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Chair Comparative Political Science and Politics
Hompage Nils C. Bandelow

European Governance by Package Deals between the European Commission and Large Firms - Preconditions, Strategies, Welfare Effects

Summary

Although the competencies of the European Union for decision-making on a supranational level have been increased during the last years, there are several policy fields in which the EU is short of formal entitlements to initiate common policies. For example despite of numerous efforts to establish a European energy policy, the Union still lacks formal competencies in the energy domain. With regards to the intentions of the EU to establish European biotechnology programs there has been no backing from the Member States for a long time. Nevertheless, the European Union has become a successful political actor in both fields. Our paper demonstrates that the enlargement of the EU's influence in some policy fields is based on the competencies it has in other European policy domains. The combination of weak vertical governance with ‘hard’ horizontal bargaining qualifies as a specific form of governance which we label "package deals".

Package deals in this interpretation are compensations of agreements in one area of the European jurisdiction with arrangements in others. These linkages are most likely to occur if (1) both partners control resources which are of interest to the other and if (2) the actors are flexible enough to strategically change their position. Given these preconditions we assume that on the European level especially the European Commission and large firms are likely to be the partners involved in package deals. At the basis of these arrangements lie (1) the economic interests of large firms and (2) the interest of the EC to enlarge its competence.

The analysis of such package deals can contribute to the explanation of decision-making processes for further European integration. Moreover, it is important to consider that these types of linkages between different policy areas can have welfare effects, which are similar to effects of logrolls known as a strategy to overcome decision blockades within the US Congress. Therefore, we will evaluate the welfare effects of package deals between large firms and the European Commission on the supranational level and propose how the risks of such bargaining procedures could be possibly kept within limits.

In the paper we have decided to rest our theoretical arguments on two examples: on the one hand on package deals of the Commission with large biotechnology firms and on the other hand on comparable deals between the Commission and large energy suppliers. The choice of these empirical cases results from the distinct properties of both cases. Nonetheless, the paper reveals surprising similarities between political strategies and results that can be found in both examples.

Zusammenfassung

Die europäische Integration hat in den letzten Jahrzehnten zu einer immer stärkeren Zunahme supranationaler Entscheidungskompetenzen geführt. Die damit einhergehenden Strategien europäischen Regierens werden in der politikwissenschaftlichen Forschung überwiegend mit dem Begriff "Governance" beschrieben. Diese so genannten "weichen" Formen des Regierens sind bereits in verschiedenen Politikfeldern analysiert worden, wobei jedoch ein empirisch auffälliges Phänomen des europäischen Integrationsprozesses bislang nicht ausreichend erklärt wurde: in einigen Politikfeldern agiert die Europäische Kommission einflussreich, ohne über formale Kompetenzen für die jeweiligen Gegenstandsbereiche zu verfügen.

Im vorliegenden Papier wird versucht, einen Beitrag zur Erklärung dieses Phänomens zu leisten. Dabei wird von der Annahme ausgegangen, dass die Europäische Kommission ihre in einigen Politikfeldern vorhandenen rechtlichen Kompetenzen und/oder finanziellen Ressourcen nutzt, um Tauschgeschäfte zur Erweiterung ihres Einflusses in anderen Feldern abzuschließen. Der wachsende Erfolg der Kommission in Politikbereichen, die nicht zu ihrem rechtlichen Zuständigkeitsbereich gehören (etwa der Energiepolitik), oder in Feldern, bei denen der Kommission natürliche Partner bei der Verlagerung der Steuerungsebene fehlen (etwa bei der Europäisierung der Förderung biotechnologischer Forschung), beruht auf dem Abschluss von Koppelgeschäften (package deals), d.h. auf Koordinationen von Gesamtlösungen über mehrere Politikbereiche.

Als Partner bei Koppelgeschäften kommen nur Akteure in Frage, die einerseits über Ressourcen verfügen, die für die jeweils andere Seite von Interesse sind. Andererseits müssen die (i. d. R. korporativen) Akteure über die notwendige Flexibilität verfügen, um ihre Positionen in einem Feld wandeln zu können, damit sie ihre veränderten Einstellungen als Tauschgut für geänderte Positionen der Tauschpartner in einem anderen Feld einsetzen können. Diese Voraussetzungen für solche politikfeldübergreifenden Vereinbarungen schränken den Kreis möglicher Partner deutlich ein. In dem vorliegenden Papier wird angenommen, dass auf der europäischen Ebene vor allem die EU-Kommission und große Unternehmen als Partner von Koppelgeschäften auftreten. Während die Kommission vor allem eine Ausweitung ihrer Kompetenzen anstrebt, verfolgen große Firmen ökonomische Interessen und sind in ihrer Strategiefähigkeit nicht durch unveränderliche ideologische Positionen eingeschränkt. Außerdem haben sie im Gegensatz zu den Mitgliedstaaten kein der Kommission entgegenlaufendes grundsätzliches Interesse am Erhalt nationaler Kompetenzen. Sie sind für die Kommission z.B. als Informanten und Lobbyisten auf nationaler Ebene sowie als Kooperationspartner bei europäischen Fördermaßnahmen von Relevanz. Allerdings hängt die Wahrscheinlichkeit von Vereinbarungen von einer Reihe von Bedingungen ab, die politisch beeinflusst werden können.

