Negotiating the Single Act: National Interests & Conventional Statecraft in the European Community (WPS 21, 1989) Andrew Moravcsik

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NEGOTIATING THE SINGLE AO':

NATIONAL INTERESTS AND CONVENTIONAL STATECRAFT

IN THE EUROPEAN COMMUNITY

by Andrew Moravcsik

Department of Governmentand Center for International Affairs

Working Paper Series #21

The aim of this paper is to explain the unexpected "relaunching" of the European Community, which

took the form of the Single European Act and the program for completing the internal market by 1992.

The data presented here challenge the common view that the Single Act was the result of an elitealliance between the Commission, Parliament, and supranational business interest groups-a view

consistent with neofunctionalist regional integration theory. An alternative view is presented,

whereby EC reform rests on interstate bargains between Britain, France, and Gennany. The essential

precondition for reform was the convergence of European economic policy preferences following the

reversal of French domestic policy in 1983, combined with the ba rgaining leverage tha t France and

Germany wielded against Britain by exploiting the threat of creating a "two-track" Europe and

excluding Britain from it. These findings suggest that neofunctionalist theories of regional

integration must be supplemented, or perhaps supplanted, by a "modified structural Realist"

approach drawn from regime theory, which stresses more tradit ional conceptions of national interestand power.



The European Community is experiencing its most important period of reform

since the completion of the Common Market in 1968.' This new impulse toward

European integration-vthe "relaunching" of Europe, as the French call it--was wholly

unexpected. The late 70s and early 80s were the era of "Europessimism" and

"Eurosclerosis," when politicians and academics alike lost faith in its institutions. Within

a few years, this malaise has been replaced by optimism and institutional momentum.

What explains the sudden and unexpected relaunching of the Community?

I. The 1992 Initiative and Problem of Unexpected Reform

The blueprints fo r the new European reforms can be found in two documents:

the European Commission's White Paper on the Internal Market of 1985 and the Single

European Act (SEA) signed by the member states in 1986. These documents link a

programme of market liberalization with procedural reforms designed to streamline

Community decision-making. The first half of this reform package, initially set forth

in the White Paper, aims to create "an area without internal frontiers in which the free

movement of goods, persons, services an d capital is ensured." To realize a "Europe

without frontiers," European leaders have committed themselves to address issues never

successfully tackled in a multinational forum, such as comprehensive liberalization of

trade in services and the removal of domestic regulatory non-tariff barriers.f

The second half of the reform package, consisting of procedural reforms

outlined in the Single Act, is designed to facilita te smoother deci sion-making. Previous

attempts to set detailed and uniform European standards for internal regulations

("harmonization") had proven time-consuming and fruitless. Accordingly, the

Commission's White Paper called for "mutual recognition," a more modest, yet potentially

Quite significant form of liberalization whereby only minimal standards are harmonized,

after which any product, service or firm produced or incorporated in accordance with the

national regulations of one member state cannot be barred from the markets of the others.



Even more important than mutual recognition are procedural changes in

decision-making. The SEA expands the use of majority •voting in the Council of

Ministers and, at least implicitly, suppresses the national veto. Since January 1966,

majority voting, where foreseen in theory by the Treaty of Rome, had been limited inpractice by the informal "Luxembourg Compromise," in which France unilaterally asserted

that any member state could veto a proposal in the Council of Ministers by declaring that

a "vital" or "very important" interest was at stake. The expansion of majority voting

under the SEA seeks to limit the role of the national veto, but is limited almost entirely

to decisions relating to the internal market. With the exception of a few minor initiatives

(such as the inclusion of collaborative research-and-development programs under the

treaty), other potential areas of European integration such as political cooperation, social

legislation, monetary policy and further procedural reform, as well as fundamental

constitutional issues such as enlargement are subject to neither the new approach nor

majority voting.3

According to the public statements of European leaders, the plan for market

liberal ization by 1992 was primari ly a response to the perceived economic weakness of

Europe. Politicians perceived this failure through persistent high unemployment and

long-term decline in international competitiveness vis-a-vis the United States and Japan,

particularly in high-technology industries such as electronics and telecommunications.

The prescription found in the 1992 initiative was derived from classical economic

liberalism: what holds Europe back is internal barriers, which generate administrative

costs for governments and firms and which preserve suboptimal economies of scale." To

compete with American and Japanese firms, European firms must be encouraged toiI

exploit an "internal" market of Continental proportions. Accordingly, the White Paper

offers a wide-ranging package of measures designed to remove administrative, technical,

financial and personal barriers to cross- border trade and ownership.

Yet awareness of possible economic benefits did not automatically call forth

a European program of liberalization or reform of EC decision-making. Free-trade

2



liberals had been calling for further libera lization since 1968. West European economies

had been in crisis for over a decade. During this period, the Commission repeatedly

proposed programmes much like the White Paper, and appropriate policy responses, liberal

and non-liberal, were proposed and debated among the member states. All these efforts

were without resul t. What needs to be accounted for, therefore, is not the existence of

a new European initiative ~ but its precise timing and specific content. After years

of Quiescence, why were significant reforms approved in 1985? Why did the initiative

focus on internal market liberalization? How were the heads of member states convinced

to renounce their veto right and accept supranational decision-making over these issues?

The aim of this paper is to answer these empirical Questions an d to relate the

findings to theories of international cooperationf Specifically, the data presented is used

to challenge the view that the Single Act and White Paper resulted from an elite alliance

between the Commission, Parliament and supranational business interest groups--a view

consistent with neo-functionalist regional integration theory. An alternative view is

presented, whereby EC reform rests on interstate bargains between Britain, France and

Germany. The essential preconditions for reform were the convergence of economic

European policy preferences following the reversal of French domestic policy in 1983,

combined with the negotiating leverage that France and Germany gained by exploiting

the threat of creating a "two-track" Europe and excluding Britain from it. These findings

suggest that neo-functionalist integration theory must be supplemented, or perhaps

supplanted, by a "modified structural Realist" approach drawn from regime theory, which

stresses more traditional conceptions of national interests and power.

II . New Evidence for Ree:ional Integration Theory

Journalis tic reportage, academic analysis and interviews with European officials

reveal a bewilderingly wide range of explanations, some contradictory, for the timing and

content of the Single Act and the White Paper. As one French official I interviewed in

Brussels Quipped, "When the little boy turns out well, everyone claims paternityl'f' But II

3



three factors consistently recur: pressure from within European institutions, particularlyII

the Parliament, for procedural reform, the lobbying of transnational business interestI

groups, and the political skill of Commission President Jacques Delors.7 Let us considerII

these factors in more detail.I

The Role of Community Inst itutions: Between 1980 and 1985, pressure fo r

reform could be discerned within various EC institutions. The most active was the

IEuropean Parliament, in whose resolutions and reports can be found two programmes-

Ione "maximalist" and one "minimalist." The "maximalists," including many Italians and

iQuite a number of Germans, were European federalists. They advocated an expansion

II

of Community activities and procedural reform, focusing particularly on increasing theI

power of the Parliament.f These activists, following a Europarliamentary penchant forII

animal names, came to be called the "Crocodile group," after the Strasbourg restauranti

where they first met. Their efforts, led by venerable Altiero Spinelli, one of the

Ifounding fathers of the Community, culminated in the European Parliament resolution

Iof February 1984 proposing a "Draft Treaty Establishing the European Union"--a new,

Imore ambitious document to replace the Treaty of Rome. The activities of the Crocodiles

I

was given new impetus by the advent of Europe-wide direct elections to Parliament inI

1979, which endowed the body with a new democratic legitimacy.II

A second group of parliamentarians , the "minimalists," were skeptics of

Ifederalism and parliamentary reform. Instead, they favored working with national leaders

ito liberalize the internal market. Founded late in 1981, the "Kangaroo Group" (named

Ifor the Australian marsupial's ability to "hop over borders") was funded by a group of

sympathetic (largely British and Dutch) business interests, and!

counted Basil de Ferranti,I

a leading British industrialist and Tory parliamentarian,· among its teaders." The

IKangaroos encouraged Parliamentary studies on economic topics, and in 1983 they

I

launched a public campaign to in favor of a detailed EC timetable fo r abolishingI

administrative, technical and fiscal barriers, a reference to 'which was included in the

Draft Treaty.'o

4



1992 and Regional Integration Theory

I

Anecdotes such as these are often cited as evidence that Single Act and White

i i

Paper emerged from an elite alliance between big business, the Commission and other;I ,I I

European institutions. Delors, the story goes, created a compelling reform program by:

\ ilinking the procedural reforms proposed by Parliament with the internal market'I 'I :

liberalization advocated by business and elaborated by Cockfield, and then convinced the,

member states to a c c e p ~ it.16

These factorL-interest group pressure, institutional momentum and politicalI i

leadership in Brussels-c-are familiar to students of nee-functionalist regional integration:I

theory, which remains I the most sophisticated social scientific attempt to account for:

European integratlon.V Space does not permit a detailed discussion of neo-functionalism, i

but its essence lies in iwo premises. The first is that of interest-group functionalism.

i

Democratic, capitalist st!ltes cooperate to form international institutions because they offer

the optimal way to satisfy the socioeconomic needs of political groups.18 Over time, theII

expansion of group loyalties, expectations and activities across borders will lead to the!

creation of political organizations, private and public, at the supranational level and,

subsequently, increases iin their strength and autonomy. Neo-f'unctionalists assert thatiI

classical interstate diplomacy is being displaced by actors acting "above" and "below" the

nation-state . Increasingly, the key actors are not to be found among diplomats and

i

politicians, but either among supranational officials and multinational interest-groups or

among domestic interesi groups and political parties.19

iI

The second key nee-functionalist premise is that of spillover. Spillover is aI

process of self-sustaining feedback whereby initial integration begets more of the same. I

I

The boundaries between issue areas and between nations are fluid, and if successful at

meeting the needs of grbups, international cooperation will expand to include new issue I

areas ("functional spillover") and new countries ("geographical spillover"). What

distinguishes neo-functit>nalist theory is the claim that this expansion takes place becauseiI,

of a feedback loop endogenous to the process of integration, rather than because of

7



changes in exogenous variables. Once initiated, integration is self-sustaining. Haas!

explained systems change--fundamental moments of reform in which new issues are taken

up, new decision-making procedures adopted or new members admitted--as the result of

spillover.20

iSpillover can work through various mechanisms, two of which concern us here.

The first is inherent in the nature of economic development. Once integration begins ina certain sector, it is argued, the economic and social linkages between issue areas will

require regulation in new areas to preserve the gains tha t have been made. A second

mechanism is the creation and empowerment of supranational organizations, both private

and public, which eventually supplant their domestic counterparts. These organizations

then shape the further path of integration.f"

Haas predicted that as integration advances, interstate bargains are no longer

limited to the minimum common denominator of national preferences or a simple

compromise between opposing positions, but move toward a pattern of accommodationI

in which the participants refrain from unconditionally vetoing proposals and instead seek

to attain agreement by means of compromises "upgrading common interests.,,22 In other

words, governments engage in a process of log-rolling. The willingness of governmentsi

to make positive trade-offs in turn creates opportunities for supranational administratorsI

to ac t as "institutionalized mediators" and to "seize upon crises" as opportunities for

"creative personal action..., the solution of which upgrades common interests among the

actors.,,23

Hence neo-functionalism, at least in its most systemic variant, would lead us

to expect to observe exactly what the commentators above have described: increasing

domestic and international interest group influence for internal market liberalization and

pressure from within supranational institutions like the .European Parliament and

leadership by an active European Commission would propel integration beyond the stage

of lowest-common-denominator bargaining.f"

8



As we shall see later in this paper, there are important empirical reasons to

believe that these neofunctionalist factors were not decisive in the case of the Single Act.

In this context, it is worth briefly noting that the experience of the Community since the

mid-1960s does not support neo-functionalist predictions-s-at least in their most systemic

form. European integration did not proceed steadily and incrementally, but in starts and

stops. Moreover , for at least two decades after the Luxembourg compromise in 1966, the

Community moved toward confederationalism and more intergovernmental ("state-to

state") decision-making centered in the Council and summit meetings, rather than toward

increasing grants of authority to supranational bodies such as the Commission and

Parliament.25 One detailed study concluded that systems change in the Community has

I

in fact proven more "political" and less "technical" than Haas predicted. While spillover,

,

and forward linkages may in some cases suffice to prompt the continued intensification,

of supranational decision-making within a given sector, they playa "minimal role" in the

i

process of opening new issues, reforming decision-making procedures, or ratifying the

accession of new members, all of which generally prompt active intervention by heads

of state and a considerable amount of non-technocrat ic interstate bargaining. In 1976,

in part as a result of these criticisms, Haas himself proclaimed the "obsolescence of

regional integration theory" and called for it to be subsumed within a "general theory o f

integration.,,26

I

Regime Theory as an Alternative EXPlanation

Is there any alternative to regional integration theory? Attempts to develop the

general theory of integration called for by Haas have been made--mostly under the

I

general rubric of "regime theory." Much of this theorizing was based on a return to the

neo-Realist emphasis on the calculation of interests and the dynamics of interstate

bargaining, and on the conviction that Realist assumptions need not lead to pessimistic .

conclusions about the possibility for cooperation. Yet, despite the empirical weakness of,

,

regional integration theory as a predictor of systems change, no attempt has been made

9



apply the insights from the study of regimes to the European Community.V!

In this paper, elements of regime theory will be used to construct an alternative

explanation of systems change that offers an empirically valid set of predictions about the

process by which the SEA was initiated and approved. [See Chart One.] This approach

is based on three principles: (1) Actors and Interests. The three largest states wield a

preponderant influence and their negotiating positions reflect international comparative

advantages, the economic policy preferences of the ruling coalition; (2 ) Bargaining. Each

of the three largest states exercises a veto over regime change, unless threatened with

exclusion from the reform by an alliance of the other two; (3) Comoliance. The,

I

resulting agreements will restrict the possibilities for future transfers of sovereignty.28

Let us consider each in turn.

