o be sure, w ithin each em p irical ch a p te r I n o te situations in w h ich p articularly stron g e vid e n ce bears o n sp ecific e x p la n a tio n s— from w h ich , in the last ch ap ter, I draw so m e ten tative co n clu sio n s— b u t fo r the m ost part these fo u r e xp lan atio n s are treated as m utually supportive. From these g e o p o litica l o r “security e xte rn alities” exp lan atio n s, p red iction s a b o u t n atio n a l p re fe re n ce s can b e d eriv ed across five dim en sion s o f n ational

85 It should be noted that geopolitical explanations o f European integration suffer from two ap­ parent weaknesses. First is a disjuncture between macro- and micro-analyses. Nearly all analyses o f everyday decision-making in individual issue-areas— agricultural, environmental, social, monetary, trade policies, for exam ple— stress the primacy o f econom ic and regulatory interests; it is odd that this is not reflected in large decisions. Second is the absence o f a plausible explanation for the d eep­ ening o f European integration over time. All four specifications o f geopolitical interests in postwar Europe— except perhaps European ideology, which remains roughly constant for long periods— suggest that the relevant geopolitical threats and distinctive national identities would decline or re­ main stable over time, whereas integration deepens. Examples include Wolfram Hanrieder, Germany, America, Europe (New Haven, Conn., 1989), 7; Hans-Pcter Schwarz, Adenauer, 2 vols. (Stuttgart, 19 8 6 -19 9 1); François Duchene,/m n Monnet: The first Statesman of Interdependence (New York, 1995), 10. More generally, Reiter, “Learning"; Judith Goldstein and Robert Keohane, eds., Ideas and Foreign Policy: Beliefs, Institutions, and Political Change (Ithaca, N.Y., 1993); Yuen Khong, Analogies at War: Korea, Munich, Dien Bien Phu, and the Vietnam Decisions of 1965 (Princeton, N.J., 1992).

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p re fe re n ce form ation: the pattern o f p referen ces across countries, across issues, and across time; salient dom estic divisions; and dom estic discourse. First, geopolitical explan ation s p redict that governm ents subordinate specific eco n o m ic interest to accom m odate broad geopolitical goals. We should there­ fo re observe systematic variation across countries but not across issues. Variation across coun tries should follow national politico-m ilitary policies. W ithin each country, support should b e consistent across co n crete econ o m ic issues. A t least three o f the fo u r geo po litical factors suggest that G erm any should be consis­ tently pro-E uropean , France less so, and Britain least. G erm any has been a fron t-lin e state against the East, lacked a colonial legacy, suffered defeat and d elegitim ation in W orld W ar II, and nurtured a strong in digenous federalist sen­ tim ent cen tered in a pow erful Christian D em ocratic party. O nly collective secu­ rity aim ed at G erm any is less clearly in the G erm an interest, but the heavy cost o f W orld W ar II and the overtly pro-W estern sympathies o f G erm an political elites app ear to have led elites to support integration as a form o f reassurance. Postwar Britain, by contrast, fo u n d itself in the opposite position: com fortably distant from the Iron C u rtain and from G erm any and possessing an un paral­ leled colonial legacy, a tradition o f parliam entary sovereignty, a weak federalist m ovem ent, and n either a Christian D em ocratic party n or a dom estic co m m u ­ nist opposition . Structural con cern s w ould position the French in between Britain and Germ any. France was n earer geograp hically to both the Soviet U nion and G erm an y and had a colonial legacy; French governm ents saw national in ­ stitutions called into question by w artim e defeat and faced a strong dom estic com m unist opposition. O n the o th er hand, France had a tradition o f central­ ization and only a weak Christian D em ocratic party. T h e timing o f m ajor innovations in E C policy should reflect their role as a response to m ajor geopolitical problem s and an instrum ent o f their resolu­ tion, while bearing little relation to fundam ental econ o m ic trends and changes. M ajor changes in geopolitical situation should trigger shifts in E uropean policy; m ajor shifts in E uropean policy should resolve m ajor problem s. T h e n et trend over tim e is unclear. C o lo n ial considerations decline quickly in the 1950s and 1960s. T h e Soviet threat also declines, in terrupted briefly during the Berlin crises o f the early 1960s and perhaps the n uclear missile controversies o f the 1980s. C o n cern about G erm any m igh t be exp ected to rise with increases in G erm an pow er and in particular the laun chin g o f Ostpolitik in the early 1970s. Popular support for E uropean integration increases in the 1960s and 1980s; support fo r the E uropean m ovem ent and am bitious federal schem es as ends in them selves declines am ong political elites over time. Christian D em ocratic par­ ties play an im portant ro le in governm en t in G erm any but n ot in France or Britain. O n the third dim ension, policy consistency and negotiating demands, the g e o ­ political explanation predicts that E C policy will be consistent with foreign and m ilitary policies, w hether unilateral, bilateral, o r global m ultilateral, n ot with broader fo reign econ om ic policy. M ajor n egotiatin g dem ands should be g e o ­ political; m ajor concessions should be, if possible, econ om ic.

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Theorizing European Integration T u rn in g to domestic actors and cleavages, the geopolitical explan ation predicts that the c h ie f executive will share prim ary responsibility fo r policy with the d e ­ fen se and fo reign ministries, as w ell as elite and p ublic opin ion . T h ese actors sh ould advance m ajor initiatives, take m ajor decisions, and im pose vetoes. Since d efen se and broad fo reign policy goals are p ublic goods, we should exp ect to see particularistic econ o m ic interest group s organ ized aroun d them . Dom estic cleavages should reflect divergen t assessments o f geopolitical threats. T h ese may result from divergen t tech nical considerations, from differences in the evalua­ tion o f the relationship betw een foreign and dom estic policy (e.g., com m unists vs. centrists), and from co n flictin g ideologies o f international relations (e.g., na­ tionalists vs. internationalists). Finally, the geopolitical theory predicts different sets o f salient concerns in do­ mestic policy discourse. D om estic deliberations should focus on the definition o f politico-m ilitary objectives and the optim al m eans o f achieving them . T h is ba­ sic position should be particularly evident in confidential deliberations am ong top decision-m akers. G eo p o litical accom m odation is “inevitable.”

Political Economic Interests W hereas the geo po litical theory o f national preferen ces focuses on the in di­ rect con sequen ces o f econ o m ic integration, the political econ o m ic accoun t stresses its direct con sequences. T h e o ries o f political econ om y explain in tern a­ tional co o p eratio n as an effort to arrange m utually beneficial policy co o rd in a­ tion am on g countries w hose dom estic policies have an im pact on o n e another. In short, coop eration is a m eans fo r governm ents to restructure the pattern o f e co n o m ic policy extern alities— the pattern o f un in ten d ed con sequences o f n a­ tional eco n o m ic activities on foreign coun tries— to their m utual benefit. In the p olitical econ o m y view, policy externalities are transm itted by international markets. T h e pattern o f externalities reflects n ot ju st the particular policies coun tries ch o o se but also their relative positions in dom estic and international m arkets. W here m arkets ren d er p referred policies incom patible o r perm it a unilateral policy to be costlessly adjusted to achieve a particular goal, a zero-sum situation exists with little incentive for coop eration. W here, on the o th er hand, recip rocal policy adjustm ent can elim inate negative policy externalities o r cre ­ ate positive ones m ore efficiently than unilateral responses, governm ents have an incentive to co o rd in ate their activities. H igh tariffs, detailed regulations, or currency depreciation , fo r exam p le, dam age foreign exp orters and so create the potential fo r co o p eratio n .27

*7 Richard N. Cooper, “Interdependence and Coordination o f Policies,” in Cooper, Economic Policy in an Interdependent World: Essays in World Economics (Cambridge, Mass., 1986), 292-293; Keohane, After, 6, 83. The approach taken here is consistent with Keohane’s “institutionalist” argument, though Keohane in fact seeks to explain the emergence o f f ormal institutions, not patterns of coop­ eration per se. Institutions, Keohane argue, emerge when transaction costs create barriers to decen­ tralized political exchange; the underlying role o f policy externalities is assumed.

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It is im p o rtan t to n o te th at this is n o t a p u re ly “e c o n o m ic ” exp lan a tio n . M ost e con o m ists have view ed m ost o f th e m ajor go als p u rsu ed by th e E C o ver the y e a rs— a m o n g them a custom s u n io n ra th e r than sim ple glo b a l liberalization , the co m m o n agricu ltu ral policy, an d m o n etary u n io n — w ith skepticism i f n ot o u trig h t hostility.28 T h e p o litica l e co n o m ic exp la n a tio n d iffers fro m a p urely e co n o m ic exp la n a tio n in that it fo cu ses o n the distribution al as w ell as the efficie n cy co n se q u e n ce s o f p o licy co o rd in a tio n . O fte n d om estic co n flict over e co n o m ic p o licy co o rd in a tio n pits w inn ers an d losers fro m the shift in p o licy e x ­ ternalities in d u ce d by in tern a tio n al co o p era tio n against o n e an o th er. T h e p o ­ litical p o w er o f certain g ro u p s, w h ich m ay o r m ay n o t re flect a ggreg ate w elfare, is an in te rv en in g variable betw een the ca lcu la tio n o f e co n o m ic costs an d b e n e ­ fits, on the o n e h an d, an d p o licy o u tco m es, o n the other. M ost im p o rtan t a m o n g these w inn ers an d losers are p ro d u cers. T h e system­ atic p olitical bias in favor o f existin g p ro d u c e r gro u p s an d against those, n otably con su m ers, taxpayers, th ird -co u n try p ro d u cers, and also p o ten tial fu tu re p ro ­ d u cers, stem s fro m the fo rm e r’s m o re in ten se, certain , an d institutionally re p ­ re sen ted an d o rg a n ize d interests. P ro d u cers may e x e rt direct, instrum ental p ressu re o n p o litician s o r m ay w ield structural pow er, as w hen a desire to e n ­ co u ra g e business in vestm en t an d grow th req u ires the satisfaction o f bro a d busi­ ness d em an ds. F or the sake o f sim plicity, I assum e th ro u g h o u t that dom estic p ro d u c ers in flu e n ce p o licy solely th ro u g h the p eak organ izatio n s rep resen tin g th ree b ro a d e co n o m ic sectors: industry, agricu ltu re, an d services. By fo cu sin g o n p ro d u c e r pressures, w eig h ted o n ly by th eir size and the intensity o f gains and losses, this e xp lan a tio n rem ains d e lib era tely sim ple, abstractin g away from co m ­ p le x secto ral splits o r “supply sid e ” issues, such as varyin g levels o f co llective ac­ tio n , fo rm a l in stitutions, partisan co m p etitio n , an d issue linkage; it is d esign ed to ca p tu re o n ly the m ost fu n d am en ta l o f e co n o m ic interests.29 Yet pressures from p ro d u cers a lo n e d o n o t exp lain go v ern m e n t policy. Instead, as G ary B e ck e r an d S am u el P eltzm an have a rgu ed , go vern m en ts p ro m o te pro28 E.g., M ichele Fratianni and Jürgen von Hagen, The European Monetary System and European Monetary Union (Boulder, Colo., 1992); Bela Balassa, The Theory of Economic Integration (London,

1961). 29 Charles E. Lindblom, Politics and Markets: The World's Political-Economic System (New York, 1977). I seek to endogenize some o f what are termed in most political econom ic analyses “supply-side" fac­ tors, notably geopolitical concerns o f state officials. Both private and public institutions arc treated as representative o f societal interests. W here societal pressures arc intense and powerful, private in­ terests are assumed to be organized and governments narrowly constrained. Existing domestic orga­ nization is employed as a proxy: if, for example, wheat, sugar, and beef producers appear to possess disproportionate and stable amounts o f political power in French peak agricultural interest groups, this fact is taken as given for French policy and hence for EC politics. “State” actors are treated as proxies for underlying social forces. The independence and anti-inflationary commitment o f the Bundesbank, for example, stands in for the broadly accepted anti-inflationary preferences o f the Germ an public, which encum ber any attempt to revise the bank statute. Similarly, British defense o f national prerogatives stands in for elite and popular views about federalism and British sovereignty. Such a simple view o f policy-making deliberately downplays collective action problems, log-rolling, and unintended consequences in the process o f domestic preference formation. F.ndogenizing in­ stitutional variation would be a logical next step. For a more intensive discussion, see Robert O. Keohane and H elen V. Milner, eds., Internationalization and Domestic Politics (Cambridge, 1996); Suzanne Berger and Ronald Dore, eds., National Diversity and Global Capitalism (Ithaca, N.Y., 1996).

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Theorizing European Integration d u cer interests w ithin bro ad constraints set by gen eral dem ands fo r regulatory p rotection , econ o m ic efficiency, and fiscal responsibility.30 In this view, o n e o b ­ jectiv e o f fo reign econ o m ic policy is to m aintain and im prove the com petitive­ ness o f n ational producers; an o th er is to achieve regu latory objectives and lim it go vern m en t spending. D om estic p olicies favoring producers, fo r exam ple sub­ sidies o r perm issive legislation, are con strain ed eith er by the govern m en t’s fiscal lim itations o r by co n flict with gen era l regu latory objectives. T his view suggests a sim ple explan ation o f fo reign econ o m ic policy-m aking in w hich governm ents p rom ote com m ercial interests until co n fro n ted with an intolerable fiscal b u r­ den o r a co n flict with strong regu latory preferences. T h e decision to cooperate should thus be p reced ed by pressure from dom estic p roducers and by the overt failure o f unilateral policies to achieve dom estic regulatory o r fiscal objectives. In the political econ o m y view, com petitiveness con cerns and policy failure co m ­ bin e to catalyze cooperation. T h e relative im portan ce o f regu latory and fiscal constraints vis-à-vis com ­ m ercial considerations varies across issues. To simplify analysis o f the shifting balan ce betw een the two, I assume that their relative im portance in E C politics parallels their relative im portan ce in dom estic politics. G overnm ents com m it­ ted to a particular balance betw een, say, econ o m ic liberalism and environm en ­ tal protection at hom e will pursue the same balance internationally. T h e strength o f com m itm ent to goals such as tariff liberalization, financial liberalization, and m on etary discipline at hom e is em ployed as a m easure o f their im portance for a govern m en t in international negotiations. T h e fo u r policies at the co re o f E uropean econ o m ic integration over the past fo u r decades have been agricultural trade liberalization, industrial trade liber­ alization, the rem oval o f regu latory trade barriers, and exch an ge-rate stabiliza­ tion. T h e re is gen eral agreem en t that in postwar E uropean dom estic politics, the d irect pow er o f p roducers vis-à-vis fiscal o r regulatory con cerns has been strongest in agriculture, w hich has won large, nearly universal subsidies in every country; less strong in industrial trade policy, w here subsidies are m ore m odest and uneven; and even less strong both in regulatory policy, such as environ ­ m ental policy, w here in d ep en d en t preferen ces fo r regulatory goals play an im ­ portan t role, and in exch an ge-rate policy, w here preferen ces for high and lower in flation em b ed d ed in dom estic labor and fiscal practices play an im portant role in national policy. I assume the sam e spectrum w hen governm ents choose EC policies. In the case o f agricultural and som e industrial policy, producers tend to be highly m obilized and governm ents are lim ited prim arily by overall e co ­ nom ic efficiency, w hich is reflected in the fiscal burden o f subsidization. In regu ­ latory policy, governm ents are slightly m ore constrained by public policy goals, w hich can be sum m arized by dividing EC m em bers into rich countries with high

30 In recent years a synthesis has emerged, in which both rent-seeking pressures and efficiency concerns play a role in the rational calculations o f policy-makers. Gary S. Becker, “A Theory of Competition among Pressure Groups,” Quarterly Journal of Economics 98 (1983), 37 2_ 399 l Samuel Peltzman, “The Economic Theory of Regulation af ter a Decade o f Deregulation,” Brookings Papers on Economic Activity (1989), 1 -4 1 ; Giandomenico Majone, Regulating Europe (London, 1996), 28-45.

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standards and p o o rer coun tries with lower standards. Finally, in the case o f m o n ­ etary policy, the m any p ro d u cer preferen ces are less sharply defin ed, whereas the constraints im posed by the gen eral m acroeconom ic p referen ces and p er­ form ance o f different coun tries are m ore im portant.

T h e Sources o f Preferences co n cern in g T rade Policy Coord ination T h e political econ om y perspective suggests that international policy co o rd i­ nation is a m eans to secure com m ercial advantages fo r p ro d u cer groups, subject to regu latory and budgetary constraints. M odern theories o f foreign trade p o l­ icy suggest that trade liberalization is driven prim arily by opportunities for profitable international trade and investm ent, though constrained by the d o ­ mestic and international distributional con sequences o f perm itting such trans­ actions. G overnm ents seek m ultilateral trade liberalization w hen it is no longer possible to realize p ro d u cer interests unilaterally. T h e most im portant reason is that fo reign coop eration is required to o p en up exp o rt markets. U nilateral trade liberalization, while alm ost universally reco m m en d ed by econom ists, is rarely a politically viable policy fo r any but extrem ely com petitive countries in sectors o f greatest com petitive advantage. Increased exp o rt opportunities offset the p oliti­ cal costs and risks o f greater im ports. International coop eration may also p ro ­ vide “tw o-level” political legitim ation and institutional support fo r governm ents in less com petitive countries seeking to liberalize. A sim ple explan ation o f trade policy based on these prem ises can be co n ­ structed by assum ing that econ o m ic investm ents are specific to particular uses in the short term and that their value is prim arily in flu en ced by the scope o f the m arket in w hich they com p ete. P roducer dem ands reflect the com petitive posi­ tion o f n ational p roducers in international markets. Internationally com petitive p roducers favor liberalization; all o th er things bein g equal, governm ents favor the benefits from increased exports. To a first approxim ation, the greater the e xp orts and e xp o rt opportu nities and the m ore com petitive are dom estic e x ­ port producers, the m ore intense the pressure fo r trade liberalization. T his rule holds w hether we are speaking o f “at the b o rd e r” measures like tariffs and q u o ­ tas o r o f regulatory barriers to trade. W ith the declin e o f tariffs or quotas, the political econ o m y view predicts the em ergen ce o f greater pressure from com ­ petitive p roducers to liberalize or harm onize o th er types o f regulations. M ore com petitive producers, particularly in industries with high econ om ies o f scale, will particularly tend to favor the elim ination o f differentials throu gh harm o­ nization o f national regulations. Such dem ands are balan ced, however, by the difficulty o f forcin g adjustm ent o n un com p etitive, im port-com petin g producers. T h e greater the level o f p o ­ tential im ports, the lower cu rren t profit levels, the h ig h er the levels o f surplus capacity, and the m ore intense the cyclical dow nturn or long-term declin e, the g reater will be the dom estic pressure fo r p rotection and subsidies. In postwar E urope, fo r exam p le, we should see G erm an industrialists and French farmers, respectively the largest and m ost com petitive potential net exp o rt sectors o f the two co u n tries’ respective national econom ies, pressing m ost strongly for liberal­

3«

Theorizing European Integration ization o f E uropean trade. Such pressure should be particularly strong during period s o f relatively h ig h growth and industrial profits, such as the 1950s, 1960s, and late 1980s. We exp ect trade liberalization to gen erate m ore support w hen it creates fewer net losers, w hich occurs w hen costs and benefits are internalized within individ­ ual sectors and firms, thereby avoidin g the im position o f large con cen trated losses on particular dom estic groups. Such patterns o f intra-industry trade tend to arise in tech nologically sophisticated industrial sectors with extensive foreign d irect investm ent, diversification, high growth, and scale econ om ies.1*1 H ence, we should exp ect the acquiescence o f im port-com petin g p roducers to be easier to obtain with regard to industrial trade liberalization than with regard to agri­ cultural liberalization. Relations with third coun tries create the same sort o f incentives. T h e greater the com petitiveness o f third-country producers, the greater the pressure for extern al p rotection and region al liberalization, both o f w hich divert trade to­ ward m em ber countries. In industrial sectors, for exam ple, w here m any postwar European coun tries w ere globally com petitive, the pressure for trade diversion throu gh extern al protection is likely to be lower than in agriculture, w here many dom estic p roducers are com petitive in E urope but un com petitive globally. T rade diversion places p roducers in e xclu d ed countries at a disadvantage, thereby in ­ creasing their incentive to o p pose o r to join an exclusive region al bloc. T h e m ore com petitive the p roducers and the h ig h er the level o f trade diversion, the g reater the con cern. E C discrim ination in the 1960s against U.S. and British C om m on w ealth agricultural com m odities, as well as British industrial products, is an im portant exam p le.32 Follow ing con ventional theories o f collective action, the analysis above as­ sumes that policies are biased in favor o f those actors with con cen trated, intense, and clearly preexisting interests and against those with m ore diffuse, uncertain, o r un rep resen ted interests. In the latter category belo n g consum ers, taxpayers, and third -coun try producers. Liberalization is facilitated w hen its costs can be o fflo a d ed o n to such groups. Yet such diffuse groups are n ot infinitely m alleable. If rents fo r p ro d u cer group s becom e extrem ely high, taxpayers and consum ers are m ore likely to rebel. T h e interests o f n on p rodu cers therefore im pose a loose constraint on national trade policies. U n der what conditions should such co n ­ straints lim it policy?33 We may sim plify the analysis o f broad constraints by lim iting them to two cases. First, the dem ands o f business group s for protection must give way in the face o f an overt failure o f unilateral policies to prom ote com petitiveness and sol51 Helen V. Milner, Resisting Protectionism: Global Industry and the Politics of International Trade (Princeton, N.J., 1988); Elhanan Helpman and Paul Krugman, Market Structure and Foreign Trade: Increasing Returns, Imperfect Competition and the International Economy (Cambridge, Mass., 1985); Real I .avergne, The Political Economy of US Tariffs: An Empirical Analysis (New York, 1983), chaps. 5, 7. 52 Robert Z. Lawrence, Regionalism, Multilateralism, and Deeper Integration (Washington, D.C., 1996), 28; Robert A. Mundell, “Tariff Preferences and the Terms o f Trade,” Manchester School of Economic and Social Studies 3 2 (19 6 4 ), 1-13 . See also chapters 2 and 3 o f this book. 33 James Q. Wilson, “The Politics o f Regulation,” in Wilson, ed., The Politics of Regulation (New York, 1980), 366ff.

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vency. In o th er words, governm ents will resist pressures for liberalization on b e­ h a lf o f relatively un com petitive industries unw illing to adjust as lo n g as the cost o f the d irect subsidies that re n d er such resistance possible rem ains tolerable. O n ly w hen the potential fo r increasing subsidies to un com petitive sectors is ex ­ hausted will governm ents co n sider liberalization. Second, n on p rodu cers gen erally im pose a tighter constraint on policy co o r­ dination if the unilateral policies in question take the form o f regulatory stan­ dards rather than “at the b o rd e r” m easures such as tariffs and quotas. Such ne­ gotiations may m obilize n ot ju st p roducers but organ ized public interest groups and parties that favor p articular environm ental, consum er, o r heath and safety regulations. Such m atters can gen erate a powerful electoral response. To sim­ plify the analysis, we assume that the h eight o f regulatory protection is a fu n c­ tion o f the p er capita w ealth of a country, with m ore w ealthy countries favoring h ig h er levels o f dom estic protection across the board. W ealthier countries favor international harm onization at h ig h er standards, w hereas p o o rer countries p re­ fe r harm onization at lower standards. Such two-dim ensional con flicts— with splits betw een com petitive and uncom petitive p roducers and betw een high- and low-standard coun tries— can lead to the form ation o f co m p lex and curious d o ­ mestic coalitions, such as so-called Baptist-Bootlegger alliances betw een p ro tec­ tionists and supporters o f high regulatory p rotection .34 T h e re are g o o d prim a facie reasons to believe that the incentives described in this sim ple explan ation o f trade policy played a significant role in postwar W estern E urope, w hich faced radically shifting com m ercial opportunities.35 T h e m ost salient trend in p o st-1945 international political econ om y has been a vast increase in op portunities fo r profitable trade am ong industrialized countries, an increase linked to historically high growth rates. T his postwar trade boom in m anufactures altered both the geo grap h ical direction o f trade and the sources o f com petitive advantage. T h e focus o f the com m ercial relations o f developed coun tries shifted from periph eral areas to the m etropolitan core, with the p er­ centage o f w orld trade am ong industrialized countries exp an din g from 46 p er­ cen t in 19 5 5 to 62 p ercen t in 1990. H a lf the increase occu rred b efo re 1963 w ithin a netw ork o f increasing intra-industry trade opportunities focused around Germ any. T rade am ong EC coun tries w ould subsequently rise from 38 percen t o f G D P in i9 6 0 to 57 p ercen t o f G D P in 19 9 1, again with the bulk o f the shift in the 1950s and early 1960s. It rose again in the late 1980s. E con om etric analy­ ses attribute a relatively small p ercen tage o f this rise to trade liberalization. T h e trend begins very early in the postwar p eriod , before significant trade liberal­ ization had occurred, and extends to coun tries outside region al trading blocs in 54 David Vogel, Trading Up (Cambridge, Mass., 1995). 55 Not only did postwar West European governments face expanding export opportunities; they were also committed, to a much greater extent than previously, to the provision o f minimal social welfare for all groups in society. These groups included farmers, whose role in the rise o f interwar fascism was considerable, and workers, for whom communism provided an attractive alternative. The relative importance o f these two factors cannot be fully assessed here, since it would require com­ parison with cases in which this commitment did not exist. See Alan S. Milward, The European Rescue of the Nation-Slate (Berkeley, 1992).

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Theorizing European Integration Scandinavia and N orth A m erica, as well as those, like Britain and France, that co n d n u ed to m aintain im perial trading p referen ces.86 T h e prim ary gains fro m trade w ere fo u n d in m anufactured goods sectors. T rade in m anufactures exp a n d ed rou ghly twice as fast as GDP, rising as a share o f w orld exports from 35 p ercen t in the 1950s to over 60 p ercen t in the mid1980s. By contrast, agricultural exports d eclin ed from 25 to 15 percent, and m in­ eral and en ergy exports (even with oil p rice inflation) fell from 40 to 24 p e r­ cent. In p art these changes reflected rapid industrialization, high growth rates, and increasing com petitiveness in Latin countries such as France, Italy, and, later, Spain. By 1988 the level o f trade in m anufactured goods, at 32 percen t o f GDP, had alm ost return ed to its historic high p rior to W orld War I. T his boom was acco m pan ied by increased intra-industry trade, driven by increased p roduct differen tiation, econ om ies o f scale, and im portation o f interm ediate goods. In E urope intra-industry trade was particularly high, reachin g 60 percen t by the 1980s, w hen the ten dency was bolstered by a direct investm ent boom am ong d e ­ ve lo p e d coun tries.37 T h e p olitical econ o m ic app roach provides a plausible prim a facie exp lan a­ tion o f the p referen ces o f postwar E uropean governm ents fo r the launching and progressive d eep en in g o f the EC. From the 1950s through the 1990s, as trade and investm ent in E urope e xp an d ed , we should exp ect to see m ajor EC m em ­ ber coun tries co n verge slowly toward greater openness in industrial trade. Policies o f the m ajor EC coun tries should con verge at differen t rates, d ep en d in g on the national p ercen tage o f trade with E urope and the com petitiveness o f lo ­ cal industry. Broadly speaking, we should exp ect G erm any strongly to favor panE uropean trade liberalization in industrial goods, with relatively o p en policies toward third countries, and to o p pose agricultural trade liberalization. France and Italy should support agricultural trade liberalization within a protected p referen tial trading area, preferably at m oderate p rice levels, w hile accepting industrial trade liberalization with initial caution but accelerating con fiden ce. Britain, with relatively low but rapidly rising levels o f exports to E urope, should initially be relatively apathetic abou t European industrial trade liberalization but rapidly grow m ore co n cern ed as trading patterns shift. Britain should strongly oppose a high extern al tariff on agricultural com m odities, which w ould u n d er­ m ine existing C om m onw ealth relations. Exclusion from a grow ing industrial trade area should be the worst o utco m e fo r each nation. T h e Sources o f Preferences co n cern in g Exchange-R ate Stabilization E C m on etary coop eration has b een directed prim arily at the stabilization o f n om inal exch an ge rates. It has taken the form o f two p eg ged exchange-rate sys-

36 Michael Chisholm, Britain on the Edge 0/Europe (London, 1995), 1 4 -17 ; Milward, European-, Jeffrey A. Frankel, Ernesto Stein, and Shang-Jin Wei, “Regional Trading Arrangements: Natural or Supernatural?” American Economic Review 86:2 (May 1996), 5 2 -5 7. 37 Commission o f the European Communities, “International Trade o f the European Community,” European Economy 3g (1989), 14; United Nations Center on Transnational Corporations, World Invest­ ment Report 1991: The Triad in Foreign Direct Investment (New York, 1991), pp. 4If; Jacques Pelkmans,

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teins established in the 1970s, the Snake and the EMS, and plans for a single cu rren cy set forth in the M aastricht Treaty. W hat political econ o m ic incentives m ight lead governm ents to seek such exch an ge-rate arrangem ents? A s in the case o f trade policy, I shall n ot present a fully d e velop ed m odel o f m acroecon om ic policy, only the m inim al, “firstcu t” theory required to gen erate predictions about the process, tim ing, and dis­ tribution o f national p referen ces co n cern in g exchange-rate stabilization. As in the case o f trade policy, my argu m en t is n ot that there is a com p ellin g m acroeco n o m ic o r m icroecon om ic justification fo r exchange-rate stabilization or m on etary un ion b ut that m on etary coop eration helps governm ents achieve cer­ tain p olitical econ o m ic goals.38 A sim ple political econ o m y o f p referen ces fo r (and against) exchange-rate stabilization can be con structed o n the basis o f three variables: capital mobility, patterns o f trade in terd ep en d en ce, and con vergen ce o r d ivergen ce am ong e x ­ p ected dom estic inflation rates. T his outline is consistent with the gen eral p o ­ litical econ o m y approach toward regu latory issues em ployed in this book, which considers pressures from p roducers directly in flu en ced by international in ter­ d e p e n d en ce, on the o n e hand, and gen eral regulatory, fiscal, and public goods co n cern s, on the other. T h e analysis begins with the same basic intuition as in trade policy, nam ely that governm ents seek to prom ote the most intense p ref­ eren ces held by producers. Yet in exch an ge-rate politics, as I argued above, specific m acro eco n o m ic goals are m ore im portant, relative to direct co m m er­ cial interests, than they are in trade policy. M any accounts focus only on capital m obility and trade in terd ep en d en ce, b ut it is the co n vergen ce and divergence am ong inflation rates that proves critical. Rising capital mobility, along with high trade, increases the tension betw een exch an ge-rate stability and dom estic m acro eco n o m ic autonom y, as well as ero d in g the advantages o f the latter— not least the capacity o f governm ents to m aintain artificially low interest rates. Trade in terd ep en d en ce creates m odest incentives to reduce exchange-rate volatility but n ot necessarily to stabilize exch an ge rates, w hich can be costly fo r exposed sectors o f the econom y, particularly in w eak-currency countries. W ith the first two factors— patterns o f capital and trade in te rd e p en d en ce — indeterm in ate, the third becom es critical. G iven capital m obility and liberal trade, a bin din g extern al exch an ge-rate constraint requires co n vergen t rates o f dom estic in flation or, at least, a p rior com m itm ent to rapid con vergen ce, lest unsustainable costs be im posed on the internationally com petitive sectors in econ o m ies o f countries that w ould otherwise perm it their currency to d ep reci­ ate. Yet E C governm ents have often exp erien ced divergent underlying rates o f in flation , w hich are deeply em bedded in dom estic institutions and expectations

Market Integration in the European Community (I«ndon, 1984), 6 4 -114 ; GATT, International Trade, vari­ ous editions (Geneva, 1980-1995), Table A.3. 18 On skepticism among economists, see Barry Eichengreen and Jeffry Frieden, “The Political Economy o f European Monetary Integration: An Analytical Introduction," in Eichengreen and Frieden, eds., The Political Economy of European Monetary Integration (Boulder, Colo., 1994), 5; Paul Krugman, "Policy Problems in a Monetary Union,” in Paul de Grauwe and Loukas Papademos, eds., The European Monetary System in the 1990s (London, 1990), 62.

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Theorizing European Integration go v e rn in g w age-settin g, p u b lic sp en d in g , an d m o n etary policy. D om estic refo rm to a lte r in fla tio n rates can b e a slow a n d costly process; u n til govern m en ts co m ­ m it to, a n d to a substantial e x te n t su cce ed in , re d u cin g in fla tio n , th ere is little reason to believe that b in d in g e x te rn a l m o n etary con strain ts are sustainable. B elow I co n sid e r the im p act o f th e first two factors, capital an d trade in te rd e ­ p e n d e n c e , then the im p act o f m a cro e co n o m ic co n ve rg e n ce. W e b e g in w ith the m a cro e co n o m ic im p act o f rising capital a n d trade flows. A g o v e rn m e n t facin g a balan ce-o f-p aym en ts d e ficit (o r surplus) has th ree bro ad p o licy option s: it can im p o se (relax) trade an d capital co n tro ls, p erm it the c u rre n c y to d e p recia te (a p p recia te), o r tigh ten (loosen ) do m estic fiscal and m o n eta ry discip lin e. T o e x p la in the ch o ic e a m o n g these o p tio n s, m any analyses o f E u ro p e an m o n etary co o p e ra tio n b e g in w ith the insight, draw n from the M u n d e ll-F le m in g analysis o f ex ch a n g e -ra te policy, that a go v ern m e n t ca n n o t target all th ree o f these p o licy objectives at o n ce. In sum , free flows o f capital a n d trad e, n om in al e x ch a n g e -ra te stability, an d d om estic m a cro e co n o m ic a u ­ to n o m y co m p rise a so -called in co n sisten t trio. A go v ern m e n t can sim u ltan e­ ously target any two o f these go als b u t n o t all th ree .39 U n til the late 1950s E u ro p e a n go vern m en ts restricted trade an d capital flows, p erm ittin g E u ro p e an g o v ern m en ts to m aintain fix e d rates an d w idely d iv ergen t m a cro e co n o m ic p olicies, a lo n g w ith low in terest rates p articularly d irected at industrial in vestm en t— an a rra n g e m en t that re q u ired , how ever, extern al subsi­ dies. T h e E u ro p e a n Paym ents U n io n , a cle a rin g a rra n gem en t a m o n g the n onc o n ve rtib le E u ro p e an cu rre n cie s o f the tim e, was fin a n ced in p art by the U n ited States. T o m ain tain eq u ilib riu m , w eak-cu rren cy co u n trie s rep ea ted ly im p osed trade b arriers a n d capital restrictions.40 O v e r the n e x t two d ecad es, m ost analysts a gree, increases in trade an d capital flows re n d e r e d restrictions on e ith e r progressively m o re costly an d less effective. O n b a la n ce, as the in co n sisten t trio p redicts, this ch a n g e app ears to have created a stee p e r tra d e -o ff b etw een n o m in a l ex ch a n g e -ra te stability a n d d om estic m acroe c o n o m ic au to n o m y.41 It re n d e re d n o m in a l e xch an ge -ra te stability m o re costly a n d , th e re fo re, less likely. T h is, c o m b in ed w ith ex te rn a l shocks like h ig h w age settlem en ts, th e oil crises, a n d th e co llap se o f B retton W oods, led to a p erio d o f c o n sid e ra b le n om in al ex ch a n g e -ra te instability lasting fo r alm ost two d ecad es a fte r 1 9 7 1 . 39 Another short-term option is to finance the deficit (or encourage capital exports). For an overview o f the trade-offs, see Robert Mundell, “T h e Monetary Dynamics o f International Adjustment under Fixed and Flexible F.xchange Rates,” Quarterly Journal of Economics (i960 ), 2 2 7 -2 5 7 ; W. Max Corden, “M onetary Integration,” Princeton Essays in International Finance 93 (Princeton, N.J., 1972). For an overview and admirably clear explication o f the literature, see Kathleen R. McNamara, The Currency of Ideas: Monetary Politics in the European Union (Ithaca, N.Y., >9 97 )40 O n distinctive national adaptation and change over tíme, John Zysman, Governments, Markets and Growth: Financial Systems and the Politics of Industrial Change (Ithaca, N .Y, 1983); Katzenstein, ed., Between Power and Plenty, John Goodm an and Louis Pauly, “T h e Obsolescence o f Capital Controls? Economic M anagem ent in an Age o f Global Markets,” World Politics 46:1 (October 1993), 50 -8 2 . 41 Goodm an and Pauly, “Obsolescence”; Michael C. Webb, “International Economic Structures, Government Interests, and International Coordination o f M acroeconomic Adjustment Policies,” International Organization 4 5 :3 (Spring 199 1), 309-342.

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R ising trade an d capital flows d id n o t sim ply stee p e n the tra d e-o ff betw een e x ch a n g e -ra te stability a n d m a cro e co n o m ic autonom y; th ey also progressively d e g ra d e d the valu e o f m a cro e co n o m ic a u to n o m y a lto g e th e r— w h eth e r o r n ot e x c h a n g e rates re m a in e d stable.42 In creasin gly costly m easures (am o n g them seg m en ted fin an cial m arkets, d raco n ian co n tro ls, ratio n in g, a n d la rge dom estic subsidies) failed to off set the ten d e n cy o f in tern a tio n al capital m arkets to e q u a l­ ize co vered in terest rates. T h is tre n d has b e e n attributed to in creased transna­ tio n alization o f p ro d u ctio n , w h ich p erm its m ultin ation al firm s to evade capital co n tro ls and trade restrictions. It surely re flecte d also the m o re in flation ary and d isruptive e co n o m ic e n v iro n m en t o f the 1970s an d 1980s, in th e face o f w hich in te rv en tio n ist go vern m en ts la ck ed the p olitical will to resist p u b lic sp en d in g or to c o m p el la rge firm s, particularly n atio n alized on es, to ra tio n a lize — resulting in an un sustain able e xp a n sio n o f state-subsidized industrial fin a n ce in France an d Italy. T h e tre n d m ay also have b e e n p u sh e d a lo n g by fin an cial liberalization rad iatin g outw ard fro m th e U n ited States.43 W h ate ve r its p recise causes, the p e rio d from the late 1970 s on w ard w itnessed a steady m o ve m e n t in n early all E u ro p e an co u n tries, w h eth e r o r n o t they w ere m em bers o f the E C o r o f co m m o n ex ch a n g e -ra te arran gem en ts, toward h ig h er, m o re m arket-driven in terest rates. Interest rates cam e in creasin gly to re flect business cycles and risk p rem ia, n o t go v ern m e n t targets. E x cep t in circum stan ces w h ere cu rre n cie s w ere greatly o vervalu ed , d e p recia tio n cam e in creasin gly to b e lin k ed to higher un d e rly in g real in terest rates— n o t low er on es, as had previ­ ously b e e n the ca se — b ecau se it u n d e rm in e d c o n fid e n ce an d led to the im p osi­ tion o f risk p rem ia on in tern atio n al capital m arkets. By 198 6 all b u t very sh o rt­ term in terest-rate d ifferen tials b etw een do m estic an d o ffsh o re m arkets had d isa p p ea re d .44 A c c o rd in g to th e M u n d ell-F lem in g fram ew ork, a rise in capital m obility do es n o t n ecessarily g e n era te n et m a cro e co n o m ic in cen tives fo r n om in al e xch an ge rate stability. T h e in cen tives facin g go vern m en ts are in d eterm in ate. Rising in ­ te r d e p e n d e n c e in creases the a m o u n t o f d om estic m a cro e co n o m ic au to n o m y that m ust b e sacrificed to stabilize e x ch a n g e rates, th ereb y discouraging exch an gerate stability, b u t also red u ces the value o f m a cro e co n o m ic a u to n o m y by u n d e r­ m in in g th e in flu e n ce o f p o licy on d om estic in terest rates, th ereb y encouraging ex ch a n g e -ra te stabilization. In o rd e r to assess the claim em pirically, we m ust sp ecify m o re p recisely the relative values o f m a cro e co n o m ic au to n o m y and e x ch a n g e -ra te stability.45 42 Jeffry Fricden, “T h e Impact o f Goods and Capital Market Integration on F.uropean Monetary Politics,” Comparative Political Studies 29 (April 1996), 193-222; Robert Mundell, “Capital Mobility and Stabilization Policy under Fixed and Floating Exchange Rates," Canadian Journal ofEconomics and Political Science 29 (1963), 4 7 5 -4 8 5 . 4S Goodm an and Pauly, “Obsolesence"; Louis W. Pauly, Opening Financial Markets: Banking Politics on the Pacific Rim (Ithaca, N.Y., 1988); Michael Loriaux, France after Hegemony: International Change and Financial Reform (Ithaca, N.Y., 199 1). Loriaux attributes the external shock to the decline o f Bretton Woods, but rising inflation, oil shocks, and lower growth may also explain the shift. 44 David M. Andrews, “Capital Mobility and Monetary Adjustment in Western Europe, 19 7 3 -19 9 1 Policy Sciences-¡I (1994), 4 2 5 -4 4 5 . 45 Accordingly m acroeconom ic analyses tend to treat the implications o f monetary cooperation as indeterm inate or insignificant. See, for example, Alberto Giovannini, “Economic and Monetary

44

Theorizing European Integration To this en d , and still m aintaining the basic M undell-Flem ing assumptions, we may co n sider the m icroeco n om ic im pact o f rising trade in terd ep en d en ce on exchan ge-rate p referen ces am ong specific econ o m ic groups. H ere indeterm inacy is red u ced , b ut the theory predicts that increasing trade in terd ep en d en ce will stim ulate n et political pressures against exch an ge-rate stabilization. To see why this is so, let us assume an op en econ o m y with specific assets (fixed econ om ic investm ents) and relatively high trade and capital in terdep en den ce. U n der such conditions, Jeffry Frieden has argu ed, p ro d u cer preferen ces can be predicted from shifts in d u ced by exch an ge-rate policy in the relative prices o f traded and n on traded go o d s (and services).46 T h e greater the m agnitude o f in terd ep en ­ d en ce, the greater will be the gains o r losses and the m ore intense the dem ands directed at governm ents. Producers have p referen ces, Frieden argues, across two characteristics o f the exch an ge rate: level and stability. A s regards the level o f exch an ge rates, a low value o f the dom estic currency increases the com petitiveness o f goods traded in ­ ternationally. T raded go o d s p roducers (exporters and im port-com peting firms) tend th erefo re to favor a weak dom estic currency to bolster their com petitive­ ness and increase the relative price o f traded goods domestically. Producers o f goods and services n ot traded across borders, by contrast, favor a strong cur­ rency, w hich bolsters the relative prices o f their goods dom estically and in ter­ nationally. N on traded go o d s p roducers can be thought o f as consum ers; a strong currency perm its them to purchase m ore traded goods. Investors are said also to support a strong currency, w hich expands their purchasing power abroad. As regards exch an ge-rate stability, exp orters and foreign investors p refer a stable currency, w hich reduces their exch an ge-rate risk and transaction costs. N on ­ tradable and im p ort-com p etin g p roducers p refer flexible rates, w hich perm it m acro eco n o m ic stim ulation beneficial to them . C om bin in g con cerns about level and stability, exp orters p refer low, stable exch an ge rates; im p ort-com peting p ro ­ ducers p refer low and flexible rates; p roducers o f n on traded goods and services p refer high and flexible rates; and, finally, international financiers and im ­ porters p refer high and stable rates. W ithout fu rth er assum ptions abou t the relative w eight o f various groups and the resolution o f conflicts am ong them , the theory does not gen erate determ i­ nate predictions. Increasing exp osure to international m arkets confronts many groups with com p etin g concerns; tradable goods p roducers in coun tries in w hich currencies w ould otherw ise depreciate, fo r exam p le, will see an advantage in stable but potentially un com petitive exch an ge rates and in m ore com petitive but less stable ones. W hat additional assum ptions seem plausible?47 We m ight begin by assuming

Union: What Happened? Exploring the Political Dimension ol'Optimum Currency Areas,’’ in Centre for Economic Policy Research, The Monetary Future of Europe (I.ondon, 1993). 46 Jeffry A. Frieden, “Invested Interests: The Politics o f National Economic Policies in a World of Global Finance,” International Organization 45:4 (Summer 1991), 425-452; Carsten Hefeker, Interest Groups and Monetary Integration: The Political Economy of Exchange Regime Choice (Boulder, Colo., 1996). 7 5 - See also Mahant, French, 17 7 -18 5 ; Willis, France, 2 51-26 4; Bjal, France, Annexe. Any pref­ erential tariff area short o f an FTA was impossible under G ATT rules and would likely have encoun­ tered U.S. criticism. P. Gore-Booth, With Great Truth and Respect (London, 1974), 2 53-254; Bossuat, L'Europe, 3 72 -3 74 . 55 Balassa, “Organized," 8 7-8 8 ; Ehrmann, Organized Business, 158; Lynch, France, 206. 56 Balassa, “O rganized,” 450, also Bj0l, France, 388; Faure Interview (1988), 3. 57 Balassa, “O rganized,” 450; Hanns Peter Muth, French Agriculture and the Political Integration of Western Europe (Leyden, 1970), 1 9 - 5 1 , 113. More generally, Pierre Barrai, Les Agrariens français de Méline à Pisani (Paris, 1968), 3 2 5 -3 2 7.

IIO

The Treaties of Rome, 19 5 5 - 795 # tanny, the Southwest, and the Massif C entral, largely p roducers o f wine and vegetables. T h ese priorities w ere also consistent with governm en t m odern iza­ tion plans at the tim e, th o u gh later governm ents w ould unsuccessfully seek to shift p ro d u ctio n into com m odities with h ig h er value-added.58 Farmers, in contrast to industry, had consistently pressed fo r E uropean co o p ­ eration since well before the Schum an Plan in 1950. M ajor farm leaders were o p en abou t the structural sources o f their preferences: Western Europe runs a deficit. . . in precisely those products whose production we could increase. . . . France would thus be assured, in a community which grants a preferential exchange treatment to its member states, that it would be able to in­ crease, without risks, its production in the certainty o f seeing it absorbed as a mat­ ter o f priority.59 In 1949 farm group s p rop osed sectoral liberalization o f European agricultural trade, to be pursued sim ultaneously with efforts to achieve com m on prices, har­ m onize the con dition s affectin g agricultural costs, and prom ote the circulation o f labor and capital. W ithin E urope, only Britain and G erm any im ported so m uch as to have a significant im pact o n French com m odity prices. Initially the focus was on Britain, by far the larger im porter, but w hen British opposition to any agricultural arran gem en t becam e clear, the FNSEA reversed position, argu­ in g that Britain should be e xclu d ed from any European m arket. In any case, there co u ld be “n o equivocation” in the dem an d, a FNSEA paper stated in 1952, that a p referen tial arran gem en t should p ro tect French p roducers from world m arket pressures. T h is go al required n ot ju st an FTA but a custom s un ion.60 Pressure fo r agricultural exp o rt m arkets rose in the late 1950s. As lo n g as France rem ained a n et im porter, rising farm prices could be achieved through im port substitution, with the cost o f price supports born by French consum ers and exp a n d ed production actually im proving the French trade balance. By the m id-1950s, however, agricultural m o d ern ization — the co-called révolution silen­ cieuse— was creating surpluses, as F ran ce’s enorm ou s reserve o f underutilized land was b ro u gh t into intensive production . W heat p roduction increased over 800 p ercen t, sugar and wine over 300 p ercen t each, creating m ore governm entfu n d ed stockpiles and subsidized exports. T h e fiscal burden soon becam e acute: in 19 55 e xp o rt subsidies totaled 64 p ercen t o f the value o f French agricultural exports. Faced with a financial crisis, the M ollet governm ent, w hich did n ot in ­ clude the Conservatives, threaten ed to lim it subsidies to agriculture but was u n ­ able to d o so. (U pon en terin g office, de G aulle was to try and fail to do the sam e.) A dom estic crisis loom ed, requiring eith er reductions in agricultural in­ com es o r increases in dom estic subsidies. A n arran gem en t fo r p referen tial treatm ent in G erm an m arkets was the only way to m aintain the system o f subsidized farm incom es. M arjolin rep orted that 58 Mahant, French, 2 19-220; Lynch, France, 146-168. M Muth, French, 88; Yves Tavernier, Le Syndicalisme paysan: FNSFA, CJNA (Paris, 1969). 24. 60 Muth, French, 7 m .

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farm ers w ere “quite enthusiastic” ab ou t the EC, th ough even they may have re­ quired a little en co u rag em en t from the governm ent. C oop eration between G er­ man and French p eak organizations, initiated in 1950, intensified; the two groups co n tin u ed to con sult d u rin g the R om e T reaty negotiations.61 Farm groups w ere sufficiently in fluen tial that, o n e decision-m aker noted, “any French gov­ ern m en t was o b liged to d e fe n d a com m on agricultural policy fo r the E C .” Rati­ fication o f any com m on m arket proposal w ithout adequate agricultural provi­ sions was con sidered difficult, perhaps im possible; alon e am ong interest groups, farm ers telegrap h ed all French parliam entarians on the eve o f the Treaty vote to ask fo r their support.62 N eith er industrialists n o r farm ers felt any abstract com m itm ent to the E uro­ pean idea o r to supranational institutions. Like their G erm an counterparts, they were skeptical o f strong supranational institutions. CN PF officials feared a re­ new al o f the cartel-busting, price-setting dirigisme associated with M onnet. T h ey frow ned on proposals fo r an investm ent bank and a E uropean com petition p o l­ icy. O ptim al from the C N P F perspective w ould have been co n tro lled liberaliza­ tion m anaged by sectoral business associations; a broader package o f safeguards w ou ld also be accep table.63 A 1952 n ote from farm groups to the m inister o f agricu ltu re observed that “fu n ction creates the o rg an __ Institutions, to the e x ­ tent they are necessary, can follow only from the facts.”64 Farmers appear to have favored a long-term , bilateral arran gem en t with G erm any that w ould assure them a larger share o f specific G erm an m arkets w ithout o p en in g France to stiffer co m ­ petition from Italy o r n orthern E urope, particularly in fruits and vegetables, ch eap w ine, and diary products. Alternatively, they prop osed a system o f sectorby-sector E uropean corporatist institutions in w hich p roducers w ould be directly represented. Like the CN PF in industrial affairs, the FNSEA op posed auton o­ m ous supranational institutions patterned on the E C SC H igh Authority and p re­ ferred that unanim ity votin g be retain ed until a com m on policy was in p lace.65 T h e D om estic Decision: A “E uropean p o licy” o r a “policy o f balance in E u ro p e”? T h e re w ere both econ o m ic and geopolitical m otivations fo r cautious French support fo r the Treaty o f Rom e in 1956. W hat does the process o f preferen ce aggregation in France tell us ab ou t their relative weight? T h e p rep o n d eran ce o f evidence, I argue, supports the prim acy o f econ o m ic m otivations, as predicted by the eco n o m ic theory o f com m ercial policy. T h e m ost straightforw ard evidence in favor o f econ o m ic interests is simply that the F rench position was n ot uniform but highly differentiated across e c o ­ n om ic sectors precisely in the m ann er predicted by political econ om y theory. T h e m ost consistent go al o f postwar French governm ents, regardless o f their 61 Muth, French, 84, also 7 m , 72 -78 , 88; Mahant, French, 224-228, 293ff. 62 Mahant, French, I26ff, 134, 13 5 -15 3 , i68ff; Balassa, “Organized,” 104. 63 Mahant, French, 182-192; Bj0l, France, Annexe; Balassa, “Organized,” 401-402. M Muth. frrruh, 85, also 10 4-105. 65 Milward, Rescue, 312. O n the longer-term strategy, 285-293, also reporting that earlier sugar producers had opposed cooperation and throughout dairy producers had opposed supranational institutions, preferring bilateral arrangements. I I 2

The Treaties of Rome, 19 55-1958 geopolitical aims, was the develop m en t o f e xp o rt m arkets in France’s largest sec­ tor o f com parative advantage, agriculture. From M inister o f A griculture Pierre Pflim lin’s “G reen P o o l” in 1950 onw ard, such plans tended to b e carefully lim ­ ited to precisely those com m odities— w heat, dairy products, sugar, and w ine— in w hich France p ro d u ced a substantial exp ortable surplus. Yet nearly five years o f n egotiation w ithin the sixteen-nation O E E C , laun ch ed on the basis o f several French proposals, en d e d in failure w hen countries outside the Six, notably Brit­ ain and the Scandinavian countries, could n ot be con vin ced to cooperate. N e­ gotiations after Messina sim ply con tin ued an existing French policy, with a re ­ d o u b led intensity due to the grow ing fiscal crisis o f French agriculture.66 French support fo r industrial tariff liberalization was, as political econ om y th eory predicts, in every way m ore cautious. Interest in con trolled liberaliza­ tion coexisted with con cern s abou t uncom petitiveness in French policy, w hether unilateral, bilateral, region al, o r m ultilateral. In 1950, 1952, and 1 9 5 4 -5 5 French governm ents had prop osed liberalization only to be b locked at hom e by balance-of-paym ents crises and sectoral pressures fo r protection .67 T h ro u gh o u t the 1950s, the governm en t and the M inistry o f Industry, like the Patronat, re ­ m ained skeptical abou t French industrial com petitiveness in the face o f high im put, labor, and social costs, as well as persistent overvaluation o f the franc. Any com m on m arket, the French governm en t m aintained, would therefore have to be acco m pan ied eith er by devaluation, co n sidered politically unacceptable, or by safeguards, com pensation, and econ o m ic policy coordin ation , as well as ar­ rangem ents fo r agriculture, co lo n ial trade, and atom ic energy.68 O n ly consistent French sup port fo r atom ic en ergy and arm am ents coop eration , while supported by sectoral interests, seem to be o f particular geopolitical im portance. Sup p ort from big business, the M ollet governm en t quickly co n clu d ed , was in­ dispensable. T h e decisive dom estic determ inants o f parliam entary ratification w ere, in the view o f the M ollet governm en t, the views o f econ o m ic interest groups, particularly industrialists and farm ers. Producers were carefully polled; peak agricultural and industrial group s were constantly consulted. T h e close­ ness o f consultation reflected relative power: farm ers w ere “alm ost associated with the negotiation s,” the Patronat and overseas p roducers group s som ewhat less, and unions, despite close links to governin g SFIO , the least.69 66 Bossual, France, 1/87-189, II/786-794; Milward, Rescue, 268, 291-293: Alan S. Milward, The European Agricultural Community, 1948-1954, EUI Working Paper no. 86/254 (Florence, 1986), Muth, French, 76 -90 ; Barrai, Agrariens, 325; Lynch, France, 129 -145, 170 -17 8 , 180. 67 On the immobilism o f the IV Republic, Philip Williams, Crisis and Compromise (London, 1964), 369, 423,426. 68 Lynch, “Restoring," 6 5-6 6 . Devaluation was viewed as incapable o f solving underlying prob­ lems o f wage inflation and lower productivity, but likely only to lead to stop-go policies, as was be­ ginning to occur in Britain. Socialists viewed it skeptically for political reasons. Cardozo, “Project," 70. This, not geopolitical concerns per se, led the French government to reject supranational insti­ tutions and thoroughgoing liberalization embodied in the Beyen Plan o f 1953-54, which one Quai d ’Orsay report characterized as a plan for the “pastoralization o f France, a dominant idea o f Nazism.” Gérard Bossuat, “The French Administrative Élite and Europe,” in Building Postwar Europe: National Decision-Makers and European Institutions, 19 4 8 -6 3 , edited by Anne Deighton (London, 1995, 27-28. 69 Faure Interview, 3 -4 . Even in the 1960s, Europe was an issue o f relatively little importance to the French electorate, as compared to the war in Algeria (during the early part o f the decade) and the state o f the economy (later). Only 4 percent o f the French public in 1957 considered interna­ c i

T h e C h o ic e fo r Eu r o pe

T h e close relationship betw een interest groups and the govern m en t was n ot w ithout in flu en ce. M ollet h im self had initially b een skeptical o f the French eco n o m y ’s ability to withstand liberalization; m ore to the point, he d o ubted the willingness o f the Assem bly to ratify any Treaty con tain in g a custom s un ion. His view appears to have been ch an ged in part by the support o f the CNPF, as well as M arjolin and Pineau, long-tim e prop onents o f m arket liberalization. Support from the CN PF was secu red only w hen the M ollet governm en t wrote CN PF d e ­ m ands essentially verbatim in to the French n egotiatin g position. In Septem ber 1956 the critical internal governm en t deliberation on the French negotiating position reach ed the con clusion that six con dition s had to be m et to secure p ar­ liam entary ratification. Five o f them w ere m ajor CN PF proposals: (1) un an i­ m ous con sen t fo r m oving to the secon d stage; (2) harm onization o f social costs; (3) m aintenance o f e xp o rt and im port taxes until France runs a positive balance o f payments; (4) safeguard tariffs for states in balance o f payments difficulties; (5) inclusion o f overseas territories. O n ly the suspension o f the Treaty in case o f a fo reign policy crisis, as in A lgeria, cam e from elsew here.70 It is striking how consistendy such dem ands, w ell known to the governm en t from previous n eg o ­ tiations, w ere pursued, from Pinay’s rem arks at the Messina m eeting to the sign­ ing o f the Treaty. T h e tim ing is telling. By 1956, with its failure to m eet O E E C obligations trig­ gerin g severe international criticism , a rising prospect o f G A T T liberalization and an FTA, both G erm any and Britain calling fo r currency convertibility, and French industry enjoying exp o rt success despite an overvalued currency, the French govern m en t cam e to see som e sort o f industrial trade liberalization as in ­ evitable. M any politicians believed that liberalization m ight increase pressure fo r industrial m odernization and red u ce im p ort costs. Between 1948 and 1958, this had been a central objective o f the French governm ent, but unilateral struc­ tural adjustm ent policies, such as indicative p lanning and subsidies, had proved in effective.71 N early all French leaders involved in the E uropean project during this p e rio d — in clu d in g Edgar Faure, M ollet, Bourges-M aunoury, Schum an, P ineau, M aurice Faure, and M arjolin — advocated trade liberalization on these grounds; C h arles de G au lle expressed a sim ilar view even m ore forcefully ju st a few years later.72 Yet this is n ot to say that the Treaty was an effort by technocrats to im pose m odern ization . T h e custom s un ion was strongly op posed by m inisterial officials, as well as specific disadvantaged econ o m ic sectors. A poll o f officials at the

tional economic issues like the Common Market as the most important problem facing France. Carolyn Warner, Controlling the Political Costs of European Integration (mimeo, Arizona State University, Tempe, 1995), 12. 70 Noël Interview, 25; Guillen, “Europe as a Cure for French Impotence?" in Nolfo, Power, 509; Lynch, France, 178. In addition, the French government insisted on a long transition period, free cir­ culation o f labor, and other proposals strongly advocated by the relevant producer groups. 71 Lynch, France, 210, also 1 3 4 -1 4 3 ,2 1 1 -2 1 2 . 72 Noël Interview (1988), 24-30; journal Officiel, Debats, Assemblée 5.7.57, 3299, 3304; 6.7.57 3374; Camps, Britain, 80; Francis O ’Neill, The French Radical Party and European Integration (New York., 1981), 93; Robert Rochefort, Robert Schumann (Paris, 1968), 328-329; Milward, Rescue, 133, Robert Marjolin, Architect of European Unity: Memoirs, 19 1 1 -1 9 8 6 (London, 1989), 249-255.

114

The Treaties of Rome, 19 5 5 -19 5 8 M atign o n revea led that 80 p e rc e n t re je cte d the Spaak R eport. F un ction al e c o ­ n o m ic m in istries stron gly o p p o sed b o th trade liberalizatio n an d sup ranational in stitutions. In A p ril 19 5 6 , rep resen tatives o f tech n ica l m inistries re jecte d the S p aak R ep o rt. T ypical w ere the reactio n s a m o n th later o f the M inister fo r N atio n al E co n o m y an d F in an ce, Paul R am adier, an d the S ecretary o f State for E co n o m ic A ffairs, Jean M asson. T h e y cla im ed the custom u n io n re fle cte d a lib ­ eral id e o lo g y that d iv erged fro m the strategy o f state in terven tio n and p u blic secto r in vestm ent p u rsu ed since the w ar an d m igh t lead to collap se o f en tire sec­ tors o f the F ren ch econ o m y; m a n a ged trade with n eg o tia ted m ark et shares was p re fe ra b le .73 A s w e have seen , business su p p o rt was essential. A seco n d a ry co n ce rn o f the F ren ch go v ern m en t, p re d icted by bo th the p o lit­ ical e co n o m y an d g e o p o litica l exp lan a tio n s, was to m aintain the e co n o m ic via­ bility o f p resen t an d fo rm e r F ren ch co lo n ies. T h e go v ern m e n t o p tio n s a im ed at ach ievin g this go a l seem in gly w ith ou t co n sid era tio n fo r the d ip lo m atic im p lica­ tio n s— a p o licy in co n sisten t w ith a g e o p o litica l e x p lan a tio n but easily co m p atible w ith an e co n o m ic o n e. T h e F ren ch g o v e rn m e n t’s first ch o ice w ou ld have been a bilateral trade a g re e m e n t w ith G erm an y go v ern in g agricu ltu re, industrial tar­ iffs, a n d arm am ents; it was sign ed b u t im p lem en ta tio n was o bstru cted by G erm an officials.74 A n o th e r o p tio n that m ig h t seem ou tlan d ish today, a p referen tia l trad­ in g a rra n g e m en t w ith the British C o m m o n w ea lth , was taken seriously. In a d a r­ in g so lo d ip lo m atic foray in S e p te m b er 1956, M o llet traveled to L o n d o n to e x ­ p lo re e co n o m ic co o p era tio n w ith Britain. H e was re b u ffed , n ot least because the British w ere aware that F ran ce w ou ld insist on in clu d in g a gricu ltu re.75 A n o th e r o p tio n , co n stru ctio n o f a G A T T -co m p a tib le custom s u n io n , was o p p o sed by F ren ch a gricu ltu ral in terests an d w ou ld have d o n e little to p rovide new invest­ m e n t a n d trad in g o p p o rtu n ities fo r p resen t and fo re ig n co lo n ies. A 19 5 6 F rench g o v ern m e n t study co n c lu d e d that the F ren ch U n io n co u ld be m ain tain ed on ly th ro u g h E u ro p e an fin an cial assistance, in vestm ent, an d m arket o p p o rtu n ities— b o th m a jor F ren ch d em an d s in the T reaty o f R om e n egotiation s. Far fro m b e ­ in g a threat, trade o p p o rtu n ities an d in vestm en t capital fro m o th e r E u ro p ean co u n trie s w ere th e o n ly re m a in in g m eans o f su p p o rtin g it; som e a cco m m o d a ­ tion fo r overseas territories fig u red p ro m in en tly a m o n g im p erial supports, such as the G aullists.76 T h e re is n o e vid en ce that E u ro p ean in tegratio n e m erg e d b e ­ cause it was geo p o litica lly su p erio r to any o f these o th er alternatives; if anythin g it was less attractive. It e m erg e d becau se it was feasible an d ach iev ed F rench e c o ­ n o m ic objectives. W h ile in dustrial trade liberalizatio n in E u ro p e was in creasin gly seen as both ” Bj«l, France, 260; Küsters, Gründung, 338-340, 3 64 -36 8, 436, 476, 5 0 8 -5 12 ; André Siegfried, “Introduction,” in Siegfried, Edouard Bonnefous, andJean-Bapüste Durosclle, eds., L ’Année politique 195 7 (Paris, ig5 8 ),xviii. 74 Wormser Papers, MAEF Microfilm, 280/9, 2 14 -2 1 9 ; MAEF 306, 2 5 -2 6 (EC Archives, Fiesole, 1 953 ~ 4 > *955 ); Lynch, France, 2 1 4 -2 1 5 ; Bossuat, L ’Europe, 274. 75 Lynch, France, 179 -18 0 . Mollet explored the possibility o f reviving wartime proposals for polit­ ical union between France and Britain, as well as France and Benelux joining the British Com m on­ wealth. Richard Griffiths, “Th e Dynamics o f Policy Inertia: Th e UK’s Participation in and Withdrawal from the Spaak Negotiations” (Florence, manuscript, 1989), 1; Guillen, “Frankreich," 7, 1 0 - 1 1 . 76 Lynch, France, 199 -20 5. Serge Berstein, “T h e Perception o f French Power by the Political Forces,” in N olfo, Power, pp. 3 4 0 -3 4 1; Mahant, French, 8 5 -9 7 , 16 5 -1 6 7 .

"5

T h e C h o ic e fo r E u r o pe

d esirab le a n d in evitable, the n u m ero u s reservation s o f in dividual m inistries, sectoral p ressu re g ro u p s, a n d in dividual p arliam en tarian s m ean t that active go v­ e rn m e n t lea d ersh ip was re q u ired . In co n trast to th e n orm al d ecen tra lize d p ro ­ ce d u re s o f th e F ourth R e p u b lic, w h ereb y a w eak ce n tra l exe cu tive d evo lved in i­ tiative to in dividual m inistries, M o llet’s team tightly co n tro lled in fo rm atio n and in flu e n c e . T h is sm all team c o llu d e d to d a m p en th e im p act o f o b jectio n s from p rofessionals, universities, b u reaucrats, a n d business interests that p erco lated u p th ro u g h the m inistries; É m ile N o ël, M o llet’s chef du cabinet, sen t back n o n ­ co m m ittal respon ses o ve r M o lle t’s sign ature, system atically rem o vin g item s fro m th e ca b in e t agen d a. R ep resen ta tio n in the “co n seil é c o n o m iq u e ” was carefu lly restricted by M arjolin an d Faure. W h erev er possible, civil servants w ere co n su lted o n ly late in th e day.77 T h e g o v ern m e n t c o llu d e d w ith the CN PF, d elib era tely d e n y ­ in g d e ta iled in fo rm atio n to the m ajority o f sectoral an d sm all business group s, as w ell as e co n o m ic m inisters, un til late 19 5 6 , m o re than a yea r after n eg o tia ­ tions b e g a n .78 W h ile M o llet rarely m e n tio n e d the Spaak C o m m ittee in m eetings w ith m inisters, treatin g it p u b licly as a g ro u p o f exp erts, n o t an in te rg o ve rn m en ­ tal n eg o tia tio n , P in eau m et qu ietly w ith Spaak b e fo re e ach session. C erta in ly at the V en ice m e e tin g in J u n e, P in eau co n trived to a p p ea r u n d e cid e d a b o u t the C o m m o n M arket, th en a g re e d qu ietly to th e S p aak R ep o rt, w h ile his p u blic sp ee ch es stressed F ren ch reservations. A t this p o in t, how ever, M o llet h a d y et to m ake a firm d ecisio n to m ove forw ard.79 T h e ro le o f p arliam en t a n d the p u b lic fu rth er co n firm s the prim acy o f e c o ­ n o m ic interests. T h e E C was hard ly n o tice d , w ith all atten tio n o n A lgeria; the d e ­ bate was d o m in a te d by tech n ica l discourse an d specialists fro m in terest gro u p s, with w h o m th e go v ern m e n t d e alt directly.80 V o tin g p atterns o n the E C d iffered from those o n th e E D C p recisely becau se ge o p o litics was now less im p ortan t, the p ro -E u ro p e a n M RP an d the o bstructio n ist C o m m u n ists a n d Poujadists aside. T h e vo te u n ited the Socialists, w h o h ad split o ver the E D C o n g e o p o litica l gro u n d s; th e tu rn in g p o in t, several p articipants recall, was the sign in g o f the L o n d o n A cco rd s, resolvin g th e G erm an situation. T h e T reaty w on o ve r C o n ser­ vatives an d R adicals largely fo r e co n o m ic reasons. A m o n g Con servatives, as well as G aullists, those p arliam en tarian s w ith close ties to sm all business an d sm all farm ers re m a in e d o p p o sed b u t w ere m o re than b a lan ced by rep resen tatives o f b ig business, m o re p ro sp ero u s a gricu ltu re, a n d the n o n -C o m m u n ist u n io n s.81 T h e vote split th e G aullists, th e party m ost likely to o p p o se o n geo p o litica l gro u n d s, p recisely becau se th ere was n o a g re em en t that any g e o p o litica l issues w ere at stake. O p p o n e n ts w ere m otivated p rim arily by geo p o litica l co n cern s and

77 Marjolin, Architect, 2 97-3 0 1; Girault, “Decision," 69; Prate, Quelle, 5 9 - 6 1 ; Bossuat, “French Administrative,” 3 0 -3 1 78 Balassa, “O rganized," 177-18 0 , 263-265; Bj0l, France, Appendixes. 79 Pineau and Rimbaud, Le Grand pari, 19 4 -19 9 ; Marjolin, Architect, 304; Bossuat, L'Europe, 3 2 0 -3 2 1. 80 Faure Interview, 3—8. 81 Kiersch, Frankreich, 903; Noël Interview, 7; Faure Interview, 24. O n the evolution o f the Socialist Party’s commitment, see also Albert du Roy, and Robert Schneider, Le Roman de la rose: D'Epinay à l'Elysée, l ’aventure des Socialistes (Paris, 1982), 24; Pineau in Serra, Il rilancio, 185, 282-283.

Il6

The Treaties of Rome, 19 5 5 - 19 5 # a distaste fo r supranationalism ; supporters reco gn ized econ o m ic benefits. D e­ spite his virulent andpathy to the E D C and cryptic criticism o f Euratom on geo p o litical grounds, d e G au lle h im self rem ained silent on the E C from Messina th rou gh ratification, sup porting his subsequent claim that h e w ould also have n egotiated a Treaty o f R om e, albeit o n e that was “som ew hat d ifferen t”— though h e was closely in fo rm ed about the negotiations. A fter com in g to power he quickly stated that France should fulfill its treaty responsibilities. D ebré, the Gaullist party spokesm an on E uropean issues, initially agreed to support the C om m on M arket if investm ents w ere m ade available fo r overseas territories and the treaty was n o t irreversible, b ut in the e n d o p posed the final text, as he had the ECSC, a rgu in g that m ajority votin g w ould perm it G erm any to dom inate the proposed structure. Yet the G en eral’s silence and the absence o f com p ellin g geopolitical argum ents perm itted a m ajority to support the Treaty on essentually econ om ic gro un ds.82 Parliam entary rh etoric focused prim arily o n econ o m ic con cerns.83 Faure d e ­ clared that “the ch o ice fo r France lay betw een go in g on as she had been , ac­ cep tin g that she w ould always be the feeblest, b eh in d the others, p ro d u cin g at h ig h er prices than anyone else, w hich was d ecad en ce, o r accepting econ om ic rehabilitation by C om m unity p ro ced u res.” H e exp loited am biguities in the T reaty to overstate the e xten t to w hich French dem ands had been m et in such areas as social harm onization and extern al tariffs. Farm groups criticized the T reaty fo r n ot go in g far e n o u g h but nonetheless telegrap h ed every D eputy and Sen ator on the eve o f the vote, callin g fo r ratification. G ain ing the support o f farm ers was “o u r big political success,” N oël recalls; it was achieved by M arjolin, w ho em ployed econ o m ic argum ents.84 A s in Britain, the vast majority o f p rom i­ n en t referen ces to “G erm an dom in ation ” co n cern ed economic n ot geopolitical exclusion: the fear G erm any and Britain m ight form an FTA or liberalize within the G A T T .85 T h e official argum ents o f the Socialists were alm ost entirely e c o ­ nom ic; the geopolitical argum ents w eigh ed on balance against the Treaty. T h e critique o f the M endèsists, the only centrist partisan gro u p to uniform ly oppose the T reaty in the A ssem bly— fo r exam p le, “the proposals w ould reduce France to the status o f a province and that she w ould lose h er originality, strength and radiance in the w orld”— rested n ot on geopolitical con cern s but on fear that free trade w ould un derm in e French industry and the balance o f paym ents, thus red u cin g France to H itler’s dream o f a “potato patch [under] the decisive and unilateral in flu en ce o f G erm any.” 86 By contrast, direct evidence o f the im portan ce o f geopolitical factors is mod85 Bossuat, L ’Europe, Mahant, French, 9 6 -9 7 ; Maijolin, Architect, 258-259; Edmond Jouve, Le Général de Gaulle et la construction de. l ’Europe (1940-1966) (Paris, 1967), 2:204-205 and on the 1953 Plan Debré, 1 :2 6 l~ 3 l6 ; 2 :4 21-42 5 ; Interview with Noël, 18 -19 . 83 For an detailed overview o f the debate and the positions o f the various parties, see Kiersch, Parliament, who reaches this conclusion on 292. 84 Mahant, French, 17 m ; Noël interview, 25. 85 E.g., Mahant, French, 158IT; Kiersch, Parliament, passim. 86 Mahant, French, 145, 147; O ’Neill, French, 9 3-96 , also 79 -86 ; Pineau and Rimbaud, Grand, 268ff.; Wilfried I-oth, “The French Socialist Party, 1947-1954,” and Denis Lefevre, "The French So­ cialist Party, 19 5 4 -19 5 7 .” in Griffiths, ed.. Socialist Parties 2 5-56. especially 4 3 -47.

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est. L e t us co n sid e r b elo w the fo u r m ost p lausible factors, n am ely the G erm an p ro b lem , th e im p act o f Suez o n F re n ch grea t-p ow er status, the im p o rtan ce o f the F ren ch n u cle a r p ro gram , a n d the p ro -E u ro p e an id e o lo g y o f the go vern m en t. Scattered rh eto ric aside, litd e e vid en ce supports an im p o rtan t ro le fo r c o n ­ cern a b o u t G erm an y in m o tivatin g F re n ch su p p o rt fo r th e Treaty. M ost F rench p o litician s b e lie ve d th e con trary, n am ely that the T reaty w ou ld isolate F rance fro m B ritain, its n atu ral an ti-G erm an ally, a n d the reso lu tion o f this issue was w idely view ed as a dem o n stration o f the prim acy o f e co n o m ic o ver geo p o litica l in terest. B e fo re th e cab in et, M arjolin stated that an FTA was “p olitically n ece s­ sary b u t e co n o m ica lly im p o ssib le.” T h e p arliam en tary co m m ittee that co n sid ­ e re d the F T A in 19 5 7 exp licitly re co g n ize d that co o p era tio n w ith Britain was g e o p o litica lly p re fe ra b le b u t co n c lu d e d that “c o n cre te o b jectio n s to a free trade a re a ,” in clu d in g d e clin in g F ren ch in flu e n ce o ver E C e co n o m ic policy, “o u t­ w eig h ed the less w ell-d e fin e d p o litica l ga in s” fro m co o p era tio n w ith the British. E ven P in eau privately a ck n o w le d ge d that clo ser relation s w ith Britain w ere d e ­ sirable but that F T A was ju s t n o t in F ra n ce ’s e co n o m ic interest; Faure a lo n e clearly v o ice d g e o p o litica l su p p o rt fo r th e E C o p tio n .87 S u p p o rt fo r a British al­ lian ce was stron g in the Q u a i d ’O rsay, w h ere a m ajority favorin g co llab o ratio n w ith B ritain split w ith a sm aller g ro u p in favor o f E u ro p ean in tegratio n . Som e at the Q u ai fav o red E uratom o r even the F T A as th e “lesser o f . . . evils,” b u t even th ere the lo u d est vo ice was that o f O liv ier W orm ser, w hose skepticism was g e n ­ erally b ased on e co n o m ic o b jectio n s.88 D u rin g the T reaty o f R o m e n egotiation s, F ran ce b lo ck e d British p rop osals fo r an F T A with the prom ise that they co u ld be n eg o tia te d later, b u t th e g o v ern m e n t h a d n o in ten tio n o f d o in g so, as its c h ie f n e g o tia to r la ter reca lled . P in eau kn ew that “o n e co u ld n o t fin d two d o zen d ep u ties in F ran ce to vo te fo r [the F T A ].” T h e F rench go v ern m e n t p ro p o sed to co n sid e r th e F T A i f o n ly a gricu ltu re w ere in clu d ed . T h e w h o le question o f rela­ tions w ith Britain was d e lib era tely o b fu scated b e fo re the A ssem bly— an act in ­ con sisten t w ith the w idesp read claim that Suez h a d crea te d a cle a r anti-British con sen su s in F ran ce.89 T h e tim in g o f the n eg o tia tio n s also belies a g e o p o litica l exp lan a tio n . E co ­ n o m ic in te gratio n fo llo w ed , rath er than p re ce d e d , the resolution o f ou tstan d in g g e o p o litica l issues, such as th e fo rm a tion o f N A T O an d the W EU , the disposition 87 Balassa, “O rganized," 318, also 2 6 6 -2 7 1 ; Bossuat, L'Europe, 3 71, also 3 7 4 -3 7 7 ; Prate, Quelle? 5 9 - 6 1 ; Mahant, French, 145. 88 Lynch, France, 1 7 1 , also 12 9 -14 5 , 1 7 0 -17 8 , 180; Bossuat, L ’Europe, 267-283, 3 17-3 2 0 , 3 8 6 389. T h e Quai d ’Orsay also saw the EC as a threat to imperial commitments, an instrument o f German political dominance and, probably as a result, questioned the sustainability o f trade liberal­ ization. Later Quai d ’Orsay criticisms focused on the irrevocable nature o f the EC legal commitment and the status o f North Africa. O f top civil servants, only the director o f Overseas Finances, Jean Sadrin, strongly supported the EC. Küsters, Gründung, 338 -340 , 3 6 4 -3 6 8 ,4 3 6 , 476, 512; Milward, Rescue, 2 08 -210 ; Gérard Bossuat, “T h e French Administrative Elite and Europe,” in Anne Deighton, ed., Building Postwar Europe: National Decision-Makers and European Institutions, 19 4 8 -6 3 (London,

1995 ). 20ff-

89 Lieber, British, 75, cites Norman Kipping, head o f the main British business federation. Henri Weber, l.e parti des patrons: Le CNPF (19 4 6 -19 8 6 ) (Paris, 1986), îooff; Frank, “T he French Alter­ native,” 1 7 1 - 1 7 3 . Cf. Lynch, France, 1 7 6 -1 7 7 .

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The Treaties of Rome, 19 5 5 - / 9 5 # o f the Saar and M oselle issues, and the launching o f the French nuclear p ro ­ gram . T h e re after M on net had to be con vin ced that the French econ om y could w ithstand the pressure; it was M arjolin — hardly a strong pro-E uropean but the individual most strongly favorable to liberalization on econ om ic gro u n d s— who played a decisive role. A t this p o in t the French governm en t drop p ed its em ph a­ sis on Euratom , w hich had been strongly pushed by M onnet, and replaced it with the C om m on M arket.90 D irect evidence for the w idespread claim that the Suez crisis fundam entally altered French preferen ces is sparse. T h e claim rests very heavily on subsequent con jectures by A d en au er’s associates, who w ould have had no way o f knowing. M ore reliable French evidence and, above all, the tim ing o f decisions con vin c­ ingly refute it. T h e m uch-cited co in cid en ce o f tim ing is superficial. It results from the prem editated French decision not to start n egotiatin g seriously until m id-Septem ber, after various outstanding geopolitical and territorial issues, n ot least the Saar, w ere near resolution. A m onth before Suez, at the latest, M ollet had already d ecid ed to seek ratification o f the custom s union. T h is decision was taken in February, May, August, o r Septem ber 1956, d ep en d in g on how one reads the evidence; serious negotiations began in O ctober, with the French pressing their partners to w ork quickly. Pineau asserts it had been d ecided early; his behavior at Venice and M ollet’s selection o f a staff support it. H ence agree­ m ent in early N ovem ber is hardly surprising. N early every oral history rejects a decisive linkage betw een Suez and E urope. T h e two leaders appear, m oreover, to have agreed before the critical call from Eden cam e through. T h e 6 N ovem ­ ber m eeting itself had been scheduled weeks previously with the aim o f perm it­ ting M ollet and A d en au er to circum vent E rh ard’s opposition; close associates had b een n egotiatin g for days. It was destined to succeed. In any case, would M ollet really m ake such a m om entous decision on a few hours’ reflection about the m ean ing o f Suez?91 T h e Suez exp lan ation contains two fu rth er contradictions. First, it should have led to increased interest in Euratom . Vulnerability o f M iddle East oil supplies was “the m ost p ortentous a rgu m en t” advanced by advocates o f atom ic energy co o p eratio n and the Suez, crisis “furnished all the factual evidence they n ee d ed .” Yet Euratom was all but d ro p p ed in favor o f the custom s union at this point. S eco n d , if Suez were decisive, n egotiated agreem en t should have been reached th rou gh a significant softening in the French position. Yet between Suez and the signing o f the Treaty the reverse occurred: with the excep tion o f the guttin g o f Euratom , com prom ises involved G erm an concessions, notably on agriculture and French overseas territories. In sum, there is little evidence that Suez did

90 Noel Interview, 24, 30. 91 In February, Pineau announced to the Assembly that the negotiations on the customs union would move forward beginning in late August. Serious study began in April. Others see a final deci­ sion that France could withstand the economic costs under specified conditions as having been taken in August. Noel Interview, 23-24; Von der Groeben Interview; Faure Interview, 4. In French oral his­ tory, only Pineau occasionally terms Suez “decisive,” though this contradicts his other testimony. See also Bossuat, ¡.’Europe, 324-325, 334-337. Cf. Küsters, Gründung, 285-304.

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m ore than supply the French governm en t with an extra argum ent to shift the views o f a few wavering parliam entarians.92 N o d o u b t the desire to achieve a geopolitical objective, an in d ep en d en t French n uclear w eapons program , helps exp lain French support fo r Euratom , though e con o m ic interests are also consistent with this position. T h e French military and atom ic en ergy establishm ents, backed by support from various parliam en­ tary constituencies, h ad been pressing fo r an in d ep en d en t n uclear capability since 1954. T h o u g h the n u clear program rem ained secret, Gaullists and C o n ­ servatives strongly supported atom ic energy coop eration. T his was the issue o f greatest salience to “E uropean s”— it was the only p o in t in a n um ber o f prom i­ n en t statem ents by the MRP, a party still closely tied to M onnet, and M on n et’s A ction C om m ittee. G eop olitical con cern s m eant that no French governm ent was in a position to ren ou n ce the m ilitary use o f n uclear w eapon s— as the G erm an SPD and M o n n et’s A ction Com m ittee dem an ded.93 Yet Euratom was in the en d a sectoral sideshow. A lth o u gh the French appear to have originally supported negotiations in large part to achieve Euratom , by late 1956 (or earlier, if we are to believe Pin eau), it had been relegated to the position o f a “sm okescreen” fo r the m ore controversial custom s u n io n — a strat­ egy Pineau claim s was discussed only am ong M ollet, Pineau, and Coty until the V en ice m eeting. In any case, the French signed the Treaty o f Rom e alth ough the G erm ans had all but gu tted Euratom , largely due to industrial opposition to F ran ce’s prop osed m on op oly o n basic n uclear inputs. In the end even a g e o ­ political goal as fun dam en tal as autonom ous n uclear w eapons p roduction in ­ flu en ced policy only within a narrow area.94 We are thus left with the geopolitical claim that the pro-E uropean position o f the M ollet govern m en t played an im portant role in defin in g the French posi­ tion. T h is is surely correct, yet it should be qualified in two ways. First, we have seen that there is at least som e reason to suspect that any governm ent, perhaps even o n e with G aullist participation, w ould eventually have p rom oted similar substantive go als— though perhaps n ot within the sam e institutional fram ework. In the cen ter o f the French political spectrum , M endès-France, n ot M ollet, was the politician with an excep tio n al position on E urope. Second, it is im portant to rem em ber that pro-E uropeanism was perm itted to prevail in M ollet’s own party, and th erefo re b oth in his section o f ministers and in subsequent ratification votes, n ot because o f the geopolitical im plications o f the Treaty but because o f its lack o f geopolitical im plications. H ere, too, econ o m ic interest may well have b een m ore im portant. M ajor is,2 Jaroslav Polach, Euratom: Its Background, Issues, and Economic Implications (Dobbs Ferry, N.Y., >964). 39 95 Bossuat, ¡.'Europe, 3 14 ,3 28 -32 9 ,3 6 2-3 6 3 ; Serra, IIrilancio, 281-282; Mahant, France, 66;JeanPaul Brunet, “Le MRP et la construction européenne, 1955-19 57," in Berstein et al., te MRP et la construction européenne, 240; Polach, Euratom, 22-23, 6 3-65; Pierre Guillen, “I.a France et la negoti­ ation du traité d ’Euratom,” Relations internationales 44 (Winter 1985), 399; Monnet, Mémoires (Paris, 1976), 2 :6 20 -6 2 1. M Pineau and Rimbaud, Le Grand pari, 194-199; Marjolin, Architect, 304; Bossuat, L ’Europe, 320 3 2 1,3 6 2 -3 6 3 .

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The Treaties of Rome, 19 5 5-19 5 8 sues— F rench m ilitary sovereignty, G erm an rearm am ent, som e territorial is­ sues— h ad first to b e resolved. For the SFIO these w ere m ajor turnin g points, after w hich M ollet co u ld an n o u n ce support fo r gen eral econ o m ic integration w ithout co n cern fo r the geopolitical consequences. M oreover, the increasing ten dency to support E urope was n ot sim ply M ollet’s personal priority: it was c o n ­ sistent with the trend in SFIO policy from 1948 onwards, m arking the final vic­ tory o f m oderate p ro-E uropean forces inspired by A n d ré Philip and L eo n Blum , the “two m ajor theoretical in flu en ces over the Socialists’ European attitude,” w ho had b egu n in the early 1950s to prom ote m ore m arket-oriented econ om ic policies. O n e analyst co n clu d es that “if the n otion o f greater autonom y from the U SA in flu en ced the M ollet G overnm ent, the b e lie f that econ o m ic m odern iza­ tion d e p e n d ed on E uropean integration was o f still greater im p ortan ce.” Rather than advance geopolitical argum ents, SFIO leaders stressed that the customs union and exp ort-led growth were econ o m ic im peratives— though opposition rem ained from those co n cern e d abou t F ran ce’s lack o f com petitiveness. T h e two con dition s im posed by the Socialist congress o f 1956 on the negotiations were in large part econ om ic: social harm onization and the inclusion o f overseas territories.95 Finally, M o llet’s con tin ued willingness to con sider coop eration with Britain — until the m om ent w hen agricultural a greem en t with G erm any was se­ cu r e — suggests that E uropean ideas w ere hardly param ount. O n e im portant im plication o f the go vern m en t’s pro-E uropean stance was ac­ ceptan ce o f the gen erally quasi-constitutional form o f the EG. De G au lle said later that he too w ould have accep ted the custom s un ion, but in a d ifferen t form ; he was apparently referrin g to E C institutions, the supranational form o f which he was to com bat fo r m ore than a decade. Still, even the M ollet governm ent, like G erm an federalists, pushed fo r a carefully calculated w eakening o f suprana­ tional institutions as co m p ared to the E C SC H igh Authority; no serious consid­ eration was given to op posing the pragm atic im position o f a veto o f the transi­ tion to the secon d stage and various safeguards. T h ese were pursued to insure France against the dire p rediction s o f econ o m ic dislocation. M ollet and Faure rem ain ed m ore com fortable with the co n fed eral C o u n cil o f Ministers, not a supranational institution like the H igh Authority.9® In sum, the p rep o n d era n ce o f e vid en ce— cross-issue variation in positions, tim ing, dom estic cleavages, and political rh eto ric— suggests the priority o f e co ­ nom ic over geopolitical m otivations. T h e geopolitical con cern s cited in most ac­ coun ts (Suez and decolon ization, the G erm an problem , atom ic energy) played m odest roles; on balan ce these considerations probably m itigated against the Treaty. O n ly p ro-E uropean ideology, w hich was linked to the active role o f the M o llet go vern m en t itself, in flu en ced the French position significantly and even 95 Michael Newman, Socialism and European Unity— The Dilemma of the Left in Britain and France (London, 1983), 35. Mahant, French, 85-88, 104fr, 155fr, 162, 165; Wilfried Loth, “Der französi­ sche Sozialismus in der Vierten und Fünften Republik,” Neat' Politische Literatur 22 (1977), 221-243; Lefebvre, “French Socialist,” 4 6 -4 7 ; Interview with Noël, 5 - 6 96 Bossuat, L ’Europe, 319; Serra, Il rilanào, 281-282, 287; Milward, Rescue, 2 0 9 -211; Fanre Interview, 24.

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this im pact was secondary. M ost F rench dem ands in the negotiations were e c o ­ nom ic; they were shared by centrist parties and had been pursued in o n e form o r a n o th er fo r m ost o f the decade. A ll options fo r E uropean econ o m ic co o p er­ ation e xce p t a “small E uropean ” custom s un ion with a strong agricultural d i­ m en sio n — m ore rapid co o p eratio n o n the C on tinent, any form o f an FTA with Britain, and even, in the m edium -term , m ud dling th o u g h — were e xclu d ed by econ o m ic consideration; at most, geopolitics may help exp lain why this series o f French governm ents took a proactive stance rather than wait to be fo rced into som e form o f co o p eratio n structured by others. D espite the concessions France received o n these points, dom estic support rem ain ed fragile. Insofar as the French governm en t, acting in part fo r id e o lo g­ ical reasons, e xp lo ited dom estic procedures and support from the CN PF to p ro ­ m ote the Treaty, it rem ained vulnerable to a backlash in the form o f opposition to im p lem entation from threaten ed industrial sectors. Safeguards and vetoes w ere p o o r substitutes fo r the only policy reco gn ized by business as a solution to its problem s: devaluation. As seen earlier in the 1950s, w hen France repeatedly failed to sustain trade agreem ents, such opposition could be fatal. Even core m em bers o f M o llet’s small team o f activists d o ubted F ran ce’s ability and w illing­ ness to im p lem en t the Treaty o f Rom e. In deed, the last governm ents o f the Fourth R epu blic soon violated it, first by im posing protectionist m easures to cope with a balan ce o f paym ents crisis, then by an n oun cin g that France w ould disre­ gard the January 19 5 9 deadlin e fo r the first E C tariff reductions.97 O nly dom es­ tic eco n o m ic reform , to com e u n d er d e G aulle, could consolidate support for the Treaty. Britain: Between Commonwealth and Continent Betw een 1955 and 196 1 British policy toward E urope reversed course. W hat b egan as a policy o f ign o rin g the custom s un ion proposal and then attem pting to subvert it was transform ed by 19 5 7 into a search fo r accom m odation and finally fo r m em bership. T h e first two stages in this evolution, apathy and sub­ version, are analyzed in this chapter; the latter two are con sidered in chap ter 3. W hat explain s Britain’s app arent p referen ce fo r the status qu o o r an FTA over a custom s union? W hat accoun ts fo r the grow ing realization that som e form o f ac­ com m odation was required? M ost analysts stress ideolo gical hostility o f the Eden and M acm illan govern ­ m ents to E uropean federalism and their desire to m aintain great-pow er status, sym bolized by close relations with the C om m onw ealth and the U nited States. Such analyses often co n d em n British leaders fo r “missing the b o at” at Messina. T h e failure o f British policies from 19 55 throu gh 19 5 7 is often taken as prima facie evidence that British policy was ideological, irrational, o r ignorant. A nthony E den, p rim e m inister at the begin n in g o f this episode, and R. A. B. Butler, his chan cellor, are often portrayed as old-fash ion ed statesmen; they themselves later term ed their policy “shortsighted.” 98 O th ers p o in t to “the d etachm en t o f 97 Balassa, “Organized,” 29iff, 320-324, 327-343, 382, 390-391. 98 Michael Charlton, The Priu of Victory (London, 1983), 194 -19 5 , also 183-184, 186. 122

The Treaties of Rome, 79 55 - / 9 5 # [British] elites fro m the sense o f p o litica l co m m itm e n t a n d o p e n e x ch a n g e o f in fo rm a tio n that was b u ild in g u p a m o n g E C S C g o v ern m e n ts.”99 Still o th ers cite the British g o v e rn m e n t’s instinctive antifederalism a n d its va gu e, a rch aic, b u t “alm ost m o ra l o b liga tio n to u p h o ld th e legacy o f British greatn ess.” T h e m ost d e ta iled historical a c c o u n t o f British p o licy co n clu d e s th at “o n ly th e p sych o lo g i­ cal u n d e rp in n in g s o f British p o licy can a cco u n t fo r the British attitude toward th e M essina in itiative.” 100 O n sim ilar gro u n d s, R ich ard G riffith s calls British p o l­ icy “irratio n al.” 101 T h is analysis ch a llen g e s such an in terp retatio n , a rg u in g instead that the British p o licy o f apath y an d o p p o sitio n to the custom s u n io n was the rational o n e fo r a g o v ern m e n t that trad ed little w ith the C o n tin e n t, h a d h ig h tariffs in p lace, and fe a re d co m p etitio n w ith G erm an p ro d u cers. British p o licy was d ictated largely by the ra tio n a l p u rsu it o f co m m e rcia l in terest, in p articu lar e x p o rt p ro m o tio n . T h is e x p la n a tio n is clo ser in spirit to th e re ce n t in terp retatio n o f A lan M ilward. Yet even M ilw ard rejects co m m e rcia l in terest p er se. H e focuses instead o n dis­ tinctively British m a cro e co n o m ic id e o lo g y related to the stron g ro le o f fin an ce, a rg u in g th at “w hat was la ck in g [in Britain] was links b etw een . . . industrial p o li­ cies an d in tern a tio n al co m m e rcia l p o licie s.” T h is in terp retatio n , how ever, co m ­ pels him to add as seco n d a ry in flu en ces the “lo n g historical tradition [as] a g re a t p o w er . . . ig n o ra n c e a b o u t its closest n eigh b o rs, . . . a rro g an ce an d m y­ o p ic co n serv atism .” 102 I a rg u e that if we b e g in fro m the assum ption that British p olicy-m akers w ere prim arily p u rsu in g co m m ercia l objectives, th ere is n o n eed fo r reco u rse to a ttribu tion s o f ig n o ra n c e o r irrationality. T h e in fo rm atio n avail­ able to British p o licy-m ak ers— little d ifferen t fro m that available to th eir C o n ­ tin en tal co u n te rp a rts— fully ju s tifie d th e skeptical attitude they to o k toward M essina. T o be sure, British lea d ers h e ld som e o ld -fash io n ed views; they w ere u n lu ck y th at the E C p ro ved m o re successful than they o r an yo n e else e xp ecte d . G e o p o litica l ideas (an d g e n e ra l e co n o m ic p olicy) p layed a role, b u t o n ly a sec­ o n d a ry o n e , p ro vid in g an a d d e d reason to b e cautious a b o u t a co m m ercia l v e n ­ ture th at even its p ro p o n e n ts a gre ed w ou ld p ro b a b ly fail and that ran co n trary to British interests. In sum , British p o licy co n stitu ted a rational, rem arkably fle x ­ ible, even far-sigh ted d e fe n se o f e n d u rin g British e co n o m ic interests. G e o p o litica l In terest a n d Id eology: “In p o litical term s, q uite a stiff p ric e ” F our co n sisten t th reads in British g e o p o litica l reaso n in g a b o u t E u ro p e d u rin g this p erio d , taken to geth er, ju stifie d c o n ce rn an d skepticism a b o u t a c o n tin e n ­ tal custom s u n io n . First was stron g British su p p o rt fo r the W estern allian ce and 99 Christopher Lord, Absent at the Creation: Britain and the Formation o f the European Community, 19 5 0 -19 5 2 (Aldershot, 1996), 166, presents this as conjecture. This is also the thesis o f Charlton’s pathbreaking oral history, The Price o f Victory. Also Miriam Camps, “Missing the Boat at Messina and O ther Times?” in Brian Brivati and Harriet Jones, eds., From Reconstruction to Integration: Britain and Europe since 1945 (London, 1993), 137. Lieber argues that Macmillan mismanaged accession domes­ tically by underem phasizing geopolitical concerns. 100 Wolfram Kaiser, Using Europe, Abusing the Europeans: Britain and European Integration, 19 4 5 -6 3 (London, 1996), 5 5 -5 6 . 101 Griffiths, “Dynamics," 6 - 7 . 102 Milward, Rescue, 3 9 3 -39 5 , also 3 4 5 -4 3 4 .

12 3

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the “special relation sh ip ” with the U nited States.103 A n exclusive custom s un ion, it was occasionally argued, m igh t split the Western alliance. M acm illan wrote as late as J u n e 1958 that if the E C fo rm ed w ithout som e free trade arrangem ent with Britain “we shall have to recon sider the w hole o f o u r political and e co ­ n om ic attitude towards E u ro p e---- W e should certainly p u t on highly protective tariffs and quotas . . . In o th er words, we should n ot allow ourselves to be d e ­ stroyed little by little. W e w ou ld figh t back with every w eapon in o u r arm oury. We w ould take o u r troops o u t o f E urope. We w ould withdraw from N A TO . We w ould ad o p t a policy o f isolationism .” 104 Th is was a co n cern even though Britain p lan n ed to withdraw som e troops from E urope anyway. Seco n d was a co n cern that the custom s un ion m ight un derm in e con trol over Germ any. As M acm illan recalled later, Messina “m ight be very dangerous to us, [for it] m ight m ean Western E urope dom in ated in fact by G erm any and used as an instrum ent fo r the revival o f G erm an pow er throu gh econ o m ic m eans.” 105 T h ird was the fear that E uropean integration, w hether o r n ot Britain jo in e d , w ould un derm in e Britain’s C om m on w ealth com m itm ent and the “special rela­ tionship ” with the U nited States, widely seen, particularly in the Foreign O ffice and the Conservative Party, as the foun dations o f Britain’s global prestige and power. T his argu m en t app eared in som e policy review docum ents. T h e re exist several strong statem ents o f co n cern about the transatlantic im plications, in­ cludin g a few letters from friends o f M acm illan and a 19 57 C abin et m eeting in w hich it was agreed that the purposes o f the EC w ere political and that “our Special R elationship with the U n ited States w ould be en d an gered if the U nited States believed that o u r in flu en ce w ould be less than that o f the E C .” 106 Fourth was the near universal British suspicion o f European federalism , sym­ bo lized by W inston C h u rch ill’s celebrated observation that “We are with them , but n ot o f th em .” 107 In 1956, to be sure, 6 5 - 7 0 p ercen t o f the British public fa­ vo red the unification o f E urope, n ot strikingly d ifferen t from 5 3 - 6 7 p ercen t in France, 7 9 - 8 2 percen t in Germ any, and 5 5 - 6 6 percen t in Italy. Yet federalist organizations in Britain w ere alm ost nonexistent. Even supporters o f m em ber­ ship criticized federalism but m aintained that a federalist E urope w ould not o ccu r fo r decades, if at all. T h e great m ajority simply co n ced ed that Britain w ould pay, “in political terms, quite a stiff p rice.” 108 N o m ainstream British politician co n sidered federal institutions acceptable. Eden had said in 1952 that jo in in g a E uropean federation was “som ething we know, in o u r bones, that we can n o t d o ”; in secret govern m en t m em os, he singled o u t referen ces to fed eral­

105 Dockrill, Britain’s Policy, 102-3. 104 Cited in Wolfram Kaiser, “Challenge to the Community: The Creation, Crisis, and Consolida­ tion o f the European Free Trade Association, 1 9 5 8 - 1 9 7 2 Journal of European Integration History 3, no. 1 (1997), 15. 105 Kaiser, “Challenge,” 8. 10* CAB 128/31, 2 May 1957. 107 David Buder and Uwe Kiesinger, The '9 7 5 Referendum (London, 1976), 5. 108 Charlton, Price, 241. Also Milward, Rescue, 432. Harold Macmillan, Riding the Storm 1 9 5 6 -1 959 (London, 1971), 62-63; Anthony Nutting, Europe Will Not Wait: A Warning and a Way Out (London, 1960); Alastair H om e, Harold Macmillan (New York, 1988), 1 :3 1 3 -3 1 7 ,2 :3 1 .

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The Treaties of Rome, 1955—1958 ism fo r criticism . His successor H arold M acm illan, the most “European” am ong m ajor British politicians o f his time and the man w ho spearheaded British asso­ ciation with the ECSC, abh o rred federalism and, like Eden, p referred pragm atic, flex ib le in tergovern m en tal solution s.109 E co n om ic Interest: “O p e n sympathy and frank am azem en t” T h e initial response o f British business to the EC was apathy. T h e president o f the Federation o f British Industry (FBI), Britain’s leadin g industrial interest gro u p , later co n ced ed that this reaction was based on two miscalculations: u n ­ derestim ation o f the prospects fo r E uropean unification and overestim ation o f dom estic opposition to free trade. Yet, as the British trade press poin ted out, trade was shifting away from the Com m onw ealth and toward the C ontinent. Intra-industry trade am ong d evelop ed coun tries was burgeon in g. A t the same tim e, a drop in the average im perial p referen ce from 11 p ercen t to 5 percen t over two decades, the increase in G A T T liberalization, and the creation o f a d e facto O E E C and EPU trade zon e were un derm in in g the “excep tion al degree o f p re fe re n ce ” enjoyed by Britain in the Sterling bloc. N onetheless, at first n ei­ ther go vern m en t n or industry pushed to initiate E uropean trade liberalization. British exports to the Six in 19 5 5, as we saw above, totaled only a quarter o f e x ­ ports to the Com m onw ealth. British firms focused on “safer” dom estic and C om m on w ealth m arkets and did n ot take large risks investing in the sectors (e.g., autom obiles) that form ed the basis o f the West European trade b o o m .110 It was the threat o f exclu sion that shattered com plaisance o f both business and governm en t. W hen the govern m en t w ithdrew from the Spaak negotiations in late 19 5 5, the overseas d irector o f the FBI, co n cern ed prim arily about exclu ­ sion, im m ediately expressed “op en sympathy with the custom s un ion idea and frank am azem en t at the U K ’s d ecisio n .” 111 A few m onths later, an FBI com m it­ tee p o lled British industry and revealed surprisingly little protectionist senti­ m ent regard in g E urope. T h e re rem ained, however, a split betw een C o m m o n ­ w ealth and C on tin en tal exp o rt interests. O n the one hand, only association with the C o m m o n M arket could p revent discrim ination against British exports. O n the other, preferen tial access to Com m onw ealth m arkets linked to reciprocal agricu ltu ral im ports still ben efited m any firms. T h e com m ittee squared the circle by p rop osin g an industrial free trade area (FTA )— an option supported by a large m ajority o f FBI m em bers p olled in O cto b e r 1956 and again a year later. M ore com petitive firms led the supporters, w hereas the small gro u p o f o p p o ­ nents was disproportion ately drawn from smaller, relatively uncom petitive sec­ tors d e p e n d en t o n p rotected Com m onw ealth or dom estic m arkets (e.g., paper, tim ber, cotton , hand tools). Like its counterparts in France and Germ any, British business rem ained suspicious o f the “supranational institutions o f the E C SC or 109 Peter Morris, “T h e British Conservative Party,” in John Gaffney, ed., Political Parties and the Euro­ pean Union (I.ondon, 1996), 125. Also Richard Lamb, The Failure of the Eden (Government (London, 1987), 6 2-6 3 . 110 For an overview, Milward, Rescue, 396-424. 111 Griffiths, “Dynamics,” 3; Lieber, Britain, 58-59.

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E C type [and] the ‘d irig iste’ ten d e n cie s that g o with th e m ”— a susp icion shared by the T rad es U n io n C o n gress ( T U C ) .112 Britain h a d b e e n relatively o p e n to co m m o d ity im p orts since th e R epeal o f the C o rn la w s in th e m id -n in etee n th century, so farm in g was a less sign ifican t o ccu p a tio n in Britain than in F ran ce o r G erm an y. By 19 5 7 , o n ly 5 p e rce n t o f the British p o p u la tio n still farm ed . A lth o u g h surviving farm ers w ere m o re efficien t o n th e a verage than th eir co u n terp a rts elsew h ere in the Six, c h e a p do m estic fo o d p rices m ean t that they also received g rea ter p er capita subsidies than d id farm ­ ers in the Six. U n d e r the 19 4 7 an d 19 5 7 A g ricu ltu re A cts, subsidies w ere p ro ­ vid ed n o t th ro u g h p rice supports, as o n the C o n tin e n t, b u t directly to farm ers. D espite its sm all size, th e m ain agricu ltu ral in terest g ro u p , the N ation al F arm ers’ U n io n (N F U ), was b elieved to co n tro l m o re p arliam en tary co n stitu en cies than su b seq u en d y app ears to have b e e n the case, and thus e n jo y ed co n sid era b le re ­ spect a m o n g T o ry MPs. T h e N FU vo ice d p u b lic skepticism o ver plan s fo r E u ro ­ p ean a gricu ltu ra l in tegratio n , w h ich th rea te n ed existin g co rp o ratist relation s as w ell as subsidy arran gem en ts. It also initially o p p o sed a British g o v ern m e n t p ro ­ posal fo r a sep arate a gricu ltu ral a g re em en t based o n O E E C p rin cip les in O c to ­ b e r 19 5 7 b u t re le n te d o n c e the go v ern m e n t ca lled fo r a lo n g transition p eriod a n d safegu a rd s.113 T h e D om estic D ecision: “Kill it o r let it co llap se?” W h at d o e s the d ecisio n -m a kin g p rocess in B ritain tell us a b o u t the relative im ­ p o rta n ce o f e co n o m ic an d g e o p o litica l con siderations? A lth o u g h it is difficult fu lly to u n tan g le the two m otivations, the e co n o m ic interests a p p ea r to have p ro vid ed , at the very least, su fficien t g ro u n d s fo r skeptical o p p o sition . British skepticism su rfaced im m ediately. Even b e fo re M essina, E den , B utler his C h a n ce llo r, an d even F oreign Secretary M acm illan , w h o was to sp earh ead the British bid fo r en try five years later, initially re jected p articipation in a cus­ tom s u n io n o u trigh t. W h en A n th o n y N u ttin g, a yo u n g official, “b e g g e d E d en ” to le t him o b serve the M essina n egotiatio n s, the p rim e m in ister re fu se d .114 E co n o m ic co n sid eratio n s w ere su fficien t to exp lain this n egative initial stance, th o u g h g e o p o litica l co n cern s m ay also have b e e n sign ifican t. E co n o m ic officials

112 Kipping, Summing, 1 5 5 - 1 5 7 . It was widely believed that membership in the customs union would be difficult for some in heavily protected larger sectors, such as chemicals, textiles, and engi­ neering, and neutral though difficult for the auto industry. Lamb, Failure, 7 4 -7 5 ; Lieber, British, 6 0 -6 3 ; Robert L. Pfaltzgraff, Jr., Britain Faces Europe (Philadelphia, 1969), 3 3 -3 4 ; Miriam Camps, Britain and the European Community, 1 9 5 5 -19 6 3 (Princeton, 1964), 115; Herbert Schneider, Grofibrittaniens Weg nach Europa (Freiburg/Breisgau, 1968), 115; Macmillan, Riding the Storm, 82; Blank, Federation, 1 4 3 -14 5 . In 1956 the FBI conducted a poll: 479 firms with an average o f 1,270 employ­ ees each were favorable to the FTA, 38 firms with an average o f 815 employees each were undecided, and 147 firms with an average o f 51 o employees each were opposed. Sir Norman Kipping, directorgeneral, noted that responses were correlated with the competitiveness o f firms. The T U C initiated consultations with the government in O ctober 1956 and announced its public support for FTA the following m onth, opposing membership in the customs union but pointing out the serious disad­ vantages o f exclusion. Lieber, British, 3 8 -4 1 . 115 Lieber, British, 4 5 -5 4 ; 1 1 7 -1 3 4 . 114 Lamb, Failure, 68. Charlton, Price, 169.

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The Treaties of Rome, 1955—195 8 exp ressed co n c e rn earliest a n d m ost consistently. Y o u n ge r T reasu ry a n d B oard o f T ra d e officials d o m in a te d th e M utual A id C o m m ittee (M A C ), w h ich was asked to p ro vid e a co m p re h e n sive assessm ent o f British interests in the n eg otiatio n s in O c to b e r 19 5 5 . (T h e F o reign O ffice initially c o n c e d e d th at th e M essina n e g o ti­ ations w ere essentially an e c o n o m ic m a tte r .)115 T h e M A C ’s analysis fo cu sed p ri­ m arily o n co m m ercia l co n sid era tio n s, ca lcu la tin g the gain s an d losses by sector. T h e lo n g -term in terests o f B ritain, th e M A C c o n clu d e d , clearly lay in clo ser ties to E u ro p e , w ith its e x p a n d in g m ark et fo r industrial go o d s, b u t in the short-term the co u n try fa ce d ad ju stm en t costs im p o sed by elim in a tin g p re fe re n ces on C o m m o n w ea lth trade a n d the low erin g o f trade barriers w ith E u ro p e. T h e M A C re p o rt co n clu d e d : “ (i) m em b ersh ip w o u ld w eaken the U n ited K in g d o m ’s e c o ­ n o m ic a n d co n se q u e n tly p o litica l relatio n sh ip w ith the C o m m o n w ea lth an d the C o lo n ies; (ii) the U n ited K in g d o m ’s e co n o m ic an d p olitical interests w ere w o rld ­ w ide an d a E u ro p e an C o m m o n M arket w ou ld be co n trary to the a p p ro a ch o f fre e r trade a n d paym ents; (iii) p articip ation w ou ld in p ractice lead grad u ally to fu rth e r in te gratio n , an d ultim ately p erh a p s to p o litical fed e ra tio n , w hich [w ould n o t be] a ccep ta b le to p u b lic o p in io n in Britain; an d (iv) it w ou ld in volve the re ­ m oval o f p ro tectio n fo r British in dustry against E u ro p ean co m p e titio n .” O n ly th e third p o in t (o n fed eralism an d p u b lic o p in io n ) clearly addresses g e o ­ politics, w h ile the fo u rth is p u rely e co n o m ic an d the first two p rim arily eco n o m ic. T h e re is n o m en tio n o f G erm an y o r the Soviet U n ion . T h e d o cu m e n t closes, how ever, w ith th e statem ent: “T h e establish m en t o f a E u ro p ean C o m m o n M arket w o u ld b e b ad fo r the U n ited K in gd o m an d i f possible sh o u ld be frustrated. But i f it cam e in to b e in g w ith ou t us . . . w e sh o u ld pay an in creasin g cost co m m e r­ cially. B u t even this w o u ld n o t o u tw eigh the p olitical o b jectio n s to jo in in g ” at the m o m en t. F ran k L ee , also at the B oard o f T ra d e and the on ly official at the tim e to re co m m e n d m em b ersh ip , o b served to officials o f the FBI: “W e co u ld n o t p o s­ sibly a ffo rd n o t to b e m em bers o f a co m m o n m arket o f this im p o rtan ce, but we co u ld n o t see how this c o u ld be d o n e w ith ou t ultim ately paying the p rice o f a co m m o n cu rre n cy an d co n sid e ra b le m e rgin g o f p olitical sovereign ty.” 116 T h is skepticism fo llo w ed fro m existin g British policy, w h ich h ad consistently su p p o rted the G A T T system and re jected variou s fo rm s o f e co n o m ic in tegration in E u ro p e . T h r o u g h o u t th e 1950s, the T reasu ry h a d been n eutral toward fu n c­ tional in te gratio n , and the F oreign O ffice h a d b e e n o p p o sed . T h is skepticism 115 Griffiths ( “Dynamics," 5) notes that even the Foreign O ffice uncharacteristically stressed eco­ nomic arguments: “In the early 1950s, the Foreign Office had taken the lead in rejecting supranationalism 011 political grounds: this argument was now used as a residual factor in supporting other negative considerations.” O n the continuity o f such pressure, Jacqueline Tratt, The Macmillan Gov­ ernment and Europe: A Study in the Process of Policy Development (New York, 1996), 16. 116 Macmillan from Heiser, British, 106; Maurice Torelli, Great Britain and Europe of the Six: The Failure of Negotiations (Montréal, 1969), 17; Lee from Jock Bruce-Gardyne and Nigel Lawson, The Power Game: An Examination of Decision-Making in Government (London, 1976) ,4 1 . See also Kaiser, Using, 2 8 -3 2 , 35;James R. V. Ellison, “Explaining British Policy toward European Integration in the 1950s” (Canterbury, mime, 1995), 1 6 - 1 7 ; Young, “British Officials,” 95. O f the three major Whitehall cen­ ters o f power on such issues, the Treasury and “to a lesser extent” the Board o f Trade “become pre­ dom inant” during the 1950s. John W. Young, “British Officials and European Integration, 19 4 4 60,” in Deighton, Building Postwar Europe, 87ffi cf. Milward, Rescue, 393.

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stem m ed n o t so m u ch fro m a b e lie f in “o n e w o rld ” free trade th ro u gh G A T T as fro m G A T T ’s e x ce p tio n s fo r C o m m o n w ea lth trade a n d th e fe a r that a E u ro p e an b lo c m ig h t e n d a n g e r th o se relation s. For the C o n servative party, to an even g re a te r e x te n t than W h iteh a ll, Im p eria l P re fe re n ce re m a in e d th e “A rk o f the C o v e n a n t.” It was sim ply an article o f faith th at C o m m o n w ea lth p re fe re n ces ru le d o u t p articip ation in a custom s u n io n w ith a co m m o n e xte rn al tariff; in this re g a rd , m any C o n servative p o liticia n s view ed e ven th e G A T T w ith su sp icion .117 H e n c e th e E u ro p e an n eg o tia tio n s raised a dilem m a. A s M acm illan stated in D e ce m b e r 19 5 6 , B ritain m ust “avoid b e in g discrim in ated against in E u ro p e .” It is, h e n o te d d u rin g th e m em b ersh ip n eg otiatio n s, “m uch m o re a p p ea lin g to be a sim p le e le m e n t in an e x p a n d in g m ark et than o n e o f the lea d in g factors in a m a rk et [the C o m m o n w ea lth ] w h ich is in the p rocess o f recessio n .” Yet, as h e o b ­ served b e fo re the C o m m o n s shortly th ereafter, e co n o m ic interests con stituted a su fficien t reason to avoid m em bership: “W e co u ld n ot e x p e c t the co u n tries o f th e C o m m o n w ea lth to co n tin u e to give p re fe re n tia l treatm en t to o u r exp o rts to th e m i f we h a d to ch a rg e them fu ll d uty o n th eir exp o rts to us . . . this o b jectio n , e ven if th ere w ere n o o th er, w ou ld b e q u ite fatal to any p ro p o sal that the U n ited K in g d o m sh o u ld seek to take p art in a E u ro p e an C o m m o n M a r k e t . . . so that is o u t.” 118 T h e custom s u n io n was also, o n e co m m e n ta to r notes, “in co m p atib le w ith Britain’s p o litica l relatio n s w ith th e C o m m o n w ea lth and the U n ited States an d , ultim ately, d etrim en tal to its p o sitio n as a w orld p ow er.” 119 S in ce th e u n desirability o f custom s u n io n an d the d an g ers o f e co n o m ic isola­ tion w ere u n d e rsto o d , d isag reem en ts a m o n g m inisters an d officials w ere lim ited to tactics. B u tler o b served in re tro sp ect that “th ere [was] n o t the slightest pos­ sibility o f th e M essina ‘co m m o n m a rk et’ co m in g in to existen ce. . . . T h e o n ly tro u b le so m e p o in t was w h e th e r we sh o u ld strive to kill it o r let it co llap se o f its own w e ig h t.” 120 M acm illan later re ca lled that “w hen we d e cid e d at the e n d o f 1 9 5 5 n o t to ta^e p a r t . . . w e w ere in flu e n ce d b y . . . co n sid eratio n s [w hich] w ere to be p ro ve d w ro n g. W e th o u g h t they w ou ldn ’t s u c c e e d — or, i f they d id, that we w o u ld w ork o u t a satisfactory association .” 121 T h is was n o t sim ply the view o f a few F o reign O ffic e officials a n d was hard ly m yo p ic (as has o ften b e en s u g g este d ). 117 Camps, “Missing," 138. This was not support for global free trade; at the Blackpool Party C on ­ ference o f 1954, liberal Tories were still fighting to persuade the party not to pass resolutions con­ dem ning the GATT, which after all exempted the Commonwealth. Macmillan, Riding the Storm, 65, 77; Interviews in Charlton, Price, 1 7 1 , 1 7 8 -1 7 9 , 182, 189; Heiser, British Policy, 49 -56 ; ns James R. V. Ellison, “Explaining British Policy toward Integration in the 1950s” (Canterbury, mimeo, 1995), 15; Kaiser, “ToJoin,” 144; Griffiths, “Dynamics,” 5. 119 Ellison, “Explaining," 17. 120 Rab Butler, cited in Charlton, Price, 198. 121 Griffiths, “Dynamics,” 6 - 7 . Griffiths interprets this as irrational decision-making, because not all policy options were explic itly considered, but in fact the reasoning was quite consistent and based on the same information available to the European leaders, who were equally pessimistic. Clappier told Bretherton that the French would not join the EC without the British. Ambassador Gladwyn Jebb in Paris did not expect success. Ambassador Christopher Warner in Brussels considered the dis­ cussions “woolly and impractical." In early 1956, Spaak doubted a successful outcom e to the negoti­ ations and sought British assistance. See interviews in A d olf M. Birke and Kurt Kluxen, eds., Die eu­ ropäische Herausforderung. England und Deutschland in Europa (Munich, Saur), 1987, 1 3 4 -13 5 , 13 7 139; Küsters, Gründung, I37n, 1 3 9 -1 4 1 ; Heiser, British, 96; Macmillan, Riding the Storm, 69.

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The Treaties of Rome, 19 5 5-19 5 8 Paul-H enri Spaak, M onnet, and B ern ard C lap pier, leadin g C on tinential partic­ ipants, w ere tellin g each o th er as w ell as the British that the weakness o f the F rench eco n o m y and polity m ean t that the n egotiation s w ou ld probably co l­ lapse— an o u tco m e that w ou ld probably lead to the form ation o f a looser free trade arrangem ent, the econ o m ic equivalen t o f the W EU. H en ce E den and B u tler ad o pted a tone o f in difference, m aking n o com m itm ents lest British pres­ tig e — and, presum ably, its ability to advance in d ep en d en t alternatives— be dam ­ a ged by association with failed negotiations. In a d in n er address before m inis­ ters from the Six, B utler dism issed the Messina m eeting as an “archeological excavatio n .” T hirty years later, he described the British position as m otivated prim arily by ennui: “A n th o n y Eden was b o red with this. Frankly he was even m ore b o red than I was.” 122 From d ie start, however, there w ere those w ho favored a m ore activist policy o f seeking to p revent o r destroy the custom s un ion. Sir Gladwyn Jebb, British am bassador in Paris, sum m arized the British position w hen he scribbled in the m argins o f a proposal: “Em brace destructively.” 123 Youn ger T ory trade officials such as A n th o n y N utting and Peter T h o rn eycro ft had successfully pressed the M A C to reco m m en d that Britain participate in the Spaak Com m ittee meetings, to steer the talks alon g m ore sensible lines. T h e C abinet agreed to send a “re p ­ resentative”— b ut on the p rio r understanding that the decision had already b een m ade n ot to participate. Since the Foreign O ffice had little interest, the British representative was an un dersecretary from the B oard o f Trade, Russell B retherton, w ho was instructed to app ear helpful, to p ropose an in tergovern ­ m ental FTA o p en to the C om m on w ealth as an alternative, but to m ake no co m ­ m itm ents. H e was given, T h o rn eycro ft later recalled, a “com pletely negative b rie f [since] the C abin et had really d ecid ed against the European co n cep t.” 124 Even th ough B retherton rep orted back that the negotiators were placing “little em phasis on supra-national authority,” that the result “looks as if it will be in­ distinguishable from the O E E C ,” and that French participation seem ed u n ­ likely— in short, that the geo po litical liabilities w ere m inim al— he was recalled by orders “from the highest levels o f govern m en t.” 125 T h e possibility that the n egotiations m ight succeed and the resulting institu­ tion exclu d e Britain instantly transform ed Britain’s skeptical enn ui into virulent hostility. B egin n in g in 1953, studies by the Treasury and Board o f T rade had stressed a long-term d eclin e in Com m onw ealth trade and a corresp ond in g rise in E uropean exports. Strategy docum en ts consistently argu ed that if the custom s un io n succeeded, Britain would again face the dilem m a M acm illan had identi­ fied: m em bership was unattractive, because it w ould com prom ise C o m m o n ­ w ealth relations, but exclu sion w ould be disastrous to British trade in the long term . T h e M A C had co n clu d ed that the C o m m o n M arket was unlikely to form ,

122 Charlton, Price. 104, iqr;:also 187-iqp;. 123 Kaiser, Using, 48. 124 Charlton, Price, 182, also i78ff. 125 I^mb, Failure, 73; Brethcrton and Uri, cited in Charlton, Price, 186-188; Camps, “Missing,” 138; Kaiser, Using, 47.

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b ut if it did, “an entirely new situation” w ould arise. “T h e disadvantages o f ab­ staining w ould, in the long-run, outw eigh the advantages,” and Britain “m ight b e fo rced to jo in on their term s.” 126 T h o m e ycro ft, director o f the Board o f Trade, argu ed that Britain’s m ajor com p etitor was Germ any; the creation o f a discrim i­ natory custom s union w ould p erm it G erm any to dom inate C on tinental markets. A gricultural officials argu ed that it was necessary to be in on the creation o f the E C to “be sure that it contains few er em barrassm ents than it otherw ise w ou ld.” 127 A prescien t Treasury rep o rt con cluded: “O n a lo n g er view the question m ight becom e, n ot w h eth er we should go into E urope to save E urope, b ut w hether we should n ot have to m ove closer to E urope in o rd er to save ourselves.” 128 W ell b efo re the Venice m eeting o f May 1956, w hen the success o f the n egoti­ ations first seem ed likely, M acm illan, w ho replaced B utler at the E xchequer the p re ced in g D ecem ber, had becam e the leader o f those w ho favored a m ore ac­ tive response. A t his request an o th er com m ittee con sidered all alternatives in detail and overw helm ingly reco m m en d ed a proposal fo r a pan-European FTA u n d er O E E C auspices— nam ed “Plan G ” w ithin the British governm ent. T h e central logic o f the com m ittee rep o rt was sim ple and prim arily com m ercial: m em bership in the EC, despite its geopolitical advantages in tying G erm any to E urope, was im possible, because it threaten ed two-thirds o f British trade, “par­ ticularly that with the C om m on w ealth .” 129 Yet exclusion was costly, T h o rn eycro ft w rote to M acm illan, because “o u r businessm en w ould be ousted from European m arkets th rou gh discrim ination in favor o f their G erm an com petitors.” As M ac­ m illan reco rd ed at the tim e, “w hen the Six have ratified they may snap their fingers at the FTA and leave us in the lu rch ”; the only alternative to exclusion was to “red irect the Messina initiative into the orbit o f the O E E C .” 130 T h e report d e fe n d ed a proposal fo r “som e sort o f tariff a rra n g e m e n t. . . designed [to] re­ duce as far as possible the risk o f dam age to o u r trade . . . with the C o m m o n ­ w ealth ."131 British ministers and officials were n ot particularly interested eith er in pan -E uropean trade liberalization o r in en co u ragin g G A T T liberalization per se — the British govern m en t had since 1931 resisted d e ep O E E C tariff cuts— but in subverting a custom s un ion from w hich they m ight be exclu ded. W hen France proved un exp ectedly forthcom in g at the Venice m eeting, the C abinet, led now by M acm illan as prim e minister, reacted im m ediately. Two days later Plan G was adopted; a m on th later it was p ublicized as an O E E C proposal. D om estic support rem ained firm , since it involved “n o real departure from past p o licies” pursued throu gh the O E E C .132 T h e C om m on s debate on the subject in the autum n o f 1956 “was rem arkable for the absence o f controversy and the unanim ity o f view on both sides o f the H ouse.” 133 T h e internal rep o rt on Plan G lsfi 127 158 189 IW 131 1,2 1,5

Lamb, Failure, 7 4 -7 5 , also 80-92; Kaiser, Using, 28-32, 35; Young, “British Officials," 96 -9 7 . Eric Roll, cited in Charlton, Price, 253. Kaiser, Using, 35. Lamb, Failure, 92-93; Milward, Rescue, 428-429; Charlton, Price, 182, 187, 190 -195. Macmillan, Riding, 435-436. Milward, Rescue, 429, also 428. Camps, “Missing," 141 Camps, Britain, 1 0 7 -10 9 ,also 1 0 6 -1 1 1 .

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The Treaties of Rome, 19 5 5 -19 5 8 p re d icte d th at C o n tin e n ta l g o v ern m en ts w ou ld em b race it becau se it better served w h at the British b e lie ve d to be th eir d o m in a n t g e o p o litica l interest, n am ely e m b e d d in g G erm an y in E u ro p e . T o this M acm illan a d d e d threats an d in d u ce m en ts. In struction s fro m M acm illan to the B o n n an d W ashin gton e m ­ bassies su ggested that an em ph asis o f destabilization o f the W estern allian ce m ig h t so ften U.S. an d G erm an o p p o sitio n to an F TA. I f th e S ix “d e cla red e c o ­ n o m ic w ar o n h e r ” by re jectin g Plan G , M acm illan th rea te n ed to em b argo arm s sh ip m en ts to th e N eth erlan d s fo r use in In d o n esia and to w ithdraw fro m N A T O an d G erm an defen se. A d e n a u e r an grily dism issed the latter threat. T o F rance M acm illan o ffe re d n u clea r assistance in lieu o f E uratom , a U.S.-U .K --French tri­ um virate, an d clo ser co n su ltatio n o n W estern d e fe n se .134 W h en these g e o p o litica l in d u ce m en ts failed , M acm illan tried e co n o m ic c o n ­ cessio n s.135 In itially Plan G e x c lu d e d foodstuffs, th ereb y e lim in atin g any co n cern a b o u t C o m m o n w ea lth trade o r British agricu ltu re; w h en the Six d e m a n d e d that agricu ltu ra l trade be h a rm o n ize d o n the basis o f co m m o n prices, M acm illan to o k m o d e st steps to a cco m m o d a te th e m .136 W h atever co n cern s British farm ers m ay have h ad , “it was cle a r,” M acm illan w rote later, “that the n e e d to m aintain C o m m o n w ea lth fre e e n try was the co n tro llin g co n sid eratio n ”— exp o rts to the C o m m o n w ea lth w ere 2.5 tim es g rea ter than British farm p ro d u c tio n .137 T h e fail­ u re o f Plan G did n o t b e co m e cle a r until early 19 5 7 , w h ereu p o n , as we shall see, M acm illan m o ved even fu rth er to a cco m m o d a te the S ix .138 C ritics o fte n co n d e m n B ritain fo r “m issing the b o a t” at M essina. T h e skep ti­ cal then h o stile British p o licy respon se fro m 19 5 5 th ro u gh 19 5 7 is o fte n taken as p rim a fa cie e vid e n ce that British p o licy was id e o lo g ical, irration al, o r ig n o ­ rant. Even B u tler an d p erh a p s E d en w ere self-critical. Such retro sp ective criti­ cism s o f British p o licy are m isp laced , fo r two reasons. First, British d ip lo m acy was far-sigh ted , e fficien t, an d w e ll-in fo rm e d — clo se to the ideal rational actor. M acm illan re a cte d swiftly to new in fo rm atio n a b o u t C o n tin e n ta l d evelop m ents; the shift to an aggressive resp o n se was d e cid e d ju s t two days after the V en ice m eetin g , years b e fo re d o m estic pressure fo rce d action . From the start, W h itehall co rrectly fo recast fu tu re e co n o m ic trends, calcu latin g e co n o m ic co n se q u e n ce s secto r-b y-secto r w ith little bias. It was u n d e rsto o d fro m the start that exclu sio n ,M Lamb, Failure, 9 6 - 9 7 , also 8 4 -8 5 . Macmillan hoped to lure the French government, believed to be hesitant to embrace trade liberalism or to face Germany alone, away from the negotiations. Licbcr, British, 16 m ; Macmillan, Riding, 438 -440 ; Horne, Macmillan, 2 :4 2 9 -4 3 2 , 4 4 4 -4 4 7. 115 By O ctober 1956, Macmillan was reduced to sending a note to Spaak stating: “I am pleading for a litde time before final decisions are m ade.” Lamb, Failure, 99. 158 Macmillan, Riding, 439ff. 157 Macmillan, Riding, 4 3 4 -4 3 5 . 158 In Britain, antifederalism, the great-power syndrome, and the resulting overestimation o f British influence in Europe may have had one tactical consequence. It led British leaders to the con­ clusion that their prestige would be strengthened in Britain dropped out o f the negotiations early and that they would have little to lose if the negotiations succeeded. When the negotiations suc­ ceeded, this led to self-isolation in which the British were trusted by no one; the unforseeable long­ term results, once de Gaulle assumed power, turned out to be catastrophic. Spaak claimed later that Britain could have stepped in as the leader o f Europe if it were willing to support innovative policies. While incorrect, this was a reasonable judgm ent at the time. France, too, was unwilling to be placed in the position o f vetoing an agreem ent late in the negotiations.

