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Lobbying in the EU

MPIfG Working Paper 06/7, October 2006

Trade Policy Lobbying in the European Union: Who Captures Whom?

Cornelia Woll , Centre d’Etudes et de Recherches Internationales (CERI),

Sciences Po Paris

Chapter prepared for David Coen and Jeremy Richardson (eds.), Lobbying in the European Union: Institutions, Actors and Issues. Oxford University Press, forthcoming. I would like to thank Holger Döring and Armin Schäfer for their helpful remarks.

Abstract

What role do firms play in the making of EU trade policy? This article surveys the policy domain and lays out the instruments firms can employ to influence decisions on trade. It underlines that European trade policy is characterized by a high degree of institutional complexity, which firms have to manage in order to be successful. In particular, the European Commission works intensively to solicit business input in order to gain bargaining leverage vis-à-vis third countries and the EU member states. This reverse lobbying creates a two-channel logic of trade policy lobbying in the EU. Corporate actors have a very good chance of working closely with the European Commission if they can propose pan-European trade policy solutions. This can be either trade liberalization or EU-wide regulatory restrictions on trade. Demands for traditional protectionist measures, especially those that reveal national interest divergences, are difficult to defend at the supranational level. Protectionist lobbying therefore goes through the national route, with corporate actors working to block liberalization by affecting the consensus in the Council of Ministers. The chapter illustrates this two-channel logic by studying business–government interactions in agricultural trade, textiles and clothing, financial services, and telecommunication services.

Zusammenfassung

Welchen Einfluss haben Unternehmen auf die europäische Handelspolitik? Durch einen Überblick des Politikfelds analysiert der Artikel Instrumente, mit denen Unternehmen in der EU Lobbyismus betreiben können. Vielen Firmen werden allerdings nicht von sich aus aktiv. Im Gegenteil, die Europäische Kommission bemüht sich aktiv um die Zusammenarbeit der Unternehmen, da sie dadurch ihre Verhandlungsposition vis-à-vis Mitgliedsstaaten und Drittstaaten stärken kann. Dieses umgekehrte Lobbying hat Folgen für die Inhalte der Unternehmensforderungen im Bereich Handelspolitik. Wirtschaftliche Akteure können ein gutes Arbeitsverhältnis mit der Europäischen Kommission aufbauen, wenn sie gesamteuropäische Konzepte verfolgen, sei es Handelsliberalisierung oder EU-weite Regulierung. Nationaler Protektionismus kann europäische Entscheidungsfindung blockieren, so dass merkantilistische Anfragen an die nationalen Regierungen gerichtet werden müssen, die diese dann durch den Rat der Minister voranbringen können. Der Artikel illustriert diese zweigleisige Lobbyingstrategien in der Landwirtschaft, dem Textilhandel, dem Finanzdienstleistungssektor und der Telekommunikation.

Introduction

1 Trade policy lobbying in the multi-level system

1.1 The integration of trade policy-making

1.2 Instruments and venues for corporate lobbying

1.2.1 Trade policy consultation with private actors

1.2.2 Instruments of commercial defence

1.3 Trade-offs in multi-level trade lobbying

2
Lobbying for protectionism or liberalization

2.1 Resistance to foreign competition: agriculture and textiles

2.1.1 Agriculture

2.1.2 Textiles and clothing

2.2 Developing pan-European policy solutions: trade in services

2.2.1 Financial services

2.2.2 Telecommunications

3
Conclusion

References

Introduction

Trade policy is a classic field for the study of private influence on policy-making. Firms and industries can gain clear advantages by protecting their markets from foreign competition or by gaining access to other countries. A large portion of the literature on international political economy therefore explains policy choices with reference to the demands of constituent interests (see Frieden and Martin 2002). For anybody interested in business lobbying, trade policy would seem to be the most appropriate place to start.

And yet, comparing trade policy lobbying in the US and the EU leaves many observers surprised. Aggressive business lobbying on trade issues is much less common in Brussels than it is in Washington, D.C. (e.g. Coen 1999; cf. Woll 2006). Shaffer (2003: 6) underlines that US firms and trade associations are very proactive in business–government relations on trade policy. This “bottom-up” approach contrasts with the “top down” EU approach where public authority, in particular the European Commission, plays the predominant entrepreneurial role.

While the US Trade Representative responded to onslaughts of private sector lobbying reinforced by congressional phone calls and committee grillings, the Commission had to contact firms to contact it (Shaffer 2003: 70).

Indeed, we will see that the European Commission has made a concerted effort to integrate firms and other private actors into the trade policy-making process in order to gain bargaining leverage not simply vis-à-vis third countries, but also over its own member states (Van den Hoven 2002). By helping to elaborate policy solutions, interest group participation increases the legitimacy of the Commission on external trade issues.

This reverse lobbying is not without consequences. While firms do increasingly seize the opportunities available to them at the supranational level, EU trade policy lobbying is marked by a particular logic. Firms face a trade-off between pressing for their immediate advantages and responding to the interests of the European Commission, which promises them access to the policy-making process (Broscheid and Coen 2003). Since the Commission is not immediately accountable to constituency interests, it can select interest groups and firms that it prefers to work with and ignore others (Grande 1996). In selecting private partners, the Commission follows two objectives: first, it requires technical expertise to advance on its policy proposals (Bouwen 2002); second, and on trade issues in particular, it is interested in finding pan-European solutions to prevent disputes between the member states that would risk stalling trade negotiations (Shaffer 2003: 78-79). When protectionist measures depend on national boundaries, industry privileges are likely to conflict with the Commission’s goals. Firms therefore have to decide between lobbying for their immediate advantage at the risk of being ignored and framing their demands in terms of a pan-European interest even if they are not certain of obtaining an advantage.

This logic creates two distinct channels for trade policy lobbying in the EU. A firm or industry interested in classic protectionism is most successful when it uses a national lobbying strategy directed at the member states and ultimately the Council of Ministers. Supranational lobbying, in turn, requires making demands with pan-European dimensions. Lobbyists thus have to find ways of proposing pan-European protectionism, most commonly in the form of pan-European trade regulation (Young 2004). Alternatively, they can lobby for trade liberalization in order to establish or maintain contacts with the European Commission and then hope to integrate more precise demands in the details of trade regulation or the implementation of agreements.

By studying the Europeanization of trade policy and the instruments firms employ to affect EU trade policy, a first part of this paper underlines the complexity individual firms have to manage in order to influence the Community stance on international trade negotiations. As an illustration of the EU trade policy lobbying logic, a second part then turns to concrete policy examples and compares the protectionist lobbying on agriculture and textiles and clothing with the lobbying on service trade liberalization in financial services and telecommunications. The conclusion discusses the extent to which the findings on business lobbying have implications for other actors seeking to affect trade policy, most notably NGOs or public interest groups.

1 Trade policy lobbying in the multi-level system

Trade policy is one of the most integrated policy areas in the EU, and yet the struggle over the competence distribution between the supranational institutions and the member states is crucial for understanding lobbying in this domain. Before turning to the key instruments for corporate lobbying on EU trade, it is therefore necessary to understand the Europeanization of trade policy and the history of competence delegation from the member states to the EU Institutions.

1.1 The integration of trade policy-making

The common commercial policy is as old as the European Economic Community itself. With the Treaty of Rome in 1957, member states agreed that a customs union requires a common external tariff, common trade agreements with third countries and uniform application across member states. On these issues, they therefore granted the European institutions the right to speak on their behalf in external trade negotiations. Initially, this authority applied to tariff rates, anti-dumping and subsidies, which were indeed the main stakes in early multilateral trade negotiations under the General Agreement on Tariffs and Trade (GATT). During the Tokyo Round of GATT (1973-9) and especially during the Uruguay Round (1986-94), non-tariff barriers to trade started to gain importance, including health, environmental and social aspects of trade policy, and the domestic regulatory issues applying to the trade in services. European trade authority did not apply to many of these issues, which pushed the Community to redefine trade competences and the degree of delegation from the member states to the EU. In particular, it stirred up a debate over which issues should fall under “exclusive” or “mixed” competence (Meunier and Nicolaïdis 1999; Meunier 2000a).

Mixed competence means that trade authority is delegated on an ad hoc basis to the Community. The setting of objectives and the ratification of the negotiation results are subject to a unanimous vote by the Council, whereas both require only a qualified majority under exclusive competence. Over time, many areas of mixed competence have been dealt with pragmatically at first, by letting the Commission negotiate without fully resolving the competence dispute. For the results to be adopted, however, the legal competence question has become pressing. When the European Court of Justice decided against an automatic expansion of trade competences in 1994, the Commission and the member states first agreed on a code of conduct and later adopted a special competence transfer procedure in 1996 (Meunier 2000b: 338-40). It was not until 2003 that the Treaty of Nice finally amended Article 133 and provided for the exclusive competence over services and intellectual property rights, with the exception of cultural and audio-visual services. The struggle underlines how heavily disputed the transfer of authority is. Delegation is a delicate matter, even in this highly integrated policy domain, and control mechanisms employed by member states are tight (De Bièvre and Dür 2005).

The various control mechanisms become evident when one considers the different stages in the trade policy-making cycle. Woolcock (2000) distinguishes between (1) the setting of objectives, (2) the conduct of negotiations and (3) the adoption of results. The negotiation objectives are decided by the General Affairs Council of foreign ministers on the basis of a Commission proposal. Long before the formal adoption of a mandate, the Commission submits the proposal to the member states or, more precisely, to senior national trade officials representing their governments on the Article 133 Committee (see Johnson 1998). Discussions during this phase are crucial, since the Commission can use the Article 133 Committee “as a sounding board to ensure that it is on the right track” (Shaffer 2003: 79). Trying to achieve a consensus on the mandate, the Article 133 Committee examines and amends the proposal before handing it to the Committee of Permanent Representatives (COREPER) and eventually the Council. Neither the European Parliament nor the general public participate in these early negotiations, which take place behind closed doors in order to shield the negotiation objectives from the trading partners. Woolcock (2000: 380) underlines how sharply the role of the European Parliament contrasts with the role of the US Congress. Indeed, constituents lobbying their representatives have more direct control over the negotiating mandate in the US, where Congress can grant or withhold negotiation authority.

