European Integration 1

The Logic of Regional Integration

Fabio Capano

International Political Economy

European Integration 2

The European Union is a supranational institution which may be qualified as a hybrid entity between a traditional state and an international organization. According to the Maastricht Treaty (1992), this is structured on three main pillars, the EU acts as a unitary state in the economic and monetary field while it rests on the consensus of every single state to carry out its policies in the field of security and internal affairs. Therefore, the EU is usually perceived as an entity which presents typical features of a Federal Community and Confederate Union and it is defined as a compound democracy. As stated by Sergio Fabbrini, the concept of governance may be fruitfully employed to analyze the EU1. This means that this subject rests on the interaction between formal and informal powers and the political power is fragmentized rather than centralized. As consequence, its political system presents a specific set of characteristics which are commonly recognizable and not in the modern nation-state. With reference to the former, the EU has a communitarian law which stand up the legislation of every single member and it is directly applicable to it. Also, it has a parliamentary institution which is directly elected from the people of every country member. However, contrarily to the modern nation state, the EU does not have autonomous resources, has a set of limited competencies in political and social areas, and presents a democratic deficit which adversely affected its legitimacy. In other words, the EU may be seen as a regulatory state which elaborates specific policies and leaves them to get implemented by the single state. According to Walter Mattli, the EU is the outcome of a long process of regional integration which began in 1952 (ECSC) in order to guarantee European security, promote its economic recovery, and contain Germany. Regional integration is defined as a phenomenon of mutual association among states that requires two specific set of conditions, namely the demand-side and supply-side2. With reference to the first condition, regional integration provides common rules, regulations, and policies which alleviate the costs of externalities that cross borders within a group
1

Sergio Fabbrini, LUnione Europea. Le istituzioni e gli attori di un sistema sopranazionale , (Bologna:Il Mulino ,2001) Introduction Walter Mattli, The Logic of Regional Integration: Europe and beyond, (Cambridge: Cambridge University Press, 1999),12

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of countries as new technologies arise and markets change in extent and structure. With regard to the second condition, regional integration depends on the willingness or payoff of national political leaders to accommodate demands for deeper integration and the presence of a strong leadership able to handle distributional questions among a group of countries. The logic of regional integration is explicable through three main theoretical approaches: functionalism, neofunctionalism, and liberal intergovernmentalism. According to Mitrany, functionalism assumes that every function is left to generate others gradually; in every case the appropriate authority is left to grow and develop out of actual performance3. Therefore a functional cooperation in the economic area grows prosperity and guarantees a stable and peaceful international system. In other words economic stability leads to political unification. The main criticism to this approach is that it is essentially a normative method and fails to specify the conditions to promote such an integrative scheme. Neofunctionalism moves form the normative to the utilitarian dimension of regional integration. In accordance with Haas, the key players of integration are above and below the nation-state. In these terms, supranational regional institutions and interest groups interact each other during the policy-making process. National governments act as brokers between these forces by offering creative responses. States pursue integration according to a utilitarian concept of interest politics and its dynamic is indissolubly associated to functional spillover, political spillover, and upgrading of common interests. The first concepts assumes that in a highly interdependent economy any integrative action in one sector creates a situation in which the original goal can be assured only by taking further actions in related sectors4. Political spillover takes into account the process of adaptive behaviour of interest groups and political parties in response to sectoral integration by avoiding assumptions of automatic cumulative integration. The third concept stresses how participants are induced by institutional mechanisms to refrain from vetoing proposals

3 4

Walter Mattli, The Logic of Regional Integration: Europe and beyond, p.21 Walter Mattli, The Logic of Regional Integration: Europe and beyond, p.25