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fro m a successful custom s u n io n w o u ld even tu ally c o m p el an ap p lica tio n fo r m em b ersh ip a n d that, m o reo ver, it w ou ld then b e d ifficu lt to refo rm a rra n g e ­ m ents the B ritish h a d n o t h a d a h a n d in creatin g. Yet such an even tuality was som e years away an d, m o re im p o rtan t, im p ro b a b le. B ritish lea d ers th e re fo re to o k a ca lcu la te d risk that the custom s u n io n w o u ld fail. T h e risk was fully w arranted. U n til early 1 9 5 7 even C o n tin e n ta l statesm en e x p e c te d the n eg otiatio n s to c o l­ lapse, a n d fo r several years a fte r F ren ch lea d ers d o u b te d that th e T reaty w ould be im p le m e n te d .139 In short, critics ascribe to British lead ers interests an d in ­ fo rm a tio n they d id n o t possess a t the tim e.140 A seco n d reason w hy retro sp ective criticism s are m isp laced is that m ost in te r­ p reta tio n s assum e that British p olicy-m akers w ere p u rsu in g g e o p o litica l goals. So in te rp re ted , British p o licy d o e s in d ee d lo o k irration al o r short-sigh ted. If we start in stead w ith the assu m ption that co m m e rcia l interests in e x p o rt p ro m o tio n w ere p re d o m in a n t an d su fficien t m otivation s fo r in itial British apathy and o p ­ p o sitio n to the E C , how ever, n o a p p ea l to irration ality is re q u ir e d — n o r d o we n e e d to shift e xp lan a tio n s to a cco u n t fo r the su b seq u en t British ap p licatio n for m em b ersh ip . T h e sim p le fact that British exp o rts to the C o m m o n w ea lth w ere fo u r tim es la rg e r than e xp o rts to E u ro p e exp lain s m u ch a b o u t the British strat­ egy; th e re cip ro ca l ro le o f a gricu ltu ral im p orts exp lain s m ost o f th e rest. C o m ­ m ercially, B ritain h a d far less to gain a n d m o re to lose fro m bo th the agricu ltu ral an d the in dustrial aspects o f th e custom s u n io n than d id any o f the Six. Initial apath y tow ard in dustrial liberalizatio n in E u ro p e , co n ce rn a b o u t lo n g-term in ­ dustrial e xclu sio n , and strict d e fe n se o f C o m m o n w ea lth arran gem en ts are the n atural resp o n se o f a co u n try in Britain’s co m m ercia l circum stan ces. D om estic cleavages, b o th w ithin the g o v ern m e n t an d w ithin business, we have seen, re ­ fle cte d e c o n o m ic interests. In p u b lic an d in co n fid e n tia l forum s, the m ain te­ n an ce o f C o m m o n w ea lth trad in g patterns an d th e a vo id an ce o f exclu sio n from E u ro p e a n m arkets w ere the two m ost co m m o n ly m e n tio n e d n ational interests; they w ere g e n era lly ack n o w le d ge d to b e sufficien t lo n g-term ju stifica tio n s for British policy. I f we fo cu s o n e co n o m ic interests, British p o licy toward E u ro p e is re n d e re d co n sisten t w ith its p o licy toward the G A T T an d the C o m m o n w ealth . G eo p o litica l factors, by con trast, o ffe r a less co n vin cin g exp lan a tio n . T h e y w ere, to start w ith, less con sisten tly o r co h e re n tly in voked. T h e th reat o f rising G erm an pow er, o r any o th e r C o n tin e n ta l threat, was n early always treated p ri­ m arily as an e co n o m ic ra th er than a p o litico -m ilitary co n cern . N o evid e n ce su g­ 139 Even Kaiser concedes this, “T o jo in ,” 5 4 -5 5 . See also I ,amb, Failure, 7 6 - 7 7 . The only clear mis­ perception was tactical: the British government consistently assumed that Continental governments were driven by geopolitical concerns. For this reason, the British did not foresee that, if the CAP was successful, a strong French government would, as we shall see in chapter 3, veto British entry /yr eco­ nomic reasons. But this was also not foreseen by others. 140 T h e underlying econom ic logic o f British policy is sometimes obscured by archaic language (com peting effectively with German industrialists is often referred to as “preventing German dom i­ nance”), because there was still a need to convince the Foreign O ffice, and because Macmillan often employed geopolitical arguments to cloak British econom ic self-interest. This was true in the multi­ lateral arena as well, where Macmillan lectured Kennedy on how a “united free world was more likely to be achieved through join t monetary and econom ic policies” than military alliances, although British monetary proposals to Kennedy were economically self-interested to the point o f irrelevance. Harold James, International Monetary Cooperation since Bretton Woods (Oxford, 1996), 16 5 -16 6 . 13 2

The Treaties of Rome, 19 5 5 -19 5 8 gests th at this was m e a n t in a m ilitary sense, th o u g h statem ents are regu larly taken o u t o f co n te x t in an e ffo rt to p ro ve it. M acm illan’s o ft-cited statem ent speaks o f “a revival o f G erm an p o w er through economic means.” A n o th e r, by David Eccles, p re sid e n t o f th e B o a rd o f T ra d e in 1 9 5 7 an d a m an w hose w ritings are o fte n c ited in favo r o f a g e o p o litica l in terp retatio n , n otes that “Although it is not military or hostile in intent, six co u n trie s in E u ro p e have sign ed a treaty to d o e x ­ actly w hat, fo r h u n d red s o f years, we h ave always said w e co u ld n o t see d o n e w ith safety to o u r co u n try .” 141 Even i f th ere w ere stro n ger d o cu m en ta ry e vid en ce in favo r o f this view, such a m otivation w ou ld re n d e r British p o licy in co h eren t. W h ile its e co n o m ic ad van tages w ere obvious, th e F T A was hard ly an effective g e o p o litica l m ean s to m axim ize relative ad van tage vis-à-vis G erm an y o r to re ­ store the W estern a llian ce. T h e F T A was, after all, the p re fe rre d ch o ice am o n g G erm an busin essm en . (N o r d id F ran ce, w ith even m o re in tense co n ce rn ab ou t G erm an y, take such a v ie w .)142 Finally, as we shall see in ch a p te r 3, geo p o litica l co n cern s d o n o t e xp lain w hy th e British w ou ld co n tin u e to h o p e fo r an F T A even after the custom s u n io n was clearly esta b lish ed .143 M acm illan ’s w arnin gs a b o u t the instability o f the W estern allian ce are best u n ­ d e rsto o d n o t as exp ressio n s o f u n d e rly in g p re fe re n ce s b u t as tactical m oves and exp ressio n s o f fru stration. T h e threats m ake little sense: M acm illan n ev er e x ­ plain s why Britain w o u ld re sp o n d to e co n o m ic isolation w ith g e o p o litica l isola­ tion, th ereb y cu ttin g o f f its n ose to spite its face. W e can , to b e sure, fin d o n ly a ve ry few in stances w h ere M acm illan ’s co n fid e n tia l statem ents can be read as treatin g th e scen ario o f British w ithdraw al fro m N A T O a n d the W E U as realis­ tic; n o n e are u n a m b igu o u s an d n o n e d em o n strate that h e to o k them seriously. C e rta in ly m any to p officials u n d e r him d id n ot. C o n ce rn a b o u t the stability o f W estern co m m itm en ts w o u ld have b e e n , m o reo ver, in co n sisten t w ith British in ­ te llig e n ce rep o rts (e.g., fro m B reth e rto n ) suggestin g that E C sup ran atio n al in ­ stitutions an d g e o p o litica l co o p e ra tio n w ere u n likely to e m erg e , w ith the a b ­ sen ce o f British c o n ce rn a b o u t N A T O m em bersh ip o n in tern al lists o f m ajor British goals, w ith British p lan s to p u ll so m e troop s back fro m the C o n tin e n t in any case, a n d w ith the lack o f in terest Britain app ears to have show n toward the m ilitarily m o re sensitive E uratom n eg otiatio n s or, previously, w ith the E D C . For the m ost part, threats to retreat in to self-isolation w ere em p lo y ed p rim arily as a d ip lo m atic tactic to secu re su p p o rt fo r Britain’s FT A p rop osals fro m the U n ited States, F ran ce, an d W est G erm any. T h e r e is n o h in t that they w ere m ean t to be ca rried o u t. T h u s the ce le b ra te d m e m o ca llin g fo r N A T O w ithdraw al is best read n o t as a statem en t o f p u rp o se b u t as a set o f in structions a b o u t w hat “we o u g h t to m ake . . . q u ite cle a r to . . . d e G au lle a n d A d e n a u e r.” A fte r A d e n a u e r angrily dism issed such threats, they d isap p ea re d fro m in tern al d o cu m e n ts— a final p iece o f e v id e n ce that we are d e a lin g w ith tactics, n o t fu n d am en tal p re fe re n ce s .144 141 Cited in Richard Griffiths, “British Policy toward the Com m on Market, 19 5 5 -19 6 0 ,” in George 'WiYk.es,ed.,BritairisFailuretoEntertheEuropeanCommunity, 1 9 6 1-19 6 3 (London, 1997),39. Emphasis added. 1Maillard, De Gaulle, 18411.; I-acouture, De GauUe, 356-358. 86 Peyrefitte, C ’etait, 2:281, 594, 620.

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the rejectio n o f its “absu rd” proposals by alm ost all governm ents (not least the G erm ans) and had b een banished from key discussions. N o m ajor governm en t su p p o rted the Com m ission. D e G au lle received and rejected a com prom ise to im p lem en t the C A P proposals and reject those o f the Com m ission. Instead the em pty ch air crisis reflected en d u rin g national interests— “prim ordial interests,” de G au lle later called them .87 Such moves, as we have seen, h ad b een p lan ned fo r years, first appearin g as the backup to the F ouchet Plan in Peyrefitte’s strategy d ocum en t o f 1 9 6 0 - 6 1 . W ith the C A P nearly in place, the British veto beh in d him , and a weak govern ­ m ent in Germ any, de G aulle, still follow ing his “pruden tly audacious” plan o f 1 9 6 0 - 6 1 , sought advantageous political terrain on w hich to provoke a conflict over basic institutional prerogatives. In d e G au lle ’s words, he sought to “profit from the crisis” in o rd er to get “rid o f false con cep tion s . . . that expose us to the dictates o f o th ers” and “rep lace the Com m ission with som ething fundam entally d ifferen t.” In internal discussions, de G au lle an n o u n ced that his fundam ental goals were to strip the Com m ission o f its un ique power o f proposal, to block the transition to m ajority voting, and to fire the current Com m ission. T h e con flict had been p lan n ed throu gh the first h a lf o f 19 6 5.88 T h e p rep o n d eran ce o f hard evidence suggests the predom inan ce o f e c o ­ n om ic con cerns. T h e re is alm ost n o evidence to support the con jecture that the G en eral, disillusioned by the collapse o f the F ouchet Plan, suspicious o f U.S. proposals fo r an MLF, and rebuffed by the Erhard governm en t in Germ any, sud­ denly ad o pted a m ore “bru tal” style o f negotiation , w hich alm ost led to the co l­ lapse o f the E C .89A subjective interpretation is m ore plausible: it is o f course not entirely false to assert that de G a u lle ’s w illingness to risk electoral em barrass­ m en t and diplom atic isolation during the em pty chair crisis o f 1 9 6 5 - 6 6 d e m o n ­ strates the p red o m in an ce o f nationalist ideas in his thinking. Yet this is easily e x ­ aggerated. De G aulle failed to achieve m ost o f his visionary ideals due to limits on the credibility o f his threats to withdraw from the E C im posed by dom estic opposition from p ro d u cer groups. Forem ost am ong o p pon en ts were farmers, w hose interests tru m ped the G en eral’s geopolitical goals. Two types o f evidence d o support the view that d e G au lle’s opposition to supranationalism stem m ed in part from his distinctive geopolitical ideas. O n e is the am biguity o f French m aterial interests. In January 1965 de G au lle requested an internal govern m en t assessment, which co n clu d ed that the transition to Q M V was un likely to un derm in e any vital French interest. T h e m oribund trans­ port policy posed no threat. W hile Q M V in the C A P and G A T T m ight threaten French gain s— a p o in t to w hich we shall return in a m o m en t— it w ould also place greater pressure on a consistently recalcitrant G erm any to accep t lower farm prices, an inform al G erm an insistence on an exem ption in this area n ot­ w ithstanding. Finally, the overall im pact o f m ajority voting was lim ited because

87 Peyrefitte, C ’était, 2:220, 286-93. 88 Peyrefitte, C ’était, 1 :66 -6 8 , 281—282, 289-292, 296; Altiero Spinelli, The Eurocrats: Conflict and Crisis in the European Community (Baltimore, 1966), 2 10 -2 11 . 89 Berstein, Republic, 172 -17 3 ; Camps, European, 10 4 -115 .

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Consolidating the Common Market, 1958-1969 the Treaty in any case retain ed unanim ity fo r decisions on new policies, Treaty am endm ents, harm onization o f dom estic regulations, fiscal and social policy, new sources o f Com m u nity fun din g, association agreem ents, and accession o f new m em bers to the EC. T h e secon d sort o f eviden ce fo r ideological con cern s is the strikingly symbolic nature o f som e o f the G en eral’s p ublic and private rh etoric on the subject. H e con tem ptuously dismissed the vision o f H allstein, as o n e analyst put it, “decked o ut in the trappings o f sovereignty,” and consistendy criticized the very idea o f govern an ce above the nation-state. H e lashed o u t even at Com m issioners like Robert M arjolin, w ho had sided with d e G au lle in recent debates. O ccasion ally— th ough this was very rare, as com p ared to the constant referen ces to farm ing in ­ terests— d e G au lle explicitly invoked the grandeur o f France.90 H e may have felt w hat H offm ann has described as a vague “determ ination to p r e v e n t . . . a leap into that supranational nirvana w here his chan ces o f direcdy in flu en cin g shared E uropean policies m igh t vanish.” 91 T h e p rep o n d era n ce o f evidence nonetheless supports the prim acy o f co m ­ m ercial considerations. T h is is clearest from de G au lle’s own utterances on the subject. T h e G en eral was deep ly co n cern ed to retain con trol over votes o n C A P finan cing, G A T T negotiations, and any FTA negotiations, w hich, he consistently com p lain ed , m igh t be e xp lo ited to un derm in e carefully n egotiated arrange­ m ents fo r n et EC financial transfers to French farm ers.92 T h e logic was simple: even with progress throu gh 1964, the C A P was n ot yet safe from reversal through the com bin ed efforts o f the Danish, British, and Am ericans, w orking through the G ATT. U n der such circum stances, the com m on m arket w ould becom e a li­ ability, stripping protection from French farmers; a free trade area would be preferable. T his m ight, d e G au lle feared, perm it the “A m ericans to inundate the European m arket with their agricultural com m odities.”93 France therefore had to m aintain con trol over the process throu gh a veto. T h is was also the most com m on ly cited m otivation in de G au lle ’s speeches and private utterances o f the period. By contrast, there appears to be n o docum en tary evidence whatso­ ever to support the co n jecture advanced by Cam ps and m any others that the boycott stem m ed from de G au lle ’s an ger over K enn ed y’s proposals fo r an MLF.94 T h e continuity o f p o licy— the fact that in m any ways de G au lle’s insistence on a veto simply m aintained the policies o f his Fourth Republic predecessors and passed them on to successors— fu rth er confirm s the prim acy o f econ o m ic m o­ tivations. Fourth Republic governm ents had sought to place stronger veto rights 90 Ménil, Who, 154; Peyrefitte, Celait, 2 :2 8 7-2 91, 297-299. The feeling was mutual: Hallstein was said to have claimed that he “had not seen politics like this since Hitler.” 91 Stanley Hoffmann, “De Gaulle’s Foreign Policy,” 303. Also Françoise de la Serre, “The Euro­ pean Economic Community and the 1965 Crisis,” in F. Roy Willis, ed., European Integration (New York, 1975), 150; Hoffmann, “Obstinate," 3 90 -391; Charles Pcntland, “Political Theories o f European Integration: Between Science and Ideology," in D. Lasok and P. Soidatos, eds., The European Com­ munities in Action (Brussels, 1981 ), 546-569. 92 Peyrefitte, C ’était, 2:255, 294; Lindberg, Leon N. “Integration as a Source o f Stress in the Euro­ pean Community,” in Joseph S. Nye, ed., International Regionalism (Boston, 1968), 238. 93 Peyrefitte, C ’était, 2:263, also 264-265. 94 See Jouve and Peyrefitte, C ’était, passim; cf. Camps, European.

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in th e T reaty o f R om e. In D e ce m b e r 19 5 7 , ju s t after ratification an d before de G au lle e n te r e d o ffice, a Q u a i d ’O rsay study h ad already isolated two m ean s o f m a in ta in in g d e facto u n an im ity vo tin g after the transition to Q M V fo reseen for 19 66 . O n e was a p erp etu a l veto o f the transition to th e th ird stage, th e o th e r re ­ ten tio n o f the n ational ve to o n essential question s as a p re co n d itio n fo r app rov­ in g th e transition. D e G au lle review ed these studies a n d co n sid e re d b o th option s. T h e first was d ifficu lt as, havin g alread y m o ved to th e seco n d stage in e x ch a n g e fo r an initial fram ew ork a g re em en t on the C A P, it w o u ld be d ifficu lt to retreat en tirely to an in terg o vern m en tal system. T h u s d e G au lle turn ed to the seco n d o p tio n . In this d e G au lle hardly d iffered fro m o th e r governm en ts; h e was o n ly m o re o p e n a b o u t his goals. G erm an y h ad d e m a n d e d un an im ity vo tin g in c e r­ tain a gricu ltu ra l m atters an d, ten years later, a p ro m in en t E C rep o rt revealed that e ig h t o f th e n in e m em bers o f the EC, in clu d in g F ran ce, w ere satisfied with the L u x e m b o u rg C o m p ro m ise .95 M ost im p o rtan t, even i f d e G a u lle ’s m otivation s in p ro vo k in g the crisis re ­ fle cte d in p art his distinctive g e o p o litica l ideas, the decisive con strain t o n F rench tactics in th e em pty ch a ir crisis rem a in ed co m m ercia l interest, w hich fo rce d de G au lle to co m p ro m ise. M any a rgu e that the L u x em b o u rg C o m p ro m ise m arked a m a jo r victo ry fo r d e G au lle a n d a critical tu rn in g p o in t in E C histo ry— a m o ­ m e n t w h en the sup ran atio n al style o f d ecisio n -m a kin g p u rsu ed u p to 1966 and d esired by F ra n ce ’s p artn ers was stunted. D e G au lle h im se lfb o a ste d that “the C A P is in p lace. H allstein an d his C om m ission have d isap p eared . Supran ation alism is g o n e . F ran ce rem ain s so vereign .” Peyrefitte speaks o f “the d efe n se o f F ra n ce ’s n atio n al in terest co m in g b e fo re e le cto ra l in terests.” T h is assessm ent is e x a g g e r­ a ted in every respect. D e G a u lle w on the e le cto ra l battle against farm ers b u t in th e e n d c o n ce d e d o n policy.96 A s we shall see, it is striking how little o f w hat de G a u lle so u gh t h e ach iev ed an d thus how little the crisis diverted the lo n g er-term evo lu tio n o f th e E C . It is p erh ap s on ly a slight e xa gg eratio n to a rgu e that “the valu e o f the L u x e m b o u rg a gre em en ts lay precisely in the fact that they had n o ju r id ic a l valu e, th at the legal regu latio n s rem a in ed intact, an d that they d id n ot restrict in any way [the E C ’s] fu tu re e vo lu tio n an d fu n ctio n in g .” In tegration to o k o th e r leg al form s; w h en the go vern m en ts w ere p rep a red to m ove ahead, th ey sim ply rein stated QMV. D e G au lle m ust h im se lf have a g re e d w ith this as­ sessm ent o f the o u tco m e , since h e c o n tin u e d to advan ce prop osals fo r fu n d a ­ m ental in stitutional refo rm , th e m ost im p o rtan t o f w h ich gave rise in 196 9 to the Soam es A ffair.97 T h e m ain reason fo r d e G a u lle ’s b a rga in in g w eakn ess was n o t the o verw h elm ­ ing stren gth o f the d ip lo m atic co a litio n facin g h im — th o u g h the unw illingness o f fo re ig n p arliam en ts to ratify treaty ch an ges a n d the threat to seek an arran ge95 Peyrefitte, C ’était, 2:255; the German government had already set an important precedent on 3 April 1964 by securing Council acquiescence to its unilateral declaration that subsequent changes in cereal prices be decided only by unanimity. T h e Dutch had insisted on a similar clause for transport. 96 Peyrefitte, C ’était, 2:620, 594, also 3 5 6 -3 7 4 . 97 de la Serre, “EEC," 148; Emile Noel, “Some Institutional Aspects o f the Crisis o f the Com ­ munities,” Lecture before the International Faculty for the Teaching o f Comparative Law (Brussels, 15 September 1966); Rudolf Lahr, “Die Legende vom ‘Luxem burger Kompromise,’ " Europa-Archiv 38:8 (10 January 1983), 223-232.

196

Consolidating the Common Market, 1958—1969 m en t with Britain m attered — but the weakness o f dom estic support. O pposition stem m ed above all from farm ers, w ho ren d ered in credible any French threat to w ithdraw from the E C.98 De G au lle and his advisers were painfully aware o f the political irony. A policy designed in large part to defen d farm interests was in ­ terpreted by farm ers as a threat. H e bitterly criticized “d em agogues” am ong agricultural groups; his m ajor priority thereafter was to restore support, in large part th rou gh a gen erou s CAP.99 In sum, then, the p rep o n d era n ce o f evidence co n cern in g each o f the fo u r stages in d e G au lle ’s E uropean strategy— his views toward the custom s union and CAP, the F ouchet Plan, the British veto, and the nature o f EC institutions— confirm s the prim acy o f econ o m ic concerns. W h ether de G aulle ultim ately sough t w elfare o r the gran d eu r o f France does not, in the end, matter; eith er way, as a dem ocratic leader he was constrained to seek the form er. A s the G en eral him self put it: “Wealth . . . is the principle object o f public con cern. No go vern m en t can aiford to ign ore these realities. T h e am bition and efficacy o f a nation’s policies are b oun d up with [econom ic] strength. . . . I was to keep e c o ­ nom ic and social problem s continually in the fo refro n t o f my actions . . . — w hich explains, incidentally, why the accusation o f in difference to such matters so obstinately leveled against de G aulle always struck m e as absurd.” 100

Germany: Adenauer’s Balancing Act In the 1960s, as had been the case during the negotiation o f the Treaty o f Rom e, G erm any was m ore strongly in flu en ced by geopolitical con cerns than ei­ ther Britain o r France. A d en au er supported strong cooperation with France and the Six, as against British proposals fo r an FTA. N onetheless, G erm an policy re ­ m ained closely in line with its econ o m ic interests. G erm any favored industrial trade liberalization inside E urope and with third countries but sought to block con struction o f the C A P and a transport policy. Slow progress toward the CA P was ultim ately possible only by em ploying high EC and G erm an subsidies to m aintain the in com e o f G erm an farm ers. As durin g the Treaty negotiations, geopolitical con cern s en tered only on the m argin, tipping G erm any away from an FTA and in favor o f a geograp hically narrow er but substantively and institu­ tionally d e ep er custom s union. G eo p o litical Interest and Ideology: A d en au er Is “scared stiff” A den au er, we saw in ch ap ter 2, held a minority, pro-French view within the G erm an fo reign policy establishm ent. A lth ough G erm any’s basic geopolitical strategy o f closer relations with all the occup ying powers did n ot chan ge during this p eriod , G erm an y’s vulnerability to extern al threats increased during the four-year Berlin crisis en d in g in 19 6 1. In particular, the possibility that the

s" Peyrefitte, Celait, 21620; I.indbcrg and Scheingold, Europe's, 256; Camps, European, 122; John Newhouse, Collision in Brussels: The Common Market Crisis of 30 June 1965 (New York, 1967), 89-90, 127-13 4, 1 5 1-15 5 . See pp. 221-222, 228-230 o f (his book. 99 Peyrefitte, C ’était, 2 :6 12 -13 . 100 De Gaulle, Memoirs, 132.

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U n ited States w ould agree to surrender West Berlin, we saw, “scared A d en au er stiff.” 101 Because “de G au lle ’s unw avering refusal to negotiate u n d er the pres­ sure o f ultim atum s . . . p revented the W estern powers from uniting on a policy o f con cessions” in Berlin, one historian has written, cooperation with France was fu rth er strengthened as the central priority o f A d en au er’s European policy. E rhard, the Bundestag m ore generally, and the SPD opposition took m ore skep­ tical views o f de G au lle’s m otivations and o f the geopolitical benefits o f FrancoG erm an relation s.102 A lth o u gh A d en au er enjoyed considerable in flu en ce, particularly in foreign policy, the geo p o litical views o f dom estic groups im posed tight constraints on a one-sidedly pro-French policy. N o G erm an governm en t co u ld entirely sacrifice relations with the U nited States and N A TO to relations with France. A t the same time, the G erm an political class w ould perceive any com p lete repudiation o f the co n n ection with France as a m ajor foreign policy “failu re,” and the battles were all on the m argin. N eith er G erm an “G aullists” n or G erm an “A danticists” had m uch room to m aneuver. T h e Bundestag w ould n ot accep t any com prom ise o f the strong con n ection with N A TO and the U n ited States. A d en au er was fo rced to retract his initially un qualified support fo r Gaullist proposals such as the F ouchet Plan. T h e Bundestag, led by Willy Brandt over A d en au er’s vehem en t o p position , im posed a pream ble on the Franco-G erm an Treaty o f 1963 reaf­ firm ing support fo r both the E C and NATO . Yet A d en au er persisted. M any have co n clu d ed that his pro-French policy, taken to the extrem e in the Franco-G erm an Treaty, was “simply n o t rational fo r­ eign policy.” 103 A t som e risk to his party’s electoral viability, A d en au er fo u gh t back and fen d ed o ff efforts to replace him with Erhard by calling attention to E rh ard ’s supposed lack o f fo reign policy exp erien ce, in particular his skepticism ab ou t E uropean integration. W hen A d en au er finally stepped down in 1963, he, Strauss, and o th er so-called G erm an Gaullists con tin ued to criticize Erhard. As chan cellor, E rhard and his fo reign ministers supported French troop w ith­ drawals from Germ any, yet avoided any outright break with France, which would surely have p rovoked w idespread criticism .104

101 Herbert Blankenhorn, Verständnis und Verständigung: Blätter eines politischen Tagesbuchs (Frank­ furt, 1980), 148fr. ,993 )-

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Toward, Monetary Integration, 1 9 6 9 -1 9 8 3 d id n o t m a tte r: L a w so n still s o u g h t to k e e p th e p o u n d d o w n , D e lo rs to in c re a s e F r e n c h d e v a lu a d o n s , a n d S c h m id t to a v o id D M a p p r e c ia tio n . Y e t in c r e a s in g c a p ita l m o b ility d o e s a p p e a r to h a v e g iv e n d e p r e c ia t io n a s m a lle r a n d s o m e w h a t m o r e e r r a tic e ffe c t o n d o m e s tic in te r e s t ra tes, u n d e r m in in g o n e o f its tra d i­ tio n a l b e n e fit s .113 T h e e v id e n c e c le a r ly su g g e s ts th a t th e E M S d id n o t ca u s e d is in fla tio n ; in ste a d , a su b s ta n tia l c o m m itm e n t to d is in fla tio n w as a p r e c o n d it io n fo r m o n e ta r y c o ­ o p e r a t io n . S h ifts in d o m e s tic p o lic y p r e c e d e a n d a p p e a r to h a v e b e e n la rg e ly in ­ d e p e n d e n t o f s h iftin g in te r n a tio n a l p o lic y p r e fe r e n c e s .114 T h e d e c lin e o f B re tto n W o o d s , th e rise o f fra n c -D M te n s io n s , a n d th e m o v e to flo a tin g p r e d a te th e c o n ­ s tru c tio n o f th e S n a k e . T h e E M S w as c r e a te d to d e fe n d S c h m id t ’s fisca l o b je c tiv e s a n d th o s e o f th e P la n B a r r e , n o t th e re v e rs e . M itte r r a n d ’s d e c is io n to im p o se rigueur p r e d a te s h is c o m m it m e n t to r e m a in in th e E M S. A t th e h e a r t o f th e s u c ­ cess o f th e E M S w as, t h e r e fo r e , th e t r e n d to w a rd lo w -in fla tio n p o lic ie s t h r o u g h ­ o u t E u r o p e w h ic h b e g a n a r o u n d 1 9 7 7 to 1 9 7 9 . T h is t r e n d o c c u r r e d re g a rd le s s o f w h e t h e r th e c o u n t r y in q u e s tio n w as in s id e o r o u ts id e th e E M S . J e a n -J a cq u e s R e y o f d ie B e lg ia n c e n tr a l b a n k re ca lls:

T h e decisive ch a n gc o f m o o d cam e about after 1982, w hen coun tries like Belgium , D en m ark and France d e cid ed to o p erate m ajor econ o m ic p olicy adjustm ents, in­ volving a clear switch toward a DM exch an ge-rate target. T h e ch an ge in policy orientation did n ot o ccu r because o f EMS, but [because] the costs o f econ o m ic divergen ce w ithin the ERM had b ecom e obvious, and they w ere unlikely to dis­ ap p ear sim ply by op tin g o u t o f the system. . . . Adm ittedly, participation was also seen to entail feed b a ck effects . . . but the first-round sequ en ce goes from the ba­ sic p olicy reversal to ERM sustainability, n ot the o th er way a ro u n d .115

In a c c o r d a n c e w ith th is view , c r o s s -n a tio n a l s tu d ie s s u g g e s t th a t a v e ra g e d is in ­ fla tio n w as n o sw ifter in E M S c o u n tr ie s th a n in n o n -E M S c o u n tr ie s s u c h as 115 In Denm ark the shift occu rred in 1 9 8 2 -8 3 ; in Ireland in 1981; in France in 1 9 7 8 -7 9 , then again in 1 9 8 2 - 8 3 . In Italy, increm ental steps during the 1980s led to a m ore autonom ou s central bank. T h e h ard lira policy cam e incrementally. Efforts to use devaluation and wage indexation (the scala mobile) to shift resources toward the tradable sector supported by the peak industrial group, C onfindustria, only en cou raged greater wage dem an d s and public spending. Boissieu and Duprat, “R ecen t,” 71; M assim o Russo and G iuseppe Tullio, Monetary Coordination within the European Monetary System (W ashington, D.C., 1988), 303; G oodm an, Monetary Sovereignly. Som e m aintain that this sequence reflected above all lessons learned from the G erm an exam ple in the 1970s and, m ore broadly, the spread o f m onetarist ideology. It is certainly true that som e n a­ tional leaders, notably Giscard an d Barre, cited the G erm an case as a m odel. Yet Giscard and Barre h ad su pp orted such dom estic policies since the m id-1960s, whereas others, particularly Socialists, switched as the result o f overt dom estic policy failure. C onsistent French su pport for the “m onetarist” position suggests that this explanation cannot be taken too far. Finally, there is m uch evidence that m onetarism as an ideology was treated with skepticism , even in Germany. N onetheless, this conjec­ ture can not be definitively rejected. For a sophisticated treatm ent, see M cNam ara, Currency. 114 Willett and Andrews, “Financial,” 2off. 115 Je an -Jacq u es Rey, cited in Francesco Giavazzi, Stefan o Micossi, and M arcus Miller, eds., The European Monetary System (C am bridge, 1988), 1 3 8 -1 3 9 . Also, Rainer M asera o f the Banca d ’ltalia ar­ gu es that the key rem ains “convergence o f econom ic fundam entals." 403; Tsoukalis, “Money,” 128; S c h m id t, Deutschen, 220, 233.

28 7

T h e C h o ic e f o r Eu r o p e Table4.2. Average annual inflation rates (%) (CPI) Country

1970-1979

1980-1986

1984-1986

Germany France Britain Italy

5.2 9.2 13.2

3.3 9.0 7.7 13.9

1.5 5.3 4.8 8.4

12.8

S o u r c e : OECD Economic Outlook 58 (December 1995),

A18.

B ritain.116 N or did the relative inflation p erform an ce o f m em ber and nonm em ber governm ents chan ge significandy, though those w ho chose to participate ten d ed to have lower inflation (see Table 4-2). D isinflation, in sum, appears to have been m ore cause than con sequence. EMS m em bership was n ot a substitute fo r disinflation, n or a necessary con dition fo r it. It was instead a particular way to institutionalize disinflation so as to reduce its perceived costs, econ o m ic and political. W hy choose international co o p eratio n rather than a unilateral p eg to the DM o r to an appropriate currency basket, as Austria, Sw eden, and Britain did at times? T h e historical record suggests, though it can n o t definitively prove, fo u r reasons, each o f w hich focuses on the expectations o f dom estic econ om ic and political actors for the EMS com m itm ent. T h e m ost com m on ly cited yet least im portant reason was the h o p e that the EMS m igh t at som e future d a te — w hether by the revision in 1981 or a shift to a single cu rren cy— transform into a m ore sym m etrical arrangem ent. Yet this must have been secondary, since we have seen that G iscard and M itterrand accepted EMS m em bership even though they realized that such a transform ation was not im m inent; the British, having discussed the m atter with the G erm ans and French, n ever even entertain ed such illusions. A secon d reason for the EM S was to dam pen exch an ge-rate volatility, thereby providing a m ore stable environm en t in w hich to m anage m onetary policy and d iscouraging the sort o f overshooting that characterized U.K. and U.S. policy d u rin g the early 1980s. U n der floating exch an ge rates and with high capital m o ­ bility, consistent m acroecon om ic m anagem en t proved difficult, if n ot im pos­ sible. In Britain, even con vin ced m onetarists like N igel Lawson had d ecid ed by 1985 that a p eg ged e xch an ge rate was the only credible m acroeconom ic policy target; H owe, as we saw above, thinks it was fo r ju st this reason. C learly this was the co n cern o f British business, w hich quickly swung to support o f m em bership in the EM S after its exp erien ce with massive exch an ge-rate appreciation and re1,6 This point is disputed, but the preponderance o f evidence supports the lack o f direct impact. Fratianni and von Hagen, European, 48 -53 , 6 8 -7 1 , 221-222; Francesco Giavazzi and Alberto Giovannini, LimitingExchange-RateFlexibility: The European Monetary System (Cambridge, Mass., 1989); Daniel Gros and Niels Thygesen, European Monetary Integration: From the European Monetary System to­ wards Monetary Union (London, lg g ij j c f . Frieden and Eichengreen, “Political,” 28. For the Commis­ sion's counterargument, see Michael Emerson et al., One Market, One Money (London, 1992), 2ioff.

2 88

Toward Monetary Integration, 1969-1983 du ced inflation. Similarly, B un desban k sup port fo r currency p egs— even if the sup port was alm ost n ever in vo ked — may have dissuaded speculators. T h e re is strong evidence that the EM S did in d eed dam pen exch an ge-rate volatility.117 A third reason was that m any believe p eg g ed exch an ge rates bolstered the credibility o f dom estic disinflation, thereby red u cin g its econ o m ic cost. T h e EM S arranged extern al fin an ce, currency swaps, and co o rd in ated intervention in sup port o f curren cy pegs. T h e E uropean political symbolism was th ough t to bolster co n fid en ce in national currencies am ong international financial m ar­ kets, thereby red u cin g risk prem ia, and am on g dom estic econ o m ic actors, thereby red u cin g the o u tp u t cost o f disinflation. T h e re is in fact litde evidence o f this: outp u t costs o f disinflation appear to have been no lower in EMS than in non-EM S countries. Yet such claim s w ere w idely believed. T h e fourth reason is that the EMS o ffered justifications that, for som e gov­ ernm ents, red u ced the p olitical costs o f un p op u lar austerity policies. In short, governm ents “cut slack” dom estically. Use o f the EM S rein forced institutional con trol over m on etary policy, avoided blam e fo r cosdy austerity by scapegoating the E C and fo reign governm ents, and provided ideological legitim ation for m on etary stabilization by linking m on etary coop eration to underlying econ om ic and geopolitical purposes (everything from the m aintenance o f trade liberal­ ization to the p revention o f Franco-G erm an w ar).118 E xcep t during the Socialist exp erim en t from 1981 throu gh 1983,the c h ie f executives o f France, w here in ­ flation was traditionally m oderate and E uropean integration popular, grasped at the EM S as an instrum ent to legitim ate and sustain a centrist coalition around austerity. B oth G iscard and M itterrand exp lo ited the symbolic and institutional sign ifican ce o f the E C to justify the im position o f rigueur. T his interpretation is m ore con vin cing than the con ventional geopolitical view that the EMS com m it­ m ent was “param o u n t” because o f F ran ce’s desire to d eep en its participation in the E C .119 T h ese considerations, alon g with underlying inflation rates, h elp exp lain the cross-national patterns in policy and process. Ability and w illingness to partici­ 117 Gros and Thygesen, European. Randall Henning and James Walsh attribute differences in exchange-rate policy between Germany and France, on the one hand, and Britain, on the other, to closer links on the Continent between banks and business, which in turn influence the respective central banks— an argument advanced also by Stephen Blank with respect to British policy gener­ ally and Alan Milward with respect to the Treaty o f Rome. Walsh maintains that in Britain, as opposed to France and Italy (and implicitly Germany), a relatively weak relationship between business and finance undermined “consensus among senior policy-makers” (particularly central bankers) for com­ petitive exchange rates. This, he argues, explains large fluctuations in exchange rates and the weak­ ness o f British support for EMS. This view cannot be dismissed, but I have not found much confirm­ ing evidence. Despite loose ties, British business, finance, and the central bank were almost perfectly aligned in the 1980s. All three, excepting one bank, were publicly opposed before 1982-83, all pub­ licly in favor by 1984. Despite close bank-industry links in Germany, business and the Bundesbank consistently took opposed positions. Cf. Henning, Currencies', Walsh, “Global.” 118 Roland Vaubel, “A Public Choice View o f the Delors Report,” in Vaubel and Thomas Willett, eds., The Political Economy of International Organizations: A Public Choice Approach (Boulder, Colo., 1991), 30 6-310 ; Jeffry A. Frieden, “Making Commitments: France and Italy in the European Monetary System, 1979 -19 8 5 ,” in Center for German and European Studies Working Paper Series 1.14 (Berkeley, Calif., 1993). 119 Moravcsik. "Why the European Community.” Cf. Frieden, “Making," 38-39.

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pate in a fixed-rate regim e was an inverse fun cdon o f underlying inflation. In fo u n d in g the EMS, Schm idt sough t to stim ulate growth while red u cin g exch an ge rate instabilities, w hereas G iscard after 19 7 6 sough t to facilitate the dom estic adjustm ent required to b rin g French inflation into line. B oth leaders felt their am bitions, unattainable throu gh dom estic institutional m eans, m ight be real­ ized th rou gh international co o p era tio n .120 C o o p eratio n rem ained weak d u rin g periods w hen governm ents pursued d i­ vergen t m acroecon om ic policies. T h e Snake and the EMS were relatively in ef­ fective w hen the inflation rates o f France, Britain, and Italy diverged and the d o ­ mestic p olitical will to im pose austerity was absent. T h e British governm ent, by contrast, faced m ore e n tren ch ed inflation, co u ld draw on w eaker public sup­ p o rt fo r E uropean integration, and in the 1980s was led by a m ore con fiden t and resolutely antifederalist c h ie f executive. T h atcher, in overt opposition to many o f h e r advisers, p referred to disinflate by con frontin g and co n qu erin g rather than circum ven tin g dom estic opposition, w hatever the short-term costs. She p ursued rigorous disinflation and crafted nationalist rather than E uropean appeals. N onetheless, those in Britain w ho did favor m em bership, notably N igel Lawson, argu ed on precisely the groun ds sketched above. Even w here policies co n verged e n o u gh to gen erate a shared interest in exch an ge-rate stabilization, persistent differen ces in inflation rates between hard- and soft-currency coun tries sparked significant distributive conflict. W hile Sch m idt sought a lower exch an ge rate and greater m acroeconom ic flexibility, he was unable to push the B un desban k very far; G erm an preferen ces were rela­ tively narrowly defin ed. H en ce the paradoxical result that G erm any initiated m ost o f the n egotiations yet was n ot forthcom in g in distributive negotiations, fo r no agreem en t could sacrifice G erm an m onetary sovereignty; no large m ove toward accom m odatin g expansion was perm itted. T h e G erm an win-set was co r­ respon din gly narrow.121 For their parts, the G iscard governm ent, and even m ore so those o f Callaghan and G iulio A n dreotti in Italy, were lim ited in their ability to im pose dom estic austerity and discipline, even with external support. H ence France, Britain, and Italy sough t lower inflation, but n on e waited to converge entirely o n G erm an levels. T h is basic cleavage betw een hard- and soft-currency coun tries drove the dispute betw een “econom ists” and “m onetarists” that ch ar­ acterized E uropean m on etary discussions from the early 1950s to the end o f the p eriod in question. Each side sought to reduce the costs o f dom estic p o l­ icy adjustm ent: France, Britain, and Italy sough t arrangem ents that w ould re­ duce inflation with m inim al austerity and discipline, w hereas G erm any sought to avoid appreciation w ithout un derm in ing dom estic m onetary control. Variation across other issues linked to m onetary policy, such as British acces­ sion, C A P reform , and region al policy, reflected narrow com m ercial interests even m ore strongly. France linked British entry to agriculture, G erm any im posed 120 Story, “Launching,” 401; Begg and Wyplosz, “European Monetary System,” 21-23. 121 Roland Vaubel, “The Return to the New European Monetary System,” in K. Brunner and A. Meltzer, eds., Monetary Institutions and the Policy Process, Garnegie-Rochcstcr Conference Series 13 (Amsterdam, 1980).

290

Toward Monetary Integration, 1969-1983 M CAs in the CAP, d o n o r coun tries perm itted increases in region al fun din g only as exp licit side-paym ents. O n ly in d efin in g p referen ces over institutional m at­ ters, the most uncertain issue, did ge o p o lid ca l ideology play a m ajor role. T h e geopolidcal argu m en t is least plausible in the case o f agricultural policy and in region al and social transfers. Even G erm an insdtudonal preferen ces co n cern in g the C o un cil and Com m ission can b e in terp reted, as we shall see, as a credible com m itm ent m echanism to achieve specific econ o m ic goals. O nly in institu­ tional matters with n o clear con sequences, such as direct elections to the Parlia­ m ent, is there strong evidence fo r the prim ary im portance o f ideology. By contrast, attem pts to prom ote co o p eratio n fo r purely geopolitical o r id eo ­ logical reasons— B ran dt’s proposals for a m onetary fund, Jen kin s’s fiscal fed e r­ alism, and perhaps som e sym bolic proposals on P om p idou’s p art— were quickly scaled back to fit within the perceived econ o m ic interests o f m ajor governm ents. Yet this is n ot to ign ore geo po litical interests and ideology entirely. Schm idt and Giscard exp lo ited E uropean ideology to justify policies they pursued prim arily fo r econ o m ic reasons. A ntifederal ideology also did have a strong, in dep en den t effect on T h a tc h er’s policies, w hich reflected to a large exten t h er personal an ­ tipathy regard in g European integration. Yet even in the British case an e co ­ nom ic explan ation tells us as m uch about British preferen ces than does a g e o ­ political one. But fo r T h a tc h e r’s personal antipathy, Britain would have jo in e d the ERM in the mid- 1980s, w hen business and the Conservative party were firmly in favor. A s we shall see in the n ext chapter, T h a tch er co u ld n ot forever resist the com bin ed pressure o f ministers, British business, and the City.

In t e r s t a t e B a r g a in in g

Given the d ifferen t p referen ces am ong various governm ents co n cern in g the nature o f m on etary co o p eratio n , as well as such related issues as agricultural re­ form , British entry, and regio n al policy, as well as varying views co n cern in g the p ro p er institutions in w hich to em bed these substantive issues, intense n egotia­ tions w ere required to reach agreem ent. In m onetary policy, negotiations were co n d u cted in three stages: n egotiations on the Snake betw een 1969 and 1973, negotiations on the EM S in 1978 and 19 79 , and negotiations w ithin the EMS. Beyond the Common Market: The Snake, 19 6 9 —*973 Despite n um erous proposals, starting with the Spaak R eport in 1956 and in­ cluding suggestions from M o n n et’s Action C om m ittee, private econom ists like Robert Triffin, the E uropean Parliam ent, and the Com m ission, which in 1965 m ade m onetary coordin ation a m ajor objective, n o con crete m om entum toward m onetary coop eration o ccurred during the 1960s. T h e C o u n cil o f Ministers did, however, agree to create E C com m ittees to discuss monetary, financial, and m acroeconom ic issues. T h e m ost im portant o f these was E CO FIN , at w hich fi­ nance and econ om ics ministers m et m onthly with m em bers o f the Com m is­ sion present. In January 1968, with the dollar un der downward pressure, pro29/

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posais fo r m onetary co o p eratio n began o n ce again to proliferate. A leading L u x em b o u rg p olid can , P ierre W erner, subm itted a plan fo r m onetary union, w hich was follow ed, o n e m onth later, by a less am bitious Com m ission m em o ­ randum and later by a p roposal from Giscard. R aym ond Barre, w ho had re ­ placed R obert M arjolin as C om m issioner fo r econ o m ic and financial affairs, called fo r “realistic” steps, such as agreed growth-rate targets, consultations on short- and m edium -term econ o m ic policy, the provision o f un con dition al short­ term credits to m em bers facin g balance o f payments problem s, and the provision o f co n ditio n al m edium -term finan cing to m em bers with persistent deficits— a cautious proposal tilted slighdy toward French “m onetarist” priorities. T h e C o u n cil accep ted Com m ission proposals establishing a consultation p rocedure and affirm ing short-term support fo r balance o f paym ents in prin ciple, but sur­ plus coun tries (Germ any, the N etherlands, and Italy) refused to m ove beyond lim ited central bank swaps.122 M om entum toward m onetary agreem en t picked up only after July 1969, when Pom pidou prop osed linked n egotiations on British entry, m onetary integration, and agricultural financing, to be discussed at a summit m eeting am ong c h ie f e x ­ ecutives at T h e H ague. T h e French insisted that agriculture be resolved first; af­ ter a m arathon m inisterial session, a system o f centralized E C finan cing for the CAP, based on 1 p ercen t o f national VAT receipts, was established. As a quid pro quo the French governm en t accep ted the o p en in g o f negotiations over British accession and lim ited new budgetary powers fo r the European Parliam ent co n ­ cern in g n on com p ulsory exp en ditures but successfully resisted pressure for d i­ rect elections to the Parliam ent. In addition, there w ere agreem ents on inter­ governm ental cooperation on foreign policy and regular sum m it m eetings in the E uropean C o u n cil.123 By contrast, m on etary policy was relegated to the rh etoric o f the final co m m u ­ n iqué, w hereby the Six u n dertook to com p lete E conom ic and M onetary Union. B randt was unw illing to m ove beyon d short-term swaps to a European Reserve F und w ithout p rior econ o m ic co n vergen ce, w hereas Pom pidou called for im ­ m ediate steps to create short-term support, coordin ate external m onetary p o l­ icy, and, in a departure from previous French policy, p ool reserves. In March 19 70 the m em ber-states called fo r study by a gro u p o f national politicians and experts chaired by Pierre W erner, Prim e Minister o f L u x em b o u rg.124 T h e W erner Report, w hich appeared in O cto b e r 1970, sought com prom ise betw een deficit and surplus countries. It p roposed an “irrevocable fixing o f par­ ity rates,” perhaps with a single currency, and “the com plete liberalization o f capital,” all w ithin a system o p erated by an E C system o f central banks m odeled on the U.S. Federal Reserve. Transition was to take place in three stages. T h e first two w ould em ploy narrow er exchange-rate bands and a m edium -term fund m anaged by national central banks. O n ly in the final stage w ould parity changes 122 Dyson, Elusive, 6 5 -7 1 ; Tsoukalis, Politics, 53, 82-90; Schmidt, Deutschen, 240-242; Franck, “New," 138-139. 123 Franck, “New,” 130 -13 5. 124 Tsoukalis, Politics, 82-90; Coffey and Presley, European Monetary Integration, 37-38.

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Tozvard Monetary Integration, 196 9 -19 8 3 be p ro h ib ited an d san ctions im p o sed fo r n o n co m p lia n ce . C o n tro ls o ver fiscal p o licy w ere p articu larly strict, w ith a u th o rity over n atio n al budgets, as w ell as e x ­ p a n d e d E C re g io n a l an d structu ral fu n d s, overseen by the P a rlia m en t.125 T h e re p o rt was g re e te d w ith m a g n ificen t rh eto ric b u t little co n cre te action . A n E C O F IN re so lu tio n o f M arch 1 9 7 1 p ro cla im ed the la u n c h in g o f th e first stage. In M ay 1 9 7 1 , six w eeks a fte r th e E C O F IN reso lu tion , the G erm an a n d D u tch g o v ern m e n ts re sp o n d e d by tem p o rarily flo atin g the D M an d th e gu ild er, despite o p p o sitio n fro m bo th th e F rench an d w ithin G erm any, from the B un desban k. A t the Paris sum m it o f O c to b e r 19 7 1 it was a g re e d to co m p lete “E u ro p ean U n io n ” by 19 7 9 and “E co n o m ic a n d M o n etary U n io n ” by 1980; the plan was e n ­ d o rsed again o n e year later. T h e c h ie f e xecu tives sim ultan eously p ro cla im ed go als in scien ce and tech n o lo gy, en viro n m en tal an d social policy, as w ell as ca ll­ in g fo r d e e p e r co o p era tio n in fo re ign policy. Yet in practical discussions at a F ra n co -G erm a n sum m it a n d various m eetin gs d u rin g 1 9 7 1 , the m e m b er states w ere m o re cautious, re a ch in g a g re em en t close to the lowest co m m o n d e n o m i­ n ator. T h e G erm an go v ern m e n t, u n d e r B u n d esb a n k pressure, insisted o n strict co n v e rg e n ce a n d a safegu ard clause that w ou ld p erm it the m o n etary m easures o f the first stage to be reversed after five years i f e co n o m ic co n v e rg e n ce h ad n ot b e e n ach ieved ; th e F ren ch , u n d e r G aullist pressure, re jected exp licit m en tio n o f transfers o f sovereign ty in the final stage. A g re e m e n t was re a ch ed on on ly a few co n cre te steps: clo ser co n su ltatio n a m o n g cen tra l banks, m o d est m edium term fin a n cial aid, an d n o n b in d in g co o rd in a tio n o f short-term policies. G e r­ m any co n tin u e d to press fo r a jo in t flo at against the d o llar but F rance rejected the p lan an d Italy refu sed , fea rin g that th eir cu rre n cie s w ou ld sim ply follow the DM u p w ard .126 T h e A p ril 19 7 2 Basle A g re em en t, re a ch ed a m o n g cen tral bankers m eetin g at the B an k fo r In tern atio n al Settlem en ts (B IS), crea te d the “S n ake in the T u n n e l.” T h is a rra n g e m en t p erm itted E u ro p e an cu rre n cie s to deviate within b an d s o f ± 2 .2 5 p ercen t. It was o rg a n ize d outside fo rm al E C institutions, and five n o n m e m b e rs — Sw eden , Norway, D en m ark, B ritain, and Irela n d — w ere p ar­ ticipants. T h e Snake re m a in e d a p u re e xch an ge -ra te agreem en t. G erm an y re ­ je c te d C o m m issio n a n d F ren ch p rop osals fo r a jo in t reserve fu n d , re g io n al p o l­ icy, an d cen tra lized red istribu tio n , insisting o n p rio r e co n o m ic co n ve rge n ce. F u rth er action c o u ld be taken o n ly by fin a n ce m inisters vo tin g un an im ously in the E C O F IN C o u n cil. In M arch 19 7 3 the jo in t p e g to the d o llar b ecam e a jo in t float; w h en the G erm an go v ern m e n t th rea te n ed to g o a h ea d on its own, P o m p i­ d o u ch o se to follow. A m o d est E u ro p e an M o n etary C o o p era tio n F un d was cre-

185 Tsoukalis, Politics, 103-104; Gros and Thygesen, European, 1 2 -1 4 , 2 4-26 . Although divergent inflation rates were not yet a major problem, the Werner Commission foresaw the potential difficul­ ties and called for massive transfers o f power: “T h e center o f decision for econom ic policy will exer­ cise in d ep en d en tly. . . a decisive influence over the general econom ic policy o f the Community'... . public budgets [will] be decided at the Community le v e l. . . the creation o f liquidity throughout the area and m onetary and credit policy will be centralized; monetary policy in relation to the outside world will be within [its] jurisdiction." Cited in Tom de Vries, “O n the Meaning and Future o f the European M onetary System,” Princeton Essays in International Finance (Princeton, N.J., 1980), 7. 126 Tsoukalis, Politics, 10 4 -10 6 , 1 1 0 -1 1 3 ; Gros and Thygesen, European, 16.

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ated , y e t it was w ith ou t rea l authority. By 19 7 4 the C om m ission co u ld re co m ­ m en d little e x c e p t fo r m o re fre q u e n t m e etin g s.127 T h e Sn ake d id n o t dissuade E u ro p e a n go vern m en ts fro m p u rsu in g sp ecific n atio n a l p riorities. W ithin six w eeks o f its crea tio n , sp ecu latio n fo rce d o u t the British p o u n d a n d the Irish p un t; th e Italian lira fo llo w ed in early 1 9 7 3 .128 T h e re m a in in g co u n tries so o n split in to stro n g a n d w eak cu rren cies, w ith G erm any, the N eth erlan d s, an d N orw ay in th e first g ro u p , an d F ran ce, B elgiu m , Sw eden, a n d D en m ark in the seco n d . F or a tim e, w eak-cu rren cy co u n tries tried to avoid u n ilatera l devaluation against the D M , reso rtin g instead to ex te rn a l fin an cin g an d capital co n tro ls. Yet u n ilateral capital co n tro ls p ro ved in effective, an d G e r­ m any re jecte d a E u ro p e an system o f tw o-tiered e x ch a n g e rates p ro p o se d by F ran ce a n d B elgium . In Jan u ary 19 7 4 , w ith devaluation in evitable an d electio n s a p p ro a ch in g , the F ren ch g o v ern m e n t withdrew. S ch m id t’s o ffe r o f a D M 9 b il­ lio n lo an to k e e p F rance in — an act o f q u estio n ab le d om estic leg ality— was re ­ je c te d ; th e F re n ch go v ern m e n t had alread y a ccu m u la ted a large d e b t k e ep in g the fra n c in the jo in t flo at, an d the p ro sp ect o f m o re was u n ap p ea lin g . France re jo in e d in D e cem b er 19 7 5 , o n ly to e x it again the fo llo w in g yea r after C h ira c ’s reflatio n . Sch m id t pressed the British an d, in A u gu st 19 7 4 , o ffe re d th e Italians a $2 b illio n lo an to fin a n ce th eir retu rn . B o th efforts w ere futile. N e ith er c o u n ­ try was able to stabilize its e x ch a n g e rates, an d in 19 7 6 bo th n eg o tia te d IM F sta­ b ilizatio n a g re em en ts.129 By 19 7 6 the Sn ake fu n ctio n e d o n ly a m o n g sm all n o rth e rn E u ro p e an c o u n ­ tries co n tig u o u s w ith G e rm a n y — th e N eth erlan d s, B elgiu m , an d D e n m ark — w ith Sw eden an d N orw ay as associate m em b ers.130 N in e e xch an ge -ra te adjust­ m ents o ccu rre d , an d the B u n d esb a n k in te rv en ed o n several o ccasio n s in favor o f sm aller cu rren cies. Yet in g e n era l the Sn ake d id n o t discip lin e devaluation s, un ilateral requests w ere n o t ch a llen g e d , an d n o co m m o n p o licy d e v e lo p e d to ­ w ard the dollar. T h e M arjolin C o m m ittee re p o rt o n m o n etary in tegratio n c o n ­ clu d ed : E u ro p e is n o n e a re r to E M U than in 1969. In fact, if th ere has b e en any m o vem en t, it has b e e n backw ard. T h e E u ro p e o f the 1960s re p re se n te d a rela ­ tively h a rm o n io u s e co n o m ic an d m o n etary entity w h ich was u n d o n e in the co urse o f re c e n t years; n atio n a l e co n o m ic an d m o n etary p o licies have n ev er in

127 Gros and Thygesen, European, 20—21. Also Tsoukalis, Politics, 1 1 4 - 1 1 8 , 126, 128, 1 3 9 -1 4 1 , 14 4 -15 0 , 155; Lankowski, Germany, 326(1, 3406?, 361; Dyson, Elusive, 85; Loriaux, France, 248-249. 128 In public France and Germany called on Britain and Italy to rejoin, but privately discouraged them from doing so— the entire tactic apparently aimed at postponing decisions on side-payments. T h e movement to the “second stage" o f EMU, proclaimed in 1973, contained no concrete measures. Germ any offered to guarantee the British sterling balances, and Heath was apparendy willing to take sterling into the float on these terms; but he was dissuaded by the Treasury. Gros and Thygesen, European, 3 0 -3 3 . 129 Tsoukalis, Politics, 1 1 5 - 1 1 8 ,1 3 9 - 1 4 1 ,1 5 4 - 1 6 8 ; Lankowski, Germany, 360; Carr, Schmidt, 8 9-94. 150 Tsoukalis, Politics, 12 9 ,1 5 2 —157; Ludlow, Making, 2 -1 2 . Switzerland proposed to join the Snake in 1975 but withdrew its application when confronted with stiff French conditions. During this pe­ riod Italy, though continuing to run a current account surplus, suffered from large capital outflows. Fearing a run on the lira, they join ed the French camp on this issue. The French, however, desiring financing but having relatively large reserves, were suspicious o f proposals that would undermine na­ tional control over reserves.

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Toward Monetary Integration, 1969-1983 25 years been m ore discordant, m ore divergent, than they are today.'31 A s two com m entators observed, “the Snake was only a lim ited, th ough significant e x ­ ception to E u ro p e ’s lapse in to m ore d ivergen ce than at any time since the very first postwar years.” 132

Relaunching Exchange-Rate Cooperation: The European Monetary System, 1 9 7 7 —1 9 7 9 M onetary integration, H elm u t Sch m idt observed in 19 7 7 , was “in the air.” T h ere was n o shortage o f inidadves. O ver a dozen proposals fo r EC reform had been advanced by m em ber governm ents, professional econom ists, and exp ert com m ittees, and w ere suggested by n um erous reports on the state o f the EC m ore generally. A m o n g these w ere reports from the Com m ission and Parliam ent fo ­ cused particularly on an expansion o f E C activities u n d er strong, centralized in ­ stitutions fo r budgetary approval and codecision by an elected Parliam ent and the Com m ission; groups app oin ted by the C o u n cil focused prim arily on im ­ proving intergovernm ental institutions.1™ Such official E C proposals had little im pact, however. N ot atypical was the fate o f the m onetary proposal advanced by Roy Jenkins, the form er L abour m inister w ho was nam ed to the Com m ission Presidency in 1976 at the suggestion o f Schm idt and Giscard. In a series o f lectures begin n in g in O cto b e r 19 7 7, Jenkins m ade closer m onetary co o p eratio n the cen terp iece o f his E C program fo r the n ext fo u r years. T his decision , a surprise to m ost observers, reflected — so he later reca lled — his assessment that it was the issue m ost likely to be accepted. Schm idt sought expansion, and stabilization program s had been in troduced by Callaghan in Britain, A ndreotti in Italy, and Barre in France— thereby creating a co n vergen ce o f interests.134 Jenkins later dow nplayed his own con tribution to the 1978 Franco-Germ an proposals, argu ing that he had con tributed relatively litde. T h e definitive prim ary-source study o f the n egotiation s co n cludes that, in the m inority o f areas w here his proposals resem bled those finally accep ted, Jenkins was simply “lucky that events app eared to p o in t in the sam e direction as his own argum ents”; Jenkins him self notes that M on net “taught m e always to advance along the line 151 Marjolin Committee Report, cited in Gros and Thygesen, European, 20, also 1 7 -2 1 ,3 5 . 152 Gros and Thygesen, European, 25. 155 Schmidt, Deutschen, 221. These included an April 1974 Commission proposal for the pooling of reserves; the Maijolin Committee report o f March 1975 calling for a $ io billion Exchange Stabilization Fund and a common currency unit as a reserve asset and means o f financial settlement; the May 1975 plan o f French finance minister Fourcade for a more symmetrical system of adjustment based on a currency basket and a joint policy vis-à-vis the dollar; the Commission Report on Euro­ pean Union o f June 1975, which called for a common currency for determination o f exchange rate margins (the “Europa"); the November 1975 report o f nine independent economists (the “AllSaints’ Day Group”) calling for the use o f a parallel currency, two O PTICA reports o f the Commis­ sion, published in 1976 and 1977, proposing a parallel currency, the February 1976 plan o f the Dutch finance minister Duisenberg for greater consultation and policy coordination; and the 1976 Tindemans Report advocating a two-track system and greater domestic policy coordination. 154 Jenkins, European, 20-25.

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o f least resista n ce.” 135 T h e o n ly p ro p o sals n o t w idely ad van ced outside o f J e n ­ kin s’s sp ee ch es w ere those c o n ce rn in g fiscal federalism , w hich the C om m ission h a d n o n e th ele ss p ro p o se d since 1 9 7 1 . A dm in istratio n o f go v ern m e n t sp en d in g, e x c lu d in g social w elfare an d law a n d o rd e r b u t in clu d in g all structu ral an d sec­ toral sp en d in g , regio n al policy, ex te rn a l relation s, fo re ig n aid, an d p erh a p s d e ­ fen se an d un em p lo ym en t, to ta lin g 5 - 7 p e rce n t o f G D P, was to b e cen tra lized at th e E C level. Such p rop osals fo r su p ranational cen tralization w ere treated al­ m ost universally, and n o t ju s t in G erm an y, as p olitically naive. C h ie f executives re a ffirm ed th e ir rh etorical co m m itm e n t to EM U at the D e cem b er 19 7 7 m eet­ in g o f th e E u ro p e an C o u n cil, b u t co n cre te steps in clu d e d on ly a few studies and a sligh t in crease in regio n al subsidies.136 It was thus left to two c h ie f execu tives, Sch m id t an d G iscard, to assum e the ro le o f “p rin cip a l arch itects” o f the EMS. A close p erson al relatio n sh ip and the c o m b in e d in flu e n ce o f th eir two co u n trie s m ade Sch m id t an d G iscard effective allies. In Jan u ary or F ebruary 19 7 8 , d u rin g o n e o f th eir n u m ero u s co n ve r­ sations, th ey d e cid e d to su p p o rt a new initiative o n E u ro p ean m o n etary in ­ teg ratio n . T h o u g h n eith e r exp licitly claim s exclu sive p aren tag e, Sch m id t a p ­ p ears to have taken the g rea ter initiative. A cco rd in g to him , the p rop osal was d e lib era tely sch e d u le d after the F ren ch e lectio n s to en sure a “stron g go v ern ­ m e n t” in F ra n ce — that is, o n e fre e o f C o m m u n ist in flu en ce. T h e two leaders ca refu lly p la n n e d the a g e n d a fo r the C o p e n h a g e n E u ro p ean C o u n cil sum m it o n 7 A p r il.137 T o th eir co u n terp arts in C o p e n h a g e n , Sch m id t and G iscard stressed the n eed to in su late a W est E u ro p e an b lo c fro m m o n etary flu ctu atio n s em an atin g from Jap an an d the U n ited States. S ch m id t ca lled fo r crea tio n o f a E u ro p ean M o n e ­ tary F un d (EM F) to take o ver fin an cial d ealin gs co n n e cte d with the Sn ake and o th e r E C fin a n cial institutions; the p o o lin g o f 1 5 - 2 0 p ercen t o f official reserves; o fficia l in terv en tio n in E C cu rre n cie s ra th er than the dollar; an d the in creased use o f a co m m o n cu rren cy u n it in cen tral b a n k transactions, with its eventual e m p lo y m e n t as a reserve asset o r co m m o n currency. Som e top F rench and G e r­

135 Cites from Ludlow, Making, 61; Jenkins in Hommage, 23, Jenkins, Life, 463. Also Schmidt, Die Deutschen, 221. Ludlow observes: “Both men had reasons o f their own for acting as they did . . . and it would be absurd to suggest that they embarked on their course simply because o f the promptings o f the Commission president.” 136 Ludlow, Making, 3 7-50 , 5 7 -6 0 , 9 7 -10 1 . This figure was based on the so-called MacDougall Report, entitled The Role of Public Finance in European Integration— the work o f Jenkins staffer Michael Emerson, inspired by the economist Robert TrifTin. T h e report contrasted this option with three al­ ternatives: the status quo with about 1 percent o f GDP spent by the Community; a program o f re­ gional, structural reform policies totaling about 2/1—3 percent o f GDP; or a set o f responsibilities on par with major federal countries, which would spend 2 0 -2 5 percent o f GDP. T h e outcome was well below even the first option. 137 Edmund Dell, “Britain and Origins o f the European Monetary System," Contemporary European History 3 (1994), 29-30; Emminger, D-mark, 357; Ludlow, Making, 88-89, also 6 3 -8 7 ; Jenkins, European, 224. Heisenberg, “Mark," 9 1-9 2 , argues it was Schmidt. Schmidt says he cannot remem­ ber. Deutschen, 221, 249. Asked about parentage, Giscard is coy, quoting Napoleon: “En matière de paternité, Monsieur, il n’y a que des hypothèses,” though he hints that he had promoted it more forcefully than Schmidt, who instead favored defense cooperation. To support this conjecture, we have seen, no evidence was found. Giscard, Pouvoir, 136, 142.

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Toward Monetary Integration, 19 69 -198 3 m an officials felt fro m an early d ate, how ever, that these elem en ts w ere m osdy “sym b o lic”; th e “k e rn e l” o f th e initiative re m a in e d e xch an ge -ra te stabilization.138 N o fo rm al p ro p o sal o r d ecisio n was m ad e at C o p e n h a g e n . W ith S ch m id t and G isca rd ’s stro n g sup po rt, a d eclaratio n p ro cla im ed the n e e d fo r “c o n c e r te d ” E u ro p e an stim u lad on . A t a co n fid e n tia l breakfast the n ex t m o rn in g, how ever, S ch m id t, G iscard, an d C allag h an a g re ed to la u n ch secret discussions am o n g p erso n a l represen tatives: S ch m id t’s assistant H o rst S ch u lm an n , B a n q u e d e F ran ce h e ad B e rn ard C la p p ie r, an d a British T reasury official. (K en C o u ze n s at­ te n d e d o n ly a few m eetings, an d by J u n e the British h a d w ithdraw n.) Sch m idt a n d G iscard, p erh ap s also C a llag h a n , w ere co n vin ced that m o n etary dip lo m acy m ust b e c o n d u cte d in secret to im p ed e o p p o sitio n fro m cen tral bankers and fin a n ce m inistries, m ost im p o rtan t B u n d esb a n k p resid en t E m m in ger. Sch m idt su bsequ en tly o b served th at fo r the reason the EM S w o u ld n ev er have e m erg e d th ro u g h fo rm a l ch a n n e ls— that is, th ro u gh the com m ittees o f the E C ’s C o u n cil o f M inisters o f E co n om ics and F in an ce. C la p p ie r, E m m in g e r’s F rench co u n te r­ part, w ith h eld in fo rm a u o n fro m the B u n d esb an k p resid en t. T h e o th e r six n a­ tional c h ie f execu tives, th e ir fin a n ce m inisters, an d cen tral ban k p residents, as w ell as sen io r officials m e etin g in th e M onetary, C en tral B ank, an d E C O F IN co m m ittees, w ere left in co m p lete ign o ra n ce. T h e D anish p rim e m inister, re ­ sp on sible fo r setting th e C o u n c il a gen d a , h eard n o th in g an d assum ed plans had b e e n a b a n d o n e d .139 S ch m id t was u n ab le to co n vin ce C a llag h a n to jo in the EMS. Aw are that the o th ers w ou ld g o a h ea d w ith ou t him , C a llag h a n so u gh t instead to b lo ck fo rm a ­ tion o f a “tw o -d ered E u r o p e ” w ith a th reat to raise such issues as the C A P, re ­ g io n a l policy, and “the sore qu estio n o f the British arm y on the R h in e ” at the u p co m in g B rem e n sum m it in J u ly — an e c h o o f M acm illan’s tacd c alm ost two d e cad e s earlier. Yet the p rom ise o f fun ds fo r co o rd in a te d in terven tio n an d re ­ g io n a l policy, as w ell as the sym pathetic attitude o f the B en e lu x co u n tries, p e r­ m itted S ch m id t an d G iscard to “establish total d o m in a n ce o ver the C o u n c il.” At B rem e n , it was a g re e d to m ake the in itiative p u b lic an d to p rep a re a d raft a g re e ­ m e n t by the e n d o f O cto b e r. N o t lo n g th ereafter C a llag h a n , after fruitless dis­ cussion w ith A n d reo tti a b o u t a co o rd in a te d A n glo-Italian p osition , d e cid e d defin itively to fo re g o the EM S. G iscard, w hose position on substantive issues was clo ser to that o f the British, arran ged w ith C a llag h a n that Britain, even if n ot p articip a tin g actively, w o u ld be an in stitutional m em b er and party to any fu rth er discussions.140 A fte r th e B rem en sum m it, n eg otia tio n s o n tech n ical details w ere transferred to variou s stan din g and ad h o c co m m ittees o f sen io r officials an d m inisters u n ­ 138 I.udlow, Making, 9 1-9 2 ; Schmidt, Deutschen, 2 31-23 2 , 237. IW Ludlow, Making, 8 2 - 9 3 ,9 4 - 1 1 7 ; Gros and Thygesen, Euro/«cm, 35 ~ 3 ^, 43 ; Schm idt,Deutschen, 221.

Iespecially 114, 126; Schmidt, Deutschen, 2 2 5 226, 2 3 1-2 3 7 ; Gros and Thygesen, European, 3 5 -3 6 , 43; Callaghan, Times and Chance, 492-493; Healey, Time of My Life, 438 -440 ; Giscard, Pouvoir, 14 7 -15 2 . There is no evidence that greater satis­ faction o f Callaghan’s demands for resource transfers would have changed his view. Cf. Taylor, “Interdependence,” 3 8 0 -3 8 1.

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d e r E CO FIN . Senior officials w ere told to “w ork out the details” o f the plan rather tiian “questioning fundam entals.” W hen the com m ittees w ere unable to reach com prom ises, m inisters and executives o f the m em ber governm ents held final n egotiations between N ovem ber 1978 and M arch 1979. T h o u g h E C insti­ tutions served to legitim ate coop eration , supranational actors played litde role as m ediators or m obilizers. Jen kin s’s initial h o p e fo r fiscal federalism aside, the Com m ission’s only co n crete co n cern was a proposal to elim inate M C A s— an is­ sue raised again, unsuccessfully, by G iscard late in the negotiations. T h e only com prom ise proposal o f note develop ed by actors o th er than France and G er­ m any was a final com prom ise p ro p o sed by B elgiu m .141 Yet E C institutions w ere n ot entirely irrelevant. T h e ir most im portant role was to legitim ate the arran gem en t by assuaging the psychological and political u n ­ ease that m igh t have arisen from the first overt act o f G erm an political leadership in the history o f European in tegratio n — w hich we have seen, Schm idt con sid­ ered the prim ary reason fo r em ployin g E uropean institutions, albeit informally. In n either France n or G erm any did EMS entry require Treaty am endm ent. N onetheless the final con clusion was delayed as Giscard faced down opposition from farm ers seeking abolition o f M CAs. Schm idt dryly referred to this dem and, n on -n ego tiable on the G erm an side, as “an unavoidable n eed to tem porarily pay tribute to French agricultural interests,” w aiting fo r ten weeks until Giscard p re ­ vailed over agricultural unrest and Gaullist o p p o sition .142 A ndrew Shon field observed o f the EM S that “rarely in the business o f in ter­ n ational politics do the technicalities so clearly express the essential points at is­ sue.” 143 Each o f the fo u r m ajor tech nical issues that occu p ied negotiators m ir­ ro red d ie fundam ental co n flict betw een weak- and strong-currency countries co n cern in g the costs o f adjustm ent. Germ any, follow ed by D enm ark and the N etherlands, insisted on the con tin ued existence o f rules like those o f the Snake, in w hich obligations to adjust fell asym m etrically on w eak-currency countries; France, Belgium , Italy, and Britain sough t to reco n figu re the system to create m ore sym m etrical obligations. G erm any supported an asym m etrical obligation to intervene that fell prim arily o n deficit countries, w hereas France, Italy, and Britain p referred symmetry. T his dispute took the form o f a tech nical debate over “d ivergen ce indicators,” the m ost im portan t issue from the very begin n in g o f negotiations to its resolution in Septem ber 1978. D eficit coun tries argu ed that the m argins within w hich cu r­ ren cies w ere to m ove should be defin ed with referen ce to a “currency basket,” later term ed the E uropean C u rren cy U nit (E C U ), and any single currency, strong or weak, that diverged from the E C U w ould be obligated to adjust. T h e arran gem en t w ould w ork to French advantage because, as C lap p ier described the Snake, “three o ut o f fo u r problem s had arisen because the strongest cur-

141 Commons, “European," 158; Ludlow, Making, 195, 251. Ludlow, Making, 282, also 263-264, 280-282; Schmidt, Deutschen, 228-229; Prate, Quelle, 255; Jenkins, Life, 470. 143 Andrew Shonfield, in Commons, “European," 59.

29 8

Toward Monetary Integration, 1969-1983 rcncy, in alm ost every case the DM, had reach ed its u p p er lim its.” 144 Surplus countries, led by Germ any, favored a “parity grid ” system, w hereby two countries w ere o bliged to in terven e, as u n d er the Snake, w hen the m axim um perm issible distance betw een their two currencies was reached. T h e parity grid appeared m ore sym m etrical, since two governm ents w ere o bliged to in terven e sim ultane­ ously, b ut the de facto obligation was asym m etrical. C red ito r coun tries could ad ­ ju st by selling their own currency, an op eration that gen erally co u ld be sustained if n o t sterilized o r reversed and so m aintained for an exten ded p eriod w ithout policy adjustm ent. D eficit countries, by contrast, had to sell foreign reserves, a course that co u ld n ot be sustained w ithout a shift in dom estic policy. With G erm any ready to aban don the p ro ject if its dem and was n ot m et, Giscard c o n ­ ced ed the parity grid system at the A ach en sum m it o f m id-Septem ber 19 7 8 — but public perceptions, as we shall see, were carefully m anaged to disguise the concession. T h e com prom ise was reached on G erm an terms, and the diver­ g en ce in dicator was red u ced to a “bureaucratic nicety offerin g jo b s for com p ut­ ers and statisticians.” 145 Even these asym m etrical obligations to intervene troubled the Bundesbank. T h e B un desban k insisted that the EMS be designed as a system o f bands n ot fixed parities, with the obligation to in terven e triggered only w hen currencies reached their m argins (and so w hen weak currencies are at their most vulnerable). A b ­ sence o f a clear standard gran ted the Bundesbank considerable de facto discre­ tion. Second, there was n o com m itm ent to jo in t policy-m aking o r central co n ­ trol eith er o f m on etary and fiscal policy o r o f policy toward the dollar; the latter role fell by default to the B undesbank. T h ird , the EMS fu n ction ed as a “twotrack” o r ‘Variable geo m etry” system, in that it was the first institution in the history o f E uropean integration to form ally im pose differential obligations. T h e Italians and Irish d em an ded broad (6 percent) bands, w hich m eant that the EM S w ould place only m arginal constraints on dom estic policy; the British o p ted out. Even with these lim itations, the agreem en t was not, as it w ere, “ratifiab le” w ithin G erm any; the Bundesbank, as we have seen, received a letter p er­ m itting it to exem p t itself from in terven tion and len din g requirem ents.146 France, Italy, and B elgium advocated extensive balance of payments financing fo r d eficit countries. G erm any resisted. Schm idt h im self had begun the n egotia­ tions strongly in favor o f a E uropean M onetary Fund, with som e p o olin g o f re ­ serves, b ut the “fun dam en tal reservations” on the part o f the Bundesbank placed a “severe constraint on the discussions,” w hich translated into a watered-down a greem en t close to the G erm an id eal.147 EM S arrangem ents slightly exp anded the short-term finan cing provisions o f the Snake but avoided o p en -en ded,

144 Jocelyn Statler, “EMS: Cul-de-sac or Signpost on the Road to EMU?” in Michael Hodges and William Wallace, eds., Economic Divergence in the European Community (London, 1981), 117; Ludlow, Making, 161. 145 Ludlow, Making, 163, generally, 162-164. 146 Ludlow, Making, 134-158 , 173, 251-273; Gros and Thygesen, European, 52-53; Emminger, DMark, 36iff. 147 Ludlow, Making, 166.

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lon ger-term com m itm ents. L ike the Snake, the EM S in cluded a “very short term fin an cin g facility” to gran t nearly unlim ited loans over periods o f forty-five days. It also exp a n d ed the “short-term ” and “m edium -term ” facilities o f the Snake but only to a level roughly the sam e as a co u n try’s IM F quota. (Recall, m oreover, that S ch m id t’s letter lim ited the exten t to w hich the Bundesbank was boun d by an in­ ternational com m itm ent.) O n this point, o n e the participant n oted later, agree­ m ent was “tem porary, alm ost fictitious.” 148 Italy, Ireland, and initially Britain, co n cern ed abou t the deflationary con se­ quen ces o f m em bership, backed proposals by the European Parliam ent and the Com m ission fo r more generous regional subsidies, w hich Germ any, the principal p o ­ tential don or, was hesitant to provide. In retrospect, even large region al trans­ fers w ould probably have been unsuccessful in persuading Callaghan to enter. G iscard sided with G erm any against Irish and Italian dem ands, declaring that “France ca n n o t upset h er own financial arrangem ents in o rd er to ensure the ad­ hesion o f those fo r w hom m em bership ou gh t to be an act o f political will rather than a question o f cash.” O n the side, however, he quietly negotiated special arrangem ents fo r the Irish, w ho en tered in exch an ge fo r a m odest bilateral arran gem en t totaling EC U 66 m illion annually. (T h e Irish calculated that Britain w ou ld soon enter, after w hich a side-paym ent would be m ore difficult to n eg oti­ ate.) Long-term finan cing, in part throu gh the European Investm ent Bank, was b oth m odest and redundant. T h e Italians, having n egotiated 6 percen t bands, accep ted a sym bolically small sum o f approxim ately ECU 133 m illion .149 With their dem ands fo r sym m etry frustrated, France and its allies called for prompt reconsideration and revision o f the EM S structure. G erm any agreed at A ach en to “co n so lid ate” the system w ithin two years, in cludin g creation o f a E uropean M onetary Fund (though with un specified powers) and the “full udlizad on o f the E C U ,” b u t specific com m itm ents w ere deliberately vague. G erm any m aintained th ro u gh o u t the n egotiations that p rior econ o m ic co n vergen ce and perm anent, centralized con trol over national bu d get deficits were p recondition s for further m on etary in tegratio n — a p reco n d itio n codified in the A ach en agreem ent. In February 1980 Schm idt and Giscard agreed to postpone the second stage “in ­ definitely.” O n the cread o n o f the EMF, the G erm an go vern m en t— here the Bun desban k was u n am biguous— was unwilling to create an autonom ous o rga­ nization w ithout adequate guarantees, w hich w ould have required form al Treaty revision. A t a heated m eetin g in 1981 the Bundesbank official in charge o f in ­ ternational affairs reportedly dismissed the m atter with four words: “We don’t want it.” 150 Schm idt, in dom estic political trouble, was in n o position to resist. T h e only p ublic com plaints abou t reversion to the old system cam e from the Com m ission, w hich subm itted a set o f proposals to the C o un cil o f Ministers. 148 Gros and Thygesen, European, 49, also 48-50; Statler, “EMS," 122-123; Ludlow, Making, 240. H9 Gros and Thygesen, European, 43; Ludlow, Making, 252-261; Fitzgerald, All, 343-344; Statler, “EMS,” 1 1 9 - 1 2 1 , 125 -126 . O n Italy and the role o f ideology, see Paul Taylor, “Interdependence and Autonomy in the European Communities: The Case o f the European Monetary System,” Journal of Common Market Studies 18 (June 1980), 381-383. 150 Connolly, Rotten Heart, 23; Gros and Thygesen, European, 5 4-55.

JOO

Toward Monetary Integration, 1969-1983 T h ese proposals, politically ill-advised and widely view ed as technically inferior, w ere ig n o re d .151 T h e distributional bargaining outcom es co u ld n ot have been clearer. Each o f the fo u r m ajor issues gen erated nearly identical interstate coalitions o f strongand w eak-currency countries, and each p ro d u ced a nearly identical o u tco m e — an asym m etrical o n e closely approxim atin g the G erm an position. T h e system did n ot im pose dom estic adjustm ent on Germ any. Despite its pretense to be a new, m ore sym m etrical system, the EMS was “basically a geograp hical extension o f the Sn ake.” 152 Both G iscard and C allaghan, as well as Schm idt, w ere quite aware o f its true nature. Yet the system was cleverly packaged, exp lo itin g fully the am biguity and co m ­ plexity o f m on etary coop eration , as well as large doses o f E uropean symbolism, to appear m ore sym m etrical— a tactic that has m isled subsequent com m entators, such as Joseph G rieco, even several decades later, w ho see the EMS as success­ ful because it was less asym m etrical and thus involved few er “relative gains” than did the Sn ak e.153 From after-din n er speeches at bilateral summits to carefully staged events like the A ach en sum m it in N ovem ber 1978, Giscard and Schm idt, like B randt and Pom p idou before them and K ohl and M itterrand later on, co n ­ stantly rem in ded those aroun d them that the Franco-G erm an relationship and the E uropean C om m unity w ere “sanctioned by history, un d erp in n ed by the n e­ cessity to overcom e the self-destructive conflicts o f the past”— and so attem pted to disguise the basic issues at stake.154 A t A ach en , press officials o f both govern ­ m ents stressed d ie historical reverberations o f Schm idt and G iscard’s jo in t visit to the th ron e o f C h arlem agn e and a co n cert in the cathedral o f A ix-la-Chapelle, deliberately evoking (albeit in a less Rom an C atholic form ) m em ories o f the cele­ brated m eetin g betw een A d en au er and d e G aulle at Rheim s nearly two decades earlier. T h e substance o f the A ach en agreem en t was kept secret and received relatively litde notice, though it eventually leaked out. In response to direct questions from the press, Schm idt den ied the existen ce o f any disagreem ent. He w axed uncharacteristically abou t “o u r old and dear co n tin en t.” Giscard added: “Perhaps w hen we discussed m onetary problem s, the spirit o f C h arlem agn e b ro o d e d over us.” 155 T h is was a deliberate decep tion. T h e EMS was also designed to appear m ore to French interests. Giscard p roposed that the new m oney be called the ECU, an English acronym (“E uropean C u rren cy U n it”) that corresp ond ed to the ecu, a French coin from the time o f the Valois. T h e appearance o f French n egotiat­ in g success was preserved by in cludin g both the ECU -based system and the par­ ity grid system in the agreem en t, though insiders in both G erm any and France

151 c)e Vries, “Meaning,” 28; Tommaso Padoa-Schioppa, Money, Economic Policy and Europe (Luxembourg, 1985), 51, also 81-83. 152 Gros and Thygesen, European, 48. IM Cf. Joseph M. Grieco, Cooperation among Nations (Ithaca, 1989), 222-223. 154 The quotation is Ludlow’s paraphrase o f after-dinner remarks at the Franco-German summit at Aachen in September 1978. Ludlow, Making, 184. 155 Ludlow, Making 182; Carr, Schmidt, 145.

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un derstood that the E C U system co u ld n ot possibly in flu en ce d e facto obliga­ tions. Such m easures, G iscard and Schm idt agreed, w ou ld “better p erm it the ‘sellin g’ o f the policy in F rance.” Le Monde even rep orted G erm an concessions at A a ch en .156

Consolidating the EMS, 19 8 0 —198 5 Betw een 19 79 and 1981 the EMS fun ction ed very m uch like the old Snake. A year after A ach en , at the first biannual m eeting to assess the system, the French govern m en t quietly aban d o n ed any p reten ce o f an E CU -based o r hybrid standard, officially red u cin g the new currency unit to a m arginal role as an ac­ co u n tin g value fo r certain EC transactions. N um erous Com m ission proposals w ere ignored. T h e fin an cin g and in terven tion m echanism s o f the EMS were rarely em ployed, a situation that suited the Bundesbank. Facilities fo r E C financial support were hardly used. M edium -term E C credits proved unattractive, since sim ilar E uro­ m arket loans w ere available w ithout conditionality. T h e enlarged credit facilities w ere used only twice, by France in 1983 (the loan proved inessential and was paid back ahead o f schedule) and by G reece in 1985. Use o f the new unlim ited, very-short-term finan cing (VSTF) facility was also rare. Intram arginal in terven ­ tions, discouraged by the EM S agreem en t, p roliferated even though they did n ot qualify fo r V ST F fu n d in g but were finan ced by the w eak-currency countries. G erm an y successfully resisted attem pts to exten d V ST F finan cing to intram ar­ gin al interventions, “due to the desire to m aintain con trol o f dom estic m o n e­ tary policy, w hich w ould otherw ise be im paired by “sym m etric” m onetary base in terven tions.” 157 For w eak-currency countries, the EMS initially im posed few direct restrictions on dom estic econ o m ic policy; instead it registered parity changes ex post facto. T his outcom e was due in part to weakness o f the DM. A fter devaluation o f the Italian lira in February 19 8 1, however, the E C M on etary C om m ittee reaffirm ed that parity changes w ould have to be approved, with the aim o f con trollin g and co n d itio n in g devaluations.158 France, still governed by Giscard and Barre, evi­ dently sough t to lim it devaluations by coun tries with even w eaker currencies. Shordy thereafter, G erm any began to challen ge prop osed parity shifts m ore aggressively, leadin g to to u gh er n egotiations and sm aller than requested deval­ uations fo r w eak-currency governm ents. T h e French devaluations o f 1 9 8 1-8 2 , fo r exam p le, totaled 18.5 p ercen t against the DM, as o p posed to the 2 3 -2 9 p ercen t that D elo rs— the m ost m oderate in the governm en t on this issue— 156 Giscard d ’Estaing, I-epouvoir, 151—152; Heisenberg, Mark, 107-108. 157 Rainer S. Masera, “An Increasing Role for the ECU; A Character in Search o f a Script,” in D. E. Fair and C. de Boussieu, eds., International Monetary and Financial Integration: The European Dimension (Dordrecht, 1988), 1 2 9 -1 3 1 , 146. See also Horst Ungerer, Owen Evans, and Peter Nyberg, TheEuropean Monetary System: The Experience, 1979 -8 2 IMF Occasional Paper no. 19 (Washington, D.C., 1983), i5ff. Economies with little hope o f short-term convergence— the Italian, Irish, and Danish— employed wide (6 percent) bands, which imposed little constraint. 158 Goodman, Monetary, 197-199. On this speculative point, I draw on discussions with David Andews. 302

Toward Monetary Integration, 1969—1983 claim ed was appropriate. By m id -1982 M itterrand was thoroughly disillusioned with Schm idt, w ho co u ld n ot deliver the Bundesbank. In the third devaluation o f M arch 1983, G erm an n egotiators o ffered 5 percen t, the French coun tered with 10 p ercen t, and they agreed on 8 p ercen t— finally offsetting the accum u­ lated in flation differential since 19 79 . T h e re was litde opposition in G erm any to a m odest devaluation, fo r the French threaten ed to exit the EM S and establish trade barriers. B ut G erm any im posed conditions, in cludin g tax increases and sp en ding cuts, w hich p rom p ted o n e sym pathetic French observer to label the EM S a “soft version o f the IMF,” even though most were moves that the French govern m en t was externally constrained to pursue in any case.159 N egotiations over British entry, agreed to at T h e H ague in 1969 and launched in Jun e 1970, raised m any o f the sam e issues as n ine years earlier, u n d er M ac­ m illan. Resolution was, however, m ore rapid because o f m ore conciliatory atti­ tudes on both sides. Britain gain ed entry b ut was fo rced to m ake concessions on m ost o th er issues. In particular, accep tan ce o f the new C A P financing arrange­ m ents was an absolute French precondition . T h e British dem an ded a long-term quid pro qu o fo r the disproportionately small gains they w ould gain from the CAP, but these dem ands w ere rejected. Instead, a m odest transitional arrange­ m en t was exten d ed . British paym ents w ould rise from 9 percen t to m ore than 20 p ercen t o f the E C budget over five years. A n d Britain was fo rced to abandon dem ands fo r o th er exceptions. France was un relen ting in pursuing its interests, th reaten in g at one p o in t to require Britain to repatriate sterling balances if the British did n ot co n ced e o n o th er issues. G erm an y initially refused any fu rth er side-paym ents, setting its initial offer on region al policy deliberately low so as to discourage serious bargaining. T h e 19 7 5 British referen d u m — a credible threat o f “involuntary” e x it— in duced generosity. A m ore extensive p rogram o f regional subsidies, carefully designed to in clude substantial British participation, was created .1“ T his p attern — an ini­ tially weak bargain ing position fo r new entrants, follow ed by region al o r struc­ tural fu n d in g if they co u ld threaten to veto an im portant initiative o r in volun ­ tarily e x it— w ould be rep eated im m ediately after G reek accession in 1979 and Iberian accession (Spain and Portugal) in 1985. In each case, paym ents cam e prim arily from Germ any, w hose exporters and investors benefited from acces­ sion with relatively little dislocation, and they w ent to those countries m ost dis­ advantaged. H en ce in exch an ge fo r participation Ireland and Italy received side-paym ents, symbolic in the Italian case, in the m onetary arrangem ents es­ tablished by G erm any and France. G reece received fun ding n ot on accession but after threaten in g to veto proposals soon afterward. A n d G reece, Italy, and France received funds to offset losses from Spanish and Portuguese accession.161 159 Favier and Martin-Roland, Le. décennie, 415; Barre, Pblitique, 76. Which currencies revalue and devalue is largely symbolic. The rate vis-à-vis currencies outside the EMS is generally dictated by the DM; so what matters most is the differential. Connolly, Rotten, 25; interview with member o f the Delors Committee. 160 Young, Terms, ìogff; Butler and Kitzinger, 1975, 77ff; Franck, “New,” 13 6 -13 7 . 161 David Allen, “Cohesion and Structural Adjustment,” in Helen Wallace and William Wallace, eds., Policy-making in the European Union (Oxford, 1996), 209-234.

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By contrast the C A P itself, the m ajor source o f the im balances that had to be offset by region al policy, rem ained with two im portant exception s unchanged. T h e first e xce p u o n , we have seen, was the establishm ent o f the p erm an ent fi­ n an cin g arrangem ent, w hereby a tax at 1 p ercen t o f VAT revenues, along with cen tralized p o o lin g o f levies, provided centralized E C funds (“own resources”). T h e secon d was the recogn ition o f M C A s— autom adc price offsets fo r currency shifts— on w hich G erm any insisted and against w hich the French protested ve­ hem ently. A very youn g Joseph Ertl, recently nam ed G erm an m inister o f agri­ culture, recalls a critical m om ent aroun d 1970 w hen the venerable M aurice Schum an, then French foreign m inister, sum m oned him fo r a face-to-face m eet­ ing. Schum an criticized Ertl for acting like a G erm an nationalist rather than a “E uropean ” (an interesting accusation from a Gaullist) and dem an ded that M CAs to be m ade tem porary lest France withdraw from the CAP. Ertl, apparently act­ in g w ithout authorization, respon ded that he was o f a yo u n ger gen eration, had n ot fo u gh t in the war, and th erefo re could n ot be sham ed. W hen he told Brandt what he had said— the ch a n cello r in a dentist ch a ir— B randt gave his support, and the French governm en t backed down. M CAs, com bin ed with enorm ous di­ rect national support systems, “co rd o n ed o f f ” national markets, essentially “ren ationalizin g” the C A P prices alm ost as soon as they were finally harm o n ized .152

Explaining Bargaining Outcomes T h e historical record suggests that interstate bargaining reflected the power and p referen ce intensity o f national governm ents rather than the desires o f supranational entrepreneurs. T his interpretation provides the most plausible exp lan ation o f the distribution o f inform ation am ong actors, the pattern o f o u t­ com es, the nature o f interstate quid pro quos, the greater success o f the EMS as co m p ared to the Snake, and the provision o f policy initiation, m ediation, and entrep reneursh ip . T u rn in g first to the efficiency o f negotiations, it is clear that even in the absence o f supranational en trep reneursh ip , the outcom es o f Snake and EMS n egotia­ tions w ere extrem ely efficient at the international level— though perhaps less so, as we shall see, at the dom estic level. T h e necessary initiation, m ediation, and m obilization were provided alm ost entirely by powerful dom estic actors— mostly ch ie f executives, ministers, and central bankers— with only inessential, interm it­ tent, and gen erally ineffective participation by supranational actors. T h u s the Snake and EMS co n fo rm ed to the pattern set in o th er m ajor postwar interna­ tional m onetary initiatives, such as Bretton W oods and Ram bouillet, w hereby the 162 Ertl, Agrarpolitik, 35 -4 3 , 96-98 , io6ff. The incident is striking. A meeting between a senior and a junior minister was itself rare, signaling the importance attributed to the issue by the French government. Brandt’s solo, off-handed style o f decision-making suggests there was no question of compromising farm interests for European ideals. Ertl, among others, has asserted that MCAs were responsible for the extraordinary expansion o f German agricultural exports during the 1970s— leading finally to Germany's becoming the world’s sixth-largest agricultural exporter, almost entirely within the protected EC market. The structure established in 1966 survived, as did substantial na­ tional subsidies; for Germany in 1984, they totaled DM20 billion. On exports, see Winfriedvon Urff, “The Common Agricultural Policy,” in C. C. Schweitzer and D. Karsten, eds., Federal Republic of Germany and EC Membership Evaluated (New York, 1990).

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Toward Monetary Integration, 196 9 -19 8 3 p rim a ry initiators o f n eg o tia tio n s w ere the c h ie f execu tives o f the two largest an d m ost in flu en tia l co u n trie s.16* P o m p id o u an d B ran d t la u n c h e d the Sn ake, S ch m id t a n d G iscard th e EM S, F ran ce an d G erm an y n eg o tia te d th e 198 3 F rench tu rn a ro u n d . E a ch e x p lo ite d w hat “exe cu tive slack” was at h an d , m ovin g soon af­ ter favo rab le e le cd o n s in 196 9 , 19 7 8 , an d 19 8 3 .164 C o m m issio n p ro p o sals w ere e ith e r re d u n d a n t, such as th e n arrow an d co n se r­ vative B arre p rop osals in 19 6 9 , o r futile, as in th e case o f J en k in s’s advocacy o f fin an cial transfers. M any o f the m ost innovative an d in flu en tia l d o cu m en ts, n ota b ly the W e rn er R ep o rt, w ere d rafted by n atio n al politicians. C o m m ittees o f ce n tra l ba n k ers an d fin a n ce m inisters p ro vid ed u sefu l tech n ica l sup po rt, but th e ir d ecisio n s directly re fle cte d th eir a ccu sto m ed d o m e sd c ro le, n o t a p articu ­ lar tran sn ation al fu n ctio n . A t n o tim e b etw een the late 1960s an d the m id-1980 s d o es th ere a p p ea r to h ave b e en a b o ttle n e ck o r bias in the provision o f viable p ro p o sals fo r m o n etary in te g ra d o n , d o zen s o f w h ich cam e fro m private e c o n o ­ m ists, m inisters, cen tra l bankers, a n d c h ie f executives. C om m ission proposals fo r C A P re fo rm , re g io n al policy, an d social p ro gram s fared the sam e. O n c e n eg o tia tio n s w ere la u n c h ed , n atio n al go vern m en ts co n tin u e d to d o m i­ n ate the p ro ceed in gs. “Few,” P eter L udlow reports, “d o u b te d that it was in the F re n ch an d G erm an capitals that the cru cial decisio n s w ere and w ou ld be tak en .” T h e n eg o tia tio n s them selves p ro ce e d e d u n m e d iated a m o n g c h ie f executives, m inisters, an d to p n atio n a l officials; th ere is n o e vid en ce they w ere in efficien t. A s fo r m o b iliza tio n , the p ro b lem was n o t to m o bilize su p p o rt b u t avoid the pos­ sibility that sup ran atio n al institutions, transn ation al b u rea u cratic com m ittees, an d official m ediators w ou ld co m p ro m ise secrccy — an d secrecy was a necessary co n d itio n , S ch m id t a rg u e d later, fo r the success o f the EM S n egotiation s. D e ­ m o b iliza tio n , n o t m o bilizatio n , o f do m estic an d transn ation al interests was criti­ cal. T h e re is n o reason to b elieve that selective m obilization w ou ld have facili­ tated g re a te r a g re em en t at any p o in t.165 T h e C o m m issio n possessed n o a p p a ren t e xp ertise in m o n etary affairs co m ­ p arab le to, le t a lo n e su p erio r to, w hat was available fro m n ational sources. E ach c h ie f e x e cu tive drew o n e x p e rt m an p ow er outside his o r h e r own staff, G iscard from the Elysée, M atign o n , an d B an q u e d e F rance, Sch m id t fro m the Finanzm in isterium a n d K anzleram t. T h e C om m ission in term itten tly co n trib u ted p ro ­ posals a n d studies, or assem bled gro u p s to discuss m o n etary co o p era tio n , but its action s a d d ed little. N ation al lead ers w ere w ell-in fo rm ed a b o u t the lo n g er-term co n se q u e n ce s o f the d ecisio n s they w ere m akin g, fo r e xa m p le, that the EM S w o u ld fu n ctio n , if at all, as a “D M z o n e ” w ith im p lication s fo r bilateral trade b a l­ an ces an d do m estic m a cro e co n o m ic constraints. L ittle e vid en ce supports the w id esp read assertion that asym m etry was an u n in te n d ed co n se q u e n ce . W e have seen that d istribu tio n al co n flicts b etw een strong- an d w eak-cu rren cy 163 James, International, 300. 164 Loukas Tsoukalis offers no hard evidence to support his intriguing claim about the 1970s that “long-term close contact among senior officials o f the member countries over a long period” consti­ tuted “a necessary but not sufficient condition for the implementation o f schemes for intra-EC co­ operation, such as the Snake and later the EMS.” Certainly it does not seem to apply to the initiation o f the EMS. Tsoukalis, “Money,” 117. 165 Ludlow, Making, 196.

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coun tries co n cern in g the sym m etry o r asymmetry o f the system were resolved in favor o f Germ any. T h e resuldng system im posed no financial o r policy com m it­ m ents w ithout p rior econ o m ic co n vergen ce toward low-inflation policies. How is this distributional outcom e to be explained? We m ay dismiss supranational bargaining theory. T h e Com m ission possessed no specific inform ation o r ideas and fulfilled no specific functions that p erm it­ ted it to in flu en ce the efficiency o f negotiations over m onetary, agricultural, or regio n al policies. Roy Jenkins h im self estimates that the m em ber states enacted n o m ore than perhaps 2 5 -3 0 p ercen t o f what he had proposed. T h a t 25 p er­ cent, m oreover, was redundant. W here Jenkins, like Barre and others in the late 1960s and early 1970s, took a distinct position on distributive issues— on sym­ m etry o f the EMS, opposition to M CAs, “two-track” m onetary integration, fiscal federalism , and agricultural price refo rm — his actions failed to co u n ter the will o f G erm any.166 T h e evidence strongly supports intergovernm ental bargaining theory, with its focus on relative p referen ce intensity and the size and shape o f national winsets. T h e process in G erm any leaves little d o u b t that, because o f the veto posi­ tion o f the B undesbank, the only ratifiable agreem ent, at least until full e co ­ nom ic co n vergen ce and institutional guarantees o f low inflation at the EC level, was one that left the B un desban k’s dom estic autonom y essentially intact. T h e B un desban k’s dom estic legitim acy— n ot least am ong industrialists— m ade its assent essential fo r dom estic ratification o f any m onetary agreem en t and its as­ sistance required fo r im plem entation. Germ any, we have seen, had a “kin ked ” win-set: any com prom ise beyon d a certain threshold w ould quickly ren d er the a greem en t unratifiable, despite what som e G erm an governm ents construed as a n et national interest in greater symmetry. T his internal division explains n ot just G erm an bargaining pow er but the seemingly contradictory and in co h eren t nature o f G erm an strategy. Brandt and Schm idt consistently initiated m onetary n egotiation s and offered large com prom ises and side-paym ents, yet adopted an un com p rom ising position o n essential issues, insisting on an asym m etrical sys­ tem with “econ o m ist” p recondition s for any future transfer o f sovereignty. G er­ m any’s narrow win-set lim ited its m ajor partners to France after 1983, exclu din g Britain and Italy from effective participation. T his exp lan ation o f bargaining outcom es is surely m ore convincing than a con ven tion al view o f G erm any as a E uropean m onetary h e g e m o n .167Views drawn 166 Jenkins, Hommage, 22-25. 167 For hegemonic explanations, see Andrei Markovits and Simon Reich, The German Predicament: Memory and Power in the New Europe (Ithaca, 1997), chap. 8, who base their assessment o f hegemony on die existence o f German trade surpluses. For criticisms, Matthias Kaelberer, “Hegemony, Domi­ nance or Leadership? Explaining Germany’s Role in European Monetary («operation," European Journal of International Relations 3 (March 1997), 35-60; Dorothee Heisenberg, “German Financial Hegemony or Simply Smaller Win-Sets? An Examination o f the Bundesbank's Role in EMS and EMU Negotiations,” paper delivered at the conference o f the American Political Science Association ( 1 -4 September 1994); McNamara, Currencies, chaps. 1-2 . McNamara shows that Germany was only slightly larger than its neighbors, marginally more wealthy per capita, lacked deep capital markets, and did not dominate European trade as the United States did after World War II. However, it did run persistent trade surpluses, and the DM was the major currency into which speculative capital tended to flow during exchange-rate crises. Also, unilateral actions by the German government may

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Toward Monetary Integration, 1969-1983 from variants o f h egem o n ic stability theory treat G erm any as a un ique, low-cost provider o f o n e or m ore o f fo u r p ublic goods: financial side-payments, the e x ­ ternalities o f m acro eco n o m ic adjustm ent, access to extensive reserves, and an a n ch o r curren cy with un ique and-in flation ary credibility. Was G erm any able to prevail in n eg od ad o n s because it co n tro lled such assets? We have seen that G erm any provided n eith er significant financial side-pay­ m ents n or desired m acro eco n o m ic adjustm ent. O ffers o f large loans to Britain, France, and Italy in exch an ge fo r exch an ge-rate stability u n d er the Snake were refused; in any case, they rep licated support available from o th er sources. Fi­ nancial in ducem en ts to Italy to jo in the EMS w ere m arginal; only Irish p artic­ ipation m igh t reasonably be traced in part to them . As for m acroeconom ic adjustm ent, it appears to be true that G erm an policy had a disp rop oruon ate in­ flu en ce on its n eighbors, m ean ing that G erm an concessions m ight have been m ore valuable than those o f others. Still, in n either the Snake n or the EMS did G erm any significantly adjust its policies in o rd er to support exchange-rate sta­ bilization, despite consistent pressure from other governm ents to do so. As one B un desban k official n oted in 1988: “External considerations are n ot perm itted to dictate m on etary policy over any length o f tim e, as this m ight co n flict with the prim ary objective o f price stability.” 168 Far from providing the m acroeconom ic adjustm ent others desired, G erm any deliberately exp loited the EMS to avoid it. H en ce an argu m en t about asset-based h egem o n ic pow er must rest on the rem ainin g two factors, G erm an y’s large reserves and its reputation fo r low in flad o n . Clearly French and British officials believed that these assets m ight h elp stabilize the system against speculadve attack and increase the credibility o f p eg g ed exch an ge rates. T his was probably true. Yet G erm an in flu en ce should n ot be exaggerated . T h e EMS was m anaged prim arily throu gh intram arginal in ­ tervention from w hich the Bundesbank abstained. In a crisis the prospect o f B un desban k intervention may have increased the credibility o f wcak-currency pegs; b ut with the possible excep tio n o f the French turnaroun d in 1983 (when the low level o f reserves appears to have been viewed in France as an im portant short-term constraint on policy), the provision o f such support in the form o f swaps, in terven tion, and balance o f paym ents support does n ot appear to have im posed bin din g constraints on French or British policy. Instead, the bin ding constraint was the willingness to tolerate high interest rates or com petitive dis­ advantage. A sim ilar caution applies to G erm an y’s anti-inflationary reputation. Certainly the desirability o f a p eg to the DM did not stem from som e technical necessity fo r w eak-currency coun tries to link to a strong currency, as some ac­ coun ts im ply.169 It was equally possible to peg, unilaterally or collectively, to a currency basket; in deed, m ost EMS governm ents overtly favored such a system. Yet w hile G erm an y’s reputation , reserves, and status as a global currency as­ sured it w ould wield in flu en ce in m on etary negotiations, there is n o reason to

have imposed larger negative policy externalities, in the form o f macroeconomic constraints and an undervalued currency, on its neighbors than they on it. 168 Begg and Wyplosz, “Recent,” 26. 169 Dyson, Elusive, 16; Kaelbercr, “Hegemony.”

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believe that these assets w ere “objectively” m ore valuable fo r G erm any than was abstention from depreciation. T h e fact that G erm any co u ld provide credibility w ithout “seriously en d an gerin g [dom estic] m onetary stability” should have m ade it more w illing to com prom ise. T h e key determ in ant o f bargaining outcom es was n ot G erm an y’s larger assets; in fact, the con cen tration o f power in G erm an hands m ade agreem en t more difficult to rea ch .170 From the perspective o f an SPD gov­ ern m en t and o f m any dom estic businessm en, G erm any benefited as m uch as or m ore than its partners from exch an ge-rate coop eration , gain in g com petitive­ ness and en h an cin g m acroecon om ic autonom y, n ot to m ention geopolitical ad ­ vantages.171 T h e fact that G erm an political and econ o m ic institutions did not w eigh t such con cern s equally with those o f low inflation was critical. T h e outcom es o f negotiations over o th er substantive issues similarly confirm in tergovern m en tal bargaining theory. In agricultural policy, o th er governm ents acced ed to P om p idou’s dem an d (backed by the threat o f veto over British ac­ cession) fo r a centrally finan ced CAP. Both G erm an and French preferen ces had co n verged substantially since i960: France was now agnostic toward o r even supportive o f British accession, though it still favored accession less than other governm en ts did, w hereas G erm any increasingly tolerated, even supported, the CAP, though similarly less than o th er governm ents. U n der such circum stances, and unlike during the 1960s, linkage was finally possible. France threatened to w ith hold accep tan ce in exch an ge fo r an agricultural finan cing agreem ent. At ro u gh ly the sam e tim e, the G erm an governm en t unilaterally im posed M CAs to assure co n tin u ed high support prices to its farm ers. T h e French governm en t threaten ed to withdraw from the CA P, but that threat was no m ore credible in 19 70 than it had been in 1965. H en ce M CAs becam e a perm an ent part o f the CAP. N o agreem en t was possible in areas such as industrial policy, w here na­ tional interests d iverged — as we shall see in m ore detail in C h ap ter Five.

Explaining Institutional Delegation In each o f these m ajor areas— agriculture, m onetary integration, and reform o f decision -m akin g— im portant steps w ere taken toward p o olin g and delegat­ in g sovereignty.172 T h e pattern o f delegation and p o olin g within and across areas is most consis­ ten t with co n cern about the credibility o f intergovernm ental com m itm ents; ide­ 170 Rolf Caesar, “German Monetary Policy and the European Monetary System," in Fair and de Boissieu, cds., International Monetary, 22. The critique is related to those that stress the “will” or pref­ erences rather than the “power" o f the hegemon as key. In the asymmetrical interdependence view proposed in this book, in contrast to the hcgemonic view, disagreements over realignments would have been less difficult to resolve if “the German authorities had not been so strongly committed to meeting their money-supply targets. ” The words are Peter Kenen’s in Giavazzi, European, 391. 171 Nor is there evidence for the claim, often heard among French economists, that German ex­ ports are less price-sensitive, allowing Germany to better tolerate currency appreciation. This is surely not evident in German domestic policies, where the value o f the DM has long been a central concern. 172 Regional policy, litde specified in the original Treaty, had to be established ad hoc through ap­ plication o f the all-purpose Article 235. Helen Wallace called its implementation “litde more than an exercise in pork barrel politics.” See David Allen, “Cohesion and Structural Adjustment,” in Wallace and Wallace, eds., Policy-Making, 212.

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ology played a secondary role, and the n eed to provide technocratic inform ation litde at all. We observe, as the credible com m itm ents approach suggests, govern ­ m ents resisting delegation and bin din g rules w here they ben efit from auton ­ omy, b ut d elegatin g and p o olin g sovereignty w here they benefit by locking in foreign (and som edm es future dom estic) governm ents. By contrast, the tech ­ nocratic view predicts a gen eral interest in centralizing exp ert functions p ro p o r­ tional to the com p lexity o f the issue, and the ideological view predicts a coalition o f “federalist” states— Italy, Germ any, and the B enelux, o n e w ould presu m e— in favor o f supranational authority. T h e predictive power o f the credible com m it­ m ent view is p rop ortional to the certainty about m aterial interests. O n agricu l­ tural and m on etary policy, positions on institutional delegation track positions on issues. O n most decision-m aking issues, such as creation o f the E uropean C o u n cil and strength en ing o f supranational institutions, large and small co u n ­ tries split. O n ly w here substantive con sequences are hardest to predict, direct elections to the Parliam ent, does federalist ideology appear to have been im ­ p o rtan t— precisely as the cred ible com m itm ent view itself predicts. In agriculture, institutional changes m ade the provisional perm anent. In o r­ d e r to institutionalize the central agricultural bargain o f the 1960s, w hich had given the French preferential access to G erm an agricultural markets in exch an ge fo r extensive subsidization o f G erm an farmers, a sim ultaneous centralization and fragm entation took place. T h e protection o f farm in com e m eant that G erm any sough t to gu aran tee especially high dom estic prices, w hereas France sough t to as­ sure large e xp o rt subsidies. In 1 9 6 9 - 7 1 , each en d o f this log-rollin g bargain was vulnerable, in particular after British accession, so there was an incentive to “lock in” co o p eratio n throu gh new institutions. Pom pidou successfully p rom oted a p erm an en t C A P finan cing system based on centralized EU taxes (“own re ­ sources”) , m aking the finan cing o f agriculture an integral part o f the acquis com­ munautaire. In linking this proposal to British accession, we have seen, he was quite frank abou t potential hostile coalitions in cludin g Britain. A t roughly the sam e tim e, G erm any unilaterally im posed M CAs, n ot only brushing aside re­ peated French efforts to negotiate them away but successfully pressing for their m ultilateral recogn ition . N o n credible French threats to withdraw from the C A P were ign ored. T h is m ove u n derm in ed a key prin ciple o f the CAP, nam ely de facto uniform ity o f dom estic prices, and thus m arked a substantial “ren ational­ ization” o f the C A P alm ost as soon as it was in place. Similarly, m onetary co o p eratio n u n d er the Snake and EMS was designed to lock in the Franco-G erm an bargain: international institutions w ould provide credibility fo r France and o tiier w eak-currency countries, and dom estic auton ­ om y fo r Germ any. A few inform ation and consultation matters aside, the re ­ q u irem en t o f unanim ous con sen t fo r exch an ge-rate realignm ents was the only lim itation on form al sovereignty im posed by m onetary integration during this period . T h is rule, w hich im posed disproportionate constraints on weak-currency coun tries in crises, offered G erm any a quid p ro quo in exch an ge fo r its lim ited support o f w eak currencies. France, Italy, and Britain had sough t tighter rules bin ding G erm any to m acroecon o m ic adjustm ent throu gh h ig h er inflation o r financing, and the Com m is­

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T h e C h o ic e fo r E u r o pe

sion persistently asserted that supranational objectives requ ired the transfer o f sovereign powers to centralized institutions. Yet any agreem en t restricting the B un desban k’s autonom y co u ld have b een n eith er ratified n or im plem ented in Germ any. H en ce im plem entation was left in the hands o f intergovernm ental com m ittees com prised o f finan ce m inisters an d central bankers, reflectin g e x ­ isting dom estic in flu en ce in m ost coun tries.173 U ntil 1986, and even then only symbolically, n o E uropean m on etary a greem en t was reco gn ized as a legal instru­ m ent u n d er eith er EC o r dom estic law. T h e only con ceivable alternative m ight have b een agreem en t on the basis o f the W erner R eport’s econom ist terms fo r the third stage— namely, with sanctions fo r n on com p lian ce, controls over fiscal p o l­ icy, and central authority over national budgets (m ore o r less as w ould be agreed in 1 9 9 1 )— b ut only after econ o m ic co n vergen ce and capital liberalization. In any case, Pom p idou was disinclined to im pose austerity and co m p elled to reject supranational institutions because o f G aullist opposition. T h e m ajor innovation o f the p eriod was the creation o f a new institution, the E uropean C o u n cil, w here c h ie f executives m eet regularly. Its m ajor con se­ q u en ce was to transfer policy initiation away from the m ore rule-governed C o m ­ mission and Parliam ent. T h e creation o f the E uropean C o u n cil reflected a close un derstan din g am ong leaders o f the three largest EC m em ber states, though federalists such as A ltiero Spinelli and M on net him self voiced support as well. Schm idt, G iscard, and both H eath and W ilson were willing to go further, sup­ p o rtin g proposals fo r a directorate o f c h ie f executives o f the large countries alon e, the creation o f an in tergovernm ental secretariat, rep lacem en t o f the C o u n cil o f M inisters by the E uropean C o u n cil u n d er certain circum stances, lim ­ itations on Com m ission participation, and, at least Giscard was tem pted to ar­ gu e, recogn ition that the E uropean C o u n cil was the only body that could give gu id an ce to the E C — rep lacin g fun ction s o f the C o u n cil o f Ministers as well as the Com m ission.174 T h ese proposals w ere rejected by sm aller countries. T h e final com m u n iqué from a 19 7 4 sum m it called fo r triannual m eetings o f the c h ie f e x ­ ecutives, to be called the European C o u n cil, in exch an ge for w hich sm aller co u n ­ tries gain ed a series o f studies, m ost im portant o n e o f direct Parliam ent e le c­ tions som etim e after 1978, and also an E C passport, renunciation o f unanim ity votin g in the C o u n cil o f M inisters excep t on the most im portant issues, and o th er proposals to rejuvenate E uropean institutions.175 O ve r the C o u n cil, coun tries ten ded to divide into stable coalitions as predicted by both the credible com m itm ents and the technocratic views, with large co u n ­ tries, in cludin g Britain, France, and Germ any, favoring con cen tration o f power in a “d irectorate,” and sm aller countries, notably the N etherlands, Belgium , Ireland, and Italy, p referring stronger, rule-governed supranational institutions, in p articular the Com m ission, alon g with qualified majority voting in the C o u n ­ 173 Members were permitted to sterilize reserve flows and manage reserves, interest rates, and fiscal policy independently. European monetary institutions “were not designed to bypass the sover­ eignty o f individual countries’ monetary authorities.” de Vries, “European,” 8. 17,1 Fitzgerald, Aft 132-139 . 175 Simon Bulmer and Wolfgang Wessels, The European Council: Decision-Making in European Politics (London, 1986), 3 5 -4 1 . 310

Toward Monetary Integration, 19 6 9 —1983

cil o f M inisters. L arg e co u n trie s favo red th e E u ro p e an C o u n cil becau se it e x ­ p a n d e d the ability o f c h ie f exe cu tive s to bargain fre e o f d o m e sd c constraints w h ile p re se rv in g th e ability o f la rge co u n trie s to take m a jor in itiatives— the EMS b e in g a cle a r e xa m p le. H e a th recalls th at the p rim ary p u rp o se o f th e C o u n cil was to p e rm it c h ie f execu tives to p ro p o se co m p ro m ises, issue lin k ages and sidepaym ents th a t m inisters, b u rea u cratic faction s, o r do m estic gro u p s m igh t o th e r­ wise b lo c k .176 T h e se in terests e n c o u ra g e d crea tio n o f an in stitution that was e x ­ clusive, n o n tra n sp a ren t, flex ib le, an d o p en -en d e d . O v e r the n e x t d e ca d e th e C om m ission “n o lo n g e r p layed the active ro le o f p o licy in itiator that was en visaged . . . the lack o f p o litical w eigh t b e h in d C o m ­ m ission initiatives n ecessitated a stro n ger p o litical b o d y fo r steerin g the E C .” 177 C h ie f exe cu tive s e x p lo ite d the C o u n c il to b e co m e “d e ep ly in volved in all the m a jor co n stitu tio n al d ecisio n s o f im p o rtan ce to the C o m m u n ity.” Initiatives w ere taken o n issues su ch as en viro n m en tal policy, p ro p o se d in 19 72 and 19 7 5 , the EM S, an d d irect electio n s. T h is p erm itted a ro u n d o f issue e xp an sio n and in stitutional ch a n g e to take p lace w ith ou t a d iscrete set o f T reaty-am en d in g n e ­ g o tiatio n s, as was to o c c u r w ith the Sin gle A ct a n d M aastricht treaties in the 1980s a n d 1990s. Sm aller co u n tries, skeptical o f such plans, settled fo r a co m ­ m itm en t to study p arliam en tary p o w er an d the reju ven atio n o f Q M V .178 O n ly on the pow ers o f the E u ro p e an Parliam ent, th e m ost sym bolic o f the in ­ stitu tion al issues an d o n e in w h ich th e p o litica l an d e co n o m ic co n seq u en ces w ere h ig h ly u n ce rtain an d th e p ro p o se d transfer o f p ow er m odest, d id id e o lo g ­ ical factors p lay an im p o rtan t ro le. Federalists criticized the C o u n c il’s an ti­ d e m o cra tic fo rm , a ch ievin g a m in o r in crease in the b u d g eta ry pow ers o f the Parliam ent, as w ell as d ire ct electio n s. D e n m ark jo in e d Britain an d F rance in o p ­ p osition to d ire ct electio n s, a n d G erm an y jo in e d Italy an d B e n e lu x in favor. A s p art o f the sam e b argain , an a g re em en t to e m p lo y Q M V w h ere the treaty re q u ired it was re a ch ed , su bject to p rio r a g re em en t by the m e m b er states. N early all d ecisio n s d u rin g this p erio d , the o n ly e x ce p tio n s b e in g som e co m m o n co m ­ m ercia l p o licy an d agricu ltu ral m atters, w ere in any case u n an im o u s u n d e r the Treaty. C a llag h a n ’s lo n e o p p o sitio n to the division o f C o u n cil issues in to those that re q u ire d un an im ity a n d those that c o u ld b e d e c id e d by Q M V — evid en d y w ith lin k ag e betw een a gricu ltu re an d the b u d g e t in m in d — was e n o u g h to b lo ck any g e n e ra l ch a n ge. N o n eth eless, two sm all co u n tries, B e lgiu m an d Irelan d , e x ­ p lo ite d th e ir turns as p re sid en t to in vo ke Q M V w ith som e lim ited success, in p a r­

176 Edward Heath, “At the Heart o f Europe,” in Geraldine Price, ed., A Window on Europe: The Lothian European Lectures 1992 (Edinburgh, 1993), 215. T h e European Council was quite accurately criticized by many European federalists in the Parliament as lacking both legal and democratic justification. Bulmer and Wessels, European, 4 3 - 4 5 and 1 1 4 - 1 1 5 , where they report: “Given that much time and effort is invested into putting together package deals at the European Council, there is an aversion to re-opening matters in the Council o f Ministers for the sake o f the Parliament. . . . T h e MEPs often found themselves being given a summary o f the proceedings o f the most recent European Council by a ju n io r minister who had not even been present himself!" 177 Bulmer and Wessels, European, 113. 178 Fitzgerald, All, 133, 1 3 8 -13 9 , 155, who hints that the Council provided an incentive for ch ief executives, particularly current EC presidents, to advance proposals that might generate high-profile diplomatic agreements, for which they could claim credit.

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T h e C h o ic e fo r Eu r o p e

ticular to circum vent British budgetary objections to the passage o f agricultural fin an cin g.’ 79 Yet this did n o t directly affect m ajor reform s, such as the agen da fo r rem oving N T B s u n d er the SE A in the m id-1980s, w hich w ould in any case have requ ired unanimity. T h e re rem ained litde support as the M arjolin R eport revealed, fo r abolishing the L u xem b o u rg Com prom ise. T h e 1970s are often portrayed as a p eriod o f stagnation in E uropean in ­ tegration, yet this characterization is true only from a federalist perspective that focuses on the institutional centralization o f adm inistrative and dem ocratic decision-m aking. From the perspective o f substantive policy-m aking, the 1970s was a d ecad e o f both con solidation and innovation. A greem en ts on perm an ent C A P finan cing and British m em bership at T h e H ague are often seen as begin n in g a new era, but alon g with M CAs they were, in fact, the final steps in the con solidadon o f a Franco-Germ an bargain that had taken over a d ecad e to n egotiate. T h a t bargain, we saw in C h ap ter 3, m oved trade liberalizadon forward, first am ong the Six and then through G A T T n e g o ­ tiations and enlargem ent, as quickly as France could stand it. A t the sam e time an agricultural policy was created that m aintained high prices for G erm an farm ­ ers, exp o rt subsidies fo r French farm ers, and preferential m arket access for both. Perm anent C A P finan cing, M CAs, even British entry secured this bargain rather than revising it. M on etary in tegration, by contrast, was an area o f substantial innovation. Its outcom es con firm the im portan ce o f econ o m ic interests, relative power, and cred ible com m itm ents. T h e Snake and EMS were created to han dle new sub­ stantive problem s occasion ed by the declin e o f Bretton W oods and by m acroecon o m ic divergen ce am ong E uropean countries. We have seen that m em ber­ ship reflected a co n vergen ce o f policy p referen ces aroun d a particular form o f dom estic disinflation; only as w eak-currency coun tries com m itted them selves to disinflation by m eans o f m onetary discipline, resulting in real currency app re­ ciation, did coop eration becom e possible. T h e precise bargain aroun d which the two organizations fo rm ed reflected the relative preferen ce intensity o f gov­ ernm ents, w hich in turn reflected the tight constraints that the Bundesbank im ­ posed on the G erm an governm ent. D elegation and p oolin g o f sovereignty in in­ stitutions reflected the w illingness o f governm ents to lock in policies; they boun d G erm any loosely and w eak-currency coun tries som ewhat m ore tightly. T h ese decisions had two im portant legacies. First, m onetary integration u n ­ d er the Snake and EMS differed from m arket integration u n d er the Com m on M arket and the C A P in that it was never in tend ed to apply uniform ly to all EC m em bers— the first o f an increasing num ber o f such variable-geom etry or m ulti­ track policies. Despite Com m ission pressure fo r participation o f all m em bers and substantial fiscal federalism , m em ber governm ents created a de facto “twotrack” E urope, dividing those w ithin the “DM zo n e ” from those outside. T h e m Decisions permitting majority voting were so rare that Fitzgerald had to wait five months for an appropriate opportunity. Fitzgerald, All, 147-148.

312

Toward Monetary Integration, 1 969—1983 Sn ake e x c lu d e d B ritain, Italy, an d, ap art fro m a few p eriod s, F rance, w hile it in ­ clu d e d n o n -E C m em bers such as N orw ay an d Sw eden . T h e ERM d id n o t in clu d e Britain un til 1990; Italy an d o th ers jo in e d w ith w ide bands; A ustria shadow ed the D M fo r years w ith ou t fo rm al m em b ersh ip .180 T h e crea d o n o f the E u ro p ean C o u n cil, a flex ib le, e xe cu tive -led fo ru m w ith an a m b igu o u s leg al relatio n sh ip to the E C , was the in stitutional co u n te rp a rt o f m ultitrack p olicies. D espite the fo r­ m al in stitutional in n o vatio n s a n d th e to leran ce fo r in fo rm al institutional p r o ­ cesses re q u ired , E C g o v ern m en ts w ere ab le to a gre e o n new form s o f substantive co o p e ra tio n . N e ith e r the G erm an go v ern m e n t n or, in p articular, the F ren ch an d Italian g o v ern m en ts w ere en tirely satisfied w ith the asym m etrical co m p ro m ise im p osed u p o n them by the B u n d esb an k. T h e go a l o f the M itterrand go v ern m e n t b ecam e re fo rm o f the EM S to re n d e r it m o re sym m etrical, n o t e x it fro m it. B ut fu rth er re fo rm was im p ossible un til a substantial n u m b er o f co u n tries had fu lfilled the co n d itio n s set fo rth by G erm an y in 19 6 5 fo r m o n etary u n io n , n am ely capital lib ­ eralizatio n an d e co n o m ic co n v e rg e n ce . W h en these co n d itio n s w ere m et, in the late 1980s, d em an d s fo r m o n etary u n io n w ou ld arise again. 180 To be sure, MCAs had already “renationalized” the CAP almost as soon as common prices were established, but the basic policy remained uniform across countries. Gisela Hendricks, "Germany and the CAP,” International Affairs (Winter 1988), 87.