Actors and Interests: Negotiations over systems change in the European

Community are essentially intergovernmenta l. States are the most important actors and,!

moreover, it is the three largest countries that possess the necessary resources to achieve

their goals in international negotiations. In this view, the Community has from itsi

inception been based on a set of interstate bargains between the leading member states

-initially bilateral agreements between France and West Germany, later triangular

i

agreements including the United Kingdom. Each views the Community through the lens

of its national interests; Community politics is the continuation of these interests byI

other means. These national interests are specific to each country, and do not result

automatically from technocratic decision-making or interest group bargaining. Instead,,

they reflect the national interest as seen by the small group of politicians who make,

European policy. The key decision-makers are the head of government and his or her

closest advisors and ministers, generally from the ruling party, party faction or ruling

I

coalition. At least in the short term, these politicians have a considerable ability to act

If" hautonomously of their societies. Thus while it is true, as neo- unctionalists argue, t at

there are general systemic incentives for international cooperation, such incentives are

10



CHART ONE PROCESS-LEVEL PREDICTIONS OF ALTERNATIVE APPROACHES

I

!Regional / n t e g r a t ~ o n Theory

IKey Actors Interest Groups and

Supranational Elites

Interests Specific EliteGroup Interests,increasinglyinfluenced by I

previous integration

Bargaining Logrolling and

Linkages; Upgradingthe common interest

INature 0/ the Spillover, issueAgreement areas fluid I

Regime Theory

Heads of Government,

Top National Officials

Structural economic interests,economic policy goals asdefined by the ruling party,

leader's commitment to Europe

Minimum Common Denominator

(veto group) except where thethreat of exclusion is made

Issue areas rigid and subject

to change only by further

interstate agreement under theunanimity rule

lOA



iI

weak. A constant pressure for integration is inevitable; the reaction of governments is

not.

National interests have two elements, one structural and one political. The

structural element reflects the country's position in the global economy. In the early

years of the Community, for example, Germany agreed to finance a disproportionate

share of the budget, much of which went to France in the form of subsidies to its

relatively efficient agricultural sector, in exchange for market liberalization for industrial,

goods, in which Germany enjoyed a comparative advantage. As the economies of the,

,

Community evolved, the real economic nature of these bargains changed, with powerful

political suppor t for agriculture subsidies leading Germany to become even more attached

to the CAP, and the spectacular growth in French industry leading France to support theI

I

Common Market. The 1992 programme is concerned with liberalizing services, an area,i

in which Britain has traditionally been quite competitive.

But the European policies of the major European states do not simply mirror

their position in the world economy. There is room as w,ell for the "autonomy of

politics.,,29 National interests are also influenced by the p a r t i c ~ l a r economic and political

policy preferences of the political leadership. Support for international liberalization goesI

hand-in-hand with a policy of economic liberalization at horne. As long as a large states

favor intervention and protection over liberalization, a consensus for EC liberalizationI

would be difficu lt to achieve. These economic policy preferences generally reflect the

policies of the governing party faction. Moreover, the extent to which the head ofI

l

government supports further European integration as an end in itself is an important

component in the national interest.I

Bargaining: In the absence of a "European hegemon" capable of providing

universal incentives or threats to promote regime formation, t ~ e r e will be few instancesI

of linkages, log-rolling or side-payments between the major states. While small countriesI

can be bought of f with side-payments, large states will e x e r c i s ~ a veto over fundamentali

changes in the scope or rules of the regime. Hence negotiations tend to converge toward

I I



the minimum common denominator of large state interests.

The only tool that can force a state to accept an outcome on a major issue,

outside of the minimum common denominator is the threat of exclusion. Once a regime

has been created, it is expensive to be excluded, in part because the non-member thereby

loses its input into further decision-making, and in part because it is denied the benefits.I

If two major states can isolate the third and threaten it with exclusion, and if such

exclusion undermines the substantive interests of the excluded state, the coercive threat

may bring about an agreement at a level of integration above the minimum common

denominator.

Compliance: The decision to join a regime involves a sacrifice of sovereigntyI

I

in exchange for certain advantages. Negotiations about systems change are about settingI

the boundaries of issue areas, and negotiators seek to safeguard themselves against any

future uncertainty by limiting its scope. Rather than postponing issues for later decision

-Haas's procedure of "upgrading the common interest"--governments will play it safe by'

clearly delineating the boundaries of reform.,

I

I

,I

III. National Interests 'and 1992

The regime-theoretical explanation outlined above suggests that an analysis of

the 1992 initiative must begin by examining the underlying preferences of Germany,

I

France and Britain. Recall that Delors identi fied four issue areas that might have served

as the vehicle for major EC reform: monetary policy, defense cooperation, institutional

reform and internal market liberalizat ion. A glance at the national preferences forI

I

political or defense cooperation and monetary coordination suggest little possibility of a

formal agreement, since in both cases France was opposed by both Britain and Germany:I

[See Chart Two.] Inter'nal market policy and procedural reform of the Council, later the

two components of the 1992 initiative, offered more promise.

i

12



CHART TWO NATIONAL PREFERENCES OF MAJOR EUROPEAN STATES. 1981-1986

Germany France United Kingdom

Internal MarketLiberalization

Favorable inprinciple

Weakly, but

increasinglyfavorable after

1984.

Favorable inprinciple, but onlyonce budgetary issueswere resolved.

StrengtheningMonetaryCoordination

Slightlystronger EMS,after capital

flowsliberalized.

Movement

toward aEuropean

central bank.

Non-participani

in the EMS; opposedto further

coordination.

PoliticalCooperation

Favorable

to codification

of current

cooperation.

Favorable tocreation of

Secretariat-

General.

Favorable tocodification ofcurrent cooperation.

,

ProceduralReform

Treaty revisionto provide for

stronger rolefo r Parliament,

repudiation ofthe Luxembourg

Compromise and

majority voting.

No revisions to' treaty

support for Luxembourg

compromise, but also for

informal efforts tofacilitate moremajority voting.

Treaty revisionor new treaty

to allow for

"variablegeometry" programs

and, after early 1984,to repudiate the

Luxembourg compromiseand promote majority

voting in the Council,but no new powersto the Parliament.

12A



Germany's Support for Reform

Both procedural reform and internal liberalization found enthusiastic supporters

in West Germany. Economic liberalization had long been viewed by the major German

political parties and their leaders as an economic opportun ity for Germany. A greater

role for the European Parliament is viewed both as desirable in itself and as a necessary

step towards eventual political union. German Foreign Minister Hans-Dietrich GenscherI

is also a strong supporter of European political cooperation, which he views as an

important part of his long-term strategy vis-a-vis Eastern Europe. On the other hand,,

at the time Germany was ambivalent about altering the agricultural policy, particularlyI

i

if it meant that Germany would pay more, and was firmly opposed to further monetaryI

integration, at least until capital flows were liberalized.3D

France and 'Britain's views toward the liberalization and procedural reform

!

were more problematic. Until 1984, French leaders were ambivalent toward internal

liberalization and procedural reform, and even after 1984, British leaders continued to

have doubts about the latter. To understand the roots of these preferences, let us

consider each country 'in turn.

,

Mitterrand on the Road to Damascus,

Although t r ~ d i t i o n a l l Y pro-European, the French Socialist Party all but ignored

Europe during the first few years of the Mitterrand presidency.31 The French

government did float Ian initiative in October 1981 on a "European social space"--aI

I ,

programme for employment through fiscal stimulation billed as the first step toward a

"socialist Europe"--and another in the Fall of 1983 on a European technology program.

Both were minor efforts. The first reflected the agenda of the French Socialist Party at,

the time, but found f e friends in either Bonn or London and was never discussed at the

Council. The second, 'even more modest in scope, offered support for policies already

in the process of adoption by the Community.

13



France's role as a European outsider during this period reflected its unorthodox

domestic economic policies, which ran counter to those of Germany and the United

Kingdom. Until 1983 French economic policy was conceived by the more radical wing

of the Socialist Party, led by politicians like Jean-Pierre

,

Chevenement and Pierre

Beregovoy. Nationalization, direct intervention to increase employment, and increases in

social welfare spending undermined international business and financial confidence in the

French economy. By March 1983 the French government had already negotiated two,

devaluations of the franc within the EMS and was rapidly heading for a third. Other

European governments, particularly the German, made it clear that a continuation of

expansive policies was incompatible with continued membership in the EMS.

Many Socialists urged Mitterrand to adopt a strategy of autarky--import

I

protection, capital controls and repudiation of the EMS--to protect expansionist domestic

policies. Others in the moderate wing of the Socialist party represented by politicians like

Michel Rocard and Jacques Delors, on the other hand, backed nearly unanimously by

French economic technocrats, advocated continued EMS membership, external openness,

and an austerity policy consisting of wage restraint and cuts in public expenditures. Some

moderates also realized that the economic fundamentals underlying French support for

EC agricultural policy were changing. Though domestic. politics dictated that theI

government not move too quickly against agricultural interests, France was no longer a!

large net beneficiary from the EC budget, with even bleaker prospects ahead after theI

entry of Spain and Portugal.32I

Mitterrand's decision to remain in the EMS, announced on 21 March 1983,

marked a turning point in French domestic politics, and with it , in French policy towardI

the Community.33 Economic decision-making was vested i the hands of those, like

Delors and Rocard, convinced of the virtues of conservative economic policies and who

believed that France must work within Europe to achieve its economic goals. With the

advent in January 1984 of the French presidency in the Council of Ministers, Mitterrand

-true to the European idealism he had espoused since the 1940s, but undoubtedly also

14



conscious of the political advantage to be gained by making a virtue out of necessity-

announced a major diplomatic initiative for a relaunching of Europe...just a few months

before the direct elections to the European Parliament.P'

From that point on, the French President played a decisive role in resolving European

disputes. French leadership and concessions helped to resolve the British agricultural and

budget disputes, and French negotiators began to support internal liberalization and

collaborative research' and development. Moreover, Mitterrand began to promote

procedural reform, which he defended with rhetoric of European federalism. He spoke

of reconsidering of the Luxembourg compromise and supported procedural reform, as

long as it was limited to the Council and the Commission and did not imply a radicalI

democratization of EC politics.35 Although committed to using the Community to combat

economic decline, Mitterrand and the French government remained uncertain whether

monetary policy, internal liberalization or cooperative R&D should be the heart of the

new initiat ive. Thus Mitterrand, without being entirely sure where it was leading,

became the primary spokesman for relaunching Europe. As one senior French diplomat

observed drily: "Monsieur Mitterrand's term as president of the European council has,

become his road to D a ~ a s c u s . , , 3 6

Thatcher on the Road to Milan

With France converted to the European cause, Britain remained the major

obstacle an initiative linking internal liberalization and procedural reform. Britain's entry

into the Community in 1973 had expanded the Community without strengthening it. The

interstate bargain that brought the British in was the same as that offered the Germans

in the 1950s--a deficit in agricultural sector in exchange for new opportunities for British

industry. Insofar as Thatcher was pro-European, it was largely because she saw the

Community almost exclusively as an organization for promoting economic liberalism in

the industrial and service sectors. By British standards, however , this represented a

considerable commitment, since the opposition Labour Party was opposed to both trade.

15



liberalization and to European integration. Having begun liberalization of telecom

services with the Telecommunications Act of 1981, having abolished exchange controls

in 1979, having publicly promised to lower European air fares, and, last but not least,

being fully aware that Britain enjoyed highly competitive banking and insurance sectors,

Thatcher particularly favored the deregulation of services.37 The British government also

favored strengthening European political cooperation, although without an independent

bureaucracy.

The most important British objection to Community policy stemmed from the

heavy British deficit from the Community's Common Agricul tural Policy (CAP). Britain,

with its small, efficient agricultural sector concentrated in areas, such as sheep husbandry,

not generously subsidized by the CAP, gained little from agricultural programs, which

made up 70% of the EC budget. Thus Britain found itself by far the largest per capita

illtl contributor to the Community budget. Thatcher's frugality bolstered British

opposition; when she entered office, she demanded "her" money back from the

Community. She insisted that two-thirds of the British deficit over the past few yearsI

be rebated, and that permanent adjustments be made to prevent future budgetary

disequilibria. EC agricultura l spending would have to be limited and redirected before

i

the British would contemplate any other reforms.

The Thatcher government, like most British governments before it, was also!

suspicious of strengthening the Commission or Parliament or expanding CommunityI

competence into areas not directly connected with trade, such as indirect taxation and

I

social legislation. Thatcher firmly opposed formal changes in Council procedures as weIlI

-i n part out of an ingrained suspicion of written constitutions common to most English,

conservatives--but she was sensitive to the need for more majority voting. Hence she

favored informal means of encouraging majority voting, but opposed any treaty changesI,

that undermined the prerogatives of national sovereignty that allowed the Luxembourg

compromise to be invoked in cases where a vital national interest was at stake.

!