The conduct of negotiations is the responsibility of the Commission, but even in areas of exclusive competence, consultation with the member states is crucial. The Article 133 Committee closely follows negotiations and the EU negotiation team meets daily with member state representatives. On sensitive issues such as service trade liberalization, trading partners have jokingly remarked that the Commission negotiates more with the member states than with the rest of the world (Woll 2004: 227). The Commission, furthermore, tries to keep the External Economic Relations Committee of the European Parliament informed, even though the Parliament has no speaking rights during negotiations. Results are adopted by the General Affairs Council either by qualified majority voting under exclusive competence or by unanimous decision under mixed competence. In practice, however, consensus decisions are the norm (Woolcock 2000: 384).

The importance of consensus between the member states applies equally to dispute settlement procedures. The most common way to bring a dispute to the WTO is for the Commission to initiate a case after consultation with the Article 133 Committee. Formal procedure requires conflictual issues to be transferred to COREPER and subsequently to the Council, should all other instances fail to resolve the dispute. In all the time the WTO has employed the dispute settlement procedure, this has only happened once. According to Shaffer (2003: 80)

“neither committee members nor the Commission wish to transfer decision-making authority on trade matters from themselves, who are trade experts, to the Council, which consists of foreign affairs ministers.”

To summarize, all stages of trade policy-making are characterized by an explicit desire to achieve and maintain consensus between the member states. The Commission cannot negotiate effectively if the EU member states are not behind the Community objectives. The interlocking of member state control and Commission authority are thus the two important dimensions of trade policy-making that interest groups and firms need to take into account if they wish to lobby effectively.

1.2 Instruments and venues for corporate lobbying

Consultation with private actors happens at various stages of EU trade policy-making. Business interests, furthermore, affect the use of instruments of commercial defence, with which the Community tries to ensure equal competition for European and foreign firms. During trade negotiations and with respect to instruments of commercial defence, the solicitation by the Commission plays a key role in shaping the access of private actors to the policy-making process.

1.2.1 Trade policy consultation with private actors

Even though discussions between the Commission and the Article 133 Committee on negotiation objectives are not public, the Commission consults extensively with firms, interest groups and NGOs in order to define specific stakes in its proposal. The EU consultation procedure is less formal than the system of Trade Advisory Committees in the US, but the Commission DG Trade and DG Industry maintain stable relations with groups such as the Union of Industries of the European Community (UNICE) or sectoral business associations. In 1998, the Commission tried to formalize its consultation and include a broader range of interest groups by instituting a Civil Society Dialogue on the upcoming round of negotiations (Van den Hoven 2002; De Bièvre and Dür forthcoming). Both business interests and public interest groups now participate in the Civil Society Dialogue. However, unlike the US advisory system, the Commission is under no legal obligation to consult with the Civil Society Dialogue or to take its reports into consideration.

Yet input from interest groups is valuable to the European Commission because it can help strengthen its negotiation stances vis-à-vis the member states and its trading partners. During the Uruguay Round, American negotiators cooperated closely with US industry representatives. By contrast, the European business community was largely absent from the negotiations, despite the importance of multilateral trading stakes. Only UNICE declared in favour of the Commission position, and Jacques Delors complained openly about the lack of business support (Grant 1994: 83-5; Van den Hoven 2002: 10).

Integrating business interests into the formulation of trade objectives therefore became an important goal for the European Commission in the 1990s. One of the most noted initiatives was the Transatlantic Business Dialogue (TABD), founded by the US Secretary of Commerce Ron Brown and European Trade Commissioner Sir Leon Brittan in 1995. The aim of the TABD was to bring together CEOs of American and European companies so that they could “pre-negotiate” issues relevant to transatlantic trade (Coen and Grant 2000; Cowles 2001). Similarly, the Commission encouraged the creation of other consultative associations, such as the European Service Forum, launched in January 1999. Initiatives such as the Civil Society Dialogue, the TABD or the European Service Forum illustrate the extent to which the Commission solicits participation from private actors and is willing to listen to their suggestions.

However, individual groups have few means of putting direct pressure on the Commission to ensure that their demands will be taken into account. Within each member state, they can try to lobby their governments to affect the consensus between member states and the Commission during all phases of the policy cycle. They can also contact the European Parliament, which holds hearings and produces reports on trade issues, but this will do little more than shape the atmosphere in which EU objectives are determined and monitored (Woolcock 2000: 380). During the adoption phase, national parliaments and the European Parliament may play a greater role in the future, especially now that co-decision has been extended by the Treaty of Amsterdam, but lobbying on trade policy still concentrates on the interchange between the Commission and member governments.

1.2.2 Instruments of commercial defence

In addition to ongoing trade negotiations, business lobbying can also target separate administrative procedures to ensure protection against ‘unfair’ foreign competition. These instruments of commercial defence include anti-dumping and countervailing duties and the Trade Barriers Regulation of 1994. All of these administrative instruments require the identification of unfair competition practices, for which firms often have better information than governments. Over time, the EU has therefore tried to facilitate business input, so as to identify the greatest possible number of trade barriers or obstacles to competition.

Anti-dumping measures, by far the most commonly used instrument of commercial defence, seek to punish exporters who sell their goods in the EU below the cost of their domestic production. The procedure begins with a complaint filed by industry representatives, which the Commission then decides to pursue or not. In the event of an investigation, the Commission studies in consultation with the national authorities whether there is evidence of dumping or injury to a European industry and seeks proof that the imposition of duties would be in the ‘Community interest’. Hearings are held to define the Community interest and to make it difficult for narrow protectionist interests to pursue anti-dumping actions (Woolcock 2000: 389-90). In fact, petitioners need to represent 50% of the injured industry, which makes it hard for individual firms to file a complaint (De Bièvre 2002: 86). After the imposition of a provisional duty by the Commission, the Council can decide by simple majority to reject the duty or to impose definite action.

Until the beginning of the World Trade Organization (WTO), which replaced GATT in 1995, the commercial policy of the EU was relatively defensive. European trade officials had simultaneously to respond to demands for protection through anti-dumping measures and to face the US, which actively sought to dismantle European trade barriers. Faced with “aggressive unilateralism” from the US (Bhagwati and Patrick 1991), the EU had sought to create a New Commercial Policy Instrument in 1984, which tried to emulate US business–government cooperation in identifying trade barriers. Unlike the US model, the European procedure was marred with difficulties. In its ten year history, European firms filed only seven petitions (Shaffer 2003: 84-94). In December 1994, the instrument was replaced by the Trade Barriers Regulation, which supporters were hoping would have more teeth. Innovations included the right of individual firms to petition the Commission directly, as may member governments. Furthermore, the petitioner no longer needs to provide proof of injury in order to file the complaint. The Trade Barrier Regulation requires the EU to exhaust all available multilateral dispute settlement procedures before resorting to unilateral action, which means that the procedure serves mostly as a means of identifying potential WTO dispute settlement cases.

Indeed, soliciting industry help in identifying such cases was one of the main motivations behind the Trade Barrier Regulation. Traditional international trade disputes were initiated by the Commission in consultation with the Article 133 Committee. Lacking close cooperation with business interests and trade associations, the EU was much less able to exploit the WTO Dispute Settlement Body when it was first established in 1995. The US, by contrast, brought several high-profile cases against the EU, and filed 8 of the first 15 complaints resulting in panels [1]. Commission officials felt that they needed to show more initiative and started to work actively to gain industry support and industry’s technical expertise on existing trade barriers.

In February 1996, the Commission launched a new Market Access Strategy, tactically announced by Sir Leon Brittan as “D-Day for European Trade Policy” to an audience of major exporting companies (Shaffer 2003: 68). Within DG Trade, a Market Access Unit was established, the primary role of which was to interact with business actors to gather information on existing trade barriers. A central pillar of the work was the maintenance of a Market Access Database (see De Bièvre 2002: 96-100)[2]. By centralizing information on trade barriers and involving firms in the collection of information, the EU was hoping to be able to counter the aggressive private–public partnerships of US trade policy. As the administration of instruments of commercial defence shows, the Commission explicitly urged business participation in instruments of commercial defence in order to gain leverage over its trading partners.

1.3 Trade-offs in multi-level trade lobbying

The study of trade negotiations and of the administration of instruments of commercial defence illustrates how important business participation is for the internal and external negotiations of the European Commission. The solicitation is based on the Commission’s hopes of increasing its technical expertise, its legitimacy, its ability to maintain consensus among the member states and its leverage in trade negotiations. However, since Commission officials do not depend on re-election by constituency interests, firms cannot exert direct pressure on European officials to reinforce their demands.

Therefore, business access is not automatic; it depends on the degree to which private actors can offer the elements the Commission is interested in. Business lobbying on trade is thus marked by a particular exchange logic, where firms provide expertise and support in order to gain access to the policy process (Bouwen 2002; Mahoney 2004).

The selective access at the European level creates a two-channel logic for business lobbyists, which specifies different routes according to the content that firms seek to defend. Classical protectionism is easier to achieve in interaction with national governments, while cooperation on the elaboration of pan-European solutions promises an excellent working relationship with the European Commission. Pan-European trade policy lobbying can be in support of liberalization, but it can also consist of regulatory protectionism that does not discriminate on the grounds of nationality but appeals instead to a greater Community interest.

In fact, the tendency of the EU to defend a rather liberal external trade policy is relatively recent. Hanson (1998) argues that member states maintained national levels of protection in sensitive sectors throughout the 1970s and 1980s, despite the fact that a common commercial policy was enshrined in the Treaty of Rome. However, through the completion of the internal market, member states lost their ability to use national policy tools, in particular due to the legislative instruments available to the Commission in enforcing market integration (Schmidt 2000). Moreover, EU voting rules make it difficult to replace national policies with protectionism at the EU level (Hanson 1998: 56). Consensual decision-making on trade policy means that measures favouring the sensitive industries in only a few countries will be vetoed by other countries.