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hapter

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Relaunching Integration: The Single European Act, 1 9 8 4 —1988 The real significance o f the Single Act [was] that when the chips were down, the great majority o f Member States [would] go along with the ultimate de­ velopm ent o f the Community. Those who chose not t o . . . would simply be left behind. — Lord Arthur Cockfield, former Commissioner for Internal Market Affairs (1994)

In the late 1980s the E u ro p e an C o m m u n ity e x p e rie n c e d its m ost im p o rtan t p e rio d o f trade liberalizatio n since c o m p le d o n o f the C o m m o n M arket in 19 6 8 .' T h is new im p u lse tow ard E u ro p e an in te g ra tio n — the “re la u n ch in g ” o f E u ro p e, the F rench ca lled it— was u n ex p ecte d . T h e late 1970s an d early 1980s w ere an e ra o f E uropessim ism an d E urosclerosis, d u rin g w h ich p o litician s an d aca­ d em ics alike lost faith in E u ro p e an institutions. A few years later, o p tim ism and in stitutional m o m en tu m h a d re p la ce d m alaise an d stagnation . T h e so urce o f this transform ation was the S in gle E u ro p ean A ct (SE A ), a d o cu m e n t app ro ved by E u ro p e an h ead s o f g o v ern m e n t in 1986. T h e SE A lin k ed fu rth er liberalizatio n o f E u ro p e an trade with p ro ce d u ra l re ­ fo rm . T h e liberalizatio n h a lf o f the p ack age, in co rp o ra tin g 2 79 proposals c o n ­ tain ed in a 19 8 5 C o m m issio n W h ite Paper, aim ed to create “an area w ith ou t in ­ ternal fro n tiers in w h ich the free m o vem en t o f go o d s, p ersons, services and 1 This chapter draws on my article “Negotiating the Single European Act: National Interests and Conventional Statecraft in the European Community," International Organization 4 5 : 1 (Winter 1991), 1 9 -5 6 . From the extensive general literature on 199z, the best negotiating history o f the Single European Act, written by an intelligent insider who took comprehensive notes, remains Jean De Ruyt, I. ’Acte unique europeen: Commentaire (Brussels, 1987). O ther usef ul histories, collections, and com ­ mentaries include Peter Ludlow, Beyond r 992: Europe and Its Western Partners (Brussels, 1989); Michael Calingaert, The 1992 Challenge from Europe: Development of the. European Community’s Internal Market (Washington, D.C., 1988); Angelika Volle, Grossbritannien und der europäische Einigungsprozess (Bonn, February 1989), 4 6 -7 6 ; Wayne Sandholtz and John Zysman, “ 1992: Recasting the European Bar­ gain," World Politics 42 (October 1989), 9 5 -12 8 ; Jochen Thies and Wolfgang Wagner, eds., A uf dem Wege zum Binnenmarkt: Europäische Integration und deutscher Föderalismus (Bonn, 1989); Roy Pryce, ed., The Dynamics of European Union (London, 1987); George Ross,, Jacques Delors and European Integration (Oxford, 1995). O n mutual recognition, a critical source is Kalypso Nicolaidis, “Mutual Recognition among Nations: T h e European Comm unity and Trade in Services,” diss., Harvard University, 1995.

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The Single European Act, 198 4-1988 capital is en su red .” 2T o realize this goal, European leaders com m itted them selves to elim inate n on tariff barriers. T h e y had to tackle com prehensive liberalization o f trade in services and the rem oval, partial harm onization, o r m utual reco gn i­ tion o f dom estic regu lad o n s that acted as NTBs. In the package prop osed then and ad d ed to over the n ext few years w ere the elim in adon o f custom s p ro ce­ dures and o th er b o rd e r form alities; the m inim al harm onization o f regulatory n on tariff barriers, particularly industrial standards and regulations in the foodp rocessing industry; the liberalization o f trade and investm ent in financial ser­ vices; the abolition o f e xch an ge con trols and o th er limits on international ca p ­ ital m ovem ents; the harm onization o f taxation systems; and the suppression o f preferen tial p ublic p rocurem en t. T h e institutional h a lf o f the SEA involved three reform s. First was the intro­ du ctio n o f qualified m ajority voting u n d er A rticle 100. B efore the SEA, A rticle 100 o f the T reaty (governing harm onization o f regulations) specified unanim ­ ity voting. In addition, as we saw in chapters 3 and 4, the use o f Q M V had been lim ited by the L u x em b o u rg C om prom ise, F ran ce’s unilateral and extra-legal as­ sertion in 1966 that any m em ber state co u ld veto a proposal in the C oun cil o f M inisters by declarin g that a “vital” o r “very im portan t” interest was at stake. T h e result was de facto unanim ity votin g even w here Q M V was authorized. T h e SEA form ally exp a n d ed the use o f Q M V in the C o u n cil o f Ministers to regulatory is­ sues co n n ected with the realization o f the internal m arket u n d er A rticle 100, but it also deliberately created the inform al exp ectation that voting w ould be practiced as con ceived b efo re 1966. T h e secon d institutional reform was the so-called new approach based on “m utual recogn ition ”— a politically uninvasive but substantively dem anding form o f liberalization w hereby only m inim al standards are harm onized and gov­ ern m en ts m ust accep t any im ports from o th er m em ber states in com pliance with them . Related to the “new ap p ro a ch ” was the “delegation to standards” p ro ­ ced u re, em ployed in som e m atters involving industrial standardization, w hereby governm en ts m andated m inim al levels o f regulatory protection and delegated the setting o f precise standards to existing, voluntary European standards-setting bodies. T h e new approach m arked a significant shift in regulatory strategy, avoid­ in g the detailed and un iform standards that had proved often fruitless during the 1970s; it red u ced the legislation required to achieve liberalization by over two-thirds. T h e third reform gran ted slightly greater powers to the E uropean Parliam ent u n d er the so-called co o p eratio n p ro cedure. T h e Parliam ent was gran ted the pow er to prop ose am endm ents w hich, if accep ted by the Com m ission, w ould be sent back to the C o un cil o f M inisters fo r consideration u n d er a favorable set o f votin g rules.3 T h e SEA return ed E uropean in tegration to public prom in en ce. Yet regu la­ tory m arket liberalization was hardly the only E C reform that co u ld have em erged d u rin g the m id-1980s. Jacques D elors and François M itterrand had sough t to 2 Article 8A o f the Treaty o f Rome, as amended by the Single Act. 5 George Tsebclis, “The Power o f the European Parliament as a Conditional Agenda-Setter," American Political Science Review 88 (1994), 128-142.

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T h e C h o ic e fo r E u r o pe

d eep en m on etary integration. T h e Parliam ent had pressed fo r greater d em o c­ ratization and institutional developm ent, co d ified in a European constitution. T h e G erm an and Italian foreign ministers had prop osed stronger coop eration on fo re ign policy. M any French officials had spoken o f defen se coop eration. Som e m ultinational firms had advocated m ore active industrial and infrastructure policies. Britain had sough t fun dam en tal budgetary and agricultural reform . A n d o f course governm ents m igh t sim ply have m ud dled throu gh w ithout any basic reform at all, con cen tratin g their efforts on unilateral or global m ultilat­ eral policies. W hat accounts for the tim ing and the con ten t o f the reform that relau n ch ed E uropean integration after years o f disappointm ent? Journalistic reportage, academ ic analysis, and oral histories reveal a bewilderingly wide range o f alternative explanations fo r the Single A ct and the W hite P ap er— from opposition to the U .S.-U SSR bargain at Reykjavik to legal p rece­ dents set by the E uropean C o u rt o f Justice to pressure from rising U.S. co m p e ­ tition. Nearly every potential cause has p rovoked extensive speculation. As a French official in Brussels qu ip p ed, “W hen the little boy turns out well, everyone claim s paternity!”4 A m o n g scholars and com m entators, however, a con ventional wisdom has em erged abou t the origins o f the SEA. It derives from supranational bargaining theory. T h e decisive im pulse stem m ed from far-sighted Com m ission officials like E tienne D avignon, Jacques Delors, and A rth ur C ockfield, w ho com bin ed the tech nocratic voluntarism said to be characteristic o f fran cop h o n e politics (D elors and D avignon) with the pragm atism said to be characteristic o f English politics (C o c k fie ld ). Participants seem particularly in clined to em brace this view. A s we saw in ch ap ter 1, C o ck field him self con fiden tly asserts that strong e n tre­ preneurial leadership was a sufficient con dition fo r reform : “If the Com m ission is ineffective, as tragically it was during the T h o rn e Presidency, the C om m unity languishes. W h ere you have a fo rcefu l and visionary President, as Jacques Delors has been , backed by a strong and effective Com m ission, the C om m unity makes progress.” 5 N um erous leading academ ic analysts follow the sam e line.6 Supra­ 4 Interview with F.C official, January 1989. For a comprehensive and sympathetic review o f poten­ tial factors, see Sandholtz and Zysman, “ 1992.’’John Ardagh, “Will the New Europe Please Sit Down,” New York Times Magazine (10 May 1991), 4 9 -59 , cites the failure o f Reaganomics, the rise o f Japan, the emergence o f Gorbachev, concern about the German Question, the rise o f global finance, the emergence o f the Green Movement, rising travel, and the general fear o f global disintegration. 5 Lord Cockfield, The European Union: Creating the Single Market (London, 1994), 111. For similar arguments, see Ross,Jacques-, Sandholtz and Zysman, “ 1992.” Delors's own assessment, as we shall see, is far more measured. 6 Whereas only a few analyses assert the extreme claim that supranational entrepreneurship was a “sufficient” condition— though the assertion that preferences can be fundamentally manipulated leads in this direction— most nonetheless advance the strong claim that it was a “necessary” condi­ tion. For representative variants o f an enormous literature, see Sandholtz and Zysman, “ 1992”; Ross, Jacques; Neill Nugent, “The Leadership Capacity o f the European Commission,"Journal of European Public Policy 2:4 (December 1995), 603-623, 1995; Geoffrey Garretl and Barry Weingast, “Ideas, Interests and Institutions: Constructing the European Community’s Internal Market," in Judith Goldstein and Robert O. Keohane, e d s Ideas and Foreign Policy: Beliefs, Institutions, and Political Change (Ithaca, 1993), 173-206; Daniel Wincott, “Liberal lntergovernmentalism and Integration: Towards an Everyday Critique," Journal of Common Market Studies 33:4 (December 1995).

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The Single European Act, 1984-1988 national officials, it is fu rth er argu ed, w ere backed by a coalition o f visionary m ultinational businessm en w ho, strongly supportive o f m arket liberalization, co n vin ced o r circum ven ted reluctant n ational leaders.7 T h e historical reco rd suggests an alternative view based o n a co n vergen ce o f n ational econ o m ic p referen ces, in tergovernm ental bargain ing am on g na­ tional leaders, and the design o f new international institutions based on the aim o f m ore credible com m itm ents. T his co n vergen ce stem m ed from a co m ­ bin ation o f structural eco n o m ic trends toward h ig h er rates o f international trade and investm ent, in cludin g m ore m ultinational production , and perceived policy failures. A fter the reversal o f French econ o m ic policy in 1983, single m arket reform em erged as the only basis on w hich European integration could have m oved forward. T h e SEA assem bled a set o f liberalized measures d e ­ m anded by business, w idely viewed as inevitable, and, to a large extent, already b ein g im p lem en ted unilaterally and bilaterally. N ational leaders w ere also m o ­ tivated by geopolitical ideologies, but econ o m ic interests rem ained prim ary in the sense that n o m ajor go vern m en t— not even that o f G erm an y— was willing to sacrifice a m ajor econ o m ic interest fo r the sake o f ideologically desirable integration. Far from b ein g in the thrall o f clever supranational entrepreneurs, m oreover, national c h ie f executives— H elm ut K ohl, François M itterrand, and M argaret T h a tc h e r— w ere the critical decision-m akers, m aneuvering dom estically to re ­ m ove obstacles to agreem en t. G overnm ents initiated most o f the m ajor propos­ als (which w ere p len tifu l), co n d u cted and m ediated m ost o f the negotiations, and m obilized dom estic support. In fact, unilateral, bilateral, and n on -E C m ul­ tilateral initiatives w ere well u n d e r way by the time the E C first co n sidered the SEA. By contrast, Com m ission officials like Delors, most European Parliam en­ tarians, and leadin g m ultinational businessm en had quite different priorities. T h e y w ou ld com e to a ccep t the SEA as a second-best outcom e. Insofar as the ac­ tivities o f Com m issioners and Europarliam entarians en h an ced the efficiency o f negotiations, they did so by increasing the saliency o f internal m arket issues, form ulating co n crete proposals, and m obilizing business sup port— tasks largely co m p lete b efo re D elors and C o ck field en tered office. T h e m ost im portant institutional reform s— exp an d ed Q M V and the new ap ­ proach to N T B rem o val— w ere designed to enhan ce the credibility o f com m it­ m ents and the efficiency o f decision-m aking. T h ey respon ded to unsatisfactory e xp erien ce with harm on ization n egotiations in the 1970s. O n ly in areas w here con sequences w ere difficult to ju d g e , notably increased powers for the Parlia­ m ent, did ideolo gical factors— p ro-E uropean sentim ent and attitudes toward dom estic parliam entary p ow er— in flu en ce national positions. T h e re is litde ev­ id en ce that a p erceived n eed fo r centralized, technocratic decision-m aking had any im p act o n the ch o ice o f institutions; in deed, the “new a p p ro a ch ” was a p ro ­ foun dly decen tralizin g policy. 7 Maria Green Cowles, “The Politics o f Big Business in the European Community: Setting the Agenda for a New Europe,” diss., American University, 1994.

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T h e C h o ic e fo r Eu r o pe N a t io n a l In t e r e s t s a n d t h e S in g l e E u r o p e a n A c t

A fter 1 983 national p referen ces in Germ any, Britain, and France con verged toward sup port fo r single m arket liberalizauon. Britain was its strongest sup­ porter, follow ed by G erm any and France. In o n e o th er area, the greater form al use o f QMV, France and G erm any were in agreem en t, w hereas the British re ­ m ained reluctant. In all o th er substantive areas, in cludin g industrial policy, agri­ cultural subsidies, m onetary un ion, foreign and defen se coop eration and pure institudonal reform s, n o two governm ents agreed. W hat explains this pattern o f national preferences? I argu e that these n adon al preferen ces prim arily reflected econ o m ic in ter­ ests, and in particular increasing global and region al trade and investm ent, w hich exacerbated con cern s abou t international com petidveness. In the 1960s a large m ajority o f m ultinational firms in E urope had b een based in the U nited States or Britain; by the 1980s there w ere m any C on tinental m ultinationals. T h e d ecad e saw increased transnational capital flows in the form o f foreign direct in­ vestm ent (FDI) and len din g. B egin n in g in the m id-1970s FDI rose rapidly, led by investm ent from o th er E uropean countries, w hich increased from 25 p ercen t to 40 p ercen t o f total inward stock. O ve r 50 p ercen t o f this investm ent entered France, Spain, Italy, Portugal, and Belgium . Intra-industry trade am ong E uro­ p ean nations also con tin ued to increase with incom e: in G reece and Portugal it totaled 3 0 - 4 0 p ercen t o f trade; in D enm ark, Spain, Italy, and Ireland ap p ro x i­ m ately 60 percent; and in the others 7 5 - 8 5 percent. T h is trade boom was not u n ique to E urope; to a greater exten t than ever before, European firms focused on global, n o t ju st region al, com petitiveness. Intra-European exports as a p er­ centage o f con sum ption exp a n d ed from 19 p ercen t to 25 p ercen t betw een 1980 and 1990, with third-country exports rising even faster, from 14 p ercen t to 19 percent. M ergers and acquisitions rose from $9 billion in 1986 to $52 bil­ lion in 1989; transadantic flows increased even faster.8 Surveys o f industry in 1 9 8 6 -8 8 reveal broad-based business support in all coun tries fo r the SEA as a tool to increase the global com petitiveness o f firms. O ve r 90 p ercen t o f top E uropean corp orate executives saw the fragm entation o f the E uropean m arket as an im portant inhibition on com petitiveness, second o nly to labor inflexibility. In Britain it was co n sidered the most im portant factor. T h is view focused on econ o m ic benefits to business: only 1 percen t o f the e x e c­ utives stressed political un ion. A ro u n d 60 p ercen t o f executives and owners felt the single m arket w ould im prove their firm ’s perform an ce, 65 p ercen t that it 8 Jean Savary, French Multinational's (Geneva, 1984) ; Maria Green Cowles, “The Rise o f the Euro­ pean Multinational,” International Economic Insights 4 (July/August 1993), 15 -18 ; Cowles, Politics, chaps. 1-2; Robert Z. Lawrence, Regionalum, Multilateralism,, and DeeperIntegration (Washington, D.C., 1996), 58-59; André Sapir, “Regional Integration in Europe," Economic Journal, November 1996; Sapir, “Regionalism and the New Theory o f International Trade; Do the Bells Toll for the GATT?” The World Economy 16 (July 1993), 423-438. Intra-European exports as a percentage o f total European exports increased from under 40 percent in 1995 to around 55 percent in 1970, but then remained stable until rising to 60 percent during the second half o f the 1980s. Yet the latter increase reflected primarily the expansion o f agricultural trade. Augusto de la Torre and Margaret R. Kelly, Regional Trade Arrangements, IMF Occasional Paper no. 93 (Washington, D.C., February, 1992).

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The Single European Act, 1984-1988 w ould increase exports, up to 80 p ercen t that it w ould increase opportunities w ithin E urope, but fewer, only aro u n d 50 percen t, that it w ould im prove “n a ­ tional p erfo rm an ce.” Service providers em phasized com petitiveness vis-à-vis fo r­ eign, n on -E E C firm s w ithin the E uropean m arket; u n d er 15 p ercen t saw global com petitiveness in third m arkets as the m ajor purp ose o f the initiative.9 T h ese structural econ o m ic con dition s translated into diffuse business support, sp earh ead ed by m ultinationals, fo r single m arket liberalization across the three m ajor countries. It was strongest in Britain, w here m ultinational firms were still disproportion ately im portant; it was slightly w eaker in Germ any, w hich had strong exp orters and a grow ing m ultinational presence; and it rem ained uneven in France, w here liberalization was seen as difficult but necessary to assure fu ­ ture com petitiveness.

Britain: “ We relished the idea o f a Europe . . . frontier-free” Britain was from the start an enthusiastic sup porter o f liberalization, which ac­ co rd ed with long-standing dem ands o f British industry, the com petitiveness o f British service providers, and T h atch erite ideology. By 1985 Britain had already im p lem en ted m any o f the reform s in the W hite Paper, in cludin g capital liberal­ ization, service deregulation , and sim plification o f custom s procedures, and had p ro p o sed them repeatedly at the E uropean level. O n ly on institutional issues did T h a tch er hesitate, seeking to avoid form al Treaty ch an ges— in part for id eolo g i­ cal reasons, in part due to the fear that an op en -en d ed n egotiation would lead to the u n co n tro lled extension o f Q M V to social and environm ental regulation. Britain also supported, perhaps only fo r tactical reasons, a m odest extension o f political coop eration . H ow is this pattern o f preferen ces to be explained? G eo p o litical Interest and Ideology: Still a “deep-set p reju d ice” against Federalism W ith the excep tion o f the discussions o f political coop eration and institutional issues, at n o p o in t do objective geopolitical calculations app ear to have played a significant ro le in British thinking on the SEA. T h e initiative was n ot a m eans o f m aintainin g British in flu en ce in E urope, m anaging security externalities, or respon din g to security threats. Such claim s are largely absent from co m m en ­ taries on Britain in E urope during the 1980s. T h e British governm en t favored a 9 Neil Fligstein and Peter Brantley, The 199 2 Single Market Program and the Interests of Business, Center for German and European Studies Working Paper 1.27 (Berkeley, 1994); Booz-Allen & Hamilton/ Wall Street Journal Survey Results, European Panel o f Chief Executives, “ 1992 Harmonization," “Europe’s Fragmented Markets,” “Company Restructuring,” n.d. (1986-1988); IFO Institut fur Wirtschaftsforschung. “An Empirical Assessment o f Factors Shaping Regional Competitiveness in Problem Regions" (Munich, 1989). Fligstein and Bentley found, however, that support did not vary with capital-intensity or measures (though rough) o f the potential to exploit increasing returns to scale, and the total r-squared for all firms was relatively low, between .15 and .25. Export-oriented sectors included textiles, fibers, and clothing in Italy; textiles, metals, mechanical engineering, com­ puters, automobiles, precision engineering in Germany; and computers and autos in France. 1'he IFO, however, reported that expected benefits did vary positively with firm size, exports, and activity in the investment goods and business services sectors. 319

Table 5.1. The single European Act, 19 8 1-198 8 : Preferences and outcomes Issues

B ritain

Germany

Internal market

Actively prefers liberalization from the late 1970s o n ­ ward, particularly in services.

Prefers liberalization o f b o rd er controls, industrial standards, go vern m en t p rocu re­ m ent, an d industrial subsidies. Strongly prefers to protect som e high dom estic standards in environ­ m ent an d elsewhere.

CA P and budget

Prefers to elim inate CAP, seeks to red uce net co n u ib u tio n through a rebate, an d seeks to cu t E C ex p o rt subsidies.

Prefers to raise o r m aintain prices and M CAs w hile cutting E C ex p o rt subsidies and stabilizing G erm an fiscal c o n ­ tribution. Favors rapid Iberian entry.

France

Commission

Outcome

Actively prefers lib­ eralization o f indus­ trial and processed fo o d standards, and prefers jo in t financial deregulation and elim ination o f border controls.

Favors autom atic m utual recognition w ithou t p rio r h ar­ m onization o r safe­ guards, balanced by social policy. T his is initially a low priority for Delors.

Q M V in trod u ced into A rticle 100, bu t with safeguards (Article 100A4) an d som e­ times p rior h arm on ­ ization. N o signifi­ can t social policy.

Prefers m odest price increases, high ex­ p ort subsidies, elim i­ nation o f M CAs, n o increase in net French contribution, and a lo n g transition p eriod fo r new Iberian entrants.

Favors large price reductions, m odest British rebate, rapid Iberian entry, elim i­ nation o f M CAs.

N o m ajor C A P re­ form . Costs contin ue to rise. M odest daily price reduction offset by side-paym ents and rise in o th er prices. Substantial British rebate. M CAs re­ form ed but rem ain significant. Long transition fo r m any Iberian products.

Industrial policy

Supports m inim al, d ecen tralized R&D program on a strict ju ste retour basis.

Supports m inim al, d ecen tralized R&D program on a strict ju ste retour basis.

Monetary policy

O p p o ses participa­ tion in ERM despite grow ing dom estic support.

O pp oses d eep en in g unless capital liberal­ ization and eco n om ic con vergen ce.

Foreign policy

O p p o ses any form al d eep en in g , p articu ­ larly in defense.

Supports d eep er coo p eration if c o n ­ sistent with N ATO .

Institutions

Strongly opposes increase in Q M V or EP powers, though willing to com p ro ­ m ise o n internal m arket.

Strongly supports exp a n d ed EP powers and Q M V in a lim ited range o f areas.

Prefers extensive program with EC funding.

French position.

M inim al, d ecen tral­ ized, ju ste retour R&D program .

Strongly and actively supports m ore sym­ m etrical m onetary coop eration .

French position.

B rie f rhetorical com ­ m itm ent to future consideration.

Supports form al co ­ operation , even if it ch allen ges N ATO .

Supports any deepening.

No action.

O p p o ses increase in EP powers and supports lim ited QMV.

Supports central­ ization and Q M V across to board; m odest support for EP powers.

QMV7 in A rticle 100 an d a few oth er areas. Inform al accep ten ce o f m utual recogn ition and “new ap p ro ach .” M odest increase in EP powers.

T h e C h o ic e fo r E u r o pe

strength en ing o f E uropean political coop eration , b ut only insofar as it was pos­ sible w ith out em pow ering an in d ep en d en t bureaucracy. Foreign policy co o p er­ ation was com fortably in tergovernm ental in form , an d w ithin it Britain’s tradi­ tionally professional Foreign O ffice had com e to play a prestigious ro le .10 If geopolitics in flu en ced British policy, therefore, it was prim arily throu gh the id eolo gical beliefs o f the Prim e Minister. T h a tch er h erself was, we saw in ch a p ­ ter 4, a virulent antifederalist. Fam ously hostile to the Foreign O ffice, she had little use fo r the traditional British desire to m ake sacrifices to “be at the heart o f E u ro p e.” She was wary o f attem pts to strengthen supranational institutions and to exp and E C co m p eten ce into areas, such as in direct taxation and social legislation, n ot im m ediately linked to trade. Like most British Conservative politicians, she was reflexively m ore Atlanticist than European on questions o f regio n al security and foreign policy; A dantic arrangem ents also gran ted Britain disp rop ortion ate in flu en ce. She firm ly op posed form al changes in C p un cil p ro ­ ce d u re s— perhaps in part because o f the antifederalism com m on to British p o ­ litical cu ltu re— th ough she un derstood the n eed for som e m ovem ent away from un an im ous decision -m akin g in o rd er to im plem ent single m arket reform e ffec­ tively. For this reason the British governm en t sough t a stronger European Court. H en ce the T h a tch er govern m en t favored informal m eans o f en couragin g Q M V but op posed any treaty changes that m ight un derm in e the sovereign p rero ga­ tives reco gn ized by the L u x em b o u rg C o m p ro m ise.11 E con om ic Interest: A “gen u in e C o m m o n M arket” T h e C o n fed eratio n o f British Industry and o th er British business groups, we have seen, had lo n g supported liberalization o f European trade. T his position reflected the C B I’s m ore m ultinational m em bership and an internal structure u n ique am ong E uropean peak business associations, o n e w hich en co u raged in­ dividual firms to express views in d ep en d en tly o f sectoral associations. In the mid 1970s the CBI had already begun to prom ote E C standardization, the removal o f n o n tariff barriers, and the reform o f p ublic procurem en t; in 19 7 7 it added R&D policies to the list. Yet the differential and diffuse im pact o f N TBs across sectors lo n g prevented the CBI from achieving consensus on a co h eren t single m arket p ro p o sal.12 T h e CBI finally ad o pted an official, public position in M arch 1980, in co n ­ ju n ctio n with the D epartm en t o f Trade and Industry. In a jo in t statem ent with the Institute o f D irectors, the CBI n oted its co n cern about the declin in g co m ­ petitiveness o f E urope vis-à-vis the Pacific Rim and called for the creation o f a “gen u in e com m on m arket,” in cludin g liberalization o f goods, services, and trans­ port, sim plification o f the C o m m o n M arket, and elim ination o f non tariff barri­ ers. M ajority votin g was to be used w here the treaty allowed it, with suspension o f the right to veto only fo r proposals “clearly designed only to develop the in10 Interview with British foreign minister, 1992. 11 Margaret Thatcher, The Path toPower (London, 1995), 470 -4 72. 12 Keith Middlemas, ed., OrchestratingEurope: The Informal Politics of the European Union, 197^-1995 (New York, 1995), 7 1 5n; Cowles, Politics, 133-139. I'he CBI was not comprised o f sectoral associations, which permitted more flexibility in representing the majority concerns, in this case that o f exportoriented ones.

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The Single European Act, 1984-1988 ternal m arket.” B egin n in g in 1983, the Institute o f D irectors called for co m p le­ tion o f the E C single m arket within five years. A t roughly the same tim e, the CBI argu ed that “unification o f the internal m a rk e t. . . m ust be the m ajor policy o b ­ je c tiv e ,” w hile any proposals that m ight lead to a “two-tier E u ro p e ” m ust be re­ sisted; this objective, the CBI argu ed, required QMV, at least “w here the treaty allows it.” 13 O n som e specific issues, however, such as lim itations on takeovers, business split down the m iddle, and here, some analysts m aintain, “the govern ­ m e n t’s liberal bias [was] decisive.” 14 A lth o u gh British industry does n ot appear to have m o u n ted a m ajor cam paign for the 1992 agen da or to have scheduled regu lar consultations, the British governm en t appears to have been fully aware and supportive o f business interests. T h e re was, however, little business support fo r m ore radical federalist schem es; hence business groups did n ot plan to make the E uropean P arliam ent’s Draft Treaty a m ajor issue or push the governm ent on b e h a lf o f it.15 Su p p o rt am ong businessm en fo r liberalization in services was particularly strong. L o n d o n had lo n g been the p reem in en t E uropean cen ter o f international financial and transport services, and bankers and insurance firm s based in the City co n tin u ed to w ield strong in flu en ce on British foreign econ om ic policy. L on don -based subsidiaries and firms had been at the heart o f the rise o f E uro­ currency m arkets in the 1960s and 1970s. In British financial services, a decade o f dom estic reform (the B ig B ang or the City R evolution), beginn in g with the B anking A ct o f 1979 and culm in atin g in the Financial Services A ct o f 1988, was already nearly com p lete w hen the E C ’s pathbreaking Second Banking Directive was approved in 1988. T h ese chan ges were designed to increase p rice co m p eti­ tion, particularly in dom estic markets, and to im pose, fo r the first tim e, detailed governm en tal licensing and oversight on what had been an inform ally regulated and highly cartelized sector. T h e decisive m om ent cam e w hen the Bank o f En­ gla n d shifted to the p ro-reform cam p, a m ove based, o n e leadin g com m entator argues, on “the p ercep tio n that reform was n eed ed to safeguard L on d o n ’s post­ war position as an international financial centre by adoptin g A m erican institu­ tional patterns.” 16 T h e result o f unilateral liberalization and sectoral com petitiveness was strong business support fo r liberalization o f European service markets, particularly in banking, insurance, and securities trading, as well as transport. In particular, 13 David Edward, Robert McAllister, and Robert Lane, “The Draft Treaty Establishing the Euro­ pean Union: Report on the United Kingdom,” in Roland Biebcr,Jean-PaulJacque, and Joseph H. II. Weiler, eds., An Ever Closer Union? (Brussels, 1985), 295H. 14 Stephen Woolcock, Michael Hodges, and Kristin Schreiber, Britain, Germany and 1992: The Limits of Deregulation (London, 1991), 100. 15 Ibid., 10 9 -110 ; Bieber, Jacque, and Weiler, Ever, 295-299. 16 Michael Moran, The Politics of the Financial Services Revolution: The USA, UK andJapan (London, 1991), 7 2 -7 8 , 8 5-8 7 , also 124 -126 , 132-134. Large and more internationally oriented firms sup­ ported liberalization, while small and more domestically oriented firms favored continued regula­ tion. This split permitted the government to act with more independence, confident that the most powerful segment o f the industry would support liberal policies. David Marsh, and G. Locksley, “Capital: The Neglected Face o f Power?” in Marsh, ed., Pressure Groups: Interest Groups in Britain (Lon­ don, 1983), 43. More generally, Stephen Blank, “Britain: The Politics o f Foreign Economic Policy, the Domestic Economy, and the Problem of Pluralistic Stagnation," in PeterJ. Katzenstein, ed., Between Power and Plenty: Foreign Economic Policies ofAdvanced Industrial States (Madison, Wise., 1978), 8 9-137.

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sin ce British fin a n ce (alo n g w ith th at o f L u x em b o u rg ) is w idely co n ce d e d to be in te rn a tio n ally co m p etitive and con stitutes twice the p ercen ta g e o f G D P o f any o th e r E C co u n try, Britain was w idely co n sid e re d to b e the stron gest b en eficia ry fro m fin an cial d e re gu la tio n . T h e a b olitio n o f e x ch a n g e co n tro ls in 19 7 9 fre ed British in stitution al investors to m ove fu n d s ab ro ad an d h e ig h te n e d the co m ­ p etitive p ressu re on do m estic service providers. Even b e fo re capital liberaliza­ tio n , British investors d evo te a g rea ter p ro p o rtio n o f G N P to overseas invest­ m e n t than th eir co u n terp a rts in any o th e r m a jor capitalist nation. T h e T h a tc h e r g o v e rn m e n t h a d also b e g u n liberalizatio n o f teleco m services w ith the T e le ­ co m m u n ica tio n s A ct o f 19 8 1 an d th ree years later fo llo w ed the U n ited States in leg alizin g co m p etitio n in basic p h o n e service. T h a tc h e r e n co u ra g e d fu rth er d e ­ re gu latio n o f in tern atio n al air transport. T h e g o v ern m e n t set ab ou t privatizing utilities an d in tro d u cin g co m p etitio n in the p u b lic p ro cu re m e n t o f largely ca p i­ tal go o d s, in clu d in g transp ortation , energy, a n d arm am en ts system s,17 By con trast, British a gricu ltu ral interests had ch a n g e d little since the 1970s. W ith its sm all, e fficie n t a gricu ltu ral secto r co n cen tra te d in areas, such as sheep hu sban dry, n o t g e n ero u sly subsidized by the C A P, Britain ga in ed little from agricu ltu ra l p ro gram s th at co m p rise 70 p e rce n t o f the E C b u d g et. T h u s Britain fo u n d itself by far the largest p er capita net co n trib u to r to the C o m m u n ity b u d ­ get. A m o re e qu ita b le a rra n g e m en t was a con sisten t go a l o f British govern m en ts in th e 19 70 s an d 1980s. T h e D om estic D ecision: Britain Is “E n th usiastic” T h e p re p o n d e ra n ce o f e vid en ce strongly supports the co n clu sio n that T h a tc h e r ’s E u ro p e an p o licy was driven p rim arily by e co n o m ic interest; it was an exten sio n o f h e r do m estic re gu lato ry re fo rm s.18 O n ly o n seco n d a ry issues was g e o p o litica l id e o lo g y in flu en tial. T h e British go v ern m e n t was “e n th u siastic” a b o u t L o rd C o c k fie ld ’s 19 8 5 W h ite Paper, w h ich , o n e co m m e n ta to r o bserved, “set o u t an essentially T h a tc h e rite a g en d a fo r ‘d e re gu la tio n ’ and ‘e n h a n ced co m p etitio n ’ th ro u g h o u t th e E C .” 19 T h e W h ite P ap er m irro re d T h a tc h e r’s own 17 Many perceived the immediate gains as small, particularly after the details o f the provisions ac­ tually enacted under the SEA bccam e clear. In a survey o f the U.K. financial service industry con­ ducted in 1989, service providers argued that the European wholesale market for financial products had already been substantially liberalized through private activity. Retail markets, limited by pre­ existing consumer loyalties and host country restrictions on business practices such as advertising and fund composition, would change only slowly. W oolcock et al., Britain, 7 8 -7 9 , 8 4 -8 5 ; Loukas Tsoukalis, The New European Economy: The Politics and Economics of Integration, ad ed. (New York, 1993), 112; Moran, Politics, 1 1 -1 2 ; Marsh and Locksley, “Capital,” 38; Sir Geoffrey Howe, “Th e 364 Econo­ mists: Ten Years O n ,” lecture at the Annual Meeting o f IFS (20 May 1991), 9 5 -9 7 ; Heather D. Gibson, The Eurocurrency Markets: Domestic Financial Policy and International Instability (New York, 1989), 8 4 -9 7. ]8 In some areas, Thatcher’s reforms rendered Britain more vulnerable to exploitation by foreign governments. T h e British econom y had long been more open to cross-border takeovers, for ex­ ample, than its neighbors’. Thatcher’s liberal policies meant that "access to the British market has been granted unilaterally anyway, so British entrepreneurs might as well seek equivalent access to the rest o f the EC m arket”— not only in the financial sector but also in industrial sectors and deregulated utilities, where am ong E C members “the market for corporate control [was] truly open only in Britain.” W oolcock et al., Britain, 9 9 -10 0 , also 9 4 -9 9 . 19 Robert Skidelsky, “Britain: Mrs. Thatcher’s Revolution,” in David Calleo and Claudia Morgenstern, eds., Recasting Europe’s Economies: National Strategies in the 1980s (Lanham, Md., 1990), 128.

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The Single European Act, 1984-1988 moves toward privatizing industry, elim inating obstacles to foreign takeovers, o p en in g p ublic p rocurem en t, red u cin g regulatory controls, in tro d u cin g co m ­ petition a m o n g alternative suppliers o f p ublic services, and deregulating the provision o f financial services.20 British dem ands to retain unanim ity w ere lim ­ ited to areas o f particular British idiosyncrasy, such as b o rd er controls, o r o f p ar­ ticular T h atch erite sensitivity, like the regulation o f small business and fiscal harm on ization. As G eoffrey H owe later observed: “Broadly we relished the idea o f a E urope that was fro n tie r-fr e e .. . . In the en d we obtain ed . . . as close as pos­ sible to achievin g that p rosp ect.” 21 By contrast, the L abour party and the T U C co n tin u ed to favor a stronger EC industrial and social policy, as well as unanim ­ ity voting, while rem ainin g som ew hat skeptical o f the SEA.22 British policy had continuously pursued extern al econ om ic liberalization w hile paying little attention to E uropean integration fo r its own sake. T h a tch er was an early advocate o f m ost o f its provisions. In 1981 and 1982 h er go vern ­ m en t called fo r pan-E uropean telecom m unications and transport d eregu la ­ tion, publicly prom ised to lower E uropean airfares, and subm itted proposals for pan -E uropean rem oval o f N TBs, starting with services.23 T h e British go vern ­ m e n t’s Septem ber 1983 m em orandum p roposed liberalization o f financial ser­ vices (especially in su ran ce), transport (especially air transp ort), the sim plifica­ tion o f fro n tier controls, m utual recogn ition o f professional qualifications, a jo in t policy to stim ulate E uropean high-tech n ology industries, and the elim in a­ tion o f n on tariff barriers throu gh E uropean standardization. T h e British gov­ e rn m en t supported a “single-passport” system fo r financial services, in w hich a firm based in any m em ber-state co u ld provide services throu ghou t the C o m m u ­ nity. In July 1984 the British m oved unilaterally to simplify custom s procedures. S u p p o rt fo r banking reform and the abolition o f exch an ge controls placed Britain firm ly 011 the side o f G erm any and the B en elux countries in favor o f the elim in ation o f capital con trols.2'1 G eop olitical interests and ideology played a secondary role. T h e traditional British geopolitical co n cern (“bein g at the heart o f E u ro p e”) swayed T h a tch er not at all. She also did n ot perm it h er own ideological opposition to Europe to in flu en ce the basic direction of British policy. D uring the SEA negotiations she co n fid ed to o n e o f h er closest advisers on European issues that had she not been prim e minister, she w ould have taken a m ore strongly anti-European view, but she was con strain ed by the views o f the parliam entary party and o f business. T h e same adviser recalls that he advised that decisions be m ade solely on the basis o f British

20 Woolcock et al., Britain, 97-99. 21 Sir Geoffrey Howe, Conflict of Loyalty (I-ondon, 1994), 4 5 6 -7 . Howe adds: “The idea o f a Europe that was frontier-free for goods, services and capital, but not for (criminal or non-European) people nor for (dangerous or infected) animals and plants." 22 Edward, McAllister, and Lane, “Draft," 295-299. 2’ The Conservative government promoted EC deregulation during the British presidency in 1981. United Kingdom, House o f Lords, Debate on F.CC Report: Internal Market (1982-83), 427; House o f Lords, Report of the European Communities Committee: Internal Market (198 1-8 2), H.L. 204; Roger Morgan, “Vereinigtes Königreich," in W. Weidenfeld and W. Wessels, eds., Jahrbuch der europäischen Integration (Bonn, annual), 1982 (p. 462), 1983 (p. 367), and 1984 (p. 388). 24 European Report, 21 September 1981; Woolcock et al., Britain, 7 8 -7 9 , 84-85; Louis W. Pauly, Opening Financial Markets: Banking Politics cm the Pacific Rim (Ithaca, 1988), 174.

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eco n o m ic interests and that such advice was invariably accepted. (T h a tch er’s p er­ ception o f econ o m ic interests may have in som e m easure reflected her personal bran d o f eco n o m ic liberalism .) T h e governm en t consulted often with business. Several W h itehall offices review ed all proposals in the W hite Paper drafted by T h a tc h e r’s fo rm er co lleagu e, C ockfield; the gen eral conclusion was that few co u ld harm British eco n o m ic interests. T h a tch er read every w ord o f the SEA text, u n d erlin in g sections, and was p repared to debate particular clauses o r d e ­ m and p articular changes at sum m it m eetings.25 G eo p o litical ideology, in this case T h a tc h er’s own antifederalism , m attered m ost on institutional questions. T h a tch er strongly o p posed form al treaty changes to provide Q M V o r to repeal the L u xem b o u rg C om prom ise, in part fo r id eolo g­ ical reasons and in part because it m ight lead o th er issues, such as environm en ­ tal and social policies, to receive sim ilar treatm ent. Britain was strongly op posed to exp ansion o f the role o f the Com m ission o r Parliam ent in the .process o f E C legislation o r im plem entation , and o bjected to expansion o f the substantive scope o f ju d icia l review by the ECJ b ut not, apparendy, to increases in its e ffec­ tiveness. In short, T h a tch er consistendy sough t to secure m axim um liberalization w hile lim iting centralization o f pow er in Brussels and to avoid spillover in the form o f m ore intensive regulation or increased financial com m itm ents. T h a tch er sim ilarly o p p o sed provisions to strengthen o r form alize m onetary coop eration in the form o f E con om ic and M onetary U n ion (EM U )— a position backed th rou gh ­ o ut this p eriod by econ o m ic analysis and, until aroun d 1985, business o p in io n .26 T h e o th er m ajor British co n cern in the p eriod , as it had been since 1973, was the E C budget. W ith accession, Britain had been fo rced to accep t the agri­ cultural and bu d g et policies as part o f the acquis communautaire. British farm ­ ers rem ained less num erous and m ore com petitive than their Con tinental counterparts, gen eratin g a lower level o f E C spending. U p o n en terin g office, T h a tch er cam p aign ed to g e t “h er m oney b a ck” from the E C, dem an din g that two-thirds o f the British deficit in recen t years be rebated and that p erm anent adjustm ents be m ade to lim it agricultural sp en ding and to prevent future b u d ­ getary disequilibria.

West Germany: Quiet Liberalism T h e m ajor im petus fo r reform in G erm any cam e from Foreign M inister HansD ietrich G en scher, soon follow ed by C h an cello r H elm ut K ohl, w ho sough t to prom ote E u ro p ean in tegration, m ore efficient E C institutions, and coop eration

25 Interview with former British prime minister’s chief adviser on European issues, 1997. British policy was also more centrally coordinated than in most countries; representatives o f up to fourteen Whitehall offices meet daily under Cabinet Office chairmanship. Mark A. Blythe, “Internal Market Measures; Policy Coordination by the United Kingdom,” in Jürgen Schwarze, ed., Legislationfor Europe 1992 (Baden-Baden, 1989), 1 11—113. 26 Bieber et al., Ever, 290-291; Howe, Conflict, 458. British initiatives, notably the 1984 bilateral Anglo-Italian initiative for a modest strengthening o f foreign policy cooperation, appear to have been primarily tactical, aimed at splitting the Franco-German couple. See Malcolm Rifkind in Hansard (27 June 1984), Col. 988 and (21 March 1984), Col. 452. 326

The Single European Act, 1984-1988 on foreign p o licy in o rd e r to realize ge o p o lid cal, ideological, an d partisan goals. Yet eco n o m ic interest rem ain ed the key constraint. N eith er geo p o litical id e o l­ ogy n o r partisan com petition led K ohl and G en sch er to pursue policies that com p rom ised G erm an e co n o m ic interests. H en ce the G erm an governm en t w el­ co m ed in tern al m arket reform , th ough it did n ot p ropose m any co n crete m ea­ sures; b u t veto ed stronger m onetary, R& D, and regu latory policies. It p ro ceed ed cautiously on agricultural reform . G eo p o litical Interest an d Ideology: O stpolitik and Electoral C om p etition T h e m ost p ro m in en t p ro p o n e n t o f fu rth er integration in Germ any was Foreign M inister G en scher, lead er o f the Free D em ocratic party. G en scher strongly sup­ p orted E uropean co o p eratio n , particularly in the area o f East-West relations and fo reign policy, w hich he viewed as a vital co m p lem en t to O stpolitik and es­ sential to an activist fo reign policy.27 In 1980, still u n der the S ch m id t go vern ­ m ent, serious plan n in g began in the Foreign Ministry fo r a E uropean relance. T h e prim ary focus was o n fo reign policy coop eration , as is clear from the early history o f the 198 1 G en sch er-C olu m b o initiative: only Italian pressure appears to have in d u ced G en scher to in clude econ o m ic issues, in cludin g “furth er d e ­ velo p m en t o f the EM S.” T h e G erm an governm en t rem ained suspicious, how­ ever, o f proposals in the m id-1980s fo r a E uropean defen se organ ization.28 In G erm an y a partisan consensus (excep ting only the G reens) had persisted since the late 1950s in favor o f E uropean integration. Federalist ideas enjoyed con siderable parliam entary, as well as public, support. Som e m ajor G erm an p ro ­ posals, such as an exp an d ed role fo r the Parliam ent and strengthen ed foreign policy co o p eratio n , w ere w idely viewed, n ot least within the Bundestag, as desir­ able steps toward eventual political un ion. T h e Bundestag voted alm ost un an i­ m ously in favor o f the P arliam ent’s D raft T reaty— a position far m ore radical than any n ational governm en t w ould adopt.29 Schm idt, even with G en sch er as fo reign m inister, had paid m ost attention to m on etary policy, but the CD U coalition govern m en t h ead ed by H elm ut K ohl, w hich took power in 1982, was gen erally m o re favorable to G en sch er’s geo po litical agenda. K ohl was also very likely personally pro-E uropean. T h e first issue K ohl raised after bein g elected C D U -C h ief, back in 19 7 3 , had been E uropean integration, with particular at­ tention to the single m arket, free m ovem ent across borders and the n eed for stream lined decision -m akin g to achieve it. To be sure, he presented the single m arket agen da as a response to econ o m ic stagnation, b ut his speeches, like those o f A den au er, consistendy presen ted integration as a solution to the p eren ­ nial “G erm an p ro b lem .” Initially up on en terin g office he did n ot prom ote E uro­ pean initiatives, b u t w ithin a few years, rep ortedly spurred by electoral com p eti­

27 For a retrospective overview, see Hans-Dietrich Genscher, Erinnerungen (Berlin, 1995), 28 Genscher, Erinnerungen, 364-365; Gaddum, Deutsche, 243, 297; Elizabeth Z. Haywood, “The French Socialists and European Institutional Reform," Journal of European Integration 12 (W interSpring 1990), 124. See also Marina Gazzo, “Introduction,” in Gazzo, ed., Towards European Union: From the '‘Crocodile” to the European Council in Milan (Brussels, 1985), 2 :28-29, 39-40. 29 Bicber et al., Ever, 213.

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tion fro m G e n sch e r (th e m ost p o p u la r a m o n g G erm an y ’s m ajor p oliticians) the C h a n c e llo r b e g a n actively p ro m o tin g in tegratio n in h ig h p o litics.30 E co n o m ic Interest: “O p e n an d u n h in d e re d a ccess” A lth o u g h G erm an b ig business an d banks d id n o t play th e p ro m in e n t ro le in d e v e lo p in g p rop osals fo r trade liberalization that th eir British, B e n e lu x , an d e xtra -E C co u n terp a rts d id, a la rge m ajority su p p o rted th e 1992 p ro gram . G e r­ m an industry, d e p e n d e n t o n E C m arkets fo r n early h a lf its exp o rts, rem ain ed relatively co m p etitive th ro u g h th e d ifficu lt 1970s an d ten d e d to favor trade lib ­ era liza tio n , in clu d in g re gu lato ry h arm o n izatio n . T h e p ercen tag e o f exp o rts in G N P was h ig h e r than fo r any o th e r E u ro p e an coun try; G erm an grow th was e x p o rt-le d even d u rin g the recession o f 1 9 8 0 -8 2 . U n like F ran ce, w h ich p re ­ fe rre d liberalizatio n b e h in d E C p ro tectio n ist barriers, G erm an y favo red glo bal o p en n e ss.31 “O p e n and u n h in d e re d access” to and suppression o f subsidies in S o u th e rn m arkets w ere vo cifero u sly ad vo cated by G erm an p ea k organ izations. In 1982 the B u n d esv erb an d d e r d e u tsch en In dustrie cam e o u t in favor o f single m a rk et lib eralizatio n , p articu larly o p p o sin g fo re ig n subsidies to un co m p etitive in dustries. In 19 8 5 the B D I reiterated its su p p o rt fo r liberalization by su p p o rtin g Q M V an d the W h ite Paper. A p o in t-b y-p o in t analysis o f the W hite P ap er d e te cted few threats to G erm an interests. A sim ilar view was h e ld rega rd in g Spanish and P o rtu gu ese accession. T h e D eu tsch er Industrie- u n d H an d elstag had co m e o u t w ith a sim ilar analysis in 19 8 1. U n ion s, g e n era lly p ositive, varied w ith level o f e x ­ ports; u n io n s th at re p re se n te d stro n g cap ital-go o d s e xp o rters, such as IG M etall, w ere m o re p ositive.32 W ithin business, lib eralizatio n p rop osals trig gered fam iliar splits a lo n g lines o f com p etitiven ess. C ap ital g o o d s p ro d u c e rs— au to m otive, m a ch in e tool, c h e m i­ cal, an d e le ctro n ics firm s— w ere optim istic, th o u g h som e e vid en ce suggests that m any p la ce d a low priority 011 lib eralizatio n , figu rin g that they w ou ld b en e fit w ith o r w ith o u t 1992. S o m e w ere co n c e rn e d a b o u t rising Jap anese co m p etitio n ; fo r e x a m p le, auto p ro d u cers fea re d that restrictions o n im ports o f low -priced 30 Gaddum, Europapolitik, 223—233; interview with Kanzleramt official; Werner Filmer and Heri­ bert Schwan, Helmut Kohl (Düsseldorf, 1985), 2 5 5 -2 5 7; Pierre Favier and Michel Martin-Roland, Le décennie Mitterrand (Paris, 1990), 2 :2 13. *' F. Franzmeyer, “Mehr Gemeinsamer Markt bei verschärftem Außenschutz der F.G— Die Bun­ desrepublik in Handelspolitischen Dilemma?" in Rudolf Hrbek, ed., EC-Mitgliedschaft: Ein vitales Interesse der Bundesrepublik Deutschland (Bonn, 1984), 7 1 -8 7 . 32 BDI, Was bringt der EG-Binnenmarkt? 2d ed. (Cologne, 1990); BDI, Einheitliche Europäische Akte: A u f dem Weg zum Gemeinsamen Binnenmarkt— Weiterentwicklung der Gemeinschaftspolitiken (Cologne, April 1987); BDI, Completion of the Single European Market: Consequences for the European Community’s External Economic Relations— German Industry’s View (Cologne, 1989); Werner W eidenfeld, Binnen­ markt '92: Perspektiven aus deutscher Sicht (Gütersloh, 1989), 9 4 -9 5 , 20 7-2 12; Christian Deubner, “T h e Southern Enlargement o f the European Community: Opportunities and Dilemmas from a West German Point o f View,"Journal of Common Market Studies 18 (March 1980), 229—245; H. Kramer, “Bundesrepublik Deutschland,” in W eidenfeld and Wessels, Jahrbuch 1982, 3 1 5 -3 1 8 ; Nichttarifäre Handelhemnisse im innergemeinschaftlichen Warenverkehr (Bonn, 1981 ). O n unions, Andrei S. Markovits and Alexander Otto, “German la b o r and Europe ‘92,” Comparative Politics 24 (January 1992), 1 6 8 -17 4 , suggest the complexity o f the considerations in the minds o f unions. I contend, however, that their data do not fully support their claim about the “primacy o f ideology” (p. 178) in the cal­ culations o f unions, not least because the issues on which unions differed, such as transnational union collaboration, played a relatively m inor role in the SEA.

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The Single European Act, 1984 —1988 au to m o b ile s w o u ld fo rc e J ap an ese firm s in to the lu x u ry m arket, th rea ten in g G erm an p ro d u cers. A substantial m inority, co n ce n tra te d in sh e lte re d sectors such as co a l m in in g, ele ctrica l p o w er g e n era tio n , sh ip b u ild in g, aircraft, a n d fo o d p ro d u cts, as w ell as sectors d e p e n d e n t o n p u b lic p ro cu re m e n t a n d p ro d u c t lines su b ject to d e ta iled n orm s a n d standards, as in fo o d p rocessin g, o p p o sed lib era l­ ization a n d so u gh t to m aintain h ig h G erm an N T B s. O n e study show ed that o f o n ly seven a m o n g h u n d red s o f G erm an sectors th rea te n ed by liberalizatio n , five w ere in fo o d p rocessin g a n d d e fe n d e d cu rre n t regu latio n s o n the basis o f c o n ­ su m er safety. Sim ilarly, G erm an farm ers rem a in ed w ary o f any sign ifican t re ­ d u ctio n in p rices.33 T h e r e was w idesp read fea r o f liberalization in service sectors, n otably fi­ n an ce, teleco m m u n ica tio n s, in su ran ce, an d transport, p articularly tru ckin g, w h ere m any sm aller firm s existed o r co m p etitio n was im p ed e d by cartels, in te r­ lo ck in g p attern s o f co rp o ra te co n tro l, an d lim itation s o n hostile takeovers. Still, it was u n cle a r w h eth e r liberalizatio n u n d e r the SEA w ou ld ch a n g e these p ra c­ tices, a n d so th e n orm was clo ser to apathy than o p p o sition . T h e b ig th ree banks w ere re p o rted ly op tim istic a b o u t fin an cial d e re gu la tio n . In assessing G erm an fin a n ce, o n e analyst co n clu d e d : “W ith the possible e x ce p tio n o f B ritain, n o o th er C o m m u n ity m e m b er w ou ld a p p ea r to have m o re to gain from the crea tio n o f a sin gle E C b a n k in g m arket. . . . F ran kfurt m igh t w ell fin d itself the co n tin e n t’s le a d in g fin a n cial ce n tre , ra n k in g p erh ap s seco n d o n ly to L o n d o n .” A m ore d if­ feren tiated situation p reva iled in in su ra n ce.34 In its p o licie s tow ard in te rn a tio n al m o n ey and capital flows, G erm an y was heavily in flu e n ce d , as w e have seen , by a do m estic con sen su s led by the B u n d es­ ba n k again st any m o n etary in tegratio n w ith ou t p rio r e co n o m ic co n ve rg e n ce. In 1981 the B u n d e sb a n k bow ed to rising pressures and e lim in a ted co n tro ls on inflow s o f capital, tradition ally em p lo y ed to restrict fo re ign use o f the D M — a step th at has b e en attribu ted to the in creasin g in tern atio n alizatio n o f G erm an b a n k in g an d industry.35 T h e D om estic D ecision: “E n d o rsem en t w ith ou t e x cite m e n t” T h r o u g h o u t d ie 19 70 s an d 1980s the G erm an go v ern m e n t con sisten tly fa­ v o red trade liberalizatio n a n d re gu lato ry h arm o n izatio n that d id n o t threaten existin g h ig h G erm an standards fo r social and en viro n m en tal p ro te c tio n — yet 53 W cidenfeld, Binnenmarkt ’92, ao7ff; Markovits and Otto, “Germ an,” 16 8 -17 4 ; Hans-Eckart Scharrer, “T h e Internal Market,” in Carl-Christoph Schweitzcr and Dctlcv Karsten, eds., The Federal Republic of Germany and EC Membership Evaluated (New York, 1990), 8 -9 ; Peter Katzenstein, ed., Industry and Politics in West Germany: Toward the Third Republic (Ithaca, 1989), passim; Thom as R. Howell ct al., eds., Conflict among Nations: Trade Politics in the 1990.5 (Boulder, Colo., 1992), 175; in­ terview with the director o f the insurance industry association, Bonn, 1989; Eckarl Gaddum, Die deutsche Europapolitik in den 8oer Jahren: Interessen, Konflikte und Entscheidungm der Regierung Kohl (Paderborn, 1994), 175; DIHT, Competitive and Adaptation Strategies of German Companies in the Single European Market: Results of a Corporate Survey (Bonn, 1989). 54 Woolcock et al., Britain, 8 8 -9 2 , also 81—84, 10 1-10 6. Germany could afford to liberalize since traditionally close relations between large banks and industry, including substantial holdings by banks, provided a comparative advantage for German banks and protection for firms, which had little to fear from hostile takeovers. 55 John Goodm an and Louis Pauly, “T h e Obsolescence o f Capital Controls? Economic Manage­ m ent in an Age o f Global Markets,” World Politics 46 (October 1993), 50 -8 2 .

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it did so w ithout great enthusiasm . Internal m arket inidadves w ere in cluded in G erm an proposals fo r reform ; K ohl and the E conom ics M inistry provided strong, perhaps decisive, support fo r C om m issioner Karl-H einz N aijes’s efforts in the early 1980s to establish an E C in tern al m arket coun cil. In Septem ber 1983 a G erm an m em orandum on ESPRIT prop osed a lo n g list o f m easures to liberal­ ize the internal m arket. T h o u g h G en sch er rem ained m odvated prim arily by geo po lid cs, the C D U proved m ore interested in liberalization than the outgoin g Sch m idt govern m en t had been . Yet regulation was still favored by many busi­ nesses. As o n e analyst con cludes, “w hile G erm an officials universally endorse E uropean in tegration, they have displayed a palpable lack o f excitem en t over the E C 1992 process itself.” 36 T h e go vern m en t’s am bivalence reflected G erm an y’s am bivalence about e c o ­ n om ic regulation. O n the o n e hand, the K ohl governm en t en tered office co n ­ vin ced that n um erous sections o f the G erm an econ om y were overregulated and oversubsidized, in part because o f the in flu en ce o f unions. Accordingly, the go vern m en t initially sough t public support fo r dom estic deregulation . Supplyside tax cuts red u ced the p ublic-sector p ercen tage o f G N P from 50 p ercen t to 46.5 percen t. A com m ission was app oin ted to exam in e d eregulation o f trans­ port, telecom m unications, and insurance. O n the o th er hand, G erm any is a w ealthy co un try with strong business and po pu lar support fo r regulation. Efforts to translate d eregu latory prescription into policy were aban don ed due to o p p o ­ sition from p ublic-sector bureaucracies, unions, and small business. Som e within the C D U saw the W hite Paper and SEA as an alternative m eans to achieve d e ­ regu lation. T h e G erm an telecom m un ication s reform com m ission, fo r exam ple, w orked closely with E C officials to deregulate and liberalize the G erm an sector, thereby overcom in g efforts by the Bundespost, backed by the unions, to defen d its m onopoly. U sing 1992 in part to fo rce dom estic deregulation , b ut reco gn iz­ ing the delicacy o f such issues as environm ental and social standards, the G er­ man govern m en t was a qu iet supporter o f the SEA but n ot a leader.37 With the excep tio n o f G erm an reunification, all m ajor EC decisions taken u n ­ d er the K ohl govern m en t w ere p repared in small cabinet m eetings with Kohl, G enscher, the finan ce and agriculture ministers, and o th er ministers only as n eeded. M ost decisions were actually reached earlier am ong the coalition part­ ners: K ohl, G enscher, and the CSU leader. Active p rom otion o f integration th ere­ fore ten d ed to em erge n ot from econ o m ic m inistries but from the Foreign

56 One analyst concludes: “In contrast to the leadership role taken by the British in some key areas o f the 1992 programme, the Germans have tended to be followers." Woolcock elai., Britain, 101-106. This stance is belied by an interview with Commissioner Karl-Heinz N'aijes (Brussels 1991). Also Heinz Kramer, “Bundesrepublik Deutschland,” in Weidenfeld and Wessels, eds., Jahrbuch 19 8 1,410, 41911; Kramer, “Bundesrepublik Deutschland,” in Weidenfeld and Wessels, eds., Jahrbuch 1982, 3 1 5 317; Thomas R. Howell and Gregory I. Hume, “Germany,” in Howell et al., Conflict among Nations, (Boulder, Colo., 1992), 175, more generally, i6off; European Report, 29 September 1983. 57 Rudolf Morawitz, “Industrial Policy,” and Joachim Scherer, “European Telecommunications Policy: Some Political Costs and Benefits,” both in Schweitzer and Karsten, Federal Republic, 1 4 -2 1, 2 53 -26 1; Woolcock et al., Britain, 81-84; Rüdiger Soltwedel, Deregulierungspotentiale in der Bundes­ republik, Kieler Studien no. 202 (Tübingen, 1986); Bundesrepublik Deutschland, Bericht derDeregulierungskomission (Bonn, n.d. [1985]).

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The Single European Act, 1984-1988 M inistry and the C h a n cello r’s O ffice. T h e re was little differen ce betw een them , th ough the C h a n cello r’s O ffice gave slighdy greater em phasis to dom estic e co ­ n om ic constraints. Given the high visibility and the electoral popularity o f the issue, how ever, K ohl an d G en sch er co m p eted to e xp lo it E uropean issues and so to p resen t them selves as statesm en. B oth sough t to capture the issue by taking p ublic initiauves, som etim es w ith out fully con siderin g their con ten t. T h is co m ­ p etition intensified after early 19 8 7. E uropean integration and O stpolitik were again linked as G en sch er began to call fo r an o p en in g to G orbachev w hich w ould requ ire solidification o f the EC. T h e re was little potential ben efit to be gained fro m high ligh tin g m arket liberalization, so the G erm an governm en t rem ained qu iet on trade liberalization itself.38 O n C A P issues K ohl aggressively co m p eted with the FDP for the farm vote and so w ould bro o k n o com prom ises in defen se o f agricultural interests. G erm any rem ained skeptical o f m any C A P reform s. A s we have seen, G erm any h^d grown d e p e n d en t on p ro tected agricultural markets. W ith the chan ge in party, even the im p o ten t hostility to high agricultural prices evident u n d er Sch m idt— the so-called Preisdruck-Politik— disappeared entirely. K ohl strongly supported the con tin uation o f M CAs o r their equivalent. In 1985 K ohl supported his agricu l­ ture m inister in invoking the L u xem b o u rg C om prom ise, the first G erm an veto in E C history, against reduction s in agricultural prices. A t the sam e time G er­ many backed British efforts to achieve a m ore equitable sharing o f budgetary costs.39 T h e result was a series o f high-level political proposals in w hich G erm any played a leadin g role but fo r w hich econ o m ic integration was subordinate. T h e G en sch er-C olu m b o initiative, co n cern ed prim arily with foreign policy co o p e r­ ation, cam e from the Foreign Ministry. In February 1984 the Kanzleram t floated the idea o f a Franco-G erm an un ion with an in d ep en d en t parliam ent and gov­ e rn m e n t Yet w hen France and G erm any m oved forward instead with a bilateral a greem en t to red u ce custom s con trols and regulatory barriers, opposition from the Finan ce and Interior m inistries un derm in ed im plem entation .40 T h e G erm an governm en t was an early sup porter o f treaty am endm ents. T h e Kanzleram t and Foreign M inistry agreed in 1984 that the D ooge Com m ittee (to p repare them ) should be given p ro m in en ce and in ten d ed to p ropose a wellknown politician, Karl Carstens, as its head. T h e y also agreed , in preparation for D o o ge C o m m ittee discussions, on a p rogram to exten d QMV, institutionalize EPC, bolster the E uropean P arliam ent’s role through direct negotiations (co n ­ ciliation procedures) with the C o u n cil o f Ministers, d eep en econ o m ic integra­ 38 Genscher, F.rinnerungen, 368-369, 3 74 -3 75 , 383; Wolfgang Bickerich, Helmut Kohl: Kanzlerder F.inheit (Düsseldorf, 1995), 185H; Gaddum, Deutsche, 233s; interview with Kanzleramt official. M Franzmeyer, “Mohr,” 7 1 -7 6 ; Gaddum, Deutsche, 113 -12 0 , 1558; Gisela Henricks, “Germany and the CAP: National Interests and the European Community,” International Affairs 65 (Winter 1988-89), 7 5 -8 7 . This is often painted by those unfamiliar with the German domestic situation as a situation in which the agricultural ministry secretly colluded against its own government to achieve higher prices, but the history o f the negotiations makes it clear that Kohl cooperated with and backed Agriculture Minister Kiechele throughout. 40 Heinz Kramer, “Bundesrepublik Deutschland,” in Weidenfeld and Wessels, eds.,Jahrbuch 1984,

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tion and harm onization, strengthen environm ental policy, and exp an d hightech n o lo gy policy. T h e G erm an governm en t stole the sp od ight on fo reign policy co o p era tio n and p reem p ted the British by p rom otin g com m on Franco-G erm an fo reign and security policy.41 A t no p oint, however, did the com m itm ent to a federal E urope lead G erm any to su p po rt co o p eratio n that con traven ed its econ o m ic interests. G erm any pressed strongly fo r a clause in the SEA perm itting governm ents with high regu ­ latory standards to derogate upw ard from harm onization agreem ents in order to m aintain high levels o f regulatory protection. O n m onetary policy, K ohl backed the Bundesbank position o f strict econ o m ic co n vergen ce b efo re any fu rth er m ove toward EMU. H e com prom ised only slightly, evidently because o f last-m inute pressure from G enscher, to include a rhetorical referen ce to m o n e­ tary in tegration but n o substantive concessions. O n R& D policy, G erm any was w illing to co o p erate only as lo n g as no significant net financial transfers were in­ volved. Finally, the room fo r C A P reform was m inim al.42

France: A Socialist or a Conservative Europe? T h e French position in the SEA negotiations was characterized by a curious com bination o f caution abou t the single m arket p roject and enthusiastic sup­ p o rt fo r E uropean reform s. French E C policy reversed betw een 1981 and 1986, from support fo r dom estic industrial policy and reflation through construction o f a “Socialist E u ro p e ” to support fo r liberalization and openness consistent with dom estic rigueur and internationalization. T his shift reflected the econ om ic and p olitical con sequences o f the failure o f the French Socialist experim ent. Econom ically, the French govern m en t had to cop e n ot only with longer-term trends toward trade and factor liberalization, w hich placed com petitive pressure on France, but with the n eed to craft an alternative econ om ic strategy. Backed by business leaders, the French governm en t com m itted to international liberal­ ization, fo r w hich E urope served as a technocratic m eans and as a source o f p o ­ litical legitim ation. By 1 9 8 4 -8 5 m any o f the reform s foreseen in the SEA were already b ein g con tem p lated in French unilateral o r bilateral policy. T h ese e co ­ n om ic con cern s app ear to have been sufficient to gen erate weak French sup­ p o rt fo r liberalizing decisions. Surprisingly, however, M itterrand quickly becam e n ot ju st a reluctant sup porter o f liberal policies but an enthusiastic activist for E uropean integration. H e, like D elors, p referred m onetary union as an EC goal, b ut he len t powerful support to the single m arket plan. T his enthusiasm is best e xp lain ed as a result o f M itterrand’s personal effort to exp lo it E urope to recast his political, partisan, and electoral identity after the failure o f Socialist p o li­ cies— a tactic d ecid ed in d ep en d en tly o f (and perhaps at the long-term expen se o f) the French Socialist party. T h e substance o f the reform was dictated by e co ­ n om ic interest. 41 Gaddum, Deutsche, 240-247. 42 Interview with Kanzleramt official.

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The Single European Act, 1984 -198 8 G eo p o litical Interest and Ideology: “M itterrand on the road to D am ascus” M ost analyses o f the geo p o lid ca l ideology underlying French policy has fo ­ cused o n the personal convicdons o f the French p resid en t— in part because he clearly instigated the p ro-E uropean turn in French policy after 1983. A bout the “tru e” p erson al beliefs o f M itterrand— a “notoriously M achiavellian” politician o f w hom it is said that “his greatest constant is inconsistency”— we can only speculate. M itterrand h im self claim ed to be E uropean and could trace his in ­ vo lvem en t in the European m ovem ent back to the 1940s. Typical o f his rem arks co n cern in g the turnaround was the following: “I have two ambitions: the c o n ­ struction o f E urope and the prom otion o f social justice. T h e EMS is necessary to achieve the first, but limits my ability to achieve the seco n d .”43 T his is accurate. W hatever its roots and how ever strong it was, M itterrand’s com m itm ent to E urope was clearly subservient to w hat he term ed the p ro m o ­ tion o f social ju s tic e — that is, to Socialist econ o m ic m anagem ent. T hus, though rhetorically pro-E uropean , M itterrand (and the French Socialists) all but ig­ n ored the E C durin g the first few years o f his presidency, lim iting activities to calls fo r socialism on a E uropean scale. M itterrand’s own pro-E uropean ac­ tivism em erged only in 1 9 8 3 -8 4 , after the Socialist exp erim en t had been aban ­ d o n ed . T h e re is, as we saw in ch ap ter 4, no evidence that M itterrand advocated pro-E uropean positions in internal debates; he op posed European econ om ic co o p eratio n until circum stances fo rced his hand. Nor, despite M itterrand’s ten ­ den cies to e xp lo it the Fifth R epublic constitution, did the French governm ent show interest in broad foreign -policy initiatives such as the G en scher-C olu m bo proposal, w hich the French im m ediately criticized. A ndré C h an dern agor, the French m inister for E uropean affairs, observed sarcastically befo re the Assem ­ blée N ationale that som e Europeans were trying to build E urope “from the ro o f do w n .” Foreign policy coop eration , central to G en sch er’s purposes, seem ed ini­ tially n ot to interest M itterrand at all.44 U n d er M itterrand, m oreover, the governm en t rem ained hostile toward strength en ing the C ourt, Com m ission, and Parliam ent. Giscard had been par­ ticularly co n cern e d by the C o u rt’s political activism and called for action at the May 1980 D ublin sum m it “to do som ething abou t the European C o u rt and its illegal decisions.” T h e French govern m en t p roposed that each o f the large coun tries be perm itted to nam e an additional justice. Yet Giscard had at least p i­

45 Tonyjudt, “Truth and Consequences," New York Review of Boobs, 3 November 1984, 8, 12. The quotation on the turnaround is from Jacques Attali, Verbatim, 198 1-19 86 (Paris, 1993), 1 ' 399. On the view that Mitterrand was genuinely pro-European, sec Alistair Cole, François Mitterrand: A Study in Leadership, 2d ed. (London, 1997), 131, 150. Certainly Mitterrand had earlier taken strikingly proEuropean stances, such as a threat in the 1970s to withdraw from the Socialist party if it voted an antiEC position. Some speculation links French European policy in this period to fears about German neutralism or U.S. unilateralism, but I was able to locate no direct evidence to support a link to policy. 44 Gabriel Robin, Jm Diplomatie de Mitterrand ou le triomphe des apparences, 198 1-1985 (Paris, 1985), 219 and passim; Gianni Bonvicini, “The Genscher-Columbo Plan and the 'Solemn Declaration on European Union’ (198 1-19 8 3 ),” in Pryce, Dynamics, 174 -18 7; Joseph Weiler, “The GenscherColumbo Draft European Act: The Politics o f Indecision,” Revue d ’intégration Européenne 6 (Spring

198 3 ). 129 - 154 -

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on eered the intergovernm ental E uropean C o u n cil and participated in creadng the EMS. T h e Socialist party view, prom ulgated in the elections o f 19 79 and 1981 and in govern m en t statem ents betw een 1981 and 1984, was that no insti­ tutional reform was necessary. O n the L u xem b o u rg Com prom ise, M itterrand m aintained G iscard’s position: exp licit support fo r the Com prom ise itself and advocating the use o f Q M V on sm aller issues. T h u s it cam e as som ething o f a sur­ prise w hen France quietly backed efforts to override the threatened British veto o f the cereal price p ackage in May 1982 and, m ore broadly, the prin ciple that the C o u n cil, rather than the vetoing state, should determ ine what constitutes a “vital interest” u n d er the L u xem b o u rg C om prom ise. Yet France, backed even by p ro-E C coun tries such as Italy, im m ediately reasserted the integrity o f the Com p rom ise. T h e Socialist party itself split over the European Parliam ent Draft Treaty, with the centrists (Rocardians) in favor and left-wingers (CERES) o p ­ posed. As late as the L u x em b o u rg co n feren ce o f m id -1985, M itterrand opposed strength en ing the Com m ission or Parliam ent.45 I f E uropean ideology was significant, it seems m ost likely that it was so because it provided M itterrand’s legitim ation fo r econ o m ic tu rn aro u n d — and a way o f p ro filin g him self as a statesman and idealist. We saw in chap ter 4 that the 1983 policy reversal appears to have stem m ed prim arily from econ o m ic calculations, with geopolitics and id eolo gy em ployed as ex post legitim ation o f the inevitable. W ith the French EC presidency in early 1984 M itterrand— perhaps true to his E u ro p ean idealism but un doubted ly also conscious o f political advantage— a n ­ n o u n ced a m ajor diplom atic initiative fo r the “relau n ch in g” o f E urope a few m onths b efo re elections to the E uropean Parliam ent. T h e decision was an ­ n o u n ced suddenly, even to his closest associates, on the flight back from the EC A th en s sum m it in D ecem ber 1983. T h e m om ent gave M itterrand m axim um personal political advantage. It was a few m onths before elections and the eve o f the French presidency o f the EC. T h e shift was backed by M itterrand’s decision to rep lace E urope M inister A n d ré C h an d ern ag or with the m ore exp erien ced Roland Dum as, to whom he gave a wide m andate. T h e decision was im m ediately reco gn ized by the G erm an Foreign Ministry as an im portant signal. Hints were soon d ro p p ed in speeches.46 Yet M itterrand him self had yet to establish clear goals. C areful n ot to com m it France rashly to new policies, his utterances w ere at first ju st symbolic. His May 1984 speech befo re the EP was “in te n d e d . . . to create an im pression o f approval fo r the draft treaty, [while] the actual w ording was m ore am biguous.”47 W hile sup porting “a new treaty,” he added that “it should n ot o f course substitute for 45 Hjalte Rasmussen, On Law and Policy in Ihe European Court ofJustice: A Study in ComparativeJudicial Policy-Making (Leyden, 1986), 354, also 357. Also R. Formesyn, “Europeanisation and the Pursuit of National Interests,” in Vincent Wright, ed., Continuity and Change in France (London, 1984), 237-241 ; Haywood, “French,” 12 1-13 6 . Cf. Attali, Verbatim, i:886ff. 46 Some participants believe Mitterrand deliberately undermined the Athens summit so that a ma­ jor breakthrough could be achieved in the French presidency. Michael Butler, Europe: More than a Continent (London, 1986), 118. 47 Haywood, “French," 133-134; Bieber et 'A., Ever Closer, 222; Genscher, Erinnerungen, 367; Attali, Verbatim, 1 :72s.

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The Single European Act, 1984 —1988 the existing treaty, but exten d it to new fields, as in the case o f a polid cal E u ro p e.” H e disdn guished the “inspiration” o f the Parliam ent’s Draft Treaty, w hich France supported, from the Draft Treaty itself. French nom inations o f Com m issioners to the new Com m ission in 1984 w ere d ecid ed with careful consideration o f the areas France sough t to con trol, n ot with gen eral idealism .4* T h e re is litde evidence o f gen u in e idealism. M itterrand had repeatedly re ­ je c te d federalist proposals; he had been particularly hostile to the Treaty on E uro­ p ean U nion p roposed by the ven erable Italian federalist and Europarliam entarian A ltiero Spinelli. B ehind the scenes M itterrand rem ained com m itted to in tergovern m en tal institutions— French proposals on the Com m ission and Par­ liam en t w ere m odest. Yet M itterrand’s speeches con tain ed precisely the sweep­ ing p ro n ou n cem en ts and gran d p rojects— at o n ce idealist and opportu nist— that had characterized his political career. A t a stroke, his rhetoric positioned him in the center, con structed a new identity for the Left, and split the Right. T h e initiatives app ear to have com e from the Elysée, w ithout discussion with or d irect pressure from others in the party, but M itterrand was surely aware that the idea had som e resonance in the cen ter o f the political spectrum , w here Delors, R ocard, G iscard, and others clearly favored E urope. By adoptin g a high profile on the issue, m oreover, M itterrand could increase his dom estic stature as an in ­ ternational statesman. “Gaullism by any o th er n am e,” Stanley H offm ann term ed the tactic. O n ce the Socialist dom estic program had failed, as A lfred G rosser o b ­ served, E urope “afforded [M itterrand] a sort o f “fuite en avance,” assuring his stature in the one area still available.” O r, as o n e senior French diplom at o b ­ served dryly: “M onsieur M itterrand’s term as presid en t o f the E uropean C o un cil b ecam e his road to Dam ascus.” 49

Economic Interest: “Modernize or decline” A com bin ation o f rising econ o m ic in terd ep en d en ce and the p erceived failure o f state-led French policies gave French business and governm en t strong in cen ­ tives to liberalize. As late as early 1983 a radical policy o f closure, devaluation, and subsidization was still bein g actively considered. By 1984 substantial liber­ alization o f trade and investm ent was viewed as inevitable— the im perative was “M odern ize o r d e clin e .” T h e question rem ained only what form it w ould take. In the face o f rising trade and investm ent in E urope, d o cum en ted at the start

‘la Cole, François, 12 6 -12 7. 49 Stanley Hoffmann, “Mitterrand's Foreign Policy, or Gaullism by Any Other Name,” in George Ross and Hoffmann, eds., The Mitterrand Experiment: Continuity and Change in Modem France (New York, 1987), 301-302; Cole, François, 126; Robin, La diplomatie de Mitterrand, 145, also 219, If a ploy for the upcoming European elections, it was singularly inept; although carefully crafted in advance and “certainly no spur o f the moment decision,” it “came as a bom bshell. . . [which] could not fail to make [the Socialists] look rather foolish during the election campaign.” Haywood, “French," 133, also 13 2 -13 5 , 147. See also George Ross, “Machiavelli Muddling Through; The Mitterrand Years and French Social Democracy,” French Politics and Society 13 (Spring 1995), 5 1-5 9 . For an equally ironic but more positive assessment, see Philippe Moreau-Defarges, . . J’ai fait un rêve . . Le président François Mitterrand, artisan de l’union européenne,” Politique Etrangère, Fall 1985.

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o f this ch a p ter, F ran ce, like G erm an y an d B ritain, saw in tense discussion in the early 1980s a b o u t d e clin in g relative co m p ed d ven ess, p articularly in h ig h -te ch ­ n o lo g y sectors, vis-à-vis third coun tries: Jap an , the U n ited States, a n d new ly in ­ d u strializin g co u n tries. S p ee ch e s by F ren ch leaders in this p erio d m ake c o n ­ stant re fe re n c e to in tern a tio n al com p etitiven ess an d “re co n q u e rin g the in tern al m a rk et.” A new ge n era tio n o f business e n tre p re n e u rs— the “y o u n g T u rk s”— as­ sum ed co n tro l o f the p ea k association o f em ployers, the CNPF, a im in g to d irect it toward less state-cen tered p olicies. R o b ert Faroux o f Saint G o b ain , fo r e x ­ a m p le, was p articularly clo se to M itterrand an d so u gh t to co n vin ce him to fo r­ sake in te rv en tio n an d p erm it F ren ch firm s to co m p ete u n h a m p e re d .so M any o th e r b usin essm en close to M itterrand re m a in e d in terven tionist. P articularly im p o rtan t was the glo b a liza tion o f fin a n ce and services, w hich h elp s e xp lain w hy d e re g u la tio n in fin an cial services, n ot initially the cen tral part o f C o c k fie ld ’s W h ite Paper, b ecam e a F ren ch priority. W ith the liberalization o f U.S. an d British fin a n ce, a new, in tern atio n ally d ere g u la ted e n v iro n m en t was e m e r g in g in w h ich first-m over advantages co u ld be o f lasting im p o rtan ce fo r fin a n cial com p etitiveness. G o ve rn m en t studies establish ed that F rance was the w o rld ’s seco n d -largest e x p o rte r o f services after the U n ited States. F rance, o n e civil servan t n o te d , “had a lot to gain [and] at the E C level we stood to gain the m ost.” 51 F rance, th o u g h a la te co m er to d om estic fin an cial liberalization , so u gh t to establish Paris as an im p o rtan t finan cial cen ter. T h u s th ere was in terest to “ca tch up with the lea d in g co u n tries in the field o f finan cial in novation (the U n ited States, the U n ited K in gd o m , C an ad a, etc.) in o rd e r to m aintain the co m ­ p etitiven ess o f the F ren ch b a n k in g system an d the role o f Paris as a fin an cial c e n ­ ter.” 52 U n favo rab le re gu latio n w o u ld u n d e rm in e the com p arative position o f ban ks in in tern atio n al m arkets. By the late 19 70 s capital co n tro ls had grow n m o re co sd y an d less effective, and the elim in atio n o f capital co n tro ls im p lied a d ­ ju stm en ts in taxation , reserve req u irem en ts, liquid ity rations, an d o th e r re gu la ­ tions. T h e se ch an ges in F ran ce led to splits betw een m o re an d less co m p etitive banks. H e n c e th e T reasury la u n c h e d refo rm s w ith ou t con sisten t su p p o rt from the b a n k in g co m m u n ity.5S T h e r e was, in a d d ition , rising co n cern in F rance ab ou t the effects o f N TBs, p articu larly those im p o sed by G erm any, w h ere legal standards b a ck ed by o rg a ­ n ization s o f m an u factu rers w ere sign ifican t barriers to im ports. T h e processed fo o d sector, w h ich in this p e rio d had g e n era ted co n sid era b le E C litigation , re ­ m a in ed a p articu lar so urce o f co n cern . In late 1982 F rance suggested that the C om m ission co m p ile a list o f in tern al barriers, based o n vo lu n tary subm issions, th o u g h in tern al m arket initiatives re m a in e d lin k ed to m o re extern al p ro tectio n . 50 Alain I-ipietz, “Governing the Economy in the Face o f International Challenge,” in James Hollifield and George Ross, eds., Searchingfor a New France (New York, 1991 ), 3 2-3 4 ; Thom as R. Christoffsen, The French Socialists in Power, 19 8 1 -1 9 8 6 (Newark, Del., 199 1), 10 1-110 ; Cowles .Politics, 230. 51 Nicolaldis, Mutual, 295-296. 52 Christian de Boissieu and Marie-Hélène Duprat, “French Monetary Policy in the Eight o f Euro­ pean Monetary and Financial Integration,” in Hcidemarie Sherman, ed., Monetary Implications of the 1992 Process (New York, 1990), 57, also 5 0 -6 1 . 53 Goodm an and Pauly, “O bsolescence,” 5 0 -8 2; Christian de Boissieu, “Recent Developments in the French Financial System,” in Boissieu, ed., Banking in France (London, 1990), 2 1-2 3.

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The Single European Act, 1984-1988 Betw een 1982 and 1984 the French governm en t pressed for bilateral agreem ents with G erm an y co n cern in g custom s form alides and n on tariff barriers— a set o f discussions that spawned two bilateral treaties and the m ultilateral Schengen agreem en t.54 B eyon d con cerns about G erm an N TBs, this p eriod witnessed im portant chan ges in the relative com petitiveness o f French agriculture, w hich shifted French support fo r the C o m m o n A gricultural Policy. E xport subsidies and p ref­ eren tial access rem ained essential, gen eratin g a large agricultural trade surplus, b ut France was no lo n g er a large n et beneficiary from the E C budget, with even bleaker prospects after the entry o f Spain and Portugal.55 M oreover, the p er­ cen tage o f the population em ployed in agriculture had been declin in g steadily. W hile the govern m en t con tin ued to support m oderately high prices and exp ort subsidies, it had slightly m ore room fo r reform . Still, France did con tin ue to b en efit from the p referen tial trading arran gem en t at the core o f the EC and o p posed any British attem pt to red u ce its liabilities u n d er the system. Claude Cheysson, the French fo reign m inister, declared in 1982, “the U nited K ingdom [seeks] juste retour, w hich is n ot a C om m unity idea. We and the British are n ot speaking o f the sam e com m unity.” 56 Yet these ch allen ges o f com petitiveness and in terd ep en d en ce did n ot u n am ­ biguously p oin t toward trade liberalization. A n alternative was to strengthen tra­ ditional state intervention. T h e Socialist governm en t, elected in 19 8 1, lo o ked to nationalization and industrial subsidies. T h o se on the Left o f the Socialist party advocated a defense o f dom estic policy throu gh collective European industrial policy and, if necessary, closure o f the French m arket. L eading figures in the C N P F did support liberalization, but still it is im plausible to explain the m ajor p olicies o f the M itterrand go vern m en t as a direct reflection o f business pres­ sure. In any case, m any less com petitive firms resisted greater com petition. C o m m ercial co n cern s alon e m igh t have had only a m odest effect were it not fo r a m ore fundam ental crisis in the traditionally statist French system o f indus­ trial m anagem ent. W ith slower growth across the O E C D after 1973, discipline had to be im posed on costs and w ages— a task to w hich the French system was unsuited. Business accep ted state subsidies but resisted state m anagem ent. In the 1970s, u n d er the encadrement de crédit, the governm en t respon ded to tight con dition s by rationing cred it to, in declin in g o rder o f priority, the Treasury, state-owned enterprises, private financial institutions, and private nonfinancial firm s— with financial in term ediation con tin uin g to provide 80 p ercen t o f fi­ nance. Preferential rates were e xten d ed to privileged sectors, in cludin g exports, housing, and agriculture, totaling 40 p ercen t o f bank lending. In the resulting M Joan Pearce, John Sutton, and Roy Batchelor, Protection and Industrial Policy in Europe (London, 1985), 6, 14, 4 7 -4 8 , 66, 140 -141 ; Ralf Joas, Zwischen Nation und Europa: Die europapolitischen Vorslellungen der Gaullisten 1978 bù 1994 (Bochum, 1996), 1 7 4 -17 6 , 224. 55 Although the French government became more accommodating o f agricultural reform and French ministers spoke out occasionally about overgenerous support— as agriculture minister, Michel Rocard even adopted an activist stance toward dairy subsidies— they remained relatively staunch supporters o f export subsidies. Paul Taylor, “The New Dynamics o f EC Integration in the 1980s,” in Juliet Lodge, ed., The European Community and the Challenge of the Future (London, 1989), 6. 56 Paul Taylor, The Limits of European Integration (London, 1983), 240-241.

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“overdraft econ om y,” n on finan cial firms, w hich borrow ed throu gh bank credits rather than rely on capital markets o r self-financing, faced a chronic shortage o f funds. W ith increasing capital m obility and financial com petition, borrowers and len ders disadvantaged by governm en t policy were able to move outside the system. To p revent this, the French system o f m anaged credit had traditionally relied on exch an ge controls, yet these proved porous. T h e late 1970s saw a large increase in foreign indebtedness by French firm s— m ost strikingly in the financial sector itself. Increased dom estic com petition from foreign banks forced French banks to take governm en t pressure to internationalize, w hich they had been ign orin g, m ore seriously.57 T h e French go vern m en t’s m icroecon om ic urge to discipline or direct firms had m acro eco n o m ic im plications as well: the system un derm in ed governm en t co n tro l over m on etary policy. By separately regulating m oney m arket rates, in ­ terest rates, and quantitative cred it restrictions, the Bank o f France»sought to stabilize exch an ge rates, prom ote investm ent, and con trol the m oney supply. Yet figh tin g inflation throu gh m onetary targetin g— adopted in 19 76 and only briefly loosen ed betw een 1981 and 198 3 — required that public-sector deficits be fin an ced through n on m on etary m eans. M onetary tightening was com in g to be view ed th rou gh o u t E urope as a substitute for a credible incom es policy, but it rem ained im possible as lo n g as the governm en t rationed credit. By the early 1 980s it had becom e app arent that a m arket-based m onetary policy that would avoid both d e b t and cred it shortages required bro ader and d e ep er private capi­ tal m arkets.58 A gain there w ere two responses to this crisis. T h e Barre governm ent, whose rh etorical goal was to “adapt France to the con dition s o f the new w orld e co n ­ om y,” sough t to overcom e these problem s through an external m onetary peg, w hich w ould com m it France to m icroecon om ic austerity and m acroecon om ic d iscip lin e— “the m ajor p reco n d itio n fo r healthy d evelop m en t.” Externally, the goal was to increase French com petitiveness in specific international m arkets by en co u rag in g less price-sensitive, h igh -tech n o lo gy exp o rt industries such as aero­ space, autom obiles, transportation systems, and electronics; rationalizing large, traditional industries such as steel, n uclear power, and telecom m unications; and fostering an o rderly con traction in labor-intensive sectors like textiles. To force adjustm ent, the govern m en t w ould increasingly exp ect firm s to seek finance at m arket rates. Part o f this program was an effort to exp an d stock and b o n d m ar­ kets, en co u rag e corp orate borrow ing on private markets, and exp an d the direct role o f households in fin an ce.59 From the m id-19 70 s onw ard the retreat from industrial policy had go n e hand57 Michael Loriaux, France after Hegemony: International Change and Financial Reform (Ithaca, 1991; Boissieu and Duprat, “French," 5 2 - 5 4 ,6 2 -6 3 ,7 8 -7 9 ; Stephen S. Cohen,James Galbraith, andjohn Zysman, “Rehabbing the Labyrinth: The Financial System and Industrial Policy in France,” in Cohen and Peter A. Gourevitch, eds.. Franc? in a Troubled World Economy (London, 1982), 4 9 -75 ; Goodman and Pauly, “Obsolescence.” 58 Loriaux, French-, Boissieu and Duprat, “French," 5 7-66 , 81. One potential response was to de­ velop new instruments for handling government debt, but such indebtedness became increasingly expensive over time. 59 Lipietz, “Governing,” 3 0 -3 1.

338

The Single European Act, 1984—1988 in -hand with financial innovation and liberalization. In July 1978 the M on ory A ct o ffered tax incentives fo r the d evelop m en t o f the stock m arket. In July 19 79 m utual fun ds w ere created, follow ed in Septem ber 1981 by new types o f short­ term assets and in Jun e 1982 new financial instrum ents fo r the low-incom e po pu latio n . T h e Socialist in terlu de created a b rie f coun tertren d, b ut by 1983 the m arketization and securitization o f corporate fin an cin g cam e to be seen, as u n d e r G iscard and Barre, as the only way to attract n eed ed industrial invest­ m ent. T h e D elors A ct o f January 1983 created new instrum ents fo r capitalizing private and nationalized firms, follow ed the n ext m onth by the creation o f an unlisted securities m arket and, later in the year, by new industrial develop m ent funds. C o rp o rate finan cing from capital markets, stocks, and bonds increased from approxim ately 25 p ercen t in 1981 to aroun d 75 p ercen t in 1986.60 We have seen that G iscard and Barre had been unable o r unw illing to cut govern m en t em ploym ent o r industrial subsidies significandy. C redit was still rationed, particularly am ong sm aller corporate borrowers; private opportunities fo r larger com pan ies grew up alongside the existing system. Intervention c o n ­ tinued, with F rench firm s w ishing to invest abroad findin g it difficult to do so, and som e fo reign firms w ishing to invest in France b ein g refused perm ission. All in all, the G iscard-Barre policy failed to stim ulate corporate activity; in 1980 pri­ vate investm ent rem ained stagnant.61 M itterrand and the Socialists cam e to pow er with an alternative policy: n a­ tionalization, subsidization, and, if necessary, extern al closure aim ed at full e m ­ ploym ent. In industrial policy m ost m em bers o f the Socialist governm en t ar­ g u ed that in terven tion to create vertically in tegrated filières, linking the entire p ro d u ctio n process from raw m aterial to finished product, w ould increase p ro ­ ductivity. M ore m oderate Socialist ministers such as D elors were skeptical o f such policies well befo re they en tered office, argu ing instead for deregulation , red u ced state in terven tion, and increased autonom y fo r business m anagers. In deed, the Socialists quickly discovered that nationalized industries were a lia­ bility; they posted enorm ou s losses in 19 8 1, and subsidies app eared to have litde effect. A s m inister o f industry, Jean-Pierre C h èvèn em en t discovered that na­ tionalization did n ot fundam entally alter these dilem m as. Plans to turn aroun d steel, coal, and shipbuildin g failed; paper, m achine tools, and autom obiles were in trouble. L abor costs rose m uch faster than in Germany. C h èvèn em en t’s highly in terventionist policy gen erated lo u d protests am ong executives and workers alike, and his resignation follow ed a rebuke from M itterrand at a February 1983 C o u n cil m eeting for n ot allow ing m anagers e n o u g h autonom y. T h e public sec­ tor aside, business investm ent was still flat.62 60 Boissieu and Duprat, “French," 5 5 -5 7 , 62-63. 61 Cohen, Galbraith, and Zysman, “Rehabbing,” 4 9 -55 , 65-66 ; Vincent Wright, “Introduction: The Change in France,” in Wright, Continuity, 18, 2 0 -2 1. 62 Favier and Martin-Roland, Décennie, 1 :45c, 455-4 56; Christoffsen, Frenth, 10 1-110 , 131-134; Loriaux, French-, Michael Loriaux, “States and Markets: French Financial Interventionism in the Seventies,” Comparative Politics 20 (January 1988), 175 -19 3 . O f particular relevance here, see Franco Archibugi, Jacques Delors, and Stuart Holland, “Planning for Development,” and Delors, “The Decline o f French Planning," in Holland, ed., Beyond Capitalist Planning (New York, 1978), 184-202, 9 -3 3 . Delors argues that problems with planning had been resolved through inflation and that

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W ith n o fiscally viable altern ative, th e M itterran d go v ern m e n t o p te d fo r aus­ terity, w h ich im p lied a p o licy o f liberalizatio n . In his first sp eech after re p lacin g C h è v è n e m e n t as m in ister o f in dustry in 19 8 3 , L a u ren t Fabius sign aled a stren gth ­ e n in g o f rigueur, p arallel to th e d ecisio n to rem ain in the EM S, a n n o u n cin g that “the state d o es n o t in te n d to b e co m e a subsdtute fo r th e ro le o f enterp rises and e n tre p re n e u rs .”63 U n d e r the m o tto “M o d e rn ize o r d e c lin e ” (later, u n d e r his p rim e m in istership, a ltered to the m o re ge n tle “M o d ern iser et rassem bler”), Fabius a n n o u n c e d that n atio n alized firm s w ou ld h e n c efo rth be e x p e c te d to b e ­ co m e p ro fitab le; those that d id n o t w ou ld perish. T h e ro le o f banks as in te rm e ­ diaries was n o t im m ed iately lim ited , but the go v ern m e n t b egan to o ffe r cred it at clo ser to m ark et term s. Fabius fo llo w ed D e lo rs’s lead by crea tin g ad d ition al instrum ents fo r firm s to bo rro w o n private capital m arkets. H e laid great rh eto rical stress on c o m p e ti­ tiveness in fo re ig n m arkets, a tu rn a ro u n d fro m the inidal Socialist p o licy o f re ­ ca p tu rin g the in tern al m arket. A fte r the shift the C F D T su p p o rted rigueur even m o re stron gly than th e g o v ern m e n t.64 M itterra n d ’s press c o n fe re n c e o f A pril 1983 sign aled his own w illingness to p ursu e this lin e — a shift seen by m any as in d icative o f a “B ad G o d e s b e rg ” e x p e rie n c e fo r the Socialist party.65 O n e analyst o b serve d , “the Socialist e x p e rie n c e . . . co n firm s the e xisten ce o f con strain ts on policy, th e im p o rtan ce o f w h ich was such that the go v ern m e n t [sacrificed] m uch o f its d iscre d o n ary p o w er o ver the allo catio n o f cre d it.”66 T h e refo rm s e x te n d e d to fin an cial m arkets as w ell. In 1984 the F rench gov­ e rn m e n t re tu rn e d to a cco m m o d a tin g fo re ig n in vestm ent an d capital flows and a ccele ra tin g the tren d toward the liberalization o f fin a n ce an d equities. In the first h a lf o f 1984 a flu rry o f deals in vo lved cross-investm ent betw een F rench n a ­ tio n a lize d firm s an d U.S. m ultin ation als, a lth o u g h F rance co n tin u e d to b lo ck fo re ig n in vestm ent in sectors w ith surplus capacity.67 O n re p lacin g D elo rs as fin a n ce m in ister in the Fabius go v ern m en t, P ierre B érégovoy m oved decisively to e x te n d the lib eralizatio n o f fin a n cial m arkets. D elo rs h ad already in tro ­ d u c e d new form s o f sh a re h o ld in g an d investm ent, as w ell as o p e n in g a “seco n d m a rk e t” fo r sm all enterp rises, w h ich G iscard an d B arre h ad left u n d e r the en­ cadrement system. In N o vem b er 198 4 a refo rm o f the e n d re fin an cial system e lim i­ n ate d cre d it ceilin gs am id capital co n tro ls an d crea te d new m oney, b o n d , and fu tu res m arkets.68 In A p ril 1985 B érégo vo y b egan to d e co n tro l b a n k rates, p e r­ m ittin g m o re in te rb a n k co m p etitio n . In early 1985 n eg o tia b le certificates o f d ep o sit w ere a u th o rized , fo llo w ed the n ex t w in ter by m arkets fo r co m m ercia l

France had to move toward a less statist mode o f industrial management, one more selective in pro­ viding finance and offering greater autonomy to managers. French planning was appropriate to a situation in which governments manage production o f basic commodities but was inappropriate to a more internalized economy. 65 Christoffsen, French, 1 3 1-13 4 .

64 Loriaux, “States," 186. 65 Philippe Bauchard, La Guerre des deux roses: Du rêve à la réalité (Paris, 1986), 290-294; Christoffsen, French, 10 0 -10 1, 108, 13 2 -13 3 , 13 7-13 8 . 66 Loriaux, “States,” 189. 67 Pearce, Sutton, and Batchelor, Protection, 7 2 -7 3 .

68 Goodman and Pauly, “Obsolescence,” 73—74.

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The Single European Act, 1984-1988 paper, n egotiable treasury bills, notes issued by specialized financial institutions, and financial futures. “T h e stock m arket,” observed o n e com m entator, “had n ever d o n e so well as u n d er the Socialists.” T h e years 1987 and 1988 saw the in­ trodu ction o f an options m arket, individual retirem en t accounts, and futures contracts on the stock in d ex .69 In sum , by the m id -1 980s the traditional French system o f extensive industrial subsidies, con trolled credit, and closed financial markets was w ell o n the way to b ein g rep laced with m ore m arket-oriented, o p en arrangem ents. Perhaps even m ore im portant, the two alternatives to liberalization and deregulation , nam ely a policy o f autarky and nationalization, initially pursued by the Socialists, and a policy o f “m ud dling th ro u g h ” with p iecem eal governm en t discipline, pursued by G iscard and Barre, had been discredited. T h e stage was set fo r m ultilateral reform . T h e Dom estic Decision: M itterrand’s “fuite en avance” T h ro u g h o u t the 1980s the French governm en t sought to create a E urope econ om ically and politically supportive o f its dom estic econ o m ic and partisan objectives. In the early years o f the M itterrand presidency, the French govern ­ m ent paid little attention to Europe; insofar as it did, the goal was a Socialist E urope. T h e most im portant French initiatives o f this period, o n e in O cto b er 198 1 on “un espace social eu ro p éen ” and an o th er in autum n 1983 on “un es­ pace industriel e u ro p ée n ,” though relatively m inor and utterly futile, reflected this go a l.70 A t his first E uropean C o u n cil m eeting in 1981 M itterrand p roposed a p ack­ age in clu d in g Euro-loans for new industries, prom otion o f the com p uter and energy industries on a E uropean scale, exam ination o f m eans to reduce the w orkw eek, recogn ition o f the overriding im portance o f social objectives, e x ­ pansion o f coop eration with the develop in g world, and an anti-unem ploym ent program o f fiscal stim ulation— all culm in atin g in the creation o f a “powerful E uropean social area” billed as the first step toward a “socialist E uro pe.” C o n ­ cessions on British dem ands for budgetary reform were linked to G erm an and British support fo r coordin ated reflation throu gh the EMS, EC social and invest­ m ent financing, and fu n d in g fo r R&D and energy projects. M itterrand also p ro ­ posed a two-tier system o f capital controls to insulate E urope from the Am erican econ o m y and an e xten d ed p eriod in w hich to stimulate the French dom estic econ o m y free from extern al constraints. A ll these efforts at European summitry, like efforts to establish an E C industrial policy in the 1970s, gain ed litde support in B onn and L o n d o n and were never seriously discussed. In the end, they only served to teach M itterrand, in his own words, “just how conservative Europe re­ ally was.” Yet such failures appear to have caused M itterrand and the Socialist party little con cern. T h e turn in g poin t clearly co in cid ed with the dom estic policy turnaround o f 1 9 8 3 -8 4 , after w hich French policy m oved cautiously in a m ore liberal and m ore 69 Bauchard, Guerre, 3 26 -32 7; also Loriaux, “States,” 188; Cohen, Galbraith, and Zysman, “Rehabbing,” 53-55; Boissieu and Duprat, “French,” 57-58. 70 Pearce, Protection, 6, 1 4 ,4 7 -4 8 ,6 6 , 14 0 -14 1, 198; Favier and Martin-Roland, Décennie, 1:367. The Mitterrand quotation is from an interview with an Elysée official in 1992.

34*

T h e C h o ic e fo r Eu r o pe

European d irectio n — w hich suggests an un derlying econ o m ic m odvation. We have seen in C h ap ter 4 and above that the failures o f the Socialist exp erim en t w ere failures o f econ o m ic m anagem ent. M itterrand’s m otivations fo r the 1983 turnaroun d w ere dictated, above all, by the econ o m ic unsustainability o f his m on etary and industrial policies. First con sequen ces o f this dom estic turnaroun d in European policy were hesitant. T h e French initiative in Septem ber 1983 p o in ted to a crisis o f E uro­ p ean com petitiveness vis-à-vis the U nited States in most high-tech sectors. T h e French o ffered support fo r E C tech n ology policies, alon g with industrial policy, p ublic works, and external protection . A lth o u gh the m em o also m entioned regu latory harm onization, standardization, and liberalization o f public p ro cu re­ m ent, these m atters w ere less prom in en t. Som e o f these proposals— with the e x ­ ceptio n o f regu latory h arm on ization — may well have been in flu en ced by co n ­ tacts with the E uropean R oun dtable o f Industrialists (E R T ), w hich had several high-level m eetings with M itterrand and his aides during 1983 and 1984, in w hich it strongly advocated industrial subsidies.71 By 1984 and 1985 the discours in France on the C om m unity had becom e m ore liberal, and the French gov­ e rn m en t em braced the internal m arket program . C atherin e Lalum ière, secre­ tary o f state fo r E uropean affairs, stressed that “the proposal fo r the establish­ m en t o f a large internal m a rk e t. . . is the m ost im portant proposal fo r o u r firms and citizens. C o lb e rt’s descendants took som e time to throw o ff the cultural shackles o f protection ism .” 72 W ithin this new strategy, financial and industrial d eregu lation , greater op en ness to foreign investm ent, a h ig h er priority on grea ter com petitiveness, and rising co n cern abou t foreign N T B s led to signifi­ can t policy changes. In financial services France sough t to accelerate European reform s in o rd er to achieve com petitive advantage. Bilateral agreem ents with G erm an y and the Sch en gen A cco rd — an ad h o c agreem en t to en d b o rd er co n ­ trols— reco gn ized the French interest in thorou gh liberalization. In short, by the e n d o f 1984 France was unilaterally, bilaterally, and m ultilaterally seeking to im p lem en t m uch o f w hat was to be in the Single A ct two years later.73 T h is shift in fo reign policy was co n n ected in two ways with the failure o f the Socialist experim en t. T h e m ore straightforw ard was simply that the dom estic shift created an incentive to pursue supportive international econ o m ic policy. If the state did n ot assure finan ce and adjustm ent, there was less reason to oppose in tern ation al m arkets d o in g so. O f the dom estic changes, fundam ental was fi­ nancial reform , w hich, as econ om ist Jacques M élitz has observed, future histo­ rians may well call the m ost im portan t p recon dition fo r the accep tan ce o f the SEA. W ithou t it, France co u ld n either have agreed n or im p lem ented the agree­ m en t.74 Policy failure gave a secon d im petus to m ajor change. French econ om ic priorities rem ained consistent with its global m arket position and policy style: m oderate agricultural reform and pressure fo r the rem oval o f N TBs particularly 71 Pearce, Protection, 6. 75 “Interview with Catherine Lalumière, Secretary o f State for European Affairs,” Speeches and Statements, French Embassy in London, CTL/D ISCOM /180/85 (31 October 1985), 3. 75 Goodman and Pauly, “Obsolescence,” 50-82. 74 Jacques Mélitz, “Financial Deregulation in Europe," European Economic Review 34 (1990),

394 - 395 -

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The Single European Act, 1984-1988 in the fo o d sector, m on etary reform o n “m onetarist” term s to loosen French m acro eco n o m ic constraints, difficult state-led m ovem ent toward financial and trade liberalizad on , an d support fo r a collective industrial policy. Yet the failure o f the Socialist exp erim en t had a second, m ore subde con se­ quen ce: it fo rced M itterrand to seek an alternative geo po litical grand projet and a partisan identity disassociated from the Com m u nist Party. T h e re is no evidence, internal o r external, that a recon sideration o f geo p o litical threats took p lace in this p eriod . O n ly the n ee d fo r political legitim ation can explain M itterrand’s sudden enthusiastic em brace o f E uropean rh etoric and his h igh-p rofile ac­ tivism. H e was o p en to pressure even from the G aullist Right, led by C hirac, w hich w ould seek to wrest con trol o f the E uropean issue from him during the p eriod o f cohabitation. W ith his Parliam ent speech in early 1984, M itterrand b e ­ gan to adopt the rh etoric o f E uropean federalism , calling for a reconsideration o f the L u x em b o u rg C om p rom ise and advocating procedural reform as lo n g as it was lim ited to the C o u n cil and the Com m ission and did n ot im ply a radical d e ­ m ocratization o f E C politics.75 From that p o in t on, M itterrand played a decisive role in p rom oting European integration. H e pursued E uropean reform even though he appears personally to have had significant doubts ab ou t liberalization; like Delors, he p referred m on etary un ion as a E uropean agenda. O n the eve o f the L u xem b o u rg co n fer­ en ce, M itterrand, with the backin g o f Delors, con tin ued to seek a link betw een the single m arket, w hich h e con tin ued to see as an essentially A nglo-G erm an p roposal, to a m ore fundam ental French concern: G erm an concessions on m on etary policy.76

Explaining National Preferences W ith the reversal o f French econ o m ic policy in 1983, single m arket liberal­ ization em erged as the only substantive issue that co u ld com m and consensus from the m ajor E C governm ents. Britain had supported it since well befo re the Conservative govern m en t took office in 19 79 , G erm any had long been passively supportive, and France m oved from support fo r industrial policy to support for trade liberalization in 1 9 8 3 -8 4 . Still, governm ents differed co n cern in g the rel­ ative im portan ce o f single m arket reform vis-à-vis o th er substantive issues and the institutional form such a reform should take. Variations in cross-national and cross-issue preferen ces con firm the prim acy o f eco n o m ic interests. T h e issues o n w hich the W hite Paper fo cu sed — fo od products, industrial standards, service d eregu la tio n — w ere precisely those h igh ­ ligh ted in bilateral efforts am ong m em ber governm ents and pressure from

75 Gazzo, ed. Towards, 1182-85; Cole, Tranfoù, 128-130. 76 On the plane to the Luxembourg summit o f December 1985, Mitterrand is reported to have con­ sidered prospects for the French proposals for coordinated fiscal reflation, monetary cooperation, social policies, and industrial policies as poor. Despite close Franco-German relations, Mitterrand described France as facing a tacit Anglo-German alliance o f free-market liberals. Mitterrand did im­ press upon his advisers the importance o f remaining part o f Europe. Favier and Martin-Roland, Décennie, 2 :2 1 6 -2 17 ; Attali, Verbatim, 1:887.

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business execu tives. N ation al p re fe re n ce s registered e co n o m ic interests, w ith each co u n try o u tlin in g distinctive p riorities. G erm an y su p p o rted m arket refo rm as w ell as re g u lato ry c o o p era tio n , im p o sin g cle a r lim its on C A P refo rm , m o n e ­ tary co o p e ra tio n , and R & D co o p e ra tio n , an d rem ain in g cautious o n service lib eralizatio n . Britain p ro m o te d C A P refo rm , m ark et lib eralizatio n , and p artic­ u larly service d e re g u la tio n , b u t stron gly o p p o sed m on etary in tegratio n , R & D p o lic ie s unless strictly juste retour, a n d co m m o n re gu lato ry p o licies in areas such as th e en viro n m en t. F rance su p p o rted m o n etary an d R & D c o o p era tio n , ad vo ­ ca ted p ru d e n t m a rk et liberalizatio n an d services d e re g u la tio n , rem a in ed very cau tio u s o n C A P refo rm , an d am bivalen t ab ou t en viro n m en tal co o p era tio n . E ach go v ern m e n t so u gh t to p ro tect sensitive areas: fiscal h arm o n izatio n and sm all business fo r Britain, h ig h re gu lato ry standards an d M C A s fo r G erm any, exe cu tive au th o rity vis-à-vis P arliam ent fo r F rance. By con trast, th o u g h all three g o v ern m en ts ostensibly favo red fo re ign p o licy co o p era tio n , n o n e suggested or seriously co n sid e re d sign ifican t com m itm ents. D efen se co o p era tio n was n ever seriously discussed. D o m estic d ecisio n -m a kin g processes fu rth er su p p o rt the e co n o m ic view. T h e m ost h ig h ly m o b ilize d social gro u p s w ere b ig business interests, p articularly m u ltin atio n a l firm s, and cleavages re flecte d com p etitiveness. In G erm an y and B ritain, su p p o rt from m an u factu rin g firm s was driven p rim arily by in tern atio n al com p etitiveness: the m o re e x p o rt-d e p e n d e n t a firm o r sector, the m o re o p ti­ m istic it ten d e d to b e a b o u t the effects o f m arket liberalization . In F ran ce, there is in su fficie n t e vid en ce to be sure. L a rg er firm s an d those w ith d isp ro p ortion ate e xp o rts o r investm ents overseas, ten d e d to b e m ost favorable. T h e service sec­ to r — le d by teleco m , transport, fin a n ce, an d in su ra n ce— w ere the m ost o p ti­ m istic o f all. A lth o u g h capital intensity itself d id n ot co rrela te w ith su p p o rt fo r lib eralizatio n , la rge m u ltin atio n al firm s in capital-intensive sectors sp ea rh ead ed efforts to p ro m o te liberalizatio n . A seco n d a ry in flu en ce o n business views was state ow nership: execu tives in sectors w ith go vern m en t-o w n ed firm s (d isp ro ­ p o rtio n a tely in n o n -e x p o rtin g sectors) view ed liberalization o f regu lato ry stan­ dards an d p u b lic p ro cu re m e n t m ost un favorably.77 T h r o u g h o u t E u ro p e , M N Cs w ere particularly p ro m in e n t supporters. Yet i f business su p p o rt was b ro ad , it was also thin; business d id n o t take a p ro ­ active ro le. T h is m ay re fle ct the diffuse n atu re o f the b e n e fits— a co n je ctu re c o n ­ sistent w ith p o lls at th e tim e. O u tsid e the B e n e lu x co u n tries, the g rea t m ajority o f busin essm en b elieved that the effects o f 1992 o n co rp o ra te costs w ou ld be sm all— m u ch less even than m o d est C om m ission estim ates. T h o u g h industrial re stru ctu rin g was view ed as in evitable, rem oval o f trade barriers was an u n im ­ p o rta n t facto r, fo r m ost E u ro p e an M N Cs w ere alread y o rg an izin g o n a C o n ­ tin en ta l scale. T h e re w ere p o ckets o f in ten se co n ce rn and o p p o sition , p articu ­ larly in sm all business, w h ich m ost E u ro p e an e xecu tives e x p e c te d to be n et losers fro m 199 2 . A n d on ly o n e q u a rter o f e xecu tives th o u g h t 1992 w ou ld b oost e m ­ p loym en t. B usin essm en h ad relatively litd e c o n fid e n ce that discrim in ato ry pub77 Fligstein and Brantley, “ 1992”; Booz-Allen and Hamilton, “European Panel”; IFO, “Empirical Assessment."

34 4

The. Single European Act, 1984-1988 lie p ro cu rem en t, levels o f taxation, o r state intervention w ould actually be re ­ strained, o r that the “Europe 19 9 2 ” p rogram w ould be im plem ented on tim e.78 C h ie f executives ju stified the SEA largely on groun ds o f com petitiveness. T h e statem ents o f politicians and executives con firm that the 1992 plan was in part a response to E u ro p e’s d eclin in g industrial com petitiveness. M ost accounts o f the SEA p o in t o u t that in the late 1970s and early 1980s m any E uropean leaders were co n cern e d with Eurosclerosis— a com bination o f persistent high unem ploy­ m ent, low growth rates relative to o th er O E C D countries, a tech nological lag in m any sectors, and d eclin in g international com petitiveness. In high-technology, E uropean leaders feared long-term declin e vis-a-vis the U nited States and, par­ ticularly, Japan in industries such as electron ics and telecom m unications. Even m ore striking was the effect o f foreign com petitive pressure and increased cap i­ tal m obility on the financial service and transport sectors. D eregulation in the U n ited States and, perhaps m ore im portant, in the U nited K ingdom an d som e sm aller coun tries posed a challen ge to o th er national service providers. E co­ nom ic crisis and extern al com p etition provide a con vin cing explanation for specific policies: standardization and R&D subsidies in high-tech sectors, and the liberalization o f financial and transport services.79 Left-w ing opposition aside, the SEA provoked litde partisan debate, lim iting o u r ability to reconstruct m otivations from cleavages. Europe rem ained a lowpriority issue fo r the voters o f all three countries. In Germ any, C D U leaders co n ­ clu d ed that there was a permissive consensus in favor o f E uropean integration b ut n o active agitation fo r it. T h e issue o f the Draft Treaty “played no part in the electio n cam p aign .” In France, observers o f French politics agreed that “the U nion T reaty was hardly m entioned by candidates fo r the European elections.” In Britain, the two m ajor political parties did n ot con sider the issue im portant e n o u g h to take official positions o n the Draf t Treaty.80 Partisan opposition from the French Com m unists, left-wing French Socialists, and the left o f the British L ab o u r party was certainly predictable on econ o m ic groun ds but n ot significant. It is clear, however, that electoral com petition in essentially pro-European electorates gave G enscher, M itterrand, and K ohl an im portant reason to present them selves— particularly while their countries held the presidency— as proE uropean . G eop olitical ideology provided an incentive for national leaders to focus their atten tio n — and the attention o f publics— on the EC, w hich in turn in creased their incentive to m ake concessions that w ould secure agreem ent. O n the C o n tin en t, diplom atic success in Europe added to a politician’s stature, som etim es in d ep en d en tly o f purpose. In Germ any, m oreover, a strong elite co n ­ sensus favored integration. G erm an parliam entarians supported political in te­

78 Booz-Allcn and Hamilton, "European Panel.” 79 Evidence is summarized in Sandholtz and Zysman, “ 1992.” Interviews with CEO o f Philips (Eindhoven, 1991). 80 Carl Otto Lenz, “The Draft Treaty Establishing the European Union: Report 011 the Federal Republic o f Germany,” in Bicber.Jacquc, and Wcilcr, Ever Closer, 214; Jacques Genton, “Ratification and Implementation o f the Draft Treaty Establishing the European Union: Constitutional and Political Implications for France,” in Bieber, Jacque, and Weiler, Ever, 221; Edward, McAllister, and Lane, “Draft,” 295-299.

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gratio n : the G erm an co m m itm e n t to Q M V an d P arliam ent pow ers, fo r e xa m p le, ap p ears to have b e e n largely in d e p e n d e n t o f, th o u g h n o t in c o n tra d ic d o n with, its substantive goals. In d e ed , th e B u n d esta g w ou ld likely have ratified S p in e lli’s D raft T reaty h a d th e o p p o rtu n ity arisen. M uch o f T h a tc h e r’s o p p o sitio n re flecte d skepticism a b o u t E C social re gu latio n fro m a relatively right-w in g go v ern m e n t in a (relatively) lo w -in co m e coun try. Yet th ere was also little p o p u la r o r p arlia­ m en ta ry su p p o rt fo r in tegratio n . Even the p ro -E u ro p e an L ib e r a l-S o c ia l D e m o ­ cratic A llia n ce M anifesto fo r th e E u ro p e an e lectio n s o p p o sed T reaty a m en d ­ m en ts.81 T h e id e o lo g ica l status o f E u ro p e in do m estic p olitics o r in th e m in ds o f lea d ers a cco u n ts fo r th e co n sisten cy o f G erm an su p p o rt fo r su p ranational insti­ tutions an d g e n e ra l re fo rm , fo r G en sch e r an d M itterra n d ’s p ro -E u ro p ean a c­ tivism b e fo r e they kn ew w hat substantive results m igh t be, an d fo r T h a tc h e r’s o p p o sitio n to sup ran atio n al in stitutions desp ite su p p o rt fo r liberalization . N o n eth eless, e co n o m ic interests re m a in e d p rim ary in the sense th at n o m ajor g o v e rn m e n t was at any tim e w illin g to sacrifice sign ifican t e co n o m ic interests for the sake o f id e o lo g y o r “h ig h p o litics.” T h e closest th in g was the F rench tu rn ­ a ro u n d , b u t as we have seen , this resu lted p rim arily fro m e co n o m ic failu re n ot g e o p o litica l im peratives. G eo p o litics p ro ved m o re m alleab le than econ o m ics. W h e re e co n o m ic an d g e o p o litica l interests cam e in to co n flict, as w ith T h a tc h e r ’s views o n Q M V an d G au llist su p p o rt fo r liberalizatio n , e co n o m ic in terest seem ed to p revail. T h e p re d o m in a n ce o f e co n o m ic co n cern s is also evid en t fro m the co n sisten cy o f n atio n al p o licies across a ran ge o f do m estic an d in tern atio n al fo ­ rum s. U n ilateral p o licy shifts, bilateral F ran co -G erm an n egotiatio n s, an d the S ch e n g e n A g re e m e n t all p re c e d e d E C efforts. T h e y w ere lin k ed by n o g e o p o lit­ ical in terest o r id e o lo g y b u t by a co m m o n e co n o m ic p ro gram .82 In all th ree co u n tries, th e tim in g o f ch a n g e also co n firm s the e co n o m ic view. A shift in do m estic p re fe re n ce s to lessen state in te rv en tio n — the failu re o f the Socialist e x p e rim e n t in F ran ce, m o d est d e re g u la tio n u n d e r K o h l in G erm any, the T h a tc h e r revo lu tio n in B rita in — im m ed iately p re ce d e d E C discussions. T h is tre n d was p an -E u ro p ean . F or e xa m p le, Britain h a d e lim in a ted capital co n tro ls in 1 9 7 9 , G erm an y in 1 9 8 1 , an d F rance was m ovin g to d o so in 19 8 4 .83 T h e m ost 81 Lenz, “Draft," 213; Edward, McAllister, and Lane, “Draft," 295-299. 82 Much has been made o f the Japanese threat in sparking European cooperation in the 1980s, and it was clearly important, particularly in electronics. Yet the French share o f global exports re­ m ained roughly constant from 1950 to 1980, with the striking increase in the Japanese share o f global exports (from 3.4% to 15.4% ) more than matched by the even more striking decline in the British share (25.5% to 9.9% ). If there was a single commercial challenge to France in the 1980s, it stemmed from Germany. During the 1970s and 1980s, as German agriculture reached grater levels o f self-sufficiency and German importers sought cheaper sources in third countries, the trade bal­ ance with Germ any worsened. J. R. H ough, The French Economy (New York, 1982), 202. 8S During 198 4-198 5 , for exam ple, Benelux banking was liberalized, leading to increased op ­ portunities for foreign banks. Swedish banking was liberalized when it becam e clear that multina­ tional banks and firms were willing to move abroad to seek cheaper capital. Pauly, Opening, 17 5 -1 7 6 ; Goodm an and Pauly, “O bsolescence," 5 7,78 ; Cowles, Politics, chap. 3; Sandholtz and Zysman, “ 1992,” 109; M anfred Wegner, “Preparing the 1990s— A Three-Pronged Strategy,” in Wolfgang Wessels and Elfriede Regelsberger, eds., The Federal Republic of Germany and the European Community (Bonn, 1988), 1 1 5 - 1 2 4 . Perhaps the only area in which national governments clearly lagged Commission propos­ als was in telecommunications, where Davignon began proposing privatization and greater com peti­ tion in 1979, before any government, except perhaps Britain, had moved forward. Yet even here, na­ tional action in the major countries often predated the passage o f Council directives on the subject.

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The Single European Act, 1984-1988 salient d ifferen ce betw een this and previous episodes o f co n cern abou t external com petitiveness, such as “le d éfi am érican” o f the late 1960s, was that unilateral policy alternatives were p erceived to have failed, leadin g to con vergen t E C p ref­ erences. By contrast, there is little evidence o f significant structural changes in the ge o p o litical situation o f E uro pe d u rin g this p eriod . Explanations based on F rench co n cern ab ou t G erm an neutralism , co n flict with Russia, o r U.S. unilat­ eralism lack em pirical sup port an d d o n ot exp lain the persistence o f interest in single m arket liberalization beyon d the early 1980s.

In t e r s t a t e B a r g a in in g

T h e SEA was n o t the sole proposal con sidered by the m em ber states during this p eriod . Varied proposals in cluded n ot ju st plans fo r internal m arket liber­ alization b u t initiatives fo r a d e ep er industrial policy, m onetary union, intensive defen se and fo reign policy co o p eratio n , and institutional reform . W hat explains the o utcom es o f interstate bargain ing over single m arket reform ? Did suc­ cessful negotiation s require, as m ost analysts have argued, decisive intervention by supranational and transnational political entrepreneurs? How was the SEA linked to Q M V — an institutional innovation o p posed by the British governm ent? My analysis challen ges existing accounts o f the SEA, w hich em phasize the ac­ tivities o f supranational and transnational entrepreneurs, in cludin g the C ourt, various Parliam entary groups, transnationally organ ized business, and above all D elors, D avignon, and o th er Com m issioners. Most analyses see som e com bin a­ tion as “necessary” con dition s for the SEA. I co n clu d e that such in flu en ce re ­ m ained secon dary and that the n egotiations con firm intergovernm ental bar­ gain in g theory. W ell-inform ed national governm ents dom in ated the process. Proposals w ere p len tifu l and national leaders them selves acted as political e n ­ trepren eurs, initiating negotiations, m ediatin g com prom ises, and m obilizing dom estic support. O u tco m es reflected above all the co n vergen ce o f national in­ terests rather than the goals o f supranational actors. Successful bilateral and m ultilateral initiatives p redated E C bargains. T h e few cases w here governm ents, n otably Britain, accep ted policies they did n ot favor involved an explicit, credible threat o f exclusion. N onetheless, it m igh t be argu ed that supranational actors had a slighdy larger in flu en ce on outcom es than in o th er gran d bargains we have exam in ed. G overnm ents had targeted internal m arket reform and Q M V as areas ripe fo r reform , and n um erous proposals had been advanced for internal m arket liberalization, b ut n o govern m en t had ou d in ed a package o f reform s like the W hite Paper. Supranational entrep ren eursh ip sp eeded reform , whose main outlines w ere firm ly set by en d u rin g national interests. S u p p o rt fo r reform grew steadily d u rin g the early 1980s, but a backlog o f seem ingly intractable issues blo cked its consideration. T h e critical elem en t was M itterrand’s new activism, w hich p erm itted rep eated Franco-G erm an threats to e xclu d e B ritain — first in a revival o f Q M V on C A P issues, then on budgetary m atters, finally on the decision to call an IG C. T h e first steps toward reform involved ren egotiation o f the E C bu d get and the structure o f C A P financing to satisfy Britain. Resolution o f these issues was so decisive that it was a de facto

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p re co n d itio n fo r la u n c h in g o th e r reform s, in clu d in g the SEA. F ran ce, G erm any, an d th e B e n e lu x co u n trie s first tu rn ed to Q M V an d the threat o f e xclu sio n to secu re T h a tc h e r’s agreem en t.

From Rebate to Relance: “Stand up and be counted ” From the start, G erm an y was w illin g to co n te m p late reform . A clear signal o f G erm an in te n t was sen t by the G e n sch e r-C o lu m b o initiative o f 19 8 1— a C o u n ­ cil reso lu tio n p ro p o se d by the G erm an fo re ign m inister, later jo in e d by his Italian c o u n te rp a rt an d b a ck e d by the C om m ission , ca llin g fo r g rea ter m o ve­ m e n t toward E u ro p e an unity. T h e G e n sch e r-C o lu m b o initiative fo cu sed o n fo r­ e ig n p o licy-m ak in g but also in clu d e d p rop osals fo r in tern al m arket refo rm . T h e two fo re ig n m inisters ju stifie d the initiative by re feren ce to e co n o m ic recession a n d in stitution al m alaise in the E C . T o address the co m p letio n o f the in tern al m arket, discussed in the C o u n c il alm ost co n tin u o u sly since the co m p letio n o f the C o m m o n M arket in 1968, the C o u n cil set up an ad h o c g ro u p to d raft a re ­ p o rt to th e Stuttgart sum m it in J u n e 198 3 .84 Yet the “S o lem n D eclaratio n o n E u ro p e an U n io n ” issued at Stuttgart by c h ie f 84 Based on declarations o f this sort, David Cameron rightly argues that the roots o f the Single Act can be traced bark into the 1970s, yet before 1983 no internal market and decision-making initiative was considered seriously by the three major governments. Cameron, “T h e 1992 Initiative: Causes and Consequences,” in Alberta Sbragia, ed., Europolitics: Institutions and Policymaking in the “New” European Community (Washington, D.C., 1992), 2 3 -74 .