16



It is important to see that more was at stake in the British objections than

temporary budgetary imbalances. Up to that time, the Community's substantive agenda

had been shaped by the original Six, and particularly by France and Germany. In 1973,

Britain had been forced to accept the agricultural and budget policies as part of the

acguis communautaire--the corpus of existing Community institutions. If Britain had

joined in 1957 and participated in subsequent negotiations, the surely would have

..looked very different, and Thatcher's demand for juste retour--in the form of a

mandating that any nation's gains from the budget remain roughly proportional to its.

contribution--was in effect a demand that Britain be allowed to have its say ex post·

~ But fo r those who had worked fo r decades in the Community and who saw the,

CAP as part of the initial Franco-German bargain at the heart of the Community, the

British demand called into question its institut ional foundat ions. As Claude Cheysson,

the French Foreign Minister, stated emphatically in 1982, "the United Kingdom [seeks]

juste retour, which is not a Community idea. We and the British are not speaking of the!

same community.,,38

The British bargaining position had one vulnerable point, however, namely the

threat that France and Germany would go ahead without Britain. 39 As Britain became'

increasingly isolated between the Fontainebleau meeting in February 1984 and the signing,

of the Single Act, Mitterrand and Kohl repeatedly invoked the threat to move toward a

two-tier Europe ("Europe a deux vitesses"), whereby those willing to move ahead with

European integration would conclude their own agreements, leaving behind those whoI

refused. Such an arrangement would have left Britain without a say in the details of the

new agreements. The experience of the 1950s, when Brita in refused to join the

Community, had demonstrated that this course could be costly in the long-run. Twenty

years later the British were still trying to reverse priorities set in their absence. As Paul

Taylor has observed: "British diplomacy...had to balance two objectives: that of satisfying

specific interests, and that of staying in the game. A measure of compromise in the

former had become necessary to achieve the latter.,,40 This threat was manipula ted with'

17



great finesse by Mitterrand, bu t it was effective largely because it was credible . In this

period, a flexible Community had found a number of prominent exponents among

European academics and commentators, and initiatives of this kind had long been viewed

favorably by the French, especially in the area of high technology.f'

IV. Setting an Agenda for Europe; A Policy History of 1992

The decisive importance of the shift in French preferences and the threat of

exclusion against Britain became evident in the course of the negotiations.42

i

From the Height of Europessimism to the French PresidencyI

In the early 1980s, at the height of "Europessimism," the member states of the

Community were unable to resolve disputes over agricultural policy and the accession of

Spain and Portugal. Ideas of splitting the EC into subgroups proliferated: "Europe adeux

vitesses," "a two-tier Community," "abgestufte Integration." With the exception of thei,

launching of the ESPRIT program in 1983, various appeals by the Commission and some

member states for a renewed commitment to Europe came to nought. The most

significant was the Genscher-Columbo initiative of 1981. The Italian and German

foreign ministers proposed, with support from the Commission, a "European Act" to

relaunch European integration through strengthened internal market liberalization,

political cooperation, harmonization of domestic laws, and a number of other initiatives.

"

The initiative fell on deaf ears in France, where interest in Europe was still limited to

sporadic proposals for steps towards a socialist Europe, and in Britain, where resolution,

of the budget wrangle remained a sine qua non for a relaunching of the Community.

Andre Chandernagor, the French Minister for European Affairs, observed sarcastically

before the Assemblee Nationale that the other Europeans were trying to build Europe

from the roof down.43 ,

I

The Council did set up an ad hoc working group to look into the proposal, buti

when it reported back to the Stuttgart summit of June 1983, its recommendation did little

18



more than codify the status QUO. The Council issued a "Solemn Declaration on European

Union," based on the ad hoc group's report, which reaffirmed in general terms the

member states' desire to reenforce and develop both economic and security cooperation.

It called for the completion of the internal market alongside numerous other proposals,

including coordinated reflation, social programs, reenforcement of the monetary system,

and a European industr ial policy. But there was no consensus for changes in decision-

making procedures. Although the document was entirely rhetorical, consisting only of

a suggestion that member states voluntarily abstain, rather than invoke the veto, it

nonetheless elicited immediate proces-verbaux reaffirming the Luxembourg Compromise

from France and from the four more recent members--Britain, Denmark, Ireland an d

Greece. Shortly thereafter, French Prime Minister Pierre Mauroy spoke out publicly

against the Stuttgart Declaration, reasserting the veto right.44 Thus the only solid

Iachievement of the conference was acceptance of the German proposal to link together

four outstanding issues in the Community--an increase in Community funds, agricultural

reform, internal liberalization, and the entry of Spain and Portugal. Genscher hoped-

in vain--that all four could be resolved as a package at the Athens summit later that

45year.

The Turning Point: The French Presidency

The turning point was France's accession to the revolving presidency of the EC

in January 1984, less than a year after the moderate wing of the Socialist Party assumed

power in France. Mitterrand's extraordinary personal involvement in the six-month

presidency prompted one French observer to call him a "one-man orchestra."46 He began

the year with a personal tour of all the European capitals to seek a consensus for

irelaunching the Community. Throughout 1984, he and his foreign minister, Roland

IDumas, practiced "shuttle diplomacy" between Paris, Bonn and London.47 Mitterrand

gave a number of speeches, most notably before the European Parliament in Strasbourg

in May, in which he emphasized the economic nature of the current crisis and elaborated

19



a vision of the future European Community as a way of combatting the economic decline!

of Europe. "Europe," he warned, "is beginning to look like ~ abandoned building site."

The speeches included proposals for political cooperation, technological programmes and!

reform of CAP, but two constant refrains were decision-making and internal market

reforms.48,I

The outlines of an interstate bargain were becoming clear. Bonn and LondonI

were agreed on the need for liberalization, with weak support from Paris, while Bonn and

Paris were agreed on procedural reform, with weak support from London. But

Mitterrand's plan to resolve these issues by calling a conference to "preserve Europe" was

blocked by the longstanding disputes over fixing the British compensation, reforming the

CAP, concluding the negotiations on enlargement, and augmenting EC resources. Within

a year, however, each of these issues had been dealt with, in each case largely due to'I

an unexpected French willingness to compromise.t? The first steps were taken in early

1984, the French government put its farmers on notice that France would no longer

unquestioningly support thei r interests in Brussels. "The revitalization of agricultural

policy," stated Michel Rocard, then Minister of Agriculture, '.'can no longer serve as the!

instrument of European unification." Under Rocard's direction, a compromise was

reached in March 1984, which marked the first steps toward bringing agricultural,

spending under contro1.50 Agricultural disputes were also at the heart of the enlargementI

issue. Farmers in Southern France, threatened by the sudden importation of cheap

vegetables and wine from Spain and Portugal, had long encouraged the French

government to stall.

These conflicts manifested themselves through threats and counterthreats over

the budget. EC finances were overextended, so much so that a decision was taken in

October 1983 to delay payments under CAP for lack of funds. Germany's had insistedI

at Stuttgart that Spain and Portugal enter by the end of 1985, and threatened to block

increases in Community funding until the enlargement issue ~ a settled. Thatcher also

promised to block any such increases until the budget issue was resolved. France, which

20



I

had opposed increased financing, but reversed its policy in mid-1983 after the pro-

European turn, was thus under time pressure. Mitterrand announced that he would,

complete the negotiations by September 1984, and from that moment time began to work

in favor of an a g r e e ~ e n t . 5 1 But the British budget issue appeared as intractable as ever. At Brussels in

March 1984, French negotiators tabled a series of concessions, agreeing for the first time

that the British net contribution should be cut permanently and should reflect Britain's

lower per capita income. But France also kept up the pressure by joining Italy in

blocking the British rebate for 1983, which totalled L 457 million. Thatcher considered

retaliating by blocking the British budget contribution for 1984, but was reportedly

dissuaded by Cabinet opposition and by the fear of losing a challenge before the British

or European courts. (Britain did delay payments of an emergency levy requested by theI

Commission.)52i

The heads of government agreed to a system for limiting future agricultural

spending that would keep any growth in British contribution roughly in line with its

percentage of Community GOP, but the budget rebate for 1984 and following yearsi

remained unsettled, with the others offering ECU I billion and Thatche r demanding ECU

1.5 billion. After days of face-to-face haggling by heads of government a deal at ECU

1.2 billion seemed all but made. British officials were drafting a communique

announcing the success when it was blocked by Kohl's sudden refusal to pay Germany's, '

share of any sum larger than ECU I billion. His unexpected stubbornness grounded the

negotiations, leaving an angry Thatcher the scapegoat.53

After the Bruxelles meeting, Mitterrand increased the pressure on the British

by invoking the threat of a two-track Europe . He called for a conference to discuss

relaunching the Community among those member states would "stand up and be counted."

In his May speech to the Parliament, he spoke frankly about the possible need for a

Europe "a geometrie ~ a r i a b l e . " Dumas announced that if a budget agreement was noti

reached, his government would call a meeting without the British to discuss various

21



proposals, and boldly raised the possibility of a two-track Europe during Thatcher's visit

to the Elysee. For his part, Kohl spoke out in favor of taking a "decisive step" toward

greater European unity within a year, whether or not all countr ies agreed. The British

press picked up the theme, and a British parliamentary report called for a more

conciliatory negotiating position to head off the exclusion of Britain from future

European initiatives.54

The Period of Crisis: Fontainebleau. the Dooge Committee and Milan

In the weeks leading up to the Fontainebleau summit of July 1984, Thatcher

seemed sobered by the experience at Brussels. She exhib ited a new positive spiri t, quietly

circulating a paper entitled "Europe: the Future," outlining her government's vision for

relaunching Europe. At the head of the list of priorities was the liberalization of the

internal market as foreseen in the Treaty of Rome, stressing the deregulation of services.

British Foreign Minister Howe called for the removal of "all--and I mean all, economic

barriers," suggesting 1990 as a deadline. These proposals were quietly supported by

France. "Europe: the Future" also addressed the decision-making issue, calling fo r

major ity voting to be respected where the Treaty provides for it. Nations should be

able to veto "where a very important national interest is at stake," but "should be

required...to set out their reasons fully" before the other Council members.55

It has been argued that Mitterrand choreographed the Fontainebleau summit

in order to remind Britain of the possibility of a "two-track" Europe. The opening, fo r

example, was delayed for two hours. Heads of government cooled their heels while

Mitterrand "confessed what The Times...described in scoffing tones as his 'dreams of

Europe.".s6 Whatever the cause, Thatcher was more conciliatory than she had been atI

Brussels. The decisive issue, which took more than a day-and-a-half to resolve, was

again the size of the British rebate. A compromise was finally reached at a figure

roughly equivalent to what the British had been offered (and had rejected) in Brussels,

with the French assuming a sizable portion of the burden. Moreover, the Council agreed

22



to generalize the principle of juste retour to payments into the budget: no member state

should be required to sustain a "budgetary burden which is excessive in relation to its

relative prosperity."5?

It was at this point, at the latest, that the Council began to develop clear

momentum toward internal market liberalization. The heads of state called for a package

of internal liberalization, coordinated stimulation and collaborative research designed to

give the Community "an economic impulse comparable to that given by the Common

Market in the 1960s." I t was further agreed to abolish customs controls at some future

date.

Mitterrand also sought agreement on expanding majority voting, but due to

lack of time he settled for the creation of two committees. The first, the Ad hoc

Committee on a People's Europe (later, the Adonnino Committee), received a mandateI

to investigate those aspects of the Community which are directly visible to the common

citizen: customs formalities for individuals, equivalence of university diplomas, the

creation of European symbols, and European volunteer programs. The second and

iultimately far more important committee, the Ad hoc Committee for Institutional Affairs

(later called the Dooge Committee, after its Irish chairman), had a mandate to consider

institutional, political ~ n economic reform. The symbolic significance of the committee

was enormous. According to the Fontainebleau communique, it was to be set up on the

lines of the "Spaak Committee," the group formed in 1955 by the Council of the

European Coal and Steel Community (ECSC) to develop proposals for the "Relance

Europeenne" of that decade. The Spaak Committee proposals eventually led in 1957 to

the signing of the Treaty of Rome and the founding of the European Economic

Community.58

At their summit meeting in Saarbrucken shortly after Fontainebleau, Mitterrand

and Kohl renewed the threat of a two-tier Europe (as well as demonstrating the

seriousness of the Franco-German interest in internal market reform) by entering into

negotiations over the abolition of all controls on normal goods traffic, harmonization of

23



domestic veterinary and sanitary legislation, free movement of people, common

streamlined administrative procedures, and eventual accession to the Benelux customs

union. This would create a "super EEC" among the five states. The Benelux countries

assented in late October 1984 and a memorandum setting out objectives was approved in,

12 December 1984.59

Mitterrand signalled grand ambitions fo r the Doege Committee by appointing

Maurice Faure, a strong pan-European and a signatory to the Treaty of Rome, as his

representative. Faure clearly had Mitterrand's personal support, and he arrived at the

second meeting with a proposed draft report reportedly approved by Mitterrand himself

over the objections of the Quai d'Orsay, It soon became clear that, while the member

states differed over political cooperation, monetary policy, defense, and procedural

reform, all (possibly excepting Greece) were in substantial agreement about the need fo r

internal market liberalization. On detai led points of internal market policy, the report

contains many British proposals, such as common EC standards, liberalization of transport

services, open public procurement, and common market in insurance.

Though the Committee devoted most of its time to procedural reform, which

it viewed as its "real task," it was unable to agree on the decisive issues of majority

voting and veto rights. The British delegation came expecting to find themselves

comfortably located in the center of the spectrum on procedural Questions, alongside

France and perhaps Germany. But France joined Germany in signaling its willingness

to accept majority voting on internal market issues, and, while dropping its earlierI

support for a completely rewritten Treaty of European Union, was favorable to

amendments. In the end, seven of the ten member states were willing to renounce the

Luxembourg compromise and expand majority voting through treaty changes; Britain,

Greece and Denmark stuck by the British program, reasserting the right to veto when

"very important national interests" are at stake and accepting only the voluntary, informalI

steps to encourage majority voting already acknowledged in the Stuttgart Declaration.

24



The majority of seven also called for an intergovernmental conference to negotiate a draft

treaty of European Union.60

As the Dooge Committee deliberated, it came time for a new European

Commission and, above all, a new President of the Commission, to be named. Domestic

coalitional politics prevented Germany, whose informal turn it was, from nominating a

suitable candidate for President. On the other hand, Davignon, the self-nominated front

runner, lacked national political experience, was considered by some to be an

insuffic iently inspiring leader, and was tied to interventionist economic policies. The

French and German governments, concerned about the progress of the "relance

europeenne," pressed for a President from a large country to give the job political status.I

Delors, freed just in time by a ministerial reshuffle in France, was nominated at the last

minute by Mitterrand.. His stature as a politician with senior ministerial experience, his

years as a member of the EC Economic and Social Committee, and his reputation for

sensible economic policy-making led Germany and Britain to signal their approval

immediately, but Thatcher nonetheless quickly took the precaution of naming Lord

Cockfield--a strong candidate with Cabinet level experience, despite press commentary

to the contrary-vas a liberal counterweight.P"

Delors got to work quickly. He distributed portfolios to his fellow

commissioners--usually the occasion for extended haggling--with unprecedented

swiftness.62 He detected the emerging European consensus for liberalization, and in his

maiden speech to the European Parliament, delivered within two weeks of coming into

office, he set the deadline of 1992 for its completion, alongside continued monetary

integration and reform of decision-making in the Council of Ministers. At the

Luxembourg summit of March 1985, France and Germany unveiled an initiative to

support the Dooge Report and relaunch the Community by limiting the Luxembourg

compromise, extend EC competence in foreign affairs, and completing the internal

market.63 In response, the Council requested the Commission to develop a detailed

timetable for completing the internal market--a task assigned to Lord Cockfield.