Yet, even if the Commission is more liberal than many of the member states, supranational trade policy initiatives are not always aimed at reducing trade barriers. In fact, the Commission does not have an a priori tendency to liberalize; it merely seeks to develop pan-European policy solutions that do not create cleavages between member states in order to avoid deadlock. Liberalization happens to be a pan-European solution, but pan-European regulation is also possible. Many have noted that the liberalization objectives of the EU often appear like an exercise in international regulation rather than the complete abandonment of all trade barriers (Winters 2001; Cremona 2001). Alasdair Young (2002) argues that EU external policy is most accurately described as an attempt to extend European cooperation to third countries. Moreover, regulatory harmonization within the single market infrequently creates “regulatory peaks,” as many of the prominent trade disputes between the EU and third countries illustrate (Young 2004). In other words, even though we should expect protectionist lobbying to employ national routes and businesses supporting liberalization to develop partnerships with the European Commission, we might also find lobbyists defending new kinds of regulatory protectionism that applies equally across member states.

2 Lobbying for protectionism or liberalization

What does this mean for industry lobbyists and why is it relevant to distinguish between classic protectionism and pan-European regulatory protectionism? With few exceptions, European trade policy applies to all industries alike, so we should expect producers and firms to move their lobbying efforts to the supranational level. Surprisingly, this is not the case. By comparing lobbying in agriculture and textiles and clothing, we can see that protectionist lobbying is only successful when it is supported within the member states, which is why lobbyists eventually have to concentrate their efforts on the domestic route. Tellingly, lobbyists targeting the Commission to maintain import restrictions on textiles and clothing were ignored in the absence of member state pressure. By contrast, a study of the service trade shows how business lobbyists have been able to influence the European Commission’s objective once they embraced liberalization as a policy objective. This was easy for the exporting companies in financial services, but required an important redefinition of policy demands in telecommunication services, where firms were not naturally inclined to support liberalization. Distinguishing between the types of demands can thus help to explain the success or failure of trade policy lobbying in the EU.

2.1 Resistance to foreign competition: agriculture and textiles

2.1.1 Agriculture

The agricultural market, one of the most integrated markets in the European Union, is characterized by a highly centralized structure of interest representation at the supranational level: the Comité des organizations professionnelles agricoles (COPA), founded in 1958. Despite the close, traditionally quasi-corporatist relations between COPA and the EU Institution on the Common Agricultural Policy (CAP), lobbying on multilateral trade issues has, most importantly, passed through national channels. Starting in the 1980s, the crisis of CAP dissolved the consensus between national agricultural organizations and left space for a more pluralist organization of agricultural interest groups. Several unified demonstration in Brussels notwithstanding, the diversification of interest representation implies that interest representation on external trade is mediated by the member states (Delorme 2002).

Indeed, during the first years of the Uruguay Round, national farmer organizations, most notably in France and Germany, lobbied heavily to ensure that their governments did not cede ground on agricultural liberalization. In December 1990, strong internal divisions between the EU member states led to a rejection of the settlement on agriculture that was supposed to conclude the Uruguay Round. The Commission hoped to strike a compromise by tying the multilateral negotiations to a reform of CAP. At the beginning of the CAP reform process, the Commission had tried to consult with national farmers’ unions, but eventually abandoned its contacts when it realized that farmers were not willing to move away from the status quo (Vahl 1997: 149). As a consequence, the Commission negotiated directly with the member states and isolated itself from the critical farmers’ union. In reaction, “farmers’ unions simply intensified their lobbying activities at the member state level” to block CAP reform and concession in the GATT negotiations (Van den Hoven 2002: 11). Once the Commission succeeded in a negotiating a compromise with the US at Blair House in Washington, D.C. in 1992, it was again the French government which threatened to veto the agreement. Since Germany had shifted its position to support the Blair House Accord, France ended up in an isolated position and did not carry through its threat (Balaam 1999: 60).

During the new round of trade talks, opposition to liberalization was also channelled through national routes. France and Ireland publicly criticized the Commission’s negotiating position during the Doha ministerial meeting, arguing that the defence of CAP ought to be the EU’s priority for negotiations (Van den Hoven 2002: 19-20). Until the time of writing, member state disagreement has severely constrained the Commission’s room for manoeuvre in the current negotiations. It is thus member state opposition, not agricultural lobbying, that explains development in agricultural trade negotiations. For the Commission, successful negotiations require neutralizing member state opposition, not resisting protectionist lobbyists at the supranational level.

2.1.2 Textiles and clothing

As in agriculture, protectionism in textiles and clothing was achieved through national strategies. Inversely, when interest groups had to start interacting with the European Commission, lobbying for protectionism became increasingly difficult. Protectionism in textiles and clothing dates was enshrined in four successive Multifibre Arrangements (MFA) from 1974-1994 and ended with a Uruguay Round Agreement on Textiles and Clothing, which stipulated that the MFA will be phased out over a ten year period.[3]

Throughout the MFA period, the orientation of the respective arrangements resulted from intense intergovernmental bargaining. The relatively moderate EU policy on MFA I (1974-6) was influenced by the liberal German and Dutch approach, which resisted US calls for strict protectionism. Since the EU industry had not yet lost its comparative advantage, the Commission did not want to intervene. Once the textiles and clothing trade balance deteriorated, the Committee for the Textile Industries in the European Community (COMITEXTIL) lobbied heavily in Brussels to draw attention to the dramatic fall in employment in the sector. Unimpressed and doubting the reliability of the figures, the Commission maintained that it would be wrong to give in to these protectionist demands. But things were different in the Council. Member states felt concerned about the health of their textiles and clothing industries and announced that the EU policy should be centred on voluntary export restraints (Ugur 1998: 660). In the difficult economic times of the late 1970s, the UK had joined France and Ireland’s strict protectionist demands, supported also in Italy. Moderate countries seeking a simple renewal of the MFA were eventually outnumbered (Aggarwal 1985: 146). Faced with insistent member states determined to protect what they considered to be their national interest, the Commission had to switch to a protectionist trade policy during MFA II and MFA III (1977-85).

The shift towards gradual liberalization under MFA IV (1986-1994) was tied to the desire of developed countries to open up trade in services and other new issues (Woolcock 2000: 378). Yet protectionist lobbying at the European level had not ceased in 1985. COMITEXTIL worked hard to draw attention to the difficult situation in the sector. Contrary to previous success, the industry difficulties were seized on by opponents of textile protection to show that earlier measures had not left the industry better off. As European countries turned away from Keynesian demand management, member state support faded. Despite intense lobbying from COMITEXTIL, trade unions and other textile associations, national representatives on the Article 133 Committee and COREPER were able to work out a compromise in favour of gradual liberalization. In 1989, moreover, the Commission accepted the mid-term review of the Uruguay Round, against the insistence of the textile industry association (Ugur 1998: 663). In 1990s, the Commission issued a communication underlining that restructuring was appropriate for the industry and Sir Leon Brittan announced to a shocked industry audience that “the textile industry is a normal industry” (cited in Scheffer 2003). Without the backing of the member states, protectionist lobbying in textiles and clothing at the EU level was a failure.

In a last attempt to secure special treatment in EU trade policy, industry representatives formed a new coalition, the European Textile and Clothing Coalition, to avert the dangers of the new policy orientation in the early 1990s. Simultaneously, the European Trade Union Committee for Textiles began to organize meetings and demonstrations. All of these efforts were ignored by the Commission, which insisted that the industry’s problems had to be resolved by securing a market opening in third countries (Ugur 1998: 664-5). At the conclusion of the Uruguay Round, the EU had endorsed the WTO’s Agreement on Textiles and Clothing, which was to phase out all protection until January 2005.

Faced with this new reality, the textile industry had to reorganize. COMITEXTIL, while other textile associations founded a new European association in 1995: the European Apparel and Textile Organization EURATEX. Needing to work with the Commission in order to affect or delay the integration of sensitive categories into the WTO agreement, EURATEX launched a review of its strategy (Scheffer 2003). In contrast to the unsuccessful pressure lobbying that had characterized earlier protectionist demands, European industry representatives decided to engage in a more cooperative manner with the European institutions. As Jacomet (2000: 307) underlines, the new “interactive lobbying” during the WTO negotiations in the early 1990s had differed sharply from previous activities because lobbyists had to accept a “trade-off” in the policy demands they could voice: they exchanged the elimination of the MFA for market access in third countries. Only by embracing a policy stance centred on market access did textile lobbyists maintain their contacts with the European institutions. Indeed, the selection logic of the EU Institutions forcing European industry representatives to reframe their demands helps to explain why the EU textile industry became supportive of foreign market access while their American colleagues continued to press for strict protectionism. The need to supply a specific kind of lobbying at the supranational level also becomes clear in the reorganization of EURATEX. As a result of its internal review, EURATEX decided to develop a more comprehensive policy “in order to be seen as relevant partners for policy-makers” (Scheffer 2003: 108). Faced with very heterogeneous demands from its national associations, EURATEX now aims not to counteract national lobbying, but to promote synergies between domestic and European efforts. After the lobbying failures of the past, EURATEX’s approach today is to focus on pan-European stances to maintain its leadership role at the EU level.

At the end of the Agreement on Textiles and Clothing’s transition period in 2005, European companies complained vigorously about Chinese competition. Still, companies acknowledged that the abandonment of the quota system was beyond their control. Whether they liked it or not, “the affected companies had to accept the new logic in order to be able to influence the calendar, the modalities of the new measures or the transition aid” (Jacomet 2004: 5). In the absence of member state pressure for protection, successful business–government relations at the supranational level required accepting the liberalization objective of the European Commission.

2.2 Developing pan-European policy solutions: trade in services

The multilateral General Agreement on Trade in Services (GATS) that entered into force with the founding of the WTO in 1995 is often cited as a prime example of business influence over trade policy. According to many observers, the American financial service companies and its Coalition for Service Industries played a key role in bringing the issue onto the international negotiating table (Drake and Nicolaïdis 1992; Sell 2000; Woll 2004). On the European side, firms were much less in evidence during the service negotiations in the Uruguay Round and the sectoral negotiations that followed GATS. However, the European Commission did consult extensively with industry representatives in two sectors: financial services and telecommunication services (Van den Hoven 2002: 10).

2.2.1 Financial services

At the conclusion of the Uruguay Round, countries agreed to continue sectoral negotiations on financial services to obtain more detailed liberalization commitments. By the initial deadline in 1995, the US declared itself unsatisfied with the existing offers and walked out of the negotiations. Behind the position of the US government was the frustration of the US private sector, which had helped to put services on the WTO agenda and now felt that it was not achieving sufficient market access in foreign countries (Woolcock 1998).