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The Single European Act, 1984-1988 executives on the basis o f the rep ort rem ained vague, widi symbolic clauses to sadsfy each govern m en t b ut n on e m andating anything o f substance. T h e D ecla­ ration reaffirm ed the desire to rein fo rce b oth econ o m ic and security co o p era­ tion and called fo r the com p letion o f the internal m arket alongside coordin ated reflation, social program s, rein fo rcem en t o f the m onetary system, and a E uro­ pean industrial policy. A gen eral consensus reco gn ized that internal m arket liberalization was the m ost prom ising, b ut n o co n crete steps w ere taken. It was also agreed that if EC institutions w ere to be strengthened, the n ext step must be to restore Q M V and restrict use o f the veto u n d er the L u xem bo u rg C o m ­ prom ise. Yet substantial opposition p recluded anything m ore than the sugges­ tion that m em ber states voluntarily abstain rather than veto. Even this inform al proposal elicited from France, Britain, D enm ark, Ireland, and G reece im m edi­ ate procès-verbaux reaffirm ing the L u xem b o u rg Com prom ise. Shortly thereafter, Prim e M inister Pierre M auroy publicly attacked the Stuttgart D eclaration and reasserted the veto right.85 T h e only co n crete o u tco m e o f the Stuttgart sum m it was, therefore, agreem en t that the EC could n ot m ove forw ard until it resolving three related p roblem s— the British rebate, the n eed to increase EC funds, and the entry o f Spain and P ortugal— and a proposal by G en scher to resolve them as a package was ap ­ proved. T h e British budgetary con tribution had been a constant co n cern since Britain’s accession in 1973. A t the tim e, as we saw in chapters 3 and 4, Britain was fo rced to accept the acquis communautaire, a ld iou gh the C A P was particularly disadvantageous to it. T h e result was a large n et budgetary deficit, alm ost as large as that o f Germ any, to the b en efit o f farm ers in the N etherlands, France, Italy, and even G erm any itself. Attem pts to offset this net deficit throu gh re­ gion al policy side-paym ents, as dem an ded by Edward H eath in the early 1970s, o r by adjusting British paym ents to the E C downward, as dem an ded by H arold W ilson and Jam es C allaghan, had only a m arginal long-term effect. U nanim ous approval o f the n ine m em ber governm ents was difficult to secure, and the result was a persistent British liability. Im m ediately on entering office, M argaret T h a tch er sought a perm an ent re ­ bate and, if possible, limits on C A P spending. She spoke bluntly o f gettin g “my m on ey b ack.” To achieve this end, however, she required bargaining leverage. B etw een 19 7 9 and 1984 she was repeatedly persuaded by C abinet colleagues and backbench ers that an attem pt to w ithhold funds w ould gen erate an im m e­ diate and un doubted ly successful legal challen ge as well as EC retaliation. So, at h e r first E uropean C o un cil m eeting, she linked the deficit to C A P price d eci­ sions, over w hich Britain w ielded a de facto veto. O n e year later, Britain gained a gen ero u s three-year proposal rebating m ore than two-thirds o f its n et co n tri­ bution. T h e o th er m em ber governm ents, however, rejected Com m ission p ro ­ posals fo r a perm an ent solution throu gh limits on agricultural subsidies and an increase in region al policy benefits to Britain— yet another futile attem pt to achieve the Com m ission’s original vision o f a liberal, lower-cost C A P.86 85 Robin, La diplomatie, 219; De Ruyt, L ’acte, 35, 3 15-3 24 . 86 Margaret Thatcher, The Downing Street Yean (New York, 1993), 6 0 -6 5; Ludlow, Beyond, x-xi; Geoffrey Howe, "The Future o f the European Community: Britain’s Approach to the Negotiations,”

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W h en the three years w ere nearly up , T h a tch er sough t to em ploy the same tactic to achieve an o th er m ultiyear bargain. But the others had had en o u gh . In mid-M ay 1982 the Belgians, then ho ldin g the presidency o f the C o u n cil, re ­ sp on ded by p ro p o sin g to pass the new agricultural prices by Q M V — an u n ­ p reced en ted but (strictly speaking) legal step accep ted by six governm ents over British, Danish, and G reek opposition . British efforts to invoke the L uxem bourg Com p rom ise w ere rejected, fo r the linkage was n ot deem ed a “vital interest.” Pressure on Britain was h eigh ten ed by an exp licit threat to institutionalize a “two-track” E urope and create a “special status” fo r Britain. A one-year bargain, relatively unfavorable to Britain, was the result. T h e follow ing year, 1983, an even sm aller British rebate was o ffered. T h a tc h e r’s efforts to fo rce a p erm anent solution to the budgetary im balance seem ed stalled.87 A fter 1983, however, the n egotiatin g situation shifted in favor o f Britain and against France, because o f the latter’s n eed fo r increased C A P funding. First, the 1 p ercen t VAT ceilin g was n o lo n ger sufficient to fu n d agricultural com m itm ents; in O cto b e r 1983 C A P paym ents w ere delayed for lack o f funds. T h e n eed to raise the VAT p ercen tage sim ply to m aintain the status qu o gave Britain a de facto veto w ithout invoking the L u xem b o u rg C om prom ise. T h a tch er prom ised to b lo ck any fu n d in g increases until the bu d get issue was resolved. Second, G er­ m any threaten ed to veto VAT increases until accession negotiations with Spain and Portugal, lo n g blocked by France, w ere co n clu d ed . G erm any im posed 1985 as a deadlin e. A s M itterrand stated in internal discussions, with Iberian acces­ sion France w ould cease to be a large n et C A P beneficiary; lim itations on C A P sp en d in g w ere now in its long-term interest.88 W ith the EC fiscal situation grow ing m ore perilous and French interests shift­ ing, M itterrand op ted fo r a fuite en avance. His intention, clearly stated in co n ­ fidential discussions by the en d o f 1983, was to e xp lo it the French presidency to achieve a high-p rofile b reakthrou gh on enlargem ent, agriculture, and the b u d ­ get.89 M itterrand’s extraordin ary personal involvem ent in the six-m onth presi­ d en cy p rom p ted o n e French observer to call him a “one-m an orchestra.” H e b e­ gan the year with a personal tour o f all the E uropean capitals to seek a basis on w hich to relau n ch the E C, follow ed by “shuttle dip lom acy” betw een Paris, Bonn, and L on d o n . H e an n o u n ced that he w ould com p lete the enlargem ent n egotia­ tions by Septem ber 1984 and called fo r a co n feren ce to “preserve E u ro p e.” His speeches, m ost notably in May b efo re the E uropean Parliam ent, un derscored

International Affairs 60 (Spring 1984), 188-189; Lord Gilmour, “The Thatcher Memoirs," Twentieth Century British History 5 (1994), 266. 97 Robin, La diplomatie, 215. The linkage to the Falklands crisis may have played a minor role, but the broadly accepted view is that the British were isolated and extended the definition o f “vital in­ terest” beyond what was acceptable. This argument is supported by two facts: the move to QMV was a long-term trend in the EC between 1980 and 1985, and Thatcher was unable to achieve a signi­ ficantly better bargain in the preceding years; things changed only in 1983 when new funding had to be voted by unanimity. 88 Robin, La diplomatie, 215. The Mitterrand government had reversed its opposition to budgetary increases after the pro-European turn and announced that it would complete the enlargement ne­ gotiations by September 1984. 89 Favier and Martin-Roland, Le décennie, 2 ; 198-202.

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The Single European Act, 1984—1988 the eco n o m ic n ature o f the current crisis and elaborated a vision o f the future E C as an instrum ent to com bat the econ o m ic declin e o f E urope. “E uro pe,” he w arned, “is b e g in n in g to lo o k like an a b an d o n ed buildin g site.” H e p roposed political co o p eratio n , tech n o lo gical program s, and C A P reform . Two constant refrains w ere decision -m akin g and internal m arket reform .90 From early on , the co re o f M itterrand’s strategy had b een to isolate the British and threaten to m ove ahead w ithout them i f they did n ot com prom ise. T hese tacdcs w ere repeatedly discussed by top officials in France and Germ any; threats w ere m ade, deliberately and consistently. T his tactic was first used to m oderate T h a tc h e r’s dem ands fo r a rebate. M itterrand and K ohl repeatedly threaten ed to m ove toward a two-tier E urope (“E urope à d eu x vitesses”), w hereby those will­ in g to m ove ahead with E uropean in tegradon w ould co n clu d e their own agree­ m ents and leave dissenters behind . M itterrand called fo r a co n feren ce to discuss re lau n ch in g the C om m unity am ong those m em ber states w ho w ould “stand up and be co u n ted .” In his May 1984 sp eech to the European Parliam ent, he picked u p the thread again, speaking frankly abou t the n eed fo r a E urope “à geom étrie variable.” Dum as an n o u n ced that if bu d get agreem en t were n ot reached , his govern m en t w ould call a m eetin g w ithout the British to discuss various p ro ­ posals fo r reform ; he boldly raised the possibility o f a two-track E urope during T h a tc h e r’s visit to the Elysée. For his part, K ohl an n o u n ced shortly thereafter that the “decisive co n d id o n s had been crea te d ” to m ove toward com pletion o f the E uropean m arket and m ajority vo u n g in the C o un cil. H e called fo r m ove­ m en t toward greater E uropean unity within a year, w hether o r n ot all countries a greed .91 T h e threat o f exclusion was n ot a bluff. M itterrand’s position p ap er fo r the F ontainebleau summit, p rep ared by Jacques Attali, foresaw two possibilities: if agreem en t was reach ed o n the budget, Spanish and Portuguese accession and the relan ce w ould be discussed; if no a greem en t was reached , discussions would b egin on how those, exclu d in g Britain, w ho w ere w illing to adopt a positive atti­ tude m igh t m ove ahead. T h e Franco-G erm an threat was deliberately leaked to raise doubts am ong the Bridsh n egodators. T h e Bridsh press picked up the them e, and a H ouse o f C o m m o n s rep o rt called fo r a m ore conciliatory n egoti­ ating position.92 W ithin a year, the agricultural and budgetary issues had been resolved, b e ­ cause o f the Bridsh linkage and the new French willingness to com prom ise. T h atch er, backed by the N etherlands, sough t a form al agreem en t bin ding gov­ ernm ents to lim it future increases in C A P spending; G erm any sough t the same go al as a ge n d em e n ’s agreem en t. T h e French governm en t put its farm ers on n o ­ tice that, as A gricu ltu re M inister M ichel R ocard stated, the revitalization o f agri­ 90 “Speech o f François Mitterrand before the Netherlands Government (7 February 1984),” re­ leased by the French Embassy in London, CTL/DISCOM /29/84. 91 Interview with Kanzleramt official, 1991; Corbett, “1985,” 268-269; Françoise de la Serre, La Grande-Bretagne et la Communauté européenne (Paris, 1987), 193-194, 207-209; Favier and MartinRoland, I s décennie, 2 ; 198-202; Paul Taylor, “New.” 98 Kohi speech in Gasso, ed. Towards, 98; Favier and Martin-Roland, I s décennie, 2 ; 200—202; House o f Commons, Third Reportfrom the Foreign Affairs Committee (Session 1983-1984), “The Forthcoming Fontainebleau Summit” (London, April 1984), xxi-xxx; Le Monde, 18 March and 5 May 1984.

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cultural policy co u ld n o lo n g er serve as the instrum ent o f European unification. U n d er R o card ’s direction, a m odest com prom ise was reached in M arch 1984. R ocard also p rop osed limits o n dairy subsidies and, with M itterrand’s backing, em ployed Q M V to g e t them through. France agreed fo r the first time that the British n et con tribution should be cu t perm anently to reflect Britain’s lower p er capita in co m e but kept u p the pressure by blockin g the 1983 British rebate to­ taling £457 m illion. Britain and G erm any overrode the vociferous protests o f Com m ission President Gaston T h o rn and rejected Com m ission efforts to create “budgetary p ea ce ” by raising the VAT to 2 percen t and to authorize future in ­ creases in spen ding w ithout dom esu c parliam entary ratification.93 A t the Brussels sum m it in M arch 1984, the heads o f governm en t agreed to agricultural spending in a way that w ould keep any growth in British con tribu­ tion rou ghly in line with its p ercen tage o f C om m unity GDP. Yet the bu d get re ­ bate fo r 1984 and follow ing years rem ained unsettled, with the others offerin g E C U 1 billion and T h a tch er dem an din g E C U 1.5 billion. A fter 36 hours o f n e­ gotiation at Fontainebleau in May 1984 and an explicit, credible threat to e x ­ clude the British from future decisions, a com prom ise was finally reached on a p erm an en t ann ual rebate totaling two-thirds o f its annual net contribution. T h e French assum ed a disproportion ate p o rdo n o f the necessary financing, since K ohl insisted that the G erm an con tribution be strictly lim ited. M oreover, the C o u n cil agreed to gen eralize the p rin ciple oijuste retour •. n o m em ber state should be required to sustain a “budgetary burden w hich is excessive in relation to its relative prosperity.” A n effort was m ade to phase out M CAs, in exch an ge for w hich G erm an farm ers received massive com p en sadon (5 percent) o f VAT pay­ m ents throu gh 1988), and the G erm an governm en t was gran ted authority to provide additional subsidies. W ith the C A P issue and accession out o f the way, Fontainebleau m arked the m om ent w hen m om entum began to gath er toward a package deal o f internal m arket and decision-m aking reform . T h e heads o f governm en t called for in ter­ nal liberalization, coordin ated stim ulation, and collaborative research designed to give the C om m unity “an econ o m ic im pulse com parable to that given by the C om m on M arket in the 1960s.” T h e y fu rth er agreed that custom s controls w ould eventually be abolished.94 T h ese decisions at Fontainebleau reflected a consensus am ong m em ber states; even staunch defen ders o f the Com m ission co n ced e that the package had little to do with Com m ission en trep ren eursh ip .95 T h o u g h som e call these declara­ tions m eaningless, the sim ultaneous actions o f governm ents indicate the seri­ ousness o f internal m arket efforts. M itterrand sought im m ediate agreem en t on e xp an d in g Q M V and o b ligin g governm ents to justify vetoes; yet he had to settle fo r the creation o f two ad hoc com m ittees— a back-up position agreed in ad ­ vance betw een Italy, the N etherlands, Germ any, and France. T h e first, the Ad 93 De Ruyt, L'acte, 47-49; Press Conference with Mitterrand, 2 April 1984; Robin, La diplomalie, 6 9 -8 1 , 13 3-14 5 , 211-2 29 , especially 145, 212; Favier and Martin-Roland, Le décennie, 2:210; John Newhouse, “O ne against Nine," New Yorker, 22 October 1984, 74 -7 8 , 89. 94 De Ruyt, L ’acte, 261. 95 David Williamson, “The Package: Making a Success o f the Single Act,” Common Market Laxo Review 25:3 (1988), 486.

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The Single European Act, 1984—1988 H o c C om m ittee on a P e o p le ’s E urope (later the A d o n n in o C o m m ittee ), was to investigate those aspects o f the Com m u nity directly visible to the com m on citi­ zen: custom s form alities fo r individuals, equivalence o f university diplom as, the creation o f European symbols, E uropean vo lu n teer program s. T h e secon d and far m ore sign ifican t com m ittee, the A d H oc Com m ittee fo r Institutional Affairs (later the D o o g e Com m ittee, after its Irish chairm an ), had a m andate to co n ­ sider in sd tu donal, political, an d econ o m ic reform . It was at diis p o in t also, as we have seen, that M itterrand and K ohl dem onstrated their com m itm ent to in ter­ nal m arket reform by entering ad hoc parallel negotiations that w ould soon lead to the Sch en gen A greem en t, elim inating bo rd er form alities am ong E uro­ p ean countries. Origins o f the Single Market Initiative: A “dull and boring” Proposal? W hy a single m arket initiative? Why, in particular, the W hite Paper? Between 1980 and 1984 the elim in ation o f N TBs rose on the E C agenda, n ot least due to pressure from the Com m ission and Parliam ent. In exp lain in g the proposal for internal m arket liberalization, claim s have b een m ade fo r the decisive im por­ tance o f supranational entrep reneurs, in cludin g the C ourt, the Parliam ent, the C om m ission , and various national governm ents as well as transnational business. M uch attention has been paid to the C o u rt’s 19 7 9 Cassis de Dijon decision, w hich p rom ulgated the p rin ciple o f “m utual reco gn ition .” T h e conventional a rgu m en t is n o t that the EC} had a d irect effect on o p en in g m arkets— such an effect w ou ld have required decad es— b ut that it inspired the Com m ission to g en eralize the p rin ciple into a program fo r m inim al regulatory harm onization u n d e r A rticle 100. T his argu m en t rests o n the con jecture that coop eration had b een ham strung by the absence o f som e random “focal p o in t” aroun d w hich states could co o rd in ate.96 Yet the evidence does n ot con firm the view that Cassis, though later e x ­ p loited by the Com m ission, was a “necessary” con dition for the SEA, or that it p rovid ed a “focal p o in t,” n o r even that any such coordin ation p roblem existed. Proposals fo r m ore aggressive regu latory liberalization in services, for exam ple, w ere b lo ck ed n o t fo r lack o f an appropriate insdtudonal solution but because o f resistance to pressure from coun tries with less com petitive providers to d e ­ m ands by the two m ajor service exporters, Britain and the N etherlands.97 Cassis, m oreover, was n o t the first ECJ decision establishing a p rin ciple o f overruling n adon al regulations to perm it EC trade, n o r the m ost extrem e, n or the most am bitious. In deed, it rep resen ted som ethin g o f a retreat from previous ECJ ju ris­ p ru d en ce. M utual recogn ition was n ot a new innovation fo r the Com m ission but a lo n g-reco gn ized p ro ced u re, em ployed in EFTA and parts o f the Treaty o f Rom e. Discussions o f em ployin g m utual recogn ition date back to 19 6 7 and in 19 7 3 , over a decade befo re the SEA, w hen Com m issioner Ralf D a h ren d o rf (with 96 Garrett and Weingast, “Ideas”; Lawrence Gomley, Prohibiting Restrictions cm Trade within the EC (Dordrecht, 1985), 267; Daniel Wincott, “Institutional Interaction and European Integration: Towards an Everyday Critique o f Liberal Intergovernmentalism^/trara«/ of Common Market Studies 33 (December 1995), 597-610. 97 Nicolaidis, Mutual, 18 9-194. See also fn. 140 o f this chapter.

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stro n g su p p o rt fro m th e British g o v ern m e n t) set fo rth a p ro gram fo r re gu lato ry h a rm o n iza tio n b ased o n a new m o d e l o f m u tu a l re co g n itio n . T h e C om m ission had m o ve d aggressively b u t u n successfully o n this basis in th e a rea o f p ro fes­ sional services— su ggestin g b o th that th e m u tu a l re co g n itio n was n o t new in 19 8 5 a n d th at its use was n o t su fficien t to g e n e ra te co o p era tio n . Finally, m utual re c o g n itio n was a m o d est p art o f th e W h ite P ap er a n d SE A agen da; m any re g u ­ latio n s still n e e d e d to b e h a rm o n ized . F or all these reasons, C o ck fie ld h im se lf d o e s n o t even co n sid e r m utual re co g n itio n to be a fu n d am en ta l in n ovation o f th e sin gle m ark et initiative, p o in tin g in stead to the “re fe re n ce to stan dards” p ro ­ ce d u re an d th e exten sio n o f m utual re co g n itio n to services.98 T h e e vid e n ce m u ch m o re stron gly sup ports the view that the level o f m em b er state d e m an d , n o t the supply o f p articu lar in stitution s— m utual re co gn itio n , the re fe re n ce to standards p ro ce d u re , a n d m ajority vo tin g, fo r e x a m p le — e x ­ plain s th e tim in g an d m otivation s fo r co o p era tio n . T h e m ove to m utual r e c o g ­ n itio n re fle cte d the realization that if m em b er go v ern m en ts, in sp ired by e c o ­ n o m ic p o licy failu re an d b ig business pressure, w ere serious a b o u t liberalizin g the in tern al E u ro p e an m arket, m utual re co g n itio n was the o n ly re m a in in g in ­ stitu tion al p ro ce d u re w ith a ch a n ce o f su cceed in g. T h e r e was a lim ited ran ge o f in stitutional alternatives. By th e early 1980s it was cle a r that a laissez faire system o f “n atio n a l tre a tm e n t” sim ply co n d o n e d risin g N T B s. T w enty years o f n e g o ­ tiations o ver “h a rm o n iza tio n ” h a d p ro ven in effectu a l. O n ly m utual re co gn itio n rem a in ed . C a refu lly d o cu m e n te d studies o f th e lin k betw een ECJ ju r is p ru ­ d e n c e , C o m m issio n e n tre p re n e u rsh ip , a n d the SE A co n clu d e th e re fo re only th at Cassis m ay have at m ost accelerated th e single m arket p ro gram , n o t that it was a n ecessary co n d itio n ; the w illin gn ess o f g o v ern m en ts to accep t m o re radical lib eralizatio n was the critical facto r.99 C o m p a riso n w ith the o th e r m a jor policy te ch n o lo g y in tro d u ce d by the “n ew a p p ro a c h ” o f 19 8 5, n am ely the “re feren ce to stan dards” p ro ce d u re , is equ ally instructive. It had b e e n in tro d u ce d in the L ow V oltage D irective o f 19 7 3 , yet its e xisten ce d id n o t lead to m o re directives o f its kin d fo r a d e ca d e an d a half. 98 I.ord Arthur Cockiield, “T h e Rea! Significance of 1992," in Colin Crouch and David Marquand, eds., The Politics of 1992: Beyond the European Single Market (Oxford, 1992), 7; Nicolaidis, Mutual, 1 5 1_1 5 4 - 2 4 7 -2 6 1, 280; Jacques Pelkmans and Ad Vollebergh, “T h e Traditional Approach to Technical Harmonization: Accom plishm ent and Deficiencies,” in Jacques Pelkmans and Marc Vankeheulen, eds., Coming to Grips with the Internal Market (Maastricht, 1986), 9 -3 0 ; interview with a Campo; all point out that there were other areas, such as testing, in which the Commission long pro­ posed mutual recognition. T h e idea was not new but was not considered viable, due to opposition from m em ber governments. A number o f different legal forms had been attempted, including one, “minimal harmonization,” in which minimal standards would be reached— an even less stringent variant o f the combination o f harmonization and mutual recognition employed in the SEA. Cassis appears to have shifted the focal point o f scholars more than the focal point o f practitioners. 99 For refutation o f the claim that Cassis was decisive, Nicolaidis, Mutual, 19 5 -28 7. Nicolaidis also rejects the view that member states were forced to act in order to keep control o f a process, which cannot explain the success o f service deregulation although the Court had limited the scope o f mutual recognition in services. See also Karen J. Alter and Sophie Meunier-Aitsahalia, “Judicial Politics in the European Community: European Integration and the Pathbrcaking Cassis de Dijon Decision,” Comparative Political Studies 26 (January 1993), 555; Claus-Dieter Ehlermann, “T h e 1992 Project: Stages, Structures, Results and Prospects," Michigan Journal of International I mw 11 (Summer 1990), 1102.

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The Single European Act, 1984-1988 O th ers argue that the decisive sources o f the single m arket initiative lie in the lobbying o f m ultinational business groups. A cco rd in g to Dr. Wisse D ekker, C E O o f Philips and an activist in this p eriod , E uropean integration in the 1950s was initiated by politicians, w hereas in the 1980s it entered a new, “industrial” phase, led by business leaders. T his, it is argued, was part o f a d e ep er trend whereby larger, m ultin ational an d exp ort-orien ted firm s w ere establishing in d ep en d en ce from n ational organizations dom in ated by smaller, national, and often m ore p ro tectio n ist firm s.1“ M ost w ho stress the role o f m ultinational business p oin t to the exclusive and in flu en tial E uropean R oundtable o f Industrialists, fo u n d ed in 1983 by Pehr G yllen ham m er, C E O o f Volvo, w hich bro u gh t to geth er the heads o f a small n u m b er o f E u ro p e ’s largest m ultinationals and w hich pressed for internal m ar­ k et liberalization from 1985 onw ard. Davignon may have had an in direct in flu ­ e n ce on the form ation o f this group . In 1981 he brou ght to geth er large E u ro ­ p ean inform ation tech n o lo gy firms (the "T horn -D avignon Com m ission”) to d evelop proposals fo r tech n o lo gy program s and E uropean technical norm s, af­ ter w hich they reportedly discussed m arket liberalization. D avignon reportedly suggested form ation o f a private gro u p . Yet the ERT did n ot originate single m arket proposals. In deed, it initially o p p o sed them , relegating reduction s in b o rd er form alities and greater standardization to secondary status. T h e ERT agen da sup ported instead an expansion o f the industrial policy proposals advo­ cated by D avignon and the French governm ent, with w hich the ERT m aintained close relations. T h e E R T ’s first m em o to the Com m ission in June 1983 focused on o p en p ublic p rocurem en t, R& D tax credits, elim ination o f fiscal and legal im pedim en ts to m ergers and subsidiaries, greater cross-border flows o f p eop le and in form ation , reform o f the region al and social policy, m onetary co o p era ­ tion, and industrial stan dardization — all reflected in the French m em orandum o f Septem ber 1983 callin g fo r an E C industrial policy. T h e ERT paid greatest attention to the establishm ent o f large E uropean venture capital projects, in ­ clu d in g netw orks o f m obile com m unications, electron ic banking, and a h ig h ­ speed rail, each o f w hich w ould be “g o d fa th ered ” by o n e o f its corporate m em ­ bers. Its first detailed proposals, advanced in D ecem ber 1984 and O cto b e r 1985, co n cern e d a trans-European infrastructure netw ork (the key elem en t o f which was later ab an d o n ed in favor o f the C h u n n el) and creation o f a E uropean tech ­ n olo gy institute o f interest to pharm aceutical com p an ies.101 Given their focus o n these transnational “grands projets,” ERT leaders were slow to em brace the W hite Paper, initially p roclaim ing it a “dull and b o rin g ” docum en t, in w hich “n o o n e was in terested.” T h e y sought instead to persuade the Com m ission to pare it down to a small num ber o f proposals and to focus on

too wisse Dekker, “Europe’s Economic Power— Potential and Perspectives,” speech at the Swiss Institute for International Studies (Geneva, 25 October 1988). Indispensable is Cowles, Politus, es­ pecially 163!!. 101 Cowles, Politics, 2 18 -224, 232. Cowles argues that multinational firms favored a “European” so­ cial democratic model o f society. Certainly business, for example in the ERT, supported an agenda o f industrial policy and public-sector spending, and came to support regulatory harmonization, ser­ vice liberalization, and elimination o f customs formalities only after initial skepticism and opposition.

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their p re fe rred agenda. O n ly in D ecem ber 1984 did ERT represen tad ves sit down fo r the first dm e with the M on net C om m ittee. By Jun e 1985, w hen the ERT finally a d o p ted the rep o rt o n the internal m arked drafted by Wisse D ekker, chairm an o f Philips, and han d-delivering copies to Attali and M itterrand, the m em ber states had already o p ted fo r the program and D elors was con ductin g in form al discussions with individual firms. From D ecem ber 1986 on, however, the E R T d id run a “w atch d og” com m ittee to press fo r im p lem entation .102 A n o th e r oft-cited business in flu en ce o n the W hite Paper agen da was a series o f sp eeches delivered in the autum n o f 1984 and early 1985 by Dekker, also a p articipant in D avignon’s Com m ittee and a fo u n d in g m em ber o f the R oun d­ table. D ekk er prop osed a plan he called “E uropa 1990.” 103 Many details o f E uropa 19 9 0 — its focus on internal m arket liberalization, division o f tasks into categories (reform o f fiscal, com m ercial, technical, and governm en t p ro cu re­ m en t p olicies), ideology o f econ o m ies o f scale, recogn ition o f the link betw een com m ercial liberalization and tax harm onization, and identification o f the ulti­ m ate go al with a particular d a te— resem bled D elors’s proposal before the E u ro ­ pean Parliam ent a few m onths later, as well as the W hite Paper o f Jun e 1985. Yet the originality o f D ek k er’s proposal should n ot be exaggerated. D ekker only p resen ted his proposals in late 1984, aroun d the sam e time that m em ber gov­ ern m en ts told D elors that internal m arket policy was the only area in w hich they w ere p repared to move. D ekker was in close con tact with officials from the C o u n ­ cil, Com m ission, and Parliam ent, and he follow ed the detailed proposals fo r the sim plification o f custom s form alities and standardization they had developed over the past three years, though he added proposals fo r electron ic bo rd er fo r­ m alities and fiscal harm on ization.104 O th e r group s o f M N Cs w ere no m ore innovative. T h e U nion o f Industrial and Em ployers’ C o n fed eratio n o f E urope (U N IC E ), the leadin g E C industrial in ter­ est gro u p rep resen tin g national peak organizations, called fo r m ore majority votin g in February 1984 b ut did n ot develop internal m arket proposals, though it w ould subsequently support them . A similar, though m ore inform al, group was fo u n d ed at the sam e time by A n d ré B énard, a m anaging director o f Royal D utch Shell, but advanced n o proposals. O n balance, the most that can be said for E uropean m ultinationals is that they offered vocal support in 1 9 8 5 -8 6 on ce others had d evelop ed proposals fo r internal m arket liberalization. T h e y raised the salience o f the program and backed it with threats o f disinvestm ent. In each case, business groups, w hile providing essential support, reacted to initiatives from the Com m ission and the Parliam ent, as well as m em ber governm en ts.105 102 Cowles, Politics, 244-245, also 174 -18 0 , 21 iff, 232; Sandholtz and Zysman, “1992,” 117; Wolf­ gang Streeck and Philippe C. Schmitter, “From National Corporation to Transnational Pluralism: Organized Interests in the Single European Market," Politics and Society 19 (June 1991), 133-165. Middlemas, Organising, 7i6 n ; Cowles, Politics, 234-238, 214-249; interview with a Campo. 105 “Europe 1990: An Agenda for Action" (Eindhoven, 13 November 1984). The four aspects o f the Dekker plan were administrative simplification o f border formalities, harmonization o f indirect taxation, standardization o f technical norms, and liberalization o f government procurement. 101 Interviews with Emile a Campo and Fernand Braun. 105 Sandholtz. and Zysman, “ 1992,” 108, 116 -12 0 ; Axel Krauss, “Many Groups Lobby 011 Imple­ mentation o f Market Plan,” Europe Magazine, July/August 1988, 24-25; Ludlow, Beyond, 27-30;

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The Single European Act, 1984-1988 A m o re im p o rtan t source o f proposals than eith er the C o u rt o r the m ultina­ tionals was the E uropean Parliam ent. Since 1980 parliam entarians had issued resoluuon s and reports sup porting two program s— o n e “m axim alist,” o n e “m ini­ m alist.” T h e m axim alists, in clu d in g m any Italians and quite a num ber o f G er­ mans, w ere E u ro p ean federalists. T h e y advocated bro ad expansion in the scope o f C om m u n ity activities, backed by procedural reform s, focusing particularly on increased p ow er fo r the Parliam ent.106 Following a Europarliam entary pen ch an t fo r anim al nam es, these activists called them selves the “C ro co d ile g ro u p ,” after the Strasbourg restaurant w here they first met. L ed by the ven erable A ltiero Sp inelli, a fo u n d in g father o f the Com m unity, their efforts culm inated in the E u ro p ean Parliam ent resolution o f February 1984 p roposin g a “Draft Treaty Establishing the E uropean U n ion ”— a new, m ore am bitious do cu m en t to re ­ p lace the Treaty o f Rom e. T h e m inim alists turned o u t to be m ore influential. Skeptical o f federalism and parliam entary reform , they p referred w orking with national leaders to lib­ eralize the internal m arket. F oun ded late in 1981 the “K angaroo G ro u p ” (nam ed fo r the Australian m arsupial’s ability to h o p over borders) was fun ded by a gro u p o f sym pathetic (largely British and D utch) business interests, and co u n ted Basil d e Ferranti, a leadin g British industrialist and Tory parliam entarian, am ong its leaders. F rench p ro p o n en ts o f m arket liberalization th ough t the nam e too silly to attract in flu en tial support and fo u n d ed their own gro u p .107 T h e Kangaroos en co u rag ed parliam entary studies on econ o m ic topics and in 1983 laun ch ed a public cam p aign in favor o f a detailed E C tim etable fo r abolishing adm inistra­ tive, tech nical, and fiscal barriers, referen ce to w hich was in cluded in the Draft Treaty. A n A ugust 1993 Parliam ent rep o rt (the A lbert-Ball Report) stressed for the first tim e the “costs o f n on -E u ro p e.” 108 T h e K angaroo G ro u p increased the salience o f internal m arket issues am ong British businessm en an d is said to have in flu en ced T h a tch er governm en t p ro ­ posals fo r m arket liberalization in 1982 and 1983. A lo n g with Com m ission and C o u n cil officials, it m ade co n tact in early 1984 with the Brussels representative o f Philips, w ho h elp ed develop D e k k er’s “E uropa 1990” initiative.109 Beyond this, how ever, there is little evidence that the Kangaroos significantly increased sup­

Calingaert, 1992, 8; Wallace, “Making,” 7. Interviews with a Campo, Braun, and von Moltke; Cowles, Politics, 174 -18 0 , 21 iff. 100 For strong claims, Marina Gazzo. “Introduction,” in Gazzo, Towards, 7-10 . Direct elections to the European Parliament in 1979 are said to have endowed the body with democratic legitimacy and given European federalists new impetus. 107 Various issues o f the publication o f the Kangaroo Group, Kangaroo News, on file in office o f the Kangaroo Group, London; interview with administrator o f the Kangaroo Group, 1989. 108 Michel Albert and James Ball, Toward European Recovery in the 1980s: Report to the European Parliament, Washington Papers, no. 109 (New York, 1984). 109 Basil de Ferranti, who created the Kangaroo Group, had worked on the CBI Europe Com­ mittee in the 1970s, communicated with British and Dutch business in 1981-83, and worked with Council officials to form the groups. At a spring 1984 meeting with a Philips representative, an Action Committee member, parliamentarians and Council officials suggested a program, including a precise timetable with precise planks, which came to Dekker, who then named a task force and came up with “Europe 1990” by Autumn 1984. The program was presented in January 1985 in co­ ordination with Delors. Interview with Wisse Dekker; a Campo, 1991.

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port fo r in tern al m arket reform . In Britain the CBI, we have seen, was already pressing fo r internal m arket reform starting in 19 7 7; D u tch business had tradi­ tionally b e en favorable. N or did the Kangaroos develop specific proposals or play a p ro m in en t ro le in p ublic debates; th rou gh o u t this p eriod the maximalists in P arliam ent garn ered far m ore publicity. M ost in flu en tial o f all n on governm en tal entrep reneurs was the Com m ission itself. T h e Com m ission’s decision to m ove toward the single m arket proposal reflected the failure o f p rior efforts to develop an E C industrial policy, prom oted by the Com m ission and supported by France and Italy. D uring the 1970s C o m ­ m issioner A ltiero Spinelli favored a broad initiative, C om m issioner R alf Dahrend o r f sought a m ore m odest on e, and various com m ittees suggested alternatives. Yet all such proposals m et with British and G erm an opposition. O f num erous industry-led efforts only A irbus succeeded. Etienne D avignon, internal m arket com m issioner from 19 76 throu gh 1984, did finally m anage to establish a p ro ­ gram fo r international research consortia called ESPRIT, w hich em erged in 1982 as a pilot program and was exp an d ed in 1984. ESPRIT did n ot seek to es­ tablish a centralized E C industrial policy, but simply coordin ated national p ro ­ gram s u n d er a strict juste retour arrangem ent, w hereby each governm en t re ­ ceived from each p roject precisely the fu n d in g it put in. Such an arrangem ent was the m axim um Britain and G erm any w ould a ccep t.110 Yet even ESPRIT re ­ m ained relatively m in or and did n ot becom e the core o f the single m arket ini­ tiative. A ny in flu en ce Davignon m ight have had on the SEA rem ained indirect, throu gh his efforts to m obilize European transnational business groups. D u rin g the 1970s internal m arket liberalization had also been an im portant if secondary co n cern o f Com m ission and C o u n cil secretariat officials. W ith the co m p letio n o f the C om m on M arket, the Com m ission had p roposed co m p re­ hensive program s to h arm on ize regu latory barriers to trade u n d er A rticle 100 o f the Treaty. In 1968 the Com m ission tabled a program o f 281 proposals with a p ro p o sed dead lin e o f eigh teen m onths fo r com p letion. Yet harm onization p ro ­ ce ed e d slowly. Four years later an o th er deadlin e, 19 7 7, was set. By 1986, nearly twenty years later, several h u n d red directives had b een passed, but most were m odest and required an excruciatin gly lo n g time to negotiate. By the late 1970s N TBs w ere co m in g into fo rce faster than the EC was n egotiating them away. O verall, m oreover, the issue o f regulatory harm onization, a highly technical m atter in flu en cin g a fragm ented set o f dom estic bureaucratic interests, re­ m ained o b scu re.111 From 1980 to 1984 Com m ission officials, led by Com m issioner fo r Industry K arl-H einz Narjes, develop ed a com prehensive plan to overcom e NTBs. Starting with the harm onization agen da o f 1968, N aijes added the reduction o f customs

110 Wayne Sandholtz, Hi-Tech Europe: The Politics of International Cooperation (Berkeley, 1992), 9 5 -9 7 , 159, 1 7 0 -17 1 , 305. Sandholtz concludes from the study o f ESPRIT thatjuste retour is a “nec­ essary” condition for cooperation, but in this regard ESPRIT was exceptional, in large part because some governments were not strongly committed to the program. At about this time, the French for­ eign minister defended the acquis communaulaire in agriculture, for example, by arguing that “juste retour is not an EC idea.” 1,1 Nicolaidis, Mutual, 13 7 -14 1; interview with a Campo.

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The Single. European Act, 19 8 4 -19 8 8 fo rm alities a n d a plan fo r d e re g u la d o n o f services a n d transp ort, th e latter e n ­ d o rsed by th e E u ro p e a n C o u n c il in D e ce m b e r 198 2. T h e n ex t year, w ith stron g p erso n a l su p p o rt fro m K o h l, N arjes a n d C o u n cil officials secu re d a g re em en t on a sp ecial C o u n c il o f M in isters fo r in tern a l m ark et m atters. T h is was critical, fo r N T B issues ten d to b e h ig h ly tech n ical an d w ere discussed in the g e n era l C o u n ­ cil o f M inisters. M inisters te n d e d to b e b o re d a n d h a d litd e in cen tive to o verru le b usin ess an d b u rea u cra tic o p p o sitio n to o b scu re proposals; a C o u n c il official w ith d e ca d e s o f e x p e rie n c e recalls n ev er seein g a m inister atten d C o u n cil dis­ cussions o f h a rm o n iza tio n issues b e fo re 19 8 4 .112 L a te r th a t year, N a ije s g a in ed approval o f a d irective ca llin g fo r a “standstill cla u se ” re q u irin g p rio r n otificatio n o f any new standards. H e discussed future p lan s w ith business g ro u p s an d ju s t b e fo re leavin g o ffice in D e cem b er 1984 re ­ lea sed a co m p re h e n sive d o cu m e n t sum m arizin g the n ecessary proposals. By the tim e D elo rs an d C o ck fie ld e n te re d o ffice in Jan u ary 19 8 5, m any o f the early steps tow ard lib eralizatio n h a d b e en taken . C o c k fie ld ’s W h ite P ap er o f J u n e 198 5, d e ­ tailin g alm ost 300 p ro p o sals fo r in tern al m ark et lib eralizatio n , was co m p rised alm ost e n tirely o f m aterials in th e files o f top C om m ission officials. In d eed , at the tim e C o ck fie ld assem bled th em , o n e -th ird o f the p rop osals w ere alread y u n ­ d e r c o n sid e ra tio n .113 T h e m ost effective steps to elim in ate adm inistrative an d re gu lato ry barriers to trade d u rin g this p erio d , how ever, w ere taken n o t by sup ran atio n al officials o r tran sn atio n al in terest g ro u p s b u t by n atio n a l go vern m en ts them selves. In early 19 8 4 the British g o v ern m e n t set fo rth an a g en d a fo r the rem oval o f “a ll” E C trad e barriers. T h e F ren ch go v ern m e n t, c o n ce rn e d that G erm an standards w ere b lo ck in g im ports, an d th e G erm an go v ern m e n t, c o n ce rn e d that F ran ce w ou ld close its b o rd e rs becau se o f b a lan ce o f paym ents difficulties, successfully pressed fo r a bilateral F ra n co -G erm a n a rra n ge m en t to sim plify and even tu ally elim in ate b o rd e r fo rm a litie s— a step that w ou ld fo rce a m easure o f d e facto m utual re c o g ­ n ition . In S a arb rü ck en shortly after the F o n tain eb leau sum m it o f M ay 1984, K o h l a n d M itterran d a g re e d to n eg o tia te th e a b olitio n o f all co n tro ls o n n orm al g o o d s traffic, h a rm o n iza tio n o f do m estic veterin a ry an d sanitary legislation, free m o ve m e n t o f p e o p le , a n d co m m o n stream lin ed adm inistrative p ro ce d u re s— an a cco rd co d ifie d in the T reaty o f M oselle. A n o th e r a g re em en t was sign ed in July. T h e G erm an g o v e rn m e n t also a g re e d to bilateral n eg otiatio n s an d to re co g n ize F re n ch standards w h ere possible. M ean w h ile discussions co n tin u e d o n fo o d p ro d u cts, th o u g h im p lem en ta tio n o n the G erm an side was, as we have seen , dis­ a p p o in tin g. B elgiu m , th e N eth erlan d s, a n d L u x em b o u rg , w h ich had lo n g since 112 Interviews with a Campo, von Moltke; interview with Karl-Heinz Naijes, 1992. Heinrich von Moltke, “Binnenmarktpolitik," in W eidenfeld and Wessels, Jahrbuch 1982, 14 9 -15 3 , and “Binnen­ marktpolitik,” in Jahrbuch 198}, 1 4 1-5 3 . Karl Kaiser et al., The European Community: Progress or Decline! (London, 1983), 1 4 - 1 5 , 4 5 - 4 7 . This policy document, drafted by the heads o f leading national re­ search institutions, demonstrates the range o f the consensus at the time that “the single most im­ portant action the Community can take in response to rising unemployment and falling GDP" is to endorse the plan for unity o f the internal market, including deregulation o f services and transport— backed by majority voting. Even during the period o f Europessimism, contemporary observers noted the increase in momentum in internal market matters. 115 Interview with Braun; a Campo; Cockfield, European, 29,42; von Moltke, “Binnenmarktpolitik”

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elim in ated b o rd e r controls, argu ed that their arran gem en t should be ge n era l­ ized; K ohl and M itterrand called fo r eventual accession to the B en elux custom s un ion. T h e idea was to create a “super E E C ,” p ro m o d n g trade liberalizadon w hile ren ew ing the threat o f a tw o-der E urope. By D ecem ber 1984, before Delors en tered o ffice, a tentative accord had been reached that would soon result in the S ch en gen A greem en t elim inating custom s ch ecks.114

British Exclusion and the Call for an Intergovernmental Conference: “A test o f truth ” We have ju st seen that the SEA em erged from a co n flu en ce o f the desire for in sd tu donal changes in the E C in gen eral, as dem onstrated in the G enscherC o lu m b o initiative, and the substantive agen da o f single m arket reform . In the preparations fo r F ontainebleau, national leaders w ere thinking ahead to ju st such a package. A s G eoffrey H owe d eclared at the time: “T h e n egotiation launched at Stuttgart and con tin ued at A th en s in D ecem ber 1983 is n ot ju st about the b u d g et and the CAP. It is abou t the w hole future shape and direction o f E u ro p e.” M itterrand and K ohl prop osed QMV, the rem oval o f fron tier controls, and in ter­ nal m arket liberalization; T h a tch er exh ib ited a newly positive spirit, circulating a p ap er en tid ed “Europe: the F u tu re” outlinin g the British go vern m en t’s vision fo r E urope. A t the head o f her list o f priorities was liberalization o f the internal m arket, particularly in services, and co o p eratio n on foreign policy. Foreign M in­ ister H owe prop osed the rem oval o f “a ll— and I m ean all, econ om ic barriers,” suggesting 1990 as a deadlin e. “Europe: the Future” also called fo r inform al Q M V w here the Treaty provided fo r it. O n the L u xem b o u rg C om prom ise, nations should be able to veto “w here a very im portant national interest is at stake” but “should be required . . . to set o ut their reasons fully” before the European C o u n cil.115 K ohl and M itterrand grasped the initiative and backed their dem ands fo r fo r­ m al treaty am endm ents with renew ed threats to create a “two-track” Europe. T h e y sough t to construct exp ert com m ittees along the lines o f the Spaak C o m ­ m ittee o f 1 9 5 5 - 5 6 that had led to the Treaty o f Rom e; in deed, it was often in ­ form ally term ed “Spaak II.” T h e leaders aim ed to give the com m ittee a high p ro ­ file by nam ing Karl Carstens as its head, b ut through a diplom atic misstep the Irish p rim e m inister nam ed his com patriot Jam es D ooge instead. M itterrand signaled gran d am bitions by app ointin g M aurice Faure, the French lead n eg o ­ tiator fo r the Treaty o f R om e negotiations, as his personal representative. Faure arrived at the second m eetin g o f the com m ittee with a p roposed draft rep o rt ap­ proved by M itterrand him self (over the objections o f the Q uai d ’O rsay), w hich

114 Heinrich von Moltke, “Binnenmarktpolitik,” in Weidenfeld and Wessels, Jahrbuch 1984, 143 -154 ; Pearce, Sutton, and Bachelor, Protection, 6, 14, 47-49, 66, 14 0 -14 1; Helen Wallace and William Wallace, Hying Together in a larger and More European Union (The Hague, 1 995), 7 1; Geoffrey Howe, “Grossbritannien und die Bundesrepublik Deutschland als europäische Partner,” EuropaArchiv 39 (10 November 1984), 637. 115 Howe, “Future,” 190; “Europe: The Future— United Kingdom Memorandum (June 1984),” in Gazzo, Towards, 8 6-95.

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The Single European Act, 1984—1988 b ecam e the w orking text. H e was m ade rap porteur and im m ediately convinced the com m ittee to act by m ajority vote, fu rth er isolating the British and other skeptics.116 T h e com m ittee viewed procedural reform as its “real task” but was unable to agree on the two decisive issues: Q M V and veto rights. T h e British delegation ar­ rived e x p ectin g to find them selves located com fortably in the cen ter o f the spec­ trum , alon gside France and perhaps Germ any. France, however, jo in e d Germ any in callin g fo r an “intergovernm ental co n fe re n c e ” (IGC) to n egotiate form al treaty chan ges establishing Q M V on internal m arket issues— a position backed by all e x ce p t Britain, G reece, and D enm ark, which supported only reiteration o f the voluntary, inform al steps to en co u rage m ajority voting already acknowl­ e d g e d in the Stuttgart D eclaration. T h e D o o ge Com m ittee agreed to disagree, with the position o f the seven reco rd ed in the text o f its rep o rt and the dissent o f the three in the footnotes. O n substantive matters, however, the British fared better. T h e rep o rt con tain ed m any originally British proposals, such as com m on E C standards, liberalization o f transport and insurance services, and op en p u b ­ lic p rocurem en t. By late 1984 the m om entum toward internal m arket reform was clear to inside observers.117 A s the D o o ge C om m ittee deliberated, it cam e time to nam e a new European Com m ission and its new president. France and Germ any, seeking to exped ite the relance by giving the position political prestige, pressed fo r a president from a large country. D om estic coalitional politics appears to have prevented G e r­ many, w hose inform al turn it was, from n om inating a candidate. Etienne Davi­ g n o n , the self-nom inated fron t-run n er, lacked national political exp erien ce and was con sidered by som e insufficiendy inspiring, though he was apparently o n e o f T h a tc h e r’s first choices. C laude Cheysson, p roposed by M itterrand, was rejected by both K ohl and T h a tch er as too intem perate. Delors, freed from the post o f m inister o f finan ce ju s t in time by a reshuffle in France, was nom inated at the last m inute. D elors’s stature as a politician with senior m inisterial e xp eri­ en ce, his years as a m em ber o f the E C E con om ic and Social Com m ittee, and his reputation fo r sensible econ o m ic policy-m aking led G erm any and Britain to sig­ nal im m ediate approval. T h a tch er nonetheless took the sensible precaution o f n am in g L ord C o ck fie ld — selected fo r his Cabinet-level exp erien ce and, Howe later rem arked, his “single-m indedness in o u r cause”— as a liberal, free-trade coun terw eight. O n i 7 j u l y 1984 D elors accepted the p ost.118 W hen D elors assum ed the presidency, internal m arket reform was n ot fo re ­ m ost in his m ind. His own preferen ces w ere n ot unlike those pursued by the French governm ent: he favored a European social policy (his first m ajor initiative 1,6 “Conclusions o f the European Council at its Meeting in Fontainebleau" (26 June 1984), re­ printed in Gazzo, Towards, 9 6 -9 7 ; Haywood, “French," 137-138; Favier and Martin-Roland, Le dé­ cennie, 2 :2 1 1 -2 1 2 . 117 Haywood, “French," 138-139; Financial Times, 30 November 1984, 3 December 1984, 22 March 1985, and 10 May 1985; Le Monde, 30 March 1985; Corbett, “ 1985,” 269; von Moltke, “Binnenmarktpolitik 1984” (1985), 143-154. 1 ls Howe, Conflict, 405. Many are said to have proposed Delors. Grant, Delors, 58; Fitzgerald, All, 588; Howe, Conflict, 404; Ross,Jacques, 28; Bauchard, Guerre, 266.

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as p re sid en t), a stronger E u ro p ean industrial and tech n o lo gy policy, and, above all, d e ep er m on etary in tegradon . Yet befo re assum ing office, D elors em barked on a trip to ten capitals, soun din g o u t m em ber governm ents on differen t “big id eas” to relau n ch the EC. M em ber states differed over p olid cal cooperation, m on etary policy, defen se, and p ro ced u ral reform , b u t all (possibly exce p d n g G reece) w ere in substantial agreem en t only abou t the n ee d fo r internal m ar­ ket lib eralizatio n — a fact already reflected in the Fontainebleau com m uniqué. D elors also spoke with a business gro u p led by M ax K ohnstam m , an old M onnet associate, w ho suggested that internal m arket reform s w ould require an exten ­ sion o f Q M V 1,9 In his m aiden speech befo re the E uropean Parliam ent on 14 January 1985, D elors an n o u n ced the goal o f co m p letin g the internal m arket by 19 9 2 — a date coeval with two four-year term s o f the C om m ission— aim ing to ren d er it irre­ versible by 1988 and co m p lete by 1992. Yet he rem ained skeptical. N ot until late 1985, how ever, did this becom e the core o f his reform program . Just b efo re the M ilan sum m it in m id -1985, after the D o o ge Com m ittee had com p leted its work, h e (som ewhat reluctandy) p ro p o sed a link betw een Q M V and internal m arket liberalizad on . Yet the Com m ission, fearin g failure, rem ained lukewarm; even then, equally im portant priorities app ear to have been a doublin g o f R & D fu n d ­ in g and m onetary refo rm .120 D espite personal doubts, D elors was n ot o n e to waste an opportunity. W hen the C o u n cil “endorsed the goal o f a single m arket by 1992 and called up on the . . . Com m ission to draw up a detailed program with a specific dm etable,” Delors passed the C o u n cil request to C o ck field , the internal m arket com m issioner, w ho in terp reted his m andate broadly and drafted a W hite Paper. In lieu o f a firm d efin ition o f a “com p leted internal m arket,” C o ck fie ld ’s W hite Paper set forth nearly 300 specific proposals, in clu d in g VAT harm onization, service d eregu la­ tion, standardization, and m utual recogn ition in various areas, accom pan ied by a b rie f philosop hical defen se o f free trade. C o ck field claim s in retrospect to have sough t deliberately to lim it the ability o f governm ents to analyze the W hite P aper by sen din g it only ten days b efo re M ilan— though, as we have seen, this tactic was n o t successful— then leakin g it strategically to the press.121 M eanw hile the m em ber states had becom e m ore active. In preparation fo r the 119 Interviews with Delors, 1989-1996. 120 Attali, Verbatim, 1:718 . Among Delors's own priorities appears to have been creation o f a European Technological Community; upon assuming the Commission Presidency, Delors also took the monetary portfolio for himself. Grant, Delors, 6 6 -6 7 ; interview with Jacques Delors, 1996. Maria Green Cowles argues on the basis o f interviews that his major concern was institutional reform, but others contest this. Delors appears to have been cautious about linking internal market and institu­ tional change in 1995 but was convinced “after six months . . . the institutional question cannot be avoided.” Press conference o f 26 June 1985, cited in Ken Endo, “Political Leadership in the Euro­ pean Community: The Role o f the Commission Presidency under Jacques Delors, 198 5-1995,” the­ sis, O xford University, 1995, 63. Also Ross .Jacques, 31; Cockfield, European, 53-54; Bulletin EC 3 -19 8 5 , pt. 1.2.4. 121 Cockfield, European, 29, 33, 42, 48 -52 , 82-83; interviews with Braun and a Campo. Mean­ while Genscher and Dumas worked to propose the EUREKA project. Genscher, Errinerungen, 376 377 -

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The Single European Act, 1984—1988 L u x em b o u rg and M ilan sum m its o f M arch and Jun e 1985, G erm any proposed to relau n ch the C om m u n ity by lim iting the L u xem bo u rg C om prom ise, exten d ­ in g EC co m p eten ce in fo re ign affairs, and co m p led n g the internal m arket— a p ackage based on the D o o ge Report. France p roposed a new A rticle 235 p er­ m itting som e coun tries to m ove ahead w ithout others (“flexibility”). G erm any rejected the clause, alon g with any form al com m itm ents on m on etary policy w ith ou t ratification by national parliam ents. T h e French governm en t called the G erm an d em an d “a retreat from the current situation,” since it sought progress w ithin the EM S only by intergovernm ental a greem en t.122 T h e British governm ent, supporting econ o m ic reform but nonetheless h o p ­ ing to ch an n el m om entum away from treaty am endm ents, launched a co u n ter­ offensive. Britain tied its previous proposal for internal m arket reform , first an ­ n o u n ced b efo re the Fontainebleau sum m it and now codified in the W hite Paper, to ge n d em e n ’s agreem ents to abstain rather than invoke the veto. T his p ro ce ­ dural proposal now in cluded two new elem ents: voluntary restraint in invoking the L u x em b o u rg Com prom ise at lower levels o f the C o u n cil o n ce the chiefs o f state had set an objective (similar to a French proposal several years earlier) and a separate treaty codifying principles o f inform al political cooperation. O n e o f the two F rench papers fo r the co n feren ce called fo r m ore o r less the sam e thing, addin g the o ld French proposal that vetoes must be justified in writing before the C o u n cil.123 As the M ilan sum m it o p en ed , the heads o f govern m en t unanim ously approved the W hite Paper. T h ey also im m ediately accep ted the British proposal on in for­ mal im provem ents to decision-m aking; but most coun tries sought to go further. T h e British, Danes, and G reeks rejected D elors’s proposal fo r im m ediate am en d­ m en t o f the T reaty to provide fo r Q M V on Articles 9 9 - 1 0 1 . G en scher proposed a return to the decision-m aking p ro ced u re w hich existed before the L u x em ­ bo u rg C om p rom ise and Q M V on internal m arket issues, b ut som e (presum ably in cludin g T h atch er) fo u n d ren unciation o f the L u xem bo u rg C om prom ise un ­ acceptable. Even w atered down with British am endm ents, the text was rejected .124 A n x io u s to avoid a failure u n d er its presidency, the Italian governm en t called u n ex p ected ly— at least fo r som e participants— fo r a m ajority vote on w hether to co n ven e a form al IG C u n d e r A rticle 236. T h e Com m ission and in particular Em ile N oël rep ortedly w orked on the proposal with Foreign M inister A ndreotti, w ho was co m p etin g with Prim e M inister C raxi to be seen as p ro-E uropean. G er­ m any and the B en elu x coun tries im m ediately supported Italy, France and Ireland cautiously jo in e d them , and Britain, D enm ark, and G reece w ere left in op posi­ tion. British protests (on p ro ced u ral grounds) against invocation o f a first-ever m ajority vote in the E uropean C o u n cil w ere dismissed, and the co n feren ce was called. T h a tch er return ed from Milan in a fury b ut w ithin a few days allowed 122 Attali, Verbatim, 1:8 9 6-89 7. 125 De Ruyt, I.’Acte, 57-59; Haywood, “French,” 142-143; Gazzo, Towards, reprints British proposals. 124 Grant, Delors, 70 -74 ; De Ruyt, L ’Acte, 6 0 -6 1 ; Haywood, “French," 143; Gazzo, Towards (Supple­ ment), 3 -8 ; Commission document, COM (85) 352 (26 June 1985).

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h e rs e lf to b e p ersu ad e d , by H ow e a m o n g others, that Britain sh o u ld attend the IG C . T w o re late d co n sid era tio n s a p p ea r to have in flu e n ce d British th in k in g .125 First, B ritain h a d litd e to lose fro m Q M V o n W h ite P ap er issues an d o th e r A rticle 1 o o m atters such as service d e re gu la tio n . A carefu l, p roposal-by-proposal study by T h a tc h e r ’s associates c o n clu d e d that British interests co u ld be th reat­ e n e d in o n ly a few areas. N o r was the British go v ern m e n t d e a f to co n stan t re ­ m in d ers th at so m e p ro ce d u ra l ch an ges w ere n e e d e d to assure im p lem en tation o f th e in te rn a l m ark et p lan. H ow e recalls th at “so o n the irritations of M ilan fad ed in to h is t o r y . . . the U K still fo rm ally ch a lle n g e d th e n e e d fo r any T reaty ch an ges at a l l . . . [but] we w ere in truth e a g e r to h a m m er in to p lace the C o ck fie ld single m ark et p ro g ra m .” 126 S e co n d , Britain faced a ren ew ed th reat o f e xclu sio n . By the tim e o f the M ilan c o n fe re n c e , p u b lic statem en ts by D u tch , F ren ch , G erm an , and, to a lesser e x ­ ten t, Italian p oliticians suggested co n sid era b le su p p o rt fo r e xclu sio n . M itterrand ca lle d the d ecisio n s at M ilan “a test o f tru th .” A s we have seen, M itterrand and K o h l h a d e x p lo ite d the th rea t o f exclu sio n w ith g rea t finesse. T h e th reat was cred ib le: F ran ce h ad lo n g p ro m o te d “tw o-track” initiatives, esp ecially in hightech , an d d u rin g this p e rio d a tw o-track E C h a d fo u n d p ro m in en t e xp o n e n ts a m o n g E u ro p ean a cad em ics a n d co m m en tators. A rticle 82 o f the E u ro p ean P a rlia m en t’s D raft T reaty o n E u ro p e an U n ion p ro p o se d it as an alternative, and leg al exp erts seriously evalu ated it as a leg al e x p ed ien t. Inside observers at the tim e a gre e that the British in terest in liberalizatio n co m b in ed w ith a cred ib le th reat o f exclu sio n to decisively in flu e n ce British policy. Britain a tten d ed the IG C , a cce p te d the in evitability o f fo rm al T reaty am en d m en t, an d p layed a skep ­ tical b u t ultim ately co n structive ro le .127

The Intergovernmental Conference: A “clear and decisive” Victory A d raft o f the SE A was set fo rth d u rin g th e first m o n th o f the IG C , rem ain in g details w ere w orked o u t a m o n g fo re ig n m inisters and c h ie f executives at five m eetin gs betw een 21 O c to b e r an d 1 D e cem b er, an d the d o cu m e n t was sign ed in F ebruary 1986. T h e d raft in tro d u ce d Q M V u n d e r A rticle 100, as w ell as ar-

125 D c Ruyt, L ’Acte, 6 0 - 6 1 ; Haywood, “French,” 143; interviews with Kanzleramt official. Com ­ mission officials; British Prime Ministerial official; Gazzo, Towards (Supplement), 3 -8 ; Howe, Conflict, 4 4 6 -4 4 8 . T h e procedure for Treaty amendment under Article 235 offered two advantages to the re­ calcitrant: it excluded the Parliament and required unanimity. Th e latter limited the possibility o f “two-track” decisions, particularly in comparison with the Parliament’s proposal for a wholly new treaty. 186 Howe, Conflict, 447, also 40 8 -409, where Thatcher is portrayed as “enthusiastic,” even before Milan; Cockfield, “Real," 5. British officials were also concerned that formal treaty changes in an IGC might encourage movement beyond single market issues. Interview with former Prime Ministerial adviser, 1997. I!7 Interview with British Prime Ministerial official; von Moltke, “Binnenmarktpolitik 1984”; Cockfield, “Real.” See Helen Wallace with Adam Ridley, Europe: The Challenge of Diversity (London, 1985), especially chap. 5; Eberhard Grabitz, ed., Abgestufte. Integration: Eine Alternative zum herkommlichen Integrationskonzept? (Kehl am Rhein, 1984); Bieber, Jacque, and Weiler, eds., Ever, 16 7 -17 5 ; Corbett, "1985,” 242.

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The Single European Act, 1984-1988 tid es go vern in g services, transport, relevant extern al tariffs, capital movem ents, and righ t o f co rp o rate establishm ent.128 From the b e gin n in g all governm ents agreed on internal m arket reform along the lines o f the W hite Paper agenda; the n egod ad o n s defin ed the term s un der w hich the refo rm w ou ld take place. From the m axim alist perspective, the SEA was a process o f lim iting the scope and intensity o f reform to those procedural and substantive changes n eed ed to liberalize the internal m arket— a process necessary to secure the assent n ot only o f Britain b ut o f o th er m em ber states w ho, w h en it cam e to drafting a d o cu m en t, suddenly proved m ore jea lo u s o f th eir sovereignty than their public rh etoric m igh t have suggested. In addition, side-paym ents w ere prom ised to p o o rer coun tries w hich otherw ise threatened to veto the arrangem ent. Pressure from Britain and o th er governm ents exem p ted certain internal m arket functions. Fiscal harm onization rem ained subject to unanimity, and the rights o f em ployees and free m ovem ent o f persons rem ained outside E C ju ris­ diction. In substantive areas o th er than internal m arket policy, the lack o f co n ­ sensus reduced com m itm ents to a m in or o r symbolic level. T h e L uxem bourg presidency asked the Com m ission to p repare texts, an op portunity that Delors, still u n reco n ciled to reform focused p redom inantly on single m arket policy, e x ­ p loited to in tro duce m aterials on m on etary coop eration , technology, the e n ­ vironm en t, culture, and co h e sio n — only to see them rem oved o n ce again. New clauses co n cern in g political co o p eratio n , social policy, tech n ology policy, cu l­ tural policy, hum an rights, d evelop m en t aid, and energy did n ot g o beyond a codification o f current practice; environm ental policy, a new area, rem ained un ­ d er unanim ity.129 M onetary co o p eratio n was m ost contentious. It had lo n g been a personal in­ terest o f D elors and had been his first ch o ice as a substantive vehicle fo r reform . Com m ission proposals subjected progress toward a com m on m onetary fun d to un an im ous approval o f those who chose to participate— a two-track proposal that w ould have acco rd ed E C legitim acy to any effort by a sm aller gro u p to p roceed o n its own. C onsistent with the m on etary p referen ces outlined in C h ap ter 4, France and Italy felt that the D elors proposal was too weak, w hereas Germ any, Britain, and the N eth erlan ds o p posed any m ention o f m onetary policy. W hen G erm any and Britain lost p atience and tied m on etary coop eration to the co m ­ plete liberalization o f capital m arkets by the en d o f 1986, the others quickly a greed to a com prom ise that in cluded n o co n crete steps beyon d existing p o li­ cies. Com m ission activism was cu rbed shortly after the o p en in g o f the co n fe r­ en ce by an inform al m eeting o f the ministers o f econ om ics and finance, w ho in­ sisted— largely at G erm an insistence— that they be consulted befo re any furth er m onetary proposals w ere m ade to the co n fe re n c e.130 128 Gazzo, Towards, 2: 56ff. 129 De Ruyt, L ’Acte, 6 7-9 1; Corbett, “ 1985," 249-250,259; Noel, “Single," 8. The Commission and a number o f governments sought to exploit the negotiations to expand EC legal competences to in­ clude many general functions under Article 235. 130 Corbett, “1985,” 247-248; Gazzo, Towards, 2:24, 86. Also Gazzo, 1:38; Ludlow, Beyond, vi.

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In a form al sense the SEA left m em ber governm ents n o closer to EMU and p erhaps fu rth er away. O p p o sed by T h a tch er but pressured by G enscher, K ohl accep ted a rh etorical re feren ce suggested by D elors to the “progressive realiza­ tion” o f EM U in the pream ble to the revised treaty. D elors saw the clause as a le­ gitim ating device, but T h a tch er argu ed that the words “did n ot chan ge anything. If they did, I w ould n ot have agreed to them .” Subsequently she second-guessed her own decision, b ut the evidence suggests she was initially correct; the rh eto ­ ric itself had no effect. In addition, fo r the first time Britain gain ed legal re co g­ n ition w ithin the Treaty o f its veto pow er over m onetary integration, w hich it co u ld use to prevent increm ental, extra-Treaty developm ents toward EMU. In d eed , som e argued that progress toward m onetary union “seem [ed] likely to be ch eck ed rather than en co u rag ed .” Even D elors w ould state only that the re­ vised treaty m akes “allow ance fo r . . . evolution w hen this becom es necessary.” 131 G overnm ents agreed on the n eed fo r significant exem ption s and escape clauses. P oorer states feared the im position o f high standards. A rticle 8C directed the Com m ission to keep in m ind the con cern s o f p o orer countries in drafting directives. R ich er countries, notably G erm any and Denm ark, feared Q M V w ould fo rce them to lower environm ental, safety, o r social standards. In this context, the n egotiators deliberately avoided discussing the L uxem bourg C om prom ise o r the p rocedures fo r calling a majority vote (the latter determ in ed later by the C o u n cil itself). Instead, G erm any p roposed that the governm en t with the h ig h ­ est standards be acco rd ed a veto. T his qualitative veto was rejected, but the final T reaty instructed the Com m ission in A rticle io o A (3 ) to take into accoun t high standards and, m ore im portant, retained a w eaker veto. A rticle io o A (4 ), written by the c h ie f executives them selves in the final summit session, perm its nations outvoted in the C o u n cil o r wishing to invoke a safeguard clause to retain their dom estic regulations u n d er A rticle 36.132 T h e SEA introduced a coop eration p ro ced u re w hereby Parliam ent could in­ tervene late in the legislative process to veto legislation o r to add am endm ents w hich, if approved by the Com m ission, w ould be placed before the C o u n cil u n ­ d er votin g rules sim ilar to those governin g Com m ission proposals. From the perspective o f the Com m ission and the m em ber states, this p ro ced u re increased the participation o f the Parliam ent w ithout in fringing on the form al powers o f eith er the Com m ission or the C o u n cil.133 To be sure, G erm any and Italy consid,51 Gazzo, Towards, 1:8, also 2 5 -2 6 ;Thatcher,Downing, 7 4 1;Economist, 30 November 1991,47; De Ruyt, L ’Acte, 272; Corbett, “ 1985,” 268. The SEA included language limiting the EMS to its present functions. The view that the outcome reflected “a triumph” for British negotiators has been most cogendy argued by Taylor in “New.” 152 Under Article iooA (4), it is now the Court and, to a lesser extent, the Commission— no longer the member-states, as under the Luxembourg Compromise— that ultimately determines what con­ stitutes proper justificadon for exempting a state from a Community internal market decision. Implementation has subsequently emerged as an important area o f conflict. De Ruyt, I.'acte, I72ff; Haywood, “French,” 146. 155 Here I follow the critics o f Tsebelis’s formal analysis o f Parliamentary powers, which deliber­ ately overlooks the element o f the procedure viewed as most critical by Commission officials at the time, namely the need for the Parliament to gain Commission approval, as well as informal pressures and the threat to veto, which are decisive. Cf. Tsebelis, “Power.”

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The Single European Act, 1984—1988 ered it in adequate; both sough t to institutionalize face-to-face negotiations b e­ tween C o u n cil and P arliam ent— a n on -bin ding “conciliation” o r bin ding “co d e ­ cision” p ro ced u re. Britain and D enm ark op posed any increase in parliam entary powers. T h e balance was held by the B en elu x countries, w hich sought to m ain­ tain the cu rren t powers o f the Com m ission, w hich they viewed as a guardian o f sm all state interests. T h e new co o p eratio n p ro ced u re was exten d ed to Article 100 and certain social, tech nological, and environm ental decisions, but n ot to o th er areas such as liberalization o f services, capital m ovem ents, and transport policy. Largely at G erm an insistence, EP consultation was required for all legis­ lation, and EP assent was reqidred fo r the accession and association o f new countries. Efforts to require assent for am en din g the Treaty, for new rules on EP elections, and fo r the creation o f new financial resources were blocked by one o r m ore o f Britain, France, and G erm an y— in the case o f financial resources, by all th ree.134 O n e final provision essential to the passage o f the internal m arket program was the expansion o f “structural fu n d s”— infrastructural fun din g for p o orer re­ gions o f the Com m unity. T his so-called co n vergen ce policy was necessary not because it was an essential elem en t o f econ o m ic liberalization, as the Com m is­ sion at times claim ed, but because it was the political price o f support from G reece, Ireland, and Italy, and later Spain and Portugal. As the report o f the in­ tergovern m ental com m ittee that p repared the negotiations (the D on delin ger G roup) m ade clear, “som e delegations [considered] appropriate provisions . . . a condition for the acceptance o f the proposals on the Internal Market,” 135 T h e richer coun tries hesitated to o ffer anything im m ediately but agreed that regional, struc­ tural, and d evelop m en t funds w ould be “significandy increased in real terms within the limits o f financial possibilities”— a phrase that laid the foun dation for a sizable increase in fun din g approved in 1988. D elors was active in m anaging the n egotiations over the structural funds. In 198 7 he linked solutions to the structural, agricultural, and bu d get problem s into a single negotiation. A greem en t on structural funds, viewed skeptically by T h atch er, show ed the willingness o f G erm any and France to threaten Britain on ce again with exclusion. T his threat is often incorrectly attributed to Delors and a Com m ission threat to resign, but as usual the power behind the threat was quietly b ut firm ly w ielded by K ohl him self. H e agreed to provide som e o f the e x ­ tra funds, then faced down T h a tch er in a late n igh t “confessional” by threaten­ ing to issue a fo u r-p o in t com m u n iqué a n n o u n cin g that the EC w ould h en ce­ forth do business w ithout B ritain.136 D om estic ratification was unproblem atic, though delayed in D enm ark and Ireland, w here constitutional obligations required a referen dum , and in Italy,

134 Interview with Delors; De Ruyt, L ’acte, 124ff. A Commission proposal to grant itself extensive implementing powers, to be overridden only by unanimous vote o f the Council, was summarily rejected. 1,5 Gazzo, Towards, 2:58. 156 Interview with Kanzleramt official, who made transcripts available. For incomplete treatments, Ardagh, “Will," 44; Ross, Jacques, 40 -43.

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w here the SEA was criticized fo r n ot go in g far en o u g h . Italian prim e m inister C raxi vo iced doubts that the SEA in cluded en o u g h o f the m axim alist agen da and prom ised support only if the E uropean Parliam ent approved it— w hich it had no ch o ice b ut to do. In the wake o f the L u xem b o u rg sum m it, K ohl and M itterrand stated— th o u gh the statem ent was perhaps fo r posterity— that they w ould have been p rep ared to g o fu rth er o n the powers o f the Parliam ent and m on etary policy respectively, as w ell as o n QMV. In Britain, by contrast, W hite­ hall studies term ed the o utco m e a success on “all the points w hich w ere o f real im p o rtan ce,” and T h a tch er hailed the results as “clear and decisive.” '*7

Explaining Interstate Bargaining: “Staying in the game” T h e co n ven do n al w isdom accords decisive in flu en ce on the SEA to the p olit­ ical entrep ren eursh ip o f visionary, acdvist E C officials, ju d g es, parliam entarians, and transnational interest groups. T his view is gro u n d ed , explicitly or implicidy, in the assum ptions o f supranational bargaining theory, nam ely that inform ation and ideas are scarce com m odities vital to international coop eration and that supranational officials have a com parative advantage in providing them. T h e most extrem e support fo r this position com es from participants, notably L ord C o ck field , w ho claim s, as we have seen, that the m ajor d ifferen ce between the successful SEA and previous reform efforts was the existence o f an activist Com m ission. A cadem ic analysts have follow ed him. T h e central conclusion o f G eo rge Ross’s study o f the D elors Com m ission is that the SEA. w ould have been im possible w ith out the particular French tradition o f technocratic political vol­ untarism fo u n d in the person o f Delors: “T h e political lucidity o f the Com m is­ sion’s proposals and the shrewdness with w hich they have been presented have been central variables in E u ro p e ’s forw ard m ovem ent. . . . T h e Com m ission had the pow er and the institutional right to pick and choose am ong possible co u rs e s .. . . T h e right c h o ic e s . . . co u ld set the C om m unity in m otion again. Bad political w o r k . . . w ould have wasted the opportunity.” 138 In the sam e vein, Wayne Sandholtz and Joh n Zysman insist that structural con dition s w ere “co n tin gen t” and “in d eterm in ate”; therefore supranational entrep reneursh ip was required to “create a co m m o n E uropean interest and construct bargains.” 139 M aking the in­ form ational assum ptions m ore exp licit throu gh gam e theory, G eoffrey Garrett and Barry W eingast speculate that ECJ decisions may have provided a necessary focal p oint, perm ittin g governm ents finally to coordin ate on a com m on set o f liberalizing p o licies.140 O th ers argue that m obilization o f transnational business gro u p s— eith er spontaneously o r with supranational en co u rag em en t— was d e ­ cisive because it perm itted interested parties to persuade o r bypass reluctant na­ tional governm en ts.141 157 Interview with British Prime Ministerial Adviser; Howe, Conflict, 457. 158 Ross.Jacqttes, 3, 12. 159 Sandholtz and Zysman, “ 1992,” 128. 140 Garrett and Weingast, “Interests,” 189. On p. 190, however, they concede that this is a “one­ sided theory that overlooks the power and functional interests o f major governments.” 141 Cowles, Politic?, Sandholtz and Zysman, “ 1992.”

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The Single European Ad, 1984—1988 Claim s fo r the im p ortan ce o f supranational entrep reneursh ip are, I argue, m uch exaggerated , n o t least because they are based simply on the facts that supra­ n ational officials w ere active and the n egotiations successful, n ot on a m eth o d­ olo gically so un d evaluation o f their in flu en ce. Instead, the data confirm s a view m ore consistent with in tergovern m en tal bargaining theory. T h ro u g h o u t the n e ­ gotiations, national c h ie f executives— K ohl, M itterrand, T h a tc h e r— w ere active, w ell-in form ed participants. M any actors, n ot least the m ost interested national governm en ts, w ere w illing and able to p erform critical n egotiating fun ction s— advancin g initiatives, m ediating am ong governm ents, and m obilizing interested social groups. By the first h a lf o f 1984, at the latest, single m arket liberaliza­ tion was reco gn ized as the only program likely to com m and consensus am ong the m ajor governm ents. W h ere distributional disagreem ents em erged, the p ref­ e ren ces o f m ajor m em ber governm ents im posed strict lim itations on possible bargains. G overnm ents vetoed agreem en ts they op posed , threaten ed to exclu d e others from those they supported, and offered side-paym ents to cin ch the deal. By contrast, Com m ission officials, Europarliam entarians, and m any business groups viewed the SEA as a second-best alternative to m onetary integration, d e ­ m ocratization, industrial policy, o r foreign policy coop eration. In short and as in tergovern m en tal theory predicts, dem ands by pow erful governm ents, n ot the supranational supply o f proposals, im posed the bin ding constraint on co o p era ­ tion. T h e decisive evidence is reviewed below. T h e m ost fun dam en tal constraints on reform were con vergen t national d e ­ m ands fo r liberalization, n ot the supply o f proposals. By 1983 national p refer­ en ces had co n verged sufficiendy that the three m ajor governm ents were willing to m ove beyon d the existing level o f E uropean integration and supported single m arket reform as the optim al way to d o so. A fter resolving accession and budget wrangles, they turned their attention to this project. V iable proposals w ere n u­ m erous, co m in g from governm ents, supranational actors, and private groups. In deed, successful bilateral Franco-G erm an negotiations and m ultilateral dis­ cussions (the Sch en gen A cco rd ) on n on tariff barriers and custom s form alities predated the lau n ch in g o f discussions w ithin the EC. Som e transnational and dom estic interests m o bilized spontaneously. O th e r proposals, such as service liberalization, w ere advanced by the British. By 1985, w hen the SEA cam e un der serious consideration, som e E C reform s w ere already in place, in cludin g creation o f the Internal M arket C o u n cil and the standstill agreem ent. G overnm ents were sufficiendy m obilized that m ost Com m ission proposals respon ded to specific requests from m em ber states. A fter 1983 internal m arket liberalization em erged as the most consistent target fo r reform in governm en t proposals from all three m ajor governm ents; Q M V was sup ported by two o f the three. T h e direct result was pressure fo r single m arket reform and a cred ible threat o f exclusion to achieve QMV. T h e decisiveness o f ch an gin g dem an d rather than shifting supply is most clearly seen if we com p are the SEA to previous Com m ission proposals. T h ro u g h ­ o ut the late 1960s and 1970s Com m issioners had p roposed m any o f the same item s as part o f various packages, often with sim ilar deadlines, only to see gov­ ern m en ts reject o r ign o re them . Narjes revived this agen da in the early 1980s, 369

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pressing fo r sim ilar institutional and regu latory changes. By assem bling all this history into a co h e re n t proposal D elors and C o ck field m ade the most o f a fa­ vorable situadon, but they w ere d o in g what others had tried before. Narjes him ­ se lf believes in retrosp ect that “a strong proposal like a program fo r internal m arket liberalization and a chan ge in the treaty was unthinkable [nicht dmhbar] be fo re F ontainebleau. T h e Delors project o f 1 9 8 4 -8 5 w ould have b een a co m ­ plete failure in 1 9 8 1 -8 2 .” 142 G enscher, K ohl, and M itterrand clearly u n d er­ stood the sam e p oint, fo r betw een 1981 and 1984 they deliberately cleared the table o f existing problem s in o rd er to m ake room for a “relan ce.” E vid en ce from negotiations un derlines the im portance o f national go vern ­ m ents. T h ro u gh o u t, governm ents w ere relatively w ell-inform ed and specific policy proposals were plentifully available, w hether from national governm ents them selves o r from supranational officials, Europarliam entarians, transnational interest groups, m ultinational firms, o r dom estic interest groups. T h e French governm en t, as well as the L u x em b o u rg presidency, subm itted entire draft trea­ ties; each governm en t subm itted draft proposals on individual issues. To be sure, 6 0 - 7 0 p ercen t o f final provisions were based o n Com m ission w ording, but m uch o f it was essentially tech nical or legal drafting. G overnm ents exam ined the W hite Paper in detail, both dom estically and in jo in t sessions, subjecting particular elem ents to frank criticism ; 3 0 -4 0 p ercen t o f the clauses were altered accordingly. M any exam ples o f Com m ission agenda-setting noted by analysts, by contrast, are m arginal: for exam p le, the Com m ission’s ability to retain the w ord­ in g “an area w ithout fron tiers” in the SE A .143 A n o th er exam ple is the w idespread description o f what o n e jo u rn alist term ed D elors’s “intuitive flair for m arket­ in g,” w hich is said to have led him to link the single m arket package to the “m agic n u m b er” o f 19 9 2 .144 T h is decision, often treated by com m entators u n ­ fam iliar with the EC as a particularly effective en trepreneurial innovation, was in fact obvious and oft-em ployed. As we have seen, m ost m ajor Com m ission p ro ­ gram s con tain ed sim ilar deadlines, as did private plans like D ekk er’s. Indeed, ju st a few m on ths earlier, N aijes had drawn up an eighteen -m onth plan for a com m on E C custom s docum en t, gradual elim ination o f fron tier controls, a un i­ form m eth od o f co llectin g VAT on im ported goods, and an increase in m eetings o f the Internal M arket C o u n cil. A s C o ck field recalls, the idea was so obvious that the m ajor p roblem was settling disagreem ents over whose date to choose: “All sorts o f p eo p le had prop osed all sorts o f dates.” 145 In sum, the only regularity 142 Interview with Narjes. 145 De Ruyt, “L'Acte," 70 -90 ; interviews with Delors; Grant, Delors, 75; Corbett, “ 1985," 245; Richard McAllister, From EC to EU: A Historical and Political Survey (London, 1997), 162-183, esp. 176 -18 0 . '« Cf.Ardagh, “Will,” 4 5 -4 6 . 1,5 Cockfield, European, 33; Pearce, Sutton, and Bachelor, Protection, 48. A deadline was in any case no guarantee o f success. Many EC plans with deadlines failed, including Pompidou's 1982 dead­ line for “Union Politique,” monetary plans promulgated by Barre when he was at the EC, various EURATOM and energy sector plans not achieved, the Commission’s various proposals for nontariff barrier removal in the 1970s, and the Parliament’s deadline o f 1982 for direct elections. Indeed, such plans failed so regularly that Monnet advised against ever setting such deadlines. Martin Holland, “Jean Monnet and the Federal Functionalist Approach to European Union," in Philomena Murray and Paul B. Rich, eds., Visions of European Unity (Boulder, Colo., 1994), 93.

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The Single European Act, 1984-1988 that stands up is that every m ajor proposal given serious consideration had strong national sponsors. N early all o f the SE A was n egou ated by traditional means: ch ie f executives, ministers, diplom ats, and personal representatives m ade proposals, shuttled am on g capitals, h am m ered o u t bargains. Bargaining was eith er un m ediated or was m ed iated th rou gh the C o u n cil secretariat o r third countries. All govern ­ m ents w ere active alth ou gh, on econ o m ic interests alon e, o n e w ould have p re­ d icted som ew hat stronger British participation. D elors h im self stresses the im ­ p ortan ce o f M itterrand’s shuttle diplom acy, recallin g that he m et six times (once a m on th ) each with K ohl and T h a tch er during the 1984 French presidency alon e. Proposals, drafting, and o th er transactions were han dled, as they w ould be in the M aastricht Treaty discussions, by w hat G eoffrey H owe term ed a “tiny but im m ensely efficient L u x em b o u rg m ach in e,” backed n ot by the Com m ission officials but by the in tergovern m en tal C o u n cil o f Ministers secretariat head ed by N iels Ersb0ll, w hich p o lled m em ber governm ents, kept the a gen d a m anageable, and p resen ted the E uropean C o u n cil with dozens o f alternative proposals.146 W h ere the Com m ission participated, it did so largely at m em ber state discre­ tion. M em ber states accep ted Com m ission initiation and m ediation because it favored their interests, b ut they rejected a sim ilar role fo r the Parliam ent, es­ sentially ign o rin g the m axim alist agenda. Parliam entary reform proposals had been circulatin g since the Kirk R eport o f 1974, w ithout success; their ideas did n o t a p p ear in E uropean C o u n cil resolutions— supranational theory tells us n oth in g about the tim ing o f the SEA. N ational governm ents viewed the Parlia­ m e n t’s proposals as too o p en -en d ed (“real reform . . . requires a treaty e n ­ com passing all C om m unity policies and the institutions n eed ed to im plem ent th em ”), too dem ocratic (the powers o f the Parliam ent should be “exten ded to new spheres o f activity”), and too autom atic (the D raft Treaty w ould have gon e into effect w ith out unanim ous C o u n cil ap p ro val). In G erm any international dis­ cussions w ere u n d er way befo re the parliam entary draft treaty; the Parliam ent’s actions had little in flu en ce o n their co u rse.147 G o vern m en t representatives, abetted by the Com m ission, deliberately e x ­ clu d ed in d ep en d e n t MEPs from decisive forum s after Fontainebleau, ignoring the Parliam ent’s con tin uous protests against the em asculation o f the Draft Treaty and its exclu sion from the “real participation” in the discussions. T h o u g h a few coun tries sent MEPs to the D o o ge Com m ittee as representatives— recall that the C o m m ittee ’s im portan ce had been dow ngraded due to a Franco-G erm an d iplom atic m isstep— o n e o f its first actions was to reject the Draft Treaty and to b egin n egotiations with a French governm en t draft instead. T h e ease with w hich the m em ber states p arried EP pressure also casts d o u b t on any argu m en t that the SEA was necessary to co o p t rising dem ands for even m ore th orou gh institu­ tional reform . In the end, the Parliam ent overw helm ingly passed a resolution

146 Howe, Conflict, 454; McAllister, From, EC, 180-183. 147 Citations are from the European Parliament’s July 1985 formal opinion regarding the working proposal for an Intergovernmental Conference. See Gazzo, Towards, 2 :1 3 -14 . Also Gaddum,Deutsche, 247; Michael Burgess, Federalism and European Union: Political Ideas, Influences and Strategies in the European Community, 19 7 2 -/9 S 7 (London, 1989), 120-123.

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p rotesting that the Single A ct “in no way represent (s) the real reform o f the C om m u n ity that o u r p eo p les n ee d ,” but had to accep t the fait accompli. 148 As an initiator and a m ediator, D elors m ade his m ost im portant contributions n o t from his ability to in terven e but from his keen awareness o f the extrem e constraints u n d e r w hich he was acdng. D elors’s most statesm anlike ju d gm en ts co n cern e d the p ro p er m om ent to com prom ise. In S e p te m b e r-O c to b e r 1985 he finally d ro p p ed strong advocacy o f m onetary and social refo rm — his p er­ sonal priorities, b ut policies un acceptable to d ie U nited Kingdom and, in the case o f m on etary policy, G erm an y— and instead stressed the links am ong inter­ nal m arket reform , m ajority voting, and the increases in structural funds n eeded to win over G reece and the o th er southern countries, as well as environm ental policy, a traditional co n cern fo r Denm ark. D elo rs’s con ciliatory m ove may have facilitated political com prom ise, but it did so precisely because his position was closely circum scribed by the views o f the m ajor states. Indeed, his elim ination o f m on etary reform from the package resulted, as we have seen, from the direct pressure o f dom estic officials.149 A ll this said, it m igh t plausibly be argu ed that supranational political en trep re­ neurs played a significant if secon dary role in assem bling a particular package o f co n crete single m arket proposals and m obilizing transnational interests— a greater role than in any o th er episode in this book. N o governm en t as steadily and successfully p rom oted a package o f single m arket initiatives as did Narjes and later C o ck field in the Com m ission and the K angaroo G roup in the Parlia­ m ent. M ost o f this w ork had been com p leted befo re Delors and C ockfield arrived. N evertheless, they su cceeded in rein troducin g m any issues that the EC had been discussing fo r decades, presentation as a package directed at solving the growth crisis, the m obilization o f transnational business aroun d that package, and relendess publicity fo r it may have been essential in m aking reform possible. So m eth in g sim ilar m ight well have em erged in tim e— after all, the W hite Paper was a response to an exp licit request from the E uropean C o u n cil— but supra­ national and transnational entrep reneurs surely speeded it alon g.150 Perhaps even m ore im portant, the K angaroo G roup and the ERT, as well as D ekk er’s initiative, w ere all d evelop ed with strong en co u ragem en t from supra­ national officials o r parliam entarians. T h ese group s o f m ultinational, exporto rien ted firms focused on EC-level liberalization, so they circum vented the m ore traditional, nationally oriented representation o f o th er European busi­ ness groups. T h e latter, th ough supportive o f liberalization, were lim ited in that national o rgan izations— w hich m ore strongly represen ted im port-com peting, 14# De Ruyt, L'Acte, 56, also 85; Gazzo, Towards, 2 :17-2 0 , 27, 30, 41, 104; 1 :1 1 - 1 7 . 149 Noel, “Single,” 7-9 ; Corbett, “Single,” 248ff; De Ruyt, L'Acte, 7off; Financial Times, 9 October 1989; interview with Jacques Delors, Harvard University, 1989, and Jacques Delors, Our Europe (London, 1992), 25-29. Also Calingaert, 1992, 9. The initial draft amendments submitted by the Commission to the Intergovernmental Committee went far beyond the final settlement (except on the powers o f the Parliament), and Delors compromised only under pressure— a fact which hardly lends credence to Delors’s claim that he foresaw all in January 1985. This may, however, underesti­ mate Delors’s skill in setting the agenda, where aggressiveness may have paid some dividends. lso This is a similar conclusion, we have seen, to that reached by the most reliable studies o f the impact o f Court decisions on the SEA.

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The Single European Act, 1984 —1988 small business, and non tradables p ro d u cers— had to approve actions. T h ere was relatively litde spontaneous m obilization o f such groups. Som e British and G erm an business group s op en ly favored single m arket liberalization even b e­ fo re 1980, an d som e transnational groups, notably the ERT, initially op posed the single m arket initiative as second-best. Still, vocal support from these groups was quickly fo rth co m in g, and it con tributed to the m om entum in favor o f full im p lem en tation o f the “E urope 19 9 2 ” plan. In ch ap ter 7 we return to the rea­ sons fo r the u n ique role o f supranational actors in the SEA negotiations. T h e rem arkable efficiency o f the negotiations, their speed and co m p re h e n ­ siveness, m igh t be attributed in part to supranational entrepreneursh ip, the distributive outcom es them selves clearly reflected the preferen ces o f m em ber states. Single m arket liberalization was the only substantive area that enjoyed sup port from all three m ajor E C governm ents; Delors ascertained this before e n terin g o ffice and acco rd ed it decisive im portan ce, though he repeatedly tried to overcom e these constraints. T h e W hite Paper agenda was close to a lowest com m on denom in ator. T h e A nglo-G erm an veto o f m onetary and defense in te­ gration and the A nglo-F ren ch veto o f institutional develop m en t fo r its own sake left only the internal m arket initiative as a feasible basis for reform . It may well be that D elo rs’s actions as finan ce m inister o f France con tributed as m uch to the SEA. as did his actions as presid en t o f the Com m ission. Efforts by Delors and o th ­ ers to realize un iquely supranational and transnational p referen ces ten ded to be futile. T h e in com in g Com m ission president had sought m onetary and social in tegration, and leadin g Parliam ent groups had p roposed institutional reform ; the m ost prom in en t transnational business groups initially o p posed the W hite Paper agen da in favor o f a centralized E C industrial and infrastructure policy; even the ECJ had sough t gen eral application o f “m utual recogn ition ” rather than a broad package o f reform s lin k ed to QMV. T h e substance o f the SEA, as in tergovernm ental theory predicts, reflected above all the national priorities o f the m ost recalcitrant countries. Germ any, the N etherlands, and the U nited K ingdom rejected o utrigh t any m onetary co o p er­ ation that w ou ld require institutional changes. T h e French threatened to veto any package w ithout a m on etary clause, but the result was no m ore than rhetoric in exch an ge fo r M itterrand’s agreem en t in p rin ciple to m ove toward capital lib­ eralization. (T h atch er m ight have vetoed but was con vin ced that the clause w ould have little e ffe c t.)151 Exclusive focus on the single m arket, w ithout a large expansion o f tech n o lo gy program s, secured British support. Danish opposition killed Com m ission proposals fo r cultural policy but en co u raged the environ ­ m ental proposals. G en sch er prop osed strengthening the Parliam ent; Delors tried to exp lo it the issue to exp an d the Com m ission’s power, but his efforts were rejected by a large m ajority o f governm ents. E xceptions to Q M V reflected in di­ vidual national concerns: in gen eral, excep tion s supported by on e or m ore large countries, such as A n glo-G erm an opposition to Q M V o n fiscal and taxation m at­

151 In an oft-cited quotation from her memoirs, Thatcher herself later treats this as a decisive mis­ take, but in fact there is no evidence that the vague SEA treaty clause in any way forced or facilitated future movement on monetary policy. Thatcher, Downing, 555, 74off.

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ters, ten d ed to be sustained, w hereas those backed by sm aller countries, such as Irish o p p o sid o n to Q M V in banking matters, ten ded to be rejected .152 T h a tch er’s success in n eg o d ad n g a fundam ental revision o f the rules fo r calculating net obligad o n s to the E C bu d g et in effect co n clu d ed n egod ad o n s over the term s o f Bridsh accession begu n in 1970. T h e agricultural acquis communautaire in h er­ ited from the 1960s was a Franco-G erm an deal, but the new agreem en t re­ flected m ore closely the new trilateral balan ce o f pow er within the EC, which Britain achieved by linking its dem ands to obstruction on o th er issues. It also m arked an im portant m ove in the direction o i juste retour'm agricultural matters, a solution sim ilar to that adopted in R& D policy. To be sure, the Com m ission quietly slipped som e new issues, such as R& D and environm ental program s, into the revised treaty. Yet m ost co n cern ed fun cdon s that the E C had been handling u n d er in d irect authorizad on fo r years; there was litde op posidon from m em berstates to a con crete m andate to cover th em .15* Yet the agreem en t was n ot endrely at the lowest com m on denom inator. T hreats to veto and exclu d e had two consequences. First, the single case o f a go vern m en t accep ting a reform it did n ot su p po rt— British acceptan ce o f fo r­ m al treaty changes m andating Q M V — was achieved through the exp licit threat o f exclu sion . T h e Bridsh w ere particularly vulnerable not simply because e xclu ­ sion w ould be costly but because the T h a tch er governm ent strongly supported internal m arket reform . T h is threat w orked because, as we have seen, the FrancoG erm an threat o f exclusion was credible and was repeatedly em ployed from 1983 throu gh 1985. Paul Taylor observes: “Bridsh diplom acy . . . had to balance two objecdves: that o f satisfying specific interests, and that o f staying in the gam e. A m easure o f com prom ise in the fo rm er [becam e] necessary to achieve the lat­ ter.” 154 A sim ilar th reat— with con sequences m ore diffuse and va gu e — secured T h a tc h e r’s accep tan ce o f increased structural funding. Second, veto threats cam e, predictably, from those countries that gain ed least from the agreem en t. P oorer coun tries— with less interest than Britain in agree­ m e n t— could m ore credibly threaten to veto or obstruct it. T h e result was Article 8, d irecd n g the Com m ission to take accoun t o f the special n eeds o f p o orer coun tries in p rop osin g directives, and a prom ise o f side-paym ents— provided in cash, w hich im posed costs on un organ ized taxpayers rather than on powerful interest groups. In sum, the evidence strongly supports the intergovernm ental view that d e ­ m and fo r liberalization, that is, the preferen ces and power o f states, n ot the sup­ ply o f policy innovadons from in form ed and inventive entrepreneurs, that was decisive fo r integration d u rin g the m id-1980s. Com m ission and Parliam ent en trep ren eu rsh ip failed to shift any m ajor aspect o f the interstate bargain and con tributed only m odesdy to its efficiency; outcom es reflected credible threats o f veto and exclusion. A t m ost supranational entrep reneurs increased the effi­ 152 De Ruyt, I,'Acts, 75-80 ; i35ff; Corbett, “ 1985,” 245IT. 155 Indeed, some such shifts, as in environmental policy, were designed to in part avoid the auto­ matic introduction o f QMV under Article 100. 154 Taylor, “New,” 3. Also Haywood, 135-136 ; Cockfield, “Real,” 5.

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The Single European Act, 198 4-1988 ciency o f the n egotiatio n s— sp eedin g agreem en t and increasing the scope o f in­ ternal m arket re fo rm — by packaging existing proposals, presenting them as an active response to econ o m ic declin e, and h elp in g to m obilize group s that, after initial hesitation, cam e to support reform . Explaining Institutional Choice T h e SEA reform package in cluded various reform s designed to p ool and d e l­ egate sovereignty. T h ese in cluded the extension o f qualified majority voting for single m arket issues and a few o th er areas; the in troduction o f m ore autom atic p ro ced u res fo r liberalization, notably “m utual recogn ition ” and “referen ce to standards”; and the involvem ent o f the Parliam ent in the legislative process th ro u gh the “coop eration p ro ce d u re .” N um erous o th er institutional reform s, prim arily suggested by the Com m ission and Parliam ent, w ere rejected. W hat explains these institutional choices? T h e historical data reveal a com bi­ nation o f co n cern for the credibility o f com m itm ents and ideological com m it­ m en t to E urope, with the fo rm er acco u n tin g fo r the details and scope o f d e le ­ gation, the latter altering the willingness o f governm ents to p ool and delegate sovereignty on the m argin. By contrast, technocratic m otivations fo r delegation a p p ear insignificant. Cross-issue variation con firm s the im portan ce o f credible com m itm ents. A r­ ticle 100, w here governm ents in tro duced QMV, was n ot an area o f particular tech n ical com p lexity o r sym bolic salience, as technocratic and ideological the­ ories predict. Instead, governm ents chose an area in w hich n um erous related issues w ere linked, with con siderable jo in t gains from com p lian ce but con cerns a b ou t obstruction. O nly in the case o f the “referen ce to standards” procedure, em ployed in about a dozen o f the W hite Paper issues, is it plausible to argue that tech nical com p lexity required d elegation to specialized industrial regula­ tors— b ut here the desire fo r credible com m itm ent provides an equally plausible explan ation . T h e speed o f decision-m aking also increased significantly.155 G ov­ ernm ents, m oreover, sough t to m anipulate Q M V so as to exclu d e those areas w here they w ere likely to find them selves isolated in opposition. H ence the British Tory govern m en t succeeded in exem p tin g fiscal harm onization, som e environm ental policies, and social security; G erm any and D enm ark supported the revised A rticle 100A4, w hich gran ted safeguards to high-standard countries. Even w here the con sequences o f institutional decisions were uncertain, as in the powers o f the Parliam ent, governm ents rem ained cautious, restricting the scope o f the co o p eratio n p ro ced u re to co re areas already subject to QMV. C ross-national variation supports eith er ideology or credible com m itm ents, b ut disconfirm s the tech nocratic view. Sm aller o r p o o rer governm en ts— Ireland 155 Wolfgang Wessels, “Verwaltung im EG-Mehrebenensystem: Auf dem Wege zum Megabüro­ kratie?” in Markus Jachtenfuchs and Beate Kohler-Koch, eds., Europäische Integration (Opladen, 1996), 165-192 . Wessels finds, intriguingly, that the total number oflegislative acts did not increase significantly in the late 1980s, though their importance may have— particularly if we assume, with Cockfield, that the “new approach" employed one five-page directive where ten fifty-page directives would previously have been needed. Cockfield, “Real," 6.

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and G reece, even Britain— were n ot m ore favorable to d elegad o n , as the tech­ nocratic perspective predicts. T h e credible com m itm ents view predicts that all governm ents, led by Britain and the governm ents o f small and wealthy co u n ­ tries, should favor QMV. T h e B en elux countries w ere in deed supportive, but Britain and D enm ark w ere not. Despite its strong support for internal m arket liberalization , Britain favored an informal norm w ithout Treaty am endm ents, th ough it quickly backed down in response to a threat o f exclusion. British am ­ bivalen ce is exp licable in part because, as the poorest o f the large countries and an o p p o n e n t o f the GAP, Britain was co n cern ed about spillover to issues in which high standards (or high C A P prices) m igh t be im posed upon it. A ntifederalist id eolo gy surely played a role. Yet in the en d Britain backed down in large part because it valued substantive gains. Id eo lo gy best explains, as even the credible com m itm ents view co n ced es it should, variation in the willingness o f coun tries to p rom ote and accept institu­ tional delegation in areas w here the con sequences were highly uncertain and relatively m in o r— notably, increased powers for the E uropean Parliam ent. H ere the geopolitical ideology o f c h ie f executives, parliam entary parties, and publics appears to have been decisive. Pressure fo r greater EP powers cam e from co u n ­ tries with a tradition o f E uropean federalism and with strong dom estic parlia­ m entary systems: Germ any, Italy, and the B enelux countries. O pposition cam e from countries, such as Britain, France, and D enm ark, with a tradition o f skep­ ticism abou t E uropean federalism a n d / o r strong executives. Both France and Britain d efe n d ed dom estic systems in which the executive was strong vis-à-vis parliam ent. N eith er Britain n or D enm ark had a strong tradition o f European federalism , and the latter’s governm en t was u n d er the tight con trol o f a parlia­ m ent w hose prerogatives the governm ents d e fe n d e d .156 T h e justifications given by participants are consistent with both an id eolo g i­ cal and a cred ible com m itm ents account. Id eological m otivations for institu­ tional ch o ice are suggested by timing: G en sch er and M itterrand were p roponents o f Q M V b efo re they were sure to w hich issues it w ould apply, w hereas T h a tch er was instinctively an o p po n en t. A t the same tim e, however, Q M V (along with m u­ tual reco gn ition and the rem oval o f custom s controls) was perceived as a m eans to avoid decision -m akin g deadlock, log-rolling, or n on co m p lian ce— thereby overcom in g the deadlocks and delays that had p lagued regulatory harm on i­ zation in the 1970s. In deed, Q M V was em ergin g as an inform al practice to cir­ cum vent opposition by recalcitrant governm en ts— notably Britain, G reece, and D en m ark— even befo re the SEA. T h ro u g h precom m itm ent, the veto power o f isolated governm ents and recalcitrant dom estic constituencies was reduced. Even the creation o f the Internal M arket C o u n cil in 1983 was viewed n ot pri­ marily as a m eans o f increasing the inform ational efficiency o f decision-m aking th rou gh specialization, b ut as a m eans o f attracting the attention o f econom ics m inisters, thus creating p olitical support for refo rm .157 156 Alberta Sbragia,"Mastricht, Enlargement, and the Future o f Institutional Change," manuscript (University o f Pittsburgh, 1993). 157 Alan Dashwood, “Majority Voting in the Council," in j. Schwar/e, ed., Legislation for Europe 1992 (Baden-Baden, 1989), 79; Thomas Sloot and Piet Verschuren, “Decision-Making Speed in the Euro­

376

The Singfe European Act, 1984-1988 By contrast, there is n o eviden ce that the SEA was view ed as a m eans o f ce n ­ tralizing in fo rm ad on in a regu latory bureaucracy. T o the contrary, the SEA rec­ o gn ized fo r the first tim e that centralized direction was inefficient. C o ck field es­ tim ated that o n e five-page “referen ce to standards” directive, such as the Low Voltage D irective, rep laced ten directives totaling 500 pages; even federalists saw this as the true advantage o f the “new ap p ro a ch .” 158 T h e prin ciple o f m utual reco gn ition has b een h erald ed as a great breakth ro u gh fo r E uropean political in tegration , b u t G ian d o m en ico M ajone rem inds us that it “works in large part b ecause it represents a perm an ent abdication o f responsibility by the C om m is­ sion to national regu latio n .” A t the sam e tim e it w ould be m isleading to see m utual reco gn ition as posing less o f a challen ge to national sovereignty than h arm on ization. M utual reco gn ition requires m ore trust am ong nations, because governm en ts p recom m it them selves to perm it im ports u n d er m inim al co llec­ tive standards, thereby privileging liberalization over con tin ued regulation. Its m ajor advantage is that it perm its m ore efficient collective decision -m akin g.159 N ational governm ents ten ded to be je a lo u s o f their sovereignty w here no clear practical purp ose fo r co o p eratio n was at hand. T h e y resisted efforts by the Com m ission to slip in provisions e xp an d in g its own autonom y. G enerally, the e xte n t o f d elegated discretion rem ained inversely proportional to its substantive scope. Extensive delegation was go vern ed by tight rules, and o p en -en d ed d e le ­ gation was avoided. N ational governm ents rejected Com m ission proposals fo r a p ro ced u re to authorize future increases in fu n d in g w ithout Treaty changes or national parliam entary ratification. T h e Com m ission was gran ted power o f im ­ p lem en tation , as was custom ary u n d e r EC practices, but Com m ission proposals to e xp an d its own powers o f im plem entation w ere rejected. In sum, the pattern and process o f transferring sovereignty suggest a com bi­ nation o f ideolo gical and instrum ental motivations. T h e m ajor governm ents that n egotiated the SEA w ere clearly w illing to prom ote E uropean institutions in part fo r reasons o f geopolitical ideology, a particularly p otent force w here the co n sequ en ces o f d elegation and p o olin g were uncertain and relatively m inor. W h ere the con sequen ces w ere calculable and significant, a com bination o f id e­ olo gy and cred ible com m itm ents best explains the pattern o f institutional choice. G overnm ents w ere unwilling to delegate o r p o ol sovereignty fo r its own sake, but w here such delegatio n and p o o lin g served a substantive purpose, ideologically federalist governm en ts p roved significantly m ore w illing to do so. C o n verg en ce o f econ o m ic p ref erences, relative power, and con cerns for cred ­ ible com m itm ent were the m ost im portant forces determ in in g the o utco m e o f

pean Community, ’’Journal of Common Market Studies 29 (September 1990), 7 5 -8 5 . It had always re­ mained standard practice in the budget council. Buder, Europe, 162; A Campo and Narjes interviews. 158 Interview with Dolors, ig8g; Cockfield, “Real," 6. 159 Giandomenico Majone, “Introduction,” in Majone, ed., Deregulation or Reregulation? Regulatory Reform in Europe and the United States (New York, 1990), 3 -4 . On Britain, see Helen Wallace, “Bi­ lateral, Trilateral and Multilateral Negotiations in the European Community," in Roger Morgan and Caroline Bray, eds., Partners and Rivals in Western Europe: Britain, France and Germany (Aldershot, 1986), 15 8 -159 .

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T he C h o ic e fo r E u r o p e

the SEA negotiations. Policy con vergen ce resulting from policy failure and global com p etition, in tergovern m en tal bargain ing using threats o f veto, exclusion, and exit, and the n eed fo r Q M V to “lo ck in” reform and un derm in e future dom estic o p po sition exp lain the fundam ental shape o f the reform . Two factors play a sig­ nifican t b u t secon dary role. First, geopolitical id eolo gy— in particular the split betw een federalists and nationalists— helps exp lain a som ewhat greater w illing­ ness to sup port b oth substantive reform and transfers o f sovereignty in France and G erm any, as well as the T h a tch er go vern m en t’s instinctive opposition to sov­ ereign ty transfers despite their instrum ental advantages. Second, supranational en trep ren eu rsh ip from Com m ission and Parliam ent failed to alter the distribu­ tional outcom es o f the negotiations, but it may have increased their efficiency. Existing governm ents and interest group s w ere som ewhat less able to spot and support proposals than in earlier cases. T h ro u gh o u t, and this was consistent w ith the chan ged institutional dynam ics o f the E C since the early 1970s, the fo ­ cus was on the p eriod ic sum m it m eetings o f the c h ie f executives in the E uro­ pean C o u n cil, from w hich em erged key requests, decisions, and deadlines. T h e SEA. rejuvenated the E C and its single m arket. A flo o d o f significant leg ­ islation was passed and a new liberalizing spirit prevailed. As the British go vern ­ m en t foresaw — but perhaps to an exten t T h a tch er h erself had n ot fully e x ­ p ecte d — these m easures reregu lated , as well as deregulated, the single market. B efore the im plem entation o f the W hite Paper agen da had truly begun , how­ ever, France and G erm any w ere m oving toward d e ep er integration in the m o n e­ tary area, to w hich we now tu rn .160 160 Majone, “Introduction”; Nicolaidis, Mutual Recognition.

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C

hapter

Six

Economic and Monetary Union: Negotiating the Maastricht Treaty, 1988—19 9 1 We should be under no illusions— the present controversy over the new Euro­ pean monetary order is about power, influence, and the pursuit o f national interests. — Wilhelm Nôlling, president, Hamburg Landeszentralbank (1992)

T h e T reaty on E uropean U n ion , negotiated fo r o n e year en din g with agree­ m en t at M aastricht in D ecem b er 19 91 and radfied by each m em ber-state in the follow ing year, set a dm etable and conditions fo r the transition to econ om ic and m on etary un ion (EM U ). EM U entailed “irrevocably locked cu rren cies” for qualifying co u n tries— a transition that was to o ccu r autom atically by 1999 even if only a few governm en ts qualified. Plans w ere set fo r a European central bank (E C B ), w hich w ould enjoy greater in d ep en d en ce than any national central bank today. Political con trol w ould be im posed only over exchange-rate cooperation vis-à-vis third countries. To qualify, countries w ould have to m eet a stringent set o f criteria, in clu d in g stable exch an ge rates, low inflation, and reduced deficits. Parallel n egotiation s on “political u n io n ,” initiated after governm ents had agreed to discuss EM U and linked to it, gen erated m odest results. G overnm ents agreed to d e ep en existing in tergovernm ental coordin ation o f foreign policy. T h e y hin ted at future defen se coop eration (the “second p illar”) and established in tergovern m en tal p rocedures to co o rd in ate p olice and im m igration policies (the “third p illar”). T h e y m odesdy exp an d ed majority votin g and m odified the legislative p ro ced u re to provide in som e cases fo r “codecision ,” in w hich the E uropean Parliam ent negotiates directly with the C o u n cil o f Ministers over its prop osed am endm ents. A n arran gem en t for coordin atin g social policy was cre ­ ated am ong eleven governm ents, with Britain op tin g out. T h e Treaty was ratified after u n exp ectedly con ten tious referen da in France and D enm ark, a sm oother one in Ireland, and the im position o f im portant legal conditions by the Germ an constitutional court. T h e co in cid en ce o f tim ing betw een G erm an unification and the Maastricht negotiations, as well as the revolutionary co n ten t o f the M aastricht Treaty, has led m ost observers to exp lain M aastricht as a response to the geopolitical revo­ lution o f 1989. “C on siderations o f security and geopolitics,” says o n e co m m en ­

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T h e C h o ic e fo r E u r o pe

tator, “o n c e again b e cam e th e d rivin g fo rce o f E u ro p e an in te g ra tio n .” 1 T h e gov­ e rn m en ts o f F ran ce an d o th e r n e ig h b o rin g co u n tries, w ith the co o p era tio n o f G erm an lead ers, a lleged ly s o u g h t a m ean s to lo ck post-u nification G erm an y in to an in te g ra te d E u ro p e. W ith o u t “F ren ch fears o f a u n ite d G erm an y,” o n e a n ­ alyst asserts, “M aastricht w o u ld n o t have h a p p e n e d .”2 O th e rs m aintain that a w ea k e n e d G erm an y was fo rc e d to o ffe r a m o n etary q u id p ro q u o in e x ch a n g e fo r W estern assent to u n ifica tio n .3 Still o th ers p o in t to the id e o lo g ical beliefs o f stro n g E u ro p e an leaders such as K o h l an d M itterrand, w ho are said to have e x ­ p lo ite d p o litical m o m en tu m resu ltin g fro m the success o f the SE A .4 It is nearly im possible, m any scholars m aintain, to fin d sign ifican t su p p o rt fo r EM U am o n g e c o n o m ic in terest gro u p s, p articu larly in G erm an .5 Even those w h o argu e that M aastricht re fle cte d a co n ca te n a tio n o f co n tin g e n t co n d itio n s so c o m p le x that th ere is litde p ro sp ect o f fin d in g su p p o rt fo r any th eo ry o f n ational p referen ces, lay sign ifican t w eigh t o n G erm an u n ificatio n .6 Sim ilar con sen su s reign s in treatm ents o f interstate b a rga in in g and institu1 MichaelJ. Baun, An Imperfect Union: The Maastricht Treaty and the New Politics of European Integration (Boulder, Colo., 1996), xii, 2, also 156, 160. Baun maintains as a “central theoretical claim ” that “the end o f the Cold War and German unification have made European integration once again primar­ ily a matter o f ‘high politics.’ ” 2 Keith Middlemas, Orchestrating Europe (New York, 1995), 157. Also Wayne Sandholtz, “Choosing Union: M onetary Politics and Maastricht," International Organization 4 7 :1 (Winter 1993), 3 1-3 4 ; Joseph Grieco, “T h e Maastricht Treaty, Economic and Monetary Union and the Neo-Realist Research Programme," Review of International Studies 2 1 ( 1 9 9 5 ) , 21—40. s E.g., Geoffrey Garrett, “T h e Politics o f Maastricht,” Economics and Politics 5 :2 (July 1993), 10 5 -12 4 ; Karl Kaltenthaler, Germany and the Politics of Europe’s Money (Durham, N.C., 1998); Alan S. Milward and V ibeke Sorensen, “Interdependence or Integration? A National Choice,” in Milward et al., The Frontier of National Sovereignty: History and Theory, 1 9 4 5 -19 9 2 (London, 1993), 29; Elizabeth Pond, Beyond the Wall: Germany’s Road to Unification (Washington, D.C., 1993), 1 5 4 -1 5 5 .1 5 9 ; Margaret Thatcher, The Downing Street Years (New York, 1993). Am ong dissenters are Peter Ludlow, “Reshaping Europe: T h e Origins o f the Intergovernmental Conferences and the Emergence o f a New European Political Architecture,” in Annual Review of European Community Affairs 1991 (London, 1992), 3 9 5 447; David Andrews and Thom as D. Willett, “Financial Interdependence and the State: International M onetary Relations at Century’s End," International Organization 5 1 :3 (Summer 1997), 499-500; John Newhouse, Europe Adrift (New York, 1997), 76 -10 6 ; and Guido Carli, Cirujuant’anni di vita ital­ iana (Rome, 1993), 405; Steven Weber and John Zysman, “Why the Changed Relation between Security and Economy Will Alter the Character o f the Europe Union,” BRIE Working Paper 99 (Berke­ ley, Calif., April 1997). 4 Thom as Risse, “Between the Euro and the Deutsche Mark: German Identity and the European Union," Georgetown Center for German and European Studies Working Paper Series PS 1.3 (Wash­ ington, D.C., 1997); Kjell Goldm ann, “Nationalism and Internationalism in Post-Cold War Europe," European Journal of International Relations 3 :3 (September 1997), 2 59-290, especially 269; Peter Katzenstein, “United Germany in an Integrating Europe," in Katzenstein, ed. Tamed Power: Germany in Europe (Ithaca, N.J., 1997), 1 1 - 1 5 , 2 4 -2 9 , 4 1 -4 5 ; Thom as Banchoff, “National Identity and the Politics o f Maastricht” (mimeo, Georgetown University, 1994). 5 Kathleen R. McNamara, The Currency of Ideas: Monetary Politics in the European Union (Ithaca, N.Y., 1997), 3 7 -4 2 ; D orothée Heisenberg, The Mark of the Bundesbank: Germany’s Role in European Monetary Cooperation (Boulder, Colo., forthcom ing). Thom as Risse considers the costs and risks for Germany to give up its “cherished” DM so obvious that he declines even to provide evidence about the per­ ceptions o f government and business o f their econom ic interests. Risse, “Between,” 2. None o f these studies conducts systematic, primary source-based research into the preferences o f national indus­ trial groups. 6 Sandholtz, “Choosing," 3 6 -3 9 , cites five necessary conditions for preference formation and hints that an even greater number would be required to explain supranational leadership and bar­ gaining outcomes.

380

Negotiating the Maastricht Treaty, 19 8 8 -19 91 tional delegation . T u rn in g from p referen ces to bargaining outcom es and insti­ tutional choices, m any analysts portray G erm any as having fared badly in the n e­ gotiation s because it gave up the D eutsche M ark w ithout iron clad guarantees o f low in flation o r offsetting m ovem ent o n political un ion. T h e supranational e n ­ trepren eurship o f Jacques D elors o r the pow er o f transnational coalitions o f central bankers and financial technocrats, it is said, un derm in ed G erm an o p p o ­ sition to EM U .7 Finally, choices to delegate and p o o l sovereignty— in cludin g creation o f the E uropean C entral Bank, expansion o f QMV, and establishm ent o f parliam entary co d ecisio n — tend to provoke explanations that stress ideology. T h e co n flict betw een federalist G erm any and France, o n the o n e hand, and antifederalist D enm ark and Britain, on the other, are said to have defin ed the cleavages on institutions. In sum , G erm an reun ification, agenda-setting by supranational officials, and federalist id eolo gy form the core o f m ost existing interpretations o f the Maas­ tricht negotiations. In this chap ter I challen ge each elem en t o f this conventional exp lan ation . W hile n o n e is wholly in correct, each requires substantial revision in ligh t o f the available historical evidence. N ational p referen ces, I argue, w ere driven prim arily by the en d u rin g struc­ tural eco n o m ic interests o f strong- and w eak-currency countries u n d er co n d i­ tions o f in creased capital m obility and m acroeconom ic con vergen ce. T h ey were essentially un ch an ged by G erm an reunification. Firm com m itm ents by France and G erm any to m ove decisively forward with E M U — and opposition by Britain to that g o a l— predate the fall o f the Berlin Wall and rem ained un ch an ged after un ification was com p leted in A ugust 1990. As in most previous EC bargains, econom ists by and large rejected EMU, but it had a clear political econ om ic justificatio n .8 T h e con dition s u n d er w hich governm ents w ould be willing to m ove to EMU, as well as the pattern o f disagreem ents am ong them , had been relatively stable since the late 1960s, but econ o m ic conditions chan ged. Shifts in national strategies d u rin g the late 1980s reflected con vergen ce in E uropean m acro eco n o m ic policies, liberalization o f trade and capital m ovem ents, dollar d ep reciatio n , a desire fo r m acro eco n o m ic loosen ing by m ajor governm ents, particularly that o f Germ any, and a desire to red u ce exch an ge-rate volatility if it could be achieved with litde loss o f com petitiveness— sim ilar factors to those, we saw in ch a p ter 4, w hich triggered initiatives fo r European m onetary co o p er­ ation in the 1970s. T h e national position was, con trary to w hat m ost analysts have co n clu d ed , consistently supported by a decisive majority in peak business group s in b oth France and G erm any.9 In Britain, with m uch h ig h er inflation, business o p p o sed an im m ediate com m itm ent to EM U but insisted on avoiding decisive exclu sion if others w ent forward. D espite ideological misgivings on the

7 George Ross,Jacques Delors and European Integration (Oxford, 1995). 8 Barry Eichengreen and Jeffry Frieden, “The Political Economy o f European Monetary Inte­ gration: An Analytical Introduction,” in Eichengreen and Frieden, eds.. The Political Economy of Euro­ pean Monetary Integration (Boulder, Colo., 1994), 5; Paul Krugman, “Policy Problems in a Monetary Union,” in Paul de Grauwe and Loukas Papademos, cds., The European Monetary System in the 1990s (London, 1990), 62. 9 E.g., business leaders in Financial Times (hereafter FT), 28 July 1989, 22, and citations below.

3S l

Table 6.1. Econom ic and monetary union negotiations, 19 8 8 -1 9 9 2 : Preferences and outcomes

Elements o f EMU

France

Germany

Britain

Commission

Outcome

Single currency (EMU)

Prefers E M U with no “o p t-o u t” but de­ m ands a p arliam en ­ tary vote to “op t-in .”

Prefers EM U with no “o p t-ou t.”

O p p o ses EMU. All cou n tries have to opt-in exp licidy but can n ot b e exclu ded .

French position.

EM U with British and Danish opt-ou t and unilateral G erm an opt-in.

Strict convergence criteria (“two-speed’ EMU)

Favors p rio r bu t flexib le m acroeco n om ic con ver­ g en ce, criteria; p rior autonom y o f national central banks; an d fu ll capital liberalization.

N one.

U nclear.

French position.

G erm an position prevails.

Schedule and pro­ cedure for the transition

Favors autom atic m ovem ent in 1999, with Q M V to decide w hich countries qualify. In the in ­ terim , a w eak EMI, h ead ed by a central banker.

Favors rapid m ove­ m ent in 1997 o r b efo re by sim ple m ajority vote. Strong interim EMI starting in 1993, h ead ed by an E U official.

Favors m axim al delay. Weak transitional EMI h ead ed by a central banker.

French posidon.

Final transition in 1997 if a m ajority qualify, 1999 au to ­ matically, with Q M V to d eterm in e m em ­ bership. W eak in ­ terim EMI h ead ed by a central banker.

ECB autonomy, mandate, and voting procedure

Prefers a u to n o ­ m ous bank, except for m ultilateral exch an ge-rate policy, firm anti-inflationary m andate, and sim ple m ajority d ecision ­ m aking.

Favors political c o n ­ trol, particularly over ex ch a n g e rates, balan ced m andate, and decisions by sim ple majority.

Location o f ECB and name o f currency

Frankfurt; Euro.

Paris, m aybe Brussels; ECU.

Domestic budgetary controls with sanctions

Yes, by sim ple majority.

N o.

financial transfers

N o bail-outs, no financial transfers.

No financial transfers.

O pp oses EM U but apparently argues that the E CB should be autonom ous with a strong antiinflationary m andate.

French position, plus even stronger C o m ­ mission role.

G erm an position prevails.

L ondon; ECU.

Brussels.

Frankfurt; Euro (decision la ter).

No.

No.

Yes, decision by Q M V (later).

N o financial transfers.

Fiscal federalism : large, perm anent financial transfers

N o bail-outs o r fed ­ eralism , bu t tem ­ porary increase in structural funds (decision later)

Table 6.2. European political union negotiations, 19 8 8 -1 9 9 2 : Preferences and outcomes

Issues

Germany

France

Britain

Commission

Outcome

Overall structure

Single structure.

T h re e pillars.

T h re e pillars.

Single structure.

T h re e pillars.

CFSP procedure

Favors Q M V and active Com m ission role.

Favors Q M V only on im plem entation, no form al role for the C om m ission, and in d ep en d en t secretariat.

Favors unanim ity, no Com m ission role, com es to support in d ep en d en t secretariat.

Sam e as Germany.

A n glo-F rench position prevails.

WEU and defense cooperation

Prefers W EU as a b rid ge betw een F.U and N ATO .

Prefers W EU sub­ ordin ate to EU.

Prefers W EU sub­ ordinate to N ATO .

Sam e as France.

Sym bolic advisory ro le fo r EU in advis­ ing WEU.

Justice and home affairs

Prefers strong policy with Q M V and Com m ission role.

Prefers w eak policy w ithout Q M V or Com m ission role.

O pposes any policy.

Com m ission view even stronger than that o f Germany.

Policy is created but with Q M V on only a few issues and no form al role fo r the Com m ission.

Social policy

Strong social policy on n onfinancial issues.

Strong social policy on nonfinancial issues.

N o social policy.

Strong social policy on m any issues.

Britain opts out an d Eleven m ove ah ead with weak coop eration on n on fin an cial issues.

Other new policies or expansion o f Q M V

Favors gen eralizin g Q M V to eco n om ic issues, including environ m en t and research, but with m any exceptions: industrial policy, professional qu alifi­ cations, in direct taxation. Seeks to restrict education and cultu re policy.

Favors new industrial policy, as well as Q M V o n research, but restrictive clauses on cultu re and environm ent.

EP powers and the legislative process

Favors Parliam entary initiative at Com m is­ sion’s exp en se, and advocates both “codecision” and limits on the righ t o f the Com m ission to am en d o r withdraw proposals.

O p p o ses any increase in EP powers.

Strengthen ECJ

Yes

Yes

Oversight of Commission (“com itology’ )

Status quo.

Status quo.

Favors n o new policies.

Favors uniform Q M V an d Com m ission in ­ volvem ent, ex ce p t in consum er safety. O p ­ poses any restrictive clauses.

C o n su m er safety, som e environm ental and public health clauses added (m ost already con d u cted u n d er A rticle 100). Restrictive culture and education clauses forbid harm onization.

O pp oses any increase in EP powers, excep t oversight over Com m ission.

Favors Parliam entary powers insofar as Com m ission p re­ rogatives intact.

M odest increase in issues subject to coop eration p ro ce ­ d u re and in tro d u c­ tion o f codecision. Com m ission powers u n ch an ged , ex ce p t EP votes on its nom ination.

Yes

Yes

Yes

Status quo.

M ajor priority is greater autonom y.

Status quo.

T h e C h o ic e fo r Eu r o pe

part o f lea d in g Conservative politicians, the British governm en t adopted the sam e position. O n o th er econ o m ic issues— social policy, im m igration, and industrial policy, fo r exa m p le — each governm en t similarly sough t to realize e n d u rin g e co n o m ic interests. T h e M aastricht n egotiations witnessed a resurgen ce o f the in tergovern m en ­ tal n egotiatin g style that had dom inated E C bargains b efo re the SEA. Supra­ national and transnational entrep ren eursh ip ten ded to be ineffective, red u n ­ dant, even coun terproductive; governm ents and a han dfu l o f officials at the C o u n cil w orkin g with the Italian, L uxem bourgeois, and D utch presidencies, alon g with the efforts o f m ajor governm ents, p laced a wide range o f proposals on the table and m ediated am ong them . O n ly a han dfu l o f officials in the in ­ tergovernm ental C o u n cil Secretariat or in m on etary bodies w ere consistently in ­ volved. T h e outcom es o f distributive con flict, I shall argue, consistently reflected the preferen ces o f G erm an y— the coun try with d ie tightest dom estic win-set and the m ost to give up in the m on etary negotiations. T hreats o f exclusion se­ cured the participation o f recalcitran t governm ents such as Britain’s. A ll this confirm s in tergovern m en tal bargain ing theory and rather decisively disconfirm s supranational theory. Finally, the ch o ice o f institutions reflected above all the n eed fo r credible com m itm ents, in particular G erm an y’s desire to “lo ck in” a gu aran tee o f low inflation by creatin g an autonom ous ECB, by far the most con ten tious issue in the negotiations. Positions o n E C B autonom y reflected the distribution o f e co ­ n om ic costs and benefits. N othin g in this act o f d elegation was technocratically necessary; governm ents in w eak-currency coun tries favored, and had long prac­ ticed at hom e, a m onetary policy based on con trol by political authorities. A nd only in gen era l institutional matters, such as the role o f the Parliam ent, did id e­ o logy in flu en ce national positions. In sum, a com bin ation o f en d u rin g econ o m ic interests, asym m etries o f in ter­ d e p e n d en ce, and the desire to coordin ate policy w ithin a structure that assured m ore cred ible com m itm ents best explains the co n d u ct and outcom e o f the M aastricht negotiations.

N a t io n a l P r e f e r e n c e Fo r m a t io n

By 1 988 France and G erm any w ere agreed to m ove toward EMU; both pressed aggressively, despite dom estic controversy. In Britain, M argaret T h a tc h e r’s o u t­ righ t opposition to EM U was rep laced by Joh n M ajor’s caution. W hile doubtin g that im m ediate participation and support was feasible, the British governm ent was u n d er strong pressure from business to dam p en currency volatility' and to avoid o utrigh t exclu sion from any Franco-G erm an arrangem ent. O n the form o f EM U, traditional splits betw een strong- and w eak-currency coun tries reem erged, with G erm any calling fo r an in d ep en d en t central bank and o th er anti-inflationary guarantees w hile France and the Com m ission sough t a central bank un der greater political control. Britain rem ained divided, supporting anti-inflationary protection b u t seeking delay on the transition to EMU. O n o th er issues, G er­ 386

Negotiating the Maastricht Treaty, 1988—1991 m any and France sup ported d e ep er co o p eratio n in som e specific areas, w hereas Britain o p p o sed in tegration across the board.