Die nähere Betrachtung von Koppelgeschäften zwischen der Kommission und großen Unternehmen kann somit einen Beitrag zur Erklärung von Entscheidungsprozessen im europäischen Integrationsprozess leisten. Allerdings sind package deals zwischen der Europäischen Kommission und großen Unternehmen auch mit Wohlfahrtseffekten verbunden. Es ist zu vermuten, dass ihre Wirkungen zum Teil mit denen des Logrolling im US-Kongress vergleichbar sind. Daher werden in dem vorliegenden Papier die Anknüpfungspunkte vorgestellt, welche die (meist formalistische) Theorie des Logrolling für die Analyse von Koppelgeschäften auf der europäischen Ebene bietet. Die daraus abgeleiteten theoretischen Vermutungen hinsichtlich der Voraussetzungen, Strategien und Wohlfahrtseffekte von package deals werden am Beispiel von zwei Bereichen illustriert. Zunächst werden die Rahmenbedingungen und die Entwicklung von Koppelgeschäften zwischen der EU-Kommission und großen biotechnologischen Unternehmen auf Grundlage bisheriger Hinweise in der Literatur dargestellt. Anschließend werden mögliche Paketvereinbarungen zwischen der Kommission und großen Energieanbietern anhand des bisherigen Verlaufs europäischer Energiepolitik untersucht. Die Auswahl der beiden Felder erfolgte nach einem "most different case design": Die Unternehmensstrukturen und auch die Koordination der einzelnen Generaldirektionen der Kommission unterscheiden sich in beiden Fällen deutlich. Der Vergleich der bisherigen Entscheidungsabläufe in den beiden Feldern zeigt jedoch ähnliche Strategien und Ergebnisse. Er gibt gleichzeitig Aufschluss über Aspekte, die geeignet sein können, die Risiken von "package deals" zu minimieren und damit ihr positives Wohlfahrtspotential zu nutzen. Daher sollten solche Arrangements in der zukünftigen Entwicklung der EU stärker berücksichtigt werden.

Contents

1 Introduction

There are several policy areas in which the European Commission (EC) successfully acts without any formal competencies. This is usually described as a weak form of vertical governance. Though we can find many descriptions of weak vertical governance by political scientists (cf. Jachtenfuchs/Kohler-Koch 1996), we still lack a more satisfactory explanation for why the EC is fairly successfully engaging in it (for example in some regulatory policy fields — e.g. energy policy — in which formal responsibilities are absent for the Commission). These fields show parallels to (re-) distributive policy areas in which the Commission had to overcome the resistance of both, member states and interest groups, in order to shift the centre of governance to Brussels (e.g. the promotion of biotechnology). On the other hand there are many regulatory policy fields in which the Union has gained important competencies — e.g. anti-trust and trade liberalisation policies. In other areas like in agriculture the Commission acquired large promotional funds. In our study we will argue that there exists a strong relationship between the enlargement of competencies or funds for the Commission in some fields and the increase of its influence in others. Therefore, success of weak vertical governance of the EC is considered as a result of its combination with ‘hard’ (resource- and competence-related) horizontal bargaining. This link has yet not been a subject of research within the theory of multi-level-governance, nor has it been subject of normative considerations. Our study of package-deal-mechanisms between the EC and large firms is an attempt to fill this gap.

In order to test our hypothesis we will examine the bargaining processes between the Commission and large firms, focussing on two examplary branches: biotechnology and energy. We have chosen these two fields, because they demonstrate important differences: biotechnology on the one hand is an industry with supranational companies as the main actors and a high level of horizontal co-ordination among all departments of the Commission involved. Energy companies on the other hand are mainly nationally or subnationally organised. The EC has no formal competencies in the more narrow field of energy policy and there are no indications of horizontal co-ordination structures within the Commission yet.

In a first step we will also discuss the welfare effects of package deals using the lens of recent public choice theory. Following to our case studies we will suggest some ideas how the reduction of welfare could be avoided by package deals and in addition how to increase their welfare potentials.

2 Why and how to assume package deals between the Commission and large firms?

The fast and uncertain process of institutional change within the European Union calls for political and economic actors to endeavour at gaining influence on policy outcomes and at engaging in the formation of new institutions at the same time. Within this process each actor aims at both — to maintain its decision-making power and possibly to gain even higher influence (Schumann 1993). Thus, the simultaneousness of policy-making with institutional change has resulted in highly complex politics.

Furthermore, there is evidence that the EU-decision-making process is being hampered by the so-called "joint decision trap" (Scharpf 1988). These imply that decisions cannot be reached by simple majorities or through the decision of hierarchies but instead are a matter of negotiations that require unanimity votes or at least qualified majorities. Such negotiation systems are assumed to be an obstacle to any progress in the sense of positive integration of the Union because actors may use their veto rights.

Consequently, public choice literature points out that within complex political settings and joint policy making the potential results can be modelled through the concept of package deals. Package deals can be defined as an exchange of losses in some issue areas with benefits in others with the result of a mutual overall gain for the actors involved. The basic idea behind such arrangements is to establish links between issue areas which are of different value for each "trading partner". Actors accept losses in fields of minor importance when they gain profits in others with higher preferential intensity. In other words, these arrangements allow the "traders" to express their preferences in different intensities. Normally such preferences are being ignored by separate decisions under majority rule (Stratmann 1995). Thus, the main advantage of package deals is to overcome decision blockades. Such decisions, however, might possibly increase the overall welfare of the group of actors while at the same time they might decrease the profit of individual actors. Hence, package deals are only probable to occur if there is a win set which does not only enlarge the overall profit but also involves gains for each individual actor (cf. Mueller 1989; Stratmann 1997).

The strategy of package deals is particularly useful for actors in a pluralistic and competitive environment. This point can be demonstrated by assuming the extreme case: one actor is at the short end of an n-1:1 vote, so s/he needs to win over at least half of her/his opponents to get what s/he wants (this is what Shepsle and Weingast 1994, 154 call "heterogeneity"). This case may often occur in the EU because each single actor has specific interests while natural partners are rare. Therefore, the only possibility to arrive at positive integration is to combine different elements or objects which are characterized by different preferential intensities. Package deals require that "traders" have resources which their partners desire: each "trader" has to assess the partner’s resources which are more valuable than her/his own. Empirical studies have shown that it is often difficult to agree upon joint decisions which include symmetrical benefits and losses for both partners.