Faced with the US refusal, the EU assumed the leadership in the financial service talks and encouraged WTO members to negotiate an interim agreement without the US in 1995 and to extend the talks until December 1997. Over the next two years, the European Commission went out of its way to gain the support of European financial service firms so it could counter the influence of the US private sector. Indeed, representatives of “Citicorp, Goldman Sachs, Merrill Lynch and the insurance companies – particularly the American Insurance Group and Aetna – established command posts” near the WTO headquarters and conferred with American negotiators throughout the financial service talks (Andrews 1997).

Business lobbying comparable to the activities of the US Coalition of Service Industries was only common in the United Kingdom, where financial service firms had founded British Invisibles in 1986, an association to promote the interests of its members, which later turned into International Financial Services London. Part of British Invisibles was the working committee LOTIS (the acronym for Liberalisation Of Trade In Services), which dates back to the early 1980s (see Wesselius 2001). For the European Commission, working with these private sector associations was crucial, because they felt that European firms could best engage the US private sector in a continued dialogue. Transnational business negotiations began at the World Economic Forum in Davos, Switzerland in 1996. US, UK and European financial service representatives met in the office of British Invisibles and eventually formed the Financial Leaders Group to promote the interests of the affected firms on both sides of the Atlantic (Sell 2000: 178).

The European Commissioner Sir Leon Brittan welcomed the creation of this group and worked closely with its European chair, Andrew Buxton of Barclays Bank (Wesselius 2002: 7). For the EU negotiators, the Financial Leaders Group was an important channel through which they hoped to moderate US expectations, in particular by addressing the concerns of the US private sectors, which had previously brought the talks to a standstill (Woolcock 1998: 33). Sir Leon Brittan had long been frustrated with the lack of support among European companies and tried to encourage them to mobilize around the issue of international trade liberalization. A representative of the European service sector remembers:

“At one occasion, he finally invited a series of CEOs for dinner and said s omething to the effect of ‘either you will get organized, or I will take the decisions single-handedly [4]’.”

Contrary to the aggressive lobbying of US financial service firms, European firms entered negotiations not so much on their own initiative but, most importantly, in response to the active encouragement of the European Commission, which was looking for business support for the difficult financial service talks in the 1990s. The close business–government relationship that developed in the EU after 1996 was based on the shared aim of liberalizing the sector. After an unexpected change in the position of the Asian countries during the currency crisis in 1997, negotiators finally reached an agreement on December 12, 1997. Yet the cooperation between financial service firm leaders and the European Commission went even further than the Financial Service Agreement. In 1998, Sir Leon Brittan asked Andrew Buxton once again to create a select group of, this time, purely European business leaders. The European Service Forum, launched on January 26, 1999, today ensures the Commission’s continued support for the liberalization of service industries and consequentially benefits from privileged access to trade policy-making at the supranational level. Had European firms not been supportive of liberalization, it is highly unlikely that they would have been able to work as closely with EU policy-makers.

2.2.2 Telecommunications

In telecommunications, the position of firms was more difficult. European network operators had long benefited from privileged positions as monopoly providers in their home countries. The WTO’s sectoral negotiations on basic telecommunications liberalization from 1994-1997 coincided with the liberalization of the internal EU market. While firms wanted to benefit from foreign market access once telecommunication markets were liberalized, they were also concerned about protecting their home market positions. Solicited by the European Commission, European operators therefore adopted a pro-liberalization stance in the mid-1990s, which allowed them to follow and influence the content of the multilateral negotiation in the WTO while still maintaining close ties to their home governments in order to defend national interests on specific issues.

In fact, the project of European telecommunications liberalization had met with very different echoes in European member states. The United Kingdom and the Nordic countries had introduced competition in their home markets and pushed actively for Europe-wide liberalization. Germany, France and the Benelux countries had initiated more moderate reforms, but had their reservations about complete liberalization. However, the Southern countries – Italy, Greece, Spain and Portugal – were not interested in changing their telecommunication systems (see Noam 1992). The struggle between the European Commission and the member states over internal telecommunications liberalization began in 1987 and is recounted elsewhere in great detail (e.g. Sandholtz 1998; Thatcher 1999b; Eliassen and Sjøvaag 1999; Holmes and Young 2002). After some judicial wrangling over EU competences, the Commission was able to propose the liberalization of telephone services in 1993 and infrastructures in 1994. In 1996, member states reached agreement on implementing liberalization by January 1, 1998. What is important for an understanding of the WTO involvement of European network operators is the consultation efforts made by the European Commission during the internal liberalization project.

Trying to gain support in the face of member state resistance, Martin Bangemann, European Commissioner for Industry, Information Technology and Telecommunications, called together a group of “wise men,” leaders from the telecom industry and user companies, in order to prepare a communication on the international competitiveness of European telecommunications. The consultation procedure is noteworthy, because the Commission dealt with the senior officials of the national operators directly and encouraged them to evaluate their position in the internationalizing market. Under pressure from user companies and competition from liberalized countries attracting telecommunications-based firms, operators in France and Germany began to concentrate on reform and internationalization, and therefore supported the EU liberalization (Thatcher 1999a). With the backing of the leading European telecommunications providers, the report issued by the senior official group, the so-called Bangemann report, was important for encouraging member states onto the route of liberalization (High-Level Group on the Information Society 1994).

Lobbying on multilateral liberalization was closely connected to internal liberalization. Before 1996, European network operators were not involved in the sectoral negotiations that had begun in 1994 (Woll 2004). With the announcement of the 1998 deadline, the European Telecommunication Network Operators association (ETNO), founded in 1992, was able to gather support for multilateral liberalization as well. A member of the WTO working group recalls:

“We had good relations with the European Commission. There was no opposition: the Commission works for Europe and we work for Europe as well. [5]”

ETNO fully supported the multilateral negotiations and helped the Commission negotiate the Basic Telecom Agreement in 1997.

Indeed, most operators affirm having been in support of the 1997 agreement and having engaged actively through their European association throughout the talks. Despite these declarations, many operators had concerns about losing their national privileges and so used their national ties to maintain a degree of control over access to their home markets. Telefónica, the Spanish operator, for example, insisted on restricting non-EC investment to the Spanish market, despite the fact that it had become an important overseas investor in Latin America. When the US criticized the Spanish position, negotiations over the case turned into bilateral talks between the Commission and the Spanish government, which had taken up the highly politicized issue (Niemann 2004: 399). Similarly, network operators in other countries tried to guarantee national privileges through the implementation of the EC regulatory framework. Member states and their regulatory agencies enjoyed immense freedom to determine interconnection terms and tariffs between networks or to impose universal service conditions. In contrast to British Telecom, which received no extra funding for universal service, France Télécom had the right to obtain compensation (Thatcher 1999a). At the same time that ETNO was lobbying for reciprocal liberalization of basic telecommunication services through the WTO, national operators were seeking to maintain regulatory advantages, i.e. restrictions to foreign market access, through their national governments.

3 Conclusion

The comparison between agriculture, textiles and clothing, financial services and telecommunication services shows that trade policy lobbying in the EU is marked by a two-channel logic. Protectionism (agriculture) is best defended through the national route, while lobbying in support of liberalization (financial services) happens at the supranational level, in particular through contacts with the European Commission. Companies that seek both foreign market access and restrictions to competition in their home markets therefore tend to adopt an ambiguous position, whereby they support liberalization in general, in order to stay in contact with the European Commission, but also work through their member states to maintain national restrictions (telecommunications). Without the backing of their home governments, protectionist lobbying that impedes European market integration is unsuccessful at the supranational level (textiles and clothing). In trade policy, firms thus face a trade-off: if they want to maintain good relations with the European Commission, they have to frame their demands in terms of pan-European solutions, which often means moving away from their immediate interest.

The entrepreneurial role of the European Commission in creating public–private contacts on trade policy has several implications. First of all, not just businesses but also other interest groups, such as environmental or social NGOs, can be solicited for input into the European trade policy process. As current consultation demonstrates, the Commission has indeed made an effort to include an ever broader range of actors in order to increase its legitimacy and work towards a policy consensus (Woolcock 2000). However, firms remain the principal source of expertise on trade barriers and will therefore come into their own whenever the EU seeks to increase its leverage vis-à-vis trading partners such as the US. It is therefore important not to overestimate the influence of public interest groups (De Bièvre and Dür forthcoming), even though the Commission tries to take their opinion into account through the Civil Society Dialogue.

Second, the complexity of the strategic interactions in European trade policy caution against superficial analyses of trade policy demands in the EU. Because of the two-channel logic, we should expect to find many firms declaring themselves in favour of trade liberalization, simply because this ensures them greater access to the EU trade negotiators. A study of trade preferences thus needs to distinguish between the strategic positions of firms and their underlying preferences, which might be much more ambiguous than the official declarations would lead us to believe. Finally, the comparison between the various business–government relations shows that European trade policy lobbying is complex. To assume that trade policy simply reflects producer demands, as many have suggested in the case of the US, would be to miss important aspects of public–private relations in the EU. While firms might capture their government’s positions or even the supranational agenda in certain cases, the Commission also instrumentalizes European firms and even affects the content of their lobbying demands. In the end, EU trade policy results as much from producer demands as it does from the complex decision-making procedures, the institutional self-interest of public actors and the power struggles created by their interaction.

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Endnotes

1

The EU, in turn, brought only two, both jointly with the US, against third countries (Shaffer 2003: 67-8).

2

Available from within the Eu at http://mkaccdb.eu.int.

3

For an historical overview, see Aggarwal (1985) and Hoekman and Kostecki (2001: 226-231).

4

Interview with the author in Brussels, November 13, 2002.

5

Interview with the author in Brussels, September 3, 2003.

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Copyright © 2006 Cornelia Woll

No part of this publication may be reproduced or transmitted without permission in writing from the author.

Jegliche Vervielfältigung und Verbreitung, auch auszugsweise, bedarf der Zustimmung des Autors.