Germany: A “European Germany” or a “German Europe” ? M odern G erm an politicians ritualistically recite T hom as M ann’s celebrated quotation: “O u r aim is n ot a G erm an E urope, but a E uropean G erm any.” Yet the two goals are closely co n n ected, and n ow here m ore clearly than at Maastricht. G erm an y sup ported a single European currency, a “European G erm any,” in e x ­ ch a n ge fo r w hich it dem an ded the creation o f European institutions o f G er­ man ch o o sin g such as an in d ep en d en t central bank, capital mobility, and prior m a cro eco n o m ic co n ve rge n ce — a “G erm an E u ro p e.” W hat m otivations u n d er­ lay G erm an y’s accep tan ce o f m on etary un ion at this time and on these terms? T h e m ost com m on ly advanced exp lan ation rests on a linkage betw een EMU and objective geopolitical shifts, in particular G erm an unification. G erm any is said to have co n ced ed EM U to reassure its n eighbors about unification. Such a con n ection was h igh ligh ted in the rh etoric o f C h an cello r H elm ut K ohl and H ans-D ietrich G en sch er d u rin g the n egotiation o f G erm an unification, from N ovem ber 1989 to A ugu st 1990. If G erm an unification played an im portant role, how ever, we should observe a m ajor shift in G erm an policy in late 1989 and, p erhaps, a shift in the opposite direction in late 1990. We should also see, in contrast to longstanding G erm an policy, inattention to the specific econ om ic co n te n t o f EM U as well as the con sequences o f econ o m ic issues, and decisive co n cern with political union. Finally, dom estic coalitions and discourse should be d o m in ated by geopolitical rather than econ o m ic considerations. Since we o b ­ serve n on e o f these, we have g o o d reason to be skeptical o f claims abou t som e causal link betw een un ification and EMU. T h e historical reco rd disconfirm s an objective geopolitical explan ation , but both political econ o m ic factors and geopolitical ideology offer m ore plausible candidates. Political econ o m ic theory predicts that the G erm an n egotiating p o ­ sition at M aastricht, like that in n egotiatin g the EMS, w ould reflect n ot the u n ­ com p rom isin g anti-inflationary position o f the Bundesbank (supported by some public and business op in ion ) b ut a com prom ise betw een the B un desban k’s anti­ in flation and the dem ands o f G erm an business interests and the C h an cello ry fo r a com petitive exch an ge rate and m acroecon om ic stim ulation. W hereas the Bun desban k’s pow er and position rem ain constant, pressure from the govern ­ m ent and business (led by big financial firms and exp o rt interests) fo r a looser m on etary policy and exch an ge-rate stability should be p roportional to pressure from dollar depreciation and the go vern m en t’s desire fo r m acroeconom ic stim­ ulation; b oth factors w ere presen t in the late 1980s and early 1990s. (In addi­ tion, the G erm an governm en t p erceived threats to the stability o f the existing EM S and the co n vergen ce o f foreign governm ents to G erm an m acroeconom ic norm s.) T h e co n flict betw een these two dom estic coalitions, the political e co ­ nom ic theory predicts, will also dom inate dom estic divisions and discourse. O n balan ce, however, given the advantages o f the EMS (despite threats to its stabil­ ity) , the G erm an econ o m ic interest in EMU should be only m odest and the risks

3 87

T h e C h o ic e f o r Eu r o p e Table 6.3. Annual percentage change in consumer prices, 1984-1992 Year

1984 1985 1986 1987 1988 1989 1990 1991 Average ( 1984 - 91 )

Germany

France

Britain

2.4

7.4 5.8 2.7 3.1 2.7 3.6 3.4 3.2 4.0

5.0

2.2 -0 .1 0.2

1.3 2.8

2.7 3.5 1.9

6.1

3.4 3.4 4.9 7.8 9.5 5.9 5.8

relatively significant; h en ce we exp ect support from econ o m ic interests will be less than enthusiastic. We therefore e xp ect G erm any to dem an d strong con ces­ sions in exch an ge for “giving up the D eutsche M ark”; EM U is likely to be possible only in co n ju n cd on with relatively strong anti-in fladon ary gu aran tees— the tra­ ditional “econ o m ist” position we e n co u n tered in chap ter 4. A nything m ore than m odest com prom ises o n this score is likely to ren d er EM U unratifiable. Even those w ho a ccep t the p redom inan ce o f econ o m ic interests can n o t dis­ miss entirely the role o f geopolitical ideology, in particular the E uropean fed e r­ alism o f K o h l, G en scher, m em bers o f the Bundestag, and the G erm an public. If E u ro p ean ideas (or the electoral advantages o f espousing them ) w ere decisive, we should e xp ect steady support fo r EM U th rou gh o u t the p eriod in questio n — at least th rou gh the 1990s. We should observe the foreign m inister and ch an cel­ lo r taking the initiative and strongest support from political parties and public o p in io n rath er than from econ o m ic interests; dom estic cleavages should reflect the relative strength o f federalist convictions in various parties, and discourse should focus o n ideolo gical and symbolic issues, such as the prevention o f fu ­ ture E u ro p ean wars and the symbolic desirability o f European union. We should observe a G erm an n egotiatin g position uniform across econ o m ic issues and relatively little attention b ein g paid to the econ o m ic con dition s u n der w hich integration p roceeds. If po pu lar support fo r E urope is decisive, we should see strong E uropean moves p reced in g elections, n ot after them. T h e balance betw een econ o m ic and ideological m otivations is difficult to judge precisely, given the absence o f prim ary docum en tation and the co n tin u ­ in g controversy surroun ding the issue. O n balance, however, the historical evi­ d en ce presen ted below — cross-issue variation, tim ing, policy consistency and n egotiatin g tactics, dom estic cleavages and discourse, and internal d elibera­ tions— offers slightly stron ger support fo r the im portance o f political econ om ic m otivations than for geopolitical con cerns. O verall the most plausible co n clu ­ sion is the following: econ o m ic con dition s were largely favorable, G erm an busi­ ness was firm ly (albeit n ot enthusiastically) supportive, and the econ o m ic co n ­ sequ en ces o f EM U w ere at best uncertain, so the K ohl governm en t enjoyed a certain autonom y to pursue its E uropean federalist am bitions. T h is con text may h elp to exp lain the active role G erm any to o k in m oving m onetary integration 388

Negotiating the Maastricht Treaty, 1988—1991 beyon d the EM S, a status qu o that was relatively attractive for Germany. Still, G erm an y rem ained o n the w hole less able to com prom ise away from its ideal e co n o m ic o u tco m e than was France, and it em ployed what bargaining power it had alm ost exclusively to prom ote its p referred econ o m ic outcom e rather than d e ep er p olitical un ion. In sum, the p rep o n d eran ce o f evidence suggests that in G erm an p re fe re n ce form ation, econ o m ic interests were at least as im portant as E uropean fed eral id eolo gy and probably m ore so. N onetheless both may have b een necessary fo r significant forw ard m ovem ent. G eo p o litical Interest and Ideology: A “political task o f historic dim ensions” C laim s that G erm an p referen ces in the M aastricht n egotiations reflected g e o ­ p olitical interests and id eolo gy take two basic form s. Most geopolitical exp lan a­ tions h ig h ligh t objective concerns, notably the sudden op portunity after N o­ vem b er 1989 to prom ote G erm an unification, w hich required G erm any to give France the diplom atic quid pro q u o o f EM U and neutralized dom estic op posi­ tion to EMU. Som e others p o in t to ideological concerns: the personal beliefs o f G en sch er and K ohl and the electoral com petition betw een the two before a proE uropean public. K o h l’s personal com m itm ent is often treated as decisive; one analyst writes that “only K ohl, virtuoso and one-m an band, could have m aneu­ vered m on etary un io n to accep tan ce in Germany. I f he isn’t widely popular, he is w idely trusted.” 10 T h e re is little d o u b t that the geopolitical strategy o f G erm an leaders linked G erm an and E uropean integration. T h e co n n ection betw een East-West rela­ tions and integration had, o f course, lo n g been central to G en sch er’s variety o f O stpolitik, and K ohl had m en tio n ed it in private discussions as early as 19 8 3 .11 T h e re is little d o ubt that G erm an unification took p reced en ce in the m inds o f K ohl and G enscher. K ohl p ro ce ed e d unilaterally, often w ithout international con sultation, in 19 8 9 -9 0 . T h e fall o f the Wall and the prospect o f m ore rapid un ification raised two con cern s that m ade linkage to E urope even m ore salient. First, E uropean support m igh t be required to negotiate with the Soviet U nion. H orst Teltschik, K o h l’s closest adviser, observed that the ch an cellor “was in a situation o f having to approve practically every French initiative for E uro pe,” the m ost novel o f w hich was the E uropean Bank fo r R econstruction and D evel­ o p m en t (E B R D ).12 Second, unification required form al changes within the E C to d efin e the status o f the new territory, resolve changes in G erm an and E C law, and establish appropriate excep tion s to existing rules. A ccep tan ce did not, at first, seem autom atic. In the first years o f the transition it was widely believed that un ification w ould strengthen G erm any; Belgium and L u xem bo u rg sup­

10 Newhouse, Europe, 102-103. 11 Timothy Garten Ash, In Europe’s Name: Germany and the Divided Continent (New York, 1993), 361 n; Peter Ludlow, “The Politics and Policies o f the European Community in 1989,” in Ludlow, ed., Annual Review of European Community Affairs 1990 (London, 1 gg 1), xlix. 12 Horst Teltschik, 329 'I'age: Innenansichten derEinigung (Berlin, 1991), 61; Stephan Haggard and Andrew Moravcsik, “The Political Economy o f Financial Assistance to Eastern Europe, 1989 -1 9 9 1 ,” in Robert O. Keohane, Joseph S. Nye, and Stanley Hoffmann, eds., After the Cold War: Politics and Institutions in Europe (Cambridge, Mass., 1993).

389

T h e C h o ic e fo r Eu r o p e

p orted rapid reun ification , b ut Britain and the N etherlands w ere op en ly skepti­ cal and France m o re discreedy so. K o h l an d G en sch er h a d consistendy supported European objectives even b e ­ fo re reun ification was on the agenda. T h e precise m ixture o f personal conviction, electo ral calculation , an d diplom atic strategy is difficult to ascertain. Foreign M inister H ans-D ietrich G enscher, we have seen, h ad long p ro m o ted E uropean integration; his overall diplom atic co n cep tio n had lo n g involved em beddin g G erm an y in international institutions. K ohl had lo n g offered rhetorical support fo r integration, which he often justified as a m eans to prevent future E uropean wars. M any have linked this support to his training as a historian and to his b e­ ing the last leadin g G erm an politician with personal m em ories o f W orld War II.1* In private discussions soon after he rep laced Schm idt as ch an cello r in 1982, K ohl term ed new G erm an efforts to brin g about E uropean unification “a political task o f historic dim ensions.” Ten years later he was callin g fo r m ovem ent to what “the fo u n d in g fathers o f m odern E urope dream ed o f follow ing the last war: the United States o f E u ro p e.” 14 H ere, in contrast to the case o f Schm idt, there is litde evi­ d e n ce o f underlying skepticism about supranational institutions or federalist ideas. A n o th e r in flu en ce on K ohl and G en sch er appears to have been electoral. T h e p eriod after 198 7 was characterized by com petition am ong party leaders, led by K o h l and G enscher, fo r p ro m in en ce in foreign policy. European activism was politically advantageous, and there is considerable evidence that both p oliti­ cians focused, som etim es obsessively, on such concerns. G en sch er’s stature in fo r­ eign affairs h elp ed to m ake him the most po pu lar o f G erm an y’s leading p oliti­ cians. A t critical points betw een 1988 and 19 9 1, K ohl and his advisers explicitly con sidered how fo reign policy activism m igh t in flu en ce the ch a n cello r’s elec­ toral standing; this was a prim ary co n cern , though it was G erm an unification that captured their im m ediate attention. E uropean integration was p opu lar in Germ any, e n o u g h so that it neutralized som e skepticism about EMU. Still, a sur­ ren d er o f the DM was constrained by the right-radical R epublican party and the CSU , b oth o f w hich m igh t exp lo it EM U in parliam entary elections, notably those sch ed u led fo r D ecem ber 1990. K ohl and G en sch er appear to have agreed to co o p erate on E uropean issues to avoid electorally dangerous treaty n egotia­ tions befo re 1 9 9 1 .15 G erm an governm ents ten ded to favor foreign policy coop eration m ore g e n ­ erally. K ohl and G enscher, like Schm idt before them , realized that G erm an un i­ lateralism had to be em b ed d ed in m ultilateral institutions in o rd er to secure the support from n eigh b o rin g countries. Even in unilateral initiatives, such as O stpolitik, the “ten -p oint plan” for G erm an unification, and the recogn ition o f fo rm er Yugoslav republics, sim ultaneous recom m itm ent to m ultilateral institu­ 13 Wolfgang Bickerich. Helmut Kohl: Kanzler derEinheil (Dusseldorf, 1995), 177-178 ; Helmut Kohl, “Ich wollte Deutschlands Einheit, " compiled by Kai Diekmann and Ralf Georg Reuth (Berlin, 1996), 483. M Thatcher, Path, 481. 15 Ash, Europe’s, 361; Ludlow “Policies," xlix, also liv. Interview with Kanzleramt official (Bonn, • 9 9 2)-

390

Negotiating the Maastricht Treaty, 1988—1991 tions served to reassure allies. H en ce the G erm an governm en t had lo n g sup­ p orted a strength en ing o f the E PC m echanism and lo o ked favorably on efforts to d eep en E uropean defen se coop eration , as lo n g as they did n ot directly ch al­ len ge N A T O . In Jan uary 1988 France and G erm any had agreed to create a F ranco-G erm an C o u n cil o n Security and D efense, as well as a Franco-G erm an brigade. T h e fo reign and defen se policy positions o n w hich France an d G er­ m any agreed in M arch and A pril 1990 were com prised o f longstanding G erm an prop osals.16 O n institutional questions, G erm any m aintained its traditional support for the prin ciples o f Q M V and exp an d ed Parliam ent powers. G erm an advocacy o f a stron ger Parliam ent reflected in large part the position o f the Bundestag, whose m em bers consistently sup ported greater political integration. K ohl had a m ore n uan ced view, in w hich institutional issues w ere secondary. T h e go vern m en t’s long-term if unstated goal was to strengthen both the C o u n cil and the Parlia­ m ent, if necessary at the exp en se o f the Com m ission. Early in negotiating M aastricht, the C D U and FDP factions in the Bundestag an n o u n ced they would n o t ratify E M U w ithout m ovem ent toward political un ion. T h e SPD threatened to o p pose M aastricht at the last m inute if the Parliam ent voted against it. For its part, the Bundesrat, rep resen tin g the regions, an n o u n ced that it w ould refuse to ratify the treaty w ithout a subsidiarity clause. G erm any had g o o d substantive as well as id eolo gical reasons to favor exp an d ed Q M V and parliam entary pow­ ers, w hich in gen eral favored the passage o f h ig h er EC regu lations— though this support did n ot exten d to areas o f particular national sensitivity such as fiscal harm on ization. G erm any p ep p ered its proposals fo r Q M V with n um erous e x ­ ceptions. Finally, G erm any publicly supported a u n ified E C institutional struc­ ture rather than the three-pillar structure favored by France and Britain, which hived o ff sensitive areas fo r in tergovern m en tal treatm ent.17 E con om ic Interest: EM U O n ly o n “n on -n eg o tia b le” Terms? From 198 7 th rou gh 1991 (and thereafter), peak business groups in G erm any consistently th o u gh less than enthusiastically supported con tin ued m onetary in tegration, albeit subject to traditional G erm an “econ o m ist” conditions. T h e G erm an e xp erien ce with the EMS had been largely positive. T h e EMS had co n ­ tributed to the un dervaluation o f the DM , w hich in the late 1980s created large trade surpluses, while only m arginally lim iting Bundesbank autonom y. G erm an business view ed m on etary integration as in its interest, but the EMS status quo was also relatively attractive, perhaps m ore so than EM U was. So G erm an business co u ld afford to insist on p recondition s fo r EMU. T h u s in O cto b e r 1988,

16 Teltschik, 329, 176, also 106, 369; Christa van Wijnbergen, “Germany and European Political Union,” in Finn Laursen and Sophie Vanhoonacker, eds., The Intergovernmental Conference on Political Union (Maastricht, 1992), 49-50; Reinhardt Rummel and Wolfgang Wessels, “Federal Republic o f Germany: New Responsibilities, Old Constraints,” in Christopher Hill, ed., National Foreign and Euro­ pean Political Cooperation (London, 1983), 34-55. 17 Interview with Kanzleramt official; JoEllyn Fountain, “The German Länder and the EC; Federalism as a Source o f Regional Influence," paper presented at the International Conference o f Europeanists, Chicago, 31 M arch -2 April 1994.

39*

T h e C h o i c e ko r E u r o p e

60 p ercen t o f G erm an industrialists supported furth er m onetary integration; th o u gh the lowest p ercen tage in the EC, w here support averaged 90 percen t, it was still a sign ifican t m ajority.18 lit t le d irect eviden ce abou t the sectoral distribution o f business preferen ces is available from the late 1 980s, but such views can be in ferred from two sources: the views o f peak interest groups, and polls co n ducted in the m id-1990s. T hese reveal that large banks w ere E M U ’s strongest supporters; they supported union n o t to red u ce foreign -exchan ge transactions— w hich w ould in fact impose losses o n th em — but apparently because integration w ould lock in op en m ar­ kets, perm ittin g them to exp an d dom estic and E uropean m arket share at the e x ­ pense o f sm aller counterparts. Business sup port was n ot based prim arily on the desire to red u ce transaction costs o f m anaging exch an ge rates o r elim inating the cost o f exch an gin g currencies. Eighty p ercen t o f G erm an exports w ere d e ­ n om in ated in DM, and the relative gains from currency stabilization were viewed as m odest. Instead, support derived from the desire to assure free m ovem ent o f investm ent and financial capital and to dam pen DM appreciation. Accordingly, larger firms and those in exp o rt sectors (autom obiles, electrical m achinery, m a­ ch in e tools) were particularly favo rable.19 Business con cern s abou t currency appreciation w ould intensify during the 1990s, as G erm an e xp o rt com petitiveness con tin ued to decline u n d er the co m ­ b in ed pressure o f the large fiscal costs o f reunification, the collapse o f the ERM, and the devaluation o f the p o u n d , peseta, and lira. By 1996 a BDI co m ­ m ittee dom in ated by G erm an y’s m ajor exp o rters— Krupp, M erck, H oechst, A E G , D aim ler-B enz, Siem ens, T ru m p f— was stressing com petitiveness: “T h e dram atic appreciation o f the DM in past years has already w orsened o u r position relative to o u r foreign com petitors. Since 1989, abou t on e third o f the price rise in labor costs is h o m em ade, two-thirds resulted from currency shocks. Such a situation should n ot rep eat itself [for] distributional m aneuvering room has b e ­ 18 Statistics from the Association for Monetary Union in Europe. 19 BDI President Hans-Olaf Henkel, “Entlasten statt endassen wäre richtig: Hohe Staatsquote führt zu hohe Arbeitslosigkeit,” Süddeutsche Zeitung, 17-18 February 1996; and poll results in “Führungskräf te sagen ja zum Euro, ohne an den Terminplan zu glauben,” Südduetsche Zeitung, 14 March 1996, which shows 77 percent support o f EMU, rising rapidly in a period o f DM appreciation. Also, Deutsche Industrie- und Handelstag, “Deutsche Unternehmen und Europäische Währung" (Bonn, September 1995); BDI, Der Euro: Chance für die deutsche Industrie—Report des Industrieforums EWU (Cologne, 1996). Some o f these polls o f business combine stability and the level o f the currency into one measure termed “volatility,” but interviews suggest the greater importance o f the level. For evidence that business statements in support o f monetary integration stressed the benefits o f market liberalization rather than the direct benefits o f monetary stabilization, see Carsten Hefeker, “Germany and European Monetary Union," Centerfor European Policy Studies Paper no. 69 (Brussels, 1997); Com­ mittee for the Monetary Union o f Europe, A Programmefor Action (Paris, 1988). 20 BDI, Euro, g, also 8 -1 1 . Mark Duckenfield, in research conducted some years after Maastricht, reports that for German exporters, the issue is not a 1-2 percent savings on transaction costs in cur­ rency charges but DM 415.2 billion in exports to F.U members, which might suffer under the dele­ terious effects o f currency instability in general and an appreciating currency in particular. Verband der chemischen Industrie, “European Monetary Union: Economic Assessment,” in European Monetary Union (Frankfurt, 1 gg6 ), 8, cited in Mark Duckenfeld, “Getdng EMU O ff the Ground: The Politics o f Monetary Union in Germany and Britain,” paper prepared for the Annual Meeting o f the American Political Science Association (August 2 8 -3 1, 1997).

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Negotiating the Maastricht Treaty, 198 8-1991 co m e narrow .” 20 T h is p osition was also h eld by p roducers o f n on tradable goods, such as the con struction industry, w ho th o u gh t that EM U w ould b en efit exp ort industries and lead to a gen era l loosen ing o f m acroecon om ic constraints.21 Business incentives w ere translated direcdy in to political dem ands. Public pressure fo r EM U cam e from business and unions, con dition al on a com m it­ m en t to low in fla tio n — w hich w ould protect the com petitive real value o f the D eutsche Mark. T h e Bundesverband d er deutschen Industrie (BD I), G erm an y’s m ajor industrial interest gro u p , praised the D elors rep ort in 1989 and issued p ublic statem ents in support o f m on etary un ion in 1990 and 19 9 1. In the late 1980s the D eutsche Industrie- un d H andelstag (D IH T ), the o th er m ajor group, p ro p o sed a three-stage plan fo r EM U closely resem bling what the G erm an gov­ e rn m en t later advocated. Sup p ort also cam e from the A ssociation fo r M onetary U n ion in E urope, fo u n d ed in late 1986 by G iscard and Sch m idt to unite rep re­ sentatives o f big business and banking across E urope. In A pril 1988 the associ­ ation published a detailed b lueprin t fo r m onetary un ion and later in the year p resen ted survey results revealing big business support fo r EMU. T h o u g h som e have argu ed that this gro u p did n ot en gage in direct lobbying, A lfred H errhausen o f D eutsche B ank praised the D elors rep ort in its nam e. Yet on balance, o n e review o f interest gro u p positions during and after the M aastricht n e g o ­ tiations con cludes, “the balan ce am ong . . . im portant interest group s . . . tips in favor of, and in m any cases takes the form o f active lobbying for, m onetary u n io n .” A bove all, this is because “events in exch an ge markets have shown that the G erm an exp o rt industry is sensitive to large adverse exch an ge rate m ove­ m ents.” Business support fo r EMU, however, rem ained con dition al on adequate anti-in flation ary safeguards. Business groups insisted that E uropean m onetary institutions be autonom ous and that all m em ber coun tries first establish in d e­ p en d en t central banks— an idea that had em erged early from G erm an business circles. Industry had an incentive to favor a larger EMU, as long as it rem ained stable and anti-inflationary, in o rd e r to prevent com petitive devaluation o n the part o f outsiders.22 U nions w ere also strongly supportive; farm ers weakly so, if at all. T h e Social D em ocratic party and the unions, led by the D eutsche G ew erkschaftsbund, backed business in support o f EMU. T h e D G B and BDI issued jo in t statem ents in favor o f EM U in July 1989 and A ugust 1990; un ion support was steady. T h e SPD may have sough t to loosen G erm an m onetary policy, w hich it felt was slow­ ing growth. A lternatively the SPD and D G B may also have shared the big busi­ ness assessm ent o f the econ o m ic benefits o f exp o rt prom otion throu gh m one81 European Construction Industry Confederation, Construction Activity in Europe (1996), cited in Duckenfield, “Getting,” 31. O ne Bauindustrie official explained, “We knew these cuts were coming with or without monetary union. The convergence criteria just make it easier for the politicians to pretend to be good guys.” Interview with official from Hauptverband der Deutschen Bauindustrie, Bonn, August 12 ,1 gg6. Non tradable goods producers would have reason to support any policy likely to promote macroeconomic stimulation in Germany. 22 The conclusion is from Hefeker, “Germany,” 55. Schonfelder and Thiel, Markt, 4g~53, also 125-126 ; Connolly, Rotten, 243; Karl Kaltenthaler, Germany and the Politics of Europe’s Money (Durham, N.C., forthcom ing); Hefeker, “Germany," 14 -16 . For a skeptical view o f transnational groups, though one not based on detailed study o f national interest groups, see McNamara, Currency.

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tary in tegration. In eith er case, dissent within the SPD was stronger than within the C D U /C SU . Som e Social D em ocrats voiced con cerns that the French and others m igh t p ull o u t o f the EM S if asymmetries persisted— an action hinted at in French and Italian govern m en t statem ents.23 G erm an farm groups tradition­ ally o p p o sed o r rem ained lukewarm toward EMU; they were slighdy m ore posi­ tively in clin ed durin g the M aastricht negotiations. It is often asserted that farm gro u p s sh ould support EM U because they are affected by shifting agricultural prices, b ut this narrowly functionalist view ignores the distributional im plications o f various subsidies designed to offset such shifts. O n balance, G erm an farmers have b en efited disproportionately from such subsidies and thus have never p er­ ceived an interest in EMU, d io u g h their view m ight have been chan gin g in the m id-1990 s as EC m em ber governm ents, in cludin g their own, becam e less will­ in g to provide subsidies.24 In addition, the K ohl govern m en t had its own m acroeconom ic reasons to side with business in favor o f EMU. Like the Schm idt governm en t a decade ear­ lier, the K ohl governm en t was continuously pressing the Bundesbank in this p erio d to loosen m on etary policy, first in response to the dollar depreciation o f the late 1980s, then in response to the shock o f G erm an unification. In 1987 the K anzleram t called fo r lower interest rates, backing the Louvre A ccord, but the B un desban k raised th e m — an act believed in retrospect to have con tributed to the “Black M onday” stock m arket crash. By early 1989 Bonn and Frankfurt were clashing again over m acro eco n o m ic policy. T h e n , w hen K ohl an n o u n ced in February 1990 his in tention to m ove toward German m onetary u n io n — a move certain to create in flation ary pressures— he set the stage fo r yet an o th er round o f con flict. T h e re after K ohl associates repeatedly attacked the Bundesbank for exce ed in g its m andate by seeking to in flu en ce taxation, governm en t spending, and wages, as well as fo r failing to support the go vern m en t’s European policy— a co m p lain t backed by exp licit rem inders that the Bundesbank statute could be ch an ged and that its cu rren t m andate “does n o t contain the obligation that sta­ bility be achieved throu gh a d eep recession.” In short, the K ohl governm en t in the late 1980s and early 1990s, like the Schm idt governm en t a decade earlier, e xp erien ce d the classic postwar G erm an con flict betw een a ch an cello r favoring m on etary accom m odation o f dollar depreciation and h igh er dom estic spending throu gh h ig h er inflation and a Bundesbank favoring m onetary tightening, lower inflation, and DM app reciation .25 T h e opposition to EM U was led, as it had been in the case o f the EMS and as predicted by the political econ o m ic theory, by the B undesbank, backed by academ ic econom ists, the dom estic ban kin g sector, and a substantial portion 25 Eckart Gaddum, Die deutsche Europapolitik in den 80er Jahren: Interessen, Konflikte und Entschei­ dungen der Regierung Kohl (Paderborn, 1994), 346-349; Wilhelm Schönfelder and Elke Thiel, Ein Markt—Eine Währung: Die Verhandlungen zur Europäischen Wirtschafts- und Währungsunion (BadenBaden, 1994), 29-39; Karl Kaltenthaler, “International Institutions and Domesdc Politics; Under­ standing the Relationship between German Domestic Politics and the EMU Initiative,” Washington University Political Science Paper 242 (St. Louis, Mo., 1994), 14 -16 ; Hefeker, “German,” 1996, 16 -1 7 . 24 Hefeker, “Germany,” 54. 25 Connolly, Rotten, 92-96, also 3 7-4 2 , 83-85, 242-243; Middlemas, Orchestrating, 171, 722n.

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Negotiating the Maastricht Treaty, 1988—1991 o f p ublic o p in io n . T h e Bundesbank C o u n cil was split over the issue. Som e m em ­ bers, particularly SPD m em bers such as Claus K ohler, app ear to have been som e­ w hat m ore sym pathetic to EMU, w hereas others, led by vice-president H elm ut Schlesinger, d efe n d ed absolute priority fo r dom estic stability. T h e balance seems to have b een h eld by a centrist faction, initially in cludin g President K arl-O tto Póhl, L eo n h ard G leske, responsible fo r international affairs, and L oth ar M üller, the Bavarian region al bank president. T h is gro u p did n ot express public o p p o ­ sition to “irrevocably lin k ed ” exch an ge rates but nonetheless question ed w hether the p ro p er p recondition s co u ld possibly be m et. Póhl, as we shall see below, was unw illing to oppose EM U outright. M oreover, though skeptical about a single currency, he and o th er B un desban k officials w ere even m ore strongly opposed to British proposals fo r a parallel currency, w hich they believed w ould u n d er­ m ine m on etary control. W hatever their differences, Bundesbank officials agreed that econom ist pre­ con dition s m ust be im posed; their co n cep tio n o f such p recondition s was stricter than that o f eith er business o r the Chancellery. T h ro u g h a series o f plans and com m entaries issued betw een 1989 and 19 9 1, the Bundesbank publicized its “u n co n d itio n al and n on -n egotiable p reco n d itio n s” fo r EMU. A m o n g these were a E uropean central bank at least as in d ep en d en t as the Bundesbank, full e co ­ n om ic un ion in clu d in g capital liberalization, and a lengthy transition based on strict co n vergen ce criteria rather than an exp licit tim etable. D urin g 1990 the B undesbank, acknow ledging the m om entum toward EMU, argued that if a b in d in g com m itm ent were m ade, it should be to a “two-track” system, with governm en ts e n terin g only if they m et specific econ om ic preconditions. In 1990 Schlesinger added a fourth p recondition : political union with centralized con trols on fiscal policy. Still, the B un desban k was n ot entirely o p posed to EMU. P ó h l’s am bivalence aside, H ans T ietm eyer, K o h l’s han dpicked n om inee to the Bundesbank Board, b ecam e increasingly in fluen tial after jo in in g the board in 1989. He took over the B un desban k presidency in 1993 after the retirem en t o f hard-liner H elm ut Schlesinger, w ho had succeeded Póhl in 19 9 1. T ietm eyer could move only m o d ­ estly in d ie go vern m en t’s direction, in part by exp loitin g argum ents about the n eed to d efen d G erm an com petitiveness. It was T ietm eyer, even befo re he as­ sum ed the presidency, w ho publicly threaten ed unruly British and Danish vot­ ers with exclusion, argu ing that if the M aastricht Treaty were n ot ratified, the subset o f coun tries that favored its provisions should co n clu d e a parallel agree­ m ent.26 Still, the G erm an C o u n cil o f E con om ic Advisers, the Finance Ministry, and the A dvisory C o u n cil o f the E conom ics Ministry all backed a strict e co n o ­ mist position. O n ly som e m em bers o f the Bundestag supported a softer position, and even am on g them there rem ained considerable skepticism about nam ing a European currency the “e c u ” (which soun ded too French) and abou t too great a com prom ise o f the precondition s.27 26 Connolly, Rotten, 282; David Marsh, Germany and Europe: The Crisis ofUnily (London, 1994), 146. 27 David Marsh, The Bundesbank: The Bank That Rules Europe (London, 1992), 2 12 -2 19 . See also Gaddum, Deutsche, 298-305; Smyser, German, 292, also 278-279; Richard Corbett, The Treaty of

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Pressure from G erm an business o n o th er econ o m ic issues discussed at Maas­ tricht rem ained essentially u n chan ged , reflectin g G erm an y’s traditional e co ­ n om ic interests. C o m p letio n o f the E uropean single m arket, n ot regulatory or m on etary harm on ization, rem ained the m ajor business con cern. Business, labor, and p ublic o p in io n favored regu latory harm onization that w ould bring other E C m em bers up to the relatively high standards prevailing in G erm any but re ­ fused to fo re g o the SEA right to derogate upward to protect dom estic standards. O n social policy, G erm an business was am bivalent, tending to favor coop eration to “level the playing field ” but n ot extensive European-level intervention in co l­ lective bargaining. W idespread skepticism co n cern in g full liberalization on p ro ­ fessional qualifications reflected strong dom estic interests. G erm an y’s particular vu lnerability to flows o f m igrants from the East, the fact that G erm any took a disp rop ortion ate p ercen tage o f m igrants and refugees to the EC, and the d o ­ mestic political lim itations im posed on restrictive policies im posed by Social D em ocratic o p p o sition — all o f w hich stoked extrem e right-wing opposition, threaten in g to the governin g C D U and FDP parties— suggest that the govern ­ m ent would favor a E uropean policy in the area o f im m igration and asylum that w ould help m anage and legitim ate m ore restrictive policies. Characteristically, econ o m ic group s said litde about political union. T h e D om estic D ecision: Reasserting the “E con om ist” C om prom ise Both econ o m ic and geopolitical factors app ear at first glan ce to have co n ­ tributed to G erm an p referen ces in the M aastricht negotiations. W hat does the evidence reveal abou t their relative contribution? T h e con ventional view, we have seen, is that G erm an support fo r E M U — in particular K o h l’s willingness to m ove ahead at Strasbourg with a schedule fo r an IG C — reflected new geopolitical circum stances after the fall o f the Berlin Wall on 9 N ovem ber 1989. K ohl, it is argued, offered EM U as a quid pro quo for French support o f G erm an unification or, alternatively, unification and e co ­ n om ic o p portu nities in form er East G erm any were required to overcom e skep­ ticism from business and the Bundesbank, which had fo rced K ohl to water down the 198 7 B asel-N yborg A greem en t and the 1988 agreem en t creating the FrancoG erm an E co n om ic C o u n cil. Two pieces o f evidence are com m only cited in fa­ vor o f this geopolitical linkage: the co in cid en ce o f tim ing betw een the agreem en t to hold an IG C , w hich was reached a m onth after the fall o f the Berlin Wall, and the G erm an willingness to “give u p ” the D eutsche M ark.28 G eo p o litical con cern s seem at first glan ce to explain K o h l’s dynam ic leader­

Maastrichl (Harlow, U.K., 1993), 4 0 -4 1; Wayne Sandholtz, “Monetary Bargains: The Treaty on EMU,” in Alan Cafruny and Glenda Rosenfeld, cds., The Stale of the European Community (Boulder, Colo., 1993), 133; Hefeker, “Germany,” 20; I.udlow, “Policies," xlii; Europäische. Währungsordnung: Gutachten des Wissenschaftlichen Beirats beim Bundesministerium für Wirtschaft, Studien-Reihc 61 (Bonn, 1989); Connolly, Rotten, 251; Detlev W. Rahmsdorf, “Währungspolitik,” in Werner Weidenfeld and Wolfgang Wessels, eds., Jahrbuch der europäischen Integration 11)1)1/92 (Bonn, 1992), 126. 28 Risse, “Between,” 2.

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Negotiating the Maastricht Treaty, 198 8-1991 ship in N ovem ber 1989. O n N ovem ber 20, he m et with close advisers to plan strategy fo r the m arathon o f elecd o n s scheduled over the com in g year. T h e ch a n cello r fo u n d h im self in the weakest electoral posidon o f his career, and his advisers co n clu d ed : “T h e C h a n cello r’s high in tern adonal reputation m ust be exp lo ited dom estically and the G erm an question was a bridge to im prove his im age.” 29 O n ly the n ex t day did the G erm an governm en t perceive the first hints that the Soviet leadership m igh t really be w illing to a ccep t radical change on the G erm an question. G erm an unification was to be the instrum ent. K o h l’s N ovem ber 28 address b efo re the Bundestag, in w hich he presented a ten-point plan fo r eventual G erm an unity em b ed d ed w ithin an “all-European process,” cam e as a surprise to all e xcep t C SU c h ie f T h e o Waigel; its con ten t was kept from G en sch er as well as from all fo reign governm ents e xcep t the U nited States. T eltschik reco rd ed in his diary that the sp eech was a “great success” because “the C h an cello r has taken over o p in io n leadership on the G erm an question .” Both G en sch er and the SPD w ere outm aneuvered and quickly follow ed suit. G en scher recalls a discussion with François M itterrand shordy thereafter in w hich both stressed the linkage betw een G erm an and European unification, focusing in particular on the n ee d fo r m ovem ent on EM U to convince France and others n ot to actively balance against G erm any.30 Yet this co in cid en ce o f tim ing is superficial; the sequ en ce o f events in fact h elps us dismiss the possibility that linkage to G erm an unification was decisive. Instead, tim ing strongly supports the econ om ic explanation. T h e decision to m ove ahead o n EM U throu gh an IG C predates the fall o f the Wall by at least three m onths and probably three years, d ep en d in g on how o n e reads the evidence, and co n tin u ed lo n g after reunification was com pleted. T h o u g h reunification did n o t becom e a focus o f G erm an policy until N ovem ber 1989 or an im m edi­ ate possibility until late January 1990, K ohl and G en scher had been consistendy if cautiously p rom otin g EM U from , at the very latest, the H anover sum m it o f mid1988. Yet in M arch 1987, shordy after the SEA cam e into force, G en scher was already callin g fo r d e ep er m on etary cooperation. H e was supported by the e co ­ nom ics m inister, M artin B angem ann, also from G en sch er’s FDP. T h e response was a series o f inform al discussions and proposals. T h e G erm an governm ent sough t to respon d to criticism s that m on etary integration was asymmetrical and established new institutions: the 1987 Basel-N yborg agreem en t perm itted in­ tram arginal in terven tion and stronger finan cing provisions, a Franco-G erm an E con om ic C o o p eratio n C o u n cil created in 1988 provided a forum fo r bilateral coop eration . By seeking to structure both to constrain the Bundesbank, Kohl and G en sch er w ent well beyon d the m inim um necessary to m aintain G erm any’s

M Teltschik, 329, 41-4 4 . Also François Mitterrand, De l ’Allemagne, De la France (Paris, 1996), cited in Le Monde, 23 April 1996, 15. 30 Teltschik, J29, 58; Bickerich, Kanzler, 130; Barbara Lippert et al., German Unification and EC Integration: German and British Perspectives (London, 1993) , 1 1 . For an overview o f the great power diplomacy, though without direct documentation on EC issues, see Philip Zelikow and Condoleeza Rice, Germany United and Europe Transformed (Cambridge, Mass., 1995), 12 0 -12 1; Hans-Dietrich Genscher, Erinnerungen (Berlin, 1995), 677-680.

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E u ro p e an im age. T h o u g h the B u n d esb an k successfully lim ited the sco p e o f b o th refo rm s, th e p ro p o sals sign aled th e in te n t o f th e ch a n ce llo r a n d fo re ign m in ister.31 In F ebru ary 1988, in respon se to F ren ch an d Italian prop osals fo r a m o re sym­ m etrical m o n eta ry a rran gem en t, G en sch e r o ffe re d a p ro p o sal fo r rap id m ove­ m e n t tow ard EM U , h in tin g that so m e sacrifice o f d om estic stability m igh t be necessary. H e suggested that a co m m ittee o f “wise m en ” b e n am ed to study the issue. K o h l e n d o rsed G e n s c h e r’s p ro p o sal in a sp eech b e fo re the E u ro p ean Parliam en t. T h e re a fte r K o h l a n d G e n sch e r m oved relentlessly toward the ca ll­ in g o f an in terg o vern m en tal c o n fe re n c e , th e o n ly p u rp o se o f w h ich co u ld b e a treaty a m en d m e n t to crea te EM U . T h is m o vem en t was m a tch ed the follow in g m o n th by a m em o fro m F in an ce M inister G erh a rd t S to lten b erg, less enthusias­ tic b u t n o t e n d rely n eg ad v e, an d a m o n th later by a B u n d esb an k p ap er an d a press c o n fe re n c e by P resid en t P ó h l, fo resh ad o w in g m any ideas subsequ en tly to a p p ea r in th e D elo rs R ep o rt. T h e se co n trib u tio n s reasserted the n ee d fo r free capital flows an d a n ti-in fla d o n ary gu aran tees in e x ch a n g e fo r any fu rth er G e r­ m an co m m itm en ts.32 F rom 1988 on w ard K o h l an d G e n sch e r lo o k e d to e x p lo it the instrum ents at th eir disposal, to in crease do m estic pressure o n B u n d esb an k an d F in an ce M in ­ istry officials. A t the H a n o v er E u ro p e an Sum m it o f J u n e 1988, w orkin g with D elors, th ey re a lized G e n s c h e r’s p ro p o sal fo r a co m m ittee to discuss m o n etary refo rm proposals, th o u g h K o h l insisted o n a co m m ittee o f cen tral ban k p resi­ dents ch a ire d by D elors. P ó h l initially a gre ed to serve o n the co m m ittee o n ly if it w ere co m p rise d solely o f cen tral ban kers an d was m an dated to p ro p o se lim ­ ited tech n ica l refo rm s in the EM S o r to assess the general desirability o f fu rth er m o n etary in te grad o n . A t the last m in u te, how ever, K o h l, M itterrand, an d D elors a g re e d that the g ro u p w ou ld b e ch a ire d by D elo rs and w ou ld p rep a re co n cre te pro p o sals fo r EM U . P ó h l, co rn e re d , co n sid e re d im m ediate resign ation b u t was re p o rted ly co n vin ced by B u n d e sb a n k co llea g u es to “participate con structively” sin ce this was the o n ly way the B u n d esban k position w ou ld be taken seriously. T o p ro d the co m m ittee fu rth er, K o h l issued a statem en t jo in tly w ith e ig h t o th er ce n te r-rig h t h ead s o f go v ern m e n t ca llin g fo r an in terg o vern m en tal co n fe re n c e o n EM U . W h en the D elo rs C o m m ittee rep o rted , K o h l m an eu v ered fo r rap id ac­ ce p ta n ce o f its re co m m e n d a tio n s at the M adrid Sum m it o f J u n e 1989. A t the M ad rid discussions K o h l had sign aled un am b igu o u sly that h e su p p o rted a rap id m ove to set a firm date fo r the IG C ; G en sch e r so u g h t to m ove even faster.33

51 Schónfelder and Thiel, Markt, 66; Bickerich, Kohl, 10 8-109, 1 1 6 - 1 1 7 , 13 1-13 4 ; Kohl, Wollte, 3 9 -4 4 ; Frank Elbc,£tn runder Tisch milscharfen Echen:Derdiplomatische Wegzurdeutschen Einheit (BadenBaden, 1993), 4 4 ft Before Decem ber 1989, the consensus view in the German government— shared by OSU chairman T h eo Waigel and top Kohl aide Teltschik— remained that unification was a realistic goal only over a ten-year period. Zelikow and Rice speculate that Teltschik did not fully un­ derstand Kohl's true motivations. Zelikow and Rice, Germany, 3 4 -3 5 , 7 9 - 8 1 ,9 2 - 9 3 , 105, 122 -12 3 . 32 Schónfelder and Thiel, Markt, 22-30. Gaddum, Deutsche, 312. 33 Marsh, Bundesbank, 21411. Póhl later called this decision an error; once on the committee, he argued, he was less able to defend Germ an interests, either by opposing proposals within the com ­ mittee or by criticizing the report afterward. Gaddum, Eurnpapolitik, 3 5 1-3 5 3 ; Charles Grant, Delors: Inside the House ThatJacques Built (London, 1994), 1 1 9 -1 2 0 ; David M. Andrews, “T h e Global Origins

398

Negotiating the Maastricht Treaty, 1988—1991 T h e p reced in g m on th K ohl, G enscher, T h e o W aigel (who had rep laced Stolte n b e rg as fin an ce m inister), and H elm ut Schlesinger, who had rep laced Póh l at the B undesbank, had m et in com m ittee to ham m er out a com m on G erm an p o ­ sition. E C governm ents, with o r w ithout Britain and D enm ark, w ould m eet within the year to set a date fo r an IG C . G erm any w ould support calling the IG C , but on the basis that E M U could p ro ceed only throu gh creation o f a federal Euro­ p ean ban k with full autonom y, a clear com m itm ent to price stability, strict lim ­ its o n the m on etary finan cing o f governm en t deficits, and prio r irrevocable fixing o f national currencies. T h ese principles w ere sum m arized in a position paper, “T h e G erm an Position on E con om ic and M onetary U n io n ,” drafted by the Fi­ n an ce M inistry and approved by the Bundesbank. A lready in spring 1989, then, the B un desban k apparently recogn ized, as it had with the D elors Com m ittee, that direct opposition w ould e x ce ed its constitutional prerogatives and m ight n o t be politically justifiable. Bundesbank support may have been based, some have since suggested, on an underestim ate o f F ran ce’s w illingness to com ply with stringent institutional and econ o m ic preconditions. T h e critical p o in t is, how ­ ever, that all agreed that co n vergen ce was a sufficient con dition fo r G erm an support o f EM U .34 T h e re after G erm an decision -m akin g was centralized in the hands o f the party leaders, th o u gh they kept a wary eye o n the Bundesbank. D ecisions relevant to E u ro p e u n d e r the K ohl governm en t, as we saw in the last chapter, were g e n er­ ally m ade by party chiefs and ratified in the C abin et by the ch an cello r and senior ministers. A s leaders o f the three coalition parties— K ohl o f the CD U , Stoltenberg and W aigel o f the CSU , G en sch er o f the FDP— were closely involved in the negotiations, B undestag rejection o f the treaty was unlikely, even w hen K ohl ul­ tim ately failed to get significant m ovem ent on political union. By O cto b e r 1989 K ohl had added the final elem en t to the G erm an n egotiat­ in g position. H e insisted that EM U be linked to d e ep er political integration, particularly to greater use o f QMV, w ider powers fo r the Parliam ent, and closer co o p era tio n on foreign policy— longstanding priorities for the Bundestag and fo r G erm an p ublic op in ion . T h ese dem ands were fleshed out early in 1990, af­ ter the fall o f the Berlin Wall, but only a few additions were new: a subsidiarity clause d em an d ed by the G erm an regions and m ore detailed proposals fo r c o ­ o p eratio n on asylum, visa, and law en fo rcem en t policy. From m id -1989 onward the G erm an p osition — EM U only on the traditional econom ist precondition s o f capital mobility, econ o m ic con vergen ce, central bank in d ep en d en ce at hom e and abroad, and sim ultaneous m ovem ent toward closer political co o p era tio n — rem ained constant.55 G erm an support for EC enlargem ent and con cerns about

o f the Maastricht Treaty on EMU,” in Cafmny and Rosenthal, Stale, 111; Schönfelder and Thiel, Markt, 5 6 -5 7 , 6 6 -6 7 ; Ludlow, “Policies,” xliv-xlv. 54 Heisenberg, Mark, 164 -16 5; Schönfelder and Thiel, Markt, 5 4-57; Ludlow, “Policies,” xlii. 55 Andrews, “Global," 112; Schönfelder and Thiel, Markt, 42-54. The Bundesbank did remain rel­ atively quiet during the first half o f 1990, during which the focus was on criticisms o f German mone­ tary union. By the second half o f 1990 and during the year 1991, Bundesbank officials reemerged as vocal critics and provided specific proposals that Kohl generally accepted over opposition from France and the Commission. Economist, 7 December 1991, 52; Lippert et al., German, 45, 120.

39 9

T h e C h o ic e fo r E u ro pe

im m igration, w hich arose at the same time, m ight be exp lain ed eith er on e co ­ nom ic gro u n d s o r as a defense against social disruption.36 By m id -1989 differen ces within the G erm an governm en t con cern ed not whether to call an IG C but when to do so. T h e govern m en t’s n egotiatin g position o n co n d itio n s was approved internally during discussions in the spring and sum ­ m er. In J u n e and July 1989 K ohl agreed with M itterrand in prin ciple to set a date fo r the IG C; French and G erm an finan ce m inistry officials m et in Septem ber 1989 to p repare the an n o u n cem en t o f the IG C fo r Strasbourg. O ver the n ext m on th K ohl m et with top business executives and secured their support; m ean­ w hile Pöhl, M itterrand, and D elors publicly predicted that a final decision on the tim ing o f an IG C to n egotiate EM U w ould be set at the Strasbourg Council. T o be sure, K ohl consistendy d em an ded that the starting date o f the IG C be d e ­ layed, but it w ould be w rong to ascribe this dem and to som e fundam ental o p ­ position to EM U or the absence o f dom estic support in Germ any. T h e bulk o f the evidence suggests instead that K ohl was driven by fear o f extrem e right-wing o pposition in the elections in late 19 9 0 — a m otivation signaled to French offi­ cials and ackn ow ledged by his closest associates, as well as G enscher, who had every incentive n ot to reveal that K ohl had taken the lead. K ohl refused to com ­ prom ise this dom estic political objective, as the geopolitical accoun t suggests he did. T h e IG C was co n ven ed only after the D ecem ber 1990 elections, in keeping with K o h l’s consistent dem and. In sum, as the ch ie f Foreign Ministry official re­ sponsible fo r EM U later observed, unification did n ot fundam entally change the G erm an policy consensus. It led only to a “redoublin g o f previous efforts.” *7 N or was subsequent G erm an n egotiatin g behavior consistent with a linkage to unification. To be sure, K o h l’s p ublic rh etoric does suggest such a link. H e as­ sured G erm an y’s allies that any steps toward reunification would be taken within E urope. A s early as O cto b e r 1989 K ohl sought to dam pen m edia speculation that G erm any m ight seek a neutralist solution and pressed President G eorge Bush to stress the link betw een Western solidarity and progress in the East. A l­ th ough he unveiled the “ten -p oint” plan fo r G erm an unity in late N ovem ber w ithout con sultin g European allies, K ohl quickly renew ed efforts to d eflect in­ 36 "Our Algeria lies to the East,” one journalist reports Germans as saying. John Newhouse, Europe Adrift (New York, 1997), 124. For the economic argument, see Haggard and Moravcsik, “Political.” 57 Schönfelder and Thiel, Markt, 22, also 20-22; Hubert Védrine, Les mondes de François Mitterrand: à l'Élysée 19 8 1-19 9 } (Paris, 1996), 420, 428-429. Genscher, despite his best efforts to emphasize his own role, remembers telling Mitterrand “with a good conscience” on November 30 that “we have already reached a decision" to set a date. The only difficulty, Genscher recalls, was that the CDU wanted to delay the IGC long enough to avoid any conflict with parliamentary elections scheduled for late 1990. Genscher, Erinnerungen, 679-680. See also Ludlow, “Politics,” xlii-xlv; Wolfgang Schäuble, Der Vertrag: Wie ich über die deutsche Einheit verhandelte (Stuttgart, 1991), 20-27; Bickerich, Kohl, 139; David Buchan, Europe: The Strange Superpower (Aldershot, 1993), 32-33; interviews with Jacques Delors (1992-1996). Even those biographers who attribute the most foresight to Kohl do not place his move for unification any earlier than June 1989; most place it much later. E.g., Christian Müller, Helmut Köhl (Frankfurt, 1996); Zelikow and Rice, Germany. Kaltenthaler asserts that EMU was “dead in the water" before the situation was “fundamentally transformed” on 9 November 1989. Yet this conclusion rests only on public statements showing that before 9 November Kohl had assured do­ mestic constituents that political union and anti-inflationary guarantees were necessary corollaries to EMU. This position did not change after g November, when Germany moved ahead. Kalthenthaler, Germany, 107-108.

4OO

Negotiating the Maastricht Treaty, 19 8 8 -19 91 ternational criticism . In every m ajor foreign policy speech and at European summits over the last two m on ths o f 1989, he exp licidy linked G erm an unifi­ cation to E uropean integration. Yet this reassurance was rhetorical; it left G erm an y’s bargaining position on m ajor E C issues un ch an ged . I f the linkage-to-unification thesis were correct, we should e x p e c t sudden G erm an concessions to France o r a significant loosening o f dom estic constraints after the Berlin Wall fell. Yet the G erm an n egotiatin g p osition hardened betw een N ovem ber 1989 and A ugust 1990: K ohl insisted the IG C should start no earlier than D ecem ber 1990, repeatedly rejected foreign appeals to accelerate the tim etable, d em an d ed a parallel IG C on political union, and reiterated econom ist dem ands. M oreover, if K ohl and G en scher had been co m p elle d to support EM U in 1989 by a quid p ro quo, they could have reversed p olicy w hen unification was co n clu d ed in A ugust 1990, a year earlier than e x ­ p ected. Yet K ohl n ot only failed to do so, he con tin ued to e xp lo it every o p p o r­ tunity to prom ote EMU. H e did n ot dem an d, fo r exam ple, w eighted votin g in the ECB, p rio r co n vergen ce b efo re setting a schedule, o r a m ore flexible tran­ sition arrangem ent, even th ough he co u ld easily have d o n e so sim ply by siding with Britain and the B un desban k against France o r simply by rem aining silent. A ll this is precisely the op posite o f w hat a causally critical linkage to unification w ould imply. A lth o u gh we can reject the linkage betw een unification and the G erm an p o ­ sition o n EM U, it is m ore difficult to disentangle the relative in flu en ce o f proE uropean id eolo gy and econ o m ic interest. O n balance, econ o m ic interests ap ­ p ear to explain m o re — particularly the tim ing, dom estic cleavages, and specific negotiatin g dem ands b eh in d the G erm an p osition — but we cann ot dismiss the role o f p ro-E uropean ideolo gy (w hether in the m inds o f leaders o r in their par­ tisan calculations) in tippin g the govern m en t to favor a rapid m ove to EMU. O n ly econ o m ic m otivations can acco u n t fo r the co re o f the G erm an “e co n o ­ m ist” position o n EM U — p rior co n vergen ce, capital mobility, central bank in ­ d e p e n d e n ce — w hich had rem ained essentially u n ch an ged since 1965. T his p o ­ sition, as we have seen, reflected a dom estic com prom ise betw een business and governm en t, on o n e side, favoring a com petitive currency and m acroeconom ic flexibility, and the B undesbank, backed to a certain exten t by public and busi­ ness op in io n , o n the other, w hich privileged low inflation. Policy consistency also supports the econ o m ic view. T h e K ohl governm en t pursued sim ilar econ om ic objectives across differen t fo rum s— it supported the Louvre A ccord, challen ged the Bundesbank dom estically, and pursuing a bilateral arrangem ent with France b efo re and during the M aastricht negotiations; an explan ation based on K o h l’s b e lie f in E uropean federalism has difficulty exp lain in g such consistency o f p o l­ icy, even outside the EC. D espite a m odest m ovem ent toward a Franco-G erm an brigade, there was no parallel m ovem ent in G erm an preferen ces and strategies co n cern in g security relations. T h e econ o m ic exp lan ation , w hich predicts that dollar depreciation, m acroe co n o m ic co n vergen ce, and capital liberalization should prom ote m onetary in ­ tegration, also best accounts fo r the tim ing o f the Franco-G erm an initiative, w hich increased m om entum after 1988, w hen all three factors w ere present. We 401

T h e C h o ic e fo r E u ro pe

observe in this p eriod a willingness on the part o f France and som e o th er weakcurren cy countries, Britain excep ted, to con verge to G erm an low-inflation stan­ dards. In addition , the F rench governm en t threaten ed to obstruct capital lib er­ alization and hin ted at withdrawal from the EM S i f con cerns abou t asymmetry w ere n o t addressed— certainly this is w hat n on e o th er than D elors was advising the F rench governm en t to do. In addition, as we have seen, business support fo r EMU, w hile n o t overw helm ing, was solid and m ore positive than p ublic opin ion . T h e consistency o f G erm an policy across international forum s— sim ultaneous efforts to strengthen the Louvre A cco rd at the global m ultilateral level, to work bilaterally with France in the Basel-N yborg process and the Franco-G erm an C o u n cil, and unilateral efforts by the C h an cello ry to place in d ep en d en t pres­ sure on the B un desban k— suggests that G erm an international m onetary p o l­ icy was n ot linked specifically to European ideology. N either the linkage-tounification view n or an ideolo gical explan ation can provide a plausible accoun t fo r G erm an bargain ing positions, dom estic cleavages, o r timing. Cross-issue variation in G erm an support fo r integration also falls into a pat­ tern predicted by econ o m ic and functional m otivations rather than the u n i­ form ly positive attitude predicted by a geopolitical explanation. lo n g sta n d in g opposition to French proposals fo r industrial policy stem m ed from G erm an com petitiveness w ithout such aid and com m itm ent to its traditional, indirect m odes o f subsidization. G erm any also op posed the extension o f majority vot­ ing to areas o f particular econ o m ic sensitivity, in cludin g in direct taxation and the recogn ition o f professional qualifications. A m ixture o f geopolitical and econ o m ic con cern s was visible in G erm an attitudes toward the coordin ation o f crim inal p olicin g, asylum, and visa matters. T h e fall o f the Wall increased the in­ centives fo r G erm an y— with borders to the East and a large proportion o f the E C ’s re fu ge es— to act in these areas. Such issues reflected a particularly delicate dom estic p ro b lem for K ohl, fo r G erm any exhibits powerful dom estic sentim ents co n cern in g responsibility to gran t asylum and equally strong right-wing, anti­ im m igrant feeling. E uropean coop eration offered not ju st a way to share the burden but perhaps also potential support fo r m easures to restrict im m igration to levels that w ou ld assure dom estic political stability. T h ese were the last sub­ stantive issues to be d em an ded by K ohl. In addition, a m ore purely geopolitical m atter, G erm an opposition to cultural policy reflected the absence o f any spe­ cific gains, as well as skepticism from region al governm ents.38 Both the issue-specific and geopolitical linkage theories predict that g e o ­ political con cern s w ould dom in ate G erm an positions, as they appear to do, in those areas w ithout clear and certain econ o m ic im plications, such as support for stronger Parliam ent and fo reign policy coop eration. O bjective geopolitical and id eolo gical constraints on a unilateral G erm an foreign or defense policy in ­ d u ced p referen ces for d e ep er cooperation; Bundestag and public o p in ion had

38 Grant, Delms, 193. At the June 1991 summit, Kohl called for common immigration and police cooperation, apparently because Germany’s liberal constitution limited its ability to deal with these problems unilaterally.

402

Negotiating the Maastricht Treaty, 1988-1991 lo n g favored greater powers fo r the European Parliam ent. R egional govern ­ m ents pressed fo r a C o u n cil o f Regions, th o u gh this step, opposed dom estically by the federal governm en t, proved m ore symbol than substance. Yet perhaps the m ost striking aspect o f G erm an policy is that the governm ent did not, in the end, insist up on significant m ovem ent toward political union as a quid p ro qu o for EMU. It appears that the EMU bargain was stable on its own. Yet dom estic deliberations and cleavages— in particular the early support o f G en sch er fo r EM U and the enthusiastic position o f governm en t as com p ared to business— p revent us from dismissing federalist ideology entirely. To be sure, the G erm an govern m en t exp licidy refused to take significant steps toward EMU until 1988, w hen a com bination o f econ o m ic con vergen ce, dollar depreciation, and Franco-Italian threats increased the econ o m ic incentive to do so. We have seen, m oreover, that business and labor, perhaps also farm ers, supported EMU from the start and that internal divisions were those p redicted by econ om ic the­ ory. Yet G en sch er and K ohl app ear to have been strongly predisposed toward integration, even in advance o f a clear econ om ic justification fo r it. T h e earliest and m ost consistent support for deep en in g m onetary integration cam e from the fo reign m inister, n ot from econ o m ic authorities. Beyond G enscher, whose role should n ot be exaggerated, stood Kohl. T h u s m om entum toward EM U was m aintained, even accelerated, after K ohl trium phed electorally and G enscher had lost first the dom estic political initiative and later his position. Electoral con cern s may have played a role, but the surrender o f the D eutsche Mark was hardly popular, and K ohl postp oned negotiations until after elections. T h e most en d u rin g source o f ideological support for EMU appears to have been K o h l’s own beliefs. Public and parliam entary support for E uropean federal goals may also help exp lain the success o f the M aastricht Treaty provisions fo r EM U after the failure o f the m ore m odest Basel-N yborg and Franco-G erm an E conom ic C oun cil agree­ m ents o f 1987 and 1988. T h e link betw een EM U and a federalist vision may have bolstered public and parliam entary support for the Maastricht Treaty by h elp in g to shield it from Bundesbank opposition. A ppreciation o f such co n ­ straints may h elp explain , fo r exam ple, P ó h l’s conciliatory behavior on the Delors Com m ittee. Yet the E uropean idealism o f the G erm an governm ent was tightly con strain ed by econ o m ic interests and parliam entary skepticism. Ratification was un problem atic, yet the Bundestag and Bundesrat did n ot pass it entirely as K ohl wanted. K ohl sought a constitutional chan ge to transfer Bundesbank fu n c­ tions to a supranational body. Schlesinger in terven ed directly, eventually water­ ing the proposal down to a clause perm itting such actions only within the co n ­ ditions fo r EM U set forth in the treaty. A nd strong opposition cam e from the G erm an Suprem e C ourt, w hich required that final im plem entation o f EMU be ratified by an o th er parliam entary vote.39 For G erm any the m ost im portant purposes o f EM U were econom ic: to d e ­ press and stabilize the real exch an ge rate and to provide the governm en t with w Connolly, Rotten, i35n.

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greater m acro eco n o m ic flexibility by un derm in in g Bundesbank control. O n balan ce, the tim ing, process, policy consistency, n egotiatin g dem ands, and cross­ issue variation o f G erm an p referen ce form ation are m ore consistent with this e co n o m ic acco u n t than with any involving ge o p o lid cal interests o r ideas. A s p o ­ litical eco n o m ic theories predict, m oreover, support fo r d e ep er m onetary inte­ gration on this basis intensified at a tim e o f do llar depreciation and pressures fo r h ig h er spen ding as well as co n vergen ce to G erm an norm s by o th er co u n ­ tries. T h e particular balan ce o f econ o m ic co n cern s— pressure fo r an au to n o ­ m ous central bank and p rio r econ o m ic con vergen ce by G erm any’s neighbors, o n the o n e hand, and fo r lim itations o n foreign depreciation and EM U even w ith out full anti-inflationary guarantees, on the o th e r— was sim ilar to that w hich had arisen in previous E uropean m onetary negotiations. T his dom estic co m p ro ­ m ise was then translated directly into policy. T h e two sides w ere represented bu­ reaucratically and agreed on a com prom ise n egotiatin g position; the govern ­ m en t slighdy relaxed these con dition s in the last days o f the negotiations. T h e result: G erm any supported an EM U that fulfilled most if n ot all o f the “econ o m ist” precondition s d em an d ed by Bundesbank and public o p in ion while paving the way fo r a larger EM U and a softer Euro, an outcom e go o d for Germ an exporters. Yet the econ o m ic theory also predicts uncertainty and skepticism ab ou t the n et benefits o f EMU, particularly vis-à-vis the existing and relatively attractive EMS. Sup p ort fo r EM U in G erm any w ould thus be n either enthusiastic nor uncontroversial. T h e weakness o f econ o m ic support had two im plications. First, the dom estic win-set in G erm any was narrow. Despite im portant d iffer­ ences o f d egree, business, parliam ent, and the Bundesbank were united in sup­ p o rt o f a relatively autonom ous E uropean central bank, m oderately tight co n ­ vergen ce criteria, and centralized budgetary controls. Second, however, within the relatively narrow constraints o f the win-set, European id eo lo g y— though n ot G erm an un ificatio n — appears to have m otivated G erm an policy on the m argin. K ohl and G en sch er’s enthusiasm fo r integration h elp ed to defin e G er­ man positions w here allow ed by the permissive parliam entary and public co n ­ sensus and the w eakness and divisions am ong econ o m ic interests (as com pared to, say, G erm an views on the SEA o r C A P ).

France: “Franc fo rt” and Frankfurt T h e p aradox o f French international m onetary policy since 1988 has been its extraord in ary continuity in the face o f d eep and persistent dom estic conflict. From 1984 onw ard French governm ents consistently advocated a d e ep er and m ore sym m etrical form o f E uropean m onetary cooperation; after 1987 they reco m m en d ed E M U — a position m aintained to the present day, regardless o f w hich party is in power. T h e re is con siderable disagreem ent over the sources o f this policy, with som e citing con cern s abou t G erm an unification, others E uro­ p ean federalist ideals, and still others a particular French econ om ic strategy o f dom estic discipline and a p eg ged exch an ge rate— the franc fort policy. Each explanation offers distinctive predictions about the nature o f French p referen ces and the process o f French p referen ce form ation. I f the G erm an 404

Negotiating the Maastricht Treaty, 198 8-1991 threat were decisive, we sh ould see a decisive shift in French policy in late 1989, discourse and dom esd c divisions dom inated by geopolitical concerns, and a rel­ atively u n d ifferen tiated set o f French n egotiatin g dem ands aim ed at locking G erm any in to E uro pe th rou gh political union. If European ideology were d eci­ sive, we sh ould see a stable French policy over this time p eriod , a set o f symbolic goals co n n e cted with federal E urope, and litde attention to the precise e co ­ n om ic term s o f the final agreem ent. I f econ om ic interests w ere decisive, p egged e xch an ge w ou ld im pose real currency appreciation and dom estic tightenin g for a co u n try with m oderate inflation, w hich co u ld be offset only by establishing m ore sym m etrical international m on etary arrangem ents. H en ce we should o b ­ serve pressure fo r m onetary co o p eratio n steadily increasing through in flation ­ ary co n vergen ce and accelerating with dollar depreciation in 19 8 7 -8 8 (and again in the m id -1990s), dom estic divisions and discourse dom inated by e co ­ n om ic co n cern s such as com petitiveness and m acroecon om ic perform ance, strong support from business, and French n egotiating dem ands aim ed at estab­ lishing looser, less autonom ous E uropean m onetary rules, as traditionally sup­ p o rted by “w eak-currency” countries. O n balan ce the historical reco rd consistendy disconfirm s the im portance o f G erm an un ification and m ost supports the econ o m ic explanation; yet we can ­ n o t dismiss the ideolo gical explan ation entirely. A lth o u gh support from French business and the co n cern o f the governm en t fo r greater m acroeconom ic flex i­ bility were clearly p redom in an t and led to the p redicted set o f internal cleavages and extern al n egotiatin g dem ands, E uropean ideology and the traditional desire o f French governm ents to play a leadin g role in E urope may well have estab­ lished a legitim ating permissive consensus within p ublic and partisan opin ion , as well as offerin g President François M itterrand yet an o th er op portunity to sign a greem en ts that p rofiled his leadership role. G eo p o litical Id eology and Interest: Is François “always dancin g with the w rong w om an”? T h e task o f un derstan din g F ran ce’s geopolitical goals and perceptions with respect to G erm any is com p licated by French president François M itterrand’s distinctive style o f governan ce, w hich involved the cultivation o f n um erous p o l­ icy op tion s throu gh the sim ultaneous pursuit o f parallel policies fo r a tim e— each often shadowed by a separate team o f internal advisers, often unknown to the o th ers— follow ed by a swift presidential decision. T h e op aque and superfi­ cially con trad ictory quality o f French foreign policy was exacerbated by M itter­ ra n d ’s insistence, w hich he shared with his predecessors, on m aintaining foreign policy as a presidential “dom ain reservée” to be co n d u cted from the Elysée.40 Still, we can isolate three geopolitical factors that may have in flu en ced French preferen ces in the M aastricht Treaty negotiations. O n e was M itterrand’s desire to bolster the prestige of France by m aintaining an active French role at the cen ter o f Europe and in defen se o f E uropean fed ­ eral ideals. T his was not, as we have seen, initially o f prim ary im portance to him. w Védrine, Les mondes, 3 0 -4 3 , 5 1-5 4.

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R e m em b ra n ce o f g lo rie s past. L o u is XIV, N a p o le o n , d e G au lle, an d M itterrand in d im in ish in g o rd er. C a rto o n by Kevin K allaugh er. T h e Econom ist, 8 Ju ly 1989. U sed with perm ission .

N eith er the E C n o r its supranational institutions, we saw in chap ter 5, played a significant role in the first years o f M itterrand’s presidency, but they em erged as an id eolo gical alternative o n ce the Socialist exp erim en t had failed. From this perspective, M itterrand’s desire to appear “E uropean ” in the M aastricht n egoti­ ations m igh t be seen as a continuation o f his decade-lon g effort to split the right w ing o f the French political spectrum and bolster the sagging electoral fortunes o f the Socialist p arty— by the late 1980s furth er w eakened by a recen t cohabita­ tion with the right. A strong m ove toward integration w ould, at the very least, e x ­ ploit pro-E uropean sentim ent and p rofile M itterrand h im self as a w orld leader. W hatever its role in determ in in g French policy during the negotiations, this m o ­ tivation was clearly reflected in M itterrand’s decision, over the objections o f all but o n e o f his top officials, to call a referen dum on the M aastricht Treaty in 1992. In 1987 and 19 8 8 — ju st befo re M itterrand’s reelection but also around the time that m om entum toward EM U began to pick up again after the French failure to in clude stronger m on etary provisions in the SEA— M itterrand also b e­ gan pressing fo r the signing o f a new Elysée Treaty, with provisions fo r closer m ili­ tary co o p eratio n , th ough the French governm en t was careful, despite Germ an pressure, to exclu d e n uclear w eapons.41 A secon d geopolitical m otivation stem m ed from traditional Gaullist ideol­ ogy, now shared by the Socialists, w hich com bin ed an im portant role for na­ 41 Védrine, Iss mondes, 55, i 20-130, 273, 295, 4 0 9 -4 15, cf. 126; Anand Me non, "Continuity and Change in French European Policy, 198 1-19 97,” paper delivered at Harvard University, 2 October 1997. For more detail, see chapters 4 and 5 o f this book.

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Negotiating the Maastricht Treaty, 198 8-1991 tional executives, a unilateralist desire fo r in d ep en d en ce from the U nited States, and opposition to supranational institutions, particularly the E uropean Parlia­ m ent. A ccordingly, France favored strength en ing the E uropean C o u n cil, o p ­ p osed greater powers fo r the Parliam ent, and advocated a bicam eral parlia­ m entary system with a Senate m ade u p o f national legislators— though this last n otion was p robably an effort to gen erate a legitim ate if nonviable alternative to G erm an y’s proposals. France, a long-tim e supporter o f a “E uropean security identity” within the EC, also spoke in favor o f d e ep er defen se coop eration in ­ d e p e n d e n t o f NA TO . How m uch o f this activity was symbolic, like the 1991 e x ­ pansion o f the jo in t Franco-G erm an b rig ad e — a step reportedly taken neither with substantial input from foreign and defen se m inistries n o r with m uch at­ ten tion to m ilitary effectiveness— rem ains unclear. In this regard, M itterrand’s d efen se o f F ran ce’s traditional prerogatives, like his executive-led style o f fo r­ eign policy-m aking, was in fact quite traditional; Stanley H offm ann has term ed it “Gaullism by any o th er n am e.” 42 T h e third and m ost com m on ly cited geopolitical m otivation was to m eet a renewed German threat. French policy-m akers had lo n g spoken o f the n eed to m aintain parity with G erm an y and to offset G erm an dom in an ce institutionally in o rd er to retain French in flu en ce in E urope and, som e com m entators argue, in such global m ultilateral forum s as the G A T T and G -7.43 T h e fall o f the Berlin Wall in N ovem ber 1989 and the p rospect o f a u n ified G erm any with an in d e­ p e n d en t policy toward eastern E urope app eared to rekindle such concerns. K o h l’s a n n o u n cem en t o f his ten-point plan for unification in N ovem ber 1989 w ithout con su ltin g E C partners and his co n d u ct o f direct negotiations with G o r­ bachev in July 1990 led in France to consternation and occasionally what ap ­ peared hysteria. A m o n g the m ore m easured p ron ou n cem en ts was that o f the French am bassador to Germ any, w ho stated in late 1989 that the real danger o f un ification was that it “w ould give birth to a E urope dom in ated by Germ any, w hich n o o n e, in the East or West, wants.” 44 E uropean integration co u ld help offset such concerns. C onsistent with M itterrand’s o p aque and contradictory leadership style, the initial F rench response to G erm an unification com bin ed two contradictory strands. O n the o n e han d, M itterrand appears to have w orked beh in d the scenes to im p ede unification by co o p eratin g with Russia, Poland, and East G erm an y— m ost spectacularly in his D ecem ber 1989 jo in t declaration with G orbachev that b o rd e r changes were prem ature and in his o p en support fo r an “East G erm an identity.” H e sought to establish a pan-E uropean con federation , a policy that 42 Enrico Martial, “France and European Political Union,” in Laursen and Vanhoonacker, Inter­ governmental Conference, 12 1-12 2 . Interview with French Cabinet Minister (May 1994); Stanley Hoffmann, “Mitterrand’s Foreign Policy, or Gaullism by Any Other Name,” in George Ross, Hoff­ mann, and Sylvia Mal/.acher, eds., The Mitterrand Experiment: Continuity and Change in Modem France (New York, 1987). 45 Christian de Boissieu and Jean Pisani-Ferry, “The Political Economy of French Economic Policy and the Perspective o f EMU,” in Barry Eichengreen and Jeffry Frieden, cds., The. Political Economy of European Integration: The Challenges Ahead (Ann Arbor, Mich., 1997). 44 Alistair Cole, François Mitterrand: A Study in Leadership, 2d ed. (London, 1997), 152, also passim; David Yost, “France in the New Europe,” Foreign Affairs 69:5 (Winter 1990), 107-128.

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had the ad d ed advantage o f possibly forestalling entry o f East E uropean co u n ­ tries in to the EC, an even t M itterrand is said to have h o p ed to delay fo r decades. T h e French also con sidered bilateral m ilitary and even n uclear coop eration with Britain as a coun terbalan ce.45 O n the other, M itterrand kept o p en the possibil­ ity o f d e e p e r coop eration with Germ any. In public he treated unification as natural, even desirable. H e pressed K ohl to offset unification with a d e ep en ­ ing o f m on etary integration. B egin n in g in February 1990, his top officials were in constant contact with their G erm an counterparts over a proposal for p oliti­ cal u n io n .46 G erm an leaders were nonetheless frustrated by M itterrand’s two­ p ro n ge d geopolitical strategy, as o n e anecdote suggests. D uring the p eriod in w hich M itterrand rem ained indecisive, the o th er European heads o f govern ­ m ent were waiting fo r the French president to arrive at a sum m it— the French presid en t insisted on arriving last, a diplom atic prerogative that his status as a head o f state, rather than head o f governm ent, perm itted— w hen K ohl turned to a n o th er prim e m inister and rem arked: “Poor François, always o ff dancing with the w rong w om an !” 47 Yet the contradictions were soon clarified. T h e refusal o f Russia, Poland, and the U n ited States to o p pose G erm any and the massive G D R vote for unification in m id-M arch 1990 fo rced a resolution o f the contradictions in French policy. In M arch 1990 the French governm en t d ro p p ed bilateral discussions with Brit­ ain, on the eve o f an im portant speech on defense coop eration by Douglas H urd in Paris, and turned definitively to Germany. M itterrand’s sole goal becam e to secure a m on etary quid pro qu o fo r France, backed by w hatever concessions on political un ion w ere required. By m id-April M itterrand and K ohl had drafted a jo in t letter in w hich both leaders called for parallel negotiations on m onetary and political un ion. It is com m on ly asserted that the French governm en t viewed Franco-G erm an coop eration as a m eans to offset grow ing G erm an power and, therefore, as a substitute fo r possible alliances with Britain or the Soviet U n ion .48 E con om ic Interest: “G erm any was the determ in ant o f o u r econ o m ic policy” From 1988 onw ard, polls revealed consistent 8 0 -9 0 p ercen t support am ong French businessm en fo r E M U — am ong the highest levels in the EC. Business began to favor coop eration to red u ce exchange-rate fluctuations and assure ch ea p er and m ore flexible sources o f finance but assumed that EM U w ould not un derm in e French com petitiveness— the prim ary co n cern o f business. T hus the CN PF em braced a strength en ing o f EMS o r a transition to EMU, as well as co n vergen ce criteria and fiscal constraints, while seeking to assure that EMU 45 Interview with French Minister, 1994; interview with adviser to Margaret Thatcher, 1997. 46 For an analysis that stresses this side, see Védrine, Les mondes, 393-479. 47 Interview with European prime minister, April 1997. 48 Baun, Imperfect; Grieco, “Maastricht”; Sandholtz, “Choosing"; Cole, François, 154-155; Grant, Delors, 133; Zelikow and Rice, German, 206-207, 234-235; Claire Tréan, “La France et le nouvel or­ dre européen,” Politique Etrangère 56 (Spring 1991), 81-90; John I h ighland, The Death of Politics: France under Mitterrand (London, 1994), 238® Martial, “France,” 116. In October 1990 Mitterrand instructed his defense minister, Jean-Pierre Chévènement, to improve nuclear capabilities but did not allocate funds for the purpose.

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Negotiating the Maastricht Treaty, 1988 -1991 was n ot too strict. T h is co n cern took various form s. Sm aller firm s and tradi­ tional sectors stressed the n ee d fo r looser co n vergen ce criteria to assure that w eak-currency “outsiders” w ou ld n o t depreciate against the franc, un derm in in g F rench com petitiveness. O th ers in business, particularly those in aerospace and o th er e x p o rt sectors d e p e n d en t on the dollar exch an ge rate, supported EMU on the co n d itio n that the Euro be set at a com petitive rate vis-à-vis the d o llar— o r the fran c en tered EM U at a particularly com petitive rate. A s the value o f the franc rose in 1992 and 1993, after the fiscal shock o f G erm an reunification, h ig h er interest rates led French industry to call fo r depreciation, though it co n tin u ed to support EMU. Su p p o rt fo r EM U surged upward again in the mid1990s, as it app eared that the E uro w ou ld n ot be as strong as som e had feared .19 T h e C o n seil N ational de Patronat Français, the leadin g French business in ­ terest gro u p , translated these p referen ces into dem ands. T h e CN PF supported EM U b u t called fo r political con trols over the E C B to p revent too harsh an antiin flation ary regim e. T h e organization split over the M aastricht Treaty and there­ fo re took no official position o n the referen dum , though its president, rep re­ senting larger and m ore com petitive firms, spoke o u t in favor. R eluctance to give strong support to the arran gem en t evidendy stem m ed prim arily from its social policy provisions, w hich business believed to be unnecessary and disad­ vantageous, particularly w ithout the full participation o f Britain. T h is am biva­ len ce may also have reflected discom fort with the in d ep en d en ce o f the ECB. I-arge banks favored EM U as well, th ough the president o f Paribas, A n d ré LévyI^ang, an advocate o f EMU, p o in ted o u t that its effects w ould be “m arginal,” since w holesale banking was already integrated and retail banking would n ot be in tegrated fo r twenty to thirty years. Banks apparently saw a significant co m p ar­ ative advantage, however, if Britain did n ot participate and d em an ded that the ECB lim it access to its refin an cin g facilities to participants in EMU. In the mid1990s leadin g French and G erm an industrialists co o p erated to publicize their support fo r EM U with a com petitive rate vis-à-vis the dollar. (French firms were som ew hat m ore vulnerable than their G erm an counterparts to w orld m arket pressure from do llar-d en o m in ated products, b ut the d ifferen ce was n ot as great as is often thought.) Prom inen t supporters o f EM U with close ties to business, am o n g them fo rm er presid en t Valéry Giscard d ’Estaing, called for a w eaker franc against the dollar and, implicitly, against the D M .50 T h e cautious and con dition al support o f business fo r EMU was ech o ed by Socialist and G aullist governm ents alike, w hich reco gn ized that financial liber­ alization, capital mobility, and co n vergen ce toward low inflation had increased the benefits and reduced the costs o f exch an ge-rate stabilization. T h e financial deregulation and budgetary reform required fo r co n vergen ce was occurrin g

49 For polls and other data on Frcnch business, sec Pisani-Ferry, “France,” 28-29; Amy Verdun, “Does European Economic and Monetary Integration Limit Policy-Making Autonomy?” Essex Uni­ versity Working Paper (Colchester, 1996); interview with French cabinet minister, 1994. Also Philippe Rauchard, Deux ministres trop tranquilles (Paris, 1994), 151 if; Blanchard and Muet, “Competitiveness”; Connolly, Rotten, 107-108, 1 1 1 -1 1 2 ; Laughland, Death, 15 -16 . 50 Pisani-Ferry, “France,” 15-2 0 , 30, and previous note.

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unilaterally. T h e Gaullist governm en t from 1986 to 1988 was particularly sup­ portive o f privatization, but even Socialist governm ents favored greater liberal­ ization and d eregulation o f finance and industry. Like Britain, the B en elux countries, an d Scandinavia, France relaxed restrictions on the activities o f fo r­ eign banks, with the Paris-based E urobon d m arket reo p en in g in 1985. W ith the striking failure o f highly in terventionist industrial policy, the governm en t was a b an d o n in g d irect financing o f industry and com m itted itself to greater auton ­ om y fo r m anagers. By 1988 France was well on the way to elim inating capital controls; the French govern m en t later advanced the tim ing o f full capital liber­ alization to an earlier date than E C rules required. T hese moves were supported by business. T h e “young T urks” in con trol o f the CN PF con tin ued to press for m ore m arket-oriented p olicies— though som e rem ained skeptical about the strong currency policy.51 By the late 1980s a com bin ation o f tech nological developm ents, cross-border investm ent, and liberalization had further reduced the cost-effectiveness o f capital controls, e xce p t in the very short term. Increasing capital m obility d u r­ in g this p eriod red u ced the scope fo r the dom estic m anipulation o f interest rates, thereby shifting the trade-off betw een exchange-rate stability and dom es­ tic m on etary autonom y in favor o f the form er. W here this trend was in ter­ ru p te d — notably by Keynesian reflation, as in France, Belgium , Sw eden, and Norway after the second oil sh ock— inflation spiraled upward and extern al disequ ilibria in d u ced policy reversal (a politically and econ om ically costly process we traced in chap ter 4 ). By 1986 there was strong evidence that rem aining real interest rate differentials betw een France and its n eighbors reflected litde m ore than risk prem ia im posed on weak currencies.52 French m acroecon om ic p erform an ce, particularly inflation, was also co n ­ vergin g to G erm an levels. In this regard, the French situation seem ed sharply differen t from that o f eith er Italy o r Britain.“ T his change, along with weak oil prices, robust econ o m ic growth durin g the late 1980s, and a tem porary dip in un em ploym en t, m ade EM U u n d er G erm an terms app ear feasible at relatively low cost. Low er inflation and progressive stabilization o f the franc was m atched after 198 7 by falling unem ploym en t during an upswing o f the business cycle. T h e d o lla r’s declin e after 1986 p laced downward pressure on the franc, but the co n tin uin g overvaluation o f the dollar m eant that the pressure did n ot grow se­ vere fo r a few years. W h en it did, French officials argued that m acroccon om ic pressures on France stem m ed from the threat o f speculative attacks rather than from d ivergen ce in underlying econ o m ic fundam entals; this was certainly the 51 Interview with official in the French Treasury, 1989; I.ouis W. Pauly, Opening Financial Markets: Banking Politics on the Pacific Rim (Ithaca, N.Y., 1988), 174; Christian de Boissieu and Marie-Helcne Duprat, “French Monetary Policy in the Light o f European Monetary and Financial Integration," in Heidemarie Shennan, ed., Monetary Implications of the 1992 Process (New York, 1990), 6 2-63; J. R. Hough, The French Economy (New York, 1982), 209. See also chapters 4 and 5, above. 52 Capital liberalization was not a direct consequence o f EC commitments. David M. Andrews, “Capital Mobility and Monetary Adjustment in Western Europe, 1973-19 91," Policy Sciences 27 (1994), 432-33; Boissieu and Duprat, “French,” 7 8 -7 9 . 55 On unit labor costs, OECD Economic Outlook 58 (Paris, November 1995), A 16.

4IO

Negotiating the Maastricht Treaty,

i ç

8 8 -iç ç i

lesson th a t lea d in g g o v ern m e n t officials a p p e a r to have draw n fro m the 198 7 EM S re a lig n m e n t.54 In this re g a rd , E M U was seen as th e co n tin u a tio n o f lo n g sta n d in g F rench in­ tern a tio n a l m o n eta ry g o a ls by o th e r m eans. T h e F ren ch e co n o m ic argu m en t fo r E M U was as follow s: p o licy was in any case co n v e rg in g toward low in flation , m ark et-d riven in terest rates, an d g rea ter capital m o b ility— in short, F ran ce was co m m itted to lib eralizau o n an d the franc fort. In this co n te x t, th e m o re sym­ m etrical E M U a p p ea red to o ffe r advantages o ver the m o re asym m etrical EMS, in c lu d in g lo w er risk p rem ia an d e xch an ge -ra te volatility, g rea ter p o litica l leg iti­ m a tio n , an d , above all, m o re sym m etrical o b liga tio n s vis-à-vis G erm any, w hich w o u ld translate in to lo o ser con strain ts o n m a cro e co n o m ic policy. T h is was not, as so m e have a rgu ed , the result o f a co m p le te id e o lo g ica l co n versio n o f F rench p o licy-m ak ers to th e G erm an d o ctrin e o f low in flation an d m o n etary d isci­ p lin e , le a d in g to a n ea r-to tal co n v e rg e n ce o f F rench an d G erm an interests.55 To th e con trary, th e F ren ch g o v ern m e n t, like F ren ch business, m ain tain ed the tra­ d itio n a l F ren ch su p p o rt fo r m o n etary u n io n o n “m o n etarist” term s— that is, w ith lo o se r co n v e rg e n ce criteria, g rea ter p o litica l co n tro l o ver the E C B , a rela­ tively la rge n u m b e r o f m em bers, an e x p licit m an d ate to target em p lo ym en t and gro w th , a n d a w ea k e r E u ro p e an cu rre n cy than that favo red by G erm any. L ik e the EM S, E M U was an e ffo rt to o ve rco m e an u n d erlyin g F ran co -G erm an asym m etry th at stem m ed ultim ately fro m G erm a n y ’s stron g e x p o rt p erfo rm an ce an d the a u to n o m y o f th e B u n d esban k. U n like the EM S, how ever, E M U took p lace after th e F ren ch econ o m y, a n d those o f m any o th e r E C m em ber-states, ha d co n v e rg e d toward G erm an m a cro e co n o m ic standards. T h e EM S d id n ot crea te this c o n v e rg e n c e — as so m e w h o stress that EM U was o n ly the result o f sp illo ver fro m th e EM S seem to suggest. N early all E u ro p e an co u n tries, w h eth e r o r n o t th ey w ere m em bers o f the EM S, co n v e rg e d toward low er in fla tio n and m o re stable ex ch a n g e -ra te p o licie s d u rin g the 1980s and su ffered from asym ­ m etry in so fa r as they so u g h t to stabilize e x ch a n g e rates. D avid A n drew s rightly ob serves th at “m o n etary a u th o rities in Paris an d R o m e w ere o b lig e d to p ursu e in creasin gly G erm an ic m o n etary p o licies th ro u g h o u t the 1980s n o t because p o licy co o rd in a tio n w ith G erm an y h a d b e e n form ally in stitutionalized, b u t in spite o f it.” 56

M Connolly, Rollen, 3 6 -4 0 , 10 7-10 9; Jacques Attali, Verbatim (Paris, 1993), 1:429; McCarthy, “France," 58; interview with French Cabinet Minister. 55 Sandholtz, “Choosing Union”; McNamara, Currency. 56 Andrews, “Capital Mobility,” 431. T h e stability o f French preferences over time and the simi­ larity o f pressures facing non-EMS and non-EC members call into question another widespread view, namely that French preferences at Maastricht stemmed from the success o f the SEA. In an influen­ tial essay, “Choosing Union,” Wayne Sandholtz revives the neofunctionalist claim that state prefer­ ences are fundamentally path-dependent, that is, the primary determinants o f state preferences are prior integrative decisions in other areas. Th e boost in public support for the EC following the SEA was a “necessary" condition, he conjectures, without which Maastricht would have been a "ritual in­ vocation.” H e also notes that the SEA’s provisions for capital liberalization created strong pressures to move to EMU. Yet the French government supported greater symmetry in the EMS and movement toward EMU from the 19 8 5 -8 7 period onward, predating the SEA’s rise to public prominence by some years. Similarly, while the move to EMU was clearly linked to capital liberalization— the French

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W ithin this new co n te x t o f co n v e rg e n ce a n d liberalizatio n , E M U p ro m ised to e x p a n d F re n ch m a cro e co n o m ic flex ib ility by im p o sin g g rea ter sym m etry b e ­ tw een F ran ce an d G erm any. In ability to sh ield F ren ch in terest rates fro m e x te r­ n al p ressu res a n d the fall o f in fla tio n to ju s t above G erm an levels suggested that in o rd e r to re d u c e real in terest rates any fu rth er, o n e n e e d e d to a lte r G erm an policy.57 E M U was e x p e c te d to loosen con strain ts o n F ren ch m a cro e co n o m ic p o l­ icy by e lim in a tin g risk p re m ia a n d lo o se n in g G erm an policy. T h e result w ou ld b e a w ea k e n in g o f the E u ro p e an cu rre n cy vis-à-vis the d o lla r an d p erh aps a m o re co m p etitive p o sitio n fo r Fran ce vis-à-vis G erm an y.58 A s o n e F ren ch p o licy­ m a k er p u t it c o n ce rn in g th e G -7 in this p eriod : “G erm an y was absolutely the d e ­ term in a n t o f o u r e co n o m ic p o licy an d yet it was som etim es d ifficu lt to w ork with them , esp ecially [with] th e B u n d esb an k. [M a cro e co n o m ic co o rd in a tio n ] was a g o o d way fo r us to . . . p ressu re G erm an y so they w ou ld a ccep t m o re grow th, a m o re d yn am ic fiscal policy, an d a re d u ctio n o f in terest rates.” 59 Y et th e e co n o m ic case fo r EM U in F rance still rested o n a ga m b le, n am ely that the co n se q u e n ce s o f a m o re sym m etrical F ran co -G erm an relatio n sh ip , new ca p i­ tal m ark et co n d itio n s, an d re d u ce d volatility u n d e r E M U — a stable E u ro re la ­ tively co m p etitive against th e d o lla r— w ou ld offset the costs o f co n v e rg e n ce and the residual ben efits o f m a in tain in g the d iscretio n to let the fran c d ep recia te u n d e r c u rre n t arran gem en ts. T h e p o licy was u n d e r co n stan t attack fro m those w h o b o re th e b ru n t o f the franc fort policy. U n ion s an d the far left an d N ation al F ro n t to o k the lead, b u t even F ren ch in dustry d id n o t advocate a strict antiin fla tio n a ry re g im e o f th e k in d fav o red by the B un desban k. A lth o u g h the p u b ­ lic disco u rse o f F ren ch elites suggests that they a ccep ted that EM U w ou ld im ­ p o se a m easure o f e co n o m ic m o d ern iza tion o n F ran ce, it is cle a r that they con sisten tly re jecte d th e view th at this w o u ld best o c c u r th ro u gh a fully in d e ­ p e n d e n t ce n tra l b a n k p a ttern ed after the B u n d esb a n k .60 P re fe re n ce A ggreg atio n : “A t least I ’ll have a v o te ” W e have seen that p rim a facie argu m en ts can b e a d va n ced fo r th ree e x p la n a ­ tions o f F ren ch p re fe re n ces. T h e F rench go v ern m e n t m ay have seen M aastricht

government attempted to link the two in negotiations— there is no evidence that the preference for EMU was a response to the unintended consequences o f the E C’s subsequent capital liberalization directives. 57 Pisani-Ferry, “France,” 16. 58 It may seem perverse to argue that the French sought lower interest rates and a more permis­ sive policy, given the French reticence to devalue even in the face o f manifest disequilibria that em erged after Germ an reunification. Yet the latter was tactical, aimed at bolstering credibility; sub­ sequently French government officials agreed that they had made a serious mistake by failing to de­ value unilaterally once they had failed to force unilateral revaluation o f the DM. Pisani-Ferry, “France,” 8 -1 0 . For a critique o f the francfort policy, see Olivier Jean Blanchard and Pierre Alain Muet, “Competitiveness through Disinflation; An Assessment o f the French M acroeconomic Strategy," Economic Policy 16 (1993), 1 2 -5 6 . 59 Yoichi Funabashi, Managing the Dollar: From the Plaza to the Louvre (Washington, D.C., 1988), 1 2 5 -12 6 . 60 Pisani-Ferry, “France," 1 2 -1 3 , 26, 3 0 -3 2 , also cites criticism by Alain Juppé and others. PisaniFerry argues that French pressure for European fiscal coordination and pressure to soften the sta­ bility pact reflect French traditions and do not challenge the independence o f the ECB. 412

Negotiating the Maastricht Treaty, 198 8-1991 as a m eans to tie a un ified G erm an y in to E urope; to prom ote M itterrand’s E uro­ pean federal vision; and to realize com m ercial and m acroecon om ic objecdves: low er interest rates an d m ore stable an d com petitive exch an ge rates. Each in­ terpretation seem s plausible. A rgu m en ts consistent with each w ere advanced in the M aastricht referen d u m debates. In the historical record , how im p ortan t does each m otivation app ear to have b een in the form ation o f French p referen ces co n cern in g the issues discussed at Maastricht? T h e historical reco rd does n ot support the view that French preferen ces in the M aastricht n egotiations w ere decisively in flu en ced by G erm an unification. A n objective geopolitical explan ation w ould p redict that French p referen ces w ou ld shift in 1989, b ut in fact p referen ces rem ained stable after 1985, despite the un ification o f G erm any and the dissolution o f the Soviet U nion. M ajor F rench initiatives cam e in 1987 and 1988, several years before the fall o f the Wall; by early 1989 the French govern m en t had already signaled a w illingness to ac­ cep t G erm an “econ o m ist” conditions. In the discourse and dom estic cleavages w ithin France, there is essentially no d irect e vid en ce— elem ents o f the refer­ endu m rhetoric, w hich in clu d ed all possible argum ents, aside— that top French policy-m akers saw them selves as “en m esh in g” G erm any in o rd er to lim it its geo p o litical am bitions. Foreign M inister R oland Dumas, fo r exam ple, justified stron ger E C institutions n o t as a geopolitical co u n ter to unification but as a way to constrain the in d ep en d e n t central bank supported by Germ any.61 It is true that in the p eriod D ecem ber 1989 throu gh Jun e 1990, M itterrand and K ohl both spoke publicly o f EM U as a coun terpart to G erm an reunification, yet there is little evidence that this was m ore than an effort to pressure the Bundesbank and o th er o p pon en ts w ithin G erm any.62 N or does the cross-issue variation in French preferen ces support an objective geo p o litical explan ation . I f G erm an unification w ere a driving fo rce beh in d the French position, we w ould exp ect strong French support fo r political integration. Yet h ere too the French position rem ained unchanged: in striking contrast to its active initiation o f discussions o n EM U, the French governm en t sough t to avoid discussions o f political u n io n , in clu d in g foreign and defen se policies, the powers o f the E u ro p ean Com m ission o r Parliam ent, and im m igration. T h e re w ere few French innovations and litde willingness to com prom ise; political un ion was view ed by both parties as a concession to G erm any in exch an ge fo r EMU. D e ­ fense co o p eratio n was an excep tio n , but it is un clear w hether the extrem e French position was m ean t to be taken seriously; o n e G erm an diplom at claim s the G er­ m an govern m en t view ed the w eak defen se provisions o f the M aastricht Treaty as n o m ore than a m eans to let France “save face .” 63 Finally, alth ough the French 61 Patrick McCarthy, “France Looks at Germany, or How to Become German (and European) While Remaining French,” in McCarthy, ed., France-Germany, 1983—1993: The Struggle to Cooperate (New York, 1993), 5 1 -7 * ; Laughland, Death, 246IÏ; Martial, “France,” 117-12 0 ; Agence Europe, 20, 23-24 April 1990; interview with French Minister. 6S Direct evidence about confidential French deliberations during this period is scant and unre­ liable, hence we are thrust back on softer sources. Given the intensity and partisanship o f the French debate to this day, it is unclear how reliable the sources would be, even if a comprehensive analysis were feasible. 65 Cole, François, 158-160.

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go vern m en t appears to have panicked briefly in the face o f G erm an u n ifica­ tion, there is litde evidence that dom esd c groups m obilized aroun d the issue. French p u b lic o p in io n rem ained relauvely sanguine abou t G erm an reun ifi­ ca tio n . T h o u g h nearly every possible argum ent was aired, the G erm an threat played a ro le in the M aastricht referen dum debates that was relatively m inor co m p ared to m acroecon om ic policy and gen eral con cerns about sovereignty. It is m ore difficult to disentangle the relative im portan ce o f ideological and eco n o m ic m otivations, th o u gh on balance the historical record appears m ore consistent with econ om ic m otivations. T h e tim ing o f French initiatives in 1987 and 1988 supports both views: it m ight be attributed to M itterrand’s w illing­ ness to support any p ro-E uropean initiative after early 1984, w hen the French lau n ch ed bilateral efforts to redress asymmetries in the EMS, o r to econ om ic co n vergen ce and dollar depreciation after 1987. D om esdc discourse and cleavages appear also to have run along lines o f e co ­ nom ic beliefs and interests rather than partisan or personal com m itm ent to the E uropean idea. Certainly M itterrand b elieved — as late as his decision in 1992 to call a re feren d u m — that a high profile in EC initiatives would bolster his own standing and that o f the Socialist party in public op in ion , yet those w ho sup­ p orted (and those w ho criticized) m onetary un ion appear prim arily to have been co n cern e d with the econ o m ic benefits and costs o f the franc fort policy.64 T his is particularly true o f French initiatives in 19 8 7 -8 8 , w hich were taken, af­ ter all, by Gaullists. T h e French aide-m ém oire o f 1988, like its Italian co u n ter­ part, called fo r the elim ination o f asymmetries in the EMS and com p lain ed that the DM was “structurally u n d ervalu ed ,” gen erating large G erm an surpluses. T h e Italian m em o threaten ed to invoke escape clauses, lim it capital liberalization, and im pose harm onization requirem ents if asymmetries in the operation o f the EMS w ere n ot redressed. Even D elors recom m en ded that the French withdraw from the EM S if its asym m etries w ere n ot redressed. French central bank gov­ ern o r Jacques de Larosière observed in 1990: “Today I am the governor o f a central bank w ho has d ecided, alon g with his nation, to follow fully the G erm an m on etary policy w ithout votin g on it. A t least, as part o f a European central bank, I’ll have a vo te.”65 M itterrand d efen d ed the treaty by stressing that the ECB board w ould be u n d er the con trol o f the C o un cil and its m em bers individ­ ually responsible to national concerns. Jacques Attali was m ore succinct: the treaty’s central purpose was “to g e t rid o f the D -M ark.”66 C o n flictin g assessments o f the cost-effectiveness o f the franc fort policy were a prom in en t part o f the ref­ eren du m debate, th ough sovereignty con cerns also played an im portant role. Som e p ro m in en t G aullist politicians, though n ot Jacques C hirac, took up the criticisms, w hich focused on the defen se o f social security and econ o m ic pros­ perity, but did n ot co n fro n t E uropean ideology direcdy. M ichel Bérégovoy, the 64 Interview with French Minister. 65 Cited in Washington Post, 25 October 1990. Bérégovoy told Lawson that he had been skeptical about EMU but had been talked around toit by de Larosière. Lawson, View, 913. See also Daniel Gros and Niels Thygesen, European Monetary Interaction: From the. European Monetary System towards Monetary Union (London, 1991), 3 1 1-3 1 3 . O n withdrawal, interview with Delors. 66 David Marsh, Germany and Europe: The Crisis of Unity (London, 1994), 144; Connolly, Rotten, 141-142 ; interview with French official. 4 * 4

Negotiating the Maastricht Treaty, 198 8-1991 French finan ce m inister fo r the Socialists during m uch o f the period, later turned against the treaty, resentfully reflectin g that he had been forced to play along with “that h u g e con trick, the M aastricht Treaty.” 67 T h e pattern o f French n egotiatin g tactics and positions across various issues tends to co n firm the p red o m in an ce o f econ o m ic concerns. France was far from un iform ly favorable o r o p posed to econ o m ic integration, as an explanation g ro u n d ed in E uropean ideology w ould predict. T h e distinctive French “m on e­ tarist” p o sitio n — support fo r a less autonom ous ECB, a larger num ber o f par­ ticipants, and a rapid transition— rem ains u n exp lain ed , as are o th er traditional eco n o m ic con cern s o f France, in cludin g a strong E uropean social policy, a strong em ploym en t law, and industrial p o licy— all areas w here relatively gen erou s French policies ren d ered France vulnerable w ithin the relatively liberal EC. As b oth geo p o litical and econ o m ic theories predict, it was only in purely institu­ tional m atters with vague, un certain , or weak substantive con sequences that g e o ­ political ideas clearly drove French preferen ces. France sought a m odest role for the E uropean Parliam ent as com p ared to the E uropean C o u n cil, an in d ep en ­ d en t defen se identity, and co o p eratio n o n foreign policy that preserved a large m easure o f sovereignty. Such policies reflected instead traditional French id e o ­ logical con cern s, m ost notably the desire to lim it the centralization o f suprana­ tional power. French priorities also in cluded strength en ing national parliam ents w hile strongly op po sin g a region s com m ittee and en h an cem en t o f Com m ission and parliam entary powers. T h e three-pillar m odel, insulating foreign and inte­ rio r policy-m aking from traditional EC procedures, was a French innovation. T h is m igh t be exp lain ed as an ideological p referen ce or as an objective g e o ­ political calculation: unilateral French defen se and foreign policies were viable as co m p ared with those o f G erm any, h en ce French suspicion o f supranational institutions.68 Perhaps the m ost striking evidence in favor o f an econ o m ic rather than an id eolo gical in terpretation is the consistency o f French policy inside and outside the EC. T h e central French econ o m ic g o a l— greater m acroeconom ic flexibility th rou gh restraints o n the Bundesbank and m ultilateral finan cing o f central bank in terv en tio n — rem ained the same regardless o f w hether the forum was re­ gion al, bilateral, o r m ultilateral. T his is flatly inconsistent with the claim that F rench policy was driven by geopolitical ideas, w hich w ould im ply a sharp dis­ tinction betw een sym bolically significant Franco-G erm an and E C co o p era ­ tion, on the o n e hand, and coop eration elsewhere, on the other. French policy toward EMU, we have seen, was consistent with the unilateral franc fort policy. France sup ported initiatives to these ends in 1979 and 1981 during EMS n e g o ­ tiations and abortive reform efforts, in 1982 as an elem ent in a G -7 proposal, in 1984 within the E C, in 1985 during the SEA negotiations, in 1987 as an aim o f the Basel-N yborg reform s o f the EMS, and in 1988 as part o f bilateral discus­ sions abou t a Franco-G erm an E con om ic C oun cil; and continuously from 1988 th rou gh 199 1 as part o f proposals for EMU. T h e uniform ity o f the French co m ­ 67 I-aughland, Death of Politics, 119; Connolly, Rotten. 68 Interviews with Permanent Representative and Council Secretariat official (Brussels, 1994); Attali Verbatim, 3:651. 4 * 5

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m itm ent to a p articular international m onetary p o licy— w hether the negotiat­ in g en viron m en t was unilateral, bilateral, regional, o r m ultilateral— is inconsis­ ten t with a geo p o litical explanation. Events after Maastricht, in particular French behavior during the currency crises o f 1 9 9 2 -9 3 , provide o n e final source o f evidence that the French gov­ ern m en t pursued its E uropean m on etary policy fo r econ o m ic reasons in d ep en ­ d e n t o f E C rules rather than p urely ideolo gical reasons. T h e French governm ent d e fe n d ed the credibility o f its com m itm ent to the franc fort policy in 19 9 2 -9 3 , even where E C rules did not require it— suggesting that the French com m itm ent to the un derlying econ o m ic policy was steady even w here it was possible to m ain­ tain E uropean credentials in o th er ways. D uring the franc-DM crisis o f August 1993, France refused to devalue (as seem ed appropriate to offset m acro eco ­ n om ic divergen ce in d u ced by the fiscal shock o f G erm an reunification) even w hen it was possible with G erm an y’s blessing and fully within the EMS. France called instead fo r a DM revaluation in an effort to shift the onus o n to G erm any alon e. W hen the N etherlands, follow ed by Belgium and Denm ark, ann oun ced they w ould follow Germ any, thereby isolating the franc, the French govern ­ m en t p referred m oving to w ider bands, thereby essentially ren dering EMS co n ­ straints m eaningless. O n ce w ithin those w ider bands, w hich w ould have perm it­ ted a 15 p ercen t devaluation w ithin the system, the French governm en t neither lo o sen ed policy significandy n or d epreciated the franc.69 In sum, evidence co n cern in g French dom estic discourse, cleavages, and n e­ gotiatin g strategy tends decisively to disconfirm the causal im portance o f G er­ m an un ification and rather strongly to con firm the predom inan ce o f econ om ic interests in French policy. H owever, we cann ot dismiss entirely a secondary but significant role fo r E uropean ideology. As in Germ any, the role o f ideology ap­ pears to have reflected the weakness o r am bivalence o f econ o m ic incentives. A lth o u gh decision-m akers app ear to have been con cern ed prim arily with relax­ in g constraints on French m acroecon om ic perform an ce, the risks and the g e n ­ eral tech n ical and political uncertainty surroun ding m onetary policy may well have m eant that n either policy was clearly superior. It is u n deniable that French businesses strongly supported EMU, but it is less clear that they had a co m ­ p ellin g structural reason to d o so. T h e M aastricht referen dum debates revealed d eep splits over the p ro p er course betw een adherents o f the franc fort and m ud­ d ling th rou gh with som e variant o f Vautre politique. French policy-m akers later cam e to believe, we have seen, that the governm en t pursued nom inal exchangerate stability to the poin t o f obsession, foresw earing devaluation in the mistaken view that establishing the credibility o f the franc and persevering with a policy o f “com petitive disinflation” was the best course. We cann ot, therefore, dismiss the possibility that E uropean federalist ideas m On these events, see Peter Norman and Lionel Barber, “The Monetary Tragedy o f Errors That Led to Currency Chaos," and “The Day Germany Planted a Currency Time Bomb,” FT, 1 1 -1 2 Feb­ ruary 1992, 2. Also interview with French Minister (Cambridge, 1994). In Italy, industry supported efforts to limit government spending and wage setdements by keeping interest rates high and the currency strong. James I. Walsh, “Global Finance, Domestic Politics: International Monetary Policies in Britain, France and Italy,” (diss., American University, 1997), 211.

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Negotiating the Maastricht Treaty, 198 8-1991 h eld by som e policy-m akers in a relatively autonom ous French state may well have in terven ed in an im p ortan t way betw een structural econ o m ic pressures and policy.70 In the absence o f conclusive evidence co n cern in g internal French d eliberations surro u n d in g E M U — an issue that rem ains controversial— we can ­ n ot dismiss the possibility that, given two highly uncertain policy options, strong p ublic sup port fo r E uro pe in tegration, and com m itm ents by both the Gaullist and the Socialist parties, it was ideological sup port fo r E urope that ren dered EM U and the franc fort the m ore attractive option . E uropean ideals provided p o ­ litical legitim acy, a w ider range o f justifications, and a set o f scapegoats n ot ju st fo r e co n o m ic adjustm ents that app eared inevitable, as with the EMS n egotia­ tions, b ut fo r con tinuation o f the franc fort policy.

Britain: A “rat bag o f proposals” from “cloud-cuckoo land’”? Britain o p p o sed nearly every policy co n tain ed in the M aastricht Treaty excep t those that strength en ed the E uropean C o u rt’s en fo rcem en t powers, provided fo r a w eak C om m on Foreign and Security Policy, called fo r greater subsidiarity, and m ade the E uropean C en tral B ank in dep en den t. It op ted o u t o f the social policy entirely and EM U provisionally. Betw een 1985 and 1991 Britain did jo in the EMS, b u t only w ithin relatively loose 6 p ercen t bands— by 1992, after a se­ ries o f policy errors, it had fallen back out. T h e ge o p o lid ca l th eory predicts that such a negative position across the board m igh t em erge as the co n sequ en ce eith er o f British antipathy toward G er­ m any o r o f British ideolo gical opposition to E uropean federalism fostered by an extrem e nationalist prim e m inister, M argaret T h atcher. EMS, less threatening to British sovereignty than EMU, m ight be m arginally acceptable, but EM U u n ­ d er no circum stances. Similarly, Britain w ould oppose the transfer o f sovereignty to the E u ro p ean Parliam ent and, because it had a viable unilateral national d e ­ fen se policy, w ould jo in France in o p posing any fo reign policy or defen se co o p ­ eration, T h e political eco n o m ic theory, by contrast, predicts that the British w ould accep t only cautious com m itm ents toward m on etary in tegratio n — a loose com m itm ent to the EMS b ut n o t E M U — favored by business groups, because o f Britain’s in co m p lete econ o m ic co n vergen ce with the low inflation and stable e x ­ ch an ge rates p revailing on the C on tinent. Business con cern s about the slide in com petitiveness that m ight result from any firm com m itm ent to stable exch an ge rates w ou ld be decisive; yet business w ould at the sam e time seek to avoid any p erm an en t exclu sion from m onetary arrangem ents, fo r exclusion was perceived as u n d erm in in g the glo b a l position o f British industry and, above all, finance. O n balan ce the eviden ce supports the econ o m ic explan ation o f British p re f­ eren ces m ore strongly b ut not decisively. In the few places w here the two g e n ­ erate strikingly divergen t p rediction s— as in Britain’s attitude toward exclusion from E M U — Britain ten d ed to follow its econ o m ic interests as they were p e r­ ceived by business interest group s and econ o m ic ministers. Still, there is sub­ 70 Some attribute these ideas to a French desire to emulate German policy, though the evidence remains inconclusive. McNamara, Currency.

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stantial e v id e n ce to suggest the im p o rtan ce o f T h a tc h e r’s E u ro sk ep u cal g e o ­ p o lid ca l id eolo g y, w h ich d e lay ed fo r q u ite som e tim e the ad o p tio n o f p o licies a d vo ca ted by p o w erfu l e c o n o m ic interests an d nearly all C a b in e t m inisters. G e o p o litic a l In terest and Ideology: “W e have s u rre n d e re d e n o u g h so vereign ty” T w o g e o p o litica l co n cern s may have p layed a ro le in Britain’s E u ro p ean p o l­ icy d u rin g this p eriod : co n ce rn a b o u t G erm an un ificatio n an d T h a tc h e r’s id e o ­ lo gica l o p p o sitio n to federalism , the latter su p p o rted by in creasin g n um bers o f p arliam en ta ry E uroskeptics. T h e first facto r, G erm an u n ificatio n , n e e d n o t detain us lon g. It is difficult to see p recisely how it m igh t have in flu e n ce d British policy. In Britain as in F rance a n d G erm an y, th ere is litde e vid e n ce to su p p o rt a lin k b etw een E u ro p ean p o l­ icy an d the revo lu tio n ary events o f 1989. T h e re w ere, to be sure, th o se — in ­ clu d in g som e E uroskep tics in P arliam en t an d even m em bers o f T h a tc h e r’s in ti­ m ate circle, such as N icolas R id ley— w h o in d u lg e d in a n ti-G erm an diatribes. Yet w h en e ve r they stated th eir position con cretely, their co n cern s p ro ved to be e c o ­ n o m ic ra th e r than m ilitary— in d e e d , the e co n o m ic n atu re o f the threat app ears to have b e e n th e so u rce o f som e fru stration a m o n g tradition al T ories. EM U, R idley ch a rg e d in a ce le b ra te d passage, was “a G erm an ra ck et d esig n ed to take o ver th e w h o le o f E u r o p e .. . . T h e D M is g o in g to b e the stron gest cu rren cy . . . I'm n o t sure I w ou ld n ’t ra th er have th e shelters an d the ch a n ce to figh t back than sim ply b e in g taken o ver b y . . . e co n o m ics.” 71 R idley was, it sh o u ld be a d d ed , fire d fo r u tterin g such com m en ts. O vera ll, th ere is n o e vid en ce o f a lin k betw een p o litico -m ilita ry goals an d e co n o m ic in tegratio n . N o r d id th e p ro sp ect o f G erm an u n ificatio n fo rge such a link. L ike M itterrand, T h a tc h e r tried initially to im p ed e G erm an u n ification ; she so u g h t allian ces with eastern co u n tries, p articularly w ith the USSR and P oland , a ro u n d the p rin cip le o f th e sanctity o f existin g b o rd ers. S h e p ro p o se d clo ser A n g lo -F ren ch c o o p e ra ­ tion. H u rd a n d the F o reign O ffice w en t som e way toward n eg o tia tin g m ilitary (in clu d in g n u clea r) co o p e ra tio n with F rance. Yet T h a tch er, u n like M itterrand, n ev er cla im ed (even rh eto rically) that E u ro p ean in tegratio n co u ld substitute fo r co o p e ra tio n against G erm any. W h en G erm an reu n ificatio n w en t forw ard any­ way, an d the F ren ch reversed p o licy o n bilateral an d re gio n al co o p era tio n with G erm an y, T h a tc h e r h a d little in terest in su p p lan tin g a b alan cin g p o licy with a E u ro p e an o n e. Instead she a ccep ted it as “o n e in stance in w h ich the fo re ign p o l­ icy I p u rsu ed m e t with u n am b igu o u s fa ilu re.” S h e c o n tin u e d to o p p o se E M U as she h a d b e fo re. In short, G erm an u n ificatio n cam e and w ent, leavin g British policy, like that o f France, u n c h a n g e d .72 If the roots o f British p o licy w ere geo p o litica l, they m ust th e re fo re have in-

71 Dom inic Lawson, “Saying the Unsayahle about the Germans: An Interview with Nicholas Ridley,” Spectator, 14 July 1990, 8; interview with Patrick Robertson, founder and director o f the Bruges Group, 1992. 72 M argaret Thatcher, The Downing Street Years (New York, 1993), 813. For an overview o f Thatcher’s policies toward the Soviet Union and German reunification in this period, Paul Sharp, Thatcher’s Diplomacy: The Revival of British Foreign Policy (London, 1 9 9 7 ),chaps. 1 0 -1 1 .

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Negotiating the Maastricht Treaty, 198 8-1991 volved n o t an objective geo po litical threat b ut a particular geopolitical ideology. T h a tc h e r’s “ro o t and b ra n ch ” opposition to EM U and m any aspects o f fed eral­ ism re flecte d h e r own bran d o f British nationalism , w hich predisposed h er to re­ je c t any p rop osal fo r centralizin g power at the E uropean level; over time this view was su p po rted by increasing num bers o f E uroskeptical MPs. Aggressive e f­ forts by D elors an d A rth u r C o ck field to e xp an d Com m ission activities to areas such as tax harm on ization only h eigh ten ed T h a tc h er’s suspicion. T h e ability “to run an in d ep en d e n t m onetary, econ o m ic and fiscal policy,” she proclaim ed, “lies at the heart o f w hat constitutes a sovereign state. . . . Taxation, fiscal and m on etary m atters [go] to the heart o f the con trol o f the execu tive.” A celebrated sp eech at Bruges in 1988, aim ed direcdy at D elors, set forth T h a tc h e r’s vision o f E u ro p ean in tegration as “preserving the differen t traditions, parliam entary pow­ ers and sense o f national pride [that have] been the source o f E u ro p e ’s vitality th rou gh the centuries . . . [not] som e s o rto fln d e n tik it European personality.” 7* She believed also, an associate recalled, that Britain had unusual in flu en ce due to “historical distinction, skilled diplom acy and versatile m ilitary fo rces”; though she appears to have disliked and distrusted the Foreign O ffic e ’s ten dency (so she believed) to seek diplom atic accom m odation that w ould brin g Britain “closer to the h eart o f E u ro p e.” 74 British sovereignty was the fundam ental issue. “In my view,” she co n clu d e d in the B ruges speech, “we have surrendered e n o u g h .” 75 T h ese id eolo gical co n cern s suggest o n e prim a facie explan ation fo r the Brit­ ish g o v ern m e n t’s extrem e opposition to nearly all proposals con sidered in the M aastricht negotiations, n ot least E M U — a tendency shared with the D anes and G reeks, similarly in clined ideologically.76 A lth o u gh John M ajor took a somewhat m ore m oderate line, his own views rem ained far less op en to Europe than those o f G eoffrey H owe, M ichael H eseltine, D ouglas H urd, and o th er leadin g Tory politicians but hardly as extrem e as the grow ing Euroskeptic opposition within the p arliam entary party. O n specific issues o f geopolitical o r ideological im port, notably CFSP and the powers o f the E uropean Parliam ent, Britain voiced its traditional support fo r in tergovern m en tal arrangem ents. Britain supported French proposals for a m ultipillar design separating foreign policy from the E C institutional structure b ut seem ed from the start w illing to com prom ise slighdy in the direction o f strength en ing an d exp an d in g the W EU (though n ot w here core N A TO functions w ere at stak e). Britain backed French skepticism ab ou t exp an din g the powers o f the Parliam ent, th ough it signaled early on a willingness to m ake m odest com prom ises such as a bin din g vote by the Parliam ent on the investiture o f the C om m ission.77 T h o u g h it involved a transfer o f national sovereignty, support for stronger en fo rcem en t by the E uropean C o u rt appears n ot to have troubled the Euroskeptics. 73 Sharp, Thatcher’s, 168 -170 , also 17 1-172 ; Thatcher, Downing, 750. 7,1 Interview with Thatcher adviser, September 1997; I-ord Gilmour, “ l'he Thatcher Memoirs," Twentieth Century British History 5:2 (1994), 257-264. 75 Sharp, Thatcher's, 1 7 6 -1 7 7 ; Margaret Thatcher, The Path to Power (London, 1995), 473-480. 76 Thatcher, Downing, 751. 77 Hugo Young, “The Prime Minister," in Dennis Kavanagh and Anthony Seldon, cds., The Major Effect (London, 1994), 23.

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E co n om ic Interest: “T h e prim e m inister has achieved exactly w hat business n eeds” T h e statem ents o f British industry co n cern in g m onetary integration suggest that its preferen ces reflected three considerations. O n balance, business sought, in d eclin in g o rd e r o f im portance, con tin ued reciprocal access to European m arkets, com petitive exch an ge rates, and low interest rates. In addition it o p ­ posed a strong E C social policy. T h ese considerations led British peak business gro u p s to advocate cautious involvem ent in EMU, but only if the exch an ge rate was com petitive and inflation low. A lth o u gh peak business groups did n ot sup­ port im m ediate or autom atic participation in the single currency schem e, they adam antly insisted on avoiding exclusion from it. In ch ap ter 4 we left British industry and banking in 1985 just after their shift to support fo r ERM participation, w hich was exp ected to stabilize exch an ge rates at a com petitive level. Sup p ort steadily increased throu ghou t the rem ainder o f the decade. CBI surveys showed that business, particularly big business, was co n ­ cern ed m ore about the exch an ge rate than about the interest rate; a com p eti­ tive value fo r sterling was seen as essential to industrial profitability. In 1988, as the dow nside o f N igel Lawson’s m acroeconom ic boom was becom ing evident and the govern m en t starting to raise both interest rates and the value o f ster­ ling to dam pen inflation, the CBI and the Institute o f D irectors reiterated their sup port fo r exch an ge-rate stabilization. It was thought at the time that ERM m em bership m ight bolster the credibility o f British policy, thereby perm itting lower interest rates. G iven the alternatives— h igh er interest rates or taxes, lower spending, o r in com es p o licy— ERM m em bership seem ed an attractive option, particularly if (as all assum ed at the time) the exchange-rate p eg was a flexible o n e within 6 p ercen t bands, as was the case fo r Italy. By 1990, with interest rates nearly 15 p ercen t, inflation close to 1 o percent, and sterling at a m oderate value, 93 p ercen t o f British business leaders supported participation in the ERM, and 50 p ercen t believed it should have hap pened lo n g a g o — albeit within wide bands. Finally, the CBI con tin ued to oppose any perm an ent exclusion from the EMS o r EMU, fo r fear o f disadvantaging British finance. CBI docum ents re ­ p eatedly m en tio n ed the n eed to be influential in future E C econ om ic n egotia­ tions, in clu d in g Maastricht, which business and governm en t alike perceived as requirin g serious participation in the EM S.78 T h u s the C B I supported the govern m en t’s entry into the ERM in late 1990, th ough it rem ained skeptical o f the high rate the governm en t chose. CBI lead ­ ers had h o p ed to delay British entry until inflation was go in g down, but sup­ p o rt fo r ERM m em bership was so overw helm ing that tem porary overvalua­ tion was overlooked. Yet inflation and com petitiveness rem ained the most 78 Walsh, Global, a n , also chap. 6; William Keegan, Mr. Lawson's Gamble (Ixindon, 1989), 198 229; Helen Thompson, “The UK and the Exchange Rate Mechanism, 1978-80 ,” in Brian Brivati and Harriet Jones, eds., From Reconstruction to Integration: Britain and Europe since 1945 (Leicester, 1993), 236; Universal NewsServir.es report, 11 October 1990. Exchange rates were a less important influence on investment decisions— other costs and proximity to customers dominated such calcu­ lations— but once in place had a significant influence on profitability, FT, 28July ) 989, 22. Interview with Patrick Robertson.

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Negotiating the Maastricht Treaty, 1988—1991 im p o rtan t co n cern s. T h e Institute o f D irectors, less in flu e n ce d by large m ulti­ n atio n al firm s, re m a in e d m o re skep u cal, n o tin g that in fla tio n re m a in e d h igh , an d even th e C B I in creasin gly criticized the h ig h in terest rates re q u ired to m ain ­ tain the parity. A L a b o u r m o d o n critical o f th e resu ltin g m a cro e co n o m ic strin­ g e n cy g a in e d surprisin g su p p o rt a m o n g C o n servative MPs. Such pressures, alo n g w ith c o n c e r n fro m h o m eo w n ers, co n trib u ted to th e M ajor g o v ern m e n t’s break with th e E R M in S e p te m b er 199 2 , w h ich fo llo w ed a p e rio d in w h ich the B an k o f E n g la n d sp en t n early £ 10 billion in a fru id ess d efe n se o f sterling. A m o n g th e lessons th e go v ern m e n t lea rn ed fro m the e x p e rie n ce , C h a n c e llo r N orm an L a m o n t re p o rte d , was that m em bersh ip in the ERM re q u ired grea ter m acroe c o n o m ic co n v e rg e n ce b etw een B ritain a n d G erm an y.79 A b o u t EM U a n d a single currency, th e C B I re m a in e d m o re cautious. A l­ th o u g h 70 p e rce n t o f businesses surveyed th o u g h t E M U w ou ld assist exp orts a n d so u rcin g and h a lf th o u g h t it w o u ld assist d istribution an d m arketing, their p rim ary c o n ce rn re m a in e d com p etitiven ess. T h e C B I n o te d that in flation ary co n v e rg e n ce was m uch m o re im p o rtan t fo r EM U than fo r EM S, since d e valu a­ tion co u ld n o t offset any re d u c e d com p etitiveness. Entry sh o u ld thus be n o t im ­ m ed iate b u t “th e cu lm in a tio n o f an evo lu tio n a ry p ro cess” o f in fla tio n a ry c o n ­ v e rg e n ce . D o u b ts w ere vo ice d a b o u t b o th strict co n v e rg e n ce criteria an d fiscal fre e d o m , th o u g h an a u to n o m o u s E C B attracted ge n era l sup port. A seco n d c o n ­ cern o f business, p articu larly in the fin an cial sector, was the th reat o f e xclu sio n fro m a “tw o-tier” EM U . N early all business leaders, in clu d in g the C B I, stressed that this o u tco m e w ou ld be w orst o f all. M arket liberalization re m a in e d the m a jo r p rio rity fo r British business, b o th in in dustry an d in services, w h ich p ro ­ vid ed m ark et o p p o rtu n ities an d co n trib u ted to h ig h flows o f FDI in to Britain. E M U was e x p e c te d to in flu e n c e fin an cial an d in dustrial firms; the go v ern m e n t sh o u ld th e re fo re m ake e ve ry e ffo rt to “rem ain in the g a m e .” H e n ce o n c e the treaty was sign ed , the C B I stron gly re co m m e n d e d rap id ratification, fo llo w ed by EM U m em b ersh ip . T h e se am biguities w ere re fle cte d in the CB I position , w hich e n d o rse d th e g o v e rn m e n t’s altern ative p arallel cu rre n cy plan (the “hard e c u ”) b u t “u n e q u iv o ca lly ” disassociated itself fro m the M ajor g o v e rn m e n t’s op p o sition to a single currency. “O n ly w h en a single cu rre n cy is esta b lish ed ,” the C B I ar­ g u e d , “will business re a p th e fu ll ben efits o f e co n o m ic and m o n etary u n io n .” T h e m o re cau tio u s In stitute o f D irecto rs e n d o rse d o n ly the “h ard e c u ” p rop osal, citin g transaction cost gain s.80 O u tsid e o f m o n etary policy, th e m ajor c o n ce rn was E C social policy, o f w hich

79 CBI, European Monetary Union: A Business Perspective (London, 1989), cited in FT, 10 November 1989, 10; House o f Commons, Treasury and Civil Service Committee, The 7992 Autumn Statement, Minutes o f Evidence (Session 199 2 -9 3 , i6N ovem ber 1992), 3 8-40 ; Walsh, Global, 191; Reuter Busi­ ness Report, 5 O ctober 1990; Universal News Service, 5, 11 O ctober 1990. “ FT, 6 July 1990, 11 , and 5 November 1990, 1, 22; also 5 March 1991, 9; 23 June 1990, iii; 20 May 1993, 19; Verdun, “European," 19; Economist, 19 May 1990, 97; Alexander Italiener, “Mastering Maastricht: EMU Issues and How They Were Setded," in Klaus Gretschmann, ed., Economic and Mone­ tary Union: Implications for National Policy-Makers (Maastricht, 1993), 6 8 -70 ; Universal News Service Report, 2 2 ju ly 1992, i4 ju n e 1990; FT, 6July 1990, 7 November 1990, 11, and 5 November 1991, 11; Sarah H ogg and J. Hill, Too Close to Call (London, 1995), I53ff. The social charter continued to enjoy strong public opinion support, even among Conservative voters.

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business was skeptical. Yet with collective bargain ing and social w elfare exclu d ed , social policy was view ed as a relauvely m in or affair. A gain the result was am bi­ guity: CB I p ublic statem ents rem ained critical, but the con federation reluctandy follow ed the U N IC E position o f supporting m odest re fo rm — a position that ev­ idently ca u gh t the M ajor governm en t by surprise. For its part, the T rades U nion Con gress was skeptical o f G erm an proposals, favoring instead stronger political co n tro l over the E C B and greater fiscal freedom , b u t it supported ratification, citing the social policy provisions. T h e L ab o u r party strongly support the social charter. T h e CBI also called consistently for stronger en fo rcem en t by the E uro­ p ean C o u rt o f Justice, a position ad o pted by the governm ent. In sum , British business supported the M ajor go vern m en t’s policy o f cautious m o vem en t toward m onetary co o p eratio n and avoidance o f any exclusion. A s the C B I directo r gen eral stated the day after Maastricht, “the Prim e M inister achieved exacd y w hat business needs: agreem en t o n econ o m ic and m on etary union, w hich has left the way o p en fo r U K participation in a single E uropean currency, steps to secure m ore even en fo rcem en t o f C om m unity legislation, and n o e x ­ tension o f C om m unity powers (e.g. social policy) that co u ld threaten in tern a­ tional com petitiveness.” 81 T h e Dom estic Decision: “T h e issue is British jo b s, British sales, Britain’s fu tu re” T h e last h a lf o f the 1980s witnessed rising dom estic pressure to participate in the ERM. Increasingly isolated, T h a tch er resisted but finally en tered in 1990. British skepticism o f the EM U rem ained constant, though both the T h a tch er and the M ajor governm ents w ere careful to avoid any result that w ould trigger p erm an en t exclusion. As regards political un ion, Britain resolutely op posed everyth in g— increased powers to the European Parliam ent, m ore supranational fo reign , defen se, and in terior policies, an exten d ed social policy, and expansion o f qualified m ajority voting. T h e only excep tio n was increased en fo rcem en t pow er on the part o f the E uropean C ourt. We have seen that both geopolitical and econ o m ic theories o ffer explan ation s o f this essentially negative position re­ gard in g the M aastricht negotiations. W hat m ore does the historical record o f decision -m akin g reveal abou t the relative in flu en ce o f econ o m ic interest and geopolitics? We may reject the in flu en ce o f the salient geopolitical event o f the period, G erm an unification. British policy does n ot chan ge in this p eriod , n either to ­ ward eco n o m ic integration n o r toward fo reign and defense policy integration; no linkage is drawn betw een m on etary integration and security affairs. O bjective geo p o litical factors exp lain , at most, British policy toward European defen se and foreign policy coop eration . G iven the relative prestige and viability o f its unilat­ eral political and m ilitary p olicies— n ot least its perm an ent seat on the UN Security C o u n cil, highly regard ed diplom ats, in d ep en d en t m ilitary capabilities, and n uclear w eapons— b oth the geopolitical and the (issue-specific) econ om ic theories p redict that Britain, like France, w ould be skeptical o f supranational in­ stitutions in this area. T h is skepticism is precisely what we observe. 81 Universal News Service Report, 11 December 1991.

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Negotiating the Maastricht Treaty, 198 8-1991 R egardin g the decisions to jo in the ERM and to oppose EMU, it is m ore difficult to disen tan gle the relative im p ortan ce o f antifederalist ideology and eco n o m ic interest. O n balan ce the evidence m ore strongly supports econ om ic m otivations, b u t it is far from unam biguous. O n this p o in t the eviden ce co n cern in g the ERM is clearest. H ere the pattern o f dom estic cleavages and the nature o f dom estic discourse clearly reveal e c o ­ n om ic interests favoring participation arrayed against T h a tc h e r’s consistent, b ut in the e n d futile, ideological opposition . In 19 8 9 -9 0 , the issue o f ERM m em bership arose again, as it had in 1981 and ig 8 5 .82 A s before, the prim ary in tern al justifications fo r participation by dom estic officials and ministers (ex­ ce p t G eo ffrey Howe) w ere econ o m ic n ot geopolitical. D escriptions o f decision ­ m akin g on ERM by such participants as H owe, Lawson, and T h a tch er all m ention strong business pressure; m any speak o f avoiding the econ o m ic costs o f exclu ­ sion from EMU. H owe appears to have been the only leadin g politician in the go vern m en t ideologically com m itted to E urope. A gainst was arrayed T h a tc h e r’s personal op p o sid o n , surely in large part ideologically m otivated. T h a tch er was able to forestall entry into the ERM fo r five years follow ing the form ation o f a clear governm en tal and interest gro u p consensus. In the absence o f party and business op position , T h a tc h e r claim ed retrospectively, she w ould have taken an even more overdy anti-E uropean stance, as she did after leaving o ffice.83 D uring the secon d h a lf o f the 1980s T h a tc h e r’s room to in dulge h er personal views narrow ed; unilateral British policy m oved in the direction consistently re co m m e n d e d by Lawson and Howe. Betw een 1986 and 1988 Lawson secredy “shadow ed” the DM at a rate o f £1 sterling to DM 3 fo r a year, red u cin g interest rates and em ployin g d irect in terven tion to avoid appreciation. B efore the M adrid sum m it o f July 1989, Lawson and H owe threaten ed to resign if their dem ands, b acked by silent m ajority in b oth cabinet and Parliam ent, w ere n ot met. T h a tch er a n n o u n ced h er willingness to jo in the ERM w hen inflation fell, capital m arkets liberalized, and the single m arket was com p leted. In O cto b e r 1990, though Lawson an d H ow e w ere now g o n e, T h a tch er entered the ERM. T h a tch er and M ajor (now h e r ch an cellor) w ere apparently thinking ahead to the 1992 e le c­ tions and sough t to dam pen opposition w ithin the party and to lower inflation w ithout h ig h er interest rates o r sp en ding cuts. Som e British officials advanced tactical argum ents fo r entry. Foreign Secretary H urd, follow ing Howe and Law­ son, was co n cern e d that British opposition to EM U w ould be un derm in ed w ith­ o u t p articipation in the ERM, a view backed by L eon Brittan and T h a tc h e r’s con fidan t, D u tch prim e m inister Ruud Lubbers. T h e y co n clu d ed that the best op tion yet un tried was a p ublic com m itm ent to the ERM. T his conclusion was rea ch ed even though eco n o m ic con dition s w ere inauspicious: inflation was ris­ ing, sterling was weak, and a recession seem ed im m inent.84 S terling en tered the system at DM 2.95, a rate aim ed at dam p en ing inflation 82 See chapter 4. 83 Interview with Chancellor o f the Exchequer; interview with Thatcher adviser; Thatcher, Path,

473 ff-

M Walsh, Global, 102-106; Keegan, iMwson’s, 15681; Lawson, View, 915, 93off; Thatcher, Downing, 710; Connolly, Rotten, 69; FI', 23 October 1990, 14; Independent, 23 October 1990, 4; interview with prime minister.