Package deals stretching over different policy-areas can cause several problems for corporate or collective actors. Public choice theory points to the problem of internal distribution of benefits and losses within each collective actor. Since collective actors often lack hierarchical control, package deals are less likely to occur since they will be blocked by the more disadvantaged subgroups or individual members. Nonetheless, most public choice models take stable and homogeneous belief systems among collective actors for granted (Benz/Scharpf/Zintl 1992).

Theoretically, the idea of package deals is often adopted in order to characterize a specific form of decision-making procedure within the US Congress. In this context the concept is used in a narrower sense — as the exchange of votes, called "logrolling" (Ferejohn 1986; Shepsle/Weingast 1994; Stratmann 1992). For this particular application the American literature provides a broad outlook on the processes leading to majority rule legislation in different contexts and circumstances (i.e. Baron/Ferejohn 1989; for an overall theoretical view of Congressional politics see Shepsle/Weingast 1994). The mathematical theory of voting claims that logrolling can even be beneficial if actors already hold the necessary majority that is needed to put their desired outcomes through. This proposition is based on the following argument: On the assumption that two competing vote buyers move sequentially, the costs for the construction of a minimal winning coalition can be much higher than the costs for buying a supermajority coalition. If a vote buyer has bribed more than a minimal winning coalition s/he can decrease the bribes because s/he does not need each voter. The savings from this decrease in bribing can be higher than the costs for bribing more voters necessary to form a minimal winning coalition (Groseclose/Snyder 1996). According to this policy leaders strive for addition support for their proposals even if they already have gained the majority. This is assumed to hold also in those cases in which leaders seem to win co-operation by negotiating package deals rather than by bribery.

We claim that there exist conceptual parallels between logrolling politics within the US Congress and package deals on the European level. Although logrolling is in the majority of cases applied to analyse the behaviour of legislative bodies (but see Stein 1980; Sebenius 1983; Benz/Scharpf/Zintl 1992) we employ the idea of package deals to the decision-making process in the Commission and not to the European Council or Parliament. We assume that the Commission is still the most important actor for initiating legislation in the EU and it also plays an extensive and significant role in bargaining processes with organised interests. Whilst in Washington interest groups gain influence through Congress, in the EU they are mostly influential through the fragmented structure of the Commission. We decided to investigate into "logrolling procedures" between the Commission and big companies because the latter have emerged as an important actor in the EU. This approach clearly departs from the main stream of research on this topic which has overwhelmingly been focussing on public/political actors. We, instead, plan to concentrate on the interaction between public and private actors. So far, co-operation of big businesses with the European Commission has only been observed by few studies which point to the emerging mobilisation of these actors in different policy fields. Direct attempts of influence of large firms emerged in the early 1980s. This phase witnessed the creation of the EU Committee of the American Chamber of Commerce (AmCham) and the European Round Table of Industrialists (ERT), one of the most influential interest groups in Brussels (Coen 1997a; Coen1992b; Greenwood 1997; Cowles 1998). Therefore, we consider it worthwhile to evaluate the development of co-operation between large firms and the Commission as a result of the Commission’s increasing regulatory competencies and the resulting presence of big companies in Brussels.

Furthermore, we have chosen the Commission and big companies to be in the main focus of our attention because of an assumed vertical (not horizontal!) homogeneity of interests of these actors which do not necessarily advocate the interests of the Member States in which they are primarily located. A study of the Council or the Parliament would lead to the problem of "nested" and "two level" games. In these institutions one would have to pay more attention to the formation of attitudes and opinions within the corporate actors themselves (cf. Behrens/Meyer-Stumborg/Simonis 1997).

Although the political systems of the EU and the United States show striking similarities (Majone 1994) — both have divided institutions and offer access to interest groups that feed the policy-making process at many stages — our study points to some theoretically interesting peculiarities in the European case. By comparing Brussels with Washington, we find there is less public control of the government and no powerful and directly elected parliament in Europe. Furthermore, in Europe policy competencies within divided institutions are fragmented and there is no well-resourced bureaucracy in the Commission which could co-ordinate special forms of interest intermediation (Aspinwall/Greenwood 1998, 25). Whereas the US Congress, among other legislatures, acts and decides under stable, well-defined majority rules, the EU is a decision-making system with fluent competencies. Contrary to coalition formation, vote buying and logrolling within the US Congress, the actors in the fragmented system of the European Union do not have (formal) equal voting power. Therefore, it is impossible to provide exact numbers of "voters", which play an important role in the first phase of the decision-making process under the supervision of the European Commission.

Theoretical modelling of package deals between the Commission and large firms demands for an understanding of the main goals of the actors. We suppose that the Commission’s main goal is to enlarge its competencies. Nonetheless, there will be different goals by different Directorates General within the Commission. This is an assumption which will be empirically tested in the following chapters. Big companies can be expected to advocate mainly their economic interests (e.g. reducing transaction costs). However, both are often incapable of achieving their goals without partners. The Commission lacks legislative decision-making powers in order to achieve positive integration in some fields. Furthermore, it needs partners to extract funds from the Member States. In order to be capable of making decisions without the consent of the Member States, the Council and the Parliament and in order to recruit partners for European research cooperations, the Commission has to use its regulatory competencies and financial resources in addition to its decision-making authority within policy domains of negative integration.

Depending on different policy fields the Commission has various legal instruments at hand, all of which differ with respect to the influence and liability of the Commission’s decisions. It can thus use competencies in some fields — for example agriculture, anti-trust, genetic engineering regulation and/or trade — in order to gain influence in fields, where it is short of legal powers and sufficient economic funds like energy, transport, the promotion of industrial biotechnology, and social welfare. In the remaining sections of the paper we will try to demonstrate this particular strategy employed by the Commission.