25



In the last days of June 1985, with the Milan summit scheduled for the

following month, proposals began to multiply. From the Commission came Delors' plan

for doubling EC research and development funding and Lord Cockfield's White Paper.

Cockfield construed the Council mandate to draft proposals for liberalizing the internal

market broadly; he included nearly 300 measures, including VAT harmonization and

I

mutual recognition of regulations.P" In his public statements, Delors tied together internal

liberalization and majority voting, stressing that the first was impossible without the

second.

The British government, feeling that it was being marginalized and hoping to

channel momentum away from amendments to the Treaty of Rome, launched a

counteroffensive to the Dooge Report based on its previous plan for internal market

reform and "gentleman's agreements" to abstain, rather than invoke the veto. ThisI

proposal now included two new elements: voluntary restraint in invoking the Luxembourg

compromise at lower levels of the Council once the chiefs of state had set an objective

and a separate treaty codifying principles of informal political cooperation.65

I

Italy rejected the British procedural proposals outright, calling them politically

and legally inadequate. Separate statements by France and the Benelux advocated broadI

economic reform and a return to majority rule as set forth in the original Treaty of

Rome. On political cooperation, the French and Germans , evidently concerned about the

British having stolen their publicity, quickly pasted together their own draft treaty on

political cooperation. It repeated entire segments of the British proposal, but with small

changes: the creation of a "Secretary-General of the European Union" to manage political

cooperation and stronger rhetoric about the role of the European Parliament.P''

At Milan, the British proposal on informal improvements to decision-making

was immediately accepted, but only as a starting point. Genscher sought to achieve aIi

more ambitious agreement by proposing a compromise based on a "return to the decision-

making procedure which existed before the so-called Luxembourg disagreement," majority

voting on internal market issues, and informal agreement to abstain from invoking the

26



veto. This was submitted to the heads of government, but some--presumably including

Thatcher--found renunciation of the Luxembourg compromise unacceptable. The text,I

along with some amendments suggested by the British, was rejected.67 At this moment,

Italian Foreign Minister Andreotti--skeptical of mere declarations of intention and

anxious to avoid a failure under the Italian Presidencyv-unexpectedly called for aII

majority vote to convene an intergovernmental conference under Article 236. Germany,

Italy and the Benelux countries immediately supported the measure, France and IrelandI

hesitatingly joined them, while three nations--Britain, Denmark and Greece--remained

opposed. British protests (on procedural grounds) against majority voting were rejec ted,

and the conference was called.68

i

Thatcher returned from Milan in a fury, but allowed herself to be persuadedI ,

that Britain should attend the Conference. The reasons were varied. First , Britain had

little to lose from majority voting on the internal market programme, which it favoredi

in general and in which there were relatively few areas where British interests could beI

placed in jeopardy. In other areas, it was assumed, reform proposals were simply

rhetorical. Nor were the British deaf to Delors' constant reminders throughout 1985 that

procedural changes were needed to assure implementation of the internal market plan.!

Second, the procedure 'for amendment under Article 236 (as opposed to negotiation of a

new treaty) offered two advantages to the recalcitrant: it excluded the Parliament and it

required unanimity. No government could be excluded from the final decision. Third,

Mitterrand continued to feed speculation about a two-tiered Europe, calling the decisions

at Milan Ita test of truth." Faced with the threat of exclusion, the priority in British

diplomacy was to preserve its power of veto over the shape of the agenda. The only way

to do this was to attendI

the conference, where Britain played a skeptical, but ultimately

constructive role.69

27



Th e Inter20vernmental Conference: Victory for th e Minimalists

A draft of the Single Act was written during the first month of negotiations,

the remaining details were worked out between the foreign ministers and heads of state

at five meetings between 21 October and I December, and the document was signed inI

February 1986.7° The speed and success of the negotiations, which resolved most of thei

central issues within the first two months, can be explained in large part by the active

role played by the Commission, led by Delors. In part this support was simply logistical;

the Commission proposed and revised texts, and managed Quietly to slip some new issues

into the treaty, such as R&D and environmental programs. But more importantly, in latei

September and early October, Delors proposed limiting institutional reform to internal

market policies, and tying the program to a massive increase in structural funds necessary,,

to gain the support of Greece and other Southern European countries. This compromise

helped convince Britain to accept limitations on the right of national veto.

The substance of the Single Act negotiations is perhaps best interpreted as a"

process of limiting the scope and intensity of reform--a process necessary to gain the

acceptance of Britain, but also of other member states who, when it came to actuallyI,

signing a treaty, proved Quite jealous of their sovereignty. In this process, the goals of

the "maximalists," who favored broad procedural and s,ubstantive reforms were

progressively sacrificed in favor of those promoted by a "minimalist" program limited to

those changes necessary to liberalize the internal market. The limitations negotiated byI

the Intergovernmental Conference took place in three stages: first, the negotiators

continued the trend, evident since the Dooge Committee, toward excluding from any

significant commitments all areas of cooperation not directly connected with the internalI

market; second, they blocked the extension of majority voting to a number of contentious

internal market issues, such as fiscal and social regulation; and, third, they offset the

implicit suppression of the veto with generous exemptions and safeguard provisions

regarding the harmonization of internal legislation.

28



Limiting the ScoDe of Substantive Reform

The first task faced by negotiators was to limit the scope of substantive reform:

The Single Act, following the White Paper, contained enabling legislation for the

liberalization of financial, insurance, business, professional, communications and transport

Iservices, public procurement, the movement of people, exchange policies and capital

imovements; the elimination of administrative and technical barriers; and the

harmonization of d o ~ e s t i c legislation?' At the same time, however, the negotiatorsi

reduced all important commitments in areas other than the internal market to a minor or

symbolic level. In each case, the lack of a consensus among the major member states

prevented reform.i

Monetary Policy: A more closely coordinated monetary policy, tied to the ECU as ai

common currency, had long been a personal interest of Delors. A "certain monetary

capacity" for the Cominunity was stressed in Delors' opening speech to the Conference:

The Commission's proposals codified the existing European Monetary System within the

treaty, and made future development toward a common monetary fund subject to

unanimous approval of those who choose to participate--a "two-track" proposal would

have allowed a some countries to go ahead on their own. France, Italy, and others felt

that even this proposal was too weak, but Germany, Britain and the Netherlands opposed

any mention of monetary policy at all. Germany and the Netherlands considered that

freedom of capital markets and coordinated economic policy must precede anyI

consideration of further monetary coordination, and Thatcher felt that Britain, which does

not participate in the existing exchange-rate mechanism of the EMS, should not surrender

any sovereignty.

Delors' attempt to push the issue was curbed shortly after the opening of the

conference by an informal meeting of the Ministers of the Economy and of Finance, who

insisted that they be I consulted before any monetary proposals were made to the

conference.n In the i face of Anglo-German opposition, only strong Franco-Italian

pressure, backed by the Commission, kept the issue open for discussion past the opening

29



sessions of the meeting. When Germany and Britain lost patience and threatened to tie

any monetary agreement to the complete liberalization of capital markets by the end of

1986, the others quickly agreed to a compromise that included no concrete steps beyond

existing policies. Reference to eventual monetary union was included in the preamble

to the revised treaty, but so was language limiting the EMS to its present functions.73

The Commission proposals permitting a "two-track" monetary system were

rejected. Moreover, the SEA, by placing the EMS under the unanimity rule of Article

236, grants Britain, a nation that does not participate in the exchange rate mechanism.

veto power over its future evolution. This has led some to argue that progress toward

monetary union "seems likely to be checked rather than encouraged." The most one can

say is, in Delors' words, that the revised treaty makes "allowance for [their] evolution

when this becomes necessary."74

Political Cooperation: The political cooperation provisions of the Single ActI

were placed in a separate "self-supporting" section, which reflects a compromise between

Britain, Ireland and Denmark (supported by Greece), who preferred a complete separation

between internal market liberalization and political cooperation, and the others, who

wanted a single integrated document. All the proposals in this area (one each fromI

Britain, France and Germany, Italy and the Netherlands) did little more than to codify

the structure of informal European Political Cooperation that had developed since 1970.,

The Franco-German proposal fo r a political "Secretary-General" of Europe was rejected

by the others, even Italy. The Single Act creates no supranational institutions-vbeyondI

a small administrative secretariat unconnected with the rest of the Community--to handle

political issues. Other differences concerned only the language with which political

cooperation is described. Although the stronger language was generally chosen->

including, for example, security under Community concerns--it remains essentially a

rhetorical exhortation, not a substantive initiative.7S

Structural. Social, Environmental and Technology Policies: Essential to the

passage of the internal market program was the expansion of structural funds aimed at

30



poorer regions of the Community--the so-called "convergence policy." This provision was

necessary not because it was an essential element of economic liberalization, as the

Commission at times claimed, but because it was the political price of support from

Greece, Ireland and Portugal. The richer countries were hesitant to pay more, but in the

end it was agreed that regional, structural and development funds would be "significantly

increased in real terms within the limits of financial possibilities"--a phrase that laid the

foundation for a massive increase in transfers approved in 1988.

On social policy, Britain's principled opposition to policy directed from Brussels

and the lack of consensus between France and Germany precluded any strong statement.

A Danish programme for economic stimulation in times of unemployment and a half

hearted French initiative to incorporate a social dialogue within the Community were

blocked, while a broad mandate for environmental policy and R&D programs, suggested

by the Commission, wits replaced with minimal commitments.P

,

The Commission, supported by Denmark, proposed an extensive program of

environmental regulation--an area where it had not previously been active. The member

states sharply curtailed the list of areas for intervention, and the unanimity rule was

retained, at least for the moment. The new R&D capabilities of the Community,

developed under ESPRIT, RACE and other programs of the early 1980s, were brought

under the treaty, but any decisions on the "framework" and financing of these programs

continued to require unanimous consent. Other issues, such as cultural policy, human

rights, development aid and energy, were dropped for lack of time. 77

Limiting the Scope of Procedural Reform

Having dismissed from the agenda all areas of potential substantive reform

other than the internal market, the second step taken by the negotiators was to strictly

limit the powers of the Parliament and the application of the potent combination of the

"new method" of qualified majority voting and mutual recognition within this area. This

issue that required the most time during the Intergovernmental Conference, and was the

31



last to be resolved, ultimately requiring required the intervention of the heads of

government.78

The Powers of the Parliament: France, Britain and others easily blocked

Germany's public proposals for strengthening the Parliament. I Even Germany, however,

favored a much smaller parliamentary role than had been envisaged in the Crocodile

proposals. To be sure, the Single Act does grant the Parl iament a new role in Community

decision-making, whereby any piece of legislation accepted by the Council by majority

vote and rejected by the Parliament must, subject to the decision of the Commission, beI

approved again by unanimous vote. But the conditions under which this provision would

be decisive are unlikely to arise very often. Nonetheless, some member states felt thatI

even this granted the Parliament too much power or who felt that any powers granted the

Parliament to be taken from the Commission.Y

Majority Voting and the Veto: The original Treaty of Rome already mandates

qualified majority voting for certain aspects of internal market policy, as well as some

agricultural issues and a number of other areas. At the Intergovernmenta l Conference ,

the member states generally agreed to limit further extensions of majority voting to

internal market issues. The Commission's proposal retained the unanimity rule only on

treaty issues and issues involving on the movement of people, but this broad reform was

opposed by all three major countries. In I he end, majority voting was not extended to,

fiscal harmonization, the movement of people or the mutual recognition of agricultural

regulations. (Fiscal policy was initially exempted from any implicit time l imit, but at the

last minute it was included under the actions to be completed by 1992.) In exchange for

the power of proposition on the external tariff, the Commission agreed not to block

Council demands for modifications. Britain insisted that nations have the right to apply

their own regulations concerning occupational safety and the rights of workers (including

worker participation)--an issue initially included in order to win over the recalcitrant

Danes. At the last minute , however, Britain accepted majority voting on this issue, given

that the proposals did not affect small and medium enterprises. The British and Irish

32



governments succeeded in mandating unanimity rule on matters concerning animal and

plant health. National prerogatives were protected in matters of immigration from third

countries, crime and t ~ r r o r i s m and commerce in arts and antiques. 80

Safeguard Clauses and Exemptions to Mutual Recognition

The third step taken by the Intergovernmental Conference to limit the Single

Act involved negotiations over the exact method for applying the mutual recognition

clauses. Under the Commission's initial proposal, the mutual recognition provisions wouldI

have come into force automatically at the end of 1992, bu t this was rejected by the

member states along with all other efforts to give the date 1992 legal status. Instead,

the Commission is mandated to examine the legislation and regulations in each member

state starting in 1992 to determine whether they constitute obstacles to trade, and to

I

propose various "equivalences" if they do, which would then be subject to Council

approval by qual ified majority . This is perhaps the most far-reaching extension of

Community power: beginning in 1993, a qualified majority of the Council, acting on the

Commission's recommendation, can demand that recalcitrant member states recognize

foreign regulations as binding on imported goods and, more significantly, on foreign,

firms operating in their territory.81

All member, states agreed on the need for exemptions and safeguards.