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b ut m oderately costly to industry. T h e negative effects on growth were com ­ p o u n d ed by the unilateral nature o f the British recession and the m onetary spillover from G erm an unification. T h e U.K. governm en t did n ot consult o th er ERM m em bers b efo re en terin g and ign ored Bundesbank warnings about the unsustainability o f the policy. T h a tc h er’s close advisers understood that the rate was high, as Pohl w arned them at the dm e. Drawing on the exp erien ce o f the EMS du rin g the 1980s, however, they advised her that Britain could easily change parity in the fu tu re — a p iece o f advice one o f h er closest advisers later term ed “my biggest m istake.” Britain did, however, em ploy a wide fluctuation band, w hich gave som e room to m aneuver. In the end the rate proved unsustainable, and the lesson learned by the British governm en t was, we have seen, n ot to fix e xch an ge rates until there was “a greater d egree o f m onetary co n vergen ce” with G erm any.85 T u rn in g from the ERM to EMU, we see a quite different picture. Support within the govern m en t fo r ERM m em bership was intense, but preferen ces con cernin g EM U w ere split, with a considerable m ajority opposed. N um erous pro-ERM offi­ cials rejected EMU, am on g them Lawson, for w hom “transaction costs and e x ­ ch an ge rate uncertainties [were] insignificant com pared with the real econ om ic and, still m ore, political issues at stake.” 86 R obert L eigh-Pem berton, governor o f the Bank o f E ngland, similarly o p posed EMU; his reaction had som ething to do with the fact he was a T h a tch er app ointee w hose appointm ent, one analyst has n oted, was “m ore blatandy polid cal than m ost.” 87 Business groups opposed m em bership. Britain prop osed instead a plan, developed by a form er ambassador now w orking in the City, fo r an “evolutionary app roach to m onetary union"— nam ely, a schem e for a parallel currency to float alongside the national cu rren ­ cies and possibly eventually replace th em — though m any aroun d T h a tch er co n ­ ce d ed to journ alists that British support was p redicated on the assumption that EM U w ould not lead to a single currency. O f top Tory politicians, only Howe op en ly supported EM U.88 Cross-issue variation (or lack th e re o f) in British p referen ces is consistent with the predictions o f both a geopolitical explanation and o n e stressing issuespecific, largely econ o m ic m otivations, but it may slightly favor the latter. L et us co n sider first n on eco n o m ic issues. O n foreign and defense policy, as well as the E uropean P arliam ent— issues w ithout clear econ om ic im plications— both the­ ories p redict negative positions. In deed, Britain o p posed Q M V in foreign policy and d em an ded a safeguard authorizing unilateral non com plian ce. T his dem and, w hich rep ortedly angered alm ost all o th er governm ents, is what one w ould e x ­

85 Interview with former Thatcher adviser; Commons, 1992 Autumn, 38. Also interview with British Treasury official, 1997; Walsh, Global, 18 9 -19 1; Lawson, No. 1 1 , 11 2 -113 ,4 8 5 -4 9 3 ,10 2 9 ; Connolly, Rotten, 13 8 -14 1; Marsh, Germany and Europe, 15 8 -159 . Thompson (“UK,” 238, also 234-238) con­ cludes that “the UK government entered the ERM without having a clear conceptual idea o f what ERM membership meant, not as an expedient action for itself but as a participant in a system which had evolved without it.” 86 Lawson, View, 1060. 87 Keegan, Mr. ¡.awsoris, 153. 88 Sir Geoffrey Howe, Conflict of Loyalty (London, 1994), 533-534.

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Negotiating the Maastricht Treaty, 198 8-1991 p ect from a governm en t with viable unilateral alternatives and a strong position in existing organizations such as N A TO . Britain’s traditional defen se o f parlia­ m entary sovereignty an d suspicion o f federal institutions dovetailed with the C onservatives’ fear that the E uropean Parliam ent m ight be dom in ated by Social D em ocrats. M ore broadly, the British govern m en t supported the French p ro ­ posal fo r a decen tralized an d supranational “th ree-pillar” design as in part a m eans to lim it the C o u rt and o th er supranational bodies to econ o m ic issues; at the sam e tim e, the governm en t adopted British business’ only m ajor institu­ tional dem an d, nam ely stronger en fo rcem en t powers for the C o u rt within the eco n o m ic realm .89 British p referen ces on m ost econ o m ic issues were consistent with both m oti­ vations. O n im m igration, results predicted by two theories arc similarly difficult to distinguish. Britain, with few problem s con tro llin g its own borders (it has only twenty-four legal points o f entry), did n ot face the difficulties in m anaging the m ovem ent o f p eo p le that o th er governm ents faced and therefore saw no n ee d to m ention m igration in the treaty. T his issue was also o f som e ideological im portance. O n social policy the British governm en t threatened to veto any agreem en t com m itting Britain to a com m on social policy, as one w ould exp ect given b oth Britain’s econ o m ic status as a m oderately p o or EC m em ber and the ideology o f the Conservative governm ent. Since most social policy con cerns with d irect financial im plications were n ot u n d er active consideration, the issue quickly becam e partisan and symbolic, with extrem e positions taken by parlia­ m entary and cabinet Euroskeptics, on the one hand, and the L abour party o p ­ position, on the other. (Yet even the Tony Blair governm ent, while jo in in g the Social C hapter, did n ot seek to exp an d its p rovisions.)90 O n the all-im portant is­ sue o f m on etary policy, Britain rem ained skeptical o f any com m itm ent to EMU, w hich position is consistent both with the low level o f con vergen ce and with British antifederalism . A s we have seen, even m oderate Tory ministers were skep­ tical o f the co n vergen ce criteria; H urd argu ed publicly that by restricting fiscal deficits, G erm any sought to create “a fitness club which w ould keep everyone u n derw eigh t fo rever.”91 O n e critical aspect o f the British position does, however, distinguish the two theories. T h e British co n cern to avoid exclusion from EM U — the most vu lner­ able spot in its n egotiatin g p o sitio n — can only have reflected fears abou t the p otential econ o m ic costs o f com m ercial exclusion; it served n o evident g e o ­ political purpose. C om p are the British position in social policy, w here an optoutw as acceptable, even desirable for econ o m ic reasons— it w ould en h an ce Brit­ ish com petitiveness. T h e T h a tch er and M ajor governm ents consistently sought the op tio n to jo in any EM U proposal; but the decisive lim itation on them was that a veto w ou ld en co u rage others to m ove ahead on their own. In the Delors C om m ittee, fo r exam p le, L eigh-Pem berton an n o u n ced opposition to a single

89 Economist, 7 December 1991, 5 2-53. 90 Interview with British Ambassador, 1996; Hogg and Hill, Too Close to Call, 257-260; FT, 6 -1 2 December 1991. 91 Newhouse, Europe, 92.

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cu rre n c y a n d to any p lan fo r w hat was b e in g term ed an “irreversible p ro cess” to ­ w ard it, y et was fo rce d to discuss details o f the F ra n co -G erm a n p lan s in o rd e r to m aintain any in flu e n ce a t all. In the e n d , h e re jected T h a tc h e r an d Lawson’s in ­ struction s to dissent fro m th e D elo rs R ep o rt.92 T h e p attern o f d om estic cleavages an d disco u rse re in fo rces th e im p o rtan ce o f e c o n o m ic calcu latio n s co n c e rn in g e xclu sio n . T h e critical d ifferen ce betw een T h a tc h e r a n d e co n o m ic in terest g ro u p s was n o t op p o sitio n to EM U , w h ich bo th sh ared , b u t the p rim e m in ister’s p re fe re n ce fo r e xclu sio n o ver p articipation in any a g re em en t. She co n sid e re d p erm ittin g the o th e r e leven m em b er g o v ern ­ m en ts to sign a separate EM U treaty. O n this p o in t T h a tc h e r was o verru led ; a m ajority in C a b in e t was u n w illin g to co u rt exclu sio n an d so u g h t a co m p ro m ise in o rd e r to “rem ain in th e g a m e .” C ritical w ere co n cern s a b o u t th e e co n o m ic costs o f exclu sio n , p articu larly to British fin a n ce.93 So m e e x p e c te d M ajor to soften T h a tc h e r ’s n eg o tia tin g stan ce an d restore flexibility to the British p osi­ tio n , b u t the shift p ro ved m in im al. T o p advisers fro m the T reasury an d Britain’s p e rm a n e n t rep resen tative in Brussels p o in ted o u t that Britain co u ld n o t afford to be e x c lu d e d en tirely fro m EM U b ecau se o f the fin an cial co n se q u e n ce s fo r th e C ity — a view re p o rted ly a cce p te d by M ajor th o u g h later ca lled in to question by th e co n tin u in g exp a n sio n o f British fin a n ce. N o n eth eless, o n c e th e treaty h a d b e e n ratified even in D en m ark, the C B I harshly criticized any delay, a view re iterated by M ajor, w h o d e cla red that “th e issue is British jo b s, British sales, B ritain ’s fu tu re .” 94 T h is un w illin gn ess to b e e x clu d e d contrasts with M a jo r’s c o n ­ d u c t o n social policy, w h ere h e saw n o reason to retain a British rig h t to p artici­ p ate a n d o p te d o u t entirely. T h e critical d ifferen ces can b e ex p la in e d o n ly if e c o n o m ic interests, in clu d in g partisan views o f the econ om y, are decisive.95 P ublic divisions an d d e b ate o ver ratification co n firm the im p o rtan ce o f both id e o lo g ica l an d e co n o m ic m otivations, w ith E uroskep tical o p p o n e n ts setting the to n e w ith discussion o f British sovereignty. T h a tc h e r criticized the ero sion o f so vereign ty an d term ed the result o f discussions o ver p olitical u n io n a “rat b a g o f p ro p o sa ls,” w h ereas advocates o f a E u ro p e an p o licy re sp o n d e d that e f­ fectiv e m o d e rn d ip lo m acy re q u ired the “p o o lin g ” o f sovereignty.96 Yet o n c o n ­ crete e c o n o m ic issues, do m estic divisions an d discourse ten d e d to turn toward u n d e rly in g co m m e rcia l co n cern s. So cial p o licy g e n era ted w idesp read skepti­ cism . D ifferen ce s betw een C on servatives, virulen tly o p p o sed to any social policy, a n d L ab o u r, m o d era tely favo rable, resu lted fro m co m p etin g p re fe re n ces over th e p rovision o f p u b lic go o d s; g e o p o litica l ideology, interest, an d attitudes to ­

92 Interview with Thatcher adviser; interview with two members o f the Delors Committee, 1991, 1996; Connolly, Rotten, 79 —80; I-awson, View, 907-909; Ross, Jacques, 8 0 -8 5; Thatcher, Downing, 70 7-70 8 ; Howe, Conflict, 5 7 6 -5 7 7 ; Walsh, Global, 15 7-15 8 . 93 Thatcher, Path, 48 3-484; Thatcher, Downing, 72 4 -7 2 5 ; FT, 23 O ctober 1990, 14; interview with form er top prime ministerial adviser. 94 Michael Angus, president o f the CBI, cited in FT, 20 May 1993, 19; interview with Thatcher adviser. 95 Interview with British ambassador, 1996; interview with Thatcher adviser, 1997. In retrospect, it is unclear whether this argument was correct. Since 1991 activities in the City have expanded greatly, consolidating its position. Yet the fear was clearly prevalent at the time. 96 Sharp, Thatcher’s, 178, also 17 9 -18 2 .

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Negotiating the Maastricht Treaty, 19 8 8 -19 9 1 w ard so vereign ty c a n n o t e xp lain this cleavage. (If the su b seq u en t action s o f the Blair g o v e rn m e n t are any g u id e, th ere was o p p o sid o n across the bo ard toward exten sive social leg islatio n at the E u ro p e an lev el— a position con sisten t with B ritain ’s structu ral e c o n o m ic circum stan ces.) M ajor sign aled a cle a r w illingness to e n terta in co m p ro m ises on co re g e o p o litica l issues such as fo re ig n policy, the E u ro p e an P arliam en t, a n d even d e fe n se , yet h e th rea te n ed to veto a gre em en t o ve r m o re e co n o m ic issues, in clu d in g la b or law, im m igratio n policy, social p o l­ icy, a n d EM U .97 E co n o m ic interests a p p ea r to have h a d ju s t as sign ifican t an in flu e n ce on dis­ cussion o f th e critical question o f EM U . T o b e sure, T h a tc h e r p ro cla im ed that th o se w h o th o u g h t nation-states w ou ld a cce p t the lim itations o f EM U w ere liv­ in g in “c lo u d cu c k o o la n d ”; th ere is little d o u b t that she o b jecte d to the im p lied loss o f sovereignty. (At tim es T h a tc h e r an d som e o f h e r closest associates c o n ­ c e d e d that she o p p o sed ERM an d E M U m em bersh ip also in o rd e r to m aintain e x e cu tiv e co n tro l o ver w h e th e r to em p lo y reserves to d e fe n d parity o r raise in ­ terest rates.) Even Ridley, with his viru len tly hostile rh eto ric a b o u t rising G e r­ m an pow er, re jecte d m o n etary in tegratio n fo r p rim arily e co n o m ic reasons: B rit­ ain co u ld n o t m e et G erm a n p ro d u ctivity rates, h e n c e e xch an ge -ra te stability w o u ld re q u ire w age cuts. T h e British, like th e F rench an d Italians, w ere aware that the EM S fu n ctio n e d asym m etrically. M ajo r app ears to have o p p o sed im m e­ d ia te co m m itm e n t to a single cu rre n cy an d any “irrev ersib le” plan fo r ach ievin g it prim arily b ecau se the British e co n o m y h a d co n v e rg e d in su fficien d y w ith those o f its n eig h b o rs an d o n ly seco n d arily becau se o f passionate p arliam en tary o p ­ p o sitio n — o r so h e to ld M itterrand n ea r the e n d o f the n eg otiatio n s.98 O n b a la n ce, th e evid e n ce o n the so u rces o f British p re fe re n ces reg a rd in g the M aastrich t T reaty perm its us to dism iss G erm an un ificatio n as an im p o rtan t fac­ to r an d to restrict the in flu e n ce o f o th e r objective g e o p o litica l co n cern s to the d e te rm in a tio n o f British fo re ig n a n d d efe n se policy.99 It is m ore difficult, how ­ ever, to d e te rm in e the relative im p o rtan ce o f g e o p o litica l id e o lo g y an d e co n o m ic in terest. T h e m ost o n e can co n clu d e is that e co n o m ic factors a p p ea r slightly m o re im p o rtan t, p articu larly in th e lo n g term o n w hat was by far the m ost sig­ n ifica n t issue o f the p eriod : m o n etary co o p era tio n . T h a tc h e r’s o u trig h t id e o ­ lo gica l o p p o sitio n to any p articip ation in the EM S and E M U co u ld d elay British co o p e ra tio n b u t c o u ld n o t b lo ck it in defin itely. We see the g rea ter fo rce o f e c o ­ n o m ic m otivation s also o n th e issue o f stren g th en in g the E u ro p ean C o u rt and

97 Economist, 7 Decem ber 1991, 52. Major was similarly uncompromising on the symbolic issue o f the term “federal.” 9B Sharp, Thatcher's, 178; interview with Thatcher adviser. Also Sharp, Thatcher’s, 174; Walsh, Global, 154; Attali Verbatim, 3 :6 91 -a ; FT, 28 July 1984, 22; interview with British ambassador; EuroWatch, 31 May 1993, 5.5. Argum ents in Cabinet for jo in in g the ERM were either econom ic or diplomatic, the latter aimed at influencing future econom ic decisions. 99 T h e timing o f policy shifts appears to support both theories. T h e major change between 1982 and 1985 is an increase in support among econom ic actors and government officials for ERM par­ ticipation. This shift is readily explicable as the result o f m ore competitive exchange rates, as busi­ ness groups stated at the time. However, we also see an increase in overt parliamentary opposition to EMU within the Conservative party as Thatcher's supporters assumed control, though this move o f course left basic British skepticism about the scheme unchanged.

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perhaps also in the gen erally m ore un com prom ising British opposition to c o n ­ cessions on social and im m igradon policy than on the powers o f the E uropean Parliam ent o r the E uropean Central Bank.

Explaining National Preference Formation In each o f the three m ajor E C m em bers a p rep o n d eran ce o f evidence shows that e co n o m ic interests were at least as im portant as geo p o lid cal con cerns in d e fin in g n adon al p referen ces in the M aastricht negotiations. Most evidence suggests that econ o m ic con cerns w ere considerably m ore im portant. A lth ough the eviden ce perm its som e tentative conclusions, in particular the rejection o f objective geo p o lid cal factors in m otivating the m ove to EMU, a m ore precise and reliable determ ination o f the relative weights o f econ o m ic interest and E uropean ideology in each coun try m ust await the availability o f m ore prim ary sources. In each coun try records o f the preferen ces and tactics o f business group s and the deliberations o f national executives rem ain incom plete. T h e available evidence strongly disconfirm s what is perhaps the most w ide­ spread hypothesis about national m otivations fo r the M aastricht Treaty, nam ely that national p referen ces were dictated by the n eed to tie G erm any into Europe after unification. In all three countries, tim ing, national n egotiating tactics, and dom estic discourse and cleavages are inconsistent with a pervasive concern abou t the geopolitical im pact o f unification. Most strikingly, British, French, and G erm an p referen ces are stable th rou gh o u t the p eriod from 1988 onw ard, un ­ ch an ged eith er by the fall o f the Berlin Wall in N ovem ber 1989 o r by the co n ­ clusion o f G erm an unification in A ugust 1990. O bjective geopolitical factors only app ear to explain policies toward foreign and defen se policy: Britain and France, with viable unilateral policies, n uclear w eapons, and U N representation, o p posed a strong com m on policy with supranational institutions. It is m ore difficult to assign relative weights to geopolitical ideology and e c o ­ n om ic in terest— that is, to varying com m itm ents to E uropean federalism and the varying com m ercial and m acro eco n o m ic preferen ces o f strong- and weakcurren cy coun tries in the face o f econ o m ic in terd ep en d en ce. In each country, to be sure, the bulk o f the evidence supports an econ o m ic explanation. G erm an support fo r m on etary integration with “econ om ist” conditions reflected the tra­ ditional dom estic com prom ise am ong econ o m ic interests: business, the ch a n ­ cellor, and the Bundesbank. G erm any sought to m aintain the benefits o f the EMS, dam p en the appreciation o f the DM, and loosen dom estic m acro eco ­ n om ic constraints in the face o f dollar depreciation and the fiscal burden o f G erm an unification. T h is policy was consistently supported by business, labor, large banks, the m ajor opposition party, and, it appears, even farmers. France also favored wresting con trol over G erm an m onetary policy away from the B u n ­ desbank in o rd er to relax dom esdc m acroecon om ic constraints and reduce risk prem ia; m ovem ent toward EMU was a quid pro quo fo r capital liberalization and, so French leaders hinted, con tin ued participation in the EMS. Rising capi­ tal m ovem ents and inflationary co n vergen ce m ade such a goal possible for France (as fo r G erm any) in a way it had n ot been a decade earlier. As in G er­ 428

Negotiating the Maastricht Treaty, 19 8 8 -19 9 1 many, so in F ran ce E M U e n jo y ed stro n g su p p o rt fro m business a n d fin an ce. C o n ­ sistent F re n ch p ressu re fo r a less a u to n o m o u s E C B , lo o ser co n v e rg e n ce criteria, a n d g re a te r p o litica l co n tro l o ver co m m o n e xch an ge -ra te p o licy suggest that F re n ch p o licy was n o t th e r e s u lt o f id e o lo g ica l co n versio n to G erm an -style m acroe c o n o m ic policy. In B ritain, w h ere in flation was ra g in g at clo se to 10 p e rce n t in 1990 , e c o n o m ic in terest g ro u p s an d e co n o m ic officials d id n o t su p p o rt EM U , fe a rin g th at fix e d e x ch a n g e rates m ig h t swifdy b e co m e u n co m p etitive, yet the o v e rrid in g co n c e rn was n o n eth eless to avoid o u trig h t e xclu sio n , w h ich was e x ­ p e c te d to h ave a n egative im p act o n in dustry an d fin a n c e .100 T h e e v id e n ce clearly suggests that these e co n o m ic co n sid eratio n s im p osed critica l con strain ts, but a lo n e they m ay have b e en in su fficien t to d e te rm in e the p attern o f n atio n al p re fe re n c e s — nam ely, an enthusiastic F ran co -G erm an m ove tow ard E M U o p p o sed by Britain. Even in G erm an y a n d F rance E M U was co n tro ­ versial, and su p p o rt a m o n g e co n o m ic gro u p s, th o u g h clearly positive, was n ot enthusiastic. T h e M aastricht re feren d u m d e b ate in F rance an d the co n tin u e d co n tro versy in G erm an y fu rth e r suggest that u n ilateral alternatives o r co n tin u e d co o p e ra tio n w ith in the EM S re m a in e d viable o p tio n s w ithin b o th coun tries. We sh o u ld n ot, th e re fo re , dism iss the possibility that E u ro p ean fed e ra l ideas p layed a seco n d a ry b u t sign ifican t ro le in sh apin g n atio n al position s toward the M aastrich t n eg otiatio n s. A n id eatio n al exp lan a tio n o f n ational p re fe re n ces w o u ld stress the ways in w h ich am bitious lead ers p ursu e th eir own fed eralist o r n atio n alist b eliefs a b o u t in tegratio n o r seek to p ro file them selves e lecto ra lly by a p p e a lin g to such beliefs a m o n g th e p u b lic o r parliam entarians. T h e d istrib u ­ tion o f such ideas is broadly co n sisten t w ith n atio n al p o sitio n s— F ran co-G erm an su p p o rt, b a ck e d by B e n e lu x a n d Italy, a n d British o p p o sitio n , b a ck e d by D e n ­ m ark an d G re e ce . M itterran d in F ran ce an d b o th K o h l a n d G en sch e r in G erm an y s o u g h t to p ro file them selves as E u ro p e an statesm en, w hereas successive British p rim e m inisters w ere m otivated in p art by stro n g p erson al o r p arliam en tary E uroskep ticism . L e t us n o t fo rg e t the lim itation s o f an e x p lan a tio n based o n g e o p o litica l id e ­ ology. It tells us little a b o u t th e tim in g o f m o vem en t toward EM U (1 9 8 7 - 8 8 ) , the reason s fo r d o in g so, th e do m estic cleavages su rro u n d in g the d ecisio n , o r e n d u rin g in te rn a tio n al co n flict betw een “e co n o m ists” an d “m on etarists” over the stru ctu re an d co n d itio n ality o f the E C B . N or can the su p p o rt o f m o re fe d ­ eralist co u n trie s b e attribu ted to the w eak provisions fo r p o litical u n io n , w hich o cca sio n ed co n sid e ra b le criticism in G erm an y. T h e n ea r-u n ifo rm negativism o f the British p osition seem s at first g la n ce to su p p o rt an id e o lo g ica l in te rp re ta ­ tion, b u t such an a cco u n t ca n n o t exp lain th e decisive w eakness o f the British p o ­ sition, nam ely, th at B ritain was con sisten tly fo rce d to m ake con cessio n s to h ead

100 'I'hc generally positive role o f Italy is anomalous. It is, moreover, troubling that the public as­ sessments o f the French and German governments appear to rest on slightly different assumptions about the probable econom ic consequences o f EMU. Though both favored a loosening o f Bundes­ bank policies, more members, and political control o f the F.CB, the rhetoric o f French politicians im­ plied that EMU had been more successful at achieving this goal than did that o f their German coun­ terparts. This suggests a possible intervening role for econom ic ideas. More research is required to sort out these considerations.

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o ff exclusion. Finally, geo p o litical ideology fails to acco u n t fo r varying positions on o th er eco n o m ic issues: French support for and A nglo-G erm an opposiuon to industrial policy, Franco-G erm an support fo r and Bridsh opposidon to d e ep en ­ in g o f social an d environm ental coop eration , on go in g Bridsh support fo r liber­ alization o f service markets, and varying national positions on co n cu rren t n e ­ gotiations over agricultural reform . Still, E uropean ideology appears to h elp explain at least two aspects o f p ref­ erences. First, as both econ o m ic and geopolitical explanations predict, ideology appears to have played a particular role in areas with n o im m ediate econ om ic im plications, such as codecision fo r the E uropean Parliam ent and cooperation in fo reign and defen se p o licy— though in the latter case objective geopolitical factors offer an adequate explan ation . T h e British and the French tended to sup port strengthening o f the C o un cil, the G erm ans supported the Parliament. T h e British w ere m ost unilateralist on foreign policy, the French less so, the G erm ans least, a reflection o f the viability o f their respective unilateral policies. Second, E uropean federal ideas and their nationalist counterparts appear to have been responsible fo r gen eral national tendencies for or against in tegra­ tion, w hich created, at the very least, considerable leads and lags. In Britain, T h a tc h e r’s op position , probably ideological in origin, delayed British entry into and adjustm ent to the EM S by five years. In Germ any, K ohl and G en scher e n ­ thusiastically p ro m o ted m on etary integration after 1988, despite considerable e con o m ic risk and befo re the m acroeconom ic benefits o f doin g so had becom e fully evident. A bsent enthusiastic support from the French and G erm an gov­ ernm ents and a permissive public consensus in both countries, it is possible that econ o m ic argum ents fo r EM U co u ld n ot have trium phed.

N e g o t ia t in g t h e M a a s t r ic h t T r e a t y

We have seen that by the late 1980s, as French and G erm an m acroeconom ic p erform an ce and policies co n verged , the level o f agreem en t betw een the two coun tries co n cern in g the desirability o f EM U rose; n either was true o f Britain. N onetheless, significant d ifferen ces rem ained, even betw een France and G er­ many. As had been the case in the Snake and EMS negotiations, France sought a looser, m ore “p o liticized ” m on etary arran gem en t and G erm any a stricter, m ore “au to n o m o u s” m on etary arran gem en t (though n ot one as strict as that fa­ vo red by the B u n d esban k). Britain sough t to avoid any m onetary arrangem ent at all b ut to avoid exclusion from any that was created. Also, as traditionally had been the case, G erm any favored strong steps toward political un ion, including co o p eratio n on in terior affairs, foreign policy, and defense coop eration, as well as stronger powers for the Parliam ent; France sought m ore m odest, in tergovern ­ m ental steps toward political un ion, with particular attention to a com m on d e ­ fense, social policy, and a stron ger E uropean C oun cil; w hereas Britain favored n o m ajor m ovem ent toward political un ion at all, though it signaled a w illing­ ness to com prom ise on fo reign policy and new powers for the E uropean Court.

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Negotiating the Maastricht Treaty, 198 8-1991 T h e bargain ing o utcom es in clu d ed a strong EM U largely o n G erm an terms, w eak provisions fo r p olitical u n io n , an expansion o f E C activities to in clude p o ­ lice and im m igration affairs, a m odest social policy from w hich Britain opted out, and new co d ecisio n powers that disappointed supporters o f the European Parliam ent. H ow are these outcom es to be explained? Intergovernm ental b ar­ gain in g th eo ry predicts that the outcom e w ould reflect the relative intensity o f n ational p referen ces in each area, with entrep reneurial functions (policy initi­ ation, m ediation , social m obilization) carried o ut by the most interested gov­ ern m en ts and those that intensely seek agreem en t m aking the largest con ces­ sions. Supranational bargaining theory predicts that the outcom es would reflect the inability o f governm ents to bargain efficiendy and the en trepreneurial in ­ tervention o f supranational officials in the Com m ission, Parliam ent, and Court as policy initiators, interstate m ediators, and m obilizers o f social support. We shall see that, after the case o f the SEA, in w hich supranational officials played as im portant a role as they ever had, M aastricht m arked a return to the in tergovern m en tal bargain ing style that had traditionally characterized E C n e­ gotiations. Bargaining was initiated, m ediated, and m obilized by governm ents, and it was efficient. T h e in terven tion o f Com m ission officials, led by Jacques D elors, was gen erally red u n d an t and occasionally coun terproductive. Distribu­ tional o utcom es consistently reflected the relative op portunity costs o f agree­ m ent, in p articular the relative satisfaction o f G erm any with the m onetary status q u o , w hich acco rd ed the G erm an governm en t dom in an t bargaining power. In e xch an ge fo r surrenderin g m onetary autonom y, G erm any was able to dictate to a very large exten t the form and fun ction European m onetary arrangem ents.

Monetary Integration: A German Europe T h e question un derlying n egotiations was w hether G erm any should adjust throu gh h ig h er inflation o r the others throu gh deflation. Formally and norm atively, the system rem ained flex ib le.101 N othin g im plied that the F rench, Italian, and British governm en ts m ust refuse to alter parities in response to repeated suggestions from the B un desban k and others, b ut in practice national policies co n verged toward a m ore rigid position. G erm an un ification altered the econ o m ic fundam entals. G erm an y’s dem and b o o m m ean t that G erm an adjustm ent had to o ccu r eith er through currency revaluation o r throu gh h ig h er inflation. T h e first was b locked by G erm an fears o f lost com petitiveness and A n glo-F ren ch -1talian fears o f a loss o f credibility; the secon d, by Bun desban k opposition. T h e result: adjustm ent co u ld take place only throu gh a collapse o f fixed rates o r throu gh the m aintenance o f high interest rates and low inflation in G erm an y’s n eighbors. T his ch o ice p laced considerable strain o n the system.102

101 David and Peter Marsh, “lessons o f Europe's Currency Turmoil," FT, 30 April 1993, 3; inter­ view with French minister. 102 Connolly, Rotten, 274-275; interview with French minister, 1994.

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European leaders at sea on monetary integration. Cartoon by Oliphant copyright © 1991 Universal Press Syndicate. Reprinted with permission. All rights reserved.

A genda-Settin g and the D elors Com m ittee: “P ó h l . . . co u ld n ot stop the process” C on sideration o f EMU began alm ost im m ediately after currency pressures un leashed by dollar depreciation led to the highly con ten tious EMS realign ­ m ent o f January 1987. T h e French dem an ded G erm an reflation, the Bundes­ bank respo n d ed with a realignm ent. (A com parison o f French and G erm an econ o m ic fundam entals gave g o o d reason to think that G erm an policy was too restricdve.) T h e French governm en t, as we have seen, searched fo r m eans o f exertin g in tern ation al pressure on Germany. E douard Balladur, Gaullist prim e m inister Jacques C h ira c’s finance m inister, called for a m ore intensive system o f m acro eco n o m ic surveillance with the aim o f a m ore “appropriate sharing o f adjustm ent efforts.” His dem and was quickly ech o ed by Delors, who called in M arch 1987 fo r a “m ore symmetric system.” In the sam e m onth G en scher called fo r institutional d e ep en in g o f m on etary coop eration. Inform al discussions were in itiated.10:1 Yet the B un desban k m anaged to frustrate efforts by French and G erm an gov­ ernm ents to create an institutional structure in w hich m ore sym m etrical policies w ould be possible. French initiatives in the G -7 cam e to nothing. T h e so-called Basel-N yborg A greem en t, w hich reflected the B un desban k’s strong in flu en ce 10s p t 1 y j Unc 1987; Le Monde, 1 April 1987; Schónfelder and Thiel, Markt, 22-30.

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Negotiating the Maastricht Treaty, 198 8-1991 over the C om m ittee o f C en tral B ank G overnors, perm itted intram arginal in ter­ ven tion s b ut created n o new b in d in g obligations on surplus countries. France and G erm an y agreed in N ovem ber 1987 to creation o f a Franco-G erm an econ om ic coun cil, w hich w ou ld p erm it finan ce m inisters and central bank presidents to m eet to set p o licy objectives. R epeating Sch m idt’s tactics o f a d ecad e earlier, the Kohl go vern m en t exclu d ed the B un desban k from the negotiations and inform ed it o f the con ten ts o f the a greem en t only days befo re the signing in January 1988. Yet the B un desban k presen ted a legal analysis p urp ortin g to show that the ar­ ran gem en t violated the Bundesbank statute— n ot so subtly threatening nonco m p lia n ce.104 H aving failed to solve the p roblem o f asymmetry by reform in g the EMS th rou gh m ultilateral, bilateral, o r region al m eans, France turned to m ore radical proposals. In O cto b e r 1987 M itterrand, w ho had already sought stronger m on e­ tary provisions in the SEA, called fo r a E uropean central bank. A fter the FrancoG erm an E con om ic C o u n cil was w atered down, the French president was quickly follow ed by Balladur, w ho prop osed a single currency in January 1988. O n e m on th later a m em o from B ah adur’s Italian coun terpart G iulian o A m ato reit­ erated the dem an d. A sym m etries in the EMS, they argued, “structurally u n d er­ va lu e d ” the DM and en larged G erm an current-accoun t surpluses. T h e Italian m em o th reaten ed to invoke escape clauses in the process o f capital liberaliza­ tion, then u n d e r consideration, as well as im p lem ent various protective dom es­ tic regulations, if cu rren t asym m etries in the operation o f the EMS were n ot redressed.105 T h e K ohl governm en t, having backed French efforts over the p re­ ced in g year, respon ded positively. G en sch er called alm ost im m ediately fo r rapid m ovem ent toward m on etary un ion, hin ting that som e sacrifice o f dom estic sta­ bility m ight be required and prop osin g a com m ittee o f “wise m en” to study fu rth er m on etary integration. K ohl quickly endorsed the proposal in a speech b efo re the E uropean Parliam ent. A M arch m em o from Finance M inister Stolte n b e rg was less enthusiastic but did n ot shut the door. T h e Com m ission was also active as were private groups. D elors’s prim ary p ri­ ority back in 1984 had been d e ep er and m ore sym m etrical m onetary in tegra­ tion. W hen Britain and G erm any had blocked French efforts to d eep en m o n e­ tary co o p eratio n , D elors finally pursued internal m arket liberalization instead, p reserving no m ore than referen ces to m onetary policy. A D ecem ber 1987 C o m ­ mission rep o rt linked EM U to capital liberalization and inform ally canvassed governm en ts abou t the possibility o f form ing an exp ert com m ittee. Yet Delors, do u btin g that an interstate consensus existed, waited until M arch 1988, after the French and Italian initiatives and the G erm an response, w hereupon the econ om ist Tom m aso Padoa-Schioppa finally con vin ced him to call publicly for EMU. In early 1988 D elors reportedly gave a sp eech within the Com m ission say­ ing “L et us n ot speak o f EM U for two years,” because o f his m isplaced skepticism abou t the G erm an com m itm ent. N um erous private and sem ipublic groups also

104 Ellen Kennedy, The Bundesbank: Germany’s Central Bank in the International Monetary System (London, 1991), 93ff. 105 Gros and Thygesen, European, 3 1 1-3 1 3 .

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p ro p o se d m o n etary u n io n . M ost p restigiou s a m o n g them was the A ssociation fo r M o n etary U n io n in E u ro p e , co m p rise d largely o f ban kers an d business­ p e o p le , fo u n d e d in late 198 6 by G iscard an d Sch m idt. In A p ril 1988 the g ro u p p u b lish ed a d e ta iled b lu e p rin t fo r m o n etary un io n an d b etw een 1988 an d 1990 p re se n te d a n n u a l survey results revea lin g substantial b ig business su p p o rt fo r m o n etary u n io n .106 A t the E u ro p e an C o u n c il o f H a n o v er o n 2 7 - 2 8 J u n e 1988, w h ere the final e le m e n t o f the SE A b argain , a fin an cial transfer to the so u th ern co u n tries (the “P a q u e t D e lo rs”), was c o n clu d e d , the m ajor govern m en ts a gre ed to set a tim etable to lift e x ch a n g e co n tro ls a n d to co n sid e r fu tu re steps toward EMU. T h a tc h e r, q u ite aware o f w hat was h a p p e n in g , had term s such as “cen tral b a n k ” a n d “single cu rre n c y ” rem o ved from the co m m u n iq u é , but h e r b e lie f that she h a d thus “s id e lin e d ” E M U was, as Law son an d the L a b o u r o p p o sition b o th o b ­ served , illusory. S h e failed to b lo ck th e p ro p o sal o n w h ich M itterrand and K o h l h a d fo cu sed th e ir attention: the n am in g o f a co m m ittee to discuss m o n etary in ­ te g ra tio n — ch a ire d , as Law son later p o in ted o u t, by o f all p e o p le D elo rs.107 K o h l an d M itterran d carefu lly a tte n d e d to the n ature o f the D elo rs C o m m it­ tee. E a rlier in th e m o n th K o h l h a d a g re e d to m ove forw ard o n m o n etary un io n in e x ch a n g e fo r F ren ch a ccep ta n ce o f a date fo r lib eralizin g capital m ovem ents. T w o aspects w ere critical: m em b ersh ip a n d m andate. A fte r ca refu l advance dis­ cussions w ith B alladur, K o h l, a n d G en sch e r, D elo rs b a ck ed G e n s c h e r’s proposal to crea te a co m m ittee o f five in d e p e n d e n t exp erts, p resu m ably academ ics o r “wise m e n ,” b u t K o h l a n d S to lte n b erg , b a ck ed by T h a tch er, insisted that the co m m ittee in volve n atio n al ce n tra l b a n k go v ern o rs actin g in their p erson al ca­ pacity. K o h l su ggested D elo rs ch a ir the co m m ittee; D elo rs an d the F ren ch, see­ in g this as biasin g th e co m m ittee toward G erm an p re fe re n ces, w ere ab le to se­ cu re o n ly the p articip ation o f th ree private e x p erts.108 Even m o re im p o rtan t was th e co m m itte e ’s m an d ate, w h ich in stru cted it to p ro p o se a co n cre te plan fo r EM U . T h e co m m ittee thus h a d to re co m m e n d m ajor refo rm s rath er than m ar­ gin a l im p rovem en ts. W e have seen that this m an date, d elib erately in serted at the last m in u te by K o h l an d M itterran d to p ressu re the B u n d esban k, n early led P ó h l to resign . P ó h l la ter term ed his p articip ation a “m istake”: “I f I had boy­ c o tted it I c o u ld n ot have sto p p ed the process, b u t I co u ld have slowed it down. I w o u ld have b e e n fre e r to criticize th e D elo rs R e p o rt.” Yet it is u n clea r w h eth er

106 Grant, Delors, 118 -12 0 ; Ross, Jacques, 8 0 -8 1; Gros and Thygesen, European, 3 12 -3 14 ; Ken Endo, “Political Leadership in the European Community: T h e Role o f the Commission Presidency under Jacques Delors, 19 8 5 -19 9 5 (diss., St. Anthony's College, Oxford, 1996), 84; 102, chap. 7; Gaddum, Deutsche, 312; Comm ittee for the Monetary Union o f Europe, Programme. Gros and Thygesen, European, 3 15, lists numerous other private and academic conferences and groups. 107 Gros and Thygesen, European, 3 1 6 —3 17; Lawson, View, 902—904; Thatcher, Downing, 708, 7 4 0 -7 4 1 ; Grant, Delors, 119 -12 0 ; Ross, Jacques, 81; Schónfelder and Thiel, Markt, 38-40 . 108 Interview with Dclors and member o f the Delors Committee. Th e idea o f central bank gover­ nors has been variously attributed to Thatcher, Kohl, and Delors. At the time, it appears that more aggressive pro-EMU actors, such as Delors, Mitterand, and Genscher, favored an independent group, whereas a more cautious group, including Kohl and Thatcher, favored central bank governors. O n the quid pro quo with capital liberalization, Vedrine, Mondes, 4 1 6 -4 1 8 .

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Negotiating the Maastricht Treaty, 1988—1991 this claim is realistic; his advisers at the time feared that if he did n ot serve, he w ould be exclu d ed from critical debates over the details o f the sch em e.109 L au n ch in g the Negotiations: K ohl and M itterrand “co n fro n t and isolate” T h atch er Betw een the H anover sum m it and the con ven in g o f the IG C in late 1990, a w ide ran ge o f m onetary alternatives was introduced and then red u ced to a few viable o p dons. T his process occu rred in three stages: in Jun e 1989 the Delors C o m m ittee rep o rt was approved; the Strasbourg sum m it o f D ecem ber 1989 d e ­ cid e d to co n ven e an IG C in late 1990; and m on etary negotiations were form ally lin k ed to discussions on political un ion in Jun e 1990. O n the D elors Com m ittee, Pohl was universally reco gn ized as the decisive voice, because the Bundesbank enjoyed an im portant voice in the critical state. A gre em en t w'ould be possible only if his skepticism o f EM U and his personal disdain fo r D elors, w hich he displayed by reading newspapers throu gh the first m eeUngs o f the com m ittee, could be overcom e. It was un derstood that he w ould reject o utrigh t any proposal with an and-in flation ary com m itm ent significantly w eaker than that o f the Bundesbank. In addition, L eigh-Pem berton o f the Bank o f En gland had b een instructed by T h a tch er and Lawson to enlist P o h l’s aid in b lo ckin g any m ove toward a central bank or a single currency. Delors, the Italian and French central bankers, and the three civilian m em bers adopted a diam et­ rically o p p o sed position, favoring a single currency with w eaker guarantees against in fla tio n .110 Early on, the com m ittee accep ted all P o h l’s dem ands. M ajor concessions were m ade by the French, in cludin g the accep tan ce o f budgetary co n vergen ce crite­ ria, n o transfers o f sovereignty during early stages o f the transition, and the prior in d ep en d e n ce o f national central banks. No objection was raised to P o h l’s d e ­ m and that the E urofed have greater in d ep en d en ce and autonom y than existing national central banks. In exch an ge, Pohl, over the objections o f Bundesbank hardliners, approved a single currency. Perhaps, he later hinted, he thought the con dition s w ould n ever be m et. In the en d only Leigh-Pem berton rem ained reluctant, but his coun terproposal fo r a parallel currency was discussed and re­ je c te d by all participants in January 1989. Pohl was unwilling to contem plate u n co n tro lled m onetary creation and rem ained skeptical o f T h a tc h e r’s entirely negative attitude toward m on etary integration. Believing that unilateral o p p o si­ tion w ould be even m ore costly than acceptan ce, Leigh-Pem berton added his signature. D elors len t his nam e to the p roceedin gs but played a m odest role th rou gh ­

109 Grant, Delors, 121, also 118 -120 ; Ross,Jacques, 8 0 -8 1; Attali Verbatim, 3:35; Cros and Thygesen, European, 3 12 -3 14 ; interviews with two members o f the Delors Committee. 110 For this paragraph and the next, I use interviews with two members o f the Delors Committee, 1991, 1996; Steven Solomon, The Confidence Game: How Unelected Central Bankers are Governing the Changed World Economy (New York, 1995), 476. Pohl was not as opposed to EMU as his Bundesbank colleagues, who insisted that he rescind some concessions at Stage II o f the transition during the last few meetings o f the committee.

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o u t, esch ew in g am bitio u s p ro p o sals o r p o litical en tre p re n e u rsh ip . Instead, he later re ca lled , h e e n c o u r a g e d p ro fessio n al discussions an d p erm itted th e cen tra l b an k ers to d ictate th e “su b stan ce” o f th e rep ort. A ld io u g h the co m m ittee may h ave g a in e d m o d e st p restig e by b e a rin g D e lo rs’s n am e, his co n cre te ro le was that o f a secretariat: h e d rafted co m p ro m ise texts but, a cco rd in g to o n e co m ­ m ittee m e m b er, n e ith e r p ro p o se d n o r b lo ck e d any m ajor e le m e n t o f th e final rep o rt. H is o n ly disdn ctive p ro p o sal was id e n d ca l to that a d va n ced by Roy J en k in s in th e EM S n eg o d a d o n s, n am ely in creases in structural fu n d in g; it m et th e sam e fate. T h e resultin g three-stage plan was very sim ilar to the W ern er R e p o rt o f 19 6 9 , albeit w ith g rea ter a n ti-in flation ary p ro tectio n . Yet the rep o rt was in te n d o n a lly u n clea r o n the m ost critical points: n o o n e , n o t even D elors, d a re d press P öh l or L eigh -P e m b erto n to co m m it to a firm sch e d u le o r a sp eci­ ficatio n o f co n cre te transitional stages fo r ach ievin g E M U .111 T h e re p o rt was ap p ro ved by the h ead s o f go v ern m e n t at the M adrid E u ro p ean C o u n c il o f J u n e 1989. P rim e M inister G o n za le z to u red the capitals in advance an d b ro k e re d a co m p ro m ise a m o n g co n flictin g positions; K o h l an d M itterrand co o rd in a te d closely. K o h l was in “c o m p le te a g re e m e n t” w ith D elo rs an d M it­ terra n d , a cco rd in g to o n e analyst w ho e x a m in e d the transcripts. G o n zale z c o n ­ clu d e d after his to u r that M itterran d an d D elo rs w ou ld insist on a ccep ta n ce o f the D elo rs R eport. T h e first stage w ou ld b egin o n 1 July 1990, an d an IG C w ould b e co n v e n e d . M itterra n d ’s p ro p o sa l to set p recise sch ed u le fo r stages two and th ree o f the transition, o r fo r th e IG C itself, received little support. T h a tc h e r h o p e d that the lack o f e x p licit app roval fo r the rep o rt, as w ell as lan gu age in ­ sisting th at “fu ll and a d eq u a te p re p a ra tio n s” m ust p re ce d e the IG C , w ou ld slow fu rth e r m o vem en t. Yet th e G erm an s an d F ren ch w ere co m m itted to m ove fo r­ w ard. G e n sch e r an d D um as a g re e d that the F rench p resid en cy in the seco n d h a lf o f the yea r w o u ld set p recise term s, an d they co n v e n e d a co m m ittee u n d e r E lisabeth G u ig o u , to m e et w h eth e r the British p articip ated o r not, w ith a m an ­ date to p ro vid e a re p o rt to serve as the basis fo r an IG C . G u ig o u ’s co m m ittee was in stru cted sim ply to sum m arize key issues ra th er than attem pt to resolve is­ sues left o p e n by the D elo rs R eport. H orst T eltschik, K o h l’s closest aide o n such question s, in fo rm ed his F ren ch co u n terp a rt, Jacqu es A ttali, that K o h l w ou ld be p re p a re d at th at tim e to “c o n fro n t an d iso late” T h a tc h e r o n EM U and lau n ch an I G C .112 111 Gram , Delors 12 0 -12 4 . 112 Ludlow, “Politics," xliii—xliv; Attali Verbatim, 3:239, also 263, 297. Also Jim Cloos, Gaston Reinesch, Daniel Vignes, and Joseph Weyland, I s Traité de Maastricht: Genèse, analyse, commentaires (Brussels, 1993), 3 8 -4 2 , 92ft; Gros and Thygesen, European, 323; Thatcher, Downing, 75 0 -7 5 2 ; Schönfelder and Thiel, Markt, 6 6 -6 7 ; interview with Frcnch minister, 1994. Michael Garthe, “Bun­ desrepublik Deutschland," in Werner W eidenfeld and Wolfgang Wessels, eds., Jahrbuch der europäi­ schen Integration 1988/89 (Bonn, 1989), 303, reports that Kohl mediated between Thatcher and Mit­ terrand, calling for a conference on changing the treaty only once the steps in the Delors Report had been considered. Some criticize the Guigou Comm ittee, named to achieve this end, as inadequate, but participants reveal that it was a deliberate attempt by politicians to precommit to further cooperation and coordinate French and Germ an policy before raising controversial issues. M itterrand’s assistant Vedrine makes it appear as if Mitterrand convinced Kohl at the summit itself and even mentions a link to German unification, but this is not corroborated elsewhere. Even this account, however,

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Negotiating the Maastricht Treaty, 19 8 8 -19 9 1 T h e F re n ch g o v ern m e n t, n ow h o ld in g the ro tatin g E C presiden cy, kep t the m o m e n tu m g o in g , re su ltin g in an a g re e m e n t at Strasb o u rg in D ecem b er, w here the c h ie f e xe cu tive s p u b licly a cce p te d a m o n etary IG C to b egin in D e cem b er 1990. T h is d ate, p ro p o se d by G erm an y fo r n early a year, was the earliest M it­ terra n d b e lie v e d h e c o u ld ach ieve. T h e British g o v ern m e n t h a d h o p e d that at S trasb o u rg th e G erm an s w o u ld ca ll fo r “fu rth e r p re p a ra tio n s,” b u t G erm an y in stead m o ve d forw ard w ith plan s to su p p o rt F rance. By O c to b e r high -level F ra n co -G e rm a n discussions w ere w ell u n d e r way to p re p a re the Strasbourg m e et­ in g o n the basis o f a g re em en t betw een K o h l an d M itterrand that an IG C w ou ld b e la u n c h e d in 1990, c o m p lete d in late 1 9 9 1 , an d ratified in 1992. M itterrand a n d P o h l b o th gave sp eech es in O c to b e r p re d ictin g that Strasbourg w ou ld set a date fo r an IG C to n eg o tia te the transition to EM U . M itterrand an d D elors w an ted n eg o tia tio n s to b e g in w ithin six m on th s, b u t K o h l insisted that they be d e lay ed u n til after the G erm an e le ctio n s o f N o vem b er 19 9 0 — con sisten t with his lo n g sta n d in g e ffo rt to d a m p en th e right-w ing e le cto ra l ch a llen g e . K o h l u n ­ d e rsco re d th e “p rin cip a l G erm an o b jectiv es”: a cco rd in g to F ren ch officials, these w ere to have p re p a ra tio n s h a n d le d by fin a n ce m inistry an d cen tra l ban k officials, the in d e p e n d e n c e o f n atio n al an d E u ro p e an cen tra l banks, a clear co m m itm en t to p rice stability, p rio r e c o n o m ic co n v e rg e n ce , an d sim ultan eou s m o vem en t to ­ w ard p o litica l u n io n . F ran ce o p p o sed every o n e o f these objectives, but M itter­ ran d sign ale d F ren ch w illin gn ess to m ake con cessio n s in e x ch a n g e fo r G erm an a ccep ta n ce o f EM U . In N o vem b er an d D e cem b er the cen tra l b a n k go vern o rs m et in Basel an d en d o rse d P o h l’s re co m m e n d a tio n that n atio n al cen tra l banks rem ain o r b e co m e in d e p e n d e n t u n d e r the new system .11* G erm an w illingness to m ove toward E M U a n d set a date fo r the IG C at Stras­ b o u rg in D e ce m b e r 198 9 is g e n era lly attributed to the su d d en o p p o rtu n ity for u n ificatio n fo llo w in g the fall o f the B erlin Wall. T h e G erm an go v ern m e n t was fo rce d to o ffe r a q u id p ro q u o to rem o ve F rench o p p o sitio n to u n ificatio n ; som e a lle g e that o th e r g o v ern m en ts su d d en ly h a d a g rea ter in cen tive to lo ck G erm an y in to E u ro p e . Yet such claim s are based o n n o m o re than M itterrand an d K o h l’s p u b lic rh e to ric an d the a p p a re n t c o in cid e n ce o f tim ing. T o be sure, the H u n ­ garian d e cisio n in S e p te m b er to p erm it East G erm an s to m ove west, an d the fall o f the B erlin W all o n 9 N o vem b er 198 9, d id ch a n g e F ren ch an d G erm an rh e to ­ ric. In th e ir sp eech es, M itterran d a n d K o h l in creasin gly lin k ed G erm an u n ifica ­ tion an d EM U . M itterran d privately w arn ed G en sch e r that i f E u ro p e an u n ifica ­ tion d id n o t p re c e d e G erm an u n ificatio n , G erm an y w ou ld face a trip le allian ce o f F ran ce, B ritain, an d Russia; the F ren ch go v ern m e n t issued sharp w arnings

clearly shows that Kohl supported an IGC but was concerned about the timing vis-d-vis German pub­ lic opinion. Vedrine, Les mondes, 4 1 9 - 4 2 1. 115 Thatcher, Downing, 760. Pohl's speech in O ctober was cautious but noted that the IGC would take place and, in an extem poraneous aside, predicted that the final decision would be taken at the Strasbourg Council meeting in December. Ludlow, “Politics,” xliv-xlv. More generally, Grant, Delors, 1 3 1-1 5 0 , especially 144; Attali Verbatim, 3:322, 326, 367-368, but see 349; Schonfelder and Thiel, Markt, 5 8 -6 9 ; David Buchan, Europe: The Strange Superpower (Aldershot, 1993),

3 2 - 34 -

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that failure to set a date fo r n egotiations o n EM U w ould be viewed as evidence that G erm an y was backin g away from Europe. His spokespersons criticized G er­ m an dem an ds fo r political un ion as a disguised effort to delay EM U .114 Yet there was n o shift in co n crete positions consistent with an “EM U for un i­ fication” bargain. As we have seen, G erm any and France had been p lanning to m ove forw ard at Strasbourg fo r m onths. A lth o u gh K ohl was clearly co n cern ed n o t to alien ate M itterrand, he in fact m ade n o fu rth er com prom ises between 9 N ovem ber 1989 and 1 A ugust 1990. To the contrary, he w ent ahead with p rearran ged plans to set a late-1990 date fo r an IG C at Strasbourg and upped G erm an dem ands, requiring parallel negotiations on political u n io n — ignoring w arnings from D elors that this linkage w ould lead to a crisis. D uring this period, D elors efficien d y m oved forw ard with preparations to include the form er East G erm an y in the E C — stream lining accession in a way that avoided potential co n flict.115 N o r is there evidence o f any quid p ro qu o on the part o f G erm an y’s n eig h ­ bors. T h e y rem ained “to u gh ,” refusing to do m ore than reiterate existing treaty a greem en ts on the G erm an question. M itterrand con tin ued to seek cooperation with East G erm any o r Russia to slow unification (though characteristically k e ep ­ ing his op tion s o p e n ), T h a tch er sough t to e xp lo it m ilitary coop eration to block unification (characteristically leaving h erself no g o o d fallback position), and o th er E uropean leaders voiced worries. A m erican and G erm an leaders exp loited the o p po rtu n ity to press fo r unification w ithout waiting for agreem en t on an increasingly in tegrated EC. French concessions to G erm any on political union o ccu rred only o n ce unification was a fait accompli. In m id-M arch, K ohl renew ed his d em an d fo r a sim ultaneous acceleration o f political un ion (still viewed skep­ tically by F ra n ce). O n ly at the time o f the East G erm an elections o f 18 M arch, in w hich K o h l’s coalition gain ed a significant victory, did the French governm en t publicly re­ verse position, co n ced in g to G erm any a secon d negotiation on E uropean polit­ ical un ion. W h en Franco-G erm an discussions in late M arch resulted in a bi­ lateral agreem en t explicitly p roposin g an agen da fo r political un ion, Delors d rop p ed his o p en opposition to it. T h e D ublin sum m it o f 28 A pril, by which time E uropean governm ents had reco n ciled them selves to G erm an unification, approved the secon d IG C on political issues and b egin n in g arrangem ents for the inclusion o f eastern G erm any in the EC. D uring the rem ainder o f 1990, the governm en ts p repared the IG C. A gain, G erm any m ade n o concessions.116 Preparations fo r the IG C stim ulated a range o f official proposals. In N ovem ber 114 Thatcher, Dawning, 79 5-796 ; Attali Verbatim, 3:343, 352-354; Francois Mitterrand, De I'AUemagne, De la France (Paris, 1996), 79 -99 ; Baun, Imperfect, 40; interview with Delors; Zelikow and Rice, Germany, 9 5-98 , 1 1 6 - 1 1 7 , 133-138, 145«; 234-235. 116 Interviews with Delors. 1,6 Teltschik, .529, 106, 172H, 176, 369; Attali, Verbatim, 3:375, 449; Baun, Imperfect, 40 -45; Kiessler and Elbe, Tisch, 59ÍT; Smyser, German, 278-279. In confidential discussions with Bush, Kohl stated that he overrode the Bundesbank on EMU in order to tie Germany to Europe and thus earn the trust o f Mitterrand, whom he considered more far-sighted than Thatcher, and discussed inte­ gration as part o f a diplomatic strategy to dampen opposition to unification.

438

Negotiating the Maastricht Treaty, 198 8-1991 1990 the C o m m ittee o f C en tral B ank G overnors respon ded to a request from the R om e sum m it by p ro p o sin g draft statutes fo r a European System o f C entral Banks (E S C B ). T h e central banks gran ted strong powers to the ESCB and ECB, particularly in exch an ge-rate policy, m on etary creation, and p rud en tial super­ vision, b ut left o th er m ajor issues to the IG C. G erm any con tin ued to push for low -inflation guarantees; the M arch 1990 E uropean C o u n cil decision affirm ed the n eed fo r co n vergen ce criteria— specific m acroecon om ic precondition s that all participants in the EM U must m eet.117 W hile F rench officials saw strict co n vergen ce criteria as an inevitable if u n ­ fortun ate q uid pro quo that G erm any co u ld exact fo r EMU, D elors did not. T h ro u g h o u t this p eriod , the Com m ission’s central and largely futile goal re­ m ained to un derm in e G erm an insistence on strict conditionality and a twospeed E urope. Pohl and others in G erm any d e n o u n ce d D elors’s proposals as u n d erm in in g dom estic m on etary discipline; even p o o rer coun tries rejected them as pressing the tem po too quickly and n eglectin g regional aid. A t the m eet­ in g o f finan ce ministers in Septem ber, only France, Belgium , Italy, and D enm ark d e fe n d ed D elors, w ho rep ortedly “left the m eeting in a state o f sh o ck.” W hen the IG C o p en ed a few m onths later, the finan ce ministers began by criticizing D elo rs’s proposal. G erm an finan ce m inister W aigel im m ediately reinserted cri­ teria fo r p rio r m acro eco n o m ic con vergen ce. D elors persisted in a futile ch a l­ len ge to G erm an y’s insistence o n con vergen ce criteria, com paring their d efin i­ tion to m edieval debates abou t the sex o f angels.118 A m o n g futile Com m ission interventions foun d, fo r exam p le, in its August 1990 o p in io n on EMU, rep ortedly written by D elors him self, and a Com m ission draft treaty o f D ecem ber 1990 w ere the use o f the nam es “e c u ” for the currency and “E u ro fe d ” fo r the bank, a short transition p eriod , C o u n cil and Parliam ent in volvem en t in n am in g the E C B ’s executive board, international representation in m on etary affairs by a troika o f supranational officials and the C o u n cil presi­ d en t rather than finan ce ministers, E urofed supervision o f econ om ic policies during the transition, gen ero u s financial assistance in the form o f both loans and grants, attendan ce by Com m ission officials at m eetings in various institu­ tions, dem ocratic accountability o f the E CB before the Parliam ent, a decision by special m ajority o f eigh t w h eth er the p recondition s fo r m ovem ent to EMU were satisfied, and n o autom atic en fo rcem en t o f p rohibitions on m onetary financing, public d ebt guaran tees (bailouts), and excessive bu d get deficits. Each o f these con dition s proved un accep table to G erm any and was rejected. O n ly Com m is­ sion proposals fo r C o u n cil con trol over fo reign -exch an ge interventions, advisory status fo r the M onetary Com m ittee, sanctions against excessive national deficits, and m ultilateral surveillance w ere a ccep ted .119

117 Schonfelder and Thiel. Markt, 63-64. 118 Grant, Delors, 147, also 14 8 -15 1; Baun, Imperfect, 4 9 -5 1. 119 See “Intergovernmental Conferences: Contributions by the Commission,” Bulletin of the EC (Supplement 2/91); Ludlow, “Reshaping,” 423-425; Robert Wester, “The European Commission and European Political Union," in Laursen and Vanhoonacker, eds., Intergovernmental, 205-214; Grant, Delors, 151.

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O th er governm en ts slowly co n verged o n the G erm an position, w hich in fact h ard en ed as the details o f the a greem en t becam e clearer. From O cto b e r 1990 onw ard, with G erm an reu n ificad o n an d parliamentary' elecd o n s com pleted, governm ents m oved away from Com m ission m aterials and began to converge aro u n d a D utch proposal to set dates on the basis o f p rio r econ o m ic con ver­ gen ce. T h is plan form ed the basis fo r agreem ents reached at sum m it m eetings in R om e in O cto b e r and D ecem ber 1990. K ohl now pushed forward, signaling his w illingness to an n o u n ce a date fo r the begin n in g o f the second stage o f EMU. In the discussions, as well as in official conclusions and press briefings, it becam e clear that the eleven w ere p repared to m ove ahead to m onetary union w ithout Britain. W ith this threat in place, the m em ber governm ents reached a com prom ise, setting 1 January 1994 as a starting date for Stage Two, and agree­ ing that a single currency w ould be an early elem en t in Stage T h re e and that sim ultaneous negotiations on political un ion w ould be con ducted . T h e date 1994 was earlier than the G erm an governm en t had previously proposed, but the significance o f this concession was m inim al because G erm an opposition had stripped the transitional system, u n d er the European M onetary Institute, o f any decision-m aking power. W h en form al negotiations began in m id-D ecem ber 1990, the m ajor contours o f a feasible bargain were already visible. G erm any again rejected British schem es for a parallel currency and insisted, over French and Com m ission objections, on E C B autonom y, strict co n vergen ce criteria, b u d ­ getary controls, m odest financial transfers, weak second-stage institutions, and parallel m ovem ent toward E uropean political un ion in exch an ge fo r a firm co m ­ m itm ent to a single currency on a specified d ate.120 T h e EM U N egotiations: France and the Com m ission “lose the ga m e ” A lth o u gh the broad lines o f EM U had been d ecided, key details rem ained to be n egotiated. Accordingly, the n egotiations began with what o n e analyst term ed a “flurry o f position papers as m ost o f the m ajor players m ade their o p en in g n e­ gotiatin g gam bits and outlined their p referred vision o f EM U .” 121 Every d elega­ tion in troduced detailed textual proposals. France and G erm any each subm it­ ted a full draft treaty, and Britain and Spain provided detailed proposals fo r the secon d stage o f EMU. Private group s also rem ained active. A proposal issued by the A ssociation fo r the M onetary U n ion o f E urope, fo r exam p le, set out plans fo r the transition in considerably greater detail than the D elors Com m ittee had p ro vid ed .122 G overnm ents established tight con trol over the negotiations. T h e L u x em ­ b o urg governm en t, having assum ed the rotating E C presidency, m anaged the p lethora o f proposals by adoptin g a p ro ced u re d evelop ed in the SEA n egotia­ tions, w hereby a com m ittee from the L u xem b o u rg presidency, the Secretary

lso Ludlow, "Reshaping," 428; Gros and Thygesen, F.urnpean, 324. 1!l Corbett, Maastricht, 39. 122 Interview with national chief negotiator, 1994; Schónfelder and Thiel, Markt, 1 1 9 -12 1 ; Italiener, “Mastering,” 68-70.

440

Negotiating the Maastricht Treaty, 1988—1991 G en eral o f the C o u n cil, and the Com m ission develop ed o p en -en d ed drafts with alternative texts in controversial spots. M ost o f the w ork was carried o u t by few er than a dozen officials o f d ie C o u n cil Secretariat and the L u xem bo u rg govern ­ m ent; the Com m ission was n ot directly involved, th ough in M arch it subm itted its own draft. By A pril the L u xem b o u rg presidency and C o u n cil Secretariat p re­ sented their draft treaty. O verlap with the Com m ission’s draft from the previous m on th was lim ited to reladvely uncontroversial provisions; the L uxem bourg draft was sufficiendy dissimilar to spark strong Com m ission criticism. In mid1 99 ° governm en ts had begun to transfer authority from E CO FIN and the M on e­ tary an d C en tral Bank C o m m ittee to the foreign ministers and heads o f state, w hose personal represen tadves, assisted by the secretary gen eral o f the C oun cil, led the n egotiadons. T h e final details w ere w orked out in N ovem ber at m iniste­ rial m eedn gs, as well as two K ohl-M ajor summits, and at M aastricht itself.123 By spring 1990 the British governm en t was the lone rem aining o p p o n en t o f m ovem ent to a single currency. It resubm itted its proposal fo r a “hard E C U ” p roposal with a parallel “ 13th currency,” w hich w ould coexist with existing cu r­ rencies, perhaps rep lacin g them in the lo n g term. Spain initially favored the idea but backed away w hen m ost o th er governm ents rejected it. Studies known to all governm en ts showed that businesspeople w ould n ot switch to the hard EC U w ith ou t the prospect o f its rapidly b ecom in g E u ro p e’s single currency. Polls revealed d iat business strongly supported a single currency; only som e banks d e ­ p en d en t on fo reign -exch an ge transactions, disproportionately located in the City o f L o n d o n , favored a parallel currency. Pôhl reiterated his earlier attacks on the proposal, stating that it w ould im pede con trol over the m oney supply and p oin tin g out that it had already been rejected twice, on ce in the D elors C o m ­ m ittee and o n ce in Rom e. So governm ents set about ham m ering o u t the details o f the transition to a single currency, with Britain playing a cautious ro le .124 In tergovernm ental bargain ing theory predicts that Germ any, whose altern a­ tive to a single currency, given asym m etries in the EMS and dom estic support for its cu rren t m acro eco n o m ic arrangem ents, was the m ost attractive am ong its sup­ porters, should ben efit on n et from side-paym ents and com prom ises. Anything less than a “G erm an” EM U w ould sim ply be vetoed at hom e, w hereas greater com prom ise wras possible in n eigh b o rin g countries. T h is was in deed both the percep tion o f participants and the result o f objective analysis, though many, perhaps most, political scientists have sought to argue that G erm any cam e away badly from the negotiations. If we take EM U with a single currency as a given and exam in e the eight m ost im portant distributional issues that surroun ded it, all but o n e favored Germ any. T h ese w ere ( 1 ) the right to o p t out, (2) “con ver­ g e n c e ” criteria fo r participation, (3) the schedule and p ro ced u re fo r the transi­ tion to EM U, in cludin g “two-speed” provisions, (4) the nature o f transitional or “secon d-stage” institutions such as the E uropean M onetary Institute, (5) the autonom y, m andate, and voting procedures o f the ECB, (6) the site o f the ECB 125 Ludlow, “Reshaping,” 429, 445; Grant, Dehirs, 184. 124 Corbett, Maastricht, 40; interviews with two members o f the Delors Committee.

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T h e C h o ic e fo r Eu r o pe

and nam e o f the currency, (7) con trols and sanctions o n excessive national deficits, and (8) provisions fo r bailouts and o th er financial transfers.125 T h ese is­ sues are sum m arized in T able 6 .1. O verall, the outcom es ten ded to be closest to G erm an y’s inidal n egod ad n g position, that is, a variant o f the “econ o m ist” position. O n all issues e xcep t the last two, G erm an com prom ises were slight, despite France, the Com m ission, and o th er governm en ts. O n controls and sanctions on excessive deficits, later term ed the “stability p act,” G erm any gain ed m uch o f what it wanted, though sanctions w ould be im posed by Q M V n ot the sim ple majority vote that G erm an hardlin ­ ers preferred; weaknesses in the treaty w ere later corrected. O n the final issue, financial transfers, G erm any successfully resisted bailouts and fiscal federalism but later, alon g with France and Britain, co n ced e d an increase in structural funds, agreed at the E din burgh sum m it o f D ecem ber 1992. Let us con sider each issue in turn. Opt-Out Clauses. D enm ark and Britain initially dem an ded a gen eralized opto u t clause, w hich the N eth erlan ds presidency obligingly proposed. T h e o th er ten ministers and D elors took the opposite view, fearin g that G erm any m ight later invoke it. K ohl h im self threaten ed to veto any agreem en t with a gen eral opt-out. T h e details o f op t-ou t clauses w ere n ot d eterm in ed until a m eeting o f finan ce m inisters ju st b efo re the M aastricht summit. L ed by Germ any, the ten pressured D enm ark to aban don its position, leaving only Britain, w hich n egoti­ ated an excep tio n al op t-ou t clau se.126 Later the G erm an Constitutional Court and the Danish parliam ent unilaterally im posed requirem ents fo r parliam en ­ tary ratification o f the final m ove to EMU. Convergence Criteria. G overnm ents agreed early on the n eed for “m utual sur­ veillan ce ” and co n vergen ce gu idelin es overseen by the C oun cil. T h e Germ ans, sup ported by the Danes, D utch, and British, went further, favoring strict co n ­ verg en ce criteria specifying inflation rates, deficits, debts, interest rates, and e x ­ chan ge rates. W eak-currency coun tries realized that EMU with high underlying inflation w ould be cosdy, but they also feared exclusion from a “two-track” schem e in w hich som e m em bers co u ld m ove ahead w ithout the others. H ence Spain, G reece, Portugal, Ireland, Italy, and the Com m ission, though interestingly not Britain, o p posed co n vergen ce criteria. D elors went so far as to allege that any such criteria w ould constitute a betrayal o f G erm an prom ises at the Rom e sum m it— a claim that elicited an angry denial from Kohl. French leaders fa­ vored a lo o ser arran gem en t as well but un derstood that fo r Germ any, strict c o n ­ verg en ce criteria were n on n egotiable; they o p posed them publicly. Finance M inister B érégovoy s spokesm an hin ted at an underlying deal w hen he recalled that “G erm any totally backed us from the m om ent we m ade it clear that we w ould not be lax on im p lem entin g the criteria for coun tries to get in to EM U .” 127 125 For a more fine-grained analysis, see Ilalianer, “Mastering." 126 Grant,Delors, 182; Ross.Jacques-, Agence Europe, Bulletin, 2 6 -27, 29 , and 30 October 1991 and 5 December 1991, 9. 127 Agence Europe, 11 December 1994; Sandholtz, “Monetary,” 13 6 -13 7 ; Lorenzo Bini-Smaghi, Tommaso Padoa-Schioppa, and Francesco Papadia, “The Policy History o f the Maastricht Treaty: The Transition to the Final Stage o f EMU,” Banca d ’Italia mimeo (Rome, 1993), 24.

442

Negotiating the Maastricht Treaty, 1988—1991 So G erm an d e m an d s w ere m et. C o n v e rg e n c e criteria w ere set clo se to E C av­ erages, th e G erm an s k e e p in g o n e eye o n th e p articipation o f Italy— p oten tially co sd y in G erm an d o m e sd c politics. P articip ation was to be lim ited to those gov­ e rn m en ts o f co u n trie s w h ere the in flation rate was w ithin 1.5 p e rce n t o f the th ree low est rates, lo n g -te rm in terest rates fell w ithin 2 p e rc e n t o f the th ree lowest, b u d g e t d e ficit was less than 3 p e rce n t o f G D P, n atio n a l d e b t was less than 60 p e r c e n t o f G D P , a n d th e cu rre n cy h a d re m a in e d w ithin th e ERM w ith n o d eva lu a tio n s fo r two years. T h e final stage w ou ld b e g in in 19 9 7 if a m ajority o f E C m em b ers m et these co n d itio n s, otherw ise in 1999. N ation al cen tra l banks w o u ld b e m a d e in d e p e n d e n t an d cap ital w ou ld circu late freely. W eak-currency co u n trie s secu re d on ly a provision p ro vid in g fo r a “fle x ib le ” in terp retatio n o f the crite ria by the E u ro p e an C o u n cil, in clu d in g “tren d s” in debts an d deficits. T h e G erm a n decisio n to a cce p t this co m p ro m ise, p ro p o se d by B elgiu m , was m ad e by K o h l him self, o ve rrid in g so m e G erm an officials. Yet even the G erm an F in a n ce M inistry an d B u n d e sb a n k w ere n o t w holly op p o sed : at th e Sep tem b er 19 9 1 m e e tin g o f E C O F IN , W aigel a n d S ch lesin g er h a d alread y stressed the c o m ­ p lete a g re e m e n t a m o n g fin a n ce m inisters that the co n v e rg e n ce criteria p ro ­ vid ed “a d eq u a te ro o m fo r p o litica l eva lu atio n ,” a p osition K o h l an d G en sch e r clearly fa v o re d .128 Schedule andDecision Procedurefor the Transition. W ith F ren ch sup po rt, the C o m ­ m ission s o u g h t rap id, u n c o n d itio n a l com m itm ents; D elors p ro p o se d 19 9 3 fo r the th ird stage a n d 19 9 5 fo r th e seco n d . D en m ark a n d B ritain, o n the op p o site e n d o f th e sp ectru m , o p p o se d any firm sch e d u le at all. O th e r go vern m en ts fa ­ v o re d an in term ed ia te so lution . M any a d va n ced p rop osals, b u t the G erm an p o ­ sition was decisive. By sid in g w ith B ritain an d D en m ark, G erm an y co u ld at any tim e have b lo ck e d a g re e m e n t o n a final d ate, an o u tco m e favo red by th e B u n ­ d esb an k. Yet K o h l an d G e n s ch e r con sisten tly so u gh t to “lo ck in” the a gre em en t, th o u g h th ey d e lay ed d o in g so un til the M aastricht sum m it itself. It was a greed , on the basis o f a co m p ro m ise p ro p o se d by Spain an d F rance, th ere that th ere w ou ld be two o p p o rtu n ities to m ove forw ard, first in 19 9 7 , seco n d in 1 9 9 9 .129 M itterran d a n d K o h l a cce p te d fro m the start that transition to th e third stage w o u ld b e d e c id e d by m ajority vote. T h e final arran gem en t, based o n D u tch and F re n ch co m p ro m ise p rop osals, establish ed that the 19 9 7 d ecisio n o n w h eth e r a m ajority o f co u n trie s m e t the criteria w ou ld b e re a ch ed by u n an im o u s vo te, fo l­ low ed, i f necessary, by automatic m o vem en t forw ard in 1 9 9 8 -9 9 , w ith g o v e rn ­ m en ts vo tin g by sim p le m ajority o n w h ich co u n trie s q u alified . T h e autom aticity o f the 19 9 9 d ecisio n re fle cte d a p erso n a l d ecisio n by K o h l, w ho, his associates a n d British co u n terp a rts surm ised, so u g h t to assure a transition to EM U even in th e fa ce o f d o m e sd c o p p o sitio n . A ll votes w ere to be cast by h ead s o f state and g o v ern m e n t, m e etin g in the E u ro p e an C o u n cil, n o t by m inisters o f fin a n ce, c e n ­ 128 Sandholtz, “M onetary" 1 3 5 -1 3 6 , 142; Schónfelder and Thiel, Markt, 135; AE, 5 December 1991, 10, and 30 O ctober 1991, 8. 129 Interviews with two national representatives, 1994, 1996; Ludlow, “Reshaping,” 425. Since the Germ an government, as opposed to the Bundesbank, had long favored setting a date, it is mislead­ ing to conclude that “the Commission and French would eventually win the date struggle" (Ross, Jacques, 246) or to speak o f a Franco-Italian “ambush” at Maastricht (Marsh, Germany and Europe, 147).

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tral ban k ers, o r p arliam en ts, a provision th at p re se rv ed th e exe cu tive s’ d o m es­ tic in itiative. G o ve rn m en ts co m m itted them selves n o t to h in d e r o th e r qualifyin g g o v ern m e n ts fro m m o vin g forw ard. Second-Stage Institutions. T h e transition was critical since, i f th e F ren ch go t th eir way, m u ltilateral su rveillan ce an d stan dard-settin g w ou ld b egin to in frin ge on B u n d e sb a n k a u to n o m y e ven b e fo re th e transition to a single currency. M any p ro p o sa ls fo r th e transition w ere e x p lo re d . F ran ce, Italy, B elgiu m , L u x em b o u rg, G re e c e , an d th e C om m ission so u g h t to establish a cen tra l b a n k as soon as pos­ sible a n d to co d ify ERM ru les w ithin the treaty, w ith the h o p e o f im p osin g sym­ m etrical adjustm en t o n G erm an y b e fo re crea tio n o f the single currency. T h e C o m m issio n to o k the lead, a d van cin g p ro p o sals fo r a sym m etrical EM S in 1990. In F eb ru ary 1 9 9 1 , shortly after the B u n d esb an k p u b licized its p lan , K o h l a n ­ n o u n c e d that G erm an y o p p o se d the crea tio n o f a E u ro p e an cen tral ban k b efo re the th ird stage, after co n v e rg e n ce criteria had b e en m et an d participants c h o ­ sen. A ga in D e lo rs’s a n gry attacks h a d n o e ffe ct o n K o h l.130 G erm an y carried the day, an d the discussion shifted to the n atu re o f an in terim o rg an izatio n , the E u ro p e an M o n etary Institute (E M I). F rance, Italy, Spain, G re e ce , and Portugal w an ted the EM I to be h e a d e d by an E C official an d g ra n ted pow ers to oversee and p ro m o te th e d e v e lo p m e n t o f a sin gle currency, b u t Britain and G erm an y successf ully p ro m o te d a sep arate b o ard o f cen tral ban kers an d strip ped the EMI o f any pow er o ve r policy. H avin g d o n e so, K o h l was in a position to accep t a Sp an ish p ro p o sa l to la u n ch the now essentially m ean ingless seco n d stage re la ­ tively early— in 19 9 4 as p ro m ised at th e R o m e sum m it, th o u g h n o t in 1993 as the C o m m issio n an d F rance a d v o ca ted .131 ECB Autonomy, Mandate, and Voting Procedures. T h e G erm an g o v ern m en t was p articularly in sisten t that th e E C B rem ain a u to n o m o u s an d be gran ted a strong a n ti-in fla tion a ry m andate. T h o u g h rejectin g a p ro m in e n t ro le fo r the C o m m is­ sion, the F ren ch go v ern m e n t so u g h t to stren gth en the C o u n cil o f M inisters as a c o u n terw e ig h t by g ra n tin g it jo in t respon sibility fo r e co n o m ic policy. G erm an y resisted F ren ch , Italian, a n d C o m m issio n d em an d s fo r th e in clu sio n o f m acroe co n o m ic p rio rities o th e r than in fla tio n (e.g., u n em p lo y m en t, grow th targets) in the E C B m an d ate, an d fo r the h e ad o f the E C B to b e draw n fro m ou tsid e the ranks o f ce n tra l bankers. O n ly B elgiu m a n d the N eth erlan d s show ed su p p o rt for em p o w erin g th e C o m m issio n , C o u rt, o r P arliam en t.132 iso Vociferous opposition from potentially excluded countries, backed by the Commission, was overridden. T h e Dutch proposal that any six countries that met the criteria in 1996 could move ahead alone was initially supported only by Germany. After the fact, Delors and his associates claim that this did not underm ine the “real purpose" o f Stage 2, which had always been to signal com mit­ ment. Schonfelder, Markt 13 3 -14 2 , 1 5 2 -1 5 7 ; Italianer, “Mastering," 95!!; Ross, Jacques', Sandholtz, “Monetary,” 137; Grant, Delors, 183-184. 131 Connolly, Rotten, 16 7 -16 9 ; Bini-Smaghi, Padoa-Schioppa, and Papadia, “Policy,” 1 4 - 2 1 . Evi­ dence o f the Germ an governm ent’s commitment is that when France and the Commission proposed that in 1997 the governments set adate for the transition by consensus, whereupon the ECOFIN would assess convergence and provide detailed plans by a qualified majority o f 8 (o f 12), «'hereupon those governments who were to move forward would vote unanimously on the exchange rates at which their currencies would be linked, Germany criticized the result as too weak, since it permitted govern­ ments that would not or could not move to veto the progress o f those who sought to move forward. 132 Ross,Jacques, 8 4 - 8 9 ,1 5 3 - 1 5 6 , i8 5-i8 8 ;in terview w ith French minister; Ludlow, “Reshaping,”

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Negotiating the Maastricht Treaty, 19 8 8 -19 9 1 A g a in G erm an y triu m p h ed . In n o asp ect o f E M U was the C om m ission gran ted th e u n iq u e p o w e r o f p ro p o sa l it e n jo y ed elsew here; in two relad vely m in o r areas it shares p ro p o sa l rig h ts w ith th e E C B . T h e Parliam en t can be co n su lte d b u t was a cco rd e d n o fo rm a l ro le . A rticle 109, c o n c e rn in g co n tro l o ve r exch an ge -ra te policy, rem a in s va g u e, w ith o ve rla p p in g co m p e te n ce fo r the C o u n c il o f M inis­ ters a n d th e E C B ; it was n o n e th ele ss g e n era lly u n d e rsto o d that exch an ge -ra te p o lic y w o u ld rem ain in E C B hands. T h e C om m ission ’s d e m a n d fo r fo rm al p ar­ ticip atio n was re jecte d . T h e r e rem a in ed som e risk that p an -E u ro p ean societal pressures o n th e E C B m ig h t lead to p o licies la x e r than those p u rsu ed by the B u n d esb a n k , b u t this possibility was offset by the fact that the M aastricht treaty w en t even fu rth e r than G erm an do m estic law in in su latin g the cen tra l ban k fro m p o litica l co n tro l. F rançois L a m o u rea u x o f the C om m ission o b served bit­ terly: “T h e r e w ill be an EM U in th e treaty [but] w e ’ve lost the ga m e o n e c o ­ n o m ic policy. P olicy co o rd in a tio n , such as it will be, will be in terg o vern m en tal, [the C o m m issio n ’s] vo ice will b e sm all.” 133 Yet vo tin g p ro ce d u re s in the E C B w ere to be o n a o n e -n a tio n , o n e -v o te basis. G erm an y an d o th e r large co u n tries n e ith e r d e m a n d e d n o r re ce iv e d w eig h ted votes. T h is issue elicited litde co n tro ­ versy o r discussion, b u t o n e e x p e r ie n c e d c h ie f n eg o tia to r term ed G erm an y ’s q u ie t w illin gn ess to co n c e d e e qu al votes “the greatest con cession h e has e ve r e x ­ p e rie n ce d at an in tern a tio n al m e e tin g .” 134 E CB location and Currency Name. G erm an y pressed fo r the E C B to b e located in F ran kfu rt a n d resisted the n am e “e c u ” fo r the currency, view ing it as too F ren ch . D ecisio n s o n site an d n am e w ere n o t resolved at M aastricht b u t w ere in ­ stead p o stp o n e d . Several years later, the b a n k was p laced in Frankfurt and the cu rre n cy was n am ed the E u ro , as the G erm an s h ad advocated. Budgetary Constraints. T h e r e was n ea r-u n a n im o u s rh eto rica l a g re em en t on the n ee d to m o n ito r an d co n strain b u d g e t deficits. A m o n g cen tral ban kers and fin a n ce m inisters, a “n e a r co n sen su s” felt that the E C m ust in te rv en e w here d e b t/ G D P ratios e x c e e d 60 p ercen t, a “m ajority” su p p o rted action w here deficits e x c e e d 3 p e r c e n t o f G D P , a n d “m any m em b ers” favo red a cd o n w h ere b u d g et d eficits e x c e e d e d in vestm ent. T h e real d e b ate co n c e rn e d the strength o f e n ­ fo rc e m e n t m ech an ism s a n d , in p articular, the use o f sanctions. From the b e g in ­ n in g the G erm an go v ern m e n t, led by W aigel, su p p o rted strin gen t sanctions, in ­ c lu d in g w ith h o ld in g E C fu n d s, p ro secu tio n in E u ro p ean C o u rt, an d suspension o f E C m em b ersh ip , fo r b u d g e t deficits. A t variou s dm es the D u tch presidency, G erm an y, an d the E C M o n etary C o m m ittee su p p o rted p u n ish m en t by sim ple m ajority. S u p p o rt fro m B érégovoy, w h o initially ap p ro v ed o f the strict provi­ sions in th e D elo rs R ep o rt, was w eak, th o u g h the F ren ch go v ern m e n t d id n ot overtly o p p o se sanctions. A cu rio u s a llian ce o f D elo rs an d B ritain, b a ck ed by Italy an d B e lgiu m , o p p o se d san cd o n s o u trig h t, a rgu in g that frien d ly pressures, m ark et fo rces, o r m o re fle x ib le criteria w ere su fficien t.135 1,3 Ross ¡Jacques, 156. Also Reimut Jochimsen, “EMU: A German Central Banker’s Perspective,” in Klaus Gretschmann, ed., Economic and Monetary Union: Implications for National Policy-Makers (Maas­ tricht, 1993), 202-203. 154 Interview with ambassador o f a member-state, 1994. 135 Corbett, Maastricht, 43; Economist, 7 April 1991, 88, 20 O ctober 199 1,60 , and 9 O ctober 1991, 5 -6 ; Grant, Delors, 183.

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T h e o u tco m e ap p roxim ated G erm an preferences. M onetary finan cing o f d e ­ ficits was b an n ed , as w ere excessive deficits o r p ublic debt, as d eterm in ed by the C o u n cil a cd n g by qualified majority. M ultilateral surveillance was im posed. Sancd on s co u ld be im posed o n a sliding scale, starting with p eer pressure, p u b ­ licity, and m arket forces th rou gh to fines and suspension o f EC payments. O n the stringency o f punishm ent, G erm an hardliners like W aigel com prom ised only slighdy, in that fu ll suspension o f E C m em bership was n o t in clu d ed .136 D elors aide François L am o ureaux lam ented that “the ‘budgetarists’ have w on .” 137 L o o k ­ in g ahead, even this relatively favorable agreem en t was n ot en o u g h to quell d o ­ mestic anxiety in Germ any, and w ithin a few years K ohl and W aigel secured even m ore exp licit budgetary co n tro ls— the so-called stability pact, im posing a p ro ­ ce d u re fo r sanctioning EM U m em bers with “excessive” fiscal deficits. Financial Transfers. P oorer countries, m ore likely to be e xclu d ed from EMU or, if adm itted, p laced u n d e r con siderable m acroeconom ic strain, sough t sidepaym ents in exch an ge fo r their assent. (Analysts have also linked these sidepaym ents to the accep tan ce o f social policy provisions.) Spain was boldest, m ak­ in g p ublic its dem an d fo r a q uid pro q u o to EMU. Germ any, Britain, and France refused to m ake such side-paym ents exp licit in the treaty, perhaps for fear o f jeo p a rd izin g ratification, and they rejected Com m ission proposals fo r perm a­ n en t increases in the Com m u nity budget. N onetheless, a m onth before the final sum m it D elors had m et with the G reek, Irish, Portuguese, and Spanish foreign ministers, quiedy prom ising them large increases in structural fu n d in g — E CU 6 billion fo r Ireland a lo n e — if they signed the M aastricht Treaty. It is hard to im agin e that this prom ise w ould have been possible, let alone credible, in the ab­ sen ce o f coordin ation with the m ajor d o n o r coun tries w ho inform ally approved a large increase in structural funding, the D elors II Packet, at the Edinburgh sum m it the follow ing year.138 T h ese e ig h t elem ents com prise a Franco-G erm an bargain, exclu din g the Brit­ ish and ign o rin g the Com m ission, on G erm an terms, the only excep tio n being side-paym ents to p o o rer countries. G erm any com m itted itself to a single E uro­ pean currency and one-country, one-vote arrangem ents at a specified date u n ­ d er a series o f con dition s that it d ictated — an o utco m e that favored France. In exch an ge G erm any received extensive concessions co n cern in g the form and substance o f m on etary un ion. T h e result was a two-track system lim ited to co u n ­ tries able to w ithstand p rio r co n vergen ce and dom estic reform , w illing to forgo bailouts and risk penalties fo r subsequent fiscal deficits, all led by an un precedentedly autonom ous central bank with a strong anti-inflationary m an date.139 T h ese m on etary arrangem ents non eth eless elicited objections from extrem e Corbett, Maastricht, 43; Ludlow, “Reshaping Europe," 397ff; Connolly, Rotten, 271. Controversial issues were the following. The Monetary Committee proposed no monetary financing o f debt and no bail-outs, and that the avoidance o f "excessive deficits” should become “a key principal o f EMU.” O n the latter issue, eleven countries were willing to grant the Council power to decide by major­ ity vote, with Britain resisting. Weak-currency countries favored lax sanctions for violators; strongcurrency countries favored tougher ones. 1,7 Ross, Jacques, 156. 158 Thatcher, Downing, 763. Connolly, Rotten, 198; Ludlow, “Reshaping,” 398. 139 For a parallel conclusion employing even more detailed data, see Italianer, “Mastering.”

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Negotiating the Maastricht Treaty, 1988-1991 elem ents on the spectrum o f Germ an opinion, notably Bundesbank officials and Bavarian politicians, w ho criticized the surviving discretion in interpreting con ­ vergence criteria, setting exchange-rate policy, and conducting fiscal policy. For the most part, however, the treaty satisfied even their demands, and m uch that did not was revised toward the Bundesbank position after the treaty had been signed. To satisfy parliam entary and public opinion, however, Kohl dictated one m ore precondition fo r agreem ent, namely a deepen in g o f political integration. To this m atter we now turn.

The Intergovernmental Conference on Political Union T h e negotiations on political union were a sideshow to the m onetary negoti­ ations. T hey began m uch later, at Germ an insistence, largely as a means o f d o ­ m esdc political legitim ation for the controversial m onetary bargains. France was never supportive; Britain at times was virulendy opposed. After setting the agenda and despite, if anything, a surfeit o f entrepreneurial agenda-setting by govern­ ments, Germ any and its federalist allies encountered difficulty translating m on e­ tary power into political concessions. France and Britain made compromises w here they were most affordable— on institutional matters— but outcom es on other issues, such as foreign and defense policy cooperation, social policy, and im m igration policy, were either close to a lowest com m on denom inator or were lim ited by opt-outs and flexibility clauses. Initiating Negotiations: Germ any Sets the A genda Political union was placed on the agenda in response to the Germ an govern­ m ent’s proposals. Since m id-1989 Kohl had argued that the Bundestag would dem and progress on foreign policy and the powers o f the Parliament in exchange for ratification o f a m onetary agreem ent. T hereafter its support would be co n ­ sistent. Until the spring o f 1990 Mitterrand ignored the Germ an initiatives; T hatcher, too, rem ained utterly skeptical. Just before K o h l’s stunning victory in the 18 M arch East Germ an elections, however, Mitterrand and K ohl’s re­ spective staffs entered high-level negotiations, swifdy ham m ering out a prelim ­ inary agreem ent. T h e jo in t “political integration” initiative called for reform o f jo in t foreign policy and internal decision-m aking institutions. O n 18 April the French and Germ an governm ents forwarded a jo in t request for a parallel co n ­ ference on political union to the Irish presidency.140 In contrast to m onetary negotiations, which focused from the start on a clear goal, the negotiations on political union were com pletely open-ended. A deluge o f proposals ensued, including a full draft treaty from Germany. T h e Parliament offered five widely differing reports. Each country advanced distinctive, often longstanding proposals. Germany, backed cautiously by France, sought co o p er­ ation on foreign policy. Germ any also pressed for cooperation on policing and im m igration, and, backed by Italy and Belgium, it favored increased Parliament powers. France proposed an independent European defense identity. Spain and 140 Ross, Jacques, 89-106; Zelikow and Rice, Germany, 234-238; Teltschik, 329, 175-176.

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o th er p o o rer countries, as we have seen, sought “cohesion ” funding. Italy aim ed to establish jo in t co n tro l o f p erm an en t French and British seats on the U N Security C o u n cil. Britain alon e sough t n oth ing new, e xce p t fo r better en fo rce­ m en t o f existing laws.141 To an even greater exten t than the m onetary negotiations, the talks were m anaged successively by the Italian, the L uxem bourgeois, and the D utch presi­ dencies. Assisted by a small team (few er than ten officials) in the C o u n cil S ecre­ tariat, the L u xem b o u rg presidency circulated questionnaires to nadonal d é lé ­ gations in advance o f the IG C to ascertain national positions. It placed an initial text on the table in early 19 9 1. T h is text reflected what app eared to be majority positions, with alternative w ording w here there was fundam ental disagreem ent. In A pril 1991 a draft treaty was o ffered, w hich con tain ed aroun d 80 percen t o f the provisions that w ould app ear eigh t m onths later in the final treaty. T h e p ro ­ ced u re w orked so sm oothly that m any felt a final treaty could have been drawn up in Jun e, had K ohl and others n ot sough t to gran t Joh n M ajor a delay.142 O n ly the Com m ission, o p p o sed alto geth er to n egotiations on political union, failed to subm it tim ely proposals. Yet D elors vehem ently attacked the L u xem ­ b o u rg go v ern m en t’s efforts. T h e Com m ission’s position was largely defensive, fo cused on m aintaining its own prerogatives. D elors criticized the absence o f form al Com m ission powers in fo reign policy and internal affairs, a “three pillar” arran gem en t p roposed by France, w hich the L u xem b o u rg presidency, rightly in retrospect, saw as a necessary con dition fo r approval by the m ajor governm ents. T h e Com m ission’s alternative proposals, relatively few in n u m ber— including, fo r exam p le, proposals fo r subsum ing the W EU u n d er the E C — w ere ign ored until m uch later.143 Parliam entary agenda-setting was similarly futile. W ell before serious n egoti­ ations started, parliam entarians w ere already disen chan ted by exclusion and gen eral dismissal o f their proposals— in cludin g som e co n cern in g fundam ental freedom s, E C resources, codecision and initiative fo r the Parliam ent, strength­ en ed region al autonom y, and a g en u in e federal union. T h e Parliam ent had no form al pow er o f ratification but tried to e xp lo it its inform al position to in flu­ en ce the negotiations. Its Institutional C o m m ittee voted 1 7 - 1 0 to protest the con ven in g o f the IG C . N um erous Italian, G erm an, and D utch national parlia­ m entarians an n o u n ced that their ratification rested in part on the Parliam ent’s ju d g m e n t.144 T h e y w ere disappointed. O n the first day o f the Maastricht sum m it, the Parlia­ m e n t’s president called fo r a unitary treaty, com m unitarization o f CFSP, no opto ut clauses fo r EMU, Parliam ent codecision fo r all issues, and furth er dem o cra­ tization, n on e o f w'hich were taken seriously. Shortly before the final summit, the 141 Middlemas, Organising, 191; Buchan, Europe, 32-34. 142 Joseph Weyland, “Strategies and Perspectives o f the Luxembourg Presidency," in Emil J. Kirchner and Anastassia Tsagkari, eds., The EC Council Presidency: The Dutch and Luxembourg Presidencies (Colchester, 1993) ,17 ; interview with member-state ambassador. The Dutch and Italian governments drafted much o f their own text; the Luxembourgeois relied more upon the Council Secretariat. 143 Buchan, Europe, 32-34; interview wiih ambassador, 1994. 144 Ludlow, “Reshaping,” 433-434. The vote was later reversed.

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Negotiating the Maastricht Treaty, 1988—1991 presid en t co m p lain ed that the trend in the n egotiations dem onstrated “the su­ prem acy o f n ational adm inistrations over policy.” T h e Parliam ent’s Socialist fac­ tion a n n o u n ced that it w ould evaluate the m eeting accordin g to w hether it e x ­ pan ded C o u n cil m ajority voting, w idespread codecision, strong social policy, a gen eral o p t-o u t fo r co m m o n defense, dem ocratic con trol over m onetary policy, and the rejectio n o f two-track solutions. T h o u g h alm ost n on e was achieved, the Parliam ent quickly backed down; given its gen eral support fo r integration, it was widely view ed as having little real choice. O n e o bserver n oted that debate after the final agreem en t “hardly reads like the same parliam ent.” 145 R each ing a Bargain: T h e T rium ph o f a “C rip p lin g” Com prom ise W ith agreem en t on the basis o f the L u xem b o u rg proposals at hand, the Dutch p resid en cy en tered office during the secon d h a lf o f 1991 and suddenly pressed fo r a m ore federalist solution. Its canvas o f m em ber governm ents had reached the erro n eo u s conclusion that eigh t o f the twelve would support a stronger draft treaty. A n entirely new draft was subm itted in Septem ber, in cludin g many C om m ission proposals, in clu d in g ren unciation o f the three-pillar structure and m ore Q M V in CFSP and social policy. Unw illing to back federalist rh etoric with action, all governm en ts e xcep t B elgium and the N etherlands rejected the text outright. T h is em barrassing episode, term ed “Black M onday,” fo rced a return to the L u x em b o u rg draft. D elo rs’s protest that the old draft was “crip p lin g” and “in ap p licab le” w ere ign ored. Final com prom ises were iron ed out at m eetings a m o n g sen ior ministers, supported by C o u n cil officials. A few issues, most n o ­ tably the last-m inute provision o f a British op t-out on social policy, rem ained fo r the C o u n cil sum m it at M aastricht on 1 0 - 1 1 D ecem ber 19 9 1. T h e summit closed with a rem in der from the Danish governm en t, u n h eed ed at the tim e, that ratification m igh t be difficult because the treaty was too o p aque to explain to dom estic p ublics.146 T h e o utcom es in clu d ed rh etorical strength en ing o f foreign and security p o l­ icy, an agreem en t without Britain on m odest, nonfiscal social policy, a very m o d ­ est exp ansion o f qualified m ajority voting, a small transfer o f power from the Com m ission to the Parliam ent throu gh the codecision p ro cedure, and, a few' years later, a d o u b lin g o f structural fun din g fo r p o o rer countries. In gen eral, the outcom e o f these political un ion n egotiations m oved the E C very m odestly in the federal direction favored by Germ any. Yet the overall structure favored the status quo. T h is three-pillar structure, a m etaphor p roposed by the French representative Pierre d e Boissieu, was designed to restrict definitively, through 145 Martyn Bond, “The European Parliament’s View o f the Two Presidencies,” Kirchner and Tsagkari, eds., EC Council, 37; European Voice, 9 May 1996, 10; AE, 6 December 1 9 9 1 ,9 -1 0 December 1991, and 12/13 November 1991. A visit to each o f the chief executives by Enrique Baron Crespe, EP president, was reported to have paved the way for acceptance o f minor EP demands, a five-year term o f Commissioners, to coincide with the EP term, and a rule that the entire Commission had to be formally endorsed by die EP. 146 Interviews with two member-state ambassadors, Council Secretariat official, prime minister, and national representative, 1994-1996; Cloos et al., Traité, 8off; Corbett, Treaty, 293ÎT; Wester, “Euro­ pean.” 212; Charles R. van Beuge, “Strategics and Perspectives o f the Dutch Presidency,” in Kirchner and Tsagkari, eds.,£C Council, 28-29; Grant, Delors, 195; Ron, Jacques, 171-172 .

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qualitative in stitu tio n al breaks, th e C om m ission a n d P arliam en t’s p rerogatives in fo re ig n a n d in te rio r p o licy.147 L e t us co n sid e r th e sp ecific issues. C o m m o n F o reign an d Secu rity Policy: M ajority V o tin g to “d istribu te n o n -sm o k in g seats” P roposals to d e e p e n th e E C ’s co m m o n fo re ig n a n d security p o licies (CFSP) h a d a p p e a re d regu larly o n th e E C a g en d a sin ce th e early 1980s. A s n eg o tia ­ tions n ea re d , Italy, the N eth erlan d s, B ritain, B elgiu m , F ran ce, an d G erm an y p re ­ sen ted d e ta iled p rop osals, fo llo w ed in 19 9 1 by C o m m issio n , F ran co -G erm an , a n d A n g lo-Italia n schem es. A ll go v ern m e n ts favo red fle x ib le co o p e ra tio n but d isag reed o ve r w h eth e r to em p lo y Q M V an d stren gth en the ro le o f the C om m ission an d C o u r t— p o licies favo red o n ly by G erm an y a n d a few others. A F ran co -G erm an p rop osal, w hich g a in e d su p p o rt fro m S p ain , G re e c e , B elgiu m , a n d the C o m m issio n , ca lled for u n an im o u s d ecisio n s to take actio n b u t im p lem en ta tio n by QMV. Britain, D e n ­ m ark, Irelan d, a n d o th ers reso lu tely re jecte d Q M V even o n im p lem en tation . T h e fin al a g re e m e n t was closest to th e British p osition , restricting Q M V to cases in w h ich go v ern m e n ts h a d vo te d un an im o u sly to app ro ve its use. D elo rs rid i­ cu le d the p ro ce d u re , citin g an im agin ary m e etin g o f ministers: First we would have to decide, unanimously, whether the meeting was to be in Warsaw, Budapest or Prague. Then we would have to agree whether we were go­ ing by plane. Lunch? We would need an opt-out for vegetarians. No doubt we could use majority voting to decide where the smoking and non-smoking sections would be.148 C o m m issio n efforts to establish a fo rm al ro le fo r sup ran atio n al institutions in fo re ig n a n d d efe n se p o licy-m ak in g p ro ved futile. M o re fed eralist g o v e rn ­ m ents, in clu d in g G erm an y, Italy, B elgiu m , the N eth erlan d s, G re e ce , an d Irelan d, b a ck e d by the C o m m issio n , so u g h t to e x te n d the tradition al E C structu re w ith C o m m issio n initiative a n d C o u rt o versigh t in to m atters o f fo re ig n p o licy — a p ro p o sa l n atu rally su p p o rted by sup ran atio n al institutions. F ran ce, b a ck ed by Britain a n d D en m ark, c o u n te re d w ith a th ree-p illa r design in w h ich fo re ign p o l­ icy, as w ell as in te rio r affairs, w ou ld be co n d u cte d outside the tradition al E C structu re an d ce n te re d o n the E u ro p e an C o u n cil, the o n ly in stitution in volved in all th ree pillars. It w o u ld con strain the adm inistrative, initiatory, adjudicative, and legislative ro les o f C o u rt, Parliam ent, an d C om m ission to th eir cu rre n t d o ­ m ains. In this regard , the p ro p o sal was sim ilar to certain elem en ts o f d e G a u lle ’s o ld F o u ch et Plan. W ell b e fo re the IG C b e g an , the th ree-p illar design h ad tri­ u m p h ed ; a last-m inute ca m p aign by D elo rs to reestablish a single structu re o r

M7 Interview with members o f Council Secretariat and permanent representative, 1994-1996. 148 Buchan, Europe, 46. Also Ludlow, “Reshaping,” 444; Cloos et al., Traité, 60; Lippert, Germany 1 1 8 -1 2 0 . T h e substantive areas o f cooperation m entioned in early Franco-German proposals were m uch cut back.

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88 - i ç

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establish m ore than an advisory role fo r the Com m ission in foreign policy­ m aking was ig n o re d .149 O n defen se policy, the discussion focused on the role o f the WEU; govern ­ m ents divided in to three groups. Britain, backed by pro-N A T O countries such as the N eth erlan ds and Portugal with tacit support from in d ep en d en t D enm ark and n eutral Ireland, h ead ed the first. A ll favored only a symbolic or advisory link betw een the E C and the WEU. A n A nglo-Italian com prom ise in O cto b e r 1991 explicidy reco gn ized no m ore than a symbolic lin k betw een the W EU and the EC. G erm an y h ead ed a secon d group , in cludin g Italy, Spain, G reece, and L u x em ­ bourg, w hich sough t a com m itm ent to an eventual W EU role as the E C ’s defense arm. Even this gro u p , however, saw E C activities as lim ited and n ot overlapping those o f N A TO . C oord in ation o f U N p eacek eep in g was m entioned, suggesting that E uropean coop eration w ould rem ain subordinate to oth er m ultilateral co m ­ m itm ents. Sm aller countries in this gro u p favored Com m ission involvem ent as a safeguard against large-state dom in an ce. France, sup ported by the Com m ission and perhaps Belgium , favored a m ore direct alternative to N A TO , in clu d in g establishm ent o f a E uropean attack force and rapid in tegration o f W EU into the E C — though how seriously Paris en ter­ tained this am bitious goal rem ains unclear. Even the French governm en t avoided any d irect ch allen ge to N A TO , p referrin g instead to w ork closely with Germ any; the resulting F ranco-G erm an com prom ise w ould have placed the W E U un der the loose supervision o f the E uropean C o u n cil.150 Symbolism aside, the co n crete obligations in both foreign and defense policy co n tain ed in the M aastricht T reaty m ost closely realized British preferences. T h e EC was authorized to forw ard only n on b in d in g requests fo r action to the WEU. A n exh ortative provision noted that existing provisions “m igh t in time lead to a co m m o n d efen se.” Further discussion was postponed. Joh n M ajor voiced satis­ faction; o th er heads o f govern m en t criticized it as “un im portan t and w ithout m uch substance”; the Com m ission dismissed it as “m inim alist.” T his outcom e reflected the m anifest lack o f consensus over questions like the E C ’s relationship to N A TO , with France ostensibly alon e in favor o f a break, or the p ro p er insti­ tutionalization o f fo reign policy, with France op posed to a stronger Com m ission o r C ourt. As G eo rge Ross concludes: “T h e real p roblem was that E urope was not con vin ced abou t the n eed fo r a new defen se identity.” M oreover, there was n ever any cred ible threat o f exclu sion aim ed at Britain. W ith its scat on the UN Security C o u n cil, n uclear arsenal, effective military, and effective foreign m in ­ istry, Britain was widely viewed as indispensable to any credible E uropean fo r­ eign o r defen se policy arran gem en t.151 149 Ross, Jacques, 143-148; Corbett, Treaty, 35-38; Lippert, 115-12 0 ; interview with Council Official. 150 It is difficult to assess how strong such preferences were, however, since no such initiatives were taken. France sought instead to influence the process primarily through Franco-German schemes, which remained close to German preferences. Ross, Jacques, 143-144, 14 6 -14 7, 181-182; Grant, Delors, 150, 186-188; van Wijnbergen, “Germany,” 57—58. 151 Ross, Jacques, 147, also 137-144. Interview with head o f government (1995) and national chief negotiator (1994); Corbett, Treaty, 44—48; L ’Expres, 20 December 1991, 16.

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Justice and H om e Affairs: R elegad o n to the T h ird Pillar Proposals for coop eration in ju stice and h o m e affairs, with particular atten­ tion to issues o f asylum, m igration, and police coop eration through E U R O P O L , w ere advanced m ost actively by Germ any. A t the L u xem b o u rg sum m it in June 1 9 9 1 , K ohl surprised even the Com m ission by prop osin g that im m igration, asylum, and p o lice co o p eratio n be m oved o ut o f the intergovernm ental “third pillar,” w here the L u xem b o u rg draft had p laced it, and back in to the m ain E C structu re— though he was p repared from the start to accom m odate Britain with op t-o u t clauses on asylum and visa policy. T h e Com m ission and Parliam ent strongly supported the G erm an proposal for “com m u nitarizin g” these policies, w hich w ould have greatly exp a n d ed their in flu en ce. O th er countries viewed the proposals with con siderable skepticism: Britain saw no substantive n eed fo r the policy, France was m ore positively in clined toward the substantive ends but re­ m ained skeptical o f supranational m eans.152 T h e final agreem en t ackn ow ledged pervasive skepticism by postponing the is­ sue. T h e three-pillar design lim ited the role o f Court, Com m ission, and Parlia­ m ent in m igration policy w hile strengthening that o f the European C oun cil. T h e only substantive chan ge was agreem en t to decide com m on third-country visa regulations by unanim ous vote and after 1996 by qualified majority, with the Com m ission enjoying a n onexclusive right o f proposal. T his chan ge exten d ed n eith er to asylum n or to im m igration policy. Social Policy: Eleven G overnm ents O p t In B oth b efo re and after Maastricht, the E C had only a m inim al social policy. W ith the excep tio n o f clauses on ge n d er equality and labor practices negotiated by France in the early years, w hich occasion ed som e im portant ECJ decisions, provisions fo r social policy w ere absent from the original Treaty o f Rom e. T h e SEA authorized Q M V on the harm onization o f health and safety regulations, an authority that the Com m ission in terpreted as broadly as possible, but all o th er social policy m easures, notably those regulating collective bargaining and finan ­ cial provisions, con tin ued to require an un reachable unanimity. In 1988 Delors had prop osed a n on b in d in g E uropean social charter, w hich all m em bers excep t Britain had approved, but it gen erated little legislative activity.15* Participants in the M aastricht n egotiations exam in ed social policy proposals p rovided by at least e ig h t national governm ents as well as the Com m ission. Dis­ agreem en t quickly red u ced to two issues: the scope o f Q M V and a provision providing fo r bin ding E uropean-level, labor-m anagem en t negotiations un der threat o f E C legislation (the “n egotiate o r w e ’ll legislate” clause). Q M V received strong support from relatively w ealthy countries, in cludin g France, Belgium , L u xem bo u rg, Italy, D enm ark, and the Com m ission; G erm any was also support­ ive but swiftly adopted a com prom ise position in favor o f “rein fo rced Q M V ” and perhaps unanim ity. L ow er-in com e countries, led by Britain and Spain and q u i­ 152 Eamomist, 30 November 1991, 48, and 7 December, 1991, 54; Ross, Jacques; Cloos, Traité, 68-69; Ludlow, “Reshaping," 444; interview with Council official. 155 Corbett, Treaty, 49-50. 45 2

Negotiating the Maastricht Treaty, 19 8 8 -19 91 etly backed by Ireland, Portugal, and G reece, resolutely o p p o sed a strong social policy. Joh n M ajor w en t furthest, p ublicly stating early on that a veto o r an opto u t was p referable to participation; H urd later m aintained that the Com m ons, d o m in ated by Conservatives, w ould have rejected any treaty n ot con tain in g a British o p t-o u t.154 E u ro p ean business, rep resen ted by U N ICE, o p posed any regulation o f “quan ­ titative” issues (wages, vacation, social security) and collective bargaining. Little was left o th er than ge n d er discrim ination and w orker safety, already subject to E C regu lation. U N IC E reluctantly supported, however, the Com m ission’s “n e ­ gotiate o r w e ’ll legislate” proposal fo r these areas, probably because it appeared easy to b lo ck proposals u n d er it. By the en d o f O cto b e r 1991 the m em ber gov­ ern m en ts had reached a com prom ise: a few nonquantitative areas were in cluded u n d e r Q M V (e.g., inform ation /consu ltation o f workers in m ultinational firm s), som e quantitative areas w ere m en tio n ed but rem ained unanim ous (e.g., social security, em ploym ent contracts, collective defen se o f w orkers), and core issues o f wage bargain ing w ere specifically exclu d ed from E C com p eten ce (e.g., re ­ m un eration , righ t to strike, trade un ion rights). In som e areas, the “negotiate or w e ’ll legislate” p ro ced u re was a d o p ted .155 T h is social policy prom ised little beyon d symbolism, yet M ajor rem ained in­ transigent. So the issue o f British participation was left to the ch ie f executives at M aastricht. M ajor prop osed subjecting all social policy to unanimity, which K ohl rejected. A t 1:00 a . m . on the last n igh t o f the summit, in face-to-face n e­ gotiations, M ajor and K ohl agreed that the eleven w ould m ove ahead w ithout Britain outside E C institutions— an arran gem en t discussed with M itterrand in advance and bro k ered by the D utch presidency. Delors, em ploying materials p repared earlier by the Com m ission legal service, con vin ced all m em ber gov­ ernm ents to perm it the eleven to act within the E C structure to adopt measures n ot applicable to B ritain — a solution apparently d evelop ed secretly in the C o m ­ mission, th ough som e later claim ed it also bo re the im print o f the C o u n cil Sec­ retariat. M ajor accep ted the proposal over the objections o f his advisers. T h e sudden British willingness to o p t o u t surprised several o th er governm ents, in ­ clu d in g M editerran ean countries, Ireland, and the N etherlands, w hich had p ro ­ fessed sup port fo r the social policy proposal all the while exp ectin g Britain to w ater it down to insignificance. W hen Britain op ted out, the others were faced with a stron ger policy than exp ected and pressure to co n clu d e the sum m it n e ­ gotiations rapidly. D elors won over southern coun tries with prom ises o f m ore substantial structural fu n d in g and, in the case o f Spain, apparently with an ap ­ peal to Socialist solidarity.156 154 Letter to the Economist, 15 June 1996; Ross Jacques, 145-153; Corbett, Treaty, 4 9 -5 1; Economist, 7 December 1991,52; Peter Lange, “Maastricht and the Social Protocol: Why Did They Do it?" Politics and Society 2 1:1 (March 1993), 5 -3 7 . 155 George Ross, “Assessing the Delors Era and Social Policy,” in Paul Pierson and Stephan Leibfried, eds., European Social Policy: Between Fragmentation and Integration (Washington. D.C., 1995), 379ft. 156 1 was unable to corroborate persistent rumors, apparently emanating from the British Foreign Office, o f a purported linkage to Yugoslavia. Cf. Susan Woodward, Balkan Tragedy: Chaos and Dis­ solution after the Cold War (Washington, D.C., 1995), 184-185; interview with German Staatssekretar, 1996; interview with prime minister, 1996.

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T h e precise form o f the social p rotocol is often said to exem plify the im ­ p ortan ce o f u n in ten d ed con sequences and supranational entrep reneursh ip in E uropean in tegration. T h e outcom e, it is said, was less attractive to the British than keep in g the social provisions out o f the treaty altogether, and in particular upset the calculations o f Britain’s M editerranean allies, such as Spain, as well as o f som e conservative governm ents in richer countries, w'hose rhetoric did n ot reflect real com m itm ent b ut who were caugh t out by the last-m inute British con cession. Yet we should n ot m ake too m uch o f this claim . W ith the election o f the Blair governm en t in 19 9 7, the British governm en t jo in e d the arrangem ent anyway. In the interim it was essentially ign ored, leadin g to the passage o f only two, relatively m inor provisions. N onetheless, it is fair to say that D elors in ter­ ven tion m oved the resulting policy slightly in the direction o f a m ore active so­ cial policy.157 T h e Expansion o f C o m p eten ces and QMV' N ational governm ents subm itted dozens o f detailed proposals to establish new p olicies o r to exten d Q M V to new areas, in cludin g trans-European infrastruc­ ture, public health, tourism , transport safety, education and vocational training, culture, energy, con su m er protection , industrial policy, civil protection , and youth. Southern governm ents ten ded to advocate new com p etences from which they m ight gain greater EC subsidies, such as tourism and public health provi­ sions. N orthern coun tries took the lead to legitim ate existing high standards or form s o f in terven tion w hich they practiced. A s we have seen, governm ents e n ­ tered into the n egotiations with particular areas o f interest and particular areas o f opposition; there w ere few op portunities fo r agreem ent. H en ce nearly all o f these efforts failed, and m ost were n ever treated as m ore than symbolic. T h e re was litde room fo r the expansion o f com petences, for no g o vern m en t supported a m ove to Q M V w ithout exceptions. France and G erm any favored extension o f Q M V “in p rin cip le ” to all “non con stitution al” econ om ic is­ sues, it is true, b ut excep tion s fo r G erm any in cluded som e o f the m ost im por­ tant areas o f eco n o m ic activity n ot yet u n d er m ajority voting, such as visa p o li­ cies, m utual reco gn ition o f professionals, and in direct taxation. Britain, Spain, Ireland, G reece, and Portugal gen erally o p posed even this m uch. G erm any and Britain blo cked French, Italian, and Com m ission proposals for a com m on in­ dustrial policy. Self-sufficient in energy, Britain and France rejected proposals, som e decades o ld , fo r an E C en ergy policy. G erm an, D utch, and Danish efforts to prom ote environm ental and con su m er p rotection gen erated strong op posi­ tion from Britain and southern countries. G erm an and L uxem bourgeois ad ­ vocacy o f greater transport safety regulations cam e to noth ing, as did FrancoItalian support fo r an E C cultural policy. Efforts to im pose Q M V on research program s were blocked by Britain in an 1 l - i vote, though K ohl o pen ly co n ­ gratulated M ajor afterward. A symbolic “E uropean citizensh ip” was created, but 157 Interviews with prime minister, Delors, permanent representative, and commission official. For a critical assessment, see Wolfgang Streeck, “From Market-making to State-building: Reflections on the Political Economy o f European Social Policy,” in Pierson and Lcibfried, eds., European, 3 89 -4 31.

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Negotiating the Maastricht Treaty, 198 8-1991 the only substantive policy related to it was a Spanish proposal to perm it EC cidzen s to vote in lo cal elections w herever they reside. Britain failed to b lo ck a provision fo r trans-European networks, strongly favored by business and other m em ber-states, w hich w ou ld b e d ecid ed by Q M V — but this was an area in which governm en ts p articipated o n an ad h o c juste retour basis. M any o th er provisions in the M aastricht Treaty, such as the inclusion o f con su m er protection , e d u ca­ tion, and p u b lic health u n d er A rticle 130, fo r the m ost part altered the legal basis o f p olicies already b ein g co n d u cted by Q M V u n d er A rticle 100. T h e c o n ­ sequ en ce was n o t always to e xp an d E C com petences: such changes tended to restrict in flu en ce previously enjoyed by C o u rt and Com m ission. D elors failed to b lo ck the in clusion o f con su m er protection in the treaty, as well as new clauses on ed u catio n and culture that explicitly lim ited efforts to coordin ate national policies. Few issues w ent the Com m ission’s way, and those that did w ere m inor. D espite com plaints by Spain ab ou t Com m ission m eddling in environm ental affairs, and dem ands from southern coun tries to retain unanimity, richer c o u n ­ tries succeeded in e xten d in g Q M V to som e environm ental issues, b ut fiscal m ea­ sures and those having to d o with land use, water, and energy w ere exem pted. H ere, too, m uch involved the reclassification o f activities already co n d u cted by Q M V u n d e r A rticle 100.158 A final dim ension o f the n egotiation over com p etences con cern ed “subsid­ iarity”— the gen eral prin ciple that policies should be prom ulgated at the lowest level (local, region al, state, o r EC) possible. T h e treaty in cluded a gen eral sub­ sidiarity clause, the legal m ean ing o f w hich rem ained unclear. D ifferen t gov­ ern m en ts sup ported the clause fo r d ifferen t reasons: in Britain it was seen as lim iting integration; in France as lim iting supranational bodies; in G erm any as sup porting region al governm ents. T h e sam e sort o f pressure led to creation o f a sym bolically im portan t but substantially im p oten t Com m ittee o f the R egion s.159 T h e E uropean Com m ission and Parliament: From C o o p eratio n to C odecision As in the SEA negotiations, G erm any strongly supported an expansion o f parliam entary powers. B acked by Italy, Belgium , and the N etherlands, G erm any advanced two proposals. First, the Parliam ent should be gran ted power o f ini­ tiative; it sh ould b e p erm itted to request that the Com m ission m ake proposals to the C o u n cil and, if the request w ere refused, to m ake its own proposals. Second, the co o p eratio n p ro ced u re should be rep laced by a codecision p ro ce ­ d ure w hereby a “com m ittee o f conciliation” consisting o f 12 MEPs and 12 m in­ isters w ould vote on prop osed parliam entary am endm ents. Five governm ents,

1M AE, 14 November 199 1,3 , and 1 2 December 1991; interviews with council official, Delors, com­ mission member o f cabinet, permanent representative, 1991-1996; Grant, Delors, 15 4 -15 5 ; Ross, Jacques-, Economist, 7 December 1991, 5 2-5 3. Consumer rights had previously been by QMV under Article 100a; since 1983, there had been Council meetings devoted to the issue— hence Delors’s op­ position to transferring it to a new article. 159 Certain educational and training policies were moved under QMV when Germany supported southern countries. Fountain, “German.” Some have argued that this reflected an effort by the fed­ eral government to increase its influence in areas traditionally run by the Lander.

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in cludin g France, the U n ited K in gdom , and Denm ark, op posed these p ropos­ als. France favored instead increased pow er for the C o un cil o f Ministers and n ational parliam ents, while the U nited K ingdom and D enm ark opposed any e x ­ pansion o f European institutions.160 N o govern m en t appears to have supported a large net increase in suprana­ tional power; even the G erm an proposals w ou ld have increased Parliam ent’s powers largely at the Com m ission’s expense. In particular, G erm any and others p ro p o sed that the C oun cil be perm itted to revise a proposal by qualified m ajor­ ity rath er than unanim ity vote, thereby red u cin g the in flu en ce o f the Com m is­ sion’s u n iqu e pow er o f proposal. In language reportedly drafted byJean-Pierre Piris, the director o f the C o u n cil Legal Service secon ded from the French Conseil d ’Etat, a provision was con sidered that w ould have elim inated the Com m is­ sion’s right to withdraw legislation during the conciliation p rocedure. Delors d e n o u n ce d such schem es as an “enterprise to dem olish the Com m ission, put the Com m ission on the sidelines.” 161 T h e Com m ission was p laced on the defensive, but D elors’s battle to avoid large reduction s in Com m ission pow er was, in the end, m odestly successful. At som e low er-level m eetings a m ajority o f governm ent representatives supported Franco-G erm an efforts to restrict the Com m ission’s existing powers o f initia­ tive— a level o f hostility o n e Com m ission insider explains as a reaction to p er­ ceived Com m ission “arro g an ce.” T his effort was avoided at the last m inute, after intensive in terven tion by D elors. T h e Com m ission did lose some rights to am end o r veto parliam entary proposals in the second reading o f the codecision p ro ­ ced u re, but it m aintained the right to rescind alterations during the CouncilParliam ent con ciliation m eetings. D elors also h elped block efforts (sponsored by the British!) to prom ote greater parliam entary involvem ent in lieu o f the Com m ission in policy im plem entation and greater parliam entary con trol over the Com m ission throu gh rights o f inquiry, petition, and a court o f auditors. An Italian proposal that the Parliam ent vet each in com ing Com m issioner individu­ ally was rejected in favor o f o n e gen eral vote on the entire Com m ission— nearly equivalen t to the Parliam ent’s p rior power to dismiss the Com m ission and in practice extrem ely hard to employ. D elors failed utterly to strengthen the exist­ ing coop eration p ro ced u re by perm itting laws to com e into force autom atically if the C o u n cil did n ot act in three m onths rather than require C o u n cil Q M V — a Com m ission proposal that w ould have increased n et supranational in fluen ce and strength en ed Com m ission pow er at the exp en se o f the C o u n cil and p ro b ­ ably also the Parliam ent.162 By m id -19 9 1, with little support outside G erm any fo r true Parliam entary initiative, debate shifted to codecision. K ohl persuaded M itterrand to support 160 This paragraph and the next are based on Ross, Jacques’, Martial, “France," 121-122; interviews with German Chancellory official and Delors. Germany proposed extending the cooperation proce­ dure to all EC issues, not just single market issues. Spain sought to water down codecision. 161 Ross, Jacques, 149; interview with Council Secretariat official. 162 Ross,Jacques, 14 8 -14 9 ,19 2 -19 3 ; Ludlow, “Reshaping,"442;interviewswith council official, De­ lors, commission official, permanent representative, 1991-1997; Grant, Delors, 15 4 -15 5 ; Economist, 7 December 1991, 52-53.

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Negotiating the Maastricht Treaty, 1988-1991 codecision and Q M V o n m any traditional econ o m ic topics. Yet the G erm an go vern m en t also accep ted a com prom ise: if the conciliation com m ittee failed, the p roposal w ould be deem ed n o t adopted, thereby splitting the blam e, b u t the C o u n cil w ould be able to resum e its com m on position in six weeks unless the Parliam ent exp licidy rejected the entire law. Parliam entary power w ould thus be lim ited exce p t w here Parliam ent was willing to a ccep t full public responsibility fo r failure, backed by an absolute m ajority vo te — a difficult standard given that m any MEPs rarely attend sessions. T h is sort o f codecision was viewed as so m in­ im al a reform , as com p ared to earlier proposals, that Parliam ent op posed it through m ost o f die negotiation . N onetheless Britain and D enm ark opposed codecision excep t w here Parliam ent was currently in volved— the single market, environm en tal and R & D p o licy— and initially boycotted the discussions. T h e N eth erlan ds sought, to exten d codecision to trans-European networks and co n ­ sum er policy; France suggested industry, health, culture, and social policy. G en ­ scher suggested a clause be added perm itting future changes. In the end, the codecision p ro ced u re was exten d ed to areas in w hich the coop eration p ro ­ ced u re was already in p lace and to a few in w hich the EC had lim ited powers or decision -m akin g was uncontroversial. In only o n e case, infrastructure policy, did the use o f codecision gen erate an unam biguous increase in the n et in flu ­ en ce o f supranational institutions, but this was an area in w hich governm ents gen erally participated o n a voluntary juste retour basis.163 O verall chan ges in the powers o f the Com m ission and Parliam ent lay close to the lowest com m on d en om in ator am ong m ajor governm ents, though this fact was carefully disguised. A very m odest am ount o f in flu en ce was transferred from the Com m ission to the Parliam ent, while France and Britain— quietly supported, it seems, by G erm an y— blocked any significant net increase in the powers o f supranational institutions. H en ce even Britain and D enm ark did not oppose ch an gin g a m ove from the coop eration p rocedure to the codecision p ro ced u re. I f on e believes that the Com m ission is m ore cohesive and effective than the Parliam ent in agenda-setting, as did Delors, the M aastricht Treaty may on balan ce have constrained supranational power. T h e m ajor loser, as in­ sider Em ile N oel and D elors h im self n oted, was the Com m ission. Still Delors co u ld co u n t him self lucky that m ore radical Franco-G erm an proposals fo r re ­ ductions in Com m ission powers failed — n ot least due to opposition from sm aller governm en ts.164

Explaining Interstate Bargaining and Institutional Choice T h e re is gen eral a greem en t am ong participants that the negotiations were efficient. Few gains w ere “left on the table,” and in distributing benefits linked to EM U at M aastricht, the G erm ans benefited the most. How is this observed

163 Emile Noel, “A New Institutional Balance?” in Renaud Dehousse, ed., Europe after Maastricht: An Ever Closer Union ? (Munich, 1994) ,1 7 ; interview with Council official. 164 Noel, “New,” 16 -2 5; interviews with council secretariat official, permanent representative; in­ terview with Delors.