3 Package deals in biotechnology policies — significant obstacles but first experiences

 

Biotechnology policies belong to the most important areas of European public policy-making. First attempts of the European Community to promote biotechnology could be witnessed in the 1970s: the Commission tried to take over responsibility of this new policy field, but this first attempt failed.

During the first period it was only the Commission’s department for research (DG XII) that was engaged in biotechnology. Although a small group of scientists put forward a first proposal for an EC research program on biotechnology in the mid 1970s the program was not established until 1982. After several years of debate the Biomolecular Engineering Program (BEP) was launched in order to support research in some special fields from 1982 to 1986. Considering that the BEP funds amounted to only 15 million ECU the program did not generate any significant incentives for the industry to engage in supranational co-operation (Gottweis 1998, 167-8). Only two companies participated in BEP-projects, despite the fact that there were several big companies active in biotechnology in one form or another. But they were all rather reluctant towards the Community’s attitude that biotechnology should be promoted. German companies for example suspected that the funds for the Commission could replace the more attractive German domestic programs. French companies criticised the scientific co-ordination of the Commission as insufficient. Many firms had established links to the United States and were not eager to restrict themselves to European partners. Thus, the Community did not experience the rather enthusiastic support from firms the national governments experienced when they began to promote biotechnology (Russel 1990/91, 48-53).

The fact that the Commission lacked any substantial resources which could have been of interest to biotechnology firms can partly be explained by the relatively small size of the European biotechnology industry at the time. First of all, biotechnology belongs to the competitive branches of industry which do not need state subsidies. In addition it consists of technologies cutting across business areas and it is used by companies in addition to other relatively successful divisions. Therefore, chemical, pharmaceutical and food industries were not especially interested in European research and development programs. Representatives of industry boards and industrial associations perceived themselves primarily as advocates of the traditional chemical industry, while they were unaware of the increasing importance of biotechnology (Greenwood/Ronit 1992). Consequently, the very limited regulatory competencies of the Commission were not of interest for the few existing firms either (Bandelow 1999, 97). However, the Commission's capacity to act effectively depends on the support of different powerful actors. Until 1987 its proposals needed unanimous support of the Council while there were ongoing conflicts of interest between the Member States. Particularly the large states refused to shift research funds and competencies to Brussels because they had already started national research programs (Bongert 1997, 121-3). The Commission also needed the advice of industrial and scientific experts to construct its programs successfully.

The situation significantly changed during the mid 1980s. The increasing globalisation of markets forced European companies into mergers with others in order to become competitive multinational actors. The effect of globalisation provided a possibility for the Commission to establish itself as the co-ordination centre for European biotechnology policy (Gottweis 1998, 167). Furthermore, the European Community increased the legal competencies for the Commission: The Single European Act (SEA) provided the Community with explicit powers in research and technology development (Articles 130f-p EC) as well as in the domain of environmental policy (Articles 130 r-t EC). In return, the formal increase of power made the Commission more interesting for big companies. While the Biomolecular Engineering Program had basically been directed to basic research, the new competencies also allowed the funding of applied industrial research. Still, the final decision in the legislation process to enact research and technology programs was with the Council (cf. Gottweis 1998, 172-5).

In the meantime the necessity for a European law to regulate genetic engineering had become indisputable. But the following policy-making process was dominated by an interesting conflict within the Commission. The outcome of this conflict between the Commission’s environmental department and other actors generated a basis for the success of the Commission's biotechnology policy in the long run.

While DG III and XII supported product-orientated regulations, DG XI (Environment; and, until 1991, Consumer Protection) advocated a new process-orientated approach. In the late 1980s it were the DG XI and its partners that dominated the process of formulating directives on contained use of genetic modified micro-organisms (90/219/EEC) and controlled release of genetic modified organisms into environment (90/220/EEC). Thus, the very first results of EC's genetic engineering policy did not match the interests of biotechnology firms (Cantley 1995, 565). But not only the big companies lost this first round. Also the Commission as a whole was not very successful in enlarging its competence either. Whereas it managed to set a framework for a genetic engineering law in Brussels, the second main goal of the Commission, the Europeanisation of promoting research on biotechnology, failed (Bongert 1997). While the main interest of the Commission as a whole was to get substantial funds for the promotion of biotechnology, her regulation policies received more attention from the industry (Szczepanik 1993). The potential to impose binding supranational regulations gave the Commission an important resource which made it attractive as a partner for large biotechnology firms. In other words, a necessary condition for the negotiation of package deals was established. In mid 1989 the big companies created the "Senior Advisory Group on Biotechnology" (SAGB). This specific form of association was the object of pioneering research (Greenwood/Ronit 1992; Greenwood/Ronit 1994; Greenwood 1995; Greenwood 1997). It also became a model for other branches in establishing direct participation for large firms on the European level in the 1990s (Coen 1998, 77). While former European associations were composed of national federations of associations, the SAGB started with just seven large firms as direct members (Hoechst, Monsanto, ICI, Rhône-Poulenc, Montedison, Unilever and Sandoz). It was thus able to overcome all the co-ordination problems of conventionally organized interest groups hampered by "membership logic". All European associations witness conflicts between large and small firms, between associations representing poor and rich countries and between various branches of industry (cf. Lanzalaco 1995). The SAGB as an exception only consisted of big companies with the overall strategy to become competitive in the global markets.

Additionally to the SAGB, the national bioindustry associations of Belgium, Denmark, France, Italy, Spain, The Netherlands, and the United Kingdom established an umbrella organisation that solely advocated biotechnology interests (the European Secretariat of National Bioindustry Associations, ESNBA). Formed in December 1991, the ESNBA developed a mutually supportive relationship with DG XI while large biotechnology firms and the SAGB enjoyed a close relationship with the DGs III and XII (Greenwood 1995; Aspinwall/Greenwood 1998, 25).