Germany, backed by Denmark, called for a de facto veto right regarding propositions that

!

forced any state below what it considers a minimally acceptable "quality of life." NoI

such clause was included in the SEA, but two provisions that move far in the same

direction were. First , the Commission agreed to consider "elevated" standards of public'

health and safety, environmental and consumer protection in the more advanced states as

binding. Second, a wide-ranging safeguard clause, based on [he preexisting Article 36,,

allows derogations from applying the mutual recognition provisions for the protection of:,

public morality, order and security, of national treasures, and proprietary materials, as

well as health, safety, environmental concerns and consumer protection.82

33



The negotiators deliberately avoided discussing the Luxembourg Compromise

or the procedures for calling a majority vote. Instead, the veto right was implicitlyI

transformed into Article 100(4) of the Single Act, which permits nations outvoted in theI

Councilor wishing to invoke a safeguard clause to retain their domestic regulations for

reasons of "exigences importantes" under Article 36. If they do so, however, they mustI

inform the Commission, which then determines whether t ~ measures constitute an

arbitrary form of discrimination or a disguised restriction on commerce, rather than a

legitimate case of derogation. The Commission or any government that believes a nation

has abused the safeguard clause may seek relief before the European Court using a special

accelerated procedure. This clause shifts the locus of conflict over the veto from the

ratification by the Council to its implementation by each nation. And the ultimate arbiter

has changed: It is now the Court and the Commission--not the member states, as under

the Luxembourg compromise-vthat ultimately determines what constitutes properI

justification for exempting a state from a Community decision.83

At the Luxembourg summit of December 1985,. the heads of government

resolved the final difficulties over the revised treaty. The ratification of the amendments,

was unproblematic, although it was delayed by Denmark, which had to fulfil

I

constitutional obligations to hold a referendum, and by Italy, which criticized the draft

for not going fa r enough. In the wake of the Luxembourg summit, Kohl and Mitterrand

stated--though perhaps only for posterity--that they would have been prepared to go

further on the powers of the Parliament and monetary policy respectively, as well as on

majority voting. Italian Prime Minister Craxi voiced doubts that the Single Act included

enough of the maximalist agenda, and promised support for the SEA only if the European

Parliament approved it.

Thatcher, by contrast, hailed the results as "clear 'and decisive." Ironically,

though predictably (given the lowest common denominator bargaining characteristic ofI

systems change in the Community), the final agreement on substantive issues came closest

to satisfying the British. The outcome of the agricultural budget negotiations, for

34



example, reflected the other member states' acknowledgement of the legitimacy of the

British claim to reshape the acguis communautaire in fundamental ways, as well as

changes in the perceptions of France, which came to see limits on agricultural spending

-as long as it appeared to be due to the demands of others-vas in their interest. Time

an d time again in negotiating the SEA the British got their way on substantive and

procedural issues--only in part because the commitment of other countries turned out to

I

be weaker than their rhetoric--until the final draft looked very much like the plan for

eliminating all barriers to trade that Geoffrey Howe had called for in ear ly 1984. In the

areas where the British government favored reform, such as liberalization of services

trade, majority voting was secured. Elsewhere it was limited. Although Britain did not,

i

succeed in blocking treaty revisions altogether, its negotiators did succeed in preventing

i

an explicit revocation of the Luxembourg compromise. We cannot know for sure how

fa r the French and Germans would actually have been prepared to go to carry out the

I

threat of a two-tier Europe, but certainly they are now hampered from doing so by the

SEA, particularly in monetary policy.84

VI. Interpreting the Negotiations

The case study offers considerable support for the predictions of the neo

realist regime theoretical model. The Single European Act was negotiated by heads of

government and their direct representatives, apparently without a great deal of public

debate or interest group activity. It is the largest states whose initiatives and objections

appear to have shaped the final agreement. The importance of French, German andi

British preferences is also demonstrated by the lack of any case--with the possible

exception of the Danish stand on workers' rights--of a single smaller nation either

i

initiating or vetoing an important initiative. The Southern nations and Ireland were·

appeased en masse with the promise of increased structural funds; the Benelux countriesi

would have been prepared in any case to go further.

35



The preferences of the large states reflected structural economic interests, thei

policy preferences of the party in power and the views of the head of state. Structural

economic interests--German industrial competitiveness and British comparative advantageI

in services (tied to a small agricultural sector)--explain some of the positions taken. Buti

the instability of conceptions of the national interest suggest that nations were guided by

more than world market position or incremental changes in interest group influence.

Instead, the success of the negotiations reflects above all the fact that in the mid-1980s,

for the first time in more than a decade, the parties in p o w ~ r in the three major states

were ideologically committed to liberal economic policies and, though to varying degreesi

and for diverse reasons, to Europe. In each case, the party faction in power was decisive:I

Had the Labour Party been in power in Britain or either th e Gaullists or left-wing

Socialists in France, the Single European Act would have b e ~ n unthinkable. Moreover,

there was considerable room for individual leaders to influence the outcome. TheI

commitment to federalism--or lack thereof--on the part of European heads ofi

government clearly played an important role, as the decisive impetus given by the FrenchI

presidency (as well as the opposition of Thatcher) demonstrate. Both leaders repeatedly

overruled their technocrats.

The SEA represents the minimum common denominator of French, GermaniI

and British preferences at the time, except on issue of treaty amendments to promote

majority voting and suppress the veto, where the British yielded to Franco-German!

pressure to convene an Intergovernmental Conference, in part because they saw it as aII

means to attain market liberalization and in part because the Franco-German demand for

constitutional reform was backed by the threat of exclusion. The steady narrowing ofII

the final agreement to a "minimalist" position that restricts majority voting to internal

market policy and thus hampers future spillover to areas like monetary policy suggests

the enduring importance of national interests and concerns about sovereignty.I!

36



Assessina Neo-FunctionalismI

In contrast, the process by which the Single Act was adopted does not support

the neo-functionalist view that pressure from the European Parliament, multinational

business interests and the Commission was decisive.

The European Parl1ament: The evidence suggests that the Single Act did not

result from the pressure or momentum generated in Community institutions. From, '

Fontainebleau on, parliamentarians were deliberately and systematically excluded from

i

negotiating process. One of the Dooge Committee's first actions was to reject the Draft

Treaty on European Union as a starting point, and with i t the procedure of submitting!

changes in Community procedures directly to the Parliament, and to negotiate from a

French draft instead.85 These reformulations were not merely cosmetic. The

representatives felt that the Parliament's proposals were too open-ended ("real reform

...requires a treaty encompassing all Community policies and the institutions needed to

implement them"), too' democratic (the powers of the European Parliament should be

"extended to new spheres of activity") and too automatic (the European Parliament draft •

treaty would have gone into effect without unanimous approval).86 The

Intergovernmental Conference followed the same policy. Maximalist pressure in theI

Crocodile Group, the Draft Treaty of European Union and the Adonnino Committee to,

transfer power from the Council, which was seen as inefficient and beholden toi

nationalist interests, to t'he Parliament, failed utterly. The Parliament's nearly continuous

protests against the em!asculation of the initiative and their exclusion from the "realI

participation" in the discussions were ignored.87 The Parliament overwhelmingly passed,

a resolution criticizing the Single Act, which "in no way represent the real reform of the,

Community that our peoples need."88

Multinational Business Interes t Groups: The internal market programme, like :

the European Economic, Community itself thirty years previously, appears to have been,

I

launched despite the apathy or opposition of major European and national business

interest groups.89 I t is difficult to assess the amount of behind-the-scenes pressure, but

37



if public statements are any indication, the major business interest groups in Europe or

in the leading member states did not take strong stands until 1985, by which time the

support for market liberalization and (in all countries except Britain) fo r majority voting,

was evident.

Almost no groups raised procedural issues. On market liberalization, the

Kangaroo Group remained relatively small until after the 1992 initiative was launched

and established no formal links with the Council until 1986. The Roundtable of

European Industrialists strongly represents non-EC European business, and was thereforeI

based in Geneva, rather than Brussels, where it did not move until 1988 upon Dekker'sI

accession to its presidency. Before 1985, its work focused mainly on EuropeanI

infrastructure projects like the Channel tunne1.90 By the time Dekker delivered his oft-

quoted speeches, nearly a year after the start of the path-breaking French presidency, the

work of the Dooge Committee was nearly complete and the member-state support for

internal market liberalization and more majority voting (except in Britain) was fixed. To

be sure, a few business interest groups, such as UNICE, had been pushing vainly forI

liberalizat ion for a long time. But what needs to be explained is why governments finallyi

listened.

Delors and the Commission: There is no doubt that Jacques Delors is an

extraordinary politician. But, as we have seen, the essential breakthrough toward the

relaunching of the Community had already been made by the time Delors entered office.

(Indeed, his actions as Finance Minister of France may well have contributed more to the

Single Act than his actions as President of the Commission.j'" Delors' most impor tant

contributions as President resulted from keen awareness of the extreme constraints under

which he was acting. His judgment, despite his own long-time attachment to European

monetary cooperation, that only internal market liberalization could gain a consensus is

characteristic of his distinctive political genius, which lies in his ability to temper his

pan-European idealism with political realism. This gave him the flexibility needed to

guide the Community through the negotiations.V

38



The initial draft amendments submitted by the Commission to the

Intergovernmental Committee were maximalist (except on the powers of the Parliament),

a fact which hardly lends credence to Delors' claim that he foresaw all in January 1985.

On the other hand, this criticism may underestimate Delors' skill in setting the agenda

-the major source of Commission power--where aggressiveness did pay dividends.

Cockfield and Delors tossed many proposals out on the table in the course of 1985. Some

were successful, such as the Commission decision to expand the White Paper to include

as many issues as possible. But, even more importantly, Delors knew when toI

compromise. That time came in late September and early October 1985, when he finally

dropped strong support for monetary and social reform and stressed instead the linkages

between internal market reform, majority voting and convergence policies.93 On balance,

then, Delors and Cockfield helped on the margin to broaden the 1992 init iative, and they

certainly contributed decisively to the remarkable speed of decision-making at the

Intergovernmental Conference. But on the general shape of the initiative, they had little

room to maneuver. The fundamentals were proposed, negotiated and approved by heads

of government.

None of these three variables--insti tutional momentum, supranational interest-

group activity and leadership at the Commission--seems to account for the timing and

content of the Single Act. This calls into doubt the long term historical prediction of

underlying neo-functional ist arguments, namely that over time, the political processes of

integration be facilitated by changes in the roles of actors and organizations. Perhaps the

most striking aspect of the SEA negotiations in this regard lies in the parallels to the

isituation in the early 1950s, when the ECSC was founded. Even regional integration

theorists are inclined to accept that the initial founding of the ECSC was an extraordinary

act of political statesmanship, but contend that once it occurred it sparked a qualitatively

different and potentially self-sustaining process of spillover. The negotiating history of

the Single European Act, however, suggests that thirty-five years later the factors that

encouraged further commitments to the Community appear to have remained essentially

39



i

the same--national economic interests, the pro-European idealism of heads of

government, and the decisive role of the large states.

The Domestic Roots of International Ree;imes

The important role in relaunching the EC played by power and interests raises

a fundamental theoretical problem in studies of international cooperation more generally,

namely, the location of the "theoretical dividing line" between nee-realism and neo

functionalism. Under what conditions does each apply? In response to this question.I

there are at least three competing approaches. II

The first and simplest theory is that all bargaining within the Community, evenI

the most mundane, reflects power and national interests and is thus best explained by the

neo-real ist regime theoretical model. A neo-realist explanation of this kind is clearly

distinguished from a neo-functionalism one by the fact that the development of interests

is treated as an exogenous factor with respect to the integration process itself. Without

exogenous shocks, the integration process would naturally slow to a halt and remain in

a political and institutional equilibrium. Claims about a self-sustaining process of

integration are, in this view, simply false. Such an explanation might begin by tracing

the way changes in economic interests, reigning economic paradigms or political alliances,

on either a national, regional or global scale, work their way into interstate bargains,

which are then negotiated between the major states.94

A second approach would attempt to vindicate neo-functionalism by specifying

it different ly. Neo-functionalist theory asserts that classical diplomacy is being!

supplanted by factors acting "above" and "below" the nation-state. Rather than focusing

on factors above the state--systemic dynamics, supranational actors and the formation of

multinational interest-groups--as was done in this article, analysts might view integration

as a process taking place exclusively below the state and consisting entirely of domestic

changes in attitudes, values, expectations, institutions and interests. 95 According to this

domestic neo- functionalist view, integration is self-sustaining because it alters the interests

40



and ideas of domestic actors so as to promote further integration. While this article

presents some evidenceagainst this view--particularly regarding the importance of sudden

changes in policy as a ' response to changes in party coalitions--it cannot be ruled out.

Some versions of this hypothesis might offer a way of reconciling neo-realist regime

theory and neo-functionalism by using the former to account for state interests and the

later to explain the resulting bargaining outcomes.96

,

A third approach (and another possible method of reconciling the two

theoretical traditions) is to posit the existence of a fundamental distinction between the

"extraordinary politics" of systems change, in which long-term intergovernmental bargains

define the broad future directions of the EC, and the "normal politics" of Community

decision-making, in which those bargains are elaborated and implemented in detail. It

is possible that the forhter is best explained by the neo-Realist regime theory, and the

latter by the neo-fun'ctionalist feedback mechanisms.V This dualist hypothesis is

consistent not only with the empirical findings of some previous researchers, but with the

I

fundamental distinction underlying regime theory itself, whereby the costs of creating

and reforming regimes he higher than the costs of maintaining them. 98 Regime creation

and change, some regime theorists argue, entails neo-realist bargaining within an

essentially anarchic setting, while regime maintenance entails more institutionalized forms

of accommodation.

Only further empirical research can determine whe ther the neo-realis t, domestic

neo-func tional ist or dualist hypothesis is most accurate. It is worth noting, however, that

these hypotheses cannot be operationalized and tested without integrating a theoretical and

empirical analysis of domestic politics to a greater degree than in the bulk of the existing

literature on international economic cooperation. This is so primarily because each of

these theoretical approaches is differentiated above all by distinctive claims about the

nature of the underlying domestic political bargains that define the "national interest."