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process and p attern o f ou tco m es— efficient negotiations in w hich the con ces­ sions on the m argin favor G erm any because the co re bargain favors others m o re — best explained? Efficiency: T h e N egotiations are a “real n ightm are” fo r D elors N um erou s analyses o f bargain ing at M aastricht stress supranational leader­ ship. Wayne Sandholtz asserts flatly that “international leadership was necessary to d efin e a p o ol o f agreem en t.” 165 Supranational bargaining theory predicts that we should observe a scarcity o f necessary inform ation and ideas (high transac­ tion costs), resulting in interstate “bargaining failures”; a com parative advantage on the part o f supranational actors in im agining innovative political solutions, in d u cin g p referen ce revelation, gen eratin g technical and legal solutions, ad­ van cin g legitim ate argum ents, and assessing dom estic political constraints; an ap p aren t com parative advantage by supranational en trep reneurs in initiating, m ediating, o r m obilizing; and a resulting chan ge in the outcom es. G eo rge Ross argues that D elors in flu en ced “all the EM U levers w hich m attered” and played a decisive role by advocating and publicizing the advantages o f EMU, p articu­ larly in the D elors Com m ittee rep o rt.166 C lo ser inspection o f the co n crete p rediction s o f supranational bargaining theory does n ot support these conclusions. T h e negotiations appear to have been Pareto-efficient and stable; lo n g befo re the end o f the negotiations, the probable results, with small excep tion s, w ere obvious to all. N eith er participants n o r com m entators have subsequently argu ed that potential gains were “left on the table.” W ith o n e o r two very m in or exception s, the Com m ission appears to have enjoyed no privileged access to inform ation o r expertise; to the contrary, its political inform ation and ju d g m e n t w ere overtly faulty, leading to in terven ­ tions that w ere futile if not, in the w ord o f a French m inister at the time, “co u n ­ terproductive.” 167 Inform ation and ideas were n either cosdy n o r in short supply n or asym m etrically distributed in favor o f supranational actors; governm ents appear to have been clearly aware o f the alternatives and quickly ascertained the probable outcom e. T h e re was relatively little disagreem ent on the technical o r legal fundam entals o f m on etary integration. To be sure, exp ert m eetings and negotiations dragged o n fo r three years, w hich m ight be taken as a sign o f p oor bargaining, yet this was n ot a Pareto-inefficient outcom e; each postponem ent, we have seen, especially those o f D ecem ber 1989 and Jun e 19 9 1, cam e in re ­ sponse to specific G erm an and British dem ands. T h e Com m ission enjoyed n o in form ational o r ideational advantage over n a­ tional governm ents. Initiatives were plen tiful, as intergovernm ental theory pre­ dicts, and nearly all governm en ts and even subnational actors, such as the B u n ­ desbank, circulated detailed proposals, even com p lete draft treaties, fo r both l6s Sandholtz, “Choosing Union,” 37. Like Lindberg and Haas, Sandholtz occasionally hints that leadership might also be provided by national actors, though the thrust o f his argument stresses the need for supranational entrepreneurship. 166 Ross, Jacques, 81-82. Also Grant, üelors; Schónfelder and Thiel, Markt, 42; Dyson and Featherstone, Elusive, 306—308. 167 Interview with French minister.

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Negotiating the Maastricht Treaty, 1988—1991 m on etary and p olid cal integration. O n specific clauses there were often six or e ig h t d ifferen t views on the table. As the intergovernm ental theory predicts, the strongest m on etary initiatives cam e from the most interested country, France, w hich advanced som e o f the earliest con crete proposals and a draft treaty gran t­ ing to the E uropean C o u n cil greater powers than the D elors R eport had recom ­ m e n d e d .168 By contrast, Com m ission and Parliam ent submissions were slow to arrive, and “w hen Com m ission papers arrived in time to be read carefully they usually b ro u g h t added value; but they had to share the table with the almost infinite n u m ber o f similar papers from m em ber states, so this was hardly enough to m ake them stand o u t.” 169 Parliam ent reports did n ot exp an d the set o f p o ten ­ tial agreem en ts. W hen they did arrive, the Com m ission and Parliam ent consis­ tently m isjudged the political situation, resulting in a series o f spectacular failures rem in iscen t o f M onnet and Hallstein’s later initiatives. Com m ission m anage­ m en t o f inform ation b ro u gh t com plaints from m em ber-states that it was co n ­ cealin g inform ation. Far from enjoying legitim acy, the Com m ission was viewed with suspicion. Som e felt that the Com m ission’s ch ie f co n cern was to accum u­ late m o re power. Suspicion o f proposals to increase Com m ission pow er— such as proposals fo r autom atic passage o f legislation if the C o un cil failed to reach d e cisio n — was o vert.170 Both m on etary and political n egotiations were in fact m anaged and m ediated prim arily by a few C o un cil secretariat officials, the rotating national presidency, n ational govern m en t leaders, and in the m onetary case officials from finance m inistries and central bankers— suggesting that transaction costs were low rela­ tive to gains. In the political union negotiations, the C o u n cil presidency, backed by a team o f few er than a dozen C o u n cil officials, structured negotiations and drafted text, draw ing o n suggestions from national governm ents. T h e re was sta­ bility in discussions and positions. In m any cases the same proposals were raised repeatedly, even after decisions had been taken, from early 1988 throu gh the en d o f 19 9 1 . In the m on etary negotiations, m uch credit has been given to Delors, p articu­ larly d u rin g the m eetings o f the D elors C om m ittee. As a Com m ission official o b ­ served, “there was n ot a phrase in the final rep o rt that [Delors] did n ot author.” D elors co n tro lled “all the EM U levers w hich m attered,” and the outcom e, Ross con cludes, was “a D elors designer p ro d u ct.” A s chair, others argue, D elors m an­ aged the m eetings and m oved the central bank governors “toward consensus on w hat the Com m ission President h im self w an ted,” follow ing up with an im p or­ tant role d u rin g the n egotiation s them selves.171 168 After Spanish, French, and German submissions, the Luxembourg representative complained that every country seemed to be submitting a complete draft treaty. Interview with national repre­ sentative; Heisenberg, Mark, 178 -179 ; Ross .Jacques', Gaddum, Deutsche, 356-366. ,wl Ross, Jacques, 90, 8 9-92. One Commission official described the process: “Everyone tosses everything that runs through their mind onto the table . .. then . . . the differences that really count will come cle a r. . . eventually, towards the last few sessions, they’ll split the differences and we'll have our text.”Joly Dixon, quoted in Ross, Jacques, 85. Ludlow, “Reshaping,” 426. 170 Interview with Council secretariat official. 171 Ross,Jacques, 81-82: Dyson and Featherstone.HujiW, 306-308; Schónfelder and Thiel, Markt, 42; Dyson and Featherstone. Endo, who has researched the question most closely of all, comes to the

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Such conclusions, w e have seen, are m isleading. It is true that D elors drafted m uch o f the w ording; h e n on eth eless had little in fluen ce. H e acted essentially in a tech nical secretariat fun ction , as coordin ator, rapporteur, and drafter; he drafted som e com prom ise texts, as Ross states, but he did n ot in flu en ce their content; two m em bers o f the D elors C om m ittee, we have seen, rem em ber him n eith er p rop osin g n o r veto in g any im portant proposal. Ross’s own source, on closer inspection, speaks o f D elors “co rrectin g” the texts, n ot drafting them. D elors refused to press the central bankers, shying away, fo r exam ple, from p ro ­ p osing a tim etable for the transition to m onetary un ion, in part because o f the celebrated failure o f the m em ber governm ents to m eet the 1980 date suggested in the W ern er Report. W ith the excep tio n o f the unwillingness to set a date and the greater deferen ce to G erm an y’s anti-inflationary p referen ces— both e le ­ m ents D elors him self o p p o sed — the D elors Com m ittee report bears a striking resem blan ce to that p ro d u ced by the W erner C om m ittee two decades earlier. If D elo rs’s presen ce lent som e prestige to the negotiations, it was only because K ohl and M itterrand nam ed him to the position precisely fo r that p u rp o se.172 T h e ou tco m e o f the political un ion negotiations was efficient despite the C o m ­ mission’s app arent decision to take itself o u t o f the gam e early. D elors boycotted the p roceedin gs and traveled to national capitals to m obilize support against the L u x em b o u rg draft, h o p in g the negotiations w ould collapse and the Com m is­ sion co u ld advance a w holly new proposal. Yet by June 1991 the m em ber gov­ ern m en ts w ere clearly h ead ed fo r agreem ent; they con tin ued talking, with only m odest results, fo r an o th er six m onths, in large part to give the British m ore time to m anage dom estic politics. T h e Com m ission’s last-ditch response, nam ely to back the D utch draft, led only to the em barrassing debacle on “Black M onday” in Septem ber 19 9 1. T h is suggests n ot only that the Com m ission lacked accurate p olitical in telligen ce, but that the n egotiations w ere relatively efficient in the sense that even a m ore activist position by agenda-setters could n ot have p ro ­ m oted d e ep er agreem en t. Similarly, D elors’s proposal for CFSP, w hereby any six coun tries co u ld initiate action and the Com m ission w ould retain im portant powers o f initiative and im plem entation, was im m ediately rejected by France, Britain, and the C o u n cil Secretariat. Such proposals were at least futile and may also have ad d ed to the cost and trouble o f n egotiatio n .173 In the end Delors criti­ cized the overall result o f the political un ion negotiations, calling it “organized sch izo ph ren ia.” T h e entire process was, he recalled, “a real nightm are.” 174 T h re e excep tion s to D elo rs’s gen eral ineffectiveness deserve m ention. First, during the year follow ing the fall o f the Berlin Wall, D elors efficiently m anaged

paradoxical conclusion that Delors was an effective entrepreneur because he did not wield influence directly, instead accepting Pohl’s demands. Endo, Political, chaps. 7-9 . 172 Interviews with two Delors Committee members, 1991, 1994. Pohl argues that “the substance o f the report came from the governors.” Gros and Thygesen, European, 320. 173 Ross,Jacques, 145-148; Grant, Delors, 189-198; interviews with Delors, member o f Council sec­ retariat. Endo, who in general thinks that leadership matters, concludes that this was a straight “fail­ ure” o f leadership. Endo, Political, 8:98. 17,1 Endo, Political, 8:103; Grant, Delors, 181.

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Negotiating the Maastricht Treaty, 198 8-1991 the in tegration o f fo rm er East G erm any into the E C — a difficult issue in cludin g agricultural and finan cial issues that m igh t have led to m uch con flict am ong E C m em bers and perhaps also derailed the n egodadons. Second, the Com m is­ sion presid en t fo u gh t a successful rearguard action to d efen d the Com m ission’s u n ique righ t o f proposal, w hich a m ajority o f governm ents had favored revok­ in g in early subm inisterial m eetings, as w ell as the Com m ission’s right to with­ draw proposals from consideration. T h ird , D elors’s last-m inute intervention crafted a two-track social policy w ithin the EC. T h is chan ge probably exp an d ed co o p era tio n a bit beyon d what governm ents them selves w ould have favo red.175 T h e E uropean Parliam ent fared even worse. Each o f its five reports was eith er re d u n d a n t or futile. O f its distinctive dem ands, it achieved only weak codecision p rocedures, a m odest expansion o f Q M V and social policy, and lim itations on EM U op t-o u ts— all o f w hich can better be exp lain ed by the longstanding back­ in g o f m ajor m em ber-states. (T h e first two had been proposed in the SEA n e­ gotiation .) D irect in flu en ce appears to have b een lim ited to small matters, such as chan ges in the length o f the term , p rom oted by the Parliam ent president in a last-m inute trip to national capitals. Even this, like codecision, reflected in ter­ governm en tal relations; the Parliam ent did not, in the words o f o n e analyst, “swim against the tid e” but took advantage o f G erm an y’s dem an d for a symbolic con cession, w hich the Parliam ent was perm itted to h elp fill.175 By contrast, p ro ­ posals fo r w hich the MEPs w ere m ost enthusiastic— m any o f w hich were co n ­ tained in the D utch d raft— w ere rejected before the Parliam ent co u ld offer its view. A s we saw, the Parliam ent, favoring any integration decision over non e, had little ch o ice but to aban don its previous threats and vote in support o f the treaty, as it had d o n e five years earlier with the SEA. Finally, there was no opportu nity for m obilization o f social groups, as had o c­ cu rred with m ultinational business in the SEA negotiations. To be sure, the C o m ­ mission h elp ed publicize the advantages o f EMU through various reports, in ­ clu d in g the Padoa-Schioppa study o f 1987 and the rep ort One Market, One Money in 19 9 0 — actions one com m entary considers so im portant that it calls the e n ­ tire intergovernm entalist acco u n t o f bargaining into question. Yet no evidence has b een presen ted to suggest that governm ents o r social groups were swayed by this tech nocratic volum e. French and Com m ission support fo r EMU, like British opposition to it and G erm an insistence on “econ o m ist” preconditions, rem ained constant from 1984 onw ard, and the subsequent debates over M aastricht sug­ gest the contrary: publicity served only to call EMU into question .177 Distribution: “G erm any is in a position to im pose con dition s” T h e central focus o f the negotiations was n ot initiatives and efficiency but a ro u n d o f distributional bargain ing as intense as any in E C history. T h e re was w idespread agreem en t o n m ovem ent to EM U with a single currency, but not

175 Interview with Delors, 1996. See pp. 45 3 -4 5 6 above. 176 Ludlow, “Reshaping," 402, also 401-402, 4 1 6 -4 1 7 . 177 Dyson and Featherstone, Elusive, 307-308.

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on the e ig h t distributional issues analyzed above. A s in the EMS, the prim ary cleavage over these issues divided strong- from w eak-currency countries, the co re source o f co n flict bein g divergen t preferen ces co n cern in g the level o f antiin flation ary credibility that governm ents desired. Britain op posed the entire ar­ rangem ents, but others w ere p rep ared to m ove a h ea d — h en ce the day-to-day bargain ing bo iled down to a co n flict betw een G erm any and France. T h e o ut­ com es strongly favored Germany. B efore m oving to con sider co m p etin g explanations, we should note that my description o f the distributive outcom es as favoring G erm any challenges the views o f m ost political scientists, w ho have co n clu d ed that G erm any did poorly in the n egotiation s.178 (N early all participants see the outcom e as a situation o f p erceived jo in t gains, b ut on e in w hich m arginal concessions favored Germany.) Such analyses rest, however, on two overt errors o f inference. First, they tend to assume that the Bundesbank position was the G erm an na­ tional position. For Joseph G rieco and G eoffrey G arrett, fo r exam ple, any co m ­ prom ise o f extrem e anti-inflationary probity marks a G erm an concession. We have seen, however, that the G erm an go vern m en t’s position had long reflected a com p rom ise betw een the Bundesbank, on the one hand, and governm en t and industry, on the other; traditionally, the coalition for m onetary coop eration was m ore w illing to accep t som e relaxation o f discipline to stabilize exch an ge rates. As a w hole, G erm any favored strong anti-inflationary safeguards but n o t— w hether fo r ideological or fo r econ o m ic reasons— the extrem e position o f the Bundesbank. S eco n d , m ost analyses that co n clu d e that G erm any did badly at Maastricht exam in e an un representative sam ple o f outcom es. M ichael Baun focuses pri­ marily on political integration, w hich leads him to term K ohl and the Germ an governm en t "m ajor losers at M aastricht” even though the n et outcom e was— even in political un ion n egotiations them selves— m odesdy in the direction favored by G erm any and m on etary negotiations were resolved alm ost entirely o n G erm an terms. Wayne Sandholtz deliberately limits his otherwise insightful analysis to three areas selected because “the G erm ans did n ot get their way.” A ny n egotiation analysis that seeks to discount the bargaining power o f o n e actor based on such a criterion assumes what it sets o u t to prove. W ithout an u n d er­ standing o f context, such analyses can be m isleading. Sandholtz, fo r exam ple, treats the a greem en t to accep t 1994 as the starting date fo r the secon d stage as a m ajor G erm an concession yet ignores the quid p ro quo, nam ely the reduction o f the EMI to a sym bolic organization and the im position o f co n vergen ce crite­ ria fo r stage three. Participants, we saw above, uniform ly believed that these quid p ro quos ren d ered any G erm an concession on the starting date m eaningless. G rie co ’s theoretical analysis, like that o f Sandholtz, is initially lim ited to those elem ents in w hich the Bundesbank did n ot get its way, w hich o f course appear to confirm the neo-Realist hypothesis that “w eaker . . . partners will seek to e n ­ 178 Baun, Imperfect, 97; Grieco, “Maastricht,” 34-38; Garrett, “Politics,” 10 5-124; Dyson and Featherstone, Elusive] Sandholtz, “Monetary,” 126, 13 4-137; also Heisenberg, Mark, 177.

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Negotiating the Maastricht Treaty, 198 8-1991 sure that the rules . . . provide sufficient o p p o rtu n id es fo r them to voice their co n cern s and interests.” G rieco is quite co rrect to stress asym m etry and their ability to lo ck in a new arran gem en t throu gh EMU, yet his Realist “relative gainsseekin g” in terpretation is at pains to exp lain G erm an accep tan ce o f the agree­ m ent. L eavin g aside con jectures abou t alliance form ation against Japan and the possible G erm an b e lie f that EM U w ou ld never actually hap pen (for n eith er o f w hich is there evid en ce), G rieco speculates that perhaps G erm an y’s acceptan ce re flecte d its “n egotiating success in ensuring that EM U w ould have p rice stabil­ ity as its prin cipal g o a l.” Yet this co n ced es that the overall n egotiated outcom e m ust have b een advantageous to G erm an y— thus suggesting that jo in t gains as well as distributional con flict un derlay the M aastricht treaty. T h e app ro ach taken in this chapter, nam ely to focus on the pattern o f co n ­ cessions across the co n text o f the entire agreem en t, clearly reveals a pattern o f o utcom es favorable to Germ any. To exp lain the distribution o f concessions, outside o f the core m ove to EMU, in favor o f Germ any, three theoretical e x ­ planations m erit consideration: the in flu en ce o f supranational officials, led by Jacques Delors; the transnational activities o f an “epistem ic com m unity” o f ce n ­ tral bankers cen tered on the D elors Com m ittee and o th er E C forum s; and the in tergovern m en tal m odel, based on Nash bargaining theory, that stresses the constraints im posed on the G erm an win-set by the Bundesbank and the result­ ing n ee d fo r a quid p ro qu o fo r the G erm an concessions on EM U and a single currency. T h e p rep o n d era n ce o f evidence supports the intergovernm ental ac­ co u n t over the supranational and transnational ones. T h e role o f Com m ission and Parliam ent n eed n ot detain us long. We have al­ ready seen that there is n o reason to believe that supranational actors, o r par­ ticular governm ents, ben efited from asym m etrical access to technical, legal, and political ideas. D elors’s in terven tion in the C o m m ittee that bore his nam e was ineffective; his support fo r the ill-fated “D utch draft” was coun terproductive. He was n o m ore effective in subsequent distributive negotiations. M oreover, his fun dam en tal but futile aims th rou gh o u t were to soften the G erm an position on EM U and to scrap the political un ion discussions. D elors was particularly hostile toward the co re G erm an dem and: strict econ o m ic conditionality fo r m em ber­ ship and, therefore, a “two-speed” EMU. H e criticized E uropean finan ce m inis­ ters, w ho supported the dem an d, by noting: “I am n o lo n ger sure Britain is the b iggest m en a ce.” Leaving aside their ineffectiveness, these efforts can hardly be in voked to explain the opposite outcom e. Com m ission policy, though un der D elors’s d irect con trol m ost o f the tim e, failed to bu d ge Kohl. T h e ineffective­ ness o f D elo rs’s efforts is doubly o dd, since by the o p en in g o f the negotiations, all governm en ts quiedy accep ted the G erm an position. D elors later recalled that a m o n g the things he had least exp ected abou t the IG C was the total victory o f the G erm an p osition — suggesting that his m isreading o f the political situation ran d e e p .179 179 Ludlow, “Reshaping,” 424, also 423-425; Heisenberg, Mark, 177; “Intergovernmental Confer­ ences: Contributions by the Commission,” Bulletin of theEC (Supplement 2/91). Interview with Delors.

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A tran sn atio n al e x p lan a tio n attributes G erm an success to tactical allian ces a m o n g the variou s ce n tra l b an k ers on th e D elors C o m m ittee. T h e cen tral c o n ­ clu sio n o f D avid C a m e ro n ’s len gth y analysis o f the n egotiatio n s is the im p o r­ tan ce o f in sd tu d o n a lize d “transn ation al actors, at som e m om en ts more in flu e n ­ tial than either go v ern m e n ta l o r su p ranational a cto rs”— th o u g h w ho in flu en ced w h o m in this a cco u n t som etim es rem ains u n c le a r.180 Dyson and Featherston e assert th at “th e crea tio n o f the D elo rs C o m m ittee w ea k en ed the ability o f n a ­ tional go v ern m e n ts to a ct as ga tek ee p e rs and co n tro l the co n te n t o f early EM U p ro p o sa ls ."181 C laim s d o n o t fit n eatly in to the two ba rga in in g theories tested h e re , b u t th ey are related to the claim s o f sup ran atio n al b a rga in in g th eory a b o u t the im p o rta n ce o f p olitical e n tre p re n e u rs an d the process o f n egotiatio n rather than th e u n d e rly in g structu re o f power. Yet the sp eculative n ature o f analyses o f the D e lo rs C o m m ittee as “tran sn ation al p o litics” is suggested by the in co m p a ti­ bility o f the assertions (in ad d itio n to the assertion that D elo rs h im se lf steered the p rocess) that have b e e n m ade a b o u t w h o in flu e n ce d w hom an d why. N o n e w ithstands close scrutiny. O n e claim is th at the tran sn ation al structu re o f the co m m ittee crea te d a c o n ­ d u it th ro u g h w h ich o n e o r m o re cross-n ation al co alitio n s o r “epistem ic co m m u ­ n ities” o f ce n tra l b an k ers co o p era ted . R o lan d V aubel an d o th ers have asserted that all cen tra l ban kers a cted as an epistem ic com m u nity, co llu d in g against go v­ ern m en ts an d p u blics to assure that the final structu re w ou ld serve th eir antiin fla tio n a ry in terests— a view occasion ally h eard fro m d isgru n tled F ren ch and Italian p olicy-m akers. Similarly, W. R. Sm yser claim s th at B u n d esban k presid en t P o h l o rg a n ize d a transn ation al co a litio n o f o th e r cen tra l bankers, w hom he p ersu ad e d to a cce p t the G erm an vision o f cen tra l b a n k autonom y. In this view, the D elo rs C o m m ittee m u ltip lied the p ow er o f certain cen tral bankers, result­ in g in a m o re a u to n o m o u s, a n ti-in fla tion a ry ( “G erm an ”) E C B than w ou ld have e m e rg e d th ro u g h tradition al dip lo m atic p ro ce d u re s .182 T h e historical re co rd do es n o t co n firm this view. T ran sn atio n al tactics w ere sec­ o nd ary: P o h l m ad e n o e ffo rt to p ersu ade, becau se the o u tco m e was structurally d e te rm in e d . H e was o p en ly co n te m p tu o u s o f D elors an d m ade little e ffo rt to re a ch out. (Even i f P o h l h a d p ersu ad ed others, the resulting allian ces w ou ld have m ade litd e d iffe re n ce , since o th e r cen tral ban kers lacked the B u n d e sb a n k ’s d o ­ m estic in d e p e n d e n c e .) A cco rd in gly, n o m em b er o f the co m m ittee app ears to have a lte re d his views o r e x ch a n g e d co n cessio n s in the co urse o f the discussions. T o be sure, L eigh -P e m b erto n re fu sed to issue a p u b lic dissent, as T h a tc h e r and 180 David Cameron, “Transnational Relations and the Development o f European Economic and M onetary Union,” in Thom as Risse-Kappcn, ed., Bringing Transnational Relations Back In: Non-State Actors, Domestic Structures and International Institutions (Cambridge, 1995), 73 —74. 181 Dyson and Featherstone, Elusive, 308. 182 Roland Vaubel, “A Public Choice View o f the Delors Report,” in Vaubel and Thom as Willett, eds., The Political Economy of International Organizations: A Public Choice Approach (Boulder, Colo., 1991), 3 0 6 -3 10 ; Amy Verdun, EMU— The Product of Policy Learning and Consensus among Monetary Experts, Essex, European Policy Process Occasional Paper Series no. 7 (Colchester, 1996); Smyser, German, 273. O n epistemic communities more generally, see Peter M. Haas, “Do Regimes Matter? F.pistemic Comm unities and M editerranean Pollution Control,” International Organization 43:3 (Summer

»989). 377- 404464

Negotiating the Maastricht Treaty, 198 8-1991 L am o n t u rged him to d o, because his advisers told him that this w ould n either dissuade others n o r soften G erm an dem ands, only dim inish Bridsh influence; even virulen t cridcs o f EM U d o n ot deny this evaluation.183 Each participant u n ­ derstood that G erm any w ou ld reject outright any proposal that did n ot grant the E urofed substantial autonom y and an and-inflationary m andate— G erm an y’s position fo r over two decades. Pòhl, him self u n d er pressure from the Bundes­ ban k C om m ittee, was gen erally reco gn ized as the decisive m em ber, because he h eld im p ortan t dom estic veto pow er in a coun try that itself held critical in ter­ national veto power. T h e o utco m e was— even Póhl u n d erstoo d — p redeterm in ed, since it reflected the dom esd c pow er o f the Bundesbank and the international power o f Germany. French officials criticized the D elors Com m ittee (and subsequent negotiators) fo r ign o rin g proposals fo r im m ediate EMS reform but accep ted the outcom e, un derstan din g that the Bundesbank co u ld im pose p recondition s for any d eep er co o p eratio n . A source close to French finance m inister Bérégovoy recalled: “It was pow er politics. If the institutions were n ot created to the liking o f the Bun desban k, there w ould be n o E uropean C entral Bank. T his was m ade explicit to Bérégovoy.” 184 O th e r analysts m aintain the opposite view, nam ely that the D elors Com m ittee em pow ered a transnational alliance o f non-German central bankers, w ho p er­ suaded o r pressured Poh l to accep t EMU. H ere there is m ore truth, but the analy­ sis again overlooks the structural determ inants o f the outcom e. It is m isleading to see here an exercise o f pow er by autonom ous central bankers over Pohl. Insofar as the com m ittee constrained Pòhl, it was from the begin n in g an instru­ m en t d eliberately designed by K ohl and M itterrand as part o f a two-level strat­ egy to bolster the pow er o f the G erm an governm en t vis-à-vis the B un desban k— a fact Pòhl him self acknow ledged from the beginning. K ohl and M itterrand called the com m ittee into bein g, deliberately gave it salience by nam ing Delors head , and ch arged it with develop in g means to reach m onetary integration rather than evaluating the end. This, alon g with a fundam ental clash o f econ om ic goals, explains P ò h l’s rejection o f an anti-EM U alliance with Leigh-Pem berton. T h e m andate was the key decision, as Póhl h im self im m ediately re co gn ize d — hence his reluctance to serve. Yet even his accep tan ce was structurally constrained: his B un desban k advisers saw litde ch o ice, because if Pòhl boycotted the p ro ce ed ­ ings, his advisers told him , he w ould have been fatally w eakened in dom estic d e ­ bates and so w ould have w ielded even less in flu en ce over the outcom e. T h is o u t­ co m e was n ot the result o f transnational tactics or direct pressure from o th er central banks; it reflected the dom estic balance o f power within Germany. From begin n in g to end, the real dynam ic was betw een K ohl and the Bundesbank. In short, David C am eron ’s assertion is quite true that “G erm an and D utch central b an k officials, exercisin g their constitutional in d ep en d en ce and autonom y, were

185 Connally, Rotten, 78 -79. Walsh, Global, 153; Heisenberg, Mark, 160. Also interviewswith two mem bersof the Delors Com ­ mittee and a French minister; Gros and Thygesen, European, 320; Connolly, Rotten, 79; Howe, Conflict, 5 7 6 -5 7 7 ; Lawson, View, 907S; Thatcher, Downing, 708.

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transnational actors an d n ot simply agents o f their governm en ts,” but there is no eviden ce that this fact in flu en ced the o utco m e o f the n egotiation s.185 To exp lain the o utco m e we n eed to turn from persuasion, stressed by supra­ national and transnational explanations, to intergovernmental bargaining power. N early all the m ajor participants attested that the distribution o f benefits re­ flected the G erm an go vern m en t’s structural power, w hich in turn resulted from its possession o f a relatively attractive alternative to agreem ent. T h e G erm an go vern m en t was tightly constrained, such that the asym m etrical EMS (or p er­ haps even floatin g rates) was an acceptable alternative. As in the case o f the EMS, the constraints on the G erm an win-set stem m ed n ot from the unattractiveness o f EM U p er se, from w hich G erm an business benefited, but from the credible veto threat issued by the B undesbank, backed by p ublic op in io n — a “kinked winset,” in the language o f two-level gam es. T h e stability o f the EMS was a con cern, but even business supporters and the C D U dem onstrated a very lim ited w illing­ ness to relax “econ o m ist” p reconditions. T h e result was an advantageous bar­ gain in g position fo r Germany. O th e r governm ents based their policies o n the sam e assum ption that the transnational form o f the negotiations was epip h en o m en al, while underlying structures o f dom estic in flu en ce and in tergovernm ental power w ould dictate the outcom e. T h e head o f the D utch central bank recalled: “Precisely because G erm an y m ust m ake concessions in o rd er to create a single currency, it is in a position to im pose conditions. In my view, it is in the interest o f G erm any as well as E urope that the con dition s be chosen so as to assure a stability-oriented p o l­ icy in the future EM U .” 186 T h e F rench, correctly perceiving the constraint to lie in G erm an dom estic politics, sough t to w eaken Bundesbank opposition through concessions w ithin EMU; the British, to bolster the Bundesbank opposition by p rop osin g alternatives to EMU. T h e French did better than the British, because o f the decisive in terven tion o f the G erm an governm en t, b ut substantial con ces­ sions to G erm any were n on etheless required. T h e institutions in the final treaty, a national representative from a m ajor coun try recalled, w ere carefully crafted to m eet G erm an dem ands over a four-year period. T h e outcom e was reached “n ot by acciden t, but by d esign .” 187 T hreats o f exit and exclu sion also played an im portant role in the n egotia­ tions, as in tergovern m en tal theory predicts. Variations in the credibility o f the threat and the costs it m igh t im pose on e xclu d ed parties exp lain the exten t to w hich such threats in flu en ced the result. T h e intergovernm ental theory p re­ dicts that such threats m ust be credible and cosdy to the target. T h e target was Britain, by far the m ost recalcitrant governm en t, having en tered both m onetary and political n egotiations with an entirely negative b rie f and few positive initia­ tives. W h ere no threats o f exclusion w ere m ade, Britain enjoyed considerable in flu en ce over the outcom e; m any observers n oted that the o th er eleven gov­ 185 Cameron, “Transnational,” 77. 186 Rahmsdorf, “Währungspolitik,” 126. Also interview with two members o f the Delors Com­ mittee and a member-state ambassador. 187 Interview with permanent representative, December 1996.

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Negotiating the Maastricht Treaty, 198 8-1991 ern m en ts continually w eakened their initial position in a vain attem pt to satisfy the twelfth. T h is observation helps to exp lain the m odest results o f the polidcal un ion n egotiation s.188 T h e effectiveness o f British obstruction was constrained, however, by the cred i­ bility and costs o f exclusion, ju s t as intergovernm ental theory predicts. C on sider three exam ples: social, m onetary, and foreign policy. T h e British governm en t was very skeptical o f co o p eratio n o n social policy; M ajor credibly claim ed that Tory MPs m igh t reject the treaty on this gro u n d alone. H en ce Britain was gran ted an opt-out, w hich n ot only satisfied partisan con cerns but perm itted British business to m aintain lower social standards than m ost EU countries. In the EM U negotiations, by contrast, the British governm en t was ju st as skeptical but believed that it w ould be costly fo r the financial services industry in the City if it w ent forw ard w ithout Britain. Aware that France and G erm any were quite w illing to exclu d e Britain, M ajor did n ot seek to block agreem en t but instead sough t an o p t-o u t with an op tion to jo in later. In CFSP, finally, m any C o n tin en ­ tal governm en ts believed that a E uropean foreign o r defen se policy w ithout Britain was n o t credible (and perhaps n ot desirable); h en ce British opposition to any im portan t dim inution o f national sovereignty was successful.189 Linkages, also as in tergovern m en tal theory predicted, rem ained alm ost e n ­ tirely within, rath er than across, issues. M ost im portant, G erm any proved unable to translate its power in the m on etary negotiations into m ore than m odest, m osdy sym bolic m ovem ent toward political u n io n — though it gain ed a rem ark­ able am oun t on EMU. To be sure, G erm any achieved a m inor expansion o f com ­ p eten ces and Q M V in som e areas o f econ o m ic regulation, most o f which were already han d led u n der o th er treaty provisions. O n o th er issues, am bitious and un iquely G erm an initiatives failed. A proposal fo r Parliam ent initiative and strong co d ecisio n were w atered down to a m uch m ore lim ited form o f co d e ci­ sion, still largely at the Com m ission’s expense. France and Britain blocked am ­ bitious G erm an proposals fo r closer fo reign and in terior policies. T h e result was the three-pillar structure, in w hich these policies rem ained intergovernm ental, rather than the “single” E C structure favored by Germ any. In defen se policy, Britain blo cked all b ut rh etorical reform , though it was u n clear w hether G er­ man and French proposals w ere eith er serious o r com patible with o n e another. A ll o th er G erm an gains reflected consensus am ong the three governm ents. All agreed to lim it the E C role in education , to reject Com m ission proposals to e x ­ pand con trol over taxation, to strengthen C o u rt enforcem en t, and to block re­ form s to loosen oversight over the Com m ission (“co m ito logy”). Institutional Delegation and Pooling: Explaining “organized chaos ” M aastricht involved m ajor decisions to p o ol and delegate sovereignty. A m ong the m ost p ro m in en t w ere the creation o f an in d ep en d en t European central bank, the three-pillar design restricting the form al reach o f the C o u rt and C o m ­ 188 AE, 12/13 November 1991, and 4 December 1991; I.udlow, “Reshaping.” 189 Interview with permanent representative, prime minister.

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mission largely to econ o m ic issues, the extension o f qualified m ajority vo d n g to new areas, and d ie m odest exp ansion o f parliam entary codecision. T his pattern o f d elega u o n and p o o lin g is best exp lain ed as the result n o t o f ideological or tech n o cratic im peradves but o f the desire fo r m ore credible com m itm ents in areas w here governm ents had significant conflicts o f interest and future failure to im p lem en t o r com ply was possible. We do n ot see support fo r the predictions o f the technocratic e xp lan atio n — namely, that delegation was required to econ o m ize on the p roduction o f e x ­ p ert in form ation. Technical com plexity does n ot seem to have been linked to d elegatio n . M onetary policy was n ot so extraordinarily co m p lex as to warrant an u n p reced en ted , autonom ous, supranational institution. Indirect taxation, envi­ ro n m en tal regulation, and o th er regu latory internal m arket issues were also co m p lex, requiring great expertise, yet these rem ained m ore decentralized. It is true that dom estic experts in som e coun tries favored delegation to an in d ep en ­ d en t central bank, but this was n ot universally the case; m oreover, they favored the bank n o t in o rd er to econ o m ize on inform ation but to lock in a particular policy outcom e. T h e key dispute was n ot w hether experts or n on exp erts w ould han dle m on etary policy b ut w h ed ier autonom ous central bankers or m ore p o ­ litical finan ce m inistries, both technically com petent, w ould do so. T h e re is no evidence that the argu m en t that delegation o f autonom y to supranational ac­ tors was requ ired for co m p eten t m anagem en t played a prom in en t role. T h e central cleavage co n cern ed the level o f political con trol over the institution, not its expertise. T h e re is som ew hat stronger support fo r the predictions o f an ideological e x ­ planation fo r d elegation and p oolin g. We observe substantial variation across countries. G erm any gen erally favored the largest am ount o f delegation and p o o l­ ing in fo reign policy and in terior policy, w hereas the British governm en t favored the least— th ough these positions are also consistent with the substantive p ref­ eren ces o f the governm ents. Ideology seem s most clearly decisive in explain in g positions on Parliam entary codecision and the relative power o f the bran ches o f E C go v ern a n ce — highly sym bolic issues closely co n n ected with dem ocratic id e­ ology, in w hich the substantive con sequences o f delegation were uncertain. As had traditionally been the case, France favored a stronger C o u n cil, G erm any a stronger Parliam ent, and Britain no increase in supranational prerogatives. We observe, m oreover, co o p eratio n betw een France and G erm any to strengthen both the Parliam ent and the C o u n cil at the exp en se o f the Com m ission. D uring the M aastricht ratification debates in France and Denm ark, overt criticism o f delegatio n and p o olin g seem ed to covary with Euroskepticism . Yet n eith er tech nocratic in form ation n or ideology seems to accoun t for vari­ ation across issues and coun tries in the level o f delegation and poolin g. In par­ ticular, they offer little explan ation o f the m ost im portant cases o f delegation and p o olin g, nam ely the creation o f an autonom ous E CB and the selective e x ­ pansion o f Q M V to certain new areas respectively. H ere the evidence strongly supports the p rediction s o f the credible com m itm ents explanation. Debates over the central bank w ere co n cern ed alm ost entirely with the credibility o f its anti-inflationary com m itm ent; if anything, m ore federalist G erm an politicians 468

Negotiating the Maastricht Treaty, 198 8-1991 in the C D U favored a m odest w eakening o f that autonom y. Germ any, while sup­ portive o f exp an d ed Parliam entary prerogatives and gen eral dem ocratic co n ­ trol in o th er areas, rejected them in the all-im portant m onetary area, w here they th reaten ed to un derm in e the anti-inflationary m andate o f the central bank. T h e description o f debates leaves little d o u b t that in m onetary policy the triple institutional gu aran tee— an autonom ous E C B with an anti-inflationary m andate com p rised o f representatives o f newly autonom ous national central banks— was designed to satisfy the Bundesbank and others in G erm any co n cern ed about in flation. T h e u n p reced en ted autonom y o f the E C B am ong supranational insti­ tutions is consistent with the extrem ely high con cern about defection from its m an d ate— ju st as is the case with dom estic central banks. D om estic and in ter­ national divisions over m on etary institutions reflected efforts to lock in lo n g ­ standing substantive preferences. T h e clear focus o f the negotiations was on the establishm ent o f a credible com m itm ent sufficient to satisfy G erm an skeptics. Strongly federalist governm ents split along substantive lines: Italy, Belgium , and Spain favored greater Com m ission and C o u n cil oversight, the N etherlands and G erm an y o p posed it. A ntifederalist Britain, though opposing EMU itself, favored the creation o f a strong, autonom ous central bank. Splits over m ajority votin g also tracked substantive com m itm ents, as the cred ­ ible com m itm ents view predicts. Germ any, fo r exam p le, favored majority voting in areas such as foreign and environm ental policy, w here it w ould favor G erm an aims, b ut also offered a long list o f excep tion s in o th er areas. G overnm ents sup­ porting Q M V in environm ental and social policy represen ted richer societies with h ig h er environm ental regulations; they were careful n ot to dilute the abil­ ity o f such governm ents to provide h ig h er dom estic protection than the EC norm . T h o se that o p posed th em — Britain, Spain, and Portugal am ong th em — ten ded to be poorer, lower-standard countries. As p redicted by the credible com m itm ent explan ation , a central issue co n cern in g the delegation o f power, beside the credibility o f the com m itm ent, was the exten t o f dem ocratic control and the scope o f agency slack. T h e p ro p er role o f “u n ele cted ” central bankers becam e a m ajor co n cern o f decision-m akers, publics, and analysts. In contrast to the con ventional wisdom , w hich stresses G erm an unification, Com m ission entrep reneursh ip , and federalist sympathies, this explan ation o f the varied outcom es at M aastricht focuses prim arily on slowly evolving econ om ic interests, intergovernm ental bargaining and relative power, and the n eed to in­ stitutionalize m ore cred ible com m itm ents. T h e latter two steps o f this causal chain are particularly un problem atic. If a legitim ate debate was possible about the secon dary significance o f the Com m ission and Parliam ent in the em ergence o f the Single E uropean Act, the M aastricht Treaty represen ted a return to the p urely intergovernm ental norm o f E C decision-m aking. Similarly the logic o f p o olin g and delegation, clearly o n e o f creating credible com m itm ents, was a re­ turn to type. T h e creation o f the European C entral Bank, the m ajor act o f d e l­ egation in the n egotiation , was unam biguously aim ed at en h an cin g the cred i­ bility o f com m itm ents in circum stances w here the costs o f defection to others co u ld be very high. 469

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T h e process o f preferen ce form ation at M aastricht is m ore problem atic and, in this respect, stands o u t in com parison to the o th er fo u r m ajor decisions in EC history. To b e sure, G erm an , French, and British national p referen ces w ere stable and reflected positions h eld by all three m ajor governm ents fo r over a decade. Yet the precise balan ce o f econ o m ic and geopolitical in flu en ces (in particular, id e­ ology) rem ains m ore difficult to disentangle than in o th er cases. T h e re certainly w ere strong econ o m ic impulses: the interest o f the French governm en t in o ff­ setting asymmetries, thereby reducin g dom estic interest rates; the interest o f the G erm an governm en t in assuring exp o rt com petitiveness and increasing fiscal slack; and above all the high level o f nom inal co n vergen ce in m acro eco ­ n om ic policy. Still, it is u n clear w hether the econ o m ic benefits truly outw eighed the costs fo r any single country, o r w hether the expectations o f various gov­ ern m en ts w ere fully com patible. If the EM U turns o u t in fact to im pose tight m onetary discipline, it is un clear that it constitutes an im provem ent fo r weakercurrency countries. I f it turns o ut in fact to loosen constraints im posed by the asym m etrical EMS, as b oth France and G erm any appear to have hop ed , it is u n ­ clear that it will gready im prove the econ o m ic p erform an ce o f Germ any, though it may en co u rag e econ o m ic changes supported by exp o rt industry and a fiscally am bitious governm en t. T h e nature o f these real effects depends, m oreover, on the adaptation o f wages, prices, and governm ent spen ding in each coun try to these new constraints. In short, even if governm ents acted on the basis o f a set o f ap p aren d y com patible econ o m ic interests, there was considerable econ om ic risk involved in choosin g EMU. W h ere governm ents left key elem ents o f the bargain o p en at Maastricht, we e xp ect co n flict to con tin ue. A n d this is precisely what we observe. K ohl and G en sch er p ushed G erm an dom estic econ o m ic interests to the lim it in the in ter­ est o f a clear com m itm ent to EMU, and they w ere forced to seek furth er con ces­ sions after the treaty was signed on issues such as the nam e o f the currency, the location o f the central bank, and the nature o f budgetary controls. O ver the n ex t two years, the French governm en t pursued a single-m inded policy o f d e ­ fen d in g the franc. T h e G erm an governm en t pressured the Bundesbank to sup­ p o rt the franc, w hich it did by in terven ing at an u n p reced en ted scale and in an u n p reced en ted way, nam ely through public and intram arginal means. T h e re­ sult was un m anageable pressure on the p ound , lire, and escudo. T h e G erm an go vern m en t was unw illing to take responsibility for the com p lete collapse o f the EM S o r to p erm it the DM to revalue upward alon e throu gh a unilateral float, as France proposed, w hile the B un desban k was unw illing to let the system threaten G erm an dom estic econ o m ic stability. T h e result was an institutional arrange­ m e n t— 15 p ercen t bands— that n o lo n g er gready constrained governm ents. T h e inconclusive o utco m e o f the political un ion negotiations left unsatisfied those governm ents w hich had favored m ore intensive cooperation. T h is o u t­ co m e was n o mistake and did n ot reflect the absence o f Com m ission involve­ m ent; instead, it resulted from the lack o f intense support fo r d eep er co o p era ­ tion in any country, com bin ed with disagreem ents abou t the direction to take. T h e fun dam en tal lack o f sup port was un derscored by the outcom e o f the Intergovernm ental C o n feren ce o f 1 9 9 6 - 9 7 , w here all con ceivable issues o f p o ­

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Negotiating Oie Maastricht Treaty, 198 8-1991 litical union were recon sidered. D espite years o f careful preparation, the reform s in the T reaty o f A m sterdam w ere m in im al— a m odest increase in Parliam entary powers and grea ter institutional integration o f the third pillar, though w ithout m uch ch a n ge in decision -m akin g processes. Perhaps the m ost e n d u rin g legacy o f M aastricht was the grow ing realization that progress toward greater integration was n ot possible am on g all twelve gov­ ern m en ts w ith ou t greater concessions to n ational particularities than had p re­ viously been the case. Even before the u n exp ectedly heated debates surroun d­ in g M aastricht ratification, the Treaty legitim ated “two-track” and “flex ib le ” solutions, in w hich som e governm ents m oved forw ard o r participated, others d id not. In 1988 only M argaret T h a tch er was callin g op en ly fo r greater flexibil­ ity, w hich w ould perm it opt-outs and E C policies with less than all m em bers as full participants. Five years later, flexibility, redubbed “en h an ced co o p era tio n ,” had becom e a legitim ate policy option . T h e p eriod in w hich reflexive rhetorical sup port fo r European federal un ion am ong supporters o f integration co u ld be taken fo r gran ted was at an end. N ot only was such a goal now w idely viewed as unattainable; it was increasingly viewed as undesirable. T h is is n ot to say the E C had becom e “T h a tch erite.” To the contrary, as the E C took steps toward flex i­ bility, it was also constructing un p reced en ted ly autonom ous centralized institu­ tions, such as the ECB. T h e unresolved tension betw een these two visions o f E urope rem ains a legacy o f the M aastricht Treaty.

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European Integration in Retrospect There will never be a United States o f Europe . . . I refuse to identify myself with those who promote the disappearance o f the nation-state ... I seek instead a federation among strong nation-states. — Jacques Delors, former president o f the Commission, 1996

W ith this statem ent the most distinguished E C visionary o f the 1980s com es full circle, return in g to the view o f his predecessor, Robert Schum an, whose state­ m ent began this book. D elors’s sen um ent recognizes that E uropean integration has b een n ot a p reordain ed m ovem ent toward federal union b ut a series o f pragm atic bargains am ong national governm ents based on co n crete national interests, relative power, and carefully calculated transfers o f sovereignty. T h e persistence o f nadon al power was the bitter lesson D elors drew from his difficult exp erien ce in the M aastricht n egotiatio n .1 T his con clusion rem ains u n ch an ged if we exch an ge the perspective o f the statesman fo r that o f the scholar. T h e central argum en t o f this b o o k — the “lib­ eral in tergo vem m en talist” argu m en t— holds that European integration was a series o f rational adaptations by national leaders to constraints and o p p o rtu n i­ ties stem m ing from the evolution o f an in terd ep en d en t w orld econom y, the relative pow er o f states in the international system, and the potential fo r in ter­ national institutions to bolster the credibility o f interstate com m itm ents. T h e historical reco rd o f the five m ost salient n egotiations in EC history— those sur­ ro u n d in g the Treaty o f R om e, C o m m o n Agricultural Policy, European M onetary System, Single E uropean Act, and M aastricht Treaty on E uropean U n io n — strongly supports this con clusion. T h is final chap ter begins by sum m arizing the em pirical findings on the sources o f national preferen ces, interstate bargain­ ing outcom es, and institutional choices in the process o f E uropean integration; briefly considers the (m osdy negative) im plications for “historical institutional­ ist” exp lan ation s o f integration; then moves to im plications fo r the com parative study o f region al integration and, finally, fo r gen eral theories o f international co n flict and cooperation. 1 Interview with member o f Jacques Delors’s cabinet, October 1996.

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W h a t D r iv e s R e g io n a l In t e g r a t io n ?

T h e tripartite rationalist fram ew ork em ployed in this b o o k im plies that the co l­ lective decisions o f n ational governm ents can be analyzed by assum ing that each first form ulates national p referen ces, then engages in interstate bargaining, and finally d ecid es w h eth er to d elegate o r p o o l sovereignty in international institu­ tions. W ithin each stage, I have advanced a narrow er theoretical claim about, re ­ spectively, the p redom in an ce o f econ o m ic incentives stem m ing from rising trade and capital flows, the relative bargain ing pow er created by asymmetrical policy in te rd e p en d en ce , and the n eed for credible com m itm ents against defection from p articular agreem ents. T h e five case studies strongly and consistently sup­ p o rt these explanations. T h e m ost widely cited alternative causes— geopolitical threats, E uropean federalist ideas, tech nocratic im peratives to delegate, and in­ terven tio n by supranational political en trep ren eu rs— played a decidedly sec­ on d ary role. Each chapter has presen ted the details. H ere aggregate patterns in the historical reco rd are briefly sketched. O u r co n fid en ce in the results reported in each individual chap ter is strength en ed by their consistency over all five cases. B efore I sum m arize the data, o n e im portant caveat deserves m ention. T h e prim ary do cum en tary reco rd is far less extensive fo r the M aastricht Treaty and, th ough the p roblem is less acute, the Single European Act, than fo r the first three cases. Judgm ents abou t national p referen ce form ation may therefore be subject to revision in ligh t o f new docum en ts and personal revelations. We m ust attach a h ig h er d egree o f uncertainty to findings co n cern in g these negotiations than to those drawn from the first two and a h a lf decades o f E C history.

National Preferences: The Preeminence o f Economic Motivations T h e bulk o f the existing literature claim s that the E C was fo u n d ed prim arily to address real and perceived geopolitical threats o r to realize federalist ideas. Yet each o f the five cases confirm s that the most persistent and pow erful source o f varying n ational p referen ces co n cern in g integration over the past fo u r d e ­ cades has been econ o m ic, in particular com m ercial, interest. T his evidence sup­ ports n o t only the gen eral im portan ce o f econ o m ic incentives but the particu­ lar theories o f econ o m ic p referen ce form ation over trade and m onetary issues advanced in ch ap ter 1, w hich locates the source o f E uropean integration in the exp lo sio n o f w orld trade after W orld War II. In response to these constraints and opportu nities, governm ents ten ded to be heavily in flu en ced by the com m ercial interests o f dom estic p ro d u cer groups, interests that reflected respective posi­ tions in the global m arket. T h ese circum stances created, accordin g to the the­ ory, strong incentives to liberalize but also d ifferen ces abou t how far and in what areas to do so. We exp ect, m oreover, that purely com m ercial m otivations would be co m bin ed, particularly in the cases o f regu latory harm onization and m o n e­ tary policy, with econ o m ic m otivations involving the provision o f dom estic p u b ­ lic goods, notably regu latory p rotection and m acroecon om ic stability.

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For each m ajor issue facin g each coun try in each negotiation, I em ployed internal docum en ts, interviews, reliable m em oirs, and, w here necessary, the ju d g m en ts o f analysts to test hypotheses drawn from political econ om y and g e o ­ p olid cal theories. T h ese hypotheses con cern ed five categories o f observable im plicadons: the cross-issue and cross-nadonal distribution o f preferen ces, the tim ing o f p re fe re n ce shifts, policy consistency, the pattern o f dom estic cleavages, a n d the co n te n t o f dom estic discourse. (T hey are sum m arized in T able 1.2 ). If we lim it ourselves to G erm an, French, and Bridsh preferen ces con cernin g the m ost im portant policy involved in each agreem en t— fifteen positions in a ll— we find that in every case the p rep o n d eran ce o f evidence confirm s the im ­ p o rtan ce o f political econ o m ic m otivations over geopolitical interest o r id eol­ ogy. In seven o f fifteen cases, no hard evidence suggests that geopolitical ideas o r interests served as m ore than ex post public justifications for national positions. In the rem aining eigh t cases— G erm any and France in the Treaty o f Rom e and the 1960s, France d u rin g discussions o f the SEA, and all three countries in the M aastricht n egotiation s— the historical reco rd suggests that geopolitical ideol­ ogy may have played a secon dary o r parallel role. In only fo u r o f those eigh t cases, how ever (G erm any in the Treaty o f Rom e and the 1960s, France and G erm any in the M aastricht n egotiatio n s), is there evidence that geopolitical considerations significandy altered final agreem en ts on econ o m ic matters. A n d in only two, p erhaps three, o f these (G erm any in the Treaty o f Rom e, the 1 960s, and perhaps the M aastricht negotiations) does the p rep o n d eran ce o f evidence suggest that geo p o litical m otivations actually altered the national position. To sum m arize, in twelve (or thirteen) o u t o f fifteen core national positions, political econ o m ic con cern s app ear sufficient to explain national motivations; in all fifteen the p re­ dom in an t in flu en ce on national preferen ces was econ om ic interest. Preferences gen erally varied across issues and countries, as political econ om ic th eory predicts, rather than sim ply across countries, as geopolitical theory leads us to exp ect. W h ether we exam in e the custom s union and m onetary co o p era ­ tion o r secondary, often stillborn, policies in areas such as transport, atom ic energy, extern al tariff policy, industrial and R& D policy, or social policy, cross­ issue variation in national positions consistently m irrors com petitiveness in glo bal m arkets, m acro eco n o m ic preferen ces, and regu latory com m itm ents. T h e strongest su p po rt fo r tariffliberalizatio n , fo r exam p le, com es consistently from business in relatively com petitive countries: G erm any and Britain sought indus­ trial liberalization but were cautious about liberalizing agriculture, the French position was the reverse. Even in the SEA, regu latory com petitiveness rem ained the decisive concern: France p laced special em phasis on a reduction in regula­ tory barriers on fo od products, Britain pressed for service deregulation, and G erm an y sough t gen eral reduction in industrial trade barriers. T h e tim ing o f shif ts in preferen ces and positions offers further support fo r the p olitical econ o m ic theory. Im portant changes in the priorities, policies, and p ref­ eren ces o f national governm ents appear to have reflected shifts in the dom estic and in tern ation al econ o m ic environm ent. Exam ples include the clear im pact o f French devaluation in 1958 on business dem ands, the rapid British response to eco n o m ic exclusion from the EC, and the response to global trends toward lib­

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European Integration in Retrospect eralization o f service provision in the 1980s. Sustainable m on etary initiatives em erged in tim es o f m acro eco n o m ic co n vergen ce and dollar dep reciatio n — as was the case ju s t p rio r to each oil crisis and again in the late 1980s— but the e f­ fects o f the two w ere difficult to separate. By contrast, im portant geopolitical events— the Suez Crisis o f 19 5 6 , the fo u n d in g o f the French Fifth R epublic in 1958, the collapse o f the Fouchet Plan negotiations in 1962, the A nglo-A m erican a greem en t at Nassau in 1963, the aban do n m en t o f the U.S. proposal fo r a m ulti­ lateral fo rce shortly thereafter, the launching o f O stpolitik in the late 1960s, the rise and fall o f déten te with the Soviet U nion in the 1970s, and G erm an un i­ fication in the 1980s— do n ot seem to have led to exp ected shifts in national p referen ces co n cern in g the EC. E C p olicies w ere at least as consistent with positions in o th er international eco n o m ic forum s. French, British, and G erm an policies on trade, agriculture, m oney, and regulation w ithin the E C w ere in m ost cases consistent with their unilateral, bilateral, and glo bal m ultilateral policies with regard to these sam e is­ sues. H en ce the Single E uropean A ct cam e into bein g only after considerable un i­ lateral liberalization, bilateral Franco-G erm an discussions, the regional S ch en ­ g e n A greem en t, and negotiation s in the G A T T T okyo R ound on n on tariff barriers. G erm any lau n ch ed a m on etary initiative in the G -7 sim ultaneously with advocating EMS; France did the sam e w hen launching EMU. O n ly o n e im ­ portan t excep tio n exists: G erm an y’s aggressive liberalism in G A T T tariff n eg o ti­ ations o f the 1950s and 1960s and its protectionism co n cern in g agriculture were n o t m irrored precisely in its position toward the E C custom s un ion, though in the e n d G erm an y m anaged to achieve sim ilar goals in both organizations. N ational n egotiatin g tactics— the m ajor dem ands and coun terdem an ds— ten d ed to be econ o m ic in nature. M onetary n egotiations focused consistently on w hether govern m en t policies had already co n verged m acroeconom ically and the exte n t to w hich cred ito r and d eb to r governm ents w ould be o bliged to co n verge further. G eop olitical con cern s w ere consistently sacrificed to econ om ic interests, as, fo r exam p le, w hen Britain and Gaullist France repeatedly accepted federal institutions to achieve their econ o m ic objectives. By contrast, there were few er attem pts to m ake econ o m ic concessions in o rd er to achieve exp licit g e o ­ political objectives. It is particularly striking that n either de G aulle n or A d en au er p rop osed anything o f the kind. W h ere econ o m ic and geopolitical factors cam e directly into co n flict— as in A d en a u er’s priority on atom ic energy coop eration, de G au lle ’s desire fo r in tergovern m en tal institutions, W illy B ran dt’s proposal in the early 1 970s fo r a m on etary fund, and som e symbolic initiatives by G eorges P o m p id o u — econ o m ic im peratives ten ded to win out. British prim e ministers rep eatedly threaten ed geopolitically self-destructive actions, usually involving the British com m itm ent to N A TO , in an effort to extract econ o m ic concessions from their C on tin en tal counterparts. Patterns o f dom estic cleavages and salient con cern s in dom estic deliberations provide fu rth er support fo r the eco n o m ic theory. Cleavages form ed consistendy alon g econ o m ic lines, and salient argum ents ten ded to be econ om ic, particularly in co n fiden tial discussions. O n n ot a single m ajor issue did governm ents take a position op en ly o p posed by a m ajor p ea k industrial, financial, o r agricultural in-

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tcrest gro u p .2 Business consistently split accordin g to the relative com petitive­ ness o f sectors and firms. By the dm e o f the Treaty o f Rom e negotiations and consistently thereafter, by contrast, debates over controversial political-m ilitary issues such as the E uropean D efense Com m unity, G erm an N A T O m em bership, the repatriation o f the Saar, rapid G erm an reunification, and the French n u­ clear p ro gram w ere resolved; m any argued that E uropean integration no lon ger had decisive geo p o litical im plications. T his b e lie f un blocked ideolo gical o p p o ­ sidon to in tegration that had form erly united French Gaullists, G erm an Social D em ocrats, and British Conservatives. E con om ic con siderations— the p rom o­ tion o f industrial m odernization in France, exp o rt success in Germ any, and the inevitable shift from Com m onw ealth to C on tinental trade in Britain— co n tin ­ u ed to be the m ost im portant determ in ant o f the positions o f key dom estic groups o n integration through the 1960s. In m onetary negotiations from the EMS to EM U, dom estic coalitions similarly form ed aroun d econ o m ic considerations: the econ o m ic dem ands o f business groups, the con cerns o f central banks, and the m acro eco n o m ic priorities o f governin g political parties. In excep tio n al cases geopolitical m otivations appear to have played an im ­ p ortan t role: A d en a u er’s p articular tendency to favor France, de G au lle ’s views o n supranational institutions, T h a tc h e r’s opposition to British participation in the EMS. Even here the con cerns o f econ om ic interest group s placed tight constraints o n national policy. R epeatedly we see leaders privileging econ om ic over geopolitical concerns: de G aulle co n sidered “agricultural m odernization” his m ost im portan t E uropean goal; M acm illan overcam e Foreign O ffice o b jec­ tions with the argu m en t that Britain “lives and dies by exp orts”; A d en au er was unable to im pose Euratom on the recalcitrant G erm an nuclear industry. In the 1970s, little evidence suggests that Schm idt o r Giscard was thinking in g e o ­ political terms w hen he prop osed m on etary integration, n o r that European leaders w ere prim arily co n cern ed with geopolitics durin g the reform s o f the 1980s. T h e reco rd does n o t support the n otion that the m ove to EMU, which was decisively u n d er way by late 1988, was bolstered in any im portant way by G erm an unification. T h e relative pow er o f p ro d u cer group s vis-à-vis m ore gen eral econ om ic c o n ­ cerns varied across policies with the p referen ce intensity and power o f p ro d u cer groups. E C policy was, in this regard, a continuation o f dom estic politics by d if­ feren t m eans. W here p roducers w ere particularly strong and governm ents had traditionally b een fo rced to provide subsidies, governm ents were fo rced to p ro ­ vide even fo r weak producers. W h ere producers w ere weaker, governm ents could fo rce m ore econ o m ic adjustm ent up on them . T h e strongest w ere consistendy farm ers, whose postwar d om in an ce is evident in their success, even before the EC, in extractin g unilateral dom estic subsidies in every country. Even relatively u n ­ com petitive producers were well served. Producer views were slightly less d o m i­ 2 One case is particularly difficult to interpret, namely that o f Germany during the 1960s. Farm groups opposed the lowering o f German wheat prices, yet the side-payment— including higher prices on dairy products, direct subsidies, export opportunities, and Monetary Compensation Accounts a few years later— more than offset this disadvantage. Surely this cannot be seen as a defeat for German farmers.

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European Integration in Retrospect n an t in industrial tariff liberalization, w here governm ents played m ore and less com petitive p roducers o ff against o n e another. W hen regulatory and n on tariff barriers cam e o n to the agen da, significant regulatory con cerns balanced p ro ­ d u cer in flu en ce. We observe relatively wealthy countries d efen d in g high stan­ dards th rou gh harm on ization and safeguards, w hereas p o o rer countries, and in this regard Britain was typical, sought m ore un con dition al liberalization. Finally, in m o n etary negotiation s over the EMS and the EMU, p ro d u cer groups were balan ced by strong national m acroecon om ic ideas and institutions. H ence the relative positions o f strong- and w eak-currency countries, w hich incorporated both com m ercial con cerns and the views o f governm ents and central banks, proved critical in shaping national preferences. Yet we should n ot n eglect geopolitical interests and ideas altogether. O ver the past forty years their im pact on E uropean integration, though clearly secondary, has n on eth eless been significant. If the fifty-year postwar boom in trade and in­ vestm ent am on g industrialized nations ren dered a m easure o f trade liberaliza­ tion, regu latory harm onization, and m on etary stabilization inevitable, it is n o n e ­ theless likely that the E C w ould have evolved differendy in the absence o f a parallel set o f geopolitical p referen ces fo r and against E uropean integration. T h e likely o utco m e absent the im pact o f geopolitical con cerns would have been a trade arran gem en t closer to the free trade area repeatedly p roposed by Brit­ ain, backed by a series o f bilateral and global agreem ents on m ultilateral trade and investm ent. Such an arran gem en t w ould likely have enticed Britain to par­ ticipate and, as a result, w ould have p erm itted — as the French always fea re d — o nly ad h o c bilateral arrangem ents fo r agriculture. T his alternative was favored by G erm an business group s and by Ludw ig Erhard, first as econ om ics m inister and then as chan cellor. A n FTA w ould likely have evolved toward consideration o f N TBs, as did the G A T T and various E uropean standards bodies durin g the 1970s and 1980s; toward reduction o f custom s form alities, as did the ad hoc S ch en gen arran gem en t b efo re the SEA; and toward service liberalization, as reflected in the unilateral policies o f nearly all E uropean governm ents, w hether inside o r outside the EC. Yet such p o licies— co n ducted on a bilateral, unilateral, o r “flexible ” basis, as occu rred am ong n on -E C E uropean coun tries— w ould likely have rem ained un even , u n coordin ated, and decentralized. Similarly, alth ough m on etary co o p eratio n alon g the lines o f the EMS would have been a likely re ­ sponse to the collapse o f B retton W oods and policy co n vergen ce after the two oil shocks, it is difficult to im agine a m ore ad hoc arran gem en t evolving in the direction o f EM U or arranging the sort o f financial side-paym ents required to in tegrate coun tries such as Spain, Portugal, and G reece into Europe. We can learn m ore ab ou t the role o f geopolitical con cerns by exam in in g the pattern o f national p referen ces across five cases. First, as the political econ om ic theory itself predicts, geopolitical factors consistendy ten ded to m atter most w here the costs and benefits o f co o p eratio n w ere uncertain, balanced, o r weak. A d en au er exp lo ited fo r geopolitical purposes the support o f G erm an business fo r both a free trade area and a custom s un ion, w hereas he was unable to over­ co m e the o u trig h t opposition o f business to atom ic energy coop eration. De G aulle p ursu ed his geopolitical goals within the constraints set by the econ om ic

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dem an ds o f p ro d u c er groups, b ut w here the two clash ed— as in the “em pty ch a ir” crisis, the creation o f supranational institutions fo r agriculture, and the Fouchet P la n — econ o m ic con cern s dom in ated.3 K ohl was able to achieve EMU, in large p art a geopolitical goal, only by w orking within constraints set by the com p rom ise betw een business and the Bundesbank. G en eral uncertainty about the co n seq u en ces o f EM U may also have assisted him , like M itterrand, in m a­ n eu verin g toward Maastricht. G eop olitical considerations ten ded to be im p or­ tant w here issues had no im m ediate econ o m ic im pact, as in foreign policy co ­ ord in atio n and in purely institutional con cerns, such as the role o f the European Parliam ent. In such cases both theories rightly p redict the predom inan ce o f co n cern s ab ou t security and sovereignty. Second, it appears that significant geopolitical factors w ere m ore ideational than objective and often co n n ected with prestigious national leaders. T h e historical record m ore strongly supports the “liberal constructivist” variant o f geo p o litical theory (the fourth p resen ted in chapter 1) than those gro u n d ed in m ore objective, Realist p ow er-balancing or in collective security. To be sure, threats from the Soviet U n ion and G erm any lurked in the backgroun d, p articu­ larly in early E C history. T h e y did not, however, gen erate overw helm ing pres­ sure fo r integration. Strong geopolitical support o r opposition to E uropean in­ tegration ten ded to reflect instead— as Stanley H offm ann and others have long m ain tain ed — distinctive ideological interpretations o f objective circum stances em an atin g from a dom estic minority. A d en a u er’s pro-French con cep tion o f G er­ m an alliance policy, de G au lle ’s vision o f an autonom ous E urope, T h a tc h er’s “ro o t and b ra n ch ” opposition to European federalism , and K ohl and M itter­ ra n d ’s equally extrem e support fo r this goal were all rather idiosyncratic m in or­ ity positions. In each case there w ere n um erous possible responses to objective threats, and o f those responses E uropean integration was n either the m ost o b ­ vious nor, often , the m ost popular. T h ird , and perhaps m ost striking, G erm any accounts fo r all three cases in w hich geo p o lid ca l factors app ear to have actually in flu en ced core national p re f­ erences: G erm an p referen ce form ation in the Treaty o f Rom e, the 1960s, and the M aastricht negotiation . T h is observation, com bin ed with the findin g that geo p o litical considerations tend to be m ediated by ideology, suggests that post­ war G erm an y’s “sem isovereign” status, in particular the postwar com m itm ent o f the G erm an p ublic and political elite to m ultilateralism , played a significant if secon dary role in shaping the E C we know today.4 O n balan ce, however, econ o m ic interests clearly rem ained dom inant. L o o k ­ in g back over forty years, o n e is struck by the in crem en tal nature o f shifts in the relative positions o f differen t states, despite the entry and exit o f governm ents with radically d ifferen t ideologies. A gainst a backgroun d o f slowly deep en in g co m m itm en t to integration, the relative positions o f Britain, France, and Ger9 For a more detailed argument, see Andrew Moravcsik, “Prudence, Audacity, Seduction: De Gaulle and Europe Reconsidered,” Harvard Center for European Studies Working Paper (Cambridge, Mass.,

1998).

* For a defense o f this position, see Peter Katzenstein, “United Germany in an Integrating Europe,” in Katzenstein, ed., Tamed Power: German') in Europe (Ithaca, N.Y., 1997), 1-48.

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European Integration in Retrospect many on issues such as agricultural liberalization, safeguards on internal tariff reductions, G A T T negotiations, and the application o f com petition policy have rem ained relatively constant— a point I shall return to. T h e steady deepening o f econ om ic in terdepen den ce am ong European governm ents seems to offer a ready explanation, whereas objective geopolitical motivations would lead us to exp ect some long-term decline in support for integration as colonial concerns, the Germ an m enace, the internal com m unist challenge, and lastly the Soviet threat receded.5

Interstate Bargaining: Interdependence and Power T h e second stage in the rationalist m odel o f international cooperation is in­ terstate bargaining. Here the central question is: W hen European governments with diverse national preferences bargain over treaty-amending reforms, what determ ines the efficiency and distributional consequences o f the agreem ents they reach? This book has tested intergovernm ental and supranational bargain­ ing theories. T h e first treats inform ation and ideas as plentiful and predicts effi­ cient negotiations with distributional bargaining shaped by asymmetrical inter­ dependen ce. T h e second assumes that supranational political entrepreneurs enjoy privileged access to scarce inform ation and ideas, which they exploit to set agendas, m ediate, and m obilize supporters, thereby improving efficiency and altering the distributional outcom e o f negotiations. T h e theories were tested by exam ining three types o f observable im plications— the distribution o f in­ form ation, the perform ance o f entrepreneurial tasks, and patterns in the effi­ ciency and distributional outcom es o f negotiations. (These are summarized in Table 1.3.) T h e historical record consistently confirm s intergovernm ental theory. Infor­ mation appears to have been plentiful, with governm ents better inform ed than supranational actors. Supranational actors appear to have lacked all the com ­ parative advantages that m ight make for successful supranational entrepre­ neurship: m ore technical expertise, a reputation for neutrality, superior political skill and vision, greater legitimacy, consistently accurate political intelligence. T hough they consistently acted as policy initiators, mediators, and mobilizers, Com m ission officials and Parliamentarians increased the efficiency o f only one agreem ent, the Single European Act; they had no im pact on the distribution o f gains. Efficiency was assured by active governmental entrepreneurship. Distri­ butional outcom es, far from favoring the Commission and Parliament, tended to reflect asymmetrical interdependence: those governments that most strongly favored the core o f each agreem ent tended to make concessions to recalcitrant governm ents on the m argin in order to achieve it. Inform ation and ideas, as intergovernm ental bargaining theory predicts, w ere generally plentiful. T hey were widely available and symmetrically distrib­ 5 Only in the case o f traditional neutrals may geopolitical factors have played an important role, but even here the evidence is at best ambiguous. Sieglinde Gstohl, “Reluctant Europeans: Sweden, Norway, and Switzerland in the Process o f European Integration (1950 -1995), PhD. thesis, University of Geneva (1998).

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uted am ong states. Sup ran ad on al officials did not, in gen eral, possess superior inform ation o r ideas. O fte n representatives o f the m ost interested national gov­ ern m en ts w ere better in form ed. Technically, we saw that the Com m ission re­ m ained relian t on n ational officials, particularly in co m p lex areas such as the C A P and m on etary policy; som etim es the Com m ission sim ply co u ld n ot (or was n ot p erm itted to) follow technical negotiations. T h e political inform ation and ju d g m e n t o f Com m ission and Parliam ent officials w ere even less reliable. Supra­ n ad o n al officials tended to ign ore political constraints and ren d er overoptim istic ju d g m en ts ab ou t the political feasibility o f their p referred options. T h is was true from the start. Ernst Haas sees 1956 as the year w hen “M on n et’s doctrin e o f a strong, u n ited E urope . . . resting on a large com m on m arket cam e into its ow n.” 6 T h e truth was precisely the opposite: M on net sought to persuade Konrad A d en au er and others to reject the custom s union in favor o f the creation o f Euratom . It w ould be the sam e over the com in g years. H allstein sough t to pres­ sure de G aulle to accep t greater centralization o f Com m ission con trol, and D e­ lors sought to secure a m ore pro-French and federalist result in the M aastricht negotiations. Both efforts w ere futile and dem onstrated a rem arkable lack o f p o ­ litical ju d g m en t. Interested m em ber governm en ts o r private individuals, n ot supranational o f­ ficials, initiated and m ediated m ajor E C negotiations. G overnm ents and private groups typically subm itted dozens, som etim es hundreds, o f proposals. W hen e x ­ isting initiatives w ere unsatisfactory to a governm ent, it typically offered alter­ natives, in som e cases subm itting entire draft treaties. T h e bias, if any, in the sup­ ply o f proposals con sidered by governm ents was in favor o f political viability, as in tergovern m en tal theory predicts, n ot in favor o f the vision o f supranational actors. Proposals that app ear to have been prop osed by international actors w ere actually m anaged b eh in d the scenes by m ajor governm ents through classi­ cal diplom atic m eans, as in the case o f the Spaak Report, the design o f the CAP, Sch m idt and G iscard’s EM S proposal, and the D elors R eport on EMU. M ore typical are situations in w hich too m any proposals must be whittled down to one. Lest o n e co n clu d e that this w hittling down itself required a third-party m edi­ ator, the M aastricht n egotiations over political un ion provide a particularly sat­ isfying test. T h e Com m ission stayed o u t o f the negotiations, turning over en tre­ preneurial fun ction s entirely to the rotating national presidency— held then by tiny L u xem bourg, w hich was backed by few er than a dozen officials drawn from the m ore in tergovern m en tal EC C o u n cil secretariat. T h e L uxem bourgeois swiftly sorted throu gh hu ndreds o f available national proposals and m anaged the n egotiation s using a single negotiatin g text. In this negotiation , as well as others, critical bargains were reach ed by c h ie f executives (and, less often, ministers and diplom atic representatives), un m ediated by third parties. T h e excep tion s are few and scattered. W here m ediators were em ployed, they ten ded to be third gov­ ernm ents, as in the case o f Maastricht. T h is finding, consistent with at least one recen t com parative study o f m ultilateral negotiations, suggests that transaction 6 Ernst B. Haas, The Uniting of Europe: Political, Social and Economic Forets, 1950—1957 (Stanford. Calif., 1958), 299, 317.

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European Integration in Retrospect costs are low relative to th e stakes fo r a n d capabilities o f even the sm allest E C m em b er-sta te.7 C ross-case co m p ariso n casts an u n favo ra b le ligh t o n certain w idesp read ex post claim s c o n c e r n in g the p o w e rfu l im p act o f e n trep ren eu rs. J acqu es D elors, fo r e x ­ a m p le, is o fte n cre d ite d w ith decisively e x p e d itin g th e single m ark et p ro ject by settin g a cle a r d e a d lin e fo r its co m p letio n (“E u ro p e 19 9 2 ”)— even th o u g h h e was n o t th e o n ly o n e to p ro p o se a d e ad lin e. T h e im p o rtan ce o f this tactic, m uch h e ra ld e d by jo u rn a lists at th e tim e, seem s p lausible until we co m p are the 1992 in itiative w ith the C o m m issio n e r’s m any e arlie r E C p rop osals that w ere in effec­ tive d esp ite th e use o f dates. T w o e arlie r C om m ission sch ed u les fo r the rem oval o f n o n ta riff barriers w ere ig n o re d . T h e W e rn er Plan fo r EM U by 1980 failed e n ­ tirely. O th e r o u tco m e s w ere a ch iev ed m ore q u ick ly than e x p ecte d . T h e custom s u n io n , initially sch e d u le d fo r 19 7 0 , was c o m p le te d in 1968 , th o u g h the C o m m is­ sion h a d p ro p o se d even e a rlie r dates in the in terim . H e n ce the lesson that d e a d ­ lin es are p ro d u ctiv e was far fro m obvious, even to o th e r E C en trep ren eu rs. N o n e o th e r than M o n n e t b e lie ve d the op posite: “E verythin g takes lo n g e r than o n e e x p e c ts — w h ich is w hy o n e m ust n ev er set tim e-lim its fo r su cce ed in g .” 8 Sim ilarly, th e rep u tatio n o f M o n n e t, H allstein, and D elo rs as visionary p olitical e n tre p re n e u rs is tarn ish ed by the fact that each was associated w ith early success, th en failu re an d d is a p p o in tm e n t— M o n n e t w ith the E D C an d E C , H allstein in the “e m p ty c h a ir” crisis, a n d D elo rs at M aastricht. Successful o u tco m e s create a re p u tatio n fo r g rea t e n tre p re n e u rsh ip as m u ch as the reverse, an d even su p ra­ n atio n a l b a rg a in in g theorists are led to w o n d e r w h eth e r C om m ission ers have an “asym m etrical in ce n tiv e ” to o ve rrea ch .9 T h e efficie n cy o f ad h o c m e d iatio n reflects in p art the fact that g o v ern ­ m ents on ly rarely can disgu ise the intensity o f th eir p re fe re n ces an d the value o f altern atives to a gre em en t. N e go tiated a greem en ts a p p ea r to be efficien t, w h e th e r o r n o t su p ran atio n al actors in te rv en ed , becau se p re fe re n ces w ere trans­ p aren t. T ru e , th e re w ere som e cases in w h ich neither do m estic n o r fo re ig n lea d ­ ers w ere sure a b o u t th e n atu re o f do m estic con strain ts in a p articu lar country. B u t o n ly d e G a u lle ’s F ran ce was a case w h ere th ere app ears to have b e en sig­ n ifica n t d iv e rg e n ce b etw een d o m e sd c and fo re ig n p ercep tio n s. G iven d e G a u lle ’s e x tra o rd in a ry p erso n ality an d the extre m e ly cen tra lized d ecisio n -m akin g a p p a ­

7 Fen Osier Hampson, assisted by Michael Hart, Multilateral Negotiations: Isssons from Arms Control, Trade and the Environment (Baltimore, Md., 1995). More generally, Donald Chisholm argues that within “multiorganizational systems"— o f which the EC is surely a prime interstate exam ple— “where formal organizational arrangements are absent, insufficient or inappropriate for providing the req­ uisite coordination, informal adaptations develop [which] may be quite stable and effective, more so perhaps than formal hierarchical arrangements. Furthermore, because informal organization per­ mits the continued existence o f formally autonomous organizations in the face o f mutual interde­ pendence, it can achieve other values, such as reliability, flexibility and representativeness, that would otherwise be precluded or substantially diminished under formal arrangements.” See Chisholm, Co­ ordination without Hierarchy: Informal Structures in Multiorganizational Systems (Berkeley, 1989), 17-18 . 8 Martin Holland, “Jean Monnet and the Federal Functionalist Approach to European Union," in Philom ena Murray and Paul B. Rich, eds., Visions of European Unity (Boulder, Colo., 1994), 93. 9 G eorge Ross,Jacques Delors and European Integration (Oxford, 1995), 13 -14 ; Ken Endo, "Political Leadership in the European Community: Th e Role o f the Commission Presidency under Jacques Delors, 19 8 5 -19 9 5 ," m imeo (St. Anthony’s College, O xford University, 1995).

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ratus o f the early Fifth R epublic, we m ight thin k o f this as an excep tion that proves the rule. Far from b ein g viewed as neutral, Com m ission and Parliam ent officials w ere treated as interested pardes. O th e r governm ents were p referred as m ediators in part because they w ere seen as less biased (or, if biased, perhaps m ore reliably s o ). N e g o d a d o n s ten ded, therefore, to be Pareto-efficient, at least at the interstate level. A lth o u gh m any outcom es disappointed federalists, I can identify n ot even o n e single case in E C history in w hich the interstate bargaining outcom e was, given the p referen ces across outcom es actually h eld by national governm ents, Pareto-suboptim al. I m easured efficiency both by exam in in g ex post criticisms and by recon structing possible agreem ents, given data about the p referen ces o f gov­ ernm ents.) Similarly, in no m ajor cases did national preferen ces app ear to co n ­ verge toward an agreem en t fo r w hich no appropriate initiative o r com prom ise existed. N o gains app ear to have b een “left on the table.” Inform ational o r ideational asym m etries bein g absent, it is unsurprising that, with a few m in or excep tion s, supranational actors gen erally failed to in fluen ce the distribution o f gains. W h ere Com m ission proposals were un ique and in n o ­ vative— exam ples in clude Sicco M ansholt’s proposals for agriculture and Walter H allstein’s proposals fo r institutional changes in the 1960s, Roy Jen kin s’s p ro ­ posals fo r financial redistribution in co n n ection with the EMS, and D elors’s proposals at M aastricht fo r political con trol o f m on etary policy and a m ore fe d ­ eralist political u n io n — they w ere politely ign ored. G enerally only redundant proposals enjoyed success. T h e Parliam ent’s involvem ent in such negotiations, particularly o n its own behalf, was uniform ly unsuccessful excep t in very m inor matters. T h e in term ittent advantages it gain ed were the result o f pressure from federalist governm ents. D istributional outcom es m irrored the relative bargaining power o f go vern ­ m ents, un derstood as the pattern o f issue-specific asymmetrical in terd ep en ­ d en ce. G overnm ents w ere consistently constrained by credible threats to veto, w hich reflected the dom estic ratifiability o f agreem ents. T his was the prim ary co n cern particularly o f less fo rth co m in g governm ents, such as those o f Britain and France in the 1950s; Britain and G erm any in the 1970s and in the 1990s; even, to som e extent, d e G a u lle ’s France in the 1960s. W ithin these constraints, governm ents that p erceived them selves as benefitin g m ost (in dom estic p oliti­ cal terms) from any co re a greem en t— as G erm any ben efited from industrial tariff reduction s in the 1950s, France from agricultural liberalization in the 1960s, Britain from the SEA in the 1980s, and France from the EMS and EMU agreem en ts— proved most willing to com prom ise in o rd er to achieve it. Analysis was com p licated slightly in the EM S and EM U cases by the “kin ked ” shape o f the G erm an win-set, but there is co m p ellin g evidence that participants perceived the G erm an win-set as the bin din g constraint on bargaining. G overnm ents also em ployed exp licit threats o f exit and exclusion , which al­ tered the negotiated o utco m e to the exten t those threats were credible and cosdy. Britain’s structural vulnerability to exclusion offers o n e consistent e x ­ am ple. H arold M acm illan in the initial accession negotiations, Jam es Callaghan in the EM S negotiations, M argaret T h a tch er in the SEA negotiations, and John 482

European Integration in Introspect M ajor in the M aastricht negotiation s w ere all explicitly threaten ed with exclu ­ sion. A ll fo u r prim e ministers respond by seeking to block agreem en t am ong the others, often by linking the n egotiations to security threats— withdrawal o f troops from E urope, or an A nglo-Fren ch n uclear alliance. W ie n this tactic failed, they com prom ised. T h e com prom ises they reach ed reflected, as in ter­ governm en tal theory predicts, the perceived relative costs and benefits o f e x ­ clusion. In an area such as the M aastricht social p rotocol, the British govern ­ m ent p erceived advantages from nonparticipaU on and w elcom ed exclusion. In areas such as tariff and m on etary policy, it p erceived disadvantages in exclusion and sough t to com prom ise. Explicit tactical linkages (“package deals”) w ere used sparingly, mostly to bal­ ance o ut benefits rather than to im pose losses— ju st as intergovernm ental th e­ o ry predicts. Efforts to link issues involving significant dom estic con cerns eith er failed o utrigh t (e.g., French efforts to link the EM S to agriculture o r G erm an ef­ forts to link EM U to p olid cal un ion) or, if initially accepted, ten ded to be ren e­ gotiated (e.g., French efforts to im pose the C A P on Germ any, w hich was possible only with h igh prices initially o p posed by F ra n ce). Linkages involving m ajor losses for a m ajor coun try app ear to have been possible only within particular sectors o f the e con o m y (e.g., am ong industrialists) because m ajor n et losers were u n ­ organ ized o r u n rep resen ted — as in the case o f the costs fo r the C A P born by third -coun try producers, consum ers, and taxpayers. T h e re exists o n e m ajor, if only partial, excep tion to the dismal record o f supranational en trep ren eu rs.10 T h e W hite Paper drafted by A rthur C ockfield, w orking with D elors, in p reparation for the SEA is the only case I fo u n d o f a suc­ cessful m ajor supranational initiative that was not first p roposed in a sim ilar form by a m em ber-state. In addition, betw een 1979 and 1985, Parliam ent and Com m ission officials en co u rag ed the m obilization o f m ultinational firms into a co h e re n t political force; those firm s becam e strong supporters o f the SEA. Initiation and m obilization by supranational officials may well have increased the efficiency o f die SEA agreem en t by o p en in g up the possibility o f realizing com m on interests in N T B liberalization, though they did n ot alter distributional outcom es. D elo rs’s own acco u n t clearly recognizes m em ber-state opposition to any o th er proposals; he shelved his p referred proposals fo r m onetary and insti­ tutional reform and becam e a late con vert to trade liberalization. Parliam entary dem ands fo r fun dam en tal institutional reform were never taken seriously, but its dem ands fo r internal m arket reform were. T h e bulk o f the recent literature on EC n egotiations focuses on the SEA alone and asks why the Com m ission and Parliam ent w ere so powerful. A com parative

10 There are also some minor exceptions. Examples include the development o f high-technology programs in the early 1980s, though these programs, due to their unique adherence to juste retour principles, did not move beyond reconfiguring existing national funds, and the eleven country “optin” on social policy at Maastricht, which may have slightly increased the strength o f social policy over what otherwise the Mediterranean countries and, perhaps in the future, Britain would have accepted. O n these see Wayne Sandholtz, High-Tech Europe: The Politics of International Cooperation (Berkeley, 1992); Paul Pierson, “The Path to European Union: An 1Iistorical Institutionalist Account,” Compara­ tive Political Studies 29:2 (April 1996), 123-164.

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perspective reverses the question: W hy is the SE A the only m ajor exam p le in E C history in w hich this is the case? T h is form ulation perm its us to p ropose a m ore precise reason fo r excep tio n al entrep ren eurial in flu en ce.11 R ecall that C om m is­ sioners, Parliam entarians, and ju d g e s m ust enjoy p rivileged access to inform adon and ideas critical fo r efficien t negotiation , w hich in turn perm its them to act as in fo rm al initiators, m ediators, o r m obilizers. A s we have seen, n on e o f the co n ven tio n al reasons cited in the literature on integration, n egotiation analysis, in tern ation al law, and international regim es exp lain why supranational officials may possess such privileged access. Com m issioners, Parliam entarians, an d ju d ges w ere n ot particularly neutral and trustworthy m ediators o f distributive con flict, m ore legitim ate representatives o f the po pu lar will, m ore creative politicians, or m o re exp ert technocrats. N on e o f these com m on ly cited reasons explains the SE A excep tion . T h e re is, however, g o o d reason to believe that supranational en trep reneurs may enjoy a com parative advantage in redressing weaknesses in domestic bar­ gain in g, w here the num ber and size o f actors, the transparency o f their p refer­ ences, the risk each bears, and nature o f p roperty rights suggests that bargaining failures should be m ore likely. T h eo ries o f com parative public policy suggest three con dition s u n d er w hich such entrep ren eursh ip is likely to be effective: w here potentially pow erful dom estic interests rem ain un organ ized and th ere­ fo re “latent,” w here organ ized group s lack access to dom estic officials w illing and able to represen t their interests, and w here the aggregation o f interests within do m esd c political systems (dom estic bureaucracies, parties, or parliam ents) fails to b rin g viable proposals to the attention o f national decision-m akers. A ce n ­ tralized, autonom ous, and co h e re n t supranational bureaucracy dedicated to the single p urpose o f p rom otin g in tegration m igh t be able to overcom e such difficulties by virtue o f its in d ep en d en ce from special interests, its ability to c o ­ ordin ate disparate policy areas, and its con tin uous access to interest group s from m ore than o n e coun try.12 T his a cco u n t may exp lain the singular in flu en ce o f Com m ission and Parlia­ m ent in the SEA negotiations. A lo n e am ong m ajor E C bargains, the SEA linked a large n um ber o f issues with n o substantive o r bureaucratic co n n ection am ong them , each o f w hich was relatively novel and app ealed prim arily to an un o rga­ nized transnational constituency. E C m em ber governm ents had lo n g negotiated 11 It also casts some light on the underlying reasons why the results reported here conflict with nearly all previous work on supranational influence in the EC. Previous studies tend disproportion­ ately to investigate those cases in which supranational entrepreneurs were active and the outcomes were positive, then simply examine strategies that supranational entrepreneurs used, assuming their efficacy. There are few studies o f overt failure. For every examination o f the failure o f the series of Mansholt Plans for CAP reform, there are dozens on Delors and Cockfield’s initiative in the SEA ne­ gotiations. Moreover, studies tend to be uncontrolled for the simultaneous activities o f other actors, notably national governments. Hence they assume a causal relation when supranational officials pro­ posed initiatives and compromises and agreement was reached. As we have seen, the redundancy, futility, and flexibility o f supranational entrepreneurs means that this cannot be assumed. For a more detailed argument based on these cases, see Andrew Moravcsik, “Informal Influence: European In­ tegration and Political Entrepreneurship," Weatherhead Center fur International Affairs Working Paper (Harvard University, 1998). 12 Robert O. Keohane, After Hegemony: Cooperation andlhscord in the World Political Economy (Prince­ ton, N.J., 1984); Oliver E. Williamson, The Economic Institutions of Capitalism (New York, 1985).

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European Integration in Retrospect tariff rem oval, agricultural policy, and exch an ge-rate stabilization, and each topic was firm ly in the hands o f o n e or a few lead ministries, b ut n o single ministry was co m p eten t to ju d g e financial and transport service liberalization, phylo-sanitary regulations, industrial standardization, the rem oval o f custom s controls, and en ­ vironm en tal re g u latio n — to nam e only the m ajor areas covered by the SEA. Such a p ackage deal was beyond the scope o f any national bureaucracy. M ore­ over, the m ajor social gro u p that m ight have advocated liberalization, m ulti­ n ational business, was n either nationally n o r internationally organ ized until C om m ission officials and parliam entarians en co u raged its organization around co m m o n p rogram s fo r research, high technology, and m arket liberalization. T h is “tw o-level” explan ation views supranational entrep reneurs as im portant by virtue o f their superior ability to in flu en ce the dom estic level as “m anagers” o f dom estic and transnational “social netw orks,” rather than by virtue o f any unique ability to in terven e at the international level as policy initiators and m ediators. T h e suggestion that the true im pedim en ts to efficient interstate bargaining are dom estic rather than in tern ation al— and, therefore, that the decisive actions o f supranational entrep reneurs involve domestic in terven tio n — deserves furth er exam ination. O n balan ce, however, in tergovern m en tal bargaining theory is decisively co n ­ firm ed. Supranational en trep ren eurs have only a rare and secondary im pact on the efficiency o f negotiations. T h e fact that we find som e m odest support fo r the supranational bargain ing hypotheses is consistent with the view that they are co rrect in th eory but o f m arginal im portan ce in practice. H ence the EC has n ot banished pow er politics from W estern E urope. A lth o u gh the interests o f m em ­ b e r governm ents are too closely intertw ined to ren d er the use o f military force o r punitive sanctions cost-effective, asym m etrical patterns o f in terd ep en d en ce rem ain the fun dam en tal basis o f international in flu en ce.

Institutional Delegation: The Centrality o f Credibility W hy have E uropean governm ents repeatedly chosen to p ool and delegate sovereignty in co m m o n institutions? T his b o o k has tested three theories that seek to exp lain patterns o f institutional choice. T h o se w ho stress federalist id e­ ology hypothesize that federalist countries will support delegation and pooling, particularly on highly sym bolic issues, and that supranational officials will be seen as federalist visionaries. D om estic cleavages and discourse follow the same pat­ tern, with particular attention paid to dem ocratic and ideological legitimacy. It is n o surprise that this was the view h eld fo r decades in the European Parliam ent by leadin g federalists such as A ltiero Spinelli. A secon d, technocratic exp lan a­ tion hypothesizes that d elegation will take place w here issues are co m p lex but apolitical, exp ert in form ation is o f decisive im portan ce, and centralized officials have a com parative advantage in its provision. We exp ect m odest cross-national effects b ut a strong dom estic ro le fo r experts. T h o se w ho stress cred ible com m itm ents hypothesize that supranational in­ stitutions resolve in com plete con tractin g problem s. States o p t for p o olin g and delegatio n w hen they seek to com m it o th er governm en ts— perhaps also their own future govern m en ts— to particular future policies, the details o f w hich are 485

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uncertain. W h ere future p olicies are predictable, rules are em ployed instead. Preferen ces co n cern in g institutions th erefo re vary across both coun tries and is­ sues, follow in g the substantive posidon o f the govern m en t on particular issues. T h o se governm en ts that favor d e ep er policy co o rd in ad o n at a m edian European level are m ost likely to support delegation; positive and, even m ore strongly, n egative p referen ce o udiers will be m ore skeptical. D elegation is likely to be kep t within limits, such as m atters o f en fo rcem en t o r the im plem entation o f co m m o n goals; even p o olin g is unlikely to be exten d ed to entirely o p en -en d ed m andates, such as the creadon o f new policies. H ypotheses were evaluated co n cern in g three types o f observable implications: cross-national and cross-issue variation in support, dom estic cleavages and dis­ course, and the institutional form o f the delegation. (These are sum m arized in T able 1.4.) A ll five case studies reveal strong support fo r an explanation resting on the n eed to bolster the credibility o f interstate com m itm ents, with a secondary yet significant ro le — o n e lim ited to situations in w hich the substantive risks and substandve con sequences o f decisions are m odest— for ideology. T h e im pact o f tech nocratic im peratives fo r d elega d o n and p o olin g seems, by contrast, to have been m inim al. National positions in Britain, France, and G erm any co n cern in g institutional d elegation varied across both coun tries and issues, with national positions track­ ing substantive goals— as predicted by the credible com m itm ents view. T h e y did n ot vary prim arily by country, as the ideolo gical view predicts, o r solely by issue, as the tech nocratic view predicts. G overnm ents often op ted, w hen it served their interests, fo r supranational institutions, regardless o f ideology. T h o se govern ­ m ents that strongly supported a likely com m on p o licy— those, in o th er words, close to the E uropean m edian p osition — tended to favor m ajority voting and delegation . G overnm ents with oudyin g views, particularly recalcitrant ones, tend to be m ore cautious. T his pattern recurs. In the Treaty o f Rom e negotiations, France sought strong institutions in atom ic energy and agriculture yet o p posed binding com m it­ m ents and p ro cedures fo r trade liberalization. G erm any took the opposite p o ­ sidon, seekin g to bind France with strict rules and decision-m aking procedures in industrial trade yet op po sin g them in agriculture and atom ic energy. Indeed, G erm any p ro tected its veto on agriculture by dem an din g a very restrictive in ­ stitutional arran gem en t— the Special Com m ittee on A gricu ltu re— and e xte n d ­ ing unanim ity voting. D urin g the first two decades o f the EC, d e G au lle and Pom p idou strongly o p p o sed supranationalism in principle yet nonetheless ad ­ vocated delegatio n and p o olin g in agricultural policy. Germ any, federalist in prin ciple, sup ported delegation and p o olin g in areas such as EC policies toward the G A T T and com p etition (antitrust) matters but o p posed French institutional proposals in agriculture, seeking to delay in troduction o f majority voting and then com m on prices by dem an d in g in troduction o f m onetary com pensation ac­ counts (M C As). Similarly, w hen France sough t to establish m ore binding supra­ national m on etary institutions, G erm any consistently resisted them , dem an din g strict en fo rcem en t o f p rio r econ o m ic con vergen ce. Sim ilar con cerns, albeit with both parties m ore w illing to com prom ise, underlay the M aastricht negotiations 486

European Integration in Retrospect over EMU. In the SEA negotiations, skeptics ten ded to be those governm ents, such as the T h a tch er go vern m en t in Britain, that feared expansion o f regulation to areas favored by a m ajority o f o th er governm ents. Equally revealing, if less widely ackn ow ledged, is the p o in t that m ajority votin g was also exp licidy lim ited by the ca u d o n o f governm ents, such as those o f G erm any and D enm ark, that sought to p ro tect extensive systems o f regulation. H en ce G erm any en tered the negotiation s insisting o n a lo n g list o f specific excep tion s to Q M V and at the last m inute d em an d ed a special clause (Article 100A4) perm itting countries with particularly high regu latory standards to o p t out o f certain decisions. T ech n o crad c m otivations, by contrast, explain little. N o correlation em erges betw een the tech nical o r legal com plexity o f an issue and the level o f co o p era ­ tion. E xternal tariff liberalization w ithin the G ATT, w hich was delegated to som e extent, was n ot clearly m ore co m p lex than internal tariff rem oval, which was go vern ed entirely by rules. C om p etition policy co n cern in g m ergers, in w hich the Com m ission enjoyed con siderable autonom y, was n ot inherently m ore com p lex than com p etition policy in w hich it did not, such as policin g industrial subsidies. R egional subsidies and agricultural policy, with m oderately high levels o f d e le ­ gation, w ere n ot clearly m ore co m p lex than m onetary policy un der the EMS, with m odest delegatio n and p oolin g. M onetary policy itself was unstable, with no delegatio n and m inim al p o o lin g in the 1980s and a com m itm ent to extrem ely high m on etary delegation in the 1990s. T his view offers little explan ation for the elim in ation o f internal tariffs, w hich was h an dled alm ost entirely with e x ­ plicit rules. T h e use o f Q M V was n ot lim ited to circum stances in which distribu­ tive con sequen ces w ere insignificant (consistent with the technocratic and p er­ haps also ideolo gical theories). To the contrary, agriculture, foreign trade, and, above all, m on etary policy involve massive redistributive consequences. Dom estic cleavages and discourse fu rth er underscore the im portance o f cred ible com m itm ents. D om estic debates w ere— excep t in the case o f highly sym bolic institutions with uncertain im pact on policy, such as the E uropean Parliam ent— dom in ated by instrum ental considerations. T his dom in an ce o f instrum ental con cern s is particularly clear in determ in in g support for p oolin g sovereignty throu gh QMV', due to the predictability o f the outcom es. From the French go vern m en t’s carefu l calculation o f safeguards and veto rights in the Treaty o f Rom e to the T h a tch er go vern m en t’s careful calculation o f the likely voting outcom es o f all 279 proposals in the single m arket W hite Paper, govern ­ m ents have carefully calculated the con sequen ces o f delegation and p oolin g fo r their substantive interests. M ajority voting and delegation o f unique agenda pow er to the Com m ission w ere deliberately designed to increase the efficiency o f decision -m akin g and to red u ce the p otential fo r log-rolling. T his institutional innovation responded to a d em an d by sm aller countries, w hich sought to over­ co m e the ten dency o f larger governm ents to strike separate bargains, though it was also sup ported by som e in G erm any and even France, w ho felt it w ould re n d er decision-m aking m ore efficient. T h e Com m ission’s right o f proposal was lim ited, th o u g h n ever frontally attacked, by the French governm ent. T h e pri­ m ary justification for the SEA, w hich exten d ed Q M V and the “new ap p ro a ch ,” was that it w ould perm it m ore efficient decision-m aking by allow ing govern ­ 487

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m ents to outvote their op pon en ts. T o be sure, the T h a tch er governm en t was re­ luctant, in part fo r ideological reasons, to accep t m ajority vo d n g u n d er A rdele i oo. Yet Britain did in the e n d co n ced e in o rd e r to achieve its econ o m ic o b jec­ tives, and British policy reflected a realistic co n cern abou t the expansion o f leg­ islative activity to in clude regulations sup ported by m ost E C m em ber go vern ­ m ents b ut o p p o sed by the n eoliberal T h a tch er governm ent. T h e im p ortan ce o f cred ible com m itm ents was also reflected in the form that d elegatio n and p o olin g have taken. Supranational actors were never viewed e n ­ tirely as trusted, neutral experts; their powers have been carefully con trolled. T h e creation o f the Special Com m ittee o n A griculture, the expansion o f the system o f oversight com m ittees (“co m ito logy”), the establishm ent o f the EMS outside the norm al E C institutions, the creation o f the E uropean C o u n cil, and the L u x ­ em b o u rg C om p rom ise w ere all exp licidy designed to narrow rather than broaden the scope fo r autonom ous action by supranational actors. T h o u g h m any wrongly blam e the m aintenance o f de facto unanim ity voting in the EC on the French alon e, we find strong evidence that G erm any and the B en elu x coun tries quietly o p p o sed the use o f QMV, particularly in agriculture, until the 1980s. No serious effo rt was m ade to exp an d Q M V fo r alm ost three decades. D elegation and p o o lin g app ear to have been em ployed prim arily to im plem ent o r en fo rce p rior agreem en ts by p recom m ittin g governm ents to greater co m p ro ­ m ise and thus m ore efficient decision-m aking. Q M V ten ded to be used, as p re ­ dicted, fo r smaller, nested decisions w ithin broadly accep ted constraints. M ajor constitutive decisions, by contrast, in cludin g those w ithin the Treaty establish­ in g the C A P and com m ercial policy, rem ained subject to unanimity. D elegation to the Com m ission o f a un ique power to prop ose legislation to the C o u n cil o f Ministers, w hich m em ber governm ents co u ld revise only by unanimity, similarly “lo cked in” a particular pattern o f future decision-m aking. T his power perm its the Com m ission to select a m o n g those proposals p referred to the status quo by all governm en ts or, in the case o f m ajority voting, a qualified m ajority o f gov­ ernm ents. T h e arran gem en t was deliberately constructed with the intention o f ren d erin g decision -m akin g m ore efficient. A gain, we should n ot exclu d e ideological considerations entirely. A lth o u gh the cred ible com m itm ents view best explains the delegation and p o olin g o f specific and precise powers, it leaves un exp lain ed patterns o f support fo r m ore gen­ eral institutional com m itm ents. T h e quasi-constitutional form o f the E C — with C o u n cil, Parliam ent, C o u rt, and C om m ission — was borrow ed from the E CSC, w hich in turn reflected the views o f m any European federalists. T h e A ngloFrench tradition o f gen era l opposition to increased supranational delegation and p o olin g, as w ell as the G erm an support fo r them , appears to reflect public and parliam entary ideology. To be sure, such ideological con cerns w ere often tru m ped by econ o m ic in terest— as in Britain’s bids fo r m em bership — but som e residual support rem ained. D e G au lle ’s opposition to Com m ission power, for exam p le, th ough lim ited by his overriding co n cern with agriculture and the electoral constraints im posed by farm ers, clearly reflected his personal ideology. T h e co n cu rren t unwillingness and occasional inability o f A d en a u er’s succes­ sors, Ludw ig E rhard and G erhard Schröder, to voice publicly o r act on their 488

European Integration in Retrospect skepticism ab ou t au tonom ous supranational institutions, is difficult to explain in p urely instrum ental terms. In the 1980s and 1990s patterns o f support fo r gen eral institudonal provi­ sions co n tin u ed to re flect federalist ideology. T his claim is clearest in support fo r the E uropean Parliam ent, an institution supported by G erm any and viewed with con siderable skepticism in Britain and France, w hich favored the central­ ization o f pow ers in the C o u n cil. T o be sure, G erm an support for Parliam entary co-decision is n o t inconsistent with its strong interest in the sort o f environ ­ m ental an d social regulations favored by the Parliam ent, and it is im portant to rem em b er that Parliam entary powers are gen erally increased at the expen se m ore o f the Com m ission than o f the m em ber-states. Still, dom estic rh etoric and cleavages suggest the existen ce o f strong ideological m otivations. Such concerns w ere n ot absent from T h a tc h e r’s opposition to m ajority votin g in the SEA and p articipation in the EMS and EMU.

European Integration and the Historical Institutionalist Challenge T h e exp lan ation o f E uropean in tegration I have presen ted is controversial n ot sim ply because som e con tin ue to assert the im portan ce o f geopolitical, id e­ o logical, tech nocratic, o r supranational determ inants o f state behavior. In recent years the n eofun ction alist search fo r a theory o f integration as a self-reinforcing process o f spillover has been revived. It is now term ed “historical institutional­ ism ” (H I). T h e research on w hich this b ook rests was n ot designed to test HI claim s rigorously, but the evidence tends to disconfirm them . T h e HI perspective develops the “p ath -d ep en d en t” view that shifting national p referen ces are an u n in ten d ed co n sequ en ce o f p rio r integration. Preferences and pow er are en d o g en o u s to integration rather than exo gen ou s structures. E con om ic in tegration and institutional develop m en t becom e self-reinforcing th rou gh con tin uous feedback, gen erally term ed “spillover,” w hich can p ro ceed in two ways.1®Previous decisions can in duce changes in national preferences, w hich p rom ote fu rth er integration. T his “social spillover” argu m en t is generally ap p lied to eco n o m ic adjustm ent, b ut som e also stress ideological o r ideational changes. Alternatively, international institutions may alter the terms u n d er w hich governm en ts n egotiate new bargain s— a process I shall term “political spillover.” Most advocates o f HI, like their n eo fun cdo n alist predecessors, do n ot exp lic­ itly claim that it displaces a structural rationalist view entirely. M ost co n ced e that the m ost fun dam en tal task is to exp lain individual decisions, even if the inputs are the result o f previous decisions. W ithout a theory o f individual decisions, we w ould n ot know what sort o f feedback m attered. Yet m any HI theorists n o n e ­ theless m aintain that feed b ack and spillover effects are so massive as to swamp any consistent effort to develop consistent theories o f national preferen ces or strategies.14 T h e fo rce o f this argu m en t lies in the claim that the consequences 13 Stephen George, Politics and Policy in the European Community (Oxford, 1985). 14 Two leading theorists make this explicit. Pierson, “Path," specifies conditions under which we should expect to observe such effects. Sec also Wayne Sandholtz, “Choosing Union: Monetary Politics and Maastricht,” International Organization 47 :1 (Winter 1993), 1-40.

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o f these decisions are often un foreseen , un intended, o r undesired. As Perry A n derso n puts it in a critique o f recen t E C scholarship, “If all historical u n d er­ takings are subject to the fatality o f un in ten d ed consequences, the m ore d elib ­ erate they are the m ore p ro n o u n ced the gap may becom e. T h e ‘construction o f E u ro p e ’ . . . was b o u n d to lead to . . . a persistent pattern o f con sequences that d isco n certed and foiled the intentions o f its architects.” 15 In other words, if gov­ ern m en ts are constantly fo rced to react to un in ten d ed con sequences o f previ­ ous decisions, HI theorists ask, what sense does it m ake to speak, as I have don e in this bo o k, o f discrete “choices fo r E u ro p e ”? W hat ligh t do the findings in this b ook shine on HI claims? Let us begin with social spillover. Structural econ o m ic trends underlying national p referen ces— trade liberalization, agricultural subsidization, capital mobility, regulatory har­ m onization, m acroecon om ic co n ve rge n ce — do not app ear to have been in ­ d u ced prim arily by p rio r decisions. T h ese trends em erged nearly a decade before the EC. T h e swiftest p eriod o f e xp o rt expansion in postwar Europe was the 1950s and early 1960s, before the EC could have had a decisive im pact. British exports, fo r exam p le, had com p leted the bulk o f their shift from the Com m onw ealth to the C o n tin en t, with decisive con sequen ces fo r Britain’s E C policy, well before Britain jo in e d the EC. C onsistent with this findin g are existing econ om etric m odels o f trade flows, w hich suggest that only a m odest percen tage o f the post­ war increase in E uropean trade can be attributed to policy changes; nearly all the increase, at least until the 1980s, reflects structural factors such as g e o ­ graphical proxim ity and p er capita in com e. (T h e effect on agricultural trade is, as w ould be exp ected , m uch h ig h e r .)16 T h e sam e can be said o f decisive e co ­ n om ic trends such as rising capital mobility, disinflation, financial liberalization, and disen chan tm en t with industrial policy. T h ro u g h o u t the p eriod all West European coun tries w ere greatly in flu en ced by these structural trends, w hether or n ot they were E C m em bers.17 T his is n ot to say that p rio r econ o m ic in tegradon has had no im pact on sub­ sequent national p referen ces. It is clearly true that with rapid structural adjust­ m ent and radon alizadon , m ore com petitive producers adapted to trade liberal­ ization by exp an d in g exports and investm ent w hereas less com petitive producers were elim in ated o r consolidated. O n balance this dynam ic created new constitu­ encies fo r fu rth er liberalization and un derm in ed its oppon en ts. T h ere is little doubt that structural adjustm ent and o th er econ o m ic feed back effects h elp ed to “lo ck in” in tegration in E u ro p e — a p h en o m en o n that deserves m ore attention in studies o f international regim es m ore generally. Som etim es feedback was id e ­ ological, as w hen the app arent success o f A d en a u er’s initially controversial strat­ egy o f Franco-G erm an coop eration ren d ered im possible a policy reversal p er­ haps desired by his successor, Ludw ig Erhard. O n this point there is agreem en t betw een HI theory and the in terpretation advanced in this book. 15 Perry Anderson, “Under the Sign o f the Interim,” Ixmdon Review of Books, 4 January 1996, 17. 18 Jeffrey A. Frankel, Regional Trading Blocks in the World Economic System (Washington, D.C., 1997), 83-86. 17 David Andrews and Thomas D. Willett, “Financial Interdependence and the State: International Monetary Relations at Century's End,” International Organization 5 1 :3 (Summer 1997), 4 7 9 -5 11 .

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European Integration in Retrospect Yet I suggest that these con sequen ces w ere n eith er un foreseen n or un in ­ ten ded, as HI th eory claims. To the contrary, it was the deliberate triumphs o f E uropean integration, n ot its unintended side-ejfects, that app ear to have in ­ creased sup port fo r fu rth er integration. T his is the key p o in t o f divergen ce betw een HI th eo ry and the tripartite “liberal intergovernm entalist” in terpreta­ tion advanced here. For m ost governm ents, in ducin g econ o m ic m odern iza­ tio n — even with unpleasant side-effects— was the m ajor purpose o f E uropean integration. T h e historical record reveals that the con sequences o f m ajor decisions were in fact foreseen and desired by national governm ents to a m uch greater extent than m ost analysts have been aware. In som e cases, am ong them the EMS and EM U, governm ents em ployed the E C explicitly as a scapegoat. Even w here this was n ot the case, my analysis reveals, nearly all governm ents w ere generally well aware o f the likely short- and long-term policy con sequences o f integration, go o d and bad. Som etim es, as with the SEA, they underestim ated the success o f a policy, b ut they alm ost n ever m isperceived the direction o f future change. M ajor national governm ents foresaw and a ccep ted — in deed, often sought to in ­ d u c e — outcom es such as the rationalization o f E uropean industry in response to the custom s u n io n , the em ergen ce o f large C A P surpluses, the asymmetrical op eration o f the EMS, the reduction in governm ental discretion after reducin g n on tariff barriers, and the possibility that majority voting on N TBs w ould p er­ m it governm en ts to be outvoted on a range o f im portant issues. HI theorists overlook the foresight o f governm ents because their analyses are rarely based on a detailed , prim ary-source analysis o f national preferen ce form ation . Instead, they m ake d o with p ublic justifications by governm ents or with secon dary sources.18 Yet since governm ents often have an incentive to deny or simply ignore their responsibility fo r certain o u tco m es— C A P surpluses, m on etary discipline, and downward pressure o n social spending, for e xa m p le— accounts based on secon dary sources and their public justifications tend to gen erate in adequate, even m isleading, support fo r claim s about “u n in te n d ed ” con sequences. Som e HI theorists focus instead on “political spillover.” T h e y argue that the feed b ack from p rio r policies to cu rren t ones is m ediated n ot by econ o m ic adap­ tation but by the d e ep en in g of supranational institutions. Som e stress the en tre­ preneurial activities o f supranational actors. It is often argued that E uropean in ­ stitutions, such as m ajority votin g o r the powers o f im plem entation in the hands o f the Com m ission, have im posed unw anted policies o n certain governm en ts— an a rgu m en t often advanced in studies o f British policy. O th ers p o in t to the e x ­ istence o f “joint decision traps,” w here governm ents are locked into undesirable policies by the n eed to m uster un an im ous support for any new legislation or treaty am en dm ent. T h is exp lan ation is com m only cited fo r C A P surpluses or the absence o f a fully d evelop ed E C social d im en sio n .19 18 For a partial exception, see Paul Pierson and Stephan Leibfried, eds., European Social Policy (Washington, D.C., 1995). 19 Fritz Scharpf, “Thejoint-Decision Trap: Lessons from German Federalism and European Inte­ gration,” Public Administration 66 (Autumn 1988), 239-278; Fritz Scharpf, “Politische Optionen in

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T h re e findings o f this b o o k call this in sdtudonal variant o f HI into question, th ough a definitive con clusion m ust await m ore focused research. W e have seen that supranational en trep ren eu rs w ielded relatively little in flu en ce, d irect or in ­ direct, on interstate negotiations. N eith er their long-term efforts to structure the agen da, n o r their efforts to m ediate am ong governm ents, n o r even their e f­ forts at social m obilization had a consistent im pact on negotiated agreem en ts— the SEA b ein g a significant b ut at m ost only a partial excep tion . In broader his­ torical perspective, cases often cited by HI theorists as exam ples o f feedback tend to be m arginal and often transient deviations from historical trends, such as, fo r exam p le, British policy with regard to the M aastricht social charter. If an HI a rgu m en t is to be viable, it m ust rest on feed back loops that run through everyday decision-m aking. Yet everyday decision-m aking highligh ts a secon d em pirical findin g that un derm in es HI claims. T h e study o f m ajor bargains reveals that the c o n ­ struction o f an international regim e in w hich legislation is voted over the o p ­ position o f m inorities and rules are en fo rced against the obstruction o f the recalcitran t— in short, the transfer o f sovereignty and autonom y to suprana­ tional institutions— was n ot an u n in ten d ed con sequence o f m ajor E C decisions; it was their primary purpose. M ost institutional constraints that HI theorists treat as u n in ten d ed o r un foreseen con sequen ces o f p rior in tegratio n — fo r e x ­ am ple, qualified m ajority votin g and a certain autonom y for the Com m ission and P arliam ent— w ere in fact con structed deliberately to en h an ce the cred ib il­ ity o f com m itm ents. In the w orld assum ed in this book, w here governm ents with varied p referen ces negotiate and construct institutions in o rd er to com m it one an o th er to linked sets o f bargains, the inability o f each state always to achieve its ideal o u tco m e on every issue is hardly surprising. T h e w orking o u t o f such bar­ gains has been the central activity o f the EC; had they been easy to reach w ith­ out u n co m fo rtable adjustm ent by any m em ber-state, little bargaining and no in ­ stitutions w ould have b een necessary. G overn m en ts were hardly unaw are that they w ere assum ing risks o f bein g outvoted o r overruled; to the contrary, we have seen that they repeatedly calcu­ lated the con sequen ces in great (and, for the m ost part, accurate) detail. T his is true even fo r policy o u tco m es— such as high agricultural surpluses— often m en tio n ed as u n in ten d ed con sequences. A s we saw in chapters 2 throu gh 4, European governm ents w ere quite aware o f the likely con sequences o f c o n ­ structing the C A P as they did. If they failed to reverse policy, it was n ot because un an im ous votin g arrangem ents p revented them from d o in g so. (N ever did a sim ple m ajority favor m ajor C A P reform , and reduction s in prices im posed by m ajority vote w ould have likely triggered unilateral n on com p lian ce by G erm any th rou gh m eans such as M CAs, as occu rred early in the 196 0 s.)20 Such provisions

vollendeten Binnenmarkt,” in Markus Jachtenfuchs and Beate Kohler Koch, eds., Europäische Inte­ gration (Opladen, 1996), 109-140; Pierson, “Path.” The studies on Britain arc too numerous to cite. For an overview o f Commission activities, sec Laura Cram, Policy-Making in the EU: Conceptual Lenses and the Integration Process (London, 1997). 20 For a critique o f Fritz Scharpf's claims about CAP, see Elmar Rieger, “Agrarpolitik: Integration durch Gemeinschaftspolitik?” in jachtenfuchs and Kohler-Koch, eds., Europäische, 401-428. It is fair to note that Scharpf himself calls into question whether the CAP would have been different with re­

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European Integration in Retrospect did hit certain governm en ts— those, predictably, with extrem e p referen ces— particularly hard. N o surprise, th erefo re, that we en co u n ter m any case studies o f T h a tc h e r’s Britain.21 In sum , the existen ce o f states dissatisfied by particular aspects o f a political arran gem en t, far from disconfirm ing the (“liberal intergovernm en talist”) theoretical accoun t presen ted in this book, is a necessary im plication o f it— as it is o f any regim e-theoretical treatm ent o f international co o p era tio n .22 O n e last fin d in g casts overall d o u b t on the HI interpretation o f E uropean in ­ tegration. H I claim s rest, in the final analysis, on the assum ption that national p referen ces and interests are unstable and un predictable. O n ly w here this as­ sum ption holds is a substantive policy com m itm ent or institutional arrangem ent a ccep ted by a particular govern m en t at a particular p o in t in time likely to be p erceived by successor governm ents as an unpleasant and u n exp ected co n ­ straint. In short, the instability o f preferen ces leads short-term and long-term n ational interests to diverge. If we take all five m ajor E C decisions as a w hole, however, it is the stability and continuity o f preferences, not their instability, that stands out. A lth o u gh there has been a slow, linear d e ep en in g o f support for various types o f econ o m ic in­ tegratio n — m ostly as a result o f exo gen ou s trends o f w hich governm ents have b een aware, ju st as the exp lan ation o f integration advanced in this b o o k p re­ dicts— the relative positions o f m ajor governm ents on co re issues such as C A P reform , tariff liberalization, G A T T negotiations, m onetary integration, foreign and defen se policy, and the powers o f the C o u n cil and Parliam ent have hardly ch an ged in forty years. G erm any has consistently sought high farm prices, low agricultural exp o rt subsidies, a liberal G A T T policy, m onetary coop eration on G erm an “econ o m ist” terms, a com m on E uropean foreign and defen se policy consistent with N A T O , and stronger powers fo r the Parliam ent. France has sought m oderate farm prices, high exp o rt subsidies, a m ore protectionist G A T T policy, m on etary in tegration o n “m onetarist” terms, a m ore in d ep en d en t com m on fo r­ eign and defen se policy, and stronger powers fo r the C oun cil. Britain has sought a m inim al CAP, a liberal G A T T policy, m inim al m onetary coop eration , a m odest fo reign and defen se policy, and weak supranational institutions. T im e and time again, observers are struck by these continuities. O f the M aastricht negotiations, fo r exam p le, o n e analyst observes: “ [Hans] T ietm eyer and [H elm ut] Schlesinger w ere also follow ing, with rem arkable consistency, the line the Bundesbank had taken thirty years previously w hen EM U and a E uropean central bank had first b een m o o ted .” 2’ W ith p referen ces so stable, HI theory itself predicts that we should rarely see EC bargains becom e un accep table o n e o r two decades later.

formed EC institutions. If there was a salient unforeseen consequence in the CAP, it was the success of the policy in stimulating European agricultural trade, which led to the formation o f a set o f vested interests in the system. This aspect o f the customs union appears to have had a much greater impact on economic behavior than on industrial trade liberalization. Frankel, Regional, 85. 21 Similarly, Germany has been an outlier in agricultural policy and a number o f regulatory issues. 22 Such analysts wrongly assume that Liberal Intergovemmentalist theory treats maximum discre­ tion— protecting sovereignty— as the preeminent state preference. This is clearly incorrect. LI the­ ory assumes that states seek the substantive goals o f major domestic interests. Cf. Pierson, “Path.” 23 David Marsh, The Bundesbank: The Bank That Rules Europe (London, 1992), 212.

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O n balan ce, the em pirical findings in this b o o k suggest that HI theorists are co rrect to n ote that in tegrau on has politically significant con sequences, notably shifts in the p referen ces and institutional environm en t in w hich future d e ci­ sions are m ade, b ut that only in excep tio n al cases are these con sequences u n in ­ ten d ed o r undesired. O n ly a few o f the conditions p rescribed in H I theory fo r the em erge n ce o f a p ath -d ep en d en t process o f un in ten d ed con sequences are gen erally fulfilled. M ore appropriate to actual state behavior in the EC is a w eaker version o f H I— o n e that stresses in tend ed rather than un in ten d ed “lock in” e f­ fects as a secon dary force b eh in d region al integration. T his version should be view ed n o t as an alternative to the structural, rationalist explan ation o f integra­ tion advanced in this b ook but as an extension o f it. Insofar as future shifts in p referen ces w ere foreseen, in ten d ed, even desired, HI provides an accoun t o f the con sequen ces o f integration consistent with the (m ore static) treatm ent o f individual decisions p resen ted here. Rather than contrast two ideal types o f his­ torical and structural analysis, we m igh t profitably direct m ore attention toward the possibilities fo r synthesis.24

G e n e r a l iz in g t h e E u r o p e a n E x p e r ie n c e

T h ro u g h o u t this b o o k I have focused on the benefits o f applying gen eral the­ ories o f com parative and international political econ o m y to European in tegra­ tion. In closing, I reverse the focus and exam in e im plications o f the findings for international politics. It is striking that m ainstream theories o f international p o ­ litical econ om y have all b ut ign o red the most successful o f postwar international regim es. A first step toward gen eralization is to recon sider the E C in the con text o f attem pts at region al in tegration elsew here in the world; a second is to exam ine the im plications for gen eral theories o f international coop eration and conflict.

Regional Integration: The European and Universal Process From the E uropean Free T rade A ssociation to econ o m ic coop eration on dis­ tant continents, the past half-cen tury has witnessed dozens o f region al schem es fo r econ o m ic in tegration. In only a few areas, am ong them the M iddle East and parts o f Asia, are such efforts conspicuous by their absence. A com prehensive com parative study o f all such efforts w ould take us well beyon d the scope o f this bo o k, b u t a p relim inary com parison betw een East Asia, N orth A m erica, and E urope is possible. T h e results con firm the prim ary o f econ o m ic incentives for w hich I have argu ed in this book. L e t us begin with the political econ o m y theory introduced in chap ter 1. Two factors closely associated with pressures fo r trade liberalization are exp o rt d e ­ p en d en ce and levels o f intra-industry trade. If the econ om ic theory is correct, we sh ould see m uch h ig h er levels in E urope than in N orth A m erica or East Asia. 24 For a more general argument relating international regime stability to societal “lock-in” effects, see Andrew Moravcsik, “Taking Preferences Seriously: A Liberal Theory o f International Politics,” International Organization 5 1 :4 (Autumn 1997), 537.

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European Integration in Retrospect Table 7.1. Regional trade dependence o f Germany, United States, and Japan as a proportion o f GNP, 1958 and 1990

Germany (vis-à-vis EC6 then EC 12 ) United States (vis-à-vis Canada & Mexico) Japan (vis-à-vis Northeast Asia, ASEAN & India)

Intraregional Trade/GNP ( 1960 )

Intra­ regional Trade/GNP ( 1990)

IntraIndustry Trade/ Regional Trade ( 1980s)

6% 1% 2%

21% 2% 3%

66% 60% 25 %

S o u r c e s : IMF, Direction of Trade, various reports; Marc Busch and Helen Milner, “The Future of the International Trading System,” in Richard Stubbs and Geoffrey Underhill, eds., Political Economy and the Changing Global Order (New York, 1994), 272.

T h is is precisely what we find. O f coun tries in these three regions, EC m em bers are by far the m ost exp o rt-d ep en d en t (as a p ercen tage o f G N P ), as well as the m ost d e p e n d en t on in traregional as co m p ared to intercontinental trade. T his re­ lationship was visible early in the postwar period, well b efo re region al trade lib­ eralization co u ld have h ad a decisive im pact, and it has grown stronger over time. C o n sid er Germ any, the U n ited States, and Japan as exam ples. In i9 6 0 G er­ m any was betw een three and six times m ore d e p e n d en t on its EC partners than the U n ited States and Japan were on their region al partners; thirty years later the differential had gro w n — with the expansion o f the EC as well as rising intra­ industry tra d e— to a ratio o f betw een seven and ten. T h e qualitative nature o f u a d e w ithin the three blocks also differs. Intra-industry trade (trade between sim ilar sectors o f the econom y) is, we saw in chap ter 1, particularly con ducive to trade liberalization, because it tends to red u ce the n um ber o f firms and sectors that find them selves n et losers. M arc Busch and H elen M ilner have observed that such firm s tend also to be international traders and m ultinational investors with a strong vested interest in free trade, w hich supports their existing m arket advantages and furth ers the realization o f optim al econ om ies o f scale. T h e G er­ man level o f intra-industry trade, though lower than the level in n eigh bors such as France, is n on eth eless som ew hat h igh er than that o f the U nited States and several times h ig h er than that o f Japan.25 B rin gin g to geth er these sim ple indicators— sum m arized in Table 7 .1 — the political econ o m y theory predicts very strong pressures fo r trade liberalization in E urope, m ore m oderate pressures in North A m erica, and very little pressure in East Asia. T his is in d eed w hat we observe. By contrast, geopolitical theories have difficulty exp lain in g this outcom e. T h e U nited States and Can ada are allies; M exico is a friendly state. Japan, N ortheast Asia, A SEAN , and India face a co m ­ m on C h in ese threat. Japan, like G erm any, was defeated in W orld War II, has a strong alliance relationship with the U nited States, and has consistently faced a5 Marc Busch and Helen Milner, “The Future of the International Trading System: International Firms, Regionalism, and Domestic Politics,” in Richard Stubbs and Geoffrey Underhill, eds., Political Economy and the Changing Global Order (New York, 1994), 269-272.

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pressures to reassure n eigh b o rin g governm ents. A t best a geopolitical argum en t w ou ld be an ad h o c exp lan ad o n after the fact. T h ese data are m ore suggestive than conclusive, b ut they do suggest that the prim acy o f p olitical econ o m y observed in postwar Europe is n o tju st a con tin gent fact ab ou t E urope b ut a gen eralization about postwar industrial nations.26 These data also cast som e d o u b t on the claim , advanced by historians and political sci­ entists alike, that regional integration was the result o f a peculiarly European d evelop m en t o f the social welfare state. O n this basis, A lan Milward calls fo r d e ­ ve lo p m en t o f a “E uropean ” theory o f in tegratio n — as op posed to an “A m erican” th eo ry— because E uropean integration was “som ethin g m ade in Europe spring­ in g from the evolution o f the E uropean nation-state.” 27 Yet if the dom estic devel­ o p m en ts that gave rise to E uropean econ o m ic integration were fo u n d uniquely in postwar E urope, it is n ot because the European co n tin en t was subject to unique social processes but because the intensity o f com m on in flu en ces— in this case, un derlying trade flows— was higher. Surely, then, the com parative political e co n ­ om y o f regionalism deserves m ore intensive study, begin n in g with the assum p­ tion that E urope and o th er region s face sim ilar challen ges and opportunities.

European Integration and Theories o f International Cooperation I f the E C can be com p ared to o th er regional integration schem es, why should it n ot have potentially im portant im plications fo r gen eral theories o f in tern a­ tional coop eration? Som e o f the gen eral theoretical im plications follow from the m ore specific findings rep o rted above and are directed at specific debates. T h e findings strongly support, fo r exam p le, e n d o gen o u s tariff theories o f international trade policy. T h e analysis o f national preferen ces co n cern in g the EMS and EM U points to the im portan ce o f relative inflation rates in shaping exch an ge-rate policy, suggesting a revision o f interest-group theories o f international m onetary co o r­ din atio n .28 By un coverin g the gen eral assum ptions that u n derlie claim s co n cern ­ ing the con dition s u n der w hich political entrep reneursh ip by international offi­ cials is likely to be successful, this analysis moves beyond the anecdotal studies that currently dom in ate the literatures on international regim es, international n egotiations, international law, and E uropean in tegration.29 T h e revisionist in ­ terpretation o f Charles de G a u lle ’s E uropean policy advanced here suggests that dem ocratic politics im poses strict limits on the construction o f “visionary” fo r­ eign policy, w hen such policies touch the interests o f powerful groups, such as 26 Although we can reject objective geopolitical circumstances as the source o f preferences, we cannot entirely dismiss the role o f ideas. Yet until ideas are clearly measured and more precisely the­ orized, claims for the importance o f ideology and ideas cannot be more than speculative. 27 Alan S. Milward, Francis M. B. Lynch, Ruggiero Ranieri, Frederico Romero, and Vibeke Sfrensen, The Frontier of National Sovereignty: History and Theory, 1945-1992 (Ixmdon, 199 3 )14 -5, 198. 28 This avoids the need to call the entire political economy approach into question. Cf. Kathleen McNamara, TheCurrency of Ideas (Ithaca, 1998); Alberto Giovannini, “Economic and Monetary Union: What Happened? Exploring the Political Dimension o f Optimum Currency Areas,” in Centre for Economic Policy Research, The Monetary Future of Europe (London, 1993). 29 For a more extensive argument and a literature review, see Moravcsik, “Informal Influence."