While the aims of both interest organisations coincided, SAGB became the much more successful model. The European umbrella association could only add an additional voice. However, the ESNBA did not represent the whole industry since there exist no biotechnology industry associations in several Member States yet (like for example in Germany).

The SAGB started to become successful in 1990. In January, the group released its main objectives in three booklets; the most important was titled "Community Policy for Biotechnology: Priorities and Actions" (Wheale/McNally 1993). Included was a list of demands for the revision of the Community’s genetic engineering directives. The Commission's DGs III and XII took this document as a guideline for their own proposals. In April 1991, Martin Bangemann of DG III presented a Communication to the Council of Ministers (Industry) in which almost the same formulations were used as in the former SAGB-booklet. Although DGs III and XII clearly advocated the interests of biotechnology firms, the companies still had a major problem: the struggle lost in the 1980s is responsible for the competence for genetic engineering regulations remaining at the Commission's environmental department (DG XI). As long as DG XI was to control this crucial area, the possibilities of package deals between big companies and their partners within the Commission were limited. DG XI rejected advice from other directorates and did not consult representatives of firms but relied on its own experts (Cantley 1995).

Thus, in the perspective of the industry, the first aim was to overcome the influence of DG XI to get access to the formulation of regulative proposals. The best way to achieve this objective was to improve the horizontal co-ordination of the Commission’s biotechnology policy by making use of the structural majority of the partners of the industry in the Commission. It was the increasing pressure of large firms that led to effective horizontal co-ordination of biotechnology policy within the Commission (cf. Katzek 1991; Kädtler/Hertle 1992; Greenwood/Ronit 1992; Greenwood/Ronit 1994). This "Biotechnology Co-ordination Committee" (BCC) was founded in March, 1991. Involved in the BCC were the four "major baronies" (Cantley 1995, 638): DG III (Industry), VI (Agriculture), XI (Environment), XII (Science, Research & Development).

Big companies and their partners within the Commission thereby removed the leadership of DG XI in regulating genetic engineering and established themselves as the main actors and arenas of biotechnology policy negotiations in the 1990s. The enlarged scopes for action of the partners also opened up possibilities for package deals.

The big companies were still not very enthusiastic about the intention of the EC to shift the national public promotion of biotechnology research to the European level. Until the mid 1990s, only about 10 per cent of European biotechnology research funds had been used by industry (Bongert 1997, 128). Nevertheless, the firms consulted with the Commission and helped to establish contacts with scientists. So in the course of the 1990s the Commission gradually became more successful. While the first European biotechnology programs lacked substantial financial resources, the "Biotechnology Research for Innovation and Development" program in Europe (BRIDGE) and BIOTECH 1 from 1990 to 1994 had a budget of together 289 million ECU. BIOTECH 2 started in 1995 with more than 500 million ECU (Bongert 1997, 126). The expanding European funds for life-sciences and related technologies are the result of the more successful politics of the Commission during the 1990's and they also form a resource for continuing financial support in the future. Although large firms are not interested in a transfer of biotechnology funds to the European level generally, they act according to a logic of "shooting where the ducks are".

Not only with biotechnology programs the Commission lures industrial partners. We assume that the Commission also uses its funds in adjacent fields. Funds for agriculture increased to several hundreds of millions of ECU. Further programs for biomedicine and health research (BIOMED) started in 1990 and also increased during the following years. In order to concentrate its resources in promoting biotechnology DG XII changed its internal structure in 1990. Biotechnology, agriculture and health were joint to a department of "Life-sciences and -technologies". The Commission also established "Industrial Platforms" within the BRIDGE-program in order to establish better contacts to the industry.

The increasing funds can also be regarded as a result of closer contacts the Commission holds to the industry. The Commission fulfilled its part of the deal with the above mentioned communication of the Commission’s vice-president Bangemann. The Commission presented drafts for a revision of the genetic engineering directives which reflect and even rephrase the concerns of industry. However, the decision-making process took several years because the German Commissioner Martin Bangemann — being sure of the support of the German government — had to fight resistance of several national governments and experts, e.g. the European Parliament, environmental groups and the environmental department of the Commission. A first result were several directives which revised the former bureaucratic implementation of EU's genetic engineering law (93/572/EEC, 93/584/EEC, 94/15/EC, 94/211/EC, 94/730/EC).

Though big companies succeeded in decreasing the influence of the Commission's environmental department through supporting the horizontal co-ordination within the Commission, their missing links and connections to the DG XI remained a problem. This was the main reason for the SAGB to merge with the ESNBA in September 1996. The new association (Europabio) has 38 large companies as direct members and eleven national associations as corporate members. It managed to establish close relationships with all important departments of the Commission (Greenwood 1997: 72; see also and http://www.europa-bio.be).

This new association improved the co-ordination of industry's biotechnology policy. Its main success became apparent in October 1998 when the revision of the "contained use" directive was enacted. The revision received law status on December 5^th, 1998 and is to be implemented by the Member States within 18 months from legislation (98/81/EC, cf. Leskien 1998). It fulfills the central demands of industry. It seemed as if the Commission wanted to thank the industrial partners for their help in promoting biotechnology through changing the regulation of genetic engineering and thus supporting the establishment of a European network.

What we have described here is only a first glimpse at package deals between the Commission and the biotechnology industry. Further research should concentrate on the complex negotiations within the numerous Committees in Brussels that are involved in the formulation and implementation of biotechnology policy. It is still possible and even highly probable that other issues (the novel food regulation, anti-trust decisions, the regulation of patents of genetic "inventions", medicine directives, agriculture policy etc.) were also involved in the negotiations between the Commission and the biotechnology industry. Our first look into the decision-making processes within one empirical field also offers links to other theoretical concepts as to the theory of bureaucracy or network models. The questions of intraorganisational decision-making processes (within the Commission and within large firms and their associations) have to be linked to the theoretical discussion of package deals.