MPI für Gesellschaftsforschung, Paulstr. 3, 50676 Köln, Germany

MPIfG: MPIfG Working Paper 06/7

http://www.mpifg.de/pu/workpap/wp06-7/wp06-7.html

[Zuletzt geändert am 20.03.2007 15:13]

1

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MPIfG Working Paper 06/3, May 2006

Lobbying Systems in the European Union: A Quantitative Study

Andreas Broscheid , University of North Carolina, Pembroke

David Coen , School of Public Policy, University College London

Abstract

This paper presents and tests a micro-theoretical model of EU lobbying across policy domains. In particular, we focus on two questions: first, we want to know why the number of interest representatives differs across policy domains and, second, we investigate why we find institutionalized fora for interest representation in some policy domains but not in others. Our argument focuses on the Commission’s need for expert information and its costs of managing contacts with a large number of interest representatives. Both factors provide incentives for the Commission to create restricted-access fora as the number of interest representatives increases. Using cross-sectional data on interest representation in a wide range of policy domains, we find some support for our hypotheses.

Zusammenfassung

In diesem Artikel entwickeln und testen wir ein mikrotheoretisches Modell, das zur Erklärung der Interessenvertretung in verschiedenen Politikfeldern in der Europäischen Union beiträgt. Dabei stehen zwei erkenntnisleitende Fragen im Vordergrund: Was beeinflusst die Zahl der Interessenvertreter in verschiedenen Politikfeldern? Und weshalb richtet die EU-Kommission in einigen Politikfeldern Foren mit beschränktem Zugang für Interessenvertreter ein? Unsere Erklärung basiert auf der Beobachtung, dass der Expertisebedarf der Kommission hauptsächlich durch Interessenvertreter gedeckt wird, dass aber die Interaktion mit einer großen Zahl von Interessenvertretern der Kommission Kosten (unter anderem Informationskosten) verursacht. Beide Beobachtungen führen unseres Erachtens dazu, dass die Kommission Foren mit beschränktem Zugang einführt, wenn die Zahl der Interessenvertreter ein bestimmtes Maß überschreitet. Wir vollziehen einen ersten Test unserer Hypothesen mit Querschnittsdaten der Interessenvertretung in verschiedenen EU-Politikfeldern, und finden unsere Erwartungen zumindest teilweise erfüllt.

Contents

Introduction
Micro and macro studies of lobbying

Why are there more lobbyists in some policy domains than in others?

Empirically testing the first two hypotheses

Why are there more interest representation fora in some policy domains than in others?

Empirically testing hypotheses three and four

Discussion

Conclusion

Data Appendix

References

Introduction [1]

The study of interest representation has been characterized by an interesting micro/macro distinction. Many studies that emphasize a systemic or sub-systemic perspective are dominated by informal theories and mainly descriptive empirical approaches. In contrast, micro-level studies of lobbying processes emphasize causal theories, which are frequently developed in a formal mathematical framework. We do not find many macro studies that build on micro models of lobbying, and we do not find many micro models of lobbying that address systemic questions.

This paper intends to contribute to the debate connecting micro and macro approaches to the study of lobbying. Using predictions from a formal model that we have detailed elsewhere (Broscheid and Coen 2003), we present preliminary statistical tests of the implications of our theory. Specifically, we try to find answers to two questions:

1. Why does the number of interest representatives differ across policy domains?

2. Why do we find institutionalized fora for interest representation in some policy domains but not in others?

We believe that a focus on organized interests targeting the European Commission is a good starting point for this investigation. First, the currently dominant formal theories of interest representation emphasize the role of informational lobbying, which is usually acknowledged to be the predominant type of lobbying of the Commission. As a result, the Commission can serve as a good empirical test case. Second, the Commission’s relatively independent and specialized directorates focus on fairly cohesive sets of policies. The patterns of interaction surrounding the directorates generally provide a useful operational definition of policy domains. Thus, it is possible to compare different policy domains with different lobbying costs, expertise requirements and the like. Third, the study of European Commission lobbying is important as it deals with the potential influence of European civil society on the institution that shapes and implements legislation.

The paper will start with a brief overview of those aspects of the macro and micro literature on interest representation that have motivated the present study. We then provide a brief informal summary of our theory connecting the two perspectives, followed by a discussion of our data and empirical results. In conclusion, we present some perspectives for the study of European lobbying.

Micro and macro studies of lobbying

The main focus of system-level studies of lobbying has been the equality and fairness of the representation of all social interests. Pluralist studies of interest representation usually conclude that representation is generally fair, as under-represented interests would become involved if their interests are not sufficiently taken into account by decision makers (Truman 1951). The government, from this perspective, appears mainly as a neutral broker between the different interests.

The pluralist approach first came under attack from Olson’s micro-level theory of collective action, which argued that certain interests were less likely to organize and hence to be politically influential (1965). Among macro-level studies, this argument provided parts of a micro foundation of theories of elite pluralism (for example, Schattschneider 1960) or studies of the varying power of industry interests (among others, McFarland 1991). The most extreme counter-theory to the pluralist argument of equal representation was neo-corporatism, an approach that combined a descriptive account of interest representation with an applied argument about the effectiveness of different lobbying systems in such areas as social policy and labor relations. In contrast to pluralist systems of interest representation, neo-corporatism was characterized by a monopoly of representation through peak associations and national labor unions (Streeck and Schmitter 1991). The great benefit of many macro theories was the ability to describe and categorize different systems of interest representation, and to provide a basis for comparative studies of different political systems (see, for example, Wilson 1990). Their weakness was often on the explanatory side, as Olson’s criticism of pluralist theories highlighted.

Pluralism, elite pluralism, neo-corporatism and their variants represent high-level theories of entire political systems. A number of meso-level approaches have focused on the inclusiveness of interest representation at the sub-system level, particularly focusing on the distinction between insider and outsider lobbyists (Broscheid and Coen 2003; Grant 2004). Depending on their level of exclusivity, such sub-systems have been characterized as iron triangles (Freeman 1965; McConnell 1966), subgovernments (McCool 1990), issue networks (Heclo 1978), or advocacy coalitions (Sabatier and Jenkins-Smith 1993). Insiders can be simply actors that are frequently consulted (as in the case of issue networks or advocacy coalitions), or they are actors actively involved in bargaining and policy negotiation or in the implementation of policy solutions (Maloney et al. 1994). The main focus in this literature is on the categorization and recognition of different types of policy networks and their role in the policy process, not the explanation of their existence (for an exception, see the studies in Marsh and Rhodes 1992).

The insider/outsider lobbyist distinction is of particular importance for the study of European Union lobbying. While the European Commission attempts to be open and transparent in its interaction with societal interests, nevertheless a core of insiders has been established. We see an elite pluralist system in the form of fora to which “access is generally restricted to a few policy players, for whom membership is competitive and strategically advisable” (Coen 1997: 98). The selection of lobbying insiders is managed and organized with a wide variety of committees, working groups, conferences and other policy fora (Pedler and Schaefer 1996). In this study, we investigate factors that may cause the differently structured lobbying systems surrounding the European Commission. This includes looking at the number of actors in areas dealing with different types of policy questions as well as the question of insider lobbying through European Commission fora.

In order to propose a causal explanation of lobbying sub-systems, it is important to look at existing causal explanations of lobbying. The predominant formal-theoretical approaches view lobbying as the strategic communication of specialized information (for a recent summary, see Grossman and Helpman 2001). Building on game-theoretic models developed throughout the 1980s (such as Kreps and Wilson 1982; Crawford and Sobel 1982), these approaches argue that interest representatives have policy-relevant information that policy makers need in order to make effective policy decisions. If the political goals of interest representatives and policy makers diverge, then information may be transmitted in a biased manner. Although the policy maker takes informational biases into account when interpreting lobbying signals, the informational advantage of interest representatives provides them with political influence.

There are several variants of informational lobbying models. They can be based on whether the information is about the interest representatives’ constituents (Ainsworth 1993; Potters and van Winden 1990) or about the impact of the policy environment on policy outcomes (Grossman and Helpman 2001). Other variations may be based on the number of lobbyists and on their position towards each other (see, for example, the Austen-Smith/Wright model on counteractive lobbying, 1992) or on the nature of the signal (for example, on discrete versus continuous signals, see Grossman and Helpman 2001; on costless versus costly signals, see Austen-Smith 1995; Lohmann 1995). One common element of almost all informational models is the fact that they investigate the interaction of one or two lobbyists with a unified government. This makes it difficult to draw conclusions about lobbying systems, which usually consist of more than two lobbyists. The model that we use in this paper tries to tackle this problem.

The informational approach is particularly useful for the study of lobbying in the EU (Crombez 2002). In Brussels the key to successful lobbying is not political patronage or campaign contributions, but the provision of information. In this context, the Commission, with its executive instruments and directives, acts as the focal point in the early stages of the lobbying process. As a technical bureaucracy it does not seek funds for re-election, but rather looks for a policy community that may provide a source of grass-roots and European-level information (Bouwen 2002; Coen 1997). The demand for the two types of information may vary across policies. For example, if a policy deals with technical standards or the regulation of sophisticated products such as pharmaceuticals, substantive expertise is very important. On the other hand, for policy that has (or might acquire) a high level of political salience in the member states, the Commission requires information on the preferences of relevant actors in the several states.

For the purpose of this study, we do not focus on the distinction between different kinds of information. We argue that technological as well as preference information addresses the question of whether a policy proposal “works,” that is, whether it has a desirable outcome and whether it will be acceptable to the actors involved in the political decision-making process. However, technical information may be more costly to obtain, whereas information on preferences can be obtained at low cost by some organizations. In both cases, the Commission has to rely on private actors to provide it with much of the information it needs; therefore, there is opportunity for interest representatives to influence policy.

Why are there more lobbyists in some policy domains than in others? [2]

The number of groups representing different interests has been one of the most important questions in the interest group literature; existing explanations have focused on the number of potential group members and the role of selective incentives, patrons, political entrepreneurs and other factors in mobilizing these potential group members. Interestingly, a comparison of the number of groups in different policy domains – the density of interest group populations – is far less common (see, for example, Heinz et al. 1990; Mahoney 2004), and a theoretical account of group density is missing. In order to provide such an account, we believe that it is important to analyze the interaction between groups and decision makers, as different policy domains may exhibit differences in this interaction.