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European Integration in Retrospect farm ers, foreign policy becom es subject to electoral and interest gro u p co n ­ straints. It becom es “low politics” regardless o f w h eth er con cern s abou t national identity are at stake.30T h e analysis o f the con dition s un d er w hich European gov­ ern m en ts chose to transfer sovereignty to particular institutional form s suggests a link betw een the evolution o f the E C and the em ergin g literature on the d e ­ sign o f in tern ation al regimes.®1 A t a bro a d er level, the findings in this b o o k ten d to support Liberal theories o f in tern ation al relations against existing Realist alternatives. T h e central claim o f L iberal in tern ation al relations theory is that the pattern o f underlying national p referen ces, n o t the distribution o f pow er resources o r institutionalized inform a­ tion, is the m ost fundam ental determ in ant o f state behavior in w orld politics.32 L ib eral theory focuses o n state-society relations; specific variants stress variation in eco n o m ic in terd ep en d en ce, dom esd c regim e type, and national identities. T h e o ries that stress variations in national preferen ces are, Liberals argue, m ore pow erful em pirically, m ore fun dam en tal analytically, and often m ore parsim o­ nious con cep tually than are theories that stress variation in relative capabilities o r p articipation in in tern ation al institutions. Variation in state preferen ces is m ore fun dam en tal, as we saw in ch a p ter 1, n ot simply because it shapes the P areto-frontier o f potential agreem en ts over w hich states engage in Realist bar­ gain in g b ut also because it helps determ in e the outcom es o f that bargaining. In the L iberal view, asym m etrical in te rd e p en d en ce — the relative intensity o f p ref­ e ren ce s— offers a distinctive understanding o f power in w orld politics, o n e even m ore fun dam en tal than m ilitary capabilities. T h o u g h universally applicable, asym m etrical in terd ep en d en ce is particularly likely to explain outcom es am ong dem ocratic states, w here the use o f m ilitary fo rce is an unlikely eventuality— R obert K eo h an e and Joseph N ye’s w orld o f “co m p lex in terd ep en d en ce.” 33 T h e consistent fin d in g in E C history that econ o m ic interests and even id e o l­ ogy take p re ced e n ce over objective geopolitical threats casts d o u b t o n specific variants o f Realism , in cludin g theories that stress “security extern alities” and “relative gains-seeking.” Both assume a hierarchy o f national preferen ces with security con cern s at the top and the exp ectation that m ilitary co n flict is likely. Both argu e that governm ents pursue econ o m ic coop eration w hen it supports th eir m ilitary alliances o r un derm in es their security through d e p e n d en ce.34 In the E C, we saw, there is litde evidence o f a stable Realist issue hierarchy. National 30 See Moravcsik, “Prudence.” 31 The traditional categories used to categorize regimes (strength, form, scope) are only a start­ ing point, as is the distinction between delegation and pooling, and unanimity voting employed here. Cf. Stephan Haggard and Beth Simmons, “Theories o f International Regimes,” International Organization 4 1:3 (Summer 1987), 4 9 1-5 17 . 3! Moravcsik, “Taking." See also Michael W. Doyle, “Kant, Liberal Legacies, and Foreign Affairs," Philosophy and Public Affairs 1 2 :3 -4 (Summer-Fall 1983), 205-235; 325-353. 33 Robert O. Keohane and Joseph S. Nye, Power and Interdependence: World Politics in Transition, 2d ed. (Boston, 1989). 34 Theories o f “security externalities" have been applied primarily to postwar U.S. international economic arrangements. It is argued that security externalities matter more in a bipolar context. If we think o f Europe in bipolar terms, due to the overriding threat from the USSR, the argument clearly holds. Whether this particular theory should be applied to concern over Germany is less clear. Cf. Joanne Gowa, Allies, Adversaries and International Trade (Princeton, 1994).

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p referen ces ten d instead to vary predictably across issues and countries in ac­ co rd an ce with issue-specific, largely econ o m ic concerns. B alancing against the USSR was consistendy am on g the weakest o f the various motivations; checkin g G erm an pow er was hardly m ore significant. T h e only salient exam ples o f an e x ­ p licit “relative gain s” security co n cern w ere British argum ents against EC m em ­ bership u n d e r the M acm illan and T h a tch er governm ents. In n either case was the a rgu m en t decisive; policy-m akers soon reversed course. In addition to challen gin g Realist argum ents about reladve-gains seeking and security externalities, the E C challen ges Realist theories o f hegem onic stability. It is a clear ch allen ge to those w ho w ould gen eralize from the postwar U.S. case to the con clusion that the existence o f a single preem in en t state is a necessary th o u gh n ot sufficient con dition fo r the form ation o f international regim es. Such theories are so obviously m isplaced in the E C co n text that they receive litde se­ rious con sideration h ere o r elsewhere. W hen co m p ared to the postwar U nited States and Japan in the Far East, G erm any in E urope is small vis-à-vis its n eig h ­ bors. A s a relatively in fluen tial state with m oderately pro-E uropean preferences and a large dom estic m arket, G erm any m ade concessions, ideologically m oti­ vated in part, that con tributed to European integration, yet there is little evidence that G erm an y’s size o r concessions were decisive.35 It m ight plausibly be argued that Germ any, as the swing state betw een Britain and France, played a critical role; its decisions were particularly decisive fo r the future o f E urope, yet this has little to d o with h egem o n ic power. Perhaps the failure o f con tem p orary in ter­ national relations scholarship to take the EC seriously has biased the co n tem ­ porary m ix o f leadin g theories in favor o f factors consistent with the rise and stagnation o f the U.S.-led Bretton W oods system— preem in en t am ong them h egem o n ic stability.36 Finally, the historical record suggests that bargaining outcom es within the E C — o r at least am ong three large states— consistently reflect issue-specific pat­ terns o f asym m etrical in terd ep en d en ce. T his findin g im plies that studies o f bar­ gain in g over d ie form ation o f international regim es m ight do well to set aside the “relative capability” m odels traditionally em ployed by Realists, as well as the excessive focus o f h egem o n ic stability theory on the role o f a single actor, in fa­ vor o f the m ore gen eral Nash bargaining m odel custom arily em ployed by n e g o ­ tiation analysts. Such a m odel o f bargaining alon g the Pareto-fronder, Stephen Krasner has argu ed, parsim oniously captures both the positive-sum and the zerosum elem ents o f bargain ing in a single m odel, thus transcending the m uch criti­ cized distinction betw een absolute and relative gains.37 A s David Baldwin has lo n g argu ed, such a m odel w ould be m ore consistent than the capability-based view with basic social-scientific theories o f power.38 35 Busch and Milner, “Future,” 263-265; McNamara, Currency, chap. 2; Dorothée Heisenberg, The Mark o f the Buntlesbank: Germany i Role in European Monetary Cooperation (Boulder, Colo., forthcom­ ing) ; Andrei Markovics and Simon Reich, The German Predicament: Memory and Power in the New Europe (Ithaca, 1997). 56 Robert Gilpin, War and Change in International Politics (New York, 1981 ). 37 Stephen D. Krasner, “Global Communications and National Power: Life on the Pareto Frontier,” World Politics 43:3 (April 1991), 336-366; Moravcsik, “Taking,” 538-539, 543-544. 38 David Baldwin, Paradoxes of Power (New York, 1989).

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European Integration in Retrospect T h e prim acy o f national p referen ces over capabilities is m ost clearly reflected in the tripartite rationalist fram ew ork that structures each o f the case studies. T h e five case studies con firm the appropriateness and the udiity o f the distinc­ tions am o n g p referen ce form ation, bargaining, and institudonal choice. Internal docum en ts, interviews, dom estic cleavages, and national n egotiating positions con firm that G erm any, France, and Britain consistently m ade policy on the basis o f stable, relatively transparent preferen ces across outcom es. U nderlying shifts in bargain ing positions and tactical m aneuvers w ere relatively stable, w eighted objectives. T h is assum ption holds even w hen a superficial inspection m ight tem p t o n e to draw the opposite co n clu sio n — as w hen dom estic preferen ce fo r­ m ation was controversial, w hen m ore than one actor represented a governm ent transnadonally and transgovernm entally, or w hen each governm ent targeted threats an d concessions at particular dom estic groups in foreign polities. T h e calculation s o f the G erm an govern m en t in the M aastricht negotiations over E co n om ic and M onetary U nion are a striking exam ple. Despite overt con flict, the institutions o f G erm an policy-m aking in d u ced a relatively consistent bar­ gain in g position based on a com prom ise am ong business, governm ent, and the B undesbank. Subjective evidence confirm s the conclusion: across the case stud­ ies, governm en tal and supranational actors consistently described their own and o n e a n o th e r’s policies in terms consistent with the rational, unitary actor assum p­ tion. G overn m en ts also treated transfers o f sovereignty to international institu­ tions as separate fro m — and gen erally subordinate to — substantive agreem ents. Similarly, in tern ation al institutions were gen erally viewed as means to im p le­ m en t substantive bargains or realize ideological p referen ces— an instrum ental view consistent with rational unitary action. T h e tripartite rationalist fram ew ork is usefully gen eralizable to m any in tern a­ tional n egotiations, fo r it offers a m eans o f com bin ing theories with a m inim um sacrifice o f structure.39 It offers a superior alternative to the pervasive tendency am on g Realists (as well as Institutionalists) to com bine different theories by p rivilegin g those explan ation s that treat state p referen ces as fixed and lim iting the app lication o f theories o f state preferen ces to anom alies left by “system ic” theories. T his ap p roach, as I have argued elsewhere, is overtly and arbitrarily b i­ ased. T h e specific tripartite sequ en ce p roposed here is in fact the only o rderin g consistent with the rationalist assum ptions that un derlie m ost m ajor theories o f in tern ation al relations.40 T h e case studies in this b o o k confirm that no assum p­ tion o f fixed con flictual or con vergen t p referen ces w ould capture the subtly varied p referen ces o f governm ents co n cern in g trade, agriculture, money, and o th er issue-areas. A lth o u gh it is usefid fo r the lim ited purpose o f e xp lo rin g p ar­ ticular theories o f strategic interaction, the a priori assum ption that p referen ces are fixed has proved an unsatisfactory starting p o in t fo r exp lo rin g most cases o f state b eh avio r— as we saw in ch ap ter 1, it has w eakened m any existing research p rogram s. It is striking that historians studying the same question reach p re­ cisely the sam e conclusion: explanations o f E C decisions, A lan Milward and his M Andrew M. Moravcsik, “Disciplining Trade Finance; The OF.CD Export Credit Arrangement,” International Organization 43:1 (Winter 1989), 173 -176. 40 Moravcsik, “Taking," 542-544.

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T h e C h o ic e fo r E u r o p e

associates argu e, have “n o predictive p ow er” in the absence o f a con vin cing ac­ co u n t o f do m esd c politics.41 A co m m o n o bjectio n to the gro u n d in g o f explanations o f state behavior in m ore detailed investigations o f national p referen ce fo rm ation — vo iced even by those w ho a ccep t the theoretical and m eth o d o lo gical case fo r d o in g so — is that such investigations are n o t only theoretically intractable b ut pose overw helm ing em pirical research challen ges better left to historians. Such an adm ission o f d e ­ feat is unnecessary. W ork from studies o f the dem ocratic p eace to e n d o gen o u s tariff policy d e m ­ onstrate that explanations o f variation in national preferen ces can be parsim o­ n iou s and powerful. T h e re is, however, an im portant m eth odological caution here. A n accurate assessment o f the nature and intensity o f state preferen ces, as historians regularly rem ind us, m ust rest on m ore than the perusal o f go vern ­ m en t statem ents and secon dary o r journ alistic accounts. Such “soft” sources are so n um erous and varied as to provide con siderable support fo r alm ost any p lau­ sible co n jectu re abou t E uropean in tegration.42 T h is b o o k confirm s that there is n o substitute fo r relian ce o n “h a rd ” prim ary sources such as internal docum ents, interviews, reliable m em oirs, and a close exam ination o f policy; studies based entirely on secondary sources— even w here there is historical consensus— may well be m isleading. Such gen era l theoretical and m eth odological conclusions are o f m ore than abstract interest. By subsum ing E uropean integration w herever possible un der gen eral theories, rather than treating it as sui generis, we invite outsiders to treat its lessons as relevan t to their own political exp erien ce. Far from bein g unique, the history o f E uropean integration has m uch to teach those co n cern ed with the W orld T rade O rgan ization , the N orth A tlantic Free T rade A rea, and o th er in tern ation al institutions. T h e E C is a laboratory in w hich to investigate a series o f co m m o n political p h en o m en a develop ed fu rth er in Europe than elsewhere o n the glo b e. I have ex p lo re d som e o f these p h en o m en a in this b o o k — the co n ­ d u ct o f in tern ation al trade, m onetary, and regulatory policy u n d er extrem ely h igh levels o f trade and capital mobility, interstate bargaining dynam ics un der co m p lex in terd ep en d en ce, and the m otivations fo r d elegation and p o olin g o f national sovereignty. O th ers deserve m ore intensive study, am ong them the o p ­ eration o f b in d in g interstate legislative procedures and the dynam ics o f legal dispute resolution. In all these things, E urope is a global harbinger. Yet we can draw reliable practical and theoretical lessons from E u ro p e’s e x ­ traordinary e xp erien ce only if we em ploy gen eral theories, shared concepts, and reliable m eth odologies. O n ly such instrum ents perm it us to distinguish rigor­ ously betw een gen eral and co n tin gen t p henom ena, and so to m ake accurate 41 Milward et al., Frontier, 196. 42 Even where a consensus exists, it can be biased or misleading, as we saw in examining the exist­ ing literature on the European policies o f Harold Macmillan, Charles de Gaulle, and Helmut Kohl. Even accurate secondary accounts characteristically fail to investigate in theoretical terms those as­ pects o f negotiations critically important for the reconstruction o f interstate bargaining, including preference intensity, the boundaries o f national win-sets, and the information available to each actor. 500

European Integration in Retrospect com parisons and transfer appropriate lessons from case to case. For this reason above all, the rein tegrad o n o f E uro pe into the m ainstream study o f in tern a­ tional and com parative polidcs should rem ain a priority for those w ho seek to understand the most successful in tern auonal insutudon o f m odern times. Critics will con tin ue to co n ten d that E uropean integration has been in fact a co n tin g e n t outcom e: a response to geopolitical fears o f a bygone era, the dream s o f visionary E uropean federalists, o r pressures from technocratic b e­ lievers in central planning. Som e go even further, asserting that integration was u n in ten d ed , a co n sequen ce un leashed by governm ents unaware o f future co n sequ en ces and incapable o f co n d u ctin g consistent policy. Such analyses naturally lead to d eep co n cern and skepticism about the future o f European in tegration. If the EC is based on n o m ore than fears, dream s, schem es, or m is­ takes, w hat co n fid en ce can we have in its future? T h e structural perspective advanced in this b o o k suggests a differen t and m o re optim istic view. E uropean integration was no accident. It continues to ad­ van ce even as dem ocratization pacifies western E urope, E uropean federal union triggers po pu lar backlash, and tech nocratic p lanning falls out o f fashion. T h e E C has b een , fo r the most part, the deliberate creation o f statesmen and citizens seekin g to realize econ o m ic interests throu gh traditional diplom atic means. O ve r forty years E uropean politicians and p eop les have repeatedly w idened and d e ep e n e d the E C while rem aining largely aware o f its past, present, and future con sequences. T his transfer o f sovereign prerogatives has, m oreover, occurred entirely w ithout b lo o d sh ed — a un ique achievem en t in w orld history. T h e result has b een an institution so firm ly gro u n d ed in the core interests o f national gov­ ern m en ts that it occup ies a p erm an en t position at the heart o f the E uropean p o ­ litical landscape. T h e re in lies the political achievem en t and the o n g o in g socialscientific puzzle.

5oi

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Index

A bs, H erm an n , 97 A ctio n C o m m ittee fo r the U n ited States o f E u ro p e, 56 , 103, 10 7, 138, 1 5 1 - 1 5 2 , 233, 245, 2 9 1; E uratom and n u clea r w eapons, 120, 14 5 , 1 4 8 - 1 4 9 A d en au er, K o n rad , 2 7 - 3 3 , 9 0 - 9 1 »9 4 “ 9 ^> 9 9 - 1 0 0 , 10 7, 1 1 9 , 1 3 1 - 1 3 3 , 1 3 6 - 1 3 7 , 1 4 4 - 1 5 2 , 15 7 , 160, 16 5, 17 4 , 182, 188, 19 1 , 1 9 8 -2 0 0 , 2 13 , 2 19 , 2 3 1, 234, 3 0 1, 3 2 7, 480; a gricu ltu re and CA P, 1 0 1 -1 0 2 , 201, 204; a nd custom s u n io n , 9 1 , 19 7 , 201, 2 0 5 -2 0 7 , 4 7 7 ; and DBV, 200; and Euratom , 9 1 , 97, 1 0 1 - 1 0 2 , 13 5, 4 7 5 - 4 7 6 ; a n d E D C , 9 1; and E uropean federalism , 91 ; and E uropean p o ­ litical u n io n , 9 1 ; and F ouchet Plan, 198, 227; a n d F rance, 9 1 , 9 4 - 9 5 , 102, 1 9 7 - 1 9 8 , 202, 2 2 5 -2 2 6 , 4 76 , 478; FTA and FJFTA, 164, 170 , 19 7 , 2 0 1, 220, 4 7 7 , 490; and G erm an u n ificatio n , 94; a n d G reat Britain, 94, 220, 223; and in stitutional d elegatio n , 102; and M LF, 227; and N A T O , 202, 226; and the Saar, 102; a n d U S, 94, 198 A gricu ltu re. See C o m m o n A gricultural Policy (C A P ) A lgeria, 10 7, 1 1 4 - 1 1 6 , 1 7 9 - 1 8 0 , 183 A m ato, G iu lian o , 433 A n d erso n , Perry, 68, 70, 490 A n d reo tti, G iu lio , 290, 2 9 5 -2 9 7 , 363 A ndrew s, David, 4 1 1 A ntitrust policy. See C o m p etitio n policy A p e l, H ans, 251 A rm an d , L ou is, 139 A ssociation fo r M on etary U n ion in E urope,

393 »4 3 4 * 440 A to m ic energy. See E uratom and n uclear w eapons. A sylum p olicies. See Im m igration and asylum p olicies Attali, Jacques, 2 7 1 , 3 5 1 , 3 56 , 4 1 4 , 436 Austria, 288, 3 1 3 Baldw in, David, 498 B all, G e o rg e , 223 B alladur, E d o u ard , 2 6 5 ,4 3 2 - 4 3 4

Bangem an n, M artin, 397 Bank o f E ngland, 2 7 6 -2 8 0 , 2 8 3 -2 8 5 , 323, 421 B ank o f France, 2 6 4 -2 6 6 , 2 7 1 , 297, 305, 338 Barre, Raym ond, 245, 2 6 1 -2 6 3 , 2 6 6 -2 6 9 , 287, 292. 295, 302, 305-306» 3 3 8 -3 4 » Basle A g re em en t (1 9 7 2 ). See Snake. B aun , M ichael, 462 B eaverbrook, L ord , 171 Bech, I>eo, 140 B ecker, Gary, 36 Belgium , 4 10 ; and CAP, 209, 2 13 , 224, 350, 488; com p etition policy, 2 19 ; custom s union and E uratom , 142; a n d E CB, 444, 469; and European federalism , 309, 376 , 429; and EP, 3 1 1 , 366, 376 , 455; and fo reign p olicy c o o p ­ eration , 226, 4 5 0 - 4 5 1 ; and G erm an un ifica­ tion, 389; im m igration and asylum policies, 447; and institutional d elegatio n , 1 5 3 - 1 5 6 , 2 19 . 3 0 9 -3 * 350 . 3 6 3 . 3 6 6 . 376 .4 8 8 ; justice and in terio r affairs, 447; and M aastricht Treaty, 440; and SEA, 3 18 , 344, 348, 3 ^ 0 360, 363, 376; Snake, EMS and EMU, 2 4 1, 287, 294, 2 9 7 -2 9 9 , 4 16 , 439, 4 4 3 -4 4 5 ; and social policy, 452 Bénard, A n d ré, 356 Bérégovoy, Pierre, 2 7 1 , 340, 4 1 4 - 4 1 5 , 442, 4 4 5 .4 6 5 Berg, Fritz, 9 6 - 9 7 , 19 9 -2 0 0 , 248 Berlin, 29, 34, 9 1, 94, 178 , 1 9 7 -1 9 8 , 244 Beyen, W illem , 139, 1 4 0 - 1 4 1 , 154 Blair, Tony, 4 2 5 - 4 2 7 ; 454 Blessing, Karl, 247 Blum , L eo n , 12 1 Bourgcs-M aunoury, M aurice, 103, 106, 11 4 , 152 Brandt, Willy, 2 7 -2 9 , 95, 245, 2 5 1, 3 0 1; agri­ culture and CAP, 258, 304, 2 4 9 -2 5 0 , 258, 2 9 1 -2 9 2 , 3 0 5 -3 0 6 , 4 75; and E C budget, 258; and E uropean C o u n cil, 259; E uropean policy' and Ostpolitik, 238, 244, 250; and fo r­ eign policy co o p eratio n , 256; and France, 19 8 , 227, 259; and region al policy, 258; and Snake, 244 B reth erton , Russell, 129, 133, 1 4 2 - 1 4 3 , 172

50 3

Index B retton W oods system , 239, 2 4 6 - 2 4 9 , 264, 2 7 7 .2 8 5 - 2 8 7 ,3 0 4 ,3 1 2 ,4 7 7 ,4 9 8 ; In ternational M on etary F un d (IM F), 250, 262, 2 72 , 2 79 , 294, 300, 303 B rittan, L e o n , 423 Brow n, G eo rg e, 17 1 B u n d esb an k, 394, 397 “ 39 8 >4 1 *, 4 3 l »445 ; and E C B , 3 9 5, 404, 4 6 5, 469; and France, 399 »47 ° ; anc* F ran co-G erm an E con om ic C o u n cil, 4 3 3; and G erm an un ificadon , 4 3 1; and L ou vre A cco rd , 394; Snake, EM S and EM U , 240, 2 4 4 - 2 5 7 , 2 8 9 -2 9 0 , 293, 2 9 7 303, 3 0 6 -3 0 9 , 3 1 2 - 3 1 3 , 328, 332, 3 87, 3 9 1,

3 9 4 “ 39 6 » 398-404» 4 1 1 - 4 1 5 >4 * 4 »4 2 8 430, 4 3 2 - 4 3 5 »4 4 3 - 444 »447 »4 58, 4 6 2 4 6 6 , 4 70 , 478 , 4 9 3 ,4 9 9 B u n desverban d d e r D eutschen Industrie (B D I), 9 6 -1 0 0 ; custom s u n io n and C o m ­ m on M arket, 19 9 -2 0 0 , 204, 328, 396, 4 7 7 ; and Euratom , 9 7, 4 77; and E C B , 404; and FTA, 1 9 9 -2 0 0 , 204, 4 77; a n d M aastricht Treaty, 396; Snake, EMS and EM U, 2 4 7 -2 4 9 , 257» 38 1 »387-393» 3 9 6 »4 0 0 -4 0 3 , 409, 428, 466, 4 78 Bush, G e o rg e , 400 Butler, R.A.B., 122, 1 2 6 - 1 3 1 C allag h an ,Jam es, 253, 2 7 4 - 2 7 6 , 2 7 9 -2 8 3 , 290, 2 9 5 - 2 9 7 , 3 0 0 -3 0 1 , 3 1 1 , 349, 482 Cam dessus, M ichel, 271 C a m ero n , David, 4 6 4 - 4 6 5 Cam ps, M iriam , 160, 184, 195 C an ad a, 3 3 6, 495 C arstens, Karl, 100, 144, 14 7 , 3 3 1 , 360 C arter, Jim m y, 27, 244, 2 5 2 -2 5 3 , 256 C h a n d ern a g o r, A n d ré, 3 3 3 -3 3 4 Ch eysson , C la u d e , 3 3 7, 361 C h èv cn e m e n t.J ea n -P ie rre, 2 7 0 - 2 7 1 , 3 3 9 - 3 4 0 C h ira c,J acq u es, 2 5 9 -2 6 2 , 2 6 6 -2 6 9 , 2 73 , 294,

343 »432 C h ish o lm , D on ald, 72 C h u rch ill, W inston, 124 C la p p ier, B ern ard , 129, 2 9 7 -2 9 9 C o ck fie ld , L o rd A rth u r, 56 , 59 , 3 1 4 - 3 1 7 , 3 2 4 - 3 2 6 ,3 3 6 ,3 5 4 ,3 5 9 - 3 6 2 ,3 6 8 - 3 7 2 , 3 7 7 ,4 1 9 ,4 8 3 C o g a n , C h arles, 189 C o h esio n Funds. See E uropean C om m u nity budget: C o h e sio n Funds C o lu m b o , E m ilio, 348 Com m ission o f the E uropean C om m u nities, 1 2 , 5 4 - 6 1 , 6 7 - 7 5 , 86, 102, 1 5 4 - 1 5 6 , 160, 16 5, 1 7 7 - 1 7 9 , 184, 196, 2 0 6 -2 0 8 , 220, 232, 236, 268, 2 9 1, 296, 334, 3 9 1, 4 1 3 - 4 1 5 , 4»9» 4 3 1 - 433» 442» 4 5 1-4 6 0 » 4 6 7 -4 6 8 , 4 8 1, 4 8 7; and agen da-setting pow er, 15 3 , 160, 19 4 , 2 0 5 - 2 1 0 , 2 2 7 -2 3 5 , 2 6 7, 2 7 3 -2 7 4 , 3 1 0 - 3 1 2 , 352, 3 7 7 , 445, 4 5 6 - 4 6 1 , 469, 479» 482, 4 8 7 -4 8 8 , 4 9 1 - 4 9 2 ; agricu ltu re a n d C A P , 15 3 , 16 1 , 201, 2 0 5 -2 0 6 , 2 0 9 -2 1 6 , 2 2 5 - 2 2 7 , 2 3 2 -2 3 4 , 298, 3 0 5 -3 0 6 , 349, 487; and bu d g eta ry powers, 2 1 5 , 2 2 7 -2 2 9 ; 446; and co m p etitio n policy, 14 9 , 1 5 3 - 1 5 4 , 2 1 8 - 2 1 9 , 487; Em pty C h a ir Crisis and L u x ­ em b o u rg C o m p ro m ise, 1 9 3 - 1 9 4 , 2 2 8 -2 3 3 ;

5 °4

and E C B , 386, 440, 4 4 4 - 4 4 5 , 469; and EP, 2 3 1, 4 19 , 449, 4 5 5 - 457 »467» 489; and fo r­ eign policy co o p eratio n , 4 4 8 - 4 5 1 ; and G A T T , 208; im m igration and asylum policies, 452; and industrial policy, 2 18 , 4 54, 487; and institutional d elegatio n , 164, 203, 2 19 , 2 2 4 - 2 2 8 ,2 8 2 ,3 1 0 - 3 1 1 ,3 3 3 - 3 3 4 ,3 4 3 , 4 4 9 - 4 5 2 , 480; ju stice and in terior affairs, 450; and M aastricht Treaty, 449, 4 59, 4 6 1, 463; as m ediator, 205, 210, 2 3 0 -2 3 3 , 3 7 1 , 4 58, 4 79 , 485; and political u n io n , 448, 460, 470, 480; and region al policy, 2 18 , 3 0 5 -3 0 6 , 482; and SEA, 3 1 6 - 3 1 7 , 326, 3 4 7, 3 5 3 -3 5 8 , 3 6 1 - 3 7 8 , 469, 4 7 9 - 4 8 7 ; Snake, EM S and EM U, 2 4 0 -2 4 1 , 259, 286, 2 9 1 -2 9 5 , 2 9 8 302, 3 0 5 -3 0 6 , 309, 4 3 9 - 4 4 5 , 4 6 1, 487; and social policy, 305, 449, 4 5 2 -4 5 3 ; and trade n egotiations, 15 3, 225, 2 3 2 -2 3 6 , 487; and transport policy, 15 3, 2 1 7 - 2 1 8 , 2 3 2 -2 3 4 C o m m ittee o f C en tral Bank G overnors, 4 3 7 -

439

C o m m ittee o f P erm an en t R epresentatives (C o rep e r), 15 5 , 207, 224, 2 2 8 -2 2 9 , 233, 268 C o m m ittee o f the R egions, 403, 4 1 5 , 4 55 C o m m o n A gricultural Policy (C A P ), 2, 4, 7, 18, 56, 80, 8 6 ,9 9 , 1 1 2 , 138, 14 7 , 1 5 7 - 1 6 0 , 17 7 , 1 8 2 - 1 9 7 , 2 1 6 - 2 1 7 , 2 2 8 - 2 3 1 , 240, 245, 2 4 8 -2 5 0 , 2 5 7 - 2 5 9 , 263, 266, 2 77, 286, 2 9 0 -2 9 1 , 297, 3 0 5 -3 0 6 »324» 3 3 ! - 332 . 3 37 »347 »4 04 »43 ° . 472» 4 7 8 -4 8 0 , 4 9 1 - 49 3 ; decision -m akin g p ro cedures, 156, 2 2 7, 309, 4 8 7 -4 8 8 , 492; finan cing, 16 1 , 164, 184, 1 8 9 - 1 9 5 , 208, 2 1 1 - 2 1 5 , 2 2 2 -2 2 4 , 22 7, 232, 236, 238, 265, 282, 292, 3 0 3 -3 0 4 , 3 0 8 -3 0 9 , 3 12 , 3 5 0 - 3 5 2 , 360, 367; and G A T T , 212; im p lem entation , 2 0 8 -2 1 6 , 2 3 6 - 2 3 7 , 309; p ricin g, 16 1 , 164, 169, 17 6 , 1 8 0 - 1 8 1 , 194, 2 0 0 -2 1 6 , 2 3 3 -2 3 6 , 244, 258, 273, 306, 3 12 , 334 » 349 »486, 492; share o f E C e xp en d itu re, 208; and SEA, 3 18 , 3 7 4 - 3 7 6 , 485; Stresa C o n feren ce (1 9 5 8 ), 2 1 1 , 233; and T reaty o f Rom e, 2 0 8 -2 0 9 C o m m o n extern al tariff, 86, 128, 138 , 14 1, 146, 15 9 , 184, 2 0 6 -2 0 7 , 2 2 1, 2 2 7, 4 74 C o m m o n Foreign and Security Policy (CFSP). See Foreign policy coop eration : CFSP Com m on w ealth , 30, 3 9 - 4 1 , 1 1 5 , 1 2 2 -1 2 9 , 136, 1 6 4 - 1 7 6 , 1 7 4 - 1 7 9 , 1 8 7 -1 8 8 , 1 9 0 1 9 1 , 2 2 0 -2 2 2 , 2 7 4 - 2 7 5 , 2 8 1 -2 8 2 , 4 76 , 490 C o m p etitio n policy, 90, 136, 1 4 7 - 1 4 9 , 154, 159 , 18 1, 184, 204, 2 1 8 - 2 1 9 , 233, 236, 479.487 C o n fed era tio n o f British Industry (C B I), 358, 422; and 19 75 referen d u m , 1 6 8 -1 6 9 ; and British E C m em bership bids, 164, 1 6 7 - 1 7 1 , 176» 2 75, 281 ; and ECB, 421 ; and ECJ, 422, 425; and FDI, 4 2 1; FTA and EFTA, 12 5, 167, * 7 °» * 7 5 » 204; and M aastricht Treaty, 4 2 0 422; and SEA, 3 2 2 -3 2 3 ; Snake, EMS and EM U, 2 7 5 - 2 7 9 , 2 8 2 -2 8 5 , 288, 2 9 1, 3 8 1, 386, 4 1 7 , 4 2 0 -4 2 3 , 42 6, 429; and social p o l­ icy, 4 2 0 -4 2 2 ; T reaty o f R om e and custom s un io n , 1 2 5 - 1 2 7 , 1 5 1 , 2 0 4 -2 0 5 C o n seil N ational d u Patronat Français (C N P F ),

Index 10 6, 2 0 4 -2 0 5 ; a n d co m p etitio n policy, 112 ; a n d E C B , 409; a n d finan cial d eregu lation , 4 10 ; a n d FTA, 11 0 , 18 1; and G A T T , 18 1; and institutional d elega tio n , 11 2 ; and M aastricht Treaty, 409; a n d SEA, 3 3 6 - 3 3 7 ; Snake, EMS and EM U , 263, 3 8 1 , 4 0 8 -4 0 9 , 4 1 2 , 4 16 , 429; and social policy, 409; T reaty o f Rom e a n d custom s u n io n , 1 0 8 - 1 1 0 , 1 1 3 - 1 1 6 , 122, 1 4 4 ,1 8 0 - 1 8 2 C o u n cil o f E u ro p e, 100, 17 1 C o u n cil o f M inisters, 6 7 , 7 1 - 7 2 , 86, 10 1, 1 2 1 , H9» *55» 228, 268, 2 9 1, 352, 3 9 1 , 430, 468, 493; and bu d g eta ry powers, 2 15; and C o m ­ m ission, 4 5 5 - 4 5 6 , 460, 488; C A P and S p e ­ cial C o m m ittee o n A gricu ltu re, 2 1 0 - 2 1 5 , 224, 22 7, 233, 236, 4 8 6 -4 8 8 ; and co m p eti­ tion policy, 2 19 ; Em pty C h air Crisis a n d L u x ­ e m b o u rg C o m p ro m ise, 229, 334, 366; and E C B , 4 1 4 , 4 39, 444, 469; a n d EP, 3 3 1 , 379 , 4 5 5 - 4 5 7 ; and fo reign policy co o p eratio n , 460; and institutional d elegatio n , 2 2 4 -2 2 5 , 3 1 0 - 3 1 1 , 333 - 334 , 343; and M aastricht Treaty, 386, 449 , 459 ; and p olitical u n io n , 448, 450, 480; a n d SEA, 322, 3 5 6 -3 6 3 , 3 6 6 - 3 6 7 , 3 7 1 ; Sn ake, EM S and EM U, 2 9 5 2 9 7, 300, 4 4 1 - 4 5 6 ; and social policy, 453; a n d transport policy, 218 C o u v e d e M urville, M aurice, 159 , 232; agricu l­ ture a n d C A P , 1 9 1 , 222; and British E C m em bersh ip, 19 1 , 222; a n d Em pty C h air Crisis, 228; and F ouchet Plan, 226 C o u zen s, K en , 280, 297 C rax i, B ettin o, 3 6 3, 368 Cu stom s U n io n a n d C o m m o n M arket, 18, 36, 70 , 8 6 - 8 7 , 9 ° - 9 1 »9 6 - 9 7 , 1 0 0 -1 5 0 , 182, 19 9 , 2 0 0 -2 0 6 , 2 3 6 - 2 3 7 , 286, 3 12 , 4 7 4 4 7 5 »4 8 1 , 4 8 5 - 4 8 7 , 4 9 1 -4 9 3 ; and CAP, 2 1 1 - 2 1 3 ; and EFTA, 16 7 , 1 7 1 , 1 7 5 , 208, 2 2 0 -2 2 1 D a h ren d o rf, Ralf, 3 53 , 358 D avignon , E tien n e, 56 , 3 16 , 3 4 7, 3 5 5 - 3 5 6 ,

35 8 »3 61 D e Boissieu, P ierre, 449 D e b ré , M ichel, 15 5 , 18 5 —18 7, 227, 264; and F o u ch et Plan, 226; T reaty o f R om e and E C S C , 1 1 7 , 182 D e Ferranti, Basil, 3 5 7 D e G asperi, A lcid e, 91 D e G au lle, C h arles, 7, 12, 27, 30, 33, 79 , 9 1, 94, 1 1 4 , 12 2 , 13 3 , 1 3 7 , 150, 160, 165, 1 7 3 - 1 7 4 , 2 0 0 -2 0 6 , 262, 2 72 , 3 0 1, 4 8 1 482; agricu ltu re a n d CA P, 1 1 1 , 17 7 , 1 8 0 19 7 , 204, 2 1 3 - 2 1 4 , 2 2 1 -2 2 2 , 2 2 7 -2 2 9 , 2 3 2 -2 3 6 , 4 7 6 - 4 7 8 , 4 8 6 -4 8 8 , 496; and British E C m em bership, 8 2 -8 4 , 1 7 1 - 1 7 2 , 1 7 6 - 1 7 7 , 1 8 0 - 1 8 2 , 1 8 5 - 1 9 3 , 204, 2 2 0 224, 2 2 7, 259 , 265; and C om m ission, 227, 480, 488; Em pty C h air Crisis and L u x em ­ b o u rg C o m p ro m ise, 185, 1 9 4 - 1 9 6 , 2 2 9 236, 4 78 ; Euratom and n u clear w eapons, 1 1 7 , 14 9 , 1 7 8 - 1 7 9 ; and ED C , 1 1 7 , 1 7 8 - 1 7 9 ; E u ro p ean policy, 8 3 - 8 4 , 1 7 7 - 1 7 9 , 1 8 3 -1 8 6 , 19 4 , 19 7 , 222, 2 2 5 -2 2 6 , 229, 232, 235, 4 7 7 - 4 7 8 , 496; a n d FNSEA, 180, 197; and

F ouchet Plan, 17 5 , 1 8 2 -1 8 6 , 189, 222, 2 2 5 22 7, 450, 478; FTA and EFTA, 164, 170, 1 7 8 - 1 8 2 , 188, 190, 193 , 207, 2 1 9 -2 2 0 ; and Germ any, 178, 198, 2 2 5 -2 2 6 , 235, 264; and institutional d elegatio n , 1 7 7 - 1 7 9 , 1 8 2 -1 8 9 , 1 9 4 “ 196, 2 0 1, 205, 222, 227, 235, 265, 4 7 5 - 4 7 8 ,4 8 0 ,4 8 6 ; and N A T O , 184; Treaty o f Rom e and custom s u n io n , 1 1 7 , 12 1 , 1 7 9 184; a n d US, 1 7 7 - 1 8 0 , 183, 189, 195; and USSR, 227 D ekker, Wisse, 355-357, 3 7 , 372 D e Larosière, Jacques, 4 14 D elors, Jacques. See also E co n om ic and M o n e ­ tary U nion (EM U ): D elors C om m ittee. 7 - 8 , 52* 56. 59* 79» 232, 2 6 1 -2 6 2 , 270, 335, 3 3 9 - 34 °» 4 3 1 - 4 3 2 , 4 55 ; and E C B »4 6 4 '» EM S and EM U, 2 7 1 , 287, 302, 332, 343, 3 6 5 -3 6 6 , 3 7 2 - 3 7 3 , 3 9 8 -4 0 2 , 4 1 4 , 4 3 3 439» 4 42 -4 4 5» 4 5 8 - 4 6 0 , 4 6 3 ,4 8 2 -4 8 3 ; and EP, 456; on a fed eratio n a m o n g n atio n ­ states, 4 72 ; and fo reign policy co o p eratio n , 4 5 0 - 4 5 1 , 460; and G erm an un ification, 438, 4 6 0 - 4 6 1 ; and institutional delegation, 362, 3 7 2 - 3 7 3 , 4 1 9 , 448, 4 5 7 , 480; and M aastricht Treaty, 3 8 1, 449, 4 6 0 -4 6 4 , 4 72 , 4 8 0 -4 8 1 ; and political u n io n , 438, 448, 460, 4 63, 482; and SEA, 3 1 5 - 3 1 7 , 3 4 7, 356,

359 »362, 36 5 - 373 »4 8 1 -4 8 3 ; and ^cïa\ policy, 3 6 1, 372 - 373 »45 2 - 45 4 »4 6 1; Struc­ tural Funds and C o h esio n Funds, 3 6 7, 372, 4 4 6 ,4 5 3 D em ocratic deficit, 7 1 , 76, 156 , 3 1 1 - 3 1 2 , 369,

3 7 ! »469* 5 01 D enm ark, 190, 19 5 , 200, 454; agricu ltu re and CA P, 99, 2 1 1 , 350; and fo reign policy c o o p ­ eration , 4 5 0 - 4 5 1 ; and EP, 3 1 1 , 3 6 7, 4 5 6 457; E uropean federalism and E uroscepticism, 376 , 3 8 1, 4 1 9 , 429; and institutional delegatio n , 3 1 1 , 3 4 9 -3 5 0 , 3 6 1 -3 6 3 , 366, 3 76 , 4 56, 468, 487; and M aastricht Treaty, 37 9 »426, 4 4 9 ,4 6 8 ; and SEA, 3 18 , 3 6 1 -3 6 3 , 3 6 6 - 3 6 7 , 3 7 2 - 3 7 6 , 487; Snake, EM S and EM U , 287, 2 9 3 -2 9 4 , 2 9 7 -2 9 8 , 395, 399, 4 16 , 439; 4 4 2 -4 4 3 ; and social policy, 366, 452 D eutsche Bank, 97 D eutsche B auern verband (D B V ), 200; and CA P, 394; EM U and M aastricht Treaty, 3 9 3 - 3 9 4 , 428; and T reaty o f R om e, 9 8 -9 9 ; D eutsche G ew erkschaftsbund (D G B ), 428; cus­ tom s u n io n and E C SC , 98; and SEA, 328; Snake, EM S and EM U, 246, 248, 393, 403; and SPD, 98; D eutsche Industrie- u n d H and clstag (D IH T ), 2 4 9 ,3 2 8 ,3 9 3 D eutsche R aiffeisenverband, 99 D eutsche Sparkassen- u n d G iroverban d, 248 D e Zulueta, Philip, 16 6, 170, 17 3 , 220 D ixon , Pierson, 188, 220 D o o g e C om m ittee (Ad H o c C om m ittee for Institutional A ffairs), 3 3 1, 353, 3 6 0 -3 6 3 ,

371

D o o ge, Jam es, 360 D raft T reaty Establishing the E uropean Union. See E uropean Parliam ent (EP): SEA

505

Index Dumas, Roland, 334, 351, 4 13, 436 Dyson, Kenneth 464 Eccles, David, 133 ECOFIN, 254, 2 91-2 9 3 , 2 9 7 -2 9 8 ,4 4 1-4 4 3 Economic and Monetary Union (EMU). See also Snake and European Monetary System (EMS). 2 ,4 , 21, 57, 149, 313, 34 7-3 49 , 381, 3 8 6 -4 4 8 , 4 5 7 -4 7 0 , 4 75 “ 478, 4 8 6 -4 8 7, 4 9 i - 493, 496; and Cohesion Funds, 446; convergence criteria, 4 3 9-4 4 3 , 462-463; Delors Com m ittee and Report, 57 , 393, 398 - 399 >4 ° 3 »4 2 5 -4 2 6 , 434 - 436 , 4 40 4 41, 445, 4 58 -46 0 , 4 6 3-4 6 5, 480; EMI, 4 4 0 -4 4 1 , 462; and EMS, 4 11 , 4 23-424; and exchange-rate policy, 3 7 9 -3 8 1; and German unification, 380, 387-389, 396, 401, 408, 4 3 7 -4 3 8 ,4 7 6 ; parallel currency plan (Great Britain), 395, 421, 424, 435, 4 4 0 -4 4 1; and political union, 3 7 9 " 3 8 i, 3 9 1»399* 4 ° 3 “ 4 ° 5 * 4 *3 »435 * 44 °» 447 * 482-483; and SEA, 3 6 5-3 6 6, 369, 3 72 -3 73 ; stability pact, 442, 4 4 5 -4 4 6 ; Stage Three, 440, 443; Stage Two, 440, 444, 462; Werner Report (1970), 266, 292. 3 ° 5 »3 10»436 , 481 Eden, Anthony, 108, 119, 12 2 -12 6 , 1 2 9 -1 3 1 , 144 Eisenhower, Dwight, 223 Emminger, Otto, 2 5 1-2 5 5 , 297 Empty Chair Crisis (19 6 5 -19 6 6 ). See Luxem bourg Compromise and Empty Chair Crisis (19 6 5 -19 6 6 ). Enlargement of EC membership, 2, 30, 150, ! 59 “ l 6 i, 164, 16 8 -17 5 , J88, 199-200, 204, 215, 2 19 -2 2 4 , 234, 237, 238-240, 244, 250, 2 57-260, 263-265, 2 7 3 -2 75 , 2 8 1282, 290-292, 303, 308-300, 312, 34Q352, 369. 374* 399* 408, 418* 482, 488, 498 Environmental policy, 37, 40, 73, 293, 3 11, 319, 326, 329, 332, 344, 3 6 5 -3 6 7, 3 72 -3 75; 43°* 454“ 457* 4 6 8 -4 6 9, 485, 489 Ersboll, Niels, 371 Ertl, Josef, 250, 304 Erhard, Ludwig, 29, 9 6 -9 9 , 10 0 -10 3, 119, 137, 144, 14 8 -14 9 , 181, 194, 198-204, 207-208, 2 1 3 -2 1 4 , 220, 223, 227-228, 2 3 5-2 36 , 247, 2 57-258, 477, 488-490 Euratom and nuclear weapons, 86, 9 0 -9 1, 94, 97, 10 0 -10 6, 113, 1 1 8 - 1 2 1 , 13 1 -14 5 , 14 8 *5°» 153_ 154* *57» J66, 172, 1 7 6 -1 8 1 , 19 9 -2 0 1, 204, 218, 406-408, 418, 422, 428, 4 51, 4 7 4 -4 7 6 , 480, 483, 486 European Assembly. See European Parlia­ ment (EP) European Bank for Reconstruction and Development (EBRD), 389 European Central Bank (ECB), 22, 68, 75, 292, 3 7 9 -3 8 1 , 3 9 9 -4 0 1, 404, 4 1 1 - 4 1 7 , 4 2 1 422, 4 2 8 -4 2 9 ,4 3 7 , 493; autonomy, 3 8 6 387, 409, 4 3 9 -4 4 1, 4 4 4 -4 4 6 , 464, 4 6 7 4 7 1, and cxchange-rate policy, 445; location, 441, 445; mandate, 4 4 4 -4 4 6 , 465, 469; vot­ ing procedures, 445 European Coal and Steel Community (ECSC), 506

86, 9 5-10 4 , 108, 112, 121, 125, 134, 13 9 141, 15 1, 15 5 -15 6 , 204, 218, 488 European Community budget. See also Common Agricultural Policy (CAP): financ­ ing. 282, 292, 304, 309, 312, 3 24-326, 337, 341 * 347 - 352 , 360, 367-369* 374 * 377 »446 * regional funds, 258, 282, 2 91-293, 300, 303; Structural Funds and Cohesion Funds, 2 9 3295 »367» 372 - 374 »434 - 436 , 442, 446, 449 »453-455 European Council, 2 3 8 -2 4 1, 244, 255, 259, 267-268, 274, 282, 292, 296, 3 0 9 -3 13 ,

334 - 335 . 3 4 ». 349 . 359 - 3 ®°' 4 ° 7 >4 ' 5 ’ 43 ° . 488; Aachen (1978), 299-302; Athens ('983)* 334 »360; Bremen (1978), 254 -2 56, 280, 297-298; Brussels (1984), 352; Copen­ hagen (1978), 296-297; Dublin (1980), 333; Dublin (1990), 438; Edinburgh (1992), 442, 446; and EMU, 396 -39 8 , 400» 4 3 4 438, 4 40 -444, 459; Fontainebleau (1984), 35 1“ 35 2* 359 - 360»363» 37° “ 37 i ; and foreign policy cooperation, 4 5 0 -4 5 1; Hannover (1988) , 397 “ 39 8, 434 “ 435 ; immigration and asylum policies, 452; Luxembourge (1985), 363, 368; Luxembourg (19 9 1), 452; Maastricht (19 9 1), 449; Madrid (1989), 423; Milan (1985), 362-365; Paris 0 9 7 0 , 293; Rome (1990), 439-4 4 4 ; and SEA, 3 7 1-3 7 2 , 378; Strasbourg (1989), 396, 4 ° ° , 4 35-438 ; Stuttgart (1983), 348-349, 360 European Court o f Justice (ECJ), 5 4 -5 6 , 61, 6 7 -7 2 , 86, 333, 4 1 8 -4 1 9 , 4 2 2 -4 2 7, 4 3 0 431, 451, 455, 467, 484, 488; and Article 177* , 5 5 - 156; Cassis de Dijon (1979), 3 5 3 354; and Empty Chair Crisis, 229; and ECB, 444; and foreign policy cooperation, 450; immigration and asylum policies, 452; and Maastricht Treaty, 417; and SEA, 316, 322, 326, 347» 353-354» 368, 373; and social pol­ icy» 452 European Defense Community (EDC), 86, 95, 100-108, 116, 13 3 -13 6 , 1 3 9 -1 4 1 , 152, 1 7 8 -1 7 9 , 476, 481 European Exchange Rate Agreement. See Snake European federalism. See Integration theory: and European federalism European Free Trade Association (EFTA). See also Free Trade Area (FTA). 6, 16 4 -16 7, 1 7 0 -17 2 , 175, 18 8-190 , 200, 207-208, 2 2 0 -2 2 1 ,2 3 5 ,3 5 3 , 494 European Investment Bank, 300 European Monetary Fund. See European Monetary System (EMS): European Monetary Fund (EMF) European Monetary Institute (EMI). See Economic and Monetary Union (EMU): EMI and European Monetary System (EMS): EMI European Monetary System (EMS). See also Snake and Economic and Monetary Union (EMU). 2, 6, 18, 42, 2 3 8 -3 13 , 327, 334, 3 4 0 -3 4 1, 387-398, 402-404, 408, 4 1 4 4 17 , 4 2 0 -42 4 , 4 2 7-4 3 3 , 436, 4 4 1-4 4 4 , 462, 4 6 5-4 6 6 , 4 7 1 -4 7 2 , 475-477» 4 8 ° “ 488, 491, 496; currency crises and realign­

Index m ents, 2 5 7 , 2 7 0 - 2 7 2 , 3 0 2 - 3 0 3 4 1 1 , 4 16 , 4 32, 470; a n d B asel-N yborg A greem en t, 3 9 6 - 3 9 7 »4 ° 2 , 4 1 4 “ 4 1 5 »4 32 ; E uropean M o n etary F un d (EM F), 2 9 9 -3 0 0 ; EMI, 444 E u ro p ean Parliam ent (E P ), 5 4 - 5 7 , 6 1 , 6 7 - 7 2 , 185, 2 3 1 , 236, 268, 2 9 1, 3 3 4 -3 3 5 » 343» 3 5 ° - 3 5 1 »3 6 2, 386, 3 9 8 -4 0 3 , 4 0 7, 4 1 3 4 1 8 , 4 2 2 - 4 3 3 , 4 7 0 - 4 7 1 , 4 78 , 4 8 0 -4 8 2 , 4 8 7 -4 8 9 , 493; a n d agen da-setting power, 3 10 , 4 5 7 , 492; a n d b u d g eta ry powers, 2 15 , 2 2 7 -2 2 8 , 2 9 2 - 2 9 3 , 3 1 1 ; and Com m ission, 4 J9» 4 5 5 - 4 5 7 ; co o p era tio n and codecision p ro ce d u re s, 3 7 9 - 3 8 1 , 4 3 0 - 4 3 1 , 4 4 8 “ 449» 4 5 5 - 4 5 7 , 4 6 1 , 4 6 7 -4 7 0 ; and C o u n cil o f M inisters, 3 3 1 ,4 5 5 - 4 5 7 ; and d irect e le c ­ tions, 2 3 8 - 2 4 1 , 244, 2 5 9 -2 6 0 , 265, 273, 292, 3 0 9 - 3 1 1 ; and ECB, 4 39, 4 4 4 " 4 4 5 ; a n d fo re ig n p olicy co o p eratio n , 4 4 8 -4 5 0 ; im m igration and asylum policies, 452; and in stitutional d elegatio n , 225, 282, 449, 4 6 1, 4 8 3 -4 8 5 ; ju stice and in terio r affairs, 450; a n d L u x em b o u rg C o m p ro m ise, 230; and M aastricht Treaty, 3 9 1 , 4 4 8 -4 4 9 , 4 5 9 -4 6 3 ; and p olitical u n io n , 4 4 7 -4 4 8 ; a n d SEA, 245,

323 . 326 - 327 , 335 ,3 4 5 -3 4 7 .3 5 3 . 3 56-358, 364 - 378 , 46 ' • 469 .479. 483 -

485; Snake, EM S a n d EM U, 2 9 1, 295, 4 4 8 449, 4 6 1; and social policy, 449, 4 6 1 , 489 E u ro p e an Paym ents U n io n (E P U ), 4 3, 110 , 12 5, 13 6 , 143, 15 5 , 2 4 1, 247 E u ro p ean Political C o o p eratio n (E P C ). See F oreign p olicy co o p eratio n : EPC E uropean R o u n d tab le o f Industrialists (E R T ),

3 4 2 >3 5 5 - 3 5 6 , 3 7 2 - 3 7 2 E u ro p ean Strategic Program fo r R esearch and D evelo p m en t in In form ation T ech n o lo gy (E SP IR IT ), 330, 358 E uropean System o f C en tral Banks (E SC B ). See E u ro p ean C e n tral B ank (ECB) E U R O P O L , 452 E xch an ge Rate M echanism (ERM ). See E u ro ­ p ean M o n etary System (EMS) Fabius, L au ren t, 340 F aroux, R obert, 336 Faure, E dgar, 1 0 3 -1 0 6 , 1 1 4 - 1 1 8 , 1 2 1 , 1 4 0 14 1 , 1 4 6 - 1 4 9 , 15 2 , 15 5 , 181 F aure, M aurice, 104, 10 7, 11 4 , 1 5 1 - 1 5 2 , 15 7, 3 6 0 -3 6 1 F eatherstone, Kevin, 464 F éd ération N ation ale des Syndicats d ’Exp loitants A gricoles (FN SEA ), 1 1 0 - 1 1 2 , 180,

!9 7

F ed eration o f British Industry (FBI). See C o n fed e ra tio n o f British Industry (CBI) F inan cial d eregu la tio n , 3 2 3 - 3 2 5 , 329, 336,

3 4 4 - 345 »3 5 9 - 3 6 2 , 365» 369» 373 »4 ° 9 " 4 1 1 ,4 2 8 , 4 34, 4 85, 490 F o u ch ct Plan. See Foreign p olicy coop eration: F o u ch et Plan F oreign p o licy co o p eratio n . See also Political u n io n . 9 4 - 9 5 , 256, 268, 2 9 2 -2 9 5 , 3 1 6 3 18 322 327 332 344 347 349 360- 36$,

,

,

,

,

,

-

,

36 9. 373. 399.493; CFSP>3 °. 3 7 9 .4°2 .4 °7 > 4 1 3 - 4 3 °. 4 4 7 -4 5 1 ■460 , 467 - 4 7 1 , 478 ;

EPC, 30, 265, 3 3 1, 365, 3 9 1; F ouchet Plan, 30, 84, 13 7 , 15 9 , 17 5 -19 0 » 194, 198, 2 2 2 2 2 7, 233, 450, 4 7 5 , 478; W EU , 100, 119 , 129, 133, 1 4 1 ,4 1 9 ,4 4 8 , 451 France. See also peak organizations and leaders under separate headings. 3 0 -3 4 , 4 1 , 4 4 - 4 8 , 53» 63» 7°» 75» 8 3 -8 6 , 4 0 1 ,4 7 8 , 4 8 1 -4 8 2 , 4 9 8 -4 9 9 ; agricu ltu re and CA P, 8 9 -9 0 , 99, 1 0 3 -1 0 4 , 1 1 0 - 1 2 2 , 126, 1 3 5 - 1 3 8 , 1 4 2 14 7 , 15 4 , 16 1 , 164, 1 7 6 - 1 8 2 , 186, 193, 2 0 1 - 2 1 5 , 2 2 1 -2 3 7 , 2 6 0 -2 6 8 , 273, 282, 2 9 0 -2 9 2 , 298, 3 0 3 -3 0 4 , 3 0 8 -3 0 9 , 3 12 ,

337. 3 4 2 -3 4 4 .3 4 7 -3 5 1. 3 7 4 . 448 . 474.477.

4 8 2 -4 8 3 , 486, 493; A ssem blée N ationale, 1 1 7 , 145, 152, 260, 266, 333; CERES, 334; com m ercial interests, 8 7 -8 9 , 10 3 -1 0 4 , 1 0 8 - 1 1 7 , 136, 145» 157» i 6 t , 1 7 7 -1 7 8 -18 3 , 186, 1 9 3 - 1 9 5 , 2 0 4 -2 0 7 , 220, 232, 237, 2 6 0 -2 6 8 , 273, 285, 3 1 8 - 3 1 9 , 328, 3 3 5 338, 3 4 2 -3 4 4 , 4 0 4 -4 0 8 , 4 1 3 -4 1 7 » 470» 4 74 , 495; and Com m ission, 236, 334, 3 6 1, 4 1 3 - 4 1 5 , 451» 4 5 6 -4 5 7 » 460, 4 6 7 -4 6 8 , 487; C om m u n ist Party 1 0 3 - 1 0 7 , 11 6 , 150, 260, 2 6 9 -2 7 0 , 296, 3 4 3 -3 4 5 ; com petition policy, 149, 18 1, 184, 2 1 8 - 2 1 9 ; C o n serva­ tives, 103, 106, 1 1 0 - 1 1 1 , 11 6 , 120, 152; and C o u n cil o f M inisters, 430, 4 56, 468, 489, 493; and custom s u n io n , 1 0 3 - 1 1 0 , 1 1 4 - 1 2 2 , 1 3 2 - 1 4 6 , 150, 15 7 , 17 7 , 1 8 2 -1 8 4 , 207, 229; a nd d eco lon izatio n , 104, 10 7, 121 ; a n d d e ­ valu ation /d ep reciatio n , 104, 109, 1 1 3 , 122, 13 6, 14 6 , 16 1 , 1 8 1 -1 8 3 , 205, 249, 257, 2 6 0 -2 6 6 , 2 6 9 -2 7 2 , 3 0 2 -3 0 2 , 335, 474; Em pty ("hair Crisis and L u x em b o u rg C o m ­ prom ise, 193, 2 2 8 -2 3 0 , 2 3 4 -2 3 6 , 334; and e n largem en t, 260, 2 6 3 -2 6 5 , 273, 290, 303, 308, 309, 3 5 0 - 3 5 1 ; E uratom and n uclear w eapons, 90, 94, 97, 1 0 3 -1 0 6 , 1 1 3 , 1 1 8 1 2 1 , 1 3 1 , 13 7 , 1 4 1 - 1 4 3 , 1 4 8 -1 4 9 , 154, 1 7 9 - 1 8 1 , 4 0 6 -4 0 8 , 428, 4 7 6 ,4 8 6 ; and E C B , 386, 4 1 1 - 4 1 5 , 429, 4 3 7, 440, 444; and E C SC , 108; and E C budget, 3 3 7, 3 4 9 -3 5 2 , 367; and E uropean C o u n cil, 407, 4 1 5 ,4 3 0 , 459; and ECJ, 4 5 1; and E D C , 104, 1 3 9 - 1 4 1 ; and E uropean federalism , 10 5 -1 0 6 , 2 5 9 260, 268, 2 7 2 - 2 7 3 , 289, 376, 378 , 3 8 1, 4 0 4 -4 0 5 , 4 1 6 - 4 1 7 , 4 2 9 -4 3 0 ; and EP, 3 1 1 ,

334 - 40 7 . 4 i 3 - 4 * 5 . 4 * 9 . 45 6 - 4 5 7 . 470 . 489; and financial d eregu lation , 2 6 1 -2 6 2 , 3 3 6 - 3 4 3 . 346, 4 0 9 - 4 1 1 , 428, 434; and fo r­ eign p olicy co o p eratio n , 2 2 6 - 2 2 7 , 3 16 , 332 - 333 » 344 »4 ° 7 »4 1 3 ” 4 1 7 »4 2 8 -4 3 0 , 4 4 7, 4 5 0 - 4 5 1 . 460, 4 6 7, 493 \franc fort p o l­ icy, 404, 4 1 1 - 4 1 7 , 470; FTA and EFTA, 1 0 3 -1 0 4 , 11 0 , 1 1 7 - 1 1 8 , 12 2 , 133, 1 4 5 - 1 4 7 , 1 5 5 - 1 5 7 , 1 8 7 -1 8 8 , 193, 2 0 4 -2 0 7 , 219; and G -7, 407, 4 1 2 , 4 1 5 , 432; and G A T T , 16 1, 184, 2 0 7-2 0 8 , 2 3 4 -2 3 6 , 265, 4 0 7 ,4 9 3 ; Gaullists, 1 0 3 -1 0 7 , 1 1 5 - 1 1 6 , 120, 136, 1 5 0 - 1 5 2 , 15 5 , 180, 260, 2 6 6 -2 6 8 , 273, 293, 298, 3 10 , 343, 346, 4 0 9 - 4 1 0 , 4 1 4 , 4 1 7 , 476; im m igration and asylum policies, 4 13 , 452; and industrial m o d ern ization , 88, 1 0 8 - 1 1 0 , 1 1 4 , 12 1 , 2 6 1, 3 3 5, 4 76 ; and industrial pol-

icy. 2 7 '. 332>3 3 7 -3 4 3 .3 5 5 .358- 402 , 4 10 ,

507

Index F rance. (continued) 4 1 5 ,4 3 0 , 454; a n d institutional delegation, 1 1 2 , 1 1 5 - 1 1 7 , 1 2 1 , 13 7 , 1 5 3 -15 7 » 164* 179» 184, 18 7, 1 9 5 - 1 9 6 , 208, 2 14 , 2 19 , 228, 2 3 4 -2 3 6 , 263, 2 73 , 3 0 9 - 3 1 1 , 3 1 5 , 3 18 ,

333 - 335 »349 * 3 52 , 3 6 1-3 6 3 » 369» 373 »

3 7 6 - 3 7 8 , 3 9 1 ,4 0 7 , 4 1 4 - 4 1 5 ,4 3 0 , 448, 4 5 1 »4 5 4 -4 5 7 » 4 6 7 -4 6 8 , 4 7 5 ,4 8 6 - 4 8 9 ; ju stice a n d in terio r affairs, 4 1 5 ,4 6 7 ; and M aastricht Treaty, 379 , 4 0 5 -4 0 6 , 4 1 2 - 4 1 6 , 4 1 9 , 42 9, 4 6 1 , 4 6 8 -4 7 0 , 474; M inistry o f F inan ce, 2 6 1, 266; M inistry o f Industry, 113 ; M o u vem en t R epublican P opulaire (M RP), 1 0 3 -1 0 6 , 11 0 , 11 6 , 1 2 0 ,2 2 7 ; N ational F ront, 4 12 ; and N A T O , 16 4 , 17 9 , 4 0 7, 4 5 1; a nd O E E C , 15 5; and political u n io n , 408, 4 »3 »4 3 ° , 437 - 4 3 8 , 4 4 7 ; Poujadists, 103, 10 5, 1 1 6 , 150; Q u ai d ’Orsay, 11 8 , 188, 196, 360; R adical Party, 103, 106, 110 , 116 ; re­ gio n al policy, 2 18 ; relations w ith co lo n ies or fo rm e r colon ies, 30, 1 0 3 -1 0 4 , 10 7 -1 0 9 , 1 1 4 - 1 1 9 , 138, 1 4 3 - 1 4 7 , 1 7 9 -1 8 0 ; relations with G erm any, 1 0 4 -1 0 5 , 133, 13 7 , 140, 17 9 , 184, 22 7, 244, 2 5 9 -2 6 0 , 2 6 3 - 2 6 7 , 272, 3 4 6 - 3 4 7 ,3 5 9 ,3 8 0 ,3 8 9 - 3 9 0 ,3 9 7 ,4 0 4 409, 4 1 2 - 4 1 8 , 4 2 2, 4 3 7 -4 3 8 , 466; relations with G reat Britain, 1 0 4 -1 0 7 , 1 1 5 , 1 1 8 , 12 1 , 1 8 7 -1 8 8 , 19 2 , 2 1 5 , 2 1 9 - 2 2 3 , 234, 2 6 3 -2 6 5 , 290, 3°3» 3 0 8 -3 0 9 , 3 5 1 , 3 6 4 ,4 0 8 ; relations with U S, 179 , 407; relation s w ith USSR, 184, 408; and SEA , 3 1 7 - 3 1 8 , 3 3 2 -3 4 4 , 3 4 7 -3 4 8 , 3 5 9 - 364 »367 - 378 , 4 ° 6 , 4 1 5 , 4 7 4 - 475 » 487; sm all business, 108, 1 1 6 , 260, 409; Sn ake, EM S and EMU, 2 3 8 - 2 4 1 , 2 4 9 - 2 5 2 , 2 5 6 - 2 7 4 , 2 7 7 -2 8 0 , 2 8 4 - 3 1 3 , 3 4 0 -3 4 4 , 3 6 3 - 3 6 5 , 3 73 , 3 8 1, 3 8 6 -3 8 9 , 394, 3 9 7 4 * 7 »427 - 4 4 6 , 4 5 9 - 466 ,4 7 0 , 4 7 5 , 4 8 3 483, 486, 493; social p olicy and social har­ m o n izatio n , 109, 1 1 4 , 1 1 7 , 1 2 1 , 13 6, 14 1, 1 4 4 - 1 4 6 , 3 6 1 , 4 1 5 , 430, 4 5 2 ,4 6 7 ; Socialist Party, 1 0 3 -1 0 6 , 1 1 6 - 1 1 7 , 1 2 i , 1 5 1 , 180, 2 6 0 -2 6 3 , 266, 2 6 9 -2 7 0 , 289, 3 3 2 -3 4 2 , 345 - 346 , 4 ° 6 , 4 0 9 - 4 1 0 , 4 14 , 4 1 7 ; and Structural Funds, 3 0 3 ,4 4 2 ; a n d Su ez crisis, 1 0 3 -1 0 4 , 10 7, 1 1 8 - 1 2 1 , 144; transport p o l­ icy, 16 1 , 204; a n d T reaty o f R om e, 1 0 3 -1 0 5 , 108, 1 1 2 - 1 2 2 , 1 2 9 - 1 3 0 , 138, 1 4 1 - 1 4 6 , 1 5 0 - 1 5 2 , 1 5 7 , 18 1 , 2 3 7, 4 74 , 487; Treasury, 2 7 1 , 3 3 6 - 3 3 7 ; unions, 1 1 3 , 11 6 , 262, 4 12 F ran co-G erm an co m m ercial treaty (1 9 5 5 ), 140, 1 4 7 - 1 4 8 F ran co-G erm an brig ad e, 3 9 1 , 4 0 1, 407 F ran co-G erm an E con om ic C o u n cil, 3 9 6 - 3 9 7 , 4 0 2 - 4 0 3 ,4 1 5 , 433 F ran co-G erm an treaty (1 9 6 3 ), 108, 179 , 184, 198, 202; 227; 406 Fratianni, M ich ele, 252 Free T rad e A rea (F T A ). See also E u ro p ean Free T ra d e A ssociation (E FT A ). 86, 90, 100, 1 1 4 - 1 1 8 , 1 2 9 - 1 3 7 , 1 4 4 - 1 4 5 , 15 5 -15 8 » 1 6 4 - 1 7 0 , 17 8 , 1 9 9 ,2 2 1 ,4 7 7 F rieden , Jeffry, 45 G -7 , 2 52 , 256, 4 0 7, 4 1 2 ,4 1 5 ,4 3 2 ,4 7 5 G addis, J o h n Lewis, 11

508

G aillard, Félix, 181 G aitskell, H u gh , 166 G arrett, G eoffrey, 368, 462 G attez, Y von, 263 G en eral A g re em en t on Tariffs and T rade (G A T T ), 7 5 , 87, 100, 1 1 4 - 1 1 7 , 1 2 5 - 1 3 2 , 13 5, 146, 1 5 3 - 1 5 5 , 16 1 , 18 1, 184, 1 9 1 - 1 9 5 , 1 9 9 - 2 0 1 , 2 0 7-2 0 8 , 2 2 9 - 2 3 1 , 2 3 4 -2 3 6 , 265, 3 1 2 ,4 0 7 ,4 77 -4 7 9 » 4 8 6 - 4 8 7 ,4 9 3 ; K en n ed y R oun d, 202, 2 0 7-2 0 8 , 2 12; T okyo R ound, 4 75; W T O , 1, 6, 500 G en sch er-C olu m b o initiative (1 9 8 1 ) , 327,

3 3 * - 333 . 348 G en scher, H ans-D ietrich, 29, 349, 437; and E uropean federalism , 3 76 , 388, 429; EMS and EM U, 254, 2 57, 332, 366, 3 8 8 -3 8 9 , 3 9 7 - 4 0 1 , 403, 4 3 2 - 4 3 3 , 436, 443, 470; and EP, 3 73 , 4 5 7; E uropean p olicy and Ostpolitik, 3 2 7 -3 2 8 , 3 3 1, 3 4 5 -3 4 6 , 3 8 9 -3 9 0 . 4 ° 3 " 404, 430; and fo reign p olicy coop eration, 333 » 39 ° ; and G erm an unification, 3 8 7 -3 9 0 , 397; and M aastricht Treaty, 470; and SEA, 3 1 6 , 3 2 6 - 3 2 7 ,3 3 0 - 3 3 1 / 3 4 8 ,3 6 3 ,3 6 6 , 370.373.376 G erm an D em ocratic R epu blic (G D R ), 244, 407; 1990 elections, 4 3 8 ,4 4 7 ; E C accession, 438, 4 6 1; and un ification, 408, 4 3 7 G erm any. See also peak organizations and leaders under separate headings. 2 1 - 2 3 , 3 ° “ 33» 4 ° “ 4 1 , 4 6 - 4 9 , 5 3 ,6 3 , 7 0 ,7 5 , 104, 12 7 , 1 7 7 178, 190, 2 6 1 -2 6 4 , 267, 273, 339, 34 7, 498; agricu ltu re and CA P, 8 9 -9 0 , 9 8 -1 0 3 , 1 1 5 , 11 9 , 126, 1 3 5 - 1 3 7 , 1 4 5 - 1 6 4 , 180, 18 3 -18 4 , 197, 2 0 0 - 2 1 7 , 2 2 3 -2 2 4 , 2 3 2 -2 3 6 , 244, 2 4 8 -2 5 0 , 2 5 7 - 2 5 9 , 263, 2 9 0 - 2 9 1 , 298, 304, 3 0 8 -3 0 9 , 3 12 , 3 2 7 -3 2 8 , 3 3 1 -3 3 2 , 343,

3 4 9 - 352 , 37 4 »394 »4 7 4 - 47 5 »483. 4 8 6 493; A gricu ltu re Ministry, 200, 258; Bundesrat, 3 9 1, 403; B undestag, 17 9 , 198, 2 0 2 204, 236, 244, 2 5 3 -2 5 5 , 258, 3 2 7, 345, 388, 3 9 1, 3 9 5 -4 0 4 , 447; Christian D em ocratic U nion (C D U ), 94, 9 8 -1 0 2 , 199, 2 0 2 -2 0 3 , 2 13 , 2 4 9 -2 5 0 , 2 57, 330, 34 5, 3 9 1, 3 9 4 -3 9 6 , 3 9 9 ,4 6 9 ; Christian Social U n ion (C S U ), 250» 33°» 39°» 399» 447^ co m m ercial in ter­ ests, 8 7 -9 0 , 9 6 - 9 8 , 1 3 5 - 1 3 6 , 140, 154, 15 7, 1 6 0 - 1 6 1 , 164, 1 9 7 -2 0 7 , 220, 2 3 3 -2 3 4 , 2 4 4 -2 5 3 , 2 5 6 -2 5 8 , 285, 3 1 7 -3 1 9 » 3 2 7 328, 3 3 1 - 3 3 2 , 343-344» 3 6 1, 373» 3 8 8 3 9 6 ,4 0 1 -4 0 3 , 428, 4 3 1 , 470, 4 7 4 - 4 7 6 , 495; and Com m ission, 184, 236, 2 9 1, 3 9 1 , 4 5 6 4 57 »4 6 7 - 4 6 8 ,4 9 1 ; and C om m ittee o f the Regions, 403; com p etition policy, 90, 136, l 4 7 - 1 49» »54* 204, 2 1 8 - 2 1 9 , 233, 236, 4 91; C onstitutional C o u rt, 403, 442; and C o u n cil o f M inisters, 2 9 1, 3 3 1, 3 9 1, 456; and cu r­ ren cy convertibility, 114 , 136; custom s union and C o m m o n M arket, 90, 9 6 - 9 7 , 1 0 0 -1 0 1 , 130, 1 3 6 - 1 4 6 , 154, 15 7 , 236, 330, 389, 4 75, 4 8 2 -4 8 6 ; Econom ics Ministry, 2 4 8 -2 5 0 , 330; Em pty C h air Crisis and L u xem bo u rg C om p rom ise, 194, 2 2 8 -2 3 0 , 2 3 4 -2 3 6 , 3 3 1; and en largem en t, 244, 250, 2 5 7 - 2 5 9 , 303, 350, 399; and Euratom , 90, 94, 9 7, 1 0 1 -1 0 2 , 120, 1 3 5 - 1 4 3 , 1 4 8 - 1 5 0 , 154, 15 7 , 1 9 9 -

Index 2 0 1, 4 7 6 , 486; and ECB, 3 8 6 - 3 8 7 , 3 9 9 4 0 1, 404, 4 2 2, 440, 4 4 4 - 4 4 5 , 469; and E C bu d get, 2 5 7 - 2 5 8 , 300, 303, 3 4 9 - 3 5 2 , 367; a n d E u ro p ean C o u n cil, 244, 438; and ECJ, 15 5; and E u ro p ean federalism , 309, 3 2 7, 357 » 3 7 6 “ 378 »3 8 1 , 3 8 8 -3 8 9 , 4 0 1 -4 0 4 , 4 1 6 , 4 2 9 - 4 3 0 ; and EP, 236, 244, 3 1 1 , 327, 3 3 i . 3 4 5 - 346 »357 » 3 6 6 - 3 6 7 , 3 76 , 3 9 1, 399, 4 0 2 -4 0 3 , 430, 4 4 7 , 4 5 5 - 456 »4 6 1, 4 6 7 - 4 6 9 , 489, 493; F in an ce Ministry, 250,

254 . 257» 3 ° 5 » 33 *» 395 »39 8 " 399 »443 ; and fin an cial d e re gu la tio n , 3 2 9 -3 3 0 , 342, 346, 365; F oreign Ministry, 254, 3 3 1 , 334, 400; a n d fo reign p o licy co o p era tio n , 9 4 - 9 5 , 2 2 6 - 2 2 7 , 3 2 7, 332, 344, 363, 3 73 , 3 9 1 , 399, 402, 4 1 5 , 430, 4 4 7 , 4 5 0 - 4 5 1 , 469, 493; Free D em o cra tic Party (FD P), 100, 103, 1 5 1 , 199, 202, 250, 2 5 5 - 2 5 8 , 3 2 7, 331» 3 9 1 »3 9 6 399; F T A a n d EFTA, 8 6 ,9 6 - 9 7 , 1 0 1 -1 0 2 , 13 6 -1 3 7 » 144 - M 5 » 157 » 204; and G -7 , 4 75 ; and G A T T , 1 6 1 , 1 9 9 - 2 0 1 , 207, 2 3 1, 2 3 4 -2 3 6 , 4 7 5 , 486, 493; G rand C o a litio n , 203; G re en Law, 98; G re en Party, 327; im m igration and asylum policies, 396, 3 9 9 -4 0 2 , 4 4 7 , 452; a n d im p o rt o f labor, 149; and industrial policy, 3 4 1 , 358, 402, 430» 454; and institutional d elegatio n , 90, 1 5 3 - 1 5 6 , 16 4 , 19 6, 2 0 1-2 0 4 , 208, 2 14 , 2 3 4 - 2 3 6 , 2 57, 2 9 1, 3 0 9 - 3 1 1 , 3 18 , 3 3 1, 346, 3 5 2 , 3 5 7 , 3 6 1 - 3 6 3 , 366, 369, 3 73 , 3 7 6 - 3 7 8 , 3 9 1 , 399, 402, 430, 4 5 2 - 4 5 7 . 4 6 7 - 4 6 9 , 4 78 , 4 8 6 -4 8 8 ; ju stice and in terior affairs, 3 3 1 , 399, 402, 4 4 7 , 452 , 4 6 7 -4 6 8 ; an d L ou vre A cco rd , 402; and M aastricht Treaty, 3 7 9 - 3 8 1 , 386, 396, 4 0 3 ,4 1 4 , 4 2 8 429, 4 6 1 - 4 6 3 , 466, 4 70 , 4 74 , 478; and N A T O , 9 1 , 9 4 - 9 5 , 16 4 , 198, 3 9 1 , 400, 476, 493; and O E E C , 15 5; and Ostpolitik, 2 7 -2 9 , 34, 238, 244, 250, 256, 259, 22 7, 390, 4 75; an d p olitical u n io n , 3 2 7, 3 8 7 -3 8 9 , 396, 399,

4 ° 3 »4 1 3 »4 2 9 - 4 3 0 .4 3 8 - 4 4 0 , 447 - 4 4 9 »

4 62, 4 6 7, 483; rearm am en t, 12 1 , 136; R efu ­ g e e party, 1 5 1 ; regio n al policy, 244, 250, 2 5 8 - 2 5 9 , 300; relations with F rance, 98, 102, 13 7 , 140, 1 5 7 , 198, 22 7, 244, 269, 346, 359 »4 ° i »4°6» 4 78 , 490; relations with G reat Britain, 140, 204, 223, 234, 244, 250, 303, 3 5 1 , 364; relations with US, 140, 179 , 198, 264; relations with USSR, 244, 389, 397; R epu blican Party, 390; revalu ation /ap p recia­ tio n , 249, 2 5 4 -2 5 6 ; and SEA, 3 1 7 - 3 1 8 , 3 2 6 - 3 3 2 , 3 3 6 - 337 » 343 - 344 »347 - 348 » 3 5 8 - 3 7 8 , 396, 4 7 4 - 4 7 5 »487; Sn ake, EMS an d EMU, 2 3 8 - 2 4 1 , 2 4 4 -2 5 9 , 262, 266, 2 6 9 - 2 7 2 , 2 7 7 -2 8 0 , 2 8 5 - 3 1 3 , 3 4 1 -3 4 3 , 363» 365» 372 - 373 »3 8 1, 3 8 6 -4 0 5 , 4 1 0 4 1 6 , 4 2 1 , 4 2 4 - 4 2 5 , 4 2 8 - 4 3 3 , 4 3 7-4 4 7 » 45 7 - 4 7 0 , 4 7 5 , 4 8 2 -4 8 3 , 486, 4 93, 499; Social D em ocratic Party (SP D ), 9 4 - 9 5 , 9 8 - 1 0 3 , 120, 13 6 , 14 5, 148, 1 5 1 - 1 5 2 , 1 9 8 -2 0 5 , 2 4 6 - 2 5 0 , 2 5 7 - 2 5 8 , 308, 3 9 1 39 7, 428, 4 76; StrucUiral Funds and C o h e ­ sion Funds, 4 4 2 , 4 46, 455; transport policy, 90, 1 0 1 - 1 0 2 , 15 4 , 15 7 , 16 1 , 1 9 7 - 2 0 1 , 204, 2 1 7 - 2 1 8 ,3 2 9 ; a n d T reaty o f R om e, 11 9 ,

1 3 8 - 1 4 1 , 146, 1 5 0 - 1 5 2 ,4 7 4 , 478; u n ifi­ cation , 1 0 2 -1 0 3 , 330, 3 7 9 - 3 8 i , 387-390» 39 6 -3 9 7 » 4 0 0 -4 0 8 , 4 1 3 - 4 1 8 , 4 2 2 -4 2 4 , 428, 4 3 !» 437 - 4 3 8 ,4 6 1 , 469, 4 7 5 - 47 6 ; and Yugoslavia, 390 G iscard d ’ Estaing, Valery, 27, 245, 269, 335, 3 3 9 - 3 4 i; agricu ltu re and CAP, 250, 258, 273 , 298; and E uropean C o u n cil, 267, 274, 3 10 , 334; and E uropean federalism , 260, 2 6 6 -2 6 8 , 2 9 1; and en largem en t, 273; and fo reign policy co o p eratio n , 256, 268; and G erm any, 238, 269; and G reat Britain, 238; and institutional d elegatio n , 267, 2 7 3 -2 7 4 , 3 3 3 -3 3 4 ; Sn ake, EM S and EM U, 2 3 8 -2 4 0 , 2 5 2 -2 5 3 , 2 5 8 -2 6 8 , 2 8 8 -2 9 2 , 2 9 5 -3 0 2 , 305. 334 . 393 . 4 ° 9 >4 3 4 . 47 6 >4 80 G lcske, L eo n h ard , 395 G o n zalez, Felipe, 436 G orbachev, M ikhail, 3 3 1 , 407 Gowa, J oan n e, 27 G ran d D esign m em o. See M acm illan, H arold: G ran d D esign m em o G reat Britain. See also peak organizations and lead­ ers under separate headings. 2 6 - 2 7 , 3 0 -3 4 , 3 9 - 4 1 »47» 53» 65» 7 0 ,8 2 , 103, 14 8 ,3 8 7 , 408, 478 , 4 93, 4 9 8 -4 9 9 ; agricu ltu re and CA P, 8 9 -9 0 , 1 1 1 - 1 1 3 , 1 2 5 - 1 2 6 , 1 3 0 - 1 3 2 , 13 5 , 16 1 , 1 6 9 - 1 7 3 , 184, 1 8 7 -1 9 0 , 2 0 4 -2 0 5 , 2 2 1 -2 2 3 , 232, 236, 263, 2 75, 282, 297, 303, 3 0 8 -3 0 9 , 3 2 4 -3 2 6 , 334, 343, 3 4 9 - 352 » 360, 3 7 4 - 37 6 , 47 4 »47 7 »49 3 ; Board o f T rade, 1 2 7 -1 2 9 ; City o f L o n d o n , 88, 123, 168, 2 7 5 - 2 7 8 , 2 8 1, 2 9 1, 3 2 3 -3 2 4 , 4 1 7 , 4 2 1, 426, 429, 4 4 1 , 467; co m m ercial interests, 8 7 -8 9 , 96, 1 2 3 - 1 3 7 , 14 5, 1 6 1 - 1 7 6 , 204, 220, 223, 2 3 3 -2 3 6 , 2 7 5 - 2 8 2 , 285, 2 9 1, 3 1 8 - 3 1 9 , 3 2 2 -3 2 6 , 343 - 344 » 373 »417 . 4 2 0 - 4 2 1 , 4 2 5 - 4 2 9 , 4 7 4 - 4 7 6 , 490; and Com m ission, 326, 3 6 1, 4 56, 460, 467; C o n ­ servative Party, 1 2 4 - 1 2 8 , 166, 1 7 1 , 17 5 , 274, 2 7 8 -2 8 2 , 285, 2 9 1, 322, 3 7 5 , 386, 4 18 , 4 2 1 - 4 2 6 , 4 53 , 476; and C o u n cil o f M inis­ ters, 430; and currency convertibility, 114 ; and custom s un ion , 1 2 2 - 1 3 6 , 1 4 3 - 1 4 5 , 149, 15 5 , 158, 164, 1 7 3 - 1 7 5 , 220, 234, 474; d e ­ valu ation /d ep reciatio n , 2 7 5 - 2 7 9 , 2 8 3 -2 8 4 ; Em pty C h a ir Crisis and L u x em b o u rg C o m ­ prom ise, 229, 234, 326; Euratom and n u ­ clear w eapons, 1 3 1 - 1 3 3 , 166, 17 2 , 1 7 6 - 1 7 9 , 4 18 , 4 2 2, 428, 4 5 1 ; and E CB, 4 1 7 , 428, 469; and E C budget, 282, 326, 3 3 7, 3 4 1, 3 4 7 352» 360, 3 67, 374; and E C m em bership bids, 2, 30, 150, 1 5 9 - 1 6 1 , 164, 1 6 8 - 1 7 5 , 188, 1 9 9 -2 0 0 , 204, 2 1 5 , 2 1 9 - 2 2 4 , 234, 237, 2 3 8 -2 4 0 , 244, 250, 2 5 7 - 2 5 9 , 2 6 3 -2 6 5 , 2 75 , 2 8 1 -2 8 2 , 2 9 0 -2 9 2 , 303, 3 0 8 -3 0 9 , 3 1 2 , 482, 488, 498; and ECJ, 326, 4 1 7 - 4 1 9 , 4 2 2 - 4 2 7 , 430; and E D C , 133; and EP, 3 1 1 , 323. 3 26. 3 6 7 . 4 ' 7 - 4 »9 >4 2 2 - 4 2 4 .4 2 8 .

4 5 6 - 4 5 7 , 489; Euroscepticism and E u ro ­ pean federalism , 1 2 3 - 1 2 4 , 12 7 , 134, 165, 17 2 , 2 74 , 283, 322, 3 7 6 - 3 7 8 , 3 8 1, 4 1 7 4 19 , 4 25, 4 2 9 -4 3 0 ; and financial d e re g u la ­ tion, 284, 3 2 3 -3 2 5 , 336, 3 4 5 -3 4 6 , 353, 3 6 1, 3 6 4 -3 6 7 ; Foreign O ffice , 124, 12 7 ,

509

Index G reat Britain. (continued) 1 7 0 - 1 7 2 , 1 7 5 , 224, 274, 2 8 3 -2 8 5 , 322, 4 1 8 - 4 1 9 , 4 76 ; a n d fo reign p o licy c o o p era ­ tion, 13 3 , 226, 3 1 9 , 3 2 2, 332, 344, 360, 3 73 , 4 1 7 - 4 2 4 , 4 2 8 - 4 3 0 , 4 5 0 - 4 5 1 , 460, 4 6 7 468, 493; F T A a n d EFTA, 86, 89, 11 8 , 125, i S o - W . *4 5 * l6 4 » 1 7 0 —1 7 2 ,1 7 5 , 2 1 9 - 2 2 1 , 4 7 7 ; a n d G A T T , 132, 13 5 , 493; im m igratio n a n d asylum policies, 4 2 5 -4 2 8 , 4 52 ; a n d industrial policy, 3 4 1, 358, 430, 454; a n d institutional d elegatio n , 12 5, 1 5 5 15 7 , 16 4 , 17 9 , 236, 263, 282, 3 0 9 - 3 1 1 , 3 * 8 - 3 1 9 , 3 2 2, 326, 3 4 9 -3 5 2 , 3 6 0 -3 6 5 , 369» 3 7 3 - 378 »3 9 1»4 1 7 ~ 4 1 9 >4 2 2 - 4 2 5 , 43 °» 4 5 4 - 4 5 7 * 4 6 7 - 4 6 9 * 4 7 5 »4 8 7 -4 8 8 , 493; ju stice and in terior affairs, 4 2 2, 4 6 7 468; L ab o u r Party, 1 6 6 - 1 6 7 , 1 9 °> 2 7 2 - 2 7 5 , 2 7 9 - 2 8 1 , 282, 285, 325, 3 4 5, 4 2 1 - 4 2 2 , 425, 434: L iberal-Social D em ocratic A llian ce, 346; a n d M aastricht Treaty, 386, 409, 4 1 7 4 1 9 , 4 2 2, 4 26, 429, 4 6 1, 4 6 6 - 4 6 7 , 470, 4 7 4 , 4 8 2 -4 8 3 , 492; M utual A id C o m m ittee (M A C ), 1 2 7 - 1 2 9 ; and Nassau sum m it (1 9 6 2 ), 17 7; N A T O and western alliance, 1 2 3 - 1 2 4 , 1 3 1 - 1 3 3 , 150, 1 6 4 - 1 6 5 , 1 7 0 - 1 7 5 , 234» 297» 322, 4 1 9 , 42 5, 4 7 5 ,4 8 3 ; and O E E C , 130; Parliam ent, 278, 2 8 1, 3 5 1 , 4 1 8 4 1 9 , 423, 4 2 7; a n d p olitical u n io n , 422, 430, 4 4 7 - 4 4 8 , 460, 4 6 7; a n d region al policy, 2 8 0 -2 8 2 , 297, 300, 303, 349: relations with France, 10 7, 1 3 1 , 192, 232, 269, 3 5 1 , 4 18 , 483; relations w ith G erm any, 1 3 0 - 1 3 3 , 166, 1 7 2 - 1 7 3 , 17 9 , 3 5 1 , 390, 4 1 7 - 4 1 8 , 4 2 2 42 4, 4 2 7 , 4 3 7 , 466; relation s with US, 1 2 2 124, 12 8 , 1 3 3 - 1 3 4 . 1 7 3 - 1 7 6 , 179» 234; and SEA, 3 1 8 - 3 1 9 , 3 2 2 -3 2 6 , 3 4 3 -3 4 4 , 3 4 7 348, 353 » 3 5 7 - 3 7 8 , 423» 4 7 4 »482, 4 8 7 -4 8 8 ; Sn ake, EM S, E M U a n d parallel currency plan , 2 3 8 - 2 4 1 , 2 5 1 - 2 5 2 , 2 5 8 -2 6 0 , 269, 274 - 294 » 297-300» 3 0 6 -3 0 9 , 3 12 , 3 4 1, 344» 3 6 5 - 3 6 6 , 3 72 -3 73 » 3 8 1, 386, 395, 3 9 9 - 4 0 2 , 4 0 9 - 4 1 0 , 417 - 431 »4 3 5 - 4 4 6 , 4 6 1 - 4 6 9 , 4 8 2 -4 8 3 , 493; and social policy, 3 1 9 , 3 2 2, 3 7 2 , 3 7 5 , 3 79 , 4 1 7 , 4 2 2 -4 3 0 , 4 4 9 »452 - 4 5 3 »467» 483» 492; Sterling bloc, 125; Structural Funds and C o h esio n Funds, 442, 446; and Suez crisis, 10 7 -1 0 8 , 144; a n d transport policy, 325; and T reaty o f R om e, 1 2 3 - 1 3 7 , 1 4 1 - 1 4 2 , 1 5 1 , 16 4 , 245; Treasury, 12 7 , 130, 223, 276, 2 7 8 -2 8 5 , 297, 426; and U N Security C o u n cil, 448,

451

G re ece , 229, 454; and accession, 2 5 8 -2 6 0 , 273 » 303; EM S a n d EM U, 302, 4 4 2 -4 4 4 ; and E uroscepticism , 4 1 9 , 429; and fo re ig n policy co o p era tio n , 4 5 0 - 4 5 1 ; a n d institutional d e l­ e gatio n , 3 4 9 -3 5 0 , 3 6 1 -3 6 3 , 376; and SEA, 3 18 , 3 6 1 - 3 6 3 , 376; and social policy, 453; Structural Funds and C o h esio n Funds, 303, 367» 3 7 2 , 4 4 6 ,4 7 7 G rie co , J osep h , 30, 3 0 1, 4 6 2 - 4 6 3 G riffiths, R ichard, 123 G rosser, A lfred , 22 7, 335 G u ig o u , E lisabeth, 2 7 1 , 436 G yllen h am m er, Pehr, 355 5 /0

Haas, Ernst, 1, 1 3 - 1 6 , 54, 59, 7 1 - 7 2 , 14 5, 160, 230, 480 H ague sum m it (19 69 ) ,2 1 5 , 2 1 8 , 292, 303, 3 12 Hallstein, W alter, 56, 100, 15 5 , 1 9 5 - 1 9 6 , 2 0 5 206, 2 12 , 225, 459; and CA P, 2 16 , 233; cu s­ toms un ion and Euratom , 14 1; Em pty C h air Crisis and L u x em b o u rg C om p rom ise, 193, 2 2 8 -2 3 2 , 4 8 1; and institutional delegation, 227, 4 8 0 -4 8 2 Healey, D ennis, 253, 276, 2 8 0 -2 8 1 H eath, Edw ard, 17 3 , 190; and E C bu d get, 349; and EFTA, 170; and British E C m em bership bids, 1 7 1 , 17 5 , 2 2 1, 2 7 9 - 2 8 1 ; and institu­ tional d elegatio n , 282, 3 1 0 - 3 1 1 ; a n d Snake, 276, 279 H erm es, A ndreas, 99 H errhausen , A llred , 393 H eseltine, M ichael, 4 19 H offm an n , Stanley, 1 5 - 1 7 , 30, 160, 195, 205, 335.407.47» H ow e, G eoffrey, 2 8 2 -2 8 5 , 288, 325, 3 6 0 - 3 6 1 ,

364 . 371» 419’. 423-424

H ungary, 4 3 7 H u rd, D ouglas, 408, 4 1 8 - 4 1 9 ; 4 2 3 - 4 2 5 , 453 Im m igration and asylum policies, 3 79 , 386, 39 6 , 399 »4 0 0 -4 0 2 , 413» 4 2 5 -4 2 8 , 4 3 1, 4 4 7 »452 Industrial policy, 218 , 2 7 1 , 308, 3 1 6 - 3 1 8 , 325,

332 , 337-343» 347-349» 355» 35 8» 362 , 369 » 373» 386, 402, 4 10 , 4 1 5 , 4 3 0 ,4 5 4 , 4 74 , 487,

490 In tegration theory, 1 1 - 1 3 , 18; and asym m etri­ cal in terd ep en d en ce, 1 - 9 , 15, 19, 52 , 6 1 63, 138, 160, 220, 234, 3 0 1, 3 8 1, 386, 463, 469» 4 7 3 »4 7 9 »4 82-485» 497 - 4 9 8 ; capital m obility and FDI, 3, 6 ,4 2 , 239, 2 8 5 -2 9 0 , 3 1 7 - 3 1 8 , 3 8 1 , 4 1 0 , 4 7 3 , 490, 500; and causal in feren ce, 10, 33, 7 7 - 8 5 ; and Coase T h e o rem , 58; and com m ercial interests, 3, 6, 12, 19, 26, 33, 3 7, 42, 50, 13 5 , 15 7 , 1 6 0 16 1, 2 0 4 -2 0 5 , 2 3 7, 2 3 9 - 2 4 1 , 2 8 5 -2 8 6 , 2 9 0 -2 9 1 , 3 12 , 3 1 7 - 3 1 8 , 3 4 3-3 4 7» 3 8 1, 3 8 6 -3 8 8 , 4 0 4 -4 0 5 , 4 1 5 , 424, 428, 469, 4 7 3 -4 7 9 » 49°» 4 9 4 “ 498; and cred ib le co m ­ m itm ents, 7 3 - 7 7 , 16 1 , 2 3 5 -2 3 6 , 2 4 0 -2 4 1 , 286, 2 9 1, 3 0 8 - 3 1 2 , 3 1 7 , 3 7 5 - 3 7 8 , 386, 463, 4 6 8 -4 6 9 , 4 7 2 - 4 7 3 , 4 8 5 -4 8 8 , 492; and e c o ­ n om ic in terd ep en d en ce, 6, 26, 3 5, 4 2 -5 0 , 239» 286, 3 8 1, 428, 4 7 2 -4 7 3 » 479» 4 9 4 ” 495» 500; and e n d o g en o u s tariff theory, 4 7 6 - 4 7 7 , 496; and epistem ic com m unities, 59, 72, 4 6 3 -4 6 6 ; and E uropean federalism ,

4 - 6 , 3 1 - 3 2 , 70» 87. 13 8 -13 9 » 153 » 157 » 16 1, 2 3 8 - 2 4 1 , 2 Q i, 3 0 0 - 3 1 1 , 3 7 5 - 3 7 8 , 381, 4 2 8 -4 3 0 , 4 6 8 -4 6 9 , 4 7 3 -4 7 4 » 4 8 5 -4 9 1 * 50 1; and evidentiary sources, 8 0 -8 4 , 473; and exch an ge rate stabilization, 4 1 -5 0 ; and hegem o n ic stability theory, 3 0 6 -3 0 7 , 498; and historical institutionalism , 14, 17 , 472, 4 8 9 -4 9 4 , 50 1; in tergovern m en tal bargain ­ in g theory, 7, 5 2 - 5 4 , 6 0 - 6 7 , 138, 1 4 2 - 1 4 6 , 14 9 -150 » 15 6 -15 7 » 206, 2 10 , 2 3 1 -2 3 5 , 2 4 0 -2 4 1 , 3 0 4 -3 0 8 , 3 12 , 3 1 7 , 3 4 7, 3 6 8 37 4 »378 , 3 8 1, 386, 4 3 1 , 4 4 1 , 4 5 8 - 4 7 2 ,

Index 4 7 9 - 4 8 5 , 4 9 1; and intra-industry trade, 3, 6, 3 9 - 4 1 , 88, 204, 3 1 7 - 3 1 8 , 4 7 3 , 4 7 7 , 490, 4 9 4 -4 9 5 ; a n d liberal in tern ation al relations theory, 4 7 2 , 4 9 1 - 4 9 3 ,4 9 7 ; a n d m e th o d ­ o lo gica l p rin ciples, 7 7 - 8 5 , 4 9 9 -5 0 0 ; and M u n d ell-F lem in g con dition s, 4 3 - 4 5 , 285; and N ash equ ilibriu m , 6 2 - 6 3 , 463; n eo fu n c­ tionalism , 4, 7 - 9 , 1 3 - 1 6 , 20, 52, 56, 60, 7 1 , 88, 10 5, 13 9 , 15 3 , 160, 17 7 , 2 3 0 -2 3 3 , 3 8 1, 386, 4 3 1 ,4 5 8 , 468, 4 7 3 , 489, 50 1; and QMV, 2 - 4 , 8, 6 1 , 6 7 - 7 0 , 7 4 - 7 6 , 86, 1 0 1 -1 0 2 , ! 3 8 * 15 3 “ I5 i>, 159» *95» 224, 3 8 1 ,4 6 8 ; a n d rationalist fram ew ork, 3 - 5 , 9, 1 9 - 2 3 , 4 7 2 - 4 7 3 , 489, 494, 499; and realist in tern a­ tional relation s theory, 4 - 6 , 2 9 -3 0 , 178 , 4 6 2 - 4 6 3 , 4 78 , 4 9 7 -4 9 9 ; and regim e theory, 9, 1 5 - 1 7 , 2 1 - 2 2 , 5 1 - 5 7 , 68, I5 3 , 484, 4 9 2 -4 9 8 ; and security extern alities, 5 - 9 , 2 6 - 3 5 , 4 9 - 5 0 , 8 7 -9 0 , 1 3 5 - 1 3 6 , 15 7 , 160, 2 0 4 -2 0 5 , 2 3 8 -2 4 0 , 285, 2 9 1, 3 1 6 - 3 1 9 , 3 4 7 . 379 » 388, 4 0 2 -4 0 5 , 4 1 5 - 4 1 7 » 424» 428, 4 7 3 - 4 7 9 , 4 9 7 -4 9 8 , 50 1; supranational b a rga in in g theory, 5 2 - 6 0 , 8 7 -8 8 , 1 3 8 - 1 4 5 , 1 5 1 - 1 5 2 , 15 7 , 2 10 , 2 3 0 -2 3 4 , 240, 3 0 4 -

306, 347 . 368 - 375 , 378 , 381 , 386, 431 , 454 , 4 5 8 - 4 6 7 , 4 7 9 - 4 8 5 ; theories o f institutional d eleg a tio n , 3 - 4 , 8 - 1 0 , 6 7 - 7 7 , 87, 139, 1 5 2 - 1 6 1 , 224, 2 3 5 -2 3 6 , 2 3 9 - 2 4 1 , 2 9 1, 3 0 8 - 3 1 2 , 3 7 5 - 3 7 8 , 3 8 0 -3 8 1 , 386, 4 6 7 473* 4 8 5 - 4 8 9 , 4 9 9 -5 0 0 ; theories o f in te r­ state bargain in g, 3, 7 - 9 , 5 1 - 6 7 , 87, 1 6 0 1 6 1 , 2 0 5 -2 0 6 , 2 3 9 - 2 4 1 , 3 0 4 -3 0 8 , 3 12 , 3 4 7, 3 6 8 -3 7 8 , 3 8 0 - 3 8 1 , 386, 4 57-4 6 9 » 473* 479~"485, 4 9 9 -5 0 0 ; th eories o f political e con o m y, 3 5 - 5 0 , 3 87, 4 0 1, 404, 4 1 5 - 4 1 7 , 4 7 3 “ 477> 4 9 4 “ 498; th eories o f p referen ce fo rm a tio n , 3 - 9 , 2 0 -5 0 , 8 7 -9 0 , 1 1 2 , 13 5, 1 5 7 , 2 0 4 -2 0 5 , 2 3 1, 2 3 9 - 2 4 1 , 2 8 5 - 2 9 1 , 3 1 2 ,3 1 7 - 3 1 9 .3 4 3 - 3 4 7 .3 7 7 - 3 7 8 .3 8 0 3 8 ' . 3 89. 3 9 6 ,4 0 4 - 4 0 5 ,4 1 5 ,4 2 4 , 4 2 8 4 29, 4 6 9 - 4 7 9 , 4 9 0 -4 9 3 , 4 9 9 -5 0 0 ; and unitary a cto r assum ption, 2 2 -2 3 , 499 In tergovern m en tal C o n fe re n ce ( 1 9 9 6 - 1 9 9 7 ) , 1 2 ,4 7 0 -4 7 1 In terio r policy. S#?Justice a n d in terio r affairs In ternational M on etary Fund (IM F). See B retton W oods system: In ternational M onetary' F un d (IMF) In ternational relation s theory. See Integration theory Irelan d, 454; and fo reign p olicy co o p eratio n , 4 5 0 - 4 5 ! ; and institutional d elegatio n , 3 10 , 349; and M aastricht Treaty, 379; and SEA, 3 18 , 363, 36 7, 3 73 , 375; Snake, EM S and EM U, 2 9 3 -2 9 4 , 2 9 9 -3 0 0 , 303, 307, 442, 446; a n d social policy, 4 53; and Structural F unds a n d C o h esio n Funds, 300, 3 6 7, 446 Italy, 30, 4 1 , 4 4 - 4 8 , 70, 7 5 , 146, 190, 2 0 7-2 0 8 ; agricu ltu re and CA P, 89, 99, 110 , 14 2 , 14 7 , 2 0 9 - 2 1 0 , 2 1 4 - 2 1 5 , 2 6 3 -2 6 4 , 349; co m p etitio n policy, 149; and Em pty C h a ir Crisis a n d L u x em b o u rg C om prom ise, 228, 334; and E C B , 4 4 4 ,4 6 9 ; and E C budget, 349; a n d E u ro p ean federalism , 309, 3 57, 3 76 , 429; and EP, 3 1 1 , 3 5 7 , 3 6 6 - 3 6 7 , 455;

and e xp o rt o f labor, 149; and foreign policy co o p eratio n , 2 2 6 - 2 2 7 , 4 5 0 - 4 5 1 '»im m igra­ tion and asylum policies, 447; and industrial policy, 3 5 8 ,4 5 4 ; and institutional delegation, 153-156.309-311.352.357.363.376.452; ju stice and in terio r affairs, 447; and political u n ion , 448; and SEA, 3 18 , 3 6 3 -3 6 8 , 376; Snake, EMS and EMU, 2 3 9 - 2 4 1 , 2 5 1 , 255, 2 6 3 -2 6 4 , 2 7 9 -2 8 0 , 286, 2 9 0 -2 9 4 , 2 9 8 -

3 ° 3 * 3° 6 - 3 ° 9 * 3 1 2 “ 3 1 3 » 3 27 »3 6 5 »394 »39 8» 4 0 3 ,4 1 0 - 4 1 1 , 4 1 4 ,4 2 0 , 4 2 7, 4 3 1 - 4 3 5 , 439-445> 464; and social policy, 452; and Structural Funds, 300, 303, 367 Japan, 30, 296, 328, 336, 463, 4 95, 498 Jebb, Sir Gladw yn, 129 Jenkins, Roy, 56, 239, 2 5 1 - 2 5 3 , 2 6 7 -2 6 8 , 283, 2 9 1, 2 9 5 -2 9 8 , 3 0 5 -3 0 6 , 4 3 6, 482 Job ert, M ichel, 259, 265 Justice and in terior affairs, 379, 399, 402, 4 1 5 . 4 2 2 , 4 3 1 ,4 4 7 ,4 5 0 - 4 5 2 , 4 6 7 - 4 7 1 Kennedy, J oh n F., 16 5, 174, 184, 19 5, 223 K eo h an e, R obert, 1 5 - 1 7 , 497 K iesinger, Kurt, 29, 203 K ip pin g, N orm an , 167 K o h l, H elm ut, 2 7 -3 2 , 2 57, 3 0 1, 346, 3 6 1 ,4 5 4 ; agricu ltu re and CAP, 258, 3 3 1; and B un des­ bank, 394, 3 9 7 -4 0 3 ,4 6 5 ; and Com m ission, 463; and E CB, 4 0 1, 4 3 7, 444; and E C b u d ­ get, 258; and E uropean federalism , 388, 390, 4 0 1, 429, 478; EMS and EMU, 239, 332, 3 6 6 -3 6 8 , 380, 3 8 8 -3 8 9 , 394-403» 408, 4 1 3 , 428, 4 3 3 - 4 3 7 , 4 4 0 -4 4 6 , 460, 465, 4 70 , 478; and EP, 259, 368, 456; E uropean policy, 3 2 7 -3 2 8 , 3 3 1, 345, 3 5 1 , 3 8 9 -3 9 0 , 4 0 3 -4 0 4 , 430; and fo reign policy co o p era ­ tion, 390; and G erm an un ification, 3 8 7 -3 9 0 , 3 9 6 - 4 0 1 , 407, 4 1 3 , 4 3 7 -4 3 8 , 4 47; im m igra­ tion and asylum policies, 402, 452; and insti­ tutional d elegatio n , 259, 3 5 1 , 360, 368, 3 9 1, 4 57; and Louvre A cco rd , 4 0 1; and M aastricht Treaty, 403, 462, 470; and M itterrand, 408, 438, 4 57; and political u n io n , 3 9 9 - 4 0 1 , 408, 4 3 7 -4 3 8 , 4 4 7 -4 4 8 ; and region al funds, 258; and SEA, 3 1 7 , 3 2 6 - 3 2 7 , 3 3 0 - 3 3 1 , 3^3, 3 5 9 -3 6 0 , 3 6 4 - 3 7 1 ; and social policy, 453 K öhler, Claus, 395 K ohlstam m , Max, 141 Krasner, Step h en , 498 Küsters, H anns-Jürgen, 87 I^affan, Brigid, 58 Lahn stein , M anfred, 253, 280 L alum ière, C ath erin e, 342 Lam on t, N orm an , 4 2 1, 465 L am o u reau x, François, 4 4 5 - 4 4 6 Lawson, N igel, 2 8 2 -2 9 0 , 4 2 0 -4 2 6 , 4 3 4 - 4 3 5 Lee, Frank, 12 7 , 1 7 1 - 1 7 6 L eigh -Pem berton, R obert, 278, 4 2 4 -4 2 6 , 435- 436, 4 6 4 -4 6 5 Lévy-Lang, A n d ré, 409 L ieber, Robert, 160, 174 L in d b erg, L eo n , 56, 59, 7 1 , 160, 2 17 Lloyd, Selwyn, 165

5 11

Index L o n d o n C o n fe re n ce ( 19 5 4 ), 136 L ou vre A cco rd , 3 9 4, 4 0 1-4 0 2 L ubbers, R u u d , 423 Ludlow, Peter, 13 , 305 L u xem b o u rg: a n d CA P, 488; EM S and EMU, 2 9 7, 4 4 0 - 4 4 1 , 444; and fo reign p olicy c o o p ­ eratio n , 4 5 1 ; and G erm an un ification, 389; a n d in stitutional d elegatio n , 1 5 3 - 1 5 6 , 2 19 , 3 0 9 - 3 1 1 , 363, 366, 3 76 , 4 52 , 488; and polit* ical u n io n , 460, 480; and SEA, 324, 344, 348, 3 5 9 " 3 6 o >363» 370. 376; and social p o l­ icy, 452 L u x em b o u rg C om p rom ise and Em pty C h air Crisis ( 1 9 6 5 - 1 9 6 6 ) . 2, 15 4 , 15 9 , 17 7 , 1 9 3 - 1 9 6 , 2 0 3 -2 0 5 , 2 2 4 -2 3 6 , 3 12 , 3 15 , 322, 3 2 6, 3 3 1 , 334, 343, 349 - 35 ° , 360 , 363 * 366, 4 78 , 4 8 1, 488 M aastricht Treaty. See also E co n om ic and M on etary U n io n (EM U ) and Political un ion. 2, 12 , 18, 22, 2 7, 42, 53, 68, 80, 83, 3 1 1 ,

3 7 >. 3 7 9 - 4 7 4 . 4 7 8 ,4 8 0 - 4 8 3 , 4 9 2 -4 9 3 M acm illan, H arold, 27, 160, 17 9 , 1 8 9 - 1 9 1 , 297; agricu ltu re a n d CA P, 192, 204, 2 2 1 -2 2 2 ; and British E E C m em bership bid, 1 6 4 - 1 6 7 , 1 7 1 , 1 7 5 - 1 7 6 , 188, 2 2 0 -2 2 3 , 303, 4 82, 498; and d e G au lle, 17 2 , 192, 2 2 1 -2 2 3 ; and E uropean federalism , 122, 125; a n d FTA, 134, 2 2 1; G rand D esign m em o , 16 5, 1 7 3 - 1 7 4 ; on G erm an econ o m ic pow er, 133; and institutional d elegatio n , 13 4 , 222; a n d Nassau sum m it (1 9 6 2 ), 177; N A T O and western allian ce, 133, 16 5, 170, 1 7 4 - 1 76; T reaty o f R om e and custom s u n io n , 1 2 3 - 1 3 1 , 166, 1 7 0 - 1 7 5 , 205, 220, 223, 4 76 M ajon e, G ian d o m e n ico , 3 7 7 M ajor, J o h n , 4 19 , 454; EMS and EM U , 386, 4 2 1 - 4 2 6 , 4 4 1 ; and EP, 427; and fo reign p o l­ icy co o p era tio n , 4 2 7 , 4 5 1; and K o h l, 4 4 1; and M aastricht Treaty, 4 8 2 -4 8 3 ; and p o liti­ cal u n io n , 448; and social policy, 422, 426, 4 5 3 .4 6 7 M ann , T h o m as, 387 M ansholt Plan, 2 1 1 - 2 1 2 , 2 1 6 - 2 1 7 , 482 M ansholt, S icco , 56 , 205, 2 1 7 , 224; agriculture and CA P, 10 1, 2 1 0 - 2 1 6 , 230; and Em pty C h air Crisis, 228, 232; and institutional d e le ­ gation, 2 1 0 - 2 1 1 M a ijo lin , R obert, 104, 107, 1 1 0 - 1 1 1 , 1 1 4 - 1 1 9 . 137 » 144 - 145 » 1 5 4 - 1 5 6 , 195 » 203, 220, 228, 232, 245, 2 9 2 -2 9 4 , 3 12 M arkovits, A n d rei, 32 M arshall Plan, 94 M asson, Jean, 1 1 5 M audling, R egin ald, 221 M auroy, Pierre, 2 6 1 -2 6 2 , 2 7 1 , 349 M ayer, R éne, 104 M élitz, Jacqu es, 342 M endès-F rance, Pierre, 106, 10 7, 120, 13 7 , 140 M essina co n fe re n ce. See Treaty o f Rome: M essina co n fe re n c e M ilw ard, A lan , 4, 13, 88, 123, 496, 499 M itterrand, François, 27, 19 7 , 2 6 1 -2 6 5 , 3 0 1,

5/2

3 6 1 ,4 0 5 ,4 2 7 ; and CAP, 273; and e n la rge­ m ent, 350 ,40 8 ; and ECB, 4 14 , 433; and European federalism , 238, 260, 2 7 0 -2 7 3 ,

335 »4 ° 5 »4 1 3 »4 2 9 »4 7 8; EMS and E M U » 239» 257» 2 6 9 -2 7 3 , 2 8 7 -2 8 9 , 3 0 2 -3 0 3 , 313» 332-333» 343» 368, 380, 3 9 8 -4 0 0 , 405, 4 0 8 ,4 1 3 ,4 3 4 - 4 3 7 ,4 4 3 , 4 6 0 ,4 6 5 , 478; and EP, 335, 368, 456; E uropean policy,

3 32 - 336 , 3 4 0 - 346 , 3 5 0 - 351 »4 0 5 - 40 7 » 4 14 ; and fo reign p olicy co o p eratio n , 333; and G erm an unification, 397, 407, 4 13 , 4 18 , 438; and industrial policy, 3 3 9 -3 4 2 ; and in ­ stitutional d elegatio n , 2 7 3 -2 7 4 , 3 3 3 “ 335» 3 43 »352 »360, 368, 376; and K ohl, 408, 457; and M aastricht Treaty, 4 0 6 ,4 1 3 - 4 1 4 ; and Poland, 407; and political un ion, 408, 447; and SEA, 274, 3 1 5 - 3 1 7 » 33 2, 337 »343 » 347 »35 3 »356, 3 5 9 “ 36o, 364, 3 6 8 -3 7 3 , 376; and social policy, 3 3 2 -3 3 3 , 3 4 1, 453; and USSR, 407 M ollet, Guy, 27, 1 0 3 - 1 1 6 , 136, 1 4 4 - 1 5 2 , 1 5 5 ‘, and agricultural subsidies, 1 1 1 ; and Euratom , 107; and G reat Britain, 12 1; and institutional d elegatio n , 1 2 1 , 154; and Suez crisis, 107; T reaty o f R om e and custom s un io n , 1 1 9 - 1 2 2 M on net, Jean, 4, 7, 18, 27, 3 0 - 3 3 , 5 2 -5 3 , 5 6 - 5 9 , 7 0 - 7 1 , 7 9 , 9 7 - 1 0 1 , 1 0 6 - 1 0 7 , 11 2 , 120, 129, 14 1 , 148, 1 5 1 - 1 5 2 , 15 7 , 187, 223, 232, 245, 295, 310 , 459; custom s u n io n and Euratom , 105, 11 9 , 1 3 8 - 1 3 9 , 142, 145, 4 8 0 -4 8 1 ; and Em pty C h air Crisis, 228; and ED C , 4 8 1; and F ouchet Plan, 226, 233; resig­ nation from ECSC, 140 M uller, Lothar, 395 M uller-A rm ack, A lfred, 200 M ultilateral Force (M L F ), 17 7 , 184, 189, 1 9 4 19 5, 2 2 1, 227, 4 75 M utual reco gn ition . See Single E uropean Act (SEA) Narjes, Karl-H einz, 330, 3 5 8 - 3 5 9 , 3 6 9 3 7 0 ,3 7 2 Nassau sum m it (19 6 2 ), 1 7 7 , 192, 2 0 4 ,2 2 1,

475

N ational Farm ers’ U n ion (NFU, Britain), 126, 169, 275 N au, H enry, 15 N etherlands, 48, 190, 454; agriculture and CA P, 89, 99, 142, 14 7 , 150, 154, 2 0 1-2 0 2 , 2 0 7 - 2 1 7 , 224, 233, 236, 3 4 9 -3 5 1» 488; com p etition policy, 149, 154; and foreign policy co o p eratio n , 226, 4 5 0 - 4 5 1 ; Empty C h air Crisis and L u x em b o u rg C om prom ise, 2 2 8 -2 3 0 , 234; and E C B , 444, 469; and EC budget, 349; and E uropean federalism , 309, 3 76 , 429; EMS and EMU, 2 4 1, 2 9 2 -2 9 4 , 2 9 7 -2 9 8 , 365, 3 73 , 4 16 , 4 4 0 -4 4 2 , 445, 465; and EP, 3 1 1 , 366, 3 76, 4 5 5 - 4 5 7 ; and G ATT, 207; and G erm an un ification, 390; and G reat Britain, 226; and institutional d e leg a ­ tion, 1 5 3 - 1 5 6 , 228, 3 0 9 - 3 1 1 ,3 5 2 ,3 6 3 ,3 6 6 , 373 »3 7 6 , 488; and M aastricht Treaty, 449, 463; and political u n io n , 460; and SEA, 344,

348 , 353 . 3 5 7 -3 6 0 , 3 6 3 - 3 6 4 . 3 7 3 - 376 ; and

Index social policy, 453; transport policy, 158, 2 1 7 218; Treaty o f Rome and customs union, 142, 150, 154 Noël, Emile, 1 1 6 - 1 1 7 , 363, 457 Nôlling, W ilhelm, 379 North American Free Trade Area (NAFTA), 500 North Atlantic Treaty Organization (NATO), 9 1»94-95* H9» *5 °» 16 4 -16 5 , 1 7 0 -17 9 , 190, 198, 201-202, 2 2 5-2 2 7, 234, 391, 400, 407, 4 19 , 425, 4 51, 4 7 5 -4 7 6 Norway, 29 3-29 4 , 3 13 , 410 Nutting, Anthony, 126, 129 Nye, Joseph, 15, 497 O il crises, 247, 257, 261, 264-266, 283, 410,

475-477

O llenhauer, Kurt, 151 Ophüls, Carl, 100, 140, 148, 155 Organization for European Economic Coop­ eration (O EEC), 87, 96, 10 0 -10 1, 1 1 3 - 1 1 4 , 1 2 5 -12 6 , 12 9 -13 0 , 14 1-14 3 , 146, 155, 181 Ostpolitik. See Germany: Ostpolitik Patronat (France). See Conseil National du Patronat Français (CNPF) Peltzman, Samuel, 36 Peyrefitte, Alain, 18 6 -18 7, 19 3 -19 6 Pflimlin, Pierre, 113 , 181 Philip, André, 121 Pinay, Antoine, 106, 114, 14 1-14 2 Pineau, Christian, 104, 107, 11 4 -12 0 , 137, 14 3 -14 5 , 1 5 2 -1 5 4 Piris, Jean-Pierre, 456 Pisani, Edgar, 191, 212 Plan G. See Great Britain: and FTA Pôhl, Karl-Otto, 250, 255, 395, 398-400,403, 4 2 4 ,4 3 4 -4 4 1 ,4 6 4 -4 6 5 Political union. See also Foreign policy coopera­ tion. 2 52 -2 53 , 3 7 9 -3 8 1 , 387-391* 3 9 5 396 , 399 - 4 ° 8»413 »422 , 426, 4 2 9 -4 3 1, 435 - 44 ° . 447 - 449 »459 - 4 6 3 >467» 47 °. 4 80 -4 8 3 Pompidou, Georges, 27, 176, 18 7-18 8 , 260, 291, 301, 475; and British EC membership, 18 9 -19 3 , 224, 238, 259, 26 3-26 5, 292, 308-309, 486; and CAP, 19 1 -19 3 , 224, 236, 2 6 5-266, 292, 308-309; and European pol­ icy, 266; and foreign policy cooperation, 256; and Germany, 238, 259; and institutional delegation, 184, 265, 260, 2 73 -2 74 , 310, 486; Snake and EMU, 238, 265-266, 292-293 . 305 . 3 i 0 Portugal: accession, 258-260, 273, 303, 3 4 9 -3 5 1; and EC budget, 337; and EMU, 4 42-446; and foreign policy cooperation, 451; and institutional delegation, 454, 469; and SEA, 318; and social policy, 453; Struc­ tural Funds and Cohesion Funds, 367, 372, 4 46 ,4 77 Prate, Alain, 268 Puchala, Donald, 14, 80 Putnam, Robert, 62 Ramadier, Paul, 115 Regional p o licy , 7, 218, 238-240, 244, 250,

258-2 5 9 . 280-282, 290-297, 300, 3 0 3 306, 349, 3 55,48 7 Rehwinkel, Edmund, 202 Reich, Simon, 32 Rey, Jean-Jacques, 287 Ridley, Nicolas, 4 18 ,4 2 7 Rocard, Michel, 271, 334 “ 335 . 35 1 Ross, George, 59, 3 6 8 ,458 -4 6 0 Rueff, Jacques, 18 1-18 3 , 264 Saarland, 9 4 -9 5 , 102, 119, 136, 14 3 -14 4 ,4 7 6 Sandholtz, Wayne, 56, 368, 458, 462 Sandys, Duncan, 171 Scheingold, Stuart, 160, 217 Schengen Agreem ent, 337, 342, 346, 353, 360, 369.4 7 5 -4 7 7 Schiller, Karl, 249 Schlesinger, Helmut, 395, 399, 403, 443, 493 Schmidt, Helmut, 2 7-2 9 , 269, 295; agriculture and CAP, 245, 250, 258, 273, 331; and Bun­ desbank, 394; and EC budget, 258; and European federalism, 238, 24 4-24 5, 2 5 2 256, 267-268, 291; EMS and EMU, 2 3 9 240, 244-258, 280, 287, 290, 294-302, 3 ° 5 - 3 ° 6 , 393-394, 433 - 434 . 476 . 4 8°: European policy, 327, 330, 390; and foreign policy cooperation, 256, 268; and France, 245; and institutional delegation, 245, 259, 267, 273, 380; and regional funds, 258; and Treaty o f Rome, 103; and US, 238, 244, 252 Schonfeld, Andrew, 298 Schroder, Gerhardt, 202-203, 228-230, 488 -48 9 Schroeder, Paul, 82 Schulman, Horst, 297 Schumacher, Kurt, 95 Schuman Plan, 31, 111 Schuman, Robert, 86, 91, 114, 472 Schumann, Maurice, 190, 304 Sebenius, James, 59 Single European Act (SEA), 2, 8, 18, 27, 80, 274, 3 11 -3 7 8 , 380, 3 9 6 -3 9 7 , 404-406, 415. 4 2 3 , 431 - 434 . 44 ° . 452 . 455 - 457 . 461, 469, 4 7 2 -4 7 7 , 479, 4 8 4 -4 8 5 ,4 9 1-4 9 2 ; and mutual recognition, 3 15-317, 353~354, 362, 375 - 377 ; and White Paper (1985), 314-316, 3 24 - 33 °. 336 , 3 43 . 347 . 353 “ 356, 359 . 362-365, 370-375, 378, 483. 487 Single Market. See Single European Act (SEA) Smyser, Wr.R., 464 Snake. See also European Monetary System (EMS) and Economic and Monetary Union (EMU). 42, 238-240, 251, 2 6 6 -26 7, 2 7 4 279 , 285 - 287 , 290 - 309 , 3 12 - 3 13 ,4 3 0 Soames Affair, 189, 193, 196 Soames, Christopher, 171 Social policy and social harmonization, 109, 114 , 11 7 , 12 1, 136, 141, 14 4 -14 6 , 150, 238, 244 . 293. 3 ° 5 . 319 . 325-326, 341. 346 , 349 . 355 . 361, 365-367» 372 - 373 . 379 . 386, 396, 409, 4 1 5 - 4 1 7 , 4 2 0 -4 3 1, 4 4 6 -4 4 9 , 4 5 2 45 4 . 457 . 461,467-469. 4 7 4 . 483. 4897492 Spaak Committee and Report (19 5 5 -19 5 6 ), 97, 1 1 5 - 1 1 6 , 125, 129, 137, 14 2 -143 , 149, 154, 291,360, 480

5 *3

Index Spaak, Paul-Henri, 106, 116 , 129, 13 8 -14 6 , 213, 226, 233 Spain, 4 1, 455; accession, 258-260, 273, 303, 3 4 9 -3 5 1; and ECB, 469; and EC budget, 337; EMS and EMU, 440 -448 ; and foreign policy cooperation, 4 5 0 -4 5 1 ; and institu­ tional delegation, 454, 469; and SEA, 318; and social policy, 4 52 -4 54 ; Structural Funds and Cohesion Funds, 367, 372, 4 4 6 -4 4 8 ,

477

Spaventa, Luigi, 238 Special Committee on Agriculture. See Council o f Ministers: CAP and Special Committee on Agriculture Spinelli, Altiero, 9 1, 150, 245, 310, 335, 346, 3 5 7 -3 5 8 .4 8 5 Stability pact. See Economic and Monetary Union (EMU): stability pact StikkerPlan, 141 Stoltenberg, Gerhardt, 398-399, 433"434 Strauss, Franz-Josef, 148, 198, 202, 213, 22 7,2 4 9 Structural Funds. See European Community budget: Structural Funds and Cohesion Funds Subsidiarity, 391, 399, 4 17, 455 Suez crisis, 27, 30, 87, 10 3-104, 107-108, 1 1 8 - 1 2 1 , 144, 166 ,475 Sweden, 288, 2 9 3 -2 9 4 ,3 13 , 410 Taylor, Paul, 374 Telecommunications policy, 3 2 4-3 2 5, 3 2 9 -3 3 0 .3 3 8 ,3 4 4 -3 4 5 Teltschik, Horst, 389, 397, 436 Thatcher, Margaret, 27, 278, 361, 4 71, 498; agriculture and CAP, 351; Bruges speech (1988) ,4 1 9 ; and enlargement, 418; and EC budget, 3 4 9 -3 5 1, 367, 374; EMS and EMU, 2 7 4 -2 7 5 , 282-284, 290, 326, 366, 386, 4 1 8 -4 2 7 , 430, 4 3 4 -4 3 6 , 464, 476, 489; Euroscepticism and European policy, 2 7 4 275, 282, 2 9 0 -2 9 1, 3 22-326, 346, 378, 4 1 7 - 4 1 9 , 478, 493; and German unification, 418, 438; and institutional delegation, 322, 3 2 5-3 2 6 , 346, 363, 376 -3 78 ; 419. 4 8 7 489; Maastricht Treaty and political union, 426, 447; and SEA, 240, 3 17 , 32 4-3 2 6 , 357, 360, 3 6 3-378 , 482, 487-489; and social pol­ icy, 346 T h o m , Gaston, 316, 352, 355 Thorneycroft, Peter, 12 9 -13 0 , 172 Tietmeyer, Hans, 395, 493 Trades Union Congress (TUC): and British EC membership bid, 169; and EMS, 277; and in­ stitutional delegation, 126; Maastricht Treaty and ECB, 422; and SEA, 325; and social pol­ icy, 422; Transport policy, 90, 98, 10 1-10 2 , 146, 154, 157, 16 1, 19 7 -2 0 1, 204, 2 17 -2 18 , 227, 234,

323- 325. 329 . 345 . 355 . 36 l >367. 474.485

5 *4

Treaty o f Amsterdam, 471 Treaty o f Rome. See also Common Agricultural Policy (CAP) and Customs union. 2, 8 6 -158 , 164, 167, 17 9 -18 4 , 188-190, 196, 201-202, 207-208, 224, 237, 245, 268, 353, 360, 4 72 -4 78 , 487-488; and competition policy, 149, 2 18 -2 19 ; and development aid, 14 8 150; as a framework document, 152, 157; implementation, 2 3 6-23 7; Messina confer­ ence, 9 9 -1 0 1 , 106, 1 1 3 - 1 1 4 , 117, 122-142; and monetary union, 149; and QMV, 15 2 158; and social policy, 452; and Suez crisis, 87, 103, 119; and transport policy, 146, 217; trading arrangements with colonies and for­ mer colonies, 14 7-14 8; Venice meeting, 11 6 -12 0 , 130, 137, 143 Treaty on European Union. See Maastricht Treaty Triffin, Robert, 253, 291 Turkey, 229 Union o f Industrial and Employers’ Confedera­ tions o f Europe (UNICE), 356, 422; 453 Union o f Soviet Socialist Republics (USSR), 29, 3 2 -3 4 ,9 1 ,9 4 , 104, 127, 133, 172, 178, 184, 222, 227-229, 244, 256, 316, 347, 389, 397, 407-408, 413, 418, 4 3 7 -4 3 8 ,4 7 5 , 4 7 8 479 »498 United Nations Security Council, 448, 451 United States (US), 30, 39, 4 3 -4 4 , 74, 82-84, 9 1 ,9 4 ,9 7 , 107, 124, 128, 13 1-13 4 , 140, 148, 166, 170, 17 3 -18 3 , 18 9 -19 5, 198, 202, 208, 216, 220-222, 234, 238, 244, 2 5 0 253, 2 5 6 -2 5 7 , 264, 268-269, 288, 292, 296, 316, 318, 324» 336 , 3 4 i“ 342, 345 »347 » 39° . 397 . 40.7-408,438 , 475 - 495 . 498 Uri, Pierre, 97, 138 -14 0 , 143, 156, 210, 215 Vaubel, Roland, 464 Villiers, George, 109 Von der Groeben, Hans, 14 3 -14 5 , 154, 232 Von Hagen,Jurgen, 252 Waigel, Theo, 397- 399 »439 »4 4 3 " 446 Wehner, Herbert, 151 Weingast, Barry, 368 Werner, Pierre, 292 Western European Union (WEU). ^ F o r e ig n policy cooperation: WEU Wilson, Harold, 262, 279, 310; and British EC membership bid, 171, ig2 , 224; and EC budget, 349 World Trade Organization (W TO), 1, 6, 500 Wormser, Olivier, 106, 118 Yugoslavia, 390 Zysman, John, 56, 368