We still cannot make a definite normative assessment of package deals between the Commission and large biotechnology firms yet. Anyhow, we doubt that further research will allow a quasi-objective assessment of welfare effects such as they can be found in the economic literature and the mathematical formalisations of logrolling. Biotechnology constitutes a controversial issue in a normative and cognitive perspective. Much uncertainty remains about the results of political decisions. Different assessments of political results will remain (Bandelow 1999). What we can do is to ask who are the winners and losers of the identified package deals.

A look at the winners and losers of European biotechnology policy yields no surprise: both actors involved in the deals, the DGs III and XII of the Commission and the biotechnology industry, are winners. Likewise, we have to expect the losers to be those actors who are not involved in the "trades": that is environmental groups and nation states. The general public must also be considered a loser, since such deals are out of reach for public control. The voters have no information on who is responsible for the political results. But in order to proof these findings further empirical work must clarify whether there really was no chance for the "losers" to become part of the decision-making network. In the subsequent chapter we will look at a second business sector which may further contribute to our understanding of the complex bargaining processes between the Commission and its partners.

4 Package deals in energy policy — a contribution to the Commission's success in completing the Single Energy Market

The energy sector, contrary to biotechnology, is characterized by many regional and local companies. Furthermore, the problem of regulatory policies prevailing in this sector is very different from the problem of promoting biotechnology. Nonetheless, we will discover some interesting similarities.

Sufficient energy supply is essential to European economic development and political integration. Right from the beginning the EU has been pursuing a common policy framework in the energy sector. EU energy policy is based on two of the three founding treaties, each of which contains rules for specific segments of the energy sector. The European Coal and Steel Community (ECSC) lays down the regulation measures for the coal-mining sector whereas the European Atomic Energy Community (EAEC) sets out the rules for the nuclear energy sector. Together with the European Economic Community (EEC), the two organisations form the original European Community (EC) (Andersen 1993). A common market for other energy sectors, such as oil, natural gas, electricity and renewables is being addressed in the Treaty of Rome. However, despite of a number of attempts made by the Commission to establish a common energy policy, until the mid 1980s the gap between theory — the intentions that were expressed in the Treaties — and the actual outcome of European policies in the energy domain was vast. Energy is a necessary resource for the industrial development of a country and is therefore considered by many governments a strategic good. In the past the economic importance of the energy sector meant that the supply of energy was generally of highly national concern and policy autonomy was guarded jealously by national governments (Padgett 1992). There is general agreement that the Commission's attempts which were made towards a common energy policy were blocked by divergent national interests until the mid 1980s (Andersen 1993; Matlary 1996; McGowan1996). Energy issues remained a matter of "low politics" — analyses of European integration processes suggest that the EU energy policy is one of the Community's major failures (Padgett 1992; Mcowan 1996a). Häckel (1996) argues that the striking changes in EU energy policies happened without the influence of or even against the will of the EC institutions.

A number of energy crises in the 1970s demonstrated clearly that there was no common EC policy and it were the crises themselves that reinforced the tendency among governments to pursue national objectives in this field. Governments have since sought to diminish their dependence on imported energy and at the same have time developed distinct national approaches which again have exacerbated the situation of policy divergences between the Member States (Padgett 1992; Matlary 1996; McGowan 1996: McGowan 1996a). Until the mid 1980s common energy policy was often nothing else but the sum of the member countries' policies and a recommendation made by the Commission which in fact were "lowest common denominator" compromises (Andersen 1993; Matlary 1996).

From the mid 1980s onwards the role of the EC institutions in energy policy increased. The collapse of the OPEC energy prices and the fact that the Eastern European countries entered the market caused a fundamental change for the internal EU market conditions as well as for the external dimensions of the EU energy sector. Aside from new opportunities to secure the energy supply, it was the increased awareness of environmental protection as well as the initiative of some Member States to enhance competitiveness in the energy sector which required a re-orientation of EU energy policy. After 1985 stress in the energy sector was increasingly put on the creation of the internal market and in 1986 a Council resolution heralded "a new 'market oriented approach', with emphasis on competition as the principal mechanism for securing the Community's future energy security" (Hancher 1990, 238). Although the Single European Act (SEA) of 1987 did say nothing about a common energy policy, it marked a turning point for the Community and reinforced the role of the Commission as the promoter of common energy policies. In 1988 a document by the Commission, titled "The Internal Energy Market", listed possible obstacles to the creation of an internal market such as state assistance, national preferences in procurement and monopolies. From then onwards the EC had a mandate to develop an internal energy market as part of the general single market (Matlary 1996).

The increasingly visible role of the Commission was less a product of changes inherent to the energy sector (e.g. technological developments) than the result of external influences. The SEA brought about procedural advantages: proposals on the internal energy market are now being decided by majority voting which has proved to add to the dynamics of the decision-making process. An instrument the Commission has been able to utilise (Matlary 1996). Moreover, the general emphasis on privatisation and deregulation and the importance of environmental protection have produced a dynamic process which has begun to impinge on the energy sectors in the Member States (Andersen 1993; McGowan 1996; McGowan1996a). EU energy policy has since been increasingly linked to environmental policy and market liberalisation and since then the Commission's possibilities to use effective policy techniques and to acquire competencies have improved. After the SEA had come into force the Commission has been able to use several legal instruments for the regulation of the energy sector. In principle it can apply four different legal instruments in order to create an internal energy market: firstly it can use Articles 85 and 86 of the Treaty of Rome, secondly it is able to initiate an infringement procedure against Member States according to Article 169, thirdly the Commission is allowed to liberalise the energy market independently following Article 90 and finally, it is in the position to formulate directives following Article 100a (Eising 1998). In addition to these legal instruments, environmental policy offers some additional, even more powerful legal instruments to influence the energy sector: in contrast to energy policy, environmental policy is part of the Treaty of Rome and the SEA established a strong foundation for environmental policy in the EC constitution (to be found under Articles 130r, 130s and 130t; Andersen 1993).