It has been observed that the interaction between interest representatives and the European Commission (and other EU institutions) is based on information (Bouwen 2002; Coen 1998). The Commission’s staffing levels are very low, compared to the extent of its tasks (van Schendelen 1996), and interest representatives are often needed to provide expert information. At the beginning of our theoretical investigation, we therefore ask under which circumstances lobbyists are willing to provide useful information.

Lobbyists present specific positions on issues, and they can always present their slant on a given issue. In the world of formal models of communication (such as Gilligan and Krehbiel 1987, 1989; Lupia and McCubbins 1997), this is called “babbling”: the lobbyists (or the “senders” of information) provide a standard recommendation, independently of whether the information consumer (or “receiver”, here the Commission) may agree with this information or not. We argue that lobbyists always “babble” unless they receive specific incentives – rewards for informative signals or punishments for non-informative signals – to provide better information.

Why do lobbyists always babble, in the absence of rewards or punishment? Consider a situation in which a lobbyist provides information that is damaging to her [3] interests. The recipient of such information will surely take it very seriously, as it is obviously not self-serving information. As a result, it is very likely that the recipient (here the Commission) will act on this information in a way that is detrimental to the lobbyist’s interests. Therefore, the lobbyist has no reason to provide this kind of detrimental information – unless she receives a reward, essentially a compensation, for its provision or is punished for not providing it.

Does the European Commission provide rewards for useful information? We believe that it does, by providing privileged access to lobbyists and interest groups that consistently provide such information. Actors with privileged access are routinely consulted, invited to workshops, consultative fora, etc. that form part of the policy-making process and allow lobbyists to influence policy more effectively. Furthermore, access translates into knowledge about political and administrative developments at the EU level, which in turn can translate into advance knowledge about EU contracts or grants or into influence on the early stages of the policy process (Coen 1998, 1999). These are all things that are highly valued by lobbyists and interest representatives. By granting or denying access, the Commission can reward useful information or punish babbling.

How does the Commission know whether a lobbyist babbles or provides useful information? It learns it after the fact, once it has proposed a policy, implemented a regulation, taken action to enforce a directive, issued a ruling, etc. If its action turns out to be bad – a proposal fails in Council and Parliament, member states resist a directive, a decision results in unexpected, negative outcomes, and so on – the Commission has to conclude that the information on which it acted was erroneous. If the Commission concludes that it was “suckered” by self-serving information provided by lobbyists, these lobbyists may lose their access and have to invest resources to regain the Commission’s confidence.

These considerations help us establish the incentives that can induce an actor to become a European Union lobbyist – to enter the political fray and try to influence the European Commission (and other institutions). First, a lobbyist will attempt to influence Commission decisions because she has policy interests. In political-economic terminology, a lobbyist expects policy utility gains if the policy she prefers is supported by the Commission. These policy gains can be ideological (if the Commission proposal conforms to the actor’s political outlook) or they can be material (in terms of budgetary transfers to the region represented by the actor, for example, regulations that favor the actor’s industry, and so on). In general, it seems to make sense that actors are more likely to become lobbyists if large policy benefits are at stake. However, our formal model shows that the situation is more complicated (Broscheid and Coen 2003: 176). If potential policy gains are large, lobbyists have a stronger incentive to babble, as the size of the policy gains outweighs the possibility of losing access. This means in turn that under some circumstances high policy stakes may lead to uninformative lobbying.

Second, the actor/lobbyist will receive non-policy benefits, such as information on policy developments, European Union grants and contracts, and so on. As we noted above, these benefits can be granted (and withheld) by the Commission as a reward for accurate information (or as punishment for babbling). One interesting property of these non-policy benefits is that they are divisible. Access is most valuable if few other actors have it. If many actors in a policy domain gain access to the Commission, however, its value decreases, as each actor receives only a smaller share of the time each Commission official can spend with interest representatives. In addition, the comparative advantage of inside information decreases, as many other actors in the domain obtain this information and can act on it. This has important consequences for the amount of babbling versus informative lobbying that takes place: as more actors become lobbyists, non-policy (access) incentives become diluted, and the incentives for informative lobbying become smaller. Consequently, more lobbyists will be tempted to present non-informative political propaganda instead of useful information.

Third, the actor considering whether or not to become a lobbyist has to consider the costs of lobbying. First, these costs consist of organizational costs – mobilizing potential members, perhaps establishing a Brussels office, and the like. Second, the actor has to incur informational costs. If she wants to be taken seriously as a lobbyist, she has to show that the information that she presents to the Commission is reliable and based on expert information. In some cases, expert information is comparatively easy to obtain for a lobbyist; if the information required by the Commission is about the preferences of the group of actors represented by a lobbyist, the lobbyist simply has to survey her members’ preferences. In other cases, however, expert information is of a technical nature and more difficult to obtain. Lobbyists may have to pay for scientific and other expert studies to credibly provide the information demanded by the Commission.

Taking these three factors together, an actor will become a lobbyist in a policy domain if the expected policy and non-policy benefits outweigh the organizational and expertise costs. How does this argument help us explain why some policy domains have more lobbyists than other domains? Remember that non-policy benefits decrease as the number of lobbyists in a domain increases. As a result, there is an optimal number of lobbyists in any policy domain; if this number is reached, there are no non-policy incentives for additional lobbyists to incur the informational and organizational costs and join the lobbying population as informed interest representatives. As we argued above, without non-policy incentives the lobbyists would only babble if they joined and, as a result, would not influence Commission policy – which means that there are no policy benefits to be derived from lobbying.

But how do we determine whether the optimal number of lobbyists is larger or smaller in a given policy domain? Here, we can consider the factors that influence the size of non-policy benefits and organizational/expertise costs to deduce two hypotheses:

Hypothesis 1. If the lobbyists in a policy domain receive greater non-policy benefits from lobbying than in another domain, we can expect more lobbyists to be active in the first domain.

Hypothesis 2. In a domain in which lobbying is comparatively costly, we will find fewer lobbyists than in a domain in which lobbying is less costly.

Empirically testing the first two hypotheses

The choice of a viable unit of analysis constitutes a problem. Our theoretical model talks about the number of lobbyists involved in the making of a particular government decision. Therefore, a straightforward test of our theory would have to look at the numbers of lobbyists involved in many different decision-making processes. We do not have such data, and they are very costly to obtain in a systematic manner. However, instead of looking at individual Commission activities, we can investigate interest populations in different policy domains. The hypotheses that we developed with respect to individual Commission activities can be easily extended to policy domains:

Hypothesis 1A. If the lobbyists in a policy domain receive greater non-policy benefits from lobbying than in another domain, we can expect more lobbyists to be active in the first domain.

Hypothesis 2A. In a domain in which lobbying is comparatively costly, we will find fewer lobbyists than in a domain in which lobbying is less costly.

Once we settle on policy domains as units of analysis, however, the difficulties begin, since we have to determine the exact boundaries of policy domains at the level of the European Union. Intuitively, we have a clear sense of different domains – agriculture, health policy, chemicals, labor policy and so on, based on the subject matter of laws and regulations. But a closer consideration leads to difficult definitional questions, such as: Does fisheries policy belong to agricultural policy, or is it a separate policy domain? Does pharmaceuticals policy belong to chemicals policy or to health policy, or is it a domain on its own? The answer is structural: policy domains can be identified as patterns of actor networks. Unfortunately, this creates an empirical problem: since we want to explain the structure of policy domains, we cannot use such a structure to define our units of analysis and thus our dependent variable. We have to find an independent indicator to distinguish between policy domains.

Our solution to the problem is to rely on existing institutional boundaries provided by the European Commission. Each directorate general (DG) that is involved in policy making and policy implementation roughly conforms to a policy domain, or a set of closely related policy domains. The institutional structure of directorates general is based on, and creates, patterns of regular interaction between different groups of governmental and non-governmental actors, which approximate the shape of existing policy domains. Furthermore, the jurisdictional boundaries of directorates general are obviously not the results of our empirical analysis, thereby guaranteeing that we do not choose those domain boundaries that create empirical support for our hypotheses.

Comparing the number of lobbyists associated with each directorate general creates new problems, as DGs differ in range (the number of policy issues they deal with) and intensity (the amount of policy-making activity they engage in). The latter factor is not a serious problem for us since the intensity of Commission activity is implicitly part of our theoretical discussion – it leads to varying levels of policy and non-policy benefits for groups. Policy domains with equal levels of Commission activity would be useless for our analysis. In fact, our main independent variables encode information about the levels of DG activities.

Our dependent variable is the number of interest groups active in a policy domain, which we obtain from the European Commission’s Conneccs database. This database contains listings of labor and employer organizations, business associations, NGOs, and community-based organizations. Conneccs entries are based on voluntary reports by interest groups, which also detail one or more predefined policy areas in which they are active. As the Conneccs policy areas closely conform to the jurisdictions of different directorates general, it is easy to obtain the dependent variable from these data.

Although Conneccs relies on self-reported entries, we believe that it provides valid data for our present inquiry. First, our theory refers to interest representatives who have incurred the expertise and organizational costs of credible lobbying. It is likely that the Conneccs database weeds out to some extent those groups that are not serious participants in EU lobbying. Second, our investigation focuses on the European Commission. Even though there are additional databases of EU interest representatives, we believe that Conneccs is useful for our purposes as the European Commission created it. Hence, it is likely to exclude those actors that do not interact with the Commission.

In order to test our hypotheses, we have to identify data that measure non-policy benefits and lobbying/organizational costs. Unfortunately, it is very difficult, if not impossible, to measure these types of costs and benefits directly. However, we can observe indirect indicators that provide us with a sense of whether such costs and benefits are higher or lower in different policy domains. First, we code the number of policy-related units of each DG as an independent variable. While the number of units records the complexity and number of policy issues that a DG deals with, it also provides a measure of the policy benefits provided by the DG. Second, we include the number of DG staff as an independent variable. This measure serves as a proxy of both policy and non-policy benefits of lobbying. The more staff a DG has, the more policy it can propose, implement and enforce. Furthermore, since non-policy benefits are to a large extent linked to contact with Commission officials, an increased number of staff will result in higher non-policy benefits. Since policy benefits are already controlled for by the number of units, the coefficient of the staff variable will reflect mainly the impact of non-policy benefits on the number of interests.