Most theories of international cooperation, including regime theory, have neglected the

I

problem of domestic interest formation, electing instead to specify interests by

41



assumption.99 Yet testing these claims about integration invariably raises many questions"

traditionally treated by students of comparative politics: Which domestic actors take the

lead in promoting and opposing economic liberalization? Are they state or societal

actors? How do they perceive their interests? How do they influence one another?,

What is their relation to the world economy? These questions necessarily connect the

literature on international cooperation with that on state-society relations in an

interdependent world economy.100 The importance of party politics and domestic

economic reform in the emergence of the Single European Act suggests the need to

combine the insights of comparative politics with those of international relations theory.

VII, Conclusion: The Sine:le European Act in Perspective

At the moment, the interstate bargain which limits the scope of the 1992

initiative appears solid, despite several recent attempts on the part of the Commission and

certain national governments to reopen certain questions.l'" This is not to say that shifts,

in domestic perceptions of interest and bargaining leverage cannot lead certain issues to

be reopened--as may happen with monetary policy-c-or that ,the Single Act has not led

to unexpected consequences. But this case study suggests that any future systems change

will not be the direct result of functional spillover or institutional accretion. Instead,

such changes will require yet another extended negotiation-i-an act of new founding, a

supremely political act, in which each member state will make a sovereign decision

whether to participate.102I

The standing of neo-functionalist theory among political scientists is a lagged

function of the standing of the Community in the eyes of Europeans. When things go

badly for the Community, as they did in 1975, scholars speak of the obsolescence of

regional integration theory; when things go well, as they do today, they speak of the

obsolescence of the nat ion-s tate . Regional integration theory, one reads today, has been

"unjustly consigned to the dustbin."103 The article challenges the notion, implicit in theseI

statements, that progress in the Community necessarily supports the claims of neo

42



functionalists. But other theories of cooperation, based on classical notions of power and

interests , can account for integration. Although the negotiations leading up to the 1992

initiative do not support the process-level predictions of nee-functionalism, the outcome

was nonetheless a decisive push toward further European integration.104

This view may allow us to reconsider much of the conventional wisdom about

the Community. I t is often argued, for example, that EC decision-making has become

more difficult as the number of members increased--a result that is supported by recent, '

applications of game theory to international cooperation. Coercive bargaining at the heart

of the Community, as illustrated in this case, may appear to be a symptom of this

unwelcome trend. Yet the success of the SEA negotiations suggests, paradoxically, that

decision-making in a Community of Twelve may in some ways be easier than decision-

making in the old Community of Six, for coercive bargaining may offer striking new

opportunities for creative statecraft. If , for example, as this case suggests, the threat by

two of the large member states to exclude the third is credible, it may more than offseti ;

the increased difficulty' of reaching a consensus. Indeed, if such threats were completely'

credible and preferences were randomly distributed, agreement would be twice as likely'

with three nations, where two are needed to adopt a proposal, as with two nations, each

with a veto. 10S

,

For the moment, this potential advantage is masked by the fact that preferences

are not randomly distributed; Britain generally, though not always, acts as a constant drag'

on Franco-German integration. (To this extent, those who argue that Franco-German

cooperation remains a precondition for further European integration are, for the moment,

correct.) But should Britain decide at some future date to propose its own reforms, as

it did briefly on the deregulation of services, this may open the possibility for new

alliances--and thus, paradoxically, for faster progress in a Community of Twelve than'

had been possible among the Six.106 This final paradox suggests that it is not necessary

to transform the nature of international politics in order to transform Europe.

43



FOOTNOTES

I. I am grateful to Kalypso Nicolatdis for collegial encouragement and criticism from thebeginning and to David Dessler, Peter Hall, Stanley Hoffmann, Robert Keohane, Diane

Orentlicher, Joseph Nye, Helen Wallace and the participants in the Ford Foundation European

Institutions Seminar at Harvard University for comments on an earlier draft. I would also like toexpress my appreciation to the Center for European Studies at Harvard University, the Krupp

Foundation, and the Morris Abrams Fellowship for essential research support, and to the European

Community Visitor's Programme for organizing and financing a research trip in January 1989.This article is based in large part in interviews with European officials conducted at that time.

Dieser Aufsatz ist meinem Uronkel Andreas Fleissig gewidmet, der die Notwendigkeit einergesamtkontinentaler europdischer Wirtschaftsgemeinschaft vor einem halben Jahrhundert vorgesehenund analysiert hat. I

I

2. The quotation is from Article 8A, as amended by the Single Act. The general literature on1992 is exploding. The best negotiating history of the Single European Act, written by anintelligent insider who took comprehensive notes, is Jean De Ruyt, L' Acte UniQue Europeen:Commentaire (Bruxelles: Editions de l'Universite de Bruxelles, 1987). For other useful historiesand commentaries, see Peter Ludlow, Beyond 1992: Europe and its Western Partners (Brussels:Center for European Policy Studies, 1989); Michael Calingaert, The 1992 Challenge from Europe:Development of the European Community's Internal Market (Washington, DC: National PlanningAssociation, 1988) and Angelika Volle, GroBbritannien und der europaische EinigungsprozeB(Bonn: Forschungsinstitut der Deutschen Gesellschaft fu r Auswartige Politik, February 1989), pp.46-76. For a collection of important German articles and documents between 1985 and 1989, seeJochen Thies and Wolfgang Wagner, eds. Auf dem Wege zum Binnenmarkt: europaische Integration

und deutscher Foderalismus (Bonn: Verlag fu r internationale Politik, 1989). For an excellent casestudy of the 1992 negotiations compared with previous experience, see Roy Pryce, ed. The

Dynamics of European Union (London and New York: Croom Helm, 1987). On the provisions of

1992 as a new form of multilateral economic negotiation, see Kalypso Nicclaidis, "MutualRecognition: The New Frontier of Multilateralism?" in Network Politics (Paris: PrometheePerspectives No. 10, June 1989), pp. 21-34.

3. The Luxembourg compromise, which was announced to the world in a press communique, hasno legal standing. Quite the opposite, it has been interpreted as an attempt to circumvent legalprocedures under Article 236 of the Treaty of Rome that were used to adopt the Single Act. Fo rthe text (in French), see Philippe Moreau-Defarges, Quel Avenir pour quelle Communaute? (Paris:Institut Francais des Relations Internationales, 1986), p. 50; for a discussion of its history, see JohnNewhouse, Collision in Brussels: The Common Market Crisis of 30 June 1965 (London: Faber and

Faber, 1967) and Michael Palmer and John Lambert, et al. European Unity: A Survey of theEuropean Organizations (London: George Allen and Unwin, 1968), pp. 251ff.

4. EC Commission, Directorate-General for Economic and Financial Affairs, "The Economics of1992: An assessment of the potential economic effects of completing the internal market of theEuropean Community," European Economy No. 35 (March 1988).

5. This article offers no more than a preliminary attempt to apply international relations theoryto the negotiation of the Single European Act. A more definitive test of this explanation ofsystems change lies beyond the scope of this paper, since it would necessarily place the Single Act

and the White Paper in the context of a systematic, comparative analysis of the success and failureof major EC internal market initiatives between 1950 and the present. A process-tracing analysisof the Single Act negotiations is nonetheless a necessary first step in this research agenda.

46



6. Among the factors mentioned are declining American hegemony, increasing competition from

US and Japan, the emergence of services on the GAIT agenda, the success of the EMS, theelimination of other issues from the EC agenda, changes in the nature of trade from goods toservices, economic stagnation since 1973, the beginnings of economic recovery in the mid-1980s,the abandonment of Europe at the Reykjavik summit, increased German assertiveness, the decisionto tie the initiative to a clear deadline, the clarity of Lord Cockfield's prose, and many others.For summaries of some of these arguments, see Michael Calingaert, 1992 Challenge, p. 7;

Economist (9 July 1988), p. 8; Peter Ludlow, "Beyond 1992," European Affairs (Autumn 1988),pp . 19, 21.

7. Calingaert and Ludlow and others stress these forces. In addi tion , see Axel Krause, " Whatafter European Integration?" European Affairs (Autumn 1988), pp . 46-55.

8. For strong claims about the importance of this group in inspiring reform, see Marina Gazzo,"Introduction," in Towards European Union: From the "Crocodile to the European Council inMilan (Brussels-Luxembourg: Agence Europe, 1985), pp . 7-10.

9. Among the most influential parliamentary reports is Michel Albert and James Ball, Toward

European Economic Recovery in the 1980s: Report presented to the European Parliament (31August 1983). Chapter 5 of the report, written by Albert, does focus on the importance ofresearch programs like ESPRIT, as well as standards, frontier barriers and employs the expression

"the costs of Non-Europe." See also "Resolution on the need to implement the internal Europeanmarket," Official Journal of the European Communities (OJEC) [CI27/9, 9 April 1984];"Report...on consolidating the internal market," European Parliament Working Documents [A 2

50/85 and A 2-50/85, 31 May 1985].

10. There were nascent trends toward reform in other EC inst itutions as well. In the landmark

Cassis de Dijon case of 1979, the European Court had introduced the principle of mutualrecognition of certain kinds of legislation, whereby members states could be compelled torecognized functionally similar legislation in foreign countries as binding. In the Council ofMinisters, there had been a steady increase in majority voting. Ten decisions were taken byqualified majority between 1966 and 1974,35 between 1974 and 1979, and more than 90 between1980 and 1984.

In addition, two more subtle arguments have been advanced. Helen Wallace views the SingleAct as "a return on investments made over many previous years" in developing a distinctive

internal negotiating culture within the EC. See "Making Multilateralism Work: Negotiations in theEuropean Community," (mimeo., August 1988), p. 6. Roy Pryce sees the Council as having beentrapped by its own rhetoric in documents like the "Solemn Declaration" at Stuttgart: "...thecumulative effect of repeated rhetorical commitments was to make some form of action eventuallyinescapable." See "Past Exper ience and Lessons for the Future," in Pryce, ed. Dynamics, p. 276.But it is unclear whether either of these arguments is intended as an alternative to the argument

advanced here (e.g. see Pryce, p, 278 on the role of member states).

I I . On the role of business, see Lawrence G. Franko, "Europe 1992: The Impact on GlobalCorporate Strategy and Multinational Corporate Strategy," (mimeo., University of Massachusettsat Boston, September 1989); Wayne Sandholtz and John Zysman, "1992: Recasting the EuropeanBargain," (manuscript to appear in World Politics, no date), pp . 9-10; Financial Times (14 February

1984); Axel Krauss, "Many Groups Lobby on Implementation of Market Plan," Europe Magazine(July/August 1988), pp . 24-25; Ludlow, Beyond 1992, pp. 27-30; Calingaert, The 1992 Challenge,p. 8; Wallace, "Making Multilateralism Work," p. 7.

12. For Dekker's proposals, see "Europe 1990: An Agenda fo r Action" (Philips, 1984) and hisspeeches at the Deutsche Gesellschaft fur Auswartige Politik, e.v., Bonn, 9 October 1984; Centerfo r European Policy Studies, Brussels, II January 1985; The Institute of Directors, London, 30May 1985; The Association of Corporate Treasurers, London, 22 May 1986. The four aspects ofthe Dekker plan were administrative simplification of border formalities, harmonization of TV A

47



("suppremir par etapes Ia fluctuations de Ia TVA aux frontiers"), standardization of technicalnorms, and liberalization of government procurement. On Dekker's view of the role of business,see Dekker's "Europe's Economic Power - Potential and Perspectives," (Speech at the Swiss Institutefor International Studies, 25 October 1988).

13. Jacques Delors, et al. La France par l'Europe (Paris: Bernard Grasset, 1988), pp. SO-51.

14. See Calingaert, The 1992 Challenge, p. 9. For Delors' version, see Delors, et al. La FranceDar l'Europe pp. 49-50. Institut ional reform was opposed by the UK and Denmark; defensecooperation by France, Ireland, Greece and others; and monetary reform by the UK, Denmarkand the Netherlands. Interview with Jacques Delors, 22 September 1989.

15. On Delors intent ions, I draw on an interview with Delors, 22 September 1989. See also thespeech by Lord Cockfield, "The Completion of the Internal Market," Institute for InternationalEconomics, Washington, 24 May 1988, cited in Calingaert, The 1992 Challenge, p, 9.

16. Ludlow, Beyond 1992, pp, 27-30; Calingaert, 1992 Challenge, passim.; Dusan Sijanski,"Communaute europeenne 1992: gouvernement de comites," Pouvoirs 48/1989, pp. 72-80; HelenWallace, "Europaische Integration," in Thies and Wagner, eds. Auf dem Weg, pp, 127-128;Sandholtz and Zysman, "1992: Recasting the European Bargain," pp. 9-10.

17. Neo-funct ionalism is a research programme of great empirical and theoretical richness,particularly as regards the political process by which economic integration between states takes

place. It is not my purpose here to elaborate this literature further, nor to attempt acomprehensive critique, but simply to demonstrate that the widely-held views about the causes ofthe 1992 initiative outlined above are consistent with the essential assumptions of neofunctionalism.

The locus classicus is Ernst B. Haas, The Uniting of Europe: Political. Social and EconomicalForces. 1950-1957 (London: Stevens and Sons, 1958). For later critique, commentary andelaboration, see Leon N. Lindberg and Stuart A. Scheingold, Europe's Would-Be Polity: Patternsof Change in the European Community (Englewood Cliffs, NJ: Prentice-Hall, 1970); Lindberg andScheingold, eds. Regional Integration: Theory and Research (Cambridge, MA: Harvard UniversityPress, 1971); Joseph S. Nye, Jr. Peace in Parts (New York: The Free Press, 1971); MichaelHodges, ed. European Integration (Harmondsworth, Middlesex: Penguin, 1972); Charles Pentland.International Theory and European Integrat ion (New York: The Free Press, 1973); Paul Taylor.The Limits of European Integration (Beckenham: Croon, Helm, 1983). For a current researchagenda based on some of the same premises, see William Wallace, "The Changing Shape of WesternEurope," (Paper delivered at the ISA Conference, London, 30 March 1989).