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and seek compromises. In this context economic decision acquires political significance for participants. The weakness of this approach is the inadequate attention to governmental preferences and its limited understanding of the problems of collective action. The last approach is known as liberal intergovernmentalism and it is an elaborated version of the classical intergovernmentalism which explains integration by looking at the process of bargaining between heads of governments. His main exponent, Andrew Moravcsik, explained integration as a two stage process. In the first stage, national preferences are determined by constraints and opportunities which rest on the issue of economic interdependence. In the second stage, national governments attempt to carry out national preferences by an interstate bargain. The outcome will depend upon the power of every single national government, the functional incentives to reduce transaction costs, and the necessity to control domestic agendas. This approach blurs the lines between realism and neofunctionalism. The main criticism is this tension between functionalist and realist argument in explaining integration. I argue that the best approach to explain European integration is liberal intergovernmentalism. This approach takes into account the pivotal role played by interest groups in a highly interdependent economy in shaping the domestic political agenda. Also, it considers how the pressure for more or less integration does not simply depend on the articulation of domestic preferences; rather it is tied to the structural constraints which the nation state has to cope with in its international bargaining. In other words, this approach attempts to resolve the puzzle concerning the role of the nation state in the new context of worldwide globalization. From this point of view, security and economic issues appear to be further strongly interconnected and the pivotal actor in the decision making process is not easily recognizable. The first step in European integration was the Schuman Plan (1950) which proposed to place French and German coal and steel industries under a common authority and abolish their tariff restrictions. The treaty which established the ECSC was signed by six European countries. The creation of a common authority and the strengthening of economic interdependence were perceived

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as guarantee to peaceful relations. Moreover, the Suez crisis (1956) undoubtedly marked the ending of the ambitions of European countries to play a politics of power in the new bipolar context. After two world wars, concerns about security played a pivotal role in promoting regional integration. In these terms, European integration was the outcome of the bargaining between heads of governments. However, to excessively focus on security reasons obscures the important role that economic considerations played in the process of European integration. Its founding father, Jean Monnet, called for a united Europe able to keep a stronger bargaining position in trade negotiations. In his mind Europe had to create a third force between the two superpowers5. In these terms the neo functional approach explains the consequences of technological advancement and market enlargement very well. It stresses how informal pressure by private firms, lobbies, and groups of interest resulted in formal arrangements such as the Treaty of Rome, the Single European Act, and the Treaty of Maastricht. These pressures favoured the strengthening of the activity of the European Court of Justice which established the supremacy and direct applicability (direct effect doctrine) of communitarian law on national legislation according to the European principle of subsidiarity. During the 60s the ECJ worked as the engine of the European integration in a phase of political stagnation which mainly rested on disputes about the process of enlargement and the deepening of political integration. During the 70s, technological development resulted in the creation of the Round Table of European Industrialists (1983) which exercised a decisive pressure for deeper political and economic integration. The final outcome was the Single European Act (1986) which established the single European market and moved Europe on deeper political institutionalization. However, as it clearly emerges by looking at the enlargement issue, neofunctionalist explanations offer us a limited understanding of the European integration6. These explanations did not take into account the resistance of national states to concede sovereignty to supranational
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Walter Mattli, The Logic of Regional Integration: Europe and beyond, p.70 Walter Mattli, The Logic of Regional Integration: Europe and beyond, p.80

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institutions, to renounce political neutrality, and to guarantee domestic security (i.e. by containing immigration), and thereby fail to offer a clear understanding of the intergovernmental compromises which resulted in the Maastricht Treaty (1992). Therefore, intergovernmental bargaining appears to be a worthy way to better understand European integration. Not only European commitment institutions (EC and ECJ) but also the German leadership played a pivotal role in strengthening regional integration. Mattli argues that Germanys willingness to act as a regional paymaster and carry out a moderate rather than imposing leadership rested on the consideration of mutual dependence between it and its partners. Therefore, national leaders preferred to tackle on security and economic issues by the means of the European institution and in so doing they aimed to maximize economic gains and minimize externalities of integration. The final achievement depended on the power of the single state. To sum up, liberal intergovernmentalism considers both informal and formal pressure in dealing with European integration and worthily explains it. This approach focuses both on the utilitarian dimension of regional integration and political features of the growing economic interdependence. As consequence cooperation is explained by a liberal and realist approach. In so doing it offers a set of explanations which do not have to be seen mutually exclusive. Rather, I argue that every explanation may be fruitfully employed to explain the different phases of European integration and its acceleration and slowdown. The Maastricht Treaty and its tripartite structure (common market, foreign policy, internal affairs) is proof of the irreducible tension between economic and security considerations in pursing a cohesive regional integration which in the European case resulted in the creation of a supranational institution.