The organizational costs of groups are difficult to measure at the macro level. As an approximation, we suggest that broad differences between policy areas reflect organizational and lobbying costs. In regulatory policy domains, the Commission requires a comparatively high level of expertise input and, as a result, interest representatives are expected to provide such information. This increases the costs associated with lobbying. Conversely, in distributive policy domains,[4] lobbying involves to a larger extent the representation of group interests; the expertise required in such policy area is more of an administrative nature and not likely to be provided by lobbyists. As a result, we assume that organizational costs are lower in distributive policy domains than in regulatory policy domains and the number of groups are correspondingly larger. We code distributive policy domains with a dummy variable that is ‘1’ for the DGs Agriculture, Education and Culture, Employment and Social Affairs, Fisheries, Regional Policy, and Research and ‘0’ for all other directorates general. Our hypothesis predicts that the coefficient of this variable is positive. However, it is possible that the distinction between distributive and regulatory policy domains corresponds not only to expertise requirements but also other to factors. In particular, as the European Union is predominantly a regulatory policy maker, we can expect policy type to be associated with the intensity of Commission policy-making activity. By including the number of policy units in our regression model, we try to control for this factor. However, if policy units do not perfectly capture the amount of policy making, the estimated impact of policy type on the number of groups may be negative rather than positive.

We include three control variables in our analysis. First, the age of the policy domain is important. As time passes, more groups can be formed; conversely, in “young” policy domains, some groups may not yet have been formed. Lowery and Gray (1995), for example, make this argument in regard to the American states. On the other hand, it is possible that new policy domains have a larger number of groups: the transfer of authority to the European Union may be the result of increased interest representation. Also, the Commission may be particularly active in new policy domains and thereby trigger group activity. We operationalize the age of a policy domain with a dummy variable that marks Justice and Home Affairs, Humanitarian Aid, and Health and Safety. In terms of Commission authority, these policy areas are not older than the Amsterdam Treaty: Justice and Home Affairs, for example, was transferred to the First Pillar of the EU by the Amsterdam Treaty.

The second control variable marks policy domains in which national or sub-national governments play a dominant role. We suppose that in such policy domains we should find fewer societal interest groups because the main interests are represented by governments (and their organizations). We use a dummy variable that is ‘1’ for Competition, Economic and Financial Affairs, Enlargement, External Relations, Justice and Home Affairs, Regional Policy, Taxation and Customs Union, and Trade.

The third control variable is the number of consultative fora for interest representation. In the second part of this paper, we will focus on this variable as a dependent variable. Here, we include it to investigate whether there is the possibility that there is mutual causation between the number of groups and the number of fora. Substantively, consultative fora could foster the formation and participation of groups, as they create an insider-outsider divide that provides incentives for outsiders to become insiders.

We use an OLS regression model to estimate the relationship between the variables. We are aware that such a model may not be, strictly speaking, appropriate, as we are dealing with count data. However, the dependent variable ranges from 10 groups (Fisheries) to 221 groups (Enterprise), and it can be treated as approximately continuous. Since the variable is bounded below by zero, we use the logarithmic transformation of the dependent variable for our estimation. Since the resulting regression is nonlinear, we use bootstrapped error estimates and confidence intervals based on the bootstrapped coefficient quantiles (for more information on bootstrapping, see Shikano 2006).

The results are summarized in table 1. Our main variables of interest provide mixed results: the number of personnel has a positive relationship to the number of groups, but the estimated coefficient is not significant (the confidence interval includes the value 0); the number of policy units has a negative coefficient, contrary to expectations, but that coefficient is also insignificant. Distributive policy domains, in contrast, differ significantly from other policy domains; however, they have fewer interest groups than regulatory policy domains, not more, as predicted by our theoretical model. Newer policy domains have more, not fewer actors, contrary to our presumption, even though this difference is not significant. As predicted, policy domains in which national government interests dominate have fewer groups, but the difference is not significant, either.

The main substantive result of our estimation is the impact of the number of fora, which has a significant and sizeable coefficient. Due to the logarithmic transformation of the dependent variable, the substantive impact of the number of fora depends on the value of the dependent variable and is not easily summarized. For example, at the mean value of the dependent variable (about 59 groups) an increase of the number of fora by three increases the number of groups by ten. How can we explain this relationship? First, the number of fora may simply be an indicator of the political activity of the Commission (see Mahoney 2004). More active directorates general, such as Agriculture, should have more fora than other DGs, and they will attract more groups. Second, fora may stimulate group participation by creating an insider-outsider dynamics. As Coen noted, interests groups compete to have seats at the inner policy tables and are willing to spend significant funds to develop positive European credentials for favored access (Coen 1997, 1998). In such a competitive environment it is possible to envisage that the Commission pump-primes lobbying activity by initially inviting insiders that have proven themselves in the Brussels environment and then, on occasion, funding the creation of new pan-European groups. As a result, potential insiders step up their EU lobbying activity to establish credibility and improve access in later rounds of policy making. Under such conditions the creation of fora and the emergence of policy insiders can ratchet up interest group activity in Brussels.

One possible reason for the insignificance of the personnel and policy-unit variables may be multicolinearity among these factors. Indeed, the two variables are highly correlated (0.91), which possibly leads to inflated standard errors and coefficients that are sensitive to small changes in the regression specification. We tested for this by estimating two versions of the regression model that removed either the personnel or the policy-unit variables; the results did not change substantially.[5]

Another problem that may lead us to underestimate the impact of our independent variables is the possibility that outliers and/or influential cases are responsible for some of the results. In order to check for this possibility, we ran several standard tests that identify outliers and influential observations. [6] The observations corresponding to Education and Culture and DG ECHO (Humanitarian Aid) were consistently marked by these methods. Regression results that exclude these two observations are summarized in table 2. Overall, the results are not much different from those that include the two influential observations, except that now the coefficient for new policy domains is significant and positive.

So far, the results are mixed. If we inspect the entire data, the number of fora and the difference between regulatory and distributive policy domains exhibit significant impacts on the number of groups. If we exclude two influential observations, the age of policy domains becomes significant. Except for the number of fora, the impact of the significant independent variables do not provide clear evidence for our theoretical model, even though they help us understand the factors that influence the number of interest groups in a policy domain.

Why are there more interest representation fora in some policy domains
than in others?

The second general question that this paper addresses deals with the conditions under which the Commission establishes fora for interest representation, thereby giving some interest representatives privileged access. We argue that the decision to establish fora is the result of a trade-off between the informational needs and the legitimacy needs of the Commission. As in our discussion of the number of groups in a policy domain, we provide a non-formal summary of arguments whose formal derivation has been presented elsewhere (Broscheid and Coen 2003).

We have argued above that the provision and possible withdrawal of non-policy incentives by the Commission constitutes an important incentive for lobbyists to provide accurate information. Furthermore, we have argued that, in the case of the Commission, these incentives are closely linked to the provision of access to decision-making processes: those actors that provide accurate information will be rewarded by continuous access, and those that are found to have provided inaccurate information will be excluded. The problem with such access-related incentives is that as more actors receive those incentives, the amount each individual actor receives decreases. As a result, “crowded” policy domains will provide smaller incentives for lobbyists to provide accurate information – they babble.

If the number of interest representatives is too large, we can talk about “access overload” (Coen 1997): the number of interest representatives dilutes non-policy incentives to such a degree that there is little informative lobbying and lots of babbling. We argue that in such a situation the Commission has incentives to select some interest representatives and provide them with privileged access, thereby increasing the non-policy incentives those representatives receive. [7] Since selected interest representatives can lose their privileged access if it turns out that they provide inaccurate information, the Commission thus creates incentives against babbling. One possible strategy of selecting insiders is the creation of fora for interest representation in which Commission officials regularly consult with a select group of societal actors. This argument leads us to our third hypothesis:

Hypothesis 3. The probability of observing Commission consultation fora for societal interests increases with the number of groups in a policy domain.

Why do we talk about the probability of observing fora, instead of stating that a large number of groups (deterministically) leads to the creation of fora? The answer is that there are several other important factors that we believe interfere with the informational rationale of granting privileged access to some lobbyists. The key to these interfering factors is legitimacy. As a non-majoritarian institution with comparatively little democratic oversight, the European Commission has to exercise a variety of politically charged duties, such as the proposal of European legislation or the formulation of administrative guidelines, opinions and the like. Without a democratic basis, the legitimacy of Commission decisions is fragile and has to rely on accountability, shared norms, broad-based support for policy output, and regular consultation with a wide range of societal actors.

Scharpf (1999) distinguishes between input-oriented and output-oriented legitimacy. As to input-oriented legitimacy, Scharpf states that “modern input-oriented theorists rarely derive legitimacy primarily from the belief that ‘that people can do no wrong.’ Instead, they insist that policy inputs should arise from public debates that have the qualities of truth-oriented deliberations and discourses” (269). If we view input legitimacy from this perspective, then the Commission has to solve a dilemma. As it does not derive its authority directly from the people, it has to rely on public, truth-oriented debates. On the one hand, this means that it has to foster “truth-oriented deliberations,” which may require it to establish institutional structures that limit “babbling” – Commission fora. On the other hand, it has to establish public debate in policy areas that often are highly technical and of low public salience. As the Commission restricts access to a few privileged actors, it limits the breadth of public debate, while at the same time increasing the truth orientation of the debate. According to these considerations, Commission fora should be more likely if policies require reliable information rather than broad-based consultation; we suggest that it is technical, regulatory policy domains that will see the establishment of fora as the number of interest groups becomes too large.

With respect to output-oriented legitimacy, Scharpf argues that “collectively binding decisions should serve the common interests of the constituency” (268). Since the Commission has no direct majoritarian basis, it has to determine the common interest through consultation. For policies that affect a wide range of actors and that are fairly non-technical, this requires broad consultation of societal actors and a consideration of their political demands. In such policy domains, the selective restriction of access will lead to a lower degree of legitimacy for Commission decision making. For policies that are highly technical and of low salience, the quality of information that the Commission uses for policy making is more important. Hence, in such policy domains it is more likely that the Commission is willing to restrict access in order to improve the informational basis for its policies and hence improve their output legitimacy.