In 1989 the DG XVII (energy policy) introduced a package of proposals for the internal energy market, including rules for the transit of gas and electricity, the transparency of electricity and gas prices and a draft regulation on the notification of investment projects in the petroleum, gas and electricity subsectors. Whilst the draft directive on price transparency was received most favourably, the one on investment notification was widely criticised and finally abandoned by the Commission (Padgett 1992; Finon/Surrey 1996). The directives on the transit of gas and electricity evoked different degrees of resistance: the proposal concerning electricity was adopted despite of some resistance, the directive concerning the transit of gas was subject to negotiation and reformulation for almost two years before it was finally adopted (Matlary 1996). Finon and Surrey point out that "the major electric and gas utilities say that they had never opposed any transit proposals, but the fact remains that transit has been very slow to take place in the EU and that it has been discouraged by the absence of a requirement upon utilities in member countries positively to support transit proposals" (1996, 169). Beyond these measures to liberalise the European market, the Commission's document of 1988 on the Single Energy Market proposes that competition in gas and electricity should take place through Third Party Access (TPA). The demand expressed in the document that the existing electricity and gas distribution networks should be obliged to open their nets to other distribution companies and large customers stirred up an immensely controversial discussion and was opposed by most of the Member States.

However, the strategy of the Commission to realise TPA as a prerequisite to the single energy market provokes questions. Why did the Commission not use its strong legal powers that are at hand according to Article 90 in order to impose directly liberalising measures in the energy sector? In fact, it initiated infringement proceedings against existing monopolies in a number of Member States for the export and the import of electricity and gas following Article 169, but withdrew from its initial plan to apply the instruments of Article 90 to legally enforce liberalisation (Schmidt 1996). However, in 1992 the Commission presented a far-reaching proposal to realise the single energy market following Article 100a and thus choose a stepwise approach.

The renunciation of strong legal powers for enforcing competition rules was caused by various factors. Firstly, there is the heterogeneous energy infrastructure across the Member States that leads to different national energy policies, together with distinct differences in the institutional and cultural environment in policy-making on the national level (Padgett 1992). Whether the Commission's proposals get support or resistance from the governments depends on the structure of national energy frameworks. Since most Member States are cautiously watching out not to loose control over their energy policy there has been strong opposition to TPA. Moreover, the energy domain is predominantly characterised (with the exception of France) by regional and local monopolies which are subject to increasing privatisation. Therefore, the application of Article 90 for liberalising the energy sector would neither be appropriate to overcome the different interests among Member States, nor would it enforce compliance of energy firms without risking that some enterprises use the exit-option.

Secondly, an important reason for the Commission not to use its powers according to Article 90 can be found in its own interests. It preferred not to use its established competencies in the areas of competition and environment in order to achieve a formal Community competence in energy policy itself (McGowan 1996, McGowan 1996a). Although the Commission has the mandate to develop the internal energy market, it has no explicit mandate to develop a common energy policy (Matlary 1996). In 1990 the Commission sought to enhance its responsibilities by seeking to join the International Energy Agency (IEA) and endeavouring to play a much greater role in the decision-making process related to questions of emergency oil stocks. Both attempts of the Commission to formalise its responsibility in energy policy were rejected in their original form by the Energy Council in May 1990 (Matlary 1996).

Since the Commission has no power to impose a common regulatory framework in the EU energy sector, its success depends on the co-operation of sectoral interests. Also the Commission's ability to implement the single market by exploiting legal instruments which are at its disposal has reinforced its importance for large energy companies. Large energy companies, e.g. some of the major energy producers, favour a free market seeking to extend their markets. At the same time, they are wary of being in a disadvantageous position because of the national differences that exist in the basic political conditions of the energy sectors. On these grounds the enterprises are interested in being able to influence the speed and the conditions of the liberalisation process. German energy producers e.g. point out that the harmonisation of environmental regulation in the Member States is necessary because of the high level of existing environmental protection in Germany. The significance of energy policy in the EC as a matter of negotiations is best illustrated by the fact that lobbying activities are refocussing on Brussels (McGowan 1996; McGowan 1996a). Furthermore, theories of European integration generally see a great relevance in the direct co-operation between the Commission and enterprises (e.g. Sandholtz/Zysman 1989; Jachtenfuchs/Kohler-Koch 1996a; Kohler-Koch 1996).

The development of energy policy in the EU illustrates that the model of package deals seems to explain the political decision-making of the Commission. Without being linked to environmental and deregulation policy, only little progress was made in the energy policy both in terms of formulation of a common energy policy and in terms of market integration. But as soon as the SEA allowed the Commission to use its competencies in the areas of environmental and deregulation policy, the Commission was able to reinforce its role in proposing energy policy and regulating the energy sector. The linkage of the energy sector with environmental protection and market liberalisation has opened possibilities to both actors to pursue their particular interests by establishing the preconditions for package deals: the Commission's interest to attain formal competence in energy policy and the enterprises' interest to extend their potential market and to have an influence on the deregulation of the energy sector.