18. See Haas, Uniting, Chapter One. The richness of detail and ambiguity of Haas' analysis m.ightlead one to argue that this first assumption is the only one that characterizes neo-functionalism.After all, Haas appears to concede in the Uniting of Europe that spillover can be positive ornegative and that functional demands for further integration will proliferate only if thesupranational organization's actions promote them. In this form, however, nee-func tionalism istautological. The interesting claims are teleological and process-oriented. For an attempt toaddress these criticisms, see Ernst B. Haas and Philippe C. Schmitter, "Economics and DifferentialPatterns of Political Integration: Projections about Unity in Latin America," InternationalOrganization (Autumn 1964), pp. 705-737.

19. For elaborations of this view, see Nye, Peace in Parts; Lindberg and Scheingold, Europe's

Would-Be Polity. I

20. See Haas, Uniting of Europe, Chapter 8 ("The Expansive Logic of Sector Integration"),especially pp, 30I, 313, in which he argues that there was a "direct causal connection" between the

negotiation of the European Coal and Steel Community (ECSC) in 1952 and the Euratom and

48



Economic Community treaties in 1957, resulting from a "clearly predictable institutional and

procedural impact" of the ECSC. Thus, he predicts, "...the logic of intergovernmental relationswithin the framework of the EEC-Euratom-ECSC Council of Ministers, its associated committees

of national experts, working under the prodding of supranational Commissions, can lead only tomore collective decision-making in the effort to overcome the inevitable crises and unforeseen

contingencies." It is true, of course, that Haas later retreated from this position, arguing, fo r

example, that the process of functional linkages was important, but the direction of the effect

("spillover" or "spillback") was indeterminate. This retraction does not blunt the critique in thispaper, since it nonetheless maintains that interest groups and supranational officials will spearhead

any movement, regardless of direction. See also Haas, "International Integration: the European and

the Universal Process," reprinted in Hodges, ed . European Integration, pp. 93ff; Haas,"Technocracy, Pluralism and the New Europe," in Stephen R. Graubard, A New Europe? (Boston:Houghton Mifflin, 1964).

21. On these interpretations of spillover. see Footnote 19. and Haas, Uniting of Europe. especiallypp. xiii-xiv; Haas and Schmitter, "Economics and Differential Patterns of Political Integration," p.707. For variations, see Joseph S. Nye, Peace in Parts: Integration and Conflict in RegionalOrganization (Boston: Little, Brown and Co.. 1971), pp . 86-107.

Changes in the interests and expectations of domestic actors comprise a third mechanism.Interest groups, politicians and and officials mobilized by the initial steps toward integration willalter their views, thus breaking down nationalist inhibitions toward further integration. Although

the process of spillover may work in part through domestic politics in member states, it is in allcases a systemic result of previous integration decisions, and thus should proceed independently

of differences in domestic political arrangements. This more complex mechanism is not tested inthis article, bu t see the section below on "The Domestic Roots of Regime Theory."

22. Haas, "International Integration: the European and the Universal Process," pp . 93ff.

23. Haas and Schmitter, "Economics and Differential Patterns of Integration," p, 707; Haas,"International Integration," p, 96.

24. Haas stressed both national and supranational dynamics, and the stress he lays on each remainsopen to debate. For example, in the Uniting of Europe he predicted the "uniting" of supranational

interest groups, but the prediction has the same ambiguity as the title of the book. One can

imagine a variant of neo-functionalism which works entirely through changes in values,

expectations and interests at the national level and coordination between state policies at thesupranational level, without any power or influence being transferred to EC officials and

organizations or to supranational interest groups. This paper seeks to assess the validity of thesystemic, supranational variant of regional integration theory. For some throughts about analternative, see also page 39-41.

25. See Juliet Lodge, "EC Policymaking: Institutional Considerations," in Lodge, ed. The European

Community and the Challenge of the Future (London: Pinter, 1989), p. 28; Taylor, Limits,Chapters Three and Ten.

26. Lindberg an d Scheingold, Europe's Would-Be Polity, Chapters 5 and 6, especially pp . 243ff.In neo-functionalist language, heads of state are "dramatic-political actors." See also Keatinge and

Murphy, "European Council's Ad Hoc Committee," in Pryce, ed. Dynamics, p. 231. On Haas 'views, see The Obsolescence of Regional Integration Theory (Berkeley, CA: University of

California, 1975).

27. On the appropriateness of regime theory, see Stanley Hoffmann, "Reflections on the Nation

State in Western Europe Today," Journal of Common Market Studies (September/December 1982),pp , 33-35. The closest variant of regime theory applied here is "modified structural realism" asset forth in Robert Keohane, Neo-Realism and its Critics (New York: Columbia University Press,1986), pp , 192-195 and Keohane, After Hegemony: Cooperation and Discord in the World Political

49



Economy (Princeton: Princeton University Press, 1984), pp. 61-64. Keohane writes that "theconcept of international regime is consistent both with the importance of differential power and

with a sophisticated view of self-interest."

28. For a defense of this tripartite distinction, see Andrew Moravcsik, "Disciplining Trade

Finance: the OECD Export Credit Arrangement," International Organization (Winter 1989), pp .

174-176.

29. Hoffmann, "Reflections," p, 26. See also David Dessler, "What's at Stake in the Agent

Structure Debate?" International Organization (Summer 1989), pp. 441-474.

30. See Foreign Minister Genscher's comments at the opening session of the IntergovernmentalConference, summarized in Gazzo, Towards Eurooean Unity II, pp. 28-29, and also the German

draft on new powers for the Parliament, summarized in Gazzo, illli!., p, 39-40. On German viewstoward the CAP, see Gisela Hendriks, "Germany and the CAP: national interests and the European

Community," International Affairs (Winter 1988-89), pp . 75-87. The German stand against moreintensive monetary cooperation softened in 1988-1989.

It might be argued that Italy, too, is a major state with a veto. But this hardly changes the

analysis, since Italy was a net beneficiary from the EC budget and the Common Market, andItalian leaders were traditionally among the Community's most consistent supporters of a strongParliament.

31. This account of the foreign policy of the first Mitterrand presidency draws heavily on Gabriel

Robin, La Diplomatie de Mitterrand ou Ie triomphe des apparences. 1981-1985 (Paris: Editions dela Bievre, 1985).

32. One suspects that Mitterrand and his ministers were looking for a way to limit agriculturalspending without appearing to have been responsible for it. Hence, the attempts to cast Thatcher

as a scapegoat and the fact that, although the French government became more accommodatingof agricultural reform and French ministers spoke out occasionally overgenerous support, theyremained one of the staunchest supporters of generous agricultural subsidies as late as the Brusselssummit of February 1988. Paul Taylor , "The New Dynamics of EC Integration in the 1980s," inLodge, ed. European Community, p. 6.

33. The economic and political reasons behind Mitterrand's decision are disputed. The decisive

economic argument appears to have been made by the Treasury to Laurent Fabius, who toldMitterrand that leaving the EMS would undermine confidence in the economy and ultimatelycompel the French government to impose as much austerity as would continued membership. The

decisive political condition appears to have been the decline of the French Communist Party,which allowed Mitterrand to align himself with the moderate wing of the Socialist Party. On thisissue, see David Cameron, "The Colors of a Rose: On the Ambiguous Record of French Socialism,"(Cambridge, MA: Center for European Studies, Harvard University, 1987); Peter Hall, Governing

the Economy: The Politics of State Intervention in Britain and France (New York: Oxford, 1986),pp. 193, 201ff; Organization for Economic Cooperation and Development, Why Economic PoliciesChange Course (Paris: OECD, 1988), pp, 56-64; Philippe Bauchard, La guerre des deux roses: dureve a la realite ]981-1985 (Paris: Bernard Grasset, 1986).

34. The speed with which Mitterrand began to manipulate Europe as an electoral issue isdemonstrated by his consideration of a plan to hold a referendum on enlargement in early 1985.

See Financial Times (6 March 1985). See also Moreau-Defarges, Quel avenir, pp, 97-98.

35. See his speech at the European Parliament, 24 May 1984, reprinted in Gazzo, ed. Towards

European Union, pp, 82-85.

50



36. Robin, La diolomatie de Mitterrand, pp. 145, 219. For another, equally ironic but morepositive assessment, see Philippe Moreau-Defarges, "'...J'ai fait un reve...' le president FrancoisMitterrand, artisan de l'union europeenne," Politiaue Etrangere (Fall 1985)

37. Thatcher supported the goal enshrined in Article 61(2) of the amended treaty, by which "theliberalization of banking and insurance policies shall be affected in step with progressiveliberalization of movements of capital." Cited in Taylor, "New Dynamics," pp. 8-14 and

Department of Trade and Industry, The Single Market: the facts (London: HMSO, 1988). Britainhad also created an independent regulatory agency, OFTEL, under the Telecommunications Act

of 1984, presaging the Commission recommendation found in the Green Book of 1987. See alsoFinancial Times (17 June 1985); Todd, A Practical Guide, p. 1.4; International Herald-Tribune (2July 1984).

38. Financial Times (26 January 1982), cited in Taylor, Limits, p. 240-241. Geoffrey Howeechoed Cheysson's point of view: "The negotiation launched at Stuttgart and continued at Athensin 1983 in December 1983 is not just about the budget and the CAP. I t is about the whole future

shape and direction of Europe." Geoffrey Howe, "The Future of the European Community:Britain's Approach to the Negotiations," International Affairs (Spring 1984), p, 190.

39. Here I draw heavily on Paul Taylor's insights in "New Dynamics". For earlier versions of thesame thesis, see Corbett, "1985 Intergovernmental Conference," p. 268-269 and Francoise de la

Serre, La Grande-Bretagne et la Communaute eurooeenne (Paris: Presses Universitaires de France,1987), p. 193-4, 207-209.

40. The quotation is from Taylor, "New Dynamics," p, 3.

41. For a summary of the debate, see Helen Wallace with Adam Ridley, Europe: The Challengeof Diversity (London: Routledge and Kegan Paul, 1985), especially Chapter 5; Eberhard Grabitz,

ed. AbgestUrfte Integration: eine Alternative zum nerzkommlichen Integrationskonzept (Kehl amRhein: Engel Verlag, 1984); Moreau-Defarges, Ouel Avenir.

42. Heinz Stadlmann, "Die europaische Gemeinschaf t nach der franzosischen Ratsprasidentschaf't,"Europa-Archiv (8 October 1984), pp. 447-454. The Franco-German agreement on procedure wasonly partial, since France did not support German efforts to strengthen the Parliament, whilepreferring to replace Article 235 of the Treaty with one that would have sanctioned the creationof a "differentiated Europe," with different sets of members involved in different programs. TheFrench traditionally support diplomatic flexibility to facilitate projects like EUREKA, whichinvolve only some countries of the Community or countries outside of the EC. See De Ruyt,

L'acte unique, p. 99.

43. Robin, La diplomatie de Mitterrand, p. 219; Gianni Bonvicini, "The Genscher-Colombo Planand the 'Solemn Declaration on European Union' (1981-1983), in Pryce, ed. Dynamics, pp. 174187.

44. Robin, La diolomatie de Mitterrand, p. 219; De Ruyt, L'acte Unique, pp. 35, 315-324. I t

is perhaps significant that in 1982 the French backed the other countries in overruling a Britishveto on the question of cereal prices. This decision, reportedly taken by Mitterrand himself,suggests that the French government, or at least its President, already accepted that the veto beused only in exceptional circumstances.

45. Guardian (3 February 1984); Rudolf Hrbek and Thomas Laufer, "Die Einheitliche EuropaischeAkte," Europa-Archiv (June 1986), pp. 173-184.

51



46. The standard was not a high one. Tradi tional ly, the Presidency of the Council had not beentaken seriously. See Colm O'Nuallain, ed. The Presidency of the European Council of Ministers(London: Croon Helm, 1985), especially the concluding chapter by Helen Wallace.

I

47. The importance of the shuttle diplomacy is stressed by Delors, who recalls that Mitterrand

met six times each with Kohl and Thatcher. In France, the key decisions taken in this periodwere in meetings a guatre with Mitterrand, Dumas, Delors and his Minister of European Affairs.

Interview with Delors, 22 September 1989.

48. The Quotation is from "Speech of Francois Mitterrand before the Netherlands Government (7February 1984)," released by the Ambassade de France a Londres (CTL/DISCOM/29/84). Seealso "Interview with Francois Mitterrand...(22 May 1984)" (CTL/DISCOM/93/84); his addressbefore the European Parliament on 24 May, reprinted in Gasso, ed. Towards European Union, pp.82-85; and his television interview, reprinted in Le Monde (23 March 1984). On the ideal of aEurope that combines the virtues of market liberalism and social democratic welfare state. see theinterview with Michel Rocard in Intervention (Feb-Apr 1984), p. 102. Mitterrand's conceptionof the internal market nonetheless remained more interventionist than the Single Act: he stressedmanpower training, technology programs and the common external tariff.

49. On the Mitterrand presidency see Stadlmann, "Die Europaische Gemeinschaft"; De Ruyt,

L'acte unique, p. 47-49; The Guardian (25 January 1984); Press Conference with Mitterrand (2

April 1984). For a contemporary critique of these policy changes, see Robin, La DiplomatieMitterrand, pp . 69-81, 133-145, 211-229, especially pp. 145, 212.

50. See also Guardian (3 February 1984); De Ruyt, L'Acte Unique, p. 48; Rocard interview,Intervention.

51. Robin, La diplomatie de Mitterrand, p. 215.

52. Ludlow, Beyond 1992, p. x-xi; Howe, "The Future of the European Community," pp. 188-189.

53. Financial Times (12 March 1984); Observer (25 March 1984); Guardian (24 July 1984). It isunclear whether Kohl's refusal was due to his failure to grasp all the details, to pent-upexacerbation after years of haggling, or, indeed, whether it was a stand on principle.

54. Le Monde (18 March 1984) (5 May 1984). See also his speech before the Bundestag on 28June 1984, excerpted in Gasso, ed. Towards European Union, p. 98.