These considerations lead us to our fourth hypothesis:

Hypothesis 4. The Commission is more likely to establish fora in policy domains in which technical information is required to make good policy. In policy domains that are less technical and that affect a large number of societal actors, Commission fora are less likely.

Empirically testing hypotheses three and four

The empirical test of our explanation of fora creation is based on the same unit of analysis and the same data used in our analysis of the number of groups in different policy domains. The dependent variable is the number of fora in different policy domains (which coincide with Commission directorates general).

The first independent variable of interest, the number of groups, is our previous dependent variable and does not have to be discussed any further. More difficult is the creation of a measure for the level of technical information required in a policy domain, and the number of societal actors affected by it. We try to solve this difficulty by relying on the general distinction between regulatory and distributive policy domains. Distributive policy domains may be bureaucratically complicated, but this type of administrative expertise can be presumed to reside in the Commission bureaucracy that grew with these policy areas; the Commission will not demand administrative expertise from societal interests. Also, distributive policy domains such as agricultural or regional policy affect a wide range of actors and are of comparatively high public salience. Regulatory policy, on the other hand, is usually fairly technical, of low salience, and directly affects only a small number of social interests (because even though there may be indirect effects – for example, if regulation causes higher prices – affected actors tend not to attribute these effects to the policy). We measure the distinction between regulatory and distributive policy with the same dummy variable used in our analysis of the number of groups.

Since a large number of groups is expected to be associated with Commission fora in regulatory policy areas, we also include a cross-variable of the distributional policy dummy and the number of groups. If the coefficient of the groups variable is positive (which is expected), then the cross variable should be negative. As control variables, we include measures of the number of personnel (as more personnel may facilitate the organization of fora) and the age dummy used in the group analysis (as newer policy domains may not have established fora even though they may in the future).

The dependent variable – number of fora per policy domain/DG – is a count variable, ranging from zero to 30. Since 13 of the 21 cases are located at the lower bound (no fora or just one forum), the assumption of a continuous dependent variable, which is essential for OLS, is violated. Due to the small number of cases, it is not possible to estimate a model that is appropriate for count data with a large number of zero observations (such as a zero-inflated Poisson model). We make do with a transformation of the dependent variable: first, we project the data range to the unit interval, by dividing the variable by 30 (the largest value). Then, we take the log-odds ratio of this variable, and essentially estimate a logistic regression with OLS. The coefficients will be difficult to interpret substantively. However, since we are mainly interested in the directionality of the coefficients, this does not matter.

Table 3 summarizes the results. The number of groups in a policy domain is strongly related to the number of fora – domains with more groups tend to have more fora, too. This conforms to our expectation. What does not conform to our expectation is that the number of groups is no less important in distributive policy areas. In fact, the coefficient of the interaction variable is positive, not negative, and it is not significant. In fact, no variable besides the number of interest groups is significant.

Since there is no significant interaction effect between the type of policy area (distributive/regulatory) and the number of groups, we exclude this variable from the analysis. Table 4 contains the resulting estimates. We find that the interaction term had masked the impact of the distinction between regulatory and distributive policy domains. If we exclude the interaction, we find that distributive policy domains have significantly more fora than regulatory policy domains. This is a significant but unexpected result. We predicted that we would find more fora in regulatory policy domains, which rely more on expertise and less on input legitimacy, than in distributive policy domains. The actual results contradict our expectations.

We can only speculate about the reasons for this relationship. One possibility is that regulatory policy domains are less prone to suffer from access overflow. They may be highly complex, specialized policy domains, in which a large number of interest groups reflects the complexity of the subject matter. Also, it is possible that in these policy domains we may find informal ways to distinguish insiders from outsiders. For example, many groups which, in the Conneccs database, claim to be active in a regulatory policy domain may in fact not participate in policy-making processes. In distributive policy domains, on the other hand, we may find that all groups that are interested in the policy are in fact lobbying the Commission, thereby creating access overflow. The reason for this increased willingness to lobby may be the greater technical simplicity of the subject matter under debate. These considerations are merely speculative. However, they point to research questions that might be profitably pursued in the future.

Overall, the results provide mixed support for our hypotheses. The main message is that there is a relationship between three factors: the number of groups in a policy domain, the number of fora in a policy domain, and the question of whether the domain deals with regulatory or distributive policy. More groups are associated with the number of fora, as our theoretical discussion predicted. However, in regulatory policy domains we find more groups but fewer fora, exactly contrary to our expectations.

Before we place too much weight on these results, we should offer a note of caution. We are dealing with a system of equations in which the dependent variables in both equations are endogenous: the dependent variable of one equation is an independent variable in the other equation, and vice versa. It can be shown that the error terms of such “non-recursive” systems of equations are correlated with each other, and with the independent variables, leading to potentially biased coefficient estimates (Achen 1986).

Discussion

To what extent do our results support or contradict our hypotheses? Overall, there is evidence for two of our main contentions: first, that Commission activity influences group activity and, second, that group activity leads to the creation of fora for interest representation. To start with the second argument, our results demonstrate a strong relationship between the number of groups and the number of fora – the more groups, the more fora. This conforms to our argument that the creation of lobbying insiders is a reaction to lobbying overload. In the other direction, we find that distributive policy domains have fewer groups than regulatory domains. Since the European Union tends to be more active in regulatory policy domains, this relationship points to the supply of policy benefits as an incentive for group activity. In addition, new policy domains exhibit a larger group presence than older domains. This may partly be due to the fact that, in new policy domains, governments tend to engage in the production of new policies that attract attention by societal actors.

One of our more puzzling findings is the fact that distributive policy domains tend to have more fora than regulatory domains. Since distributive policy domains tend to have fewer groups, our lobbying-overload argument cannot quite capture this relationship. One possible explanation is that the relationship indicates that Commission fora can perform roles that our theoretical arguments do not capture. In distributive policy domains, for example, fora may not be used to generate expertise but to assure consultation with all stakeholders that may be affected by a policy – to generate input legitimacy, to use Scharpf’s terminology (1999).

Another interesting – but methodologically worrisome – finding is the fact that the number of fora not only seems to be influenced by the number of groups, but also seems to influence the number of groups in a policy domain. On the one hand, this confirms our argument that government activism leads to group activism. Also, we can view fora as an additional source of private benefits supplied to lobbyists, thereby making their activities more profitable. However, methodologically, the apparent two-way relationship between groups and fora indicates a problem of mutual causation, which has been shown to lead to biased parameter and error estimates. Due to the small number of cases, cross-sectional solutions to this problem – such as the use of instrumental variables – are not viable.

Even though we cannot solve the methodological problem, we can use it to draw substantive implications. Possibly, the statistical relationship between the group and fora variables points to a substantive bi-directional relationship. On the one hand, there is the relationship discussed in the theoretical arguments presented in this paper: large numbers of lobbyists lead to uninformative lobbying signals, and the Commission reacts with the selection of lobbying insiders. On the other hand, the distinction between lobbying insiders and outsiders may create costs for lobbying outsiders, who may now be induced to invest resources to convince the Commission to select them as insiders, too. In other words, the creation of fora pump-primes group activism. This process may be reflected in the Conneccs data, as groups who in the past have been marginally involved react to the creation of fora with, among other things, creating entries in the database.

Substantively, then, the mutual relationship between groups and fora points to a dynamic process that cannot be captured by a cross-sectional sample. As a result, one of our main methodological insights is a call for studies that investigate the dynamic nature of European Union lobbying. In addition, we show that the study of group mobilization in the European Union should not be conducted without the simultaneous investigation of policy making that affects the studied groups, and vice versa.

Conclusion

The main theoretical concern of this study has been a micro-level foundation of macro-level characteristics of lobbying systems. Even though the empirical results that we present are preliminary and so far lack the necessary detail, they provide modest support for our arguments. The overall pattern that emerges is that factors associated with the level of European Commission policy making are related to the number of groups in a policy domain: there are more groups in new and in regulatory policy domains; the presence of Commission fora for interest representation also constitutes a predictor of the size of the lobbying population. In addition, one of our main theoretical arguments – that lobbying fora are a reaction to large numbers of lobbyists – seems to be supported by the fact that the policy domains with large numbers of interest groups also have more fora.

Besides providing initial support for our arguments, the results of our study indicate the direction future research has to take. In particular, the unclear directionality of the relationship between the number of interest groups in a policy domain and the number of fora indicates that the dynamic nature of lobbying has to be taken into account in the future. This contention receives support from the literature on lobbying in the United States, which has pointed to the presence of policy-making and lobbying cycles, in which interest group pressure, policy-making and interest group reaction to policy change alternate (see, for example, Vogel 1989; McFarland 1991). In addition, a dynamic perspective on European Union lobbying also requires an extended theoretical focus that takes account of the interaction between interest group pressure, the resulting institutional structuring of the interaction between EU and lobbyists, and the resulting incentive changes for lobbyists. Recent initiatives to increase the transparency of EU lobbying serve as a reminder that institutional change in interest representation is a continuing presence in European Union politics.

Data Appendix

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Endnotes

1

We would like to thank Pieter Bouwen, John Constantelos, Fabio Franchino and Christine Ingebritsen for their comments on earlier versions of this paper, and Jürgen Feick, Jörg Teuber and Cornelia Woll for their constructive criticism that has made this working paper possible. Nevertheless, all errors and omissions are the fault of the authors.

2

We provide a formalization of our theory in Broscheid and Coen (2003); here, we present an intuitive summary of our argument.

3

Following conventions common in game theory, we denote the first mover in an interaction with the female pronoun. As a result, lobbyists are female in our presentation, and politicians are male.

4

Lowi and Wilson distinguish between distributive and redistributive policies. As both types of policies deal with the distribution of material values, it is not necessary for our purposes to distinguish between them.

5

These results are not reported here, but the authors will provide the results upon request.
Specifically, we inspected the hat matrix, dfits and dfbetas. For an explanation of these indicators, see Bollen and Jackman (1985).

6

An alternative reaction to access overload is the consolidation of interest representatives into larger organizations. We do not pursue this possibility in the present study.

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