At least six directorates of the Commission are involved in the energy policy process: the Energy Directorate (DG XVII), the Competition Directorate (DG IV), the Directorate General for Customs Union and Indirect Taxation (DG XXI), the Industry Directorate (DG III), the Directorate for Internal Market and Financial Services and the Environmental Directorate (DG XI) (Padgett 1992; Andersen 1993). Package deals based on compensations in the energy sector are supported by the consensus orientation of the Commission. The latter is demonstrated by the fact that it has opted for bargaining and incrementalist solutions, although the strength of the DG IV lies in its ability to intervene directly and eventually force the energy industry to liberalise its markets. Padgett (1992) puts emphasis on the preference of the Commission for bargaining rather than for confrontation: "The Commission is not trying to implement the single market through the law — well some parts of the Commission may want to do this — but in DG XVII we prefer to find political solutions" (Padgett 1992, 60). This particular political strategy of the Commission to complete the single market without strong opposition from the Member States can be seen in its practice to negotiate the degree of liberalisation with large national energy firms in order to get their support and invalidate resistance of Member States. Since formal competencies are absent in the energy policy, probably — especially with respect to matters of deregulation — agreements with the energy firms will be reached. The renunciation of legal powers following Article 90 may be an indication for this strategy. In addition, the increasing liberalisation of energy markets will intensify the pressure for concentrating processes on the energy sectors and will consequently intensify the significance of EU merger control. Therefore, a negotiated level of anti-trust control in exchange for gradually increasing competition in the energy industry, e.g. opening their transmission systems for third parties, may be a likely object of package deals between the Commission and energy companies. The stepwise opening of the electricity market may constitute evidence for these kind of bargaining procedures. Over and above these possible package deal objects, significance of the industry's influence on the policy-making in the EU energy sector is generally assumed: "(...) the work to establish the Single Market has been characterised by the fact that industrial interests have been most successful in getting the Commission's attention. They gained access at an early stage and were able to formulate important premises" (Andersen 1993, 152).

The policy process in the energy area demonstrates that the emergence of the Commission's regulatory role on those matters has been important in so far as energy firms have become aware of a policy that will increasingly be designed at the EU level. Consequently, large energy firms are operating directly as political actors and turn to EU institutions, especially to the Commission. The development of the single energy market, e.g. in particular the opening of the electricity market, gives reason to assume that the political engagement of the energy companies was in retrospect a relevant factor for the progress in EU energy policy made over the last years. Most likely package deals have contributed to the Commission's success in making progress towards a single energy market. On the other hand the developments in the energy domain reveal the disadvantages and clear limits of such bargaining strategies: the Commission's goals have often been ambitious, the final directives have frequently been watered down and have even sometimes been abandoned. Consequently, there is general agreement among observers that progress made within the internal market so far scarcely constitutes a common energy policy at the EU level contributing to positive integration (e.g. Matlary 1996; Finon/Surrey 1996; McGowan 1996a). In addition, actors involved in energy policy share no common view of how to develop energy policy in the EU. In other words, the actors can be divided into one group that is worried about the absence of a common EU energy policy and a group happy to see such an absence persist.

5 Discussion: requirements and results of package deals between the Commission and large firms

Although the political integration of Western Europe goes hand in hand with an increase of competencies for decision-making on a supranational level, an independent and supranational centre for policy-making has not been created yet. Since the political system of the EU cannot be called a state and since there is not one government at its disposal, the identity of the EU is often described as a structure sui generis, i.e. as multi-level, multi-dimensional and multi-perspective polity (cf. Jachtenfuchs/Kohler-Koch 1996a; König/Rieger/Schmitt 1996; Abromeit 1997). Thus, it is the term "governance" that has become fashionable for political scientists in order to describe the patterns of rules in the EU: European governance means finding joint solutions through multi-level partnerships and mediation of the claims of affected interests (Bulmer 1998). Incorporated into this concept is the formation of policy networks, within which various social and political actors try to negotiate deals and make binding decisions. Within European policy networks it is the Commission that is the most important actor. Composed of 23 Directorates General and numerous committees it has, numerically, become the biggest institution, thus, being able to set the agenda for the Community's politics and policies. The European treaties give the Commission the exclusive right to propose new legislation which is — as we know from national political systems — the most important point for influence in the decision-making process (Andersen/Eliassen 1993). Besides the role the Commission plays in the field of initiating legislation, it also supervises the implementation of Community policies in the Member States, although it lacks direct political control there. Whereas the Commission can use its formal powers as a strong instrument in setting regulations, e.g. in the field of competition policy, its powers are limited to the supervision of finding consensus between Member States and relevant sectoral interests as far as the administration of Community policies is concerned. Which possibilities the Commission actually has to get the support of interests and governments alike depends on the divergent regulative and financial competencies it holds in the different policy fields.

The illustrated empirical cases of energy and biotechnology policy demonstrate that one approach to explain why the Commission can successfully act in policy fields in which it has no formal competencies, is the concept of package deals. For example, hitherto research in the field of biotechnology policy has not considered a combined perspective, i.e. to consider problems that result from other policy fields but impinge on the biotechnology domain. Although there are mostly the same actors participating in negotiations about different policy objects, the opportunities offered by counterbalancing the measures and trade-offs between divergent policy fields have not been systematically assessed yet. Political research in the field of energy pays too little attention to the question, why the opening of the internal energy market is proceeding — despite of absent formal competencies of the Commission, despite of renunciation of strong legal powers and despite of persistent reluctance from a great number of the Member States to transfer competencies to the European level. Only the consideration of package deals as one form of European governance seems to give plausible answers to why such unexpected policy results occur.

The structural conditions for the policy fields compared here are divergent. Characteristical for the policy area of biotechnology are supranational companies on part of the industry, increased competencies on part of the Commission and a high level of horizontal governance, i.e. co-ordination between every Commission department involved. Most energy companies are nationally or subnationally organised. As to the EC, it has no formal competencies in the field of energy policy and there are yet no indications for horizontal co-ordination within the Commission. Whether the Commission is able to use legal regulation instruments or not is of crucial importance and an analytical effort to find indications for package deals in energy and biotechnology policy makes this even more obvious. Since the moment SEA came into force the Commission has been