55. See "Europe: The Future--United Kingdom Memorandum (June 1984)" reprinted in Gazzo,ed. Towards European Union, pp . 86-95, from which the Quotations are taken. Times (18 October1984); Financial Times (22 March 1984); Christopher Tugendhat's article in Financial Times (9January 1985); Malcolm Rifkind, "Fur ein starker geeintes Europa-vein praktisches Programm,"in Integration (April 1985), pp . 49-54; Guardian (30 May 1984); Center for Policy Studies,Making it Work: The Future of the European Community (London: Center for Policy Studies,1984); Statement by Min iste r Roland Dumas (14 June 1984), issued by the Ambassade de Francea Londres (CTL/DISCOM/98/84); Le Monde (15 June 1984). At the same time, a Conservativeparty think-tank issued a report calling for a "relaunching of Europe."

56. Taylor, "New Dynamics," p. 7. Taylor argues that the mood of conciliation was due to thefact that during British and French failure in March at Brussels, they had "looked into the abyss,and were shocked into an awareness of the need to hold themselves back." By taking time toconfess his personal ideals, Taylor argues, Mitterrand was letting Thatcher "see the future."

57. De Ruyt, L'acte unique, p. 261. The Commission later adopted a standard measure of theburden. See EC Commission, Making a Success of the Single Act, p, 28.

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58. "Conclusions of the European Council at its Meeting in Fontainebleau," (26 June 1984),reprinted in Gazzo, ed. Towards European Union, pp. 96-97. On the Spaak Committee, see Hanns

Jurgen Kusters, "The Treaties of Rome (1955-1957)," in Pryce, ed. Dynamics, pp . 84ff.

59. Sunday Times (3 March 1985); International Herald-Tribune (21 March 1985); Financial

Times (15 May 1985).Geoffrey Howe, "GroBbritannien und die Bundesrepublik Deutschland alseuropaische Partner," Europa-Archiv (10 November 1984), p. 637. France reportedly insisted that

Italy be excluded, for fear that Italian participation would slow the negotiations.

60. Financial Times (30 November 1984), (3 December 1984), (22 March 1985) and (10 May

1985); Le Monde (30 March 1985). On the Committee's "real task," see Katherine Meenan, "TheWork of the Dooge Committee," Administration (Vol. 33, No.4), cited in Patrick Keatinge and

Anna Murphy, "The European Council's Ad Hoc Committee on Institutional Affairs (1984-1985),"in Pryce, ed. Dynamics, p. 227; De Ruyt, L'acte unique, p. 117. France, too, accepted that thefirst priority of the Community must be the creation of an "espace economique interieur

homogene." On the objections of the Quai d'Orsay, presumably to the renunciation of the

Luxembourg compromise, see Corbett, 1985 Intergovernmental Conference, p. 269.

61. Daily Telegraph (12 July 1984); Financial Times (12 September 1984).

62. Financial Times (31 December 1984).

63. Daily Telegraph (4 March 1985).

64. Financial Times (17 June 1985). Both VAT harmonization and harmonization of regulationshad been discussed fruitlessly by the Council fo r a decade.

!

65. De Ruyt, L'Acte Unique, pp. 57-59. For the British proposals, see "Europe: The Future,"

which was resubmitted by Britain, and the "Draft Treaty on Political Cooperation," evidently the

same paper that British Foreign Minister Sir Geoffrey Howe had presented to the conference offoreign ministers at Stresa earlier in the month. For the proposals of Italy, the Benelux, France

and Germany, and the British proposals above, see Gazzo, ed. Towards European Union:Supplement. For commentary, see Times (London) (21 June 1985).

66. See statement by Mme. Catherine Lalumiere, Secretary of State for European Affairs, before

the National Assembly (11 June 1985), released by the Ambassade de France Ii Londres(CTL/DISCOM/96/85). The French evidently had a certain building in Paris in mind to housethe Secretariat-General.

67. See Gasso, ed. Towards European Union: Supplement, pp, 27-32.

68. De Ruyt, L'Acte Unique, pp. 60-61. The option of invoking Article 236, which allowsamendment by unanimous consent of the Council, had been previously presented in the Italianpre-summit memorandum as a possible compromise between a new treaty and the more ad hocBritish approach. Nonetheless, the vote does not seem to have been planned in advanced by thegovernments who voted affirmatively. See Gasso, ed. Towards European Union: Supplement, pp.3-8.

iI

69. De Ruyt, L'Acte Unique, p. 68. The decision to invoke Article 236 also reenforced the splitbetween political cooperation, which could involve a new treaty adopted by only some of the

nations, and institutional reform, which now had to start from the existing treaty and thus required

unanimity. On the British calculation, see Taylor, "New Dynamics," pp. 10.

70. See De Ruyt, L'Acte Unique, pp. 67-91.

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71. France briefly opposed deregulation of ai r services, but t h e ~ backed down.

72. My account follows Corbett, "1985 Intergovernmental Conference," pp. 247-248. Delors'speech is reprinted in Gazzo, ed. Towards European Unity II, p. 24. See also Gazzo, p. 38;Ludlow, Beyond 1992, p. vi. On Delors' characterization of the role of Germany and Britain, seehis press conference of 27 November 1985, reprinted in Gazzo, ibid., p, 86.

73. There are subtle differences between Corbett's account and that of De Ruyt (L'acte unique,pp. 177-187), which I follow here.

74. Gazzo, Towards European Union, p. 8, 25-26.

75. De Ruyt, L'acte unique, p, 224-227; Corbett, "1985 Intergovernmental Conference," pp, 251

253.

76. Touleman, "Le Mythe de 1992," p. 8; Corbett, "1985 Intergovernmental Conference," p, 248.See also the communique of the Luxembourg summit in December 1985, reprinted (in German)in Thies and Wagner, eds. Au f dem Weg, p. 143.

77. Corbett, "1992 Intergovernmental Conference," pp. 249-250, 259.

78. This section draws on De Ruyt, L'acte unique, p, 112-118, 163-165 and Corbett, "1985Intergovernmental Conference," pp. 245-247. The new internal market articles in question are 8A,100A and 100B (internal market), 28 (common external tariff), 57 (liberalization of professionalqualifications), 59 (liberalization of services), 70 (liberalization of capital movements) and 84(maritime and air transport policy). De Ruyt points out that the Single Act simply extended and

clarified the use of majority voting to areas where the Commission had been acting under the

broad mandate of Article 235 and the old Article 100. And, he reports, fiscal harmonization might

have been absent altogether from the Single Act, had it not been for the subreptitious pressure ofsome delegations.

79. Corbett, "1992 Intergovernmental Conference," p. 255-258, 262-263. The Commission wasgiven implementing powers, bu t these must be exercised at the whim of the Council, sinceCommunity measures may specify the mode of implementation in considerable detail.

80. De Ruyt, L'acte unique, pp. 166-175; Financial Times (28 November 1985); Corbett, "1985Intergovernmental Conference," PP. 245-247. Both Germany and France considered tabling aproposal for majority voting in all areas connected with the extension of the internal market, bu ttheir positions tended to be more moderate once actual commitments were required.

81. De Ruyt, L'acte uniaue, p. 158-161, 166; Gazzo, Towards European Union II, p. 152.

82. De Ruyt, L'acte unique, pp, 166-175; Todd, Practical Guide, p. 1.18-19.

83. De Ruyt, L'acte unique, pp. I72ff. The final procedures for coming to a vote were not setuntil December 1986, after a year of discussion in the COREPER committee of the Council,where it was decided that any member of the Council or the Commission can call for a vote,subject to majority acceptance by the Council and two-weeks advance notification of issues that

might come to a vote. It is unclear whether there is any significance to the precise wording ofthe condition fo r derogation, which has been changed from "vital national interest" to "exigenceimportant" as defined by Article 36. See De Ruyt, pp. 118-119.

84. For speculation on Franco-German intentions, see De Ruyt, L' Acte Unique, p. 272; Corbett,

"1985 Intergovernmental Conference," p. 268. The view that the outcome reflected "a triumph"for British negotiators has been most cogently argued by Taylor in "New Dynamics."

54



85. De Ruyt, L' Acte Uniaue, p. 56.

86. European Parliament's opinion of 9 July 1985 regarding the proposal for an IntergovernmentalConference, reproduced in Gazzo, Towards European Union II, pp. 13-14.

87. See the exchange between Pflimlin and Poos, including the note of the Conference Presidency,repr inted in Gazzo, Towards European Union II, pp. 17-20. See also Delors' explicit denial of the

democratic legitimacy of the Parliament in his opening address to the Conference, reprinted inGazzo, illli!., p. 27. On the pragmatist position of the British, see Foreign Minister Sir Geoffrey

Howe's comments at the opening session, reprinted in illli!., p. 30. For a response, see Spinelli'sspeech on 2 October 1985 before the German Bundestag" reprinted in Gazzo, illlil., p. 41.Proposals to strengthen the Parliament were discussed, if at all, in large part due to pressure from

the Italians, who were acting in part in deference to the wishes of Spinelli, chairman of theEuropean Parliament Committee on Institutional Affairs and a grand old man of Europe. Interviewwith Benjamin Patterson, European MP, Strasbourg, 19 January 1989. Four years laterparliamentarians are still complaining that the new initiative was not a "Treaty of European Unity,"but a more modest "Single Act." See European Parliament, Rapport. ..sur la strategie du Parliamenteuropeen en vue de la creation de "Union europeene (Document A2-0332/88, 21 December 1988).

88. See the programmatic statement of Spinelli and two associates in the inaugural issue of the"Crocodile" newsletter, reprinted in Gazzo, ed. Towards European Union I, pp. 11-17. See alsoGazzo, ed. Towards European Union II, p, 104; De Ruyt, L'Acte Uniaue, p. 85.

A similar argument can be made about the European Court. It is misleading to view themutual recognition provisions of the Single Act as a simple reflection of evolving Communityjurisprudence, particularly the Cassis de Dijon case of 1979. The Single Act strictly limits"maximalist" judicial precedents set by the Court in recent years, in the same way that it limitsmaximalist ambitions of the Parliament.For example, the Court, interpreting the original Treaty

of Rome in a continuous series of cases since 1966, has tended to allow the Commission broaderpowers to harmonize legislation and has recognized few exceptions under Article 36. The SingleAct, in contrast, revised the treaty to limit the applicability of harmonization to the facilitationof open markets. For a "maximalist" critique, see Pierre Pescatore, "Critical Observationsconcerning the 'European Single Act'" in Gazzo, Towards European Union II, p. 153, 158-159.

89. On the lack of active elite business support for the initial European initiat ives, see Haas, TheUniting of Europe, Chapter Five.

90. Krause, "Many Groups Lobby," p. 24.

91. The tone is heroic, as the opening words of the chapter on Delors' initiative illustrate:"January 1985: the winter was harsh. In Brussels as in Paris, people were shivering. On the topfloor of the Berlaymont, in a vast office that didn't yet seem quite lived in, Jacques Delorsgathered his closest associates around him ..." See Delors, et al., La France par l'Europe, p. 47.

92. See Helen Wallace, "Europaische Integration," pp. 127-128.

93. Financial Times (9 October 1989).

94. This interpretation may imply that the ability to carryon such negotiations may be a function

of the autonomy of heads of government from domestic interests, rather than a function of theirdomestic or international interest group support . As several analysts of the Community havenoted, interest groups and bureaucracies have a tendency to favor the status guo. As a result ofthis, Community involvement in areas has often seemed to reach a point of equilibrium, whereinterests for and against further change are balanced. It may well be the abil ity of heads ofgovernment to gain autonomy from these status guo forces that permits systems change.

55



95. Nye, Peace in Parts; Lindberg and Scheingold, Eurooe's Would-Be Polity.

96. See footnote 24.

97. For a similar argument, see Robert Keohane and Stanley Hoffmann, "European Integrationand Neo-functional Theory: Community Politics and Institutional Change," (Paper prepared for

Florence Workshop, September 1989). This position may also be implied in Haas' later work. See

Ernst Haas, "Turbulent Fields and the Theory of Regional Integration," International Organization(Spring 1976), p, 177, 186, 196ff.

98. See Keohane, After Hegemony.

99. Keohane, After Hegemony, p. 6. But cf. Keohane, "The Demand for International Regimes,"International Organizat ion (Spring 1982), pp. 325-55. On the problem of interests, see alsoMoravcsik, "Disciplining Export Finance."

100. For previous work focusing on state-society relations in the world economy, see Hall,Governing the Economy; Peter Gourevitch, Politics in Hard Times: Comparative Resoonses toInternational Economic Crises (Ithaca: Cornell University Press, 1986); Peter Katzenstein, SmallStates in World Markets (Ithaca: Cornell University Press, 1985); Katzenstein, ed. Between Powerand Plenty (Madison: University of Wisconsin Press, 1977); Helen Milner, Resisting Protectionism:

Global Industries and the Politics of International Trade (Princeton: Princeton University Press,1988.).

101. It is, however, unclear to what extent the 1992 initiative will lead to unforeseenconsequences. It was probably not foreseen, for example, at least in France, the extent to whichthe liberalization of capital transactions may force countries to harmonize systems for taxingsavings and financial investment. Nor did the British appear to realize that other countries wouldtake the social or structural fund policies as seriously as they have.

102. See Mitterrand's interview, in which he threatens to go forward toward a common monetary

policy without Britain, and Thatcher's response before the House of Commons in Independent(27 July 1989).

103. See Pryce and Wessels, "Search," p. 2; Keohane and Hoffmann, "European Integration.",

104. Analysts who stress power and interests have traditionally been pessimistic. See StanleyHoffmann, "Obstinate or Obsolete? The Fate of the Nation State and the Case of Western Europe,"Daedalus (Summer 1966), pp. 892-908.

105. The logic is straightforward. If there are two states, each with a veto, the probability ofadoption (assuming a random distribution of preferences) is 25%. If there are three states, eachof which votes yes or no on a proposal, the odds of a 2-1 or 3-0 split in favor are 50%.

106. On the importance of Franco-German relations, see Roy Price and Wolfgang Wessels, "TheSearch for an ever Closer Union: A Framework for Analysis," in Pryce, ed. Dynamics, p. 19.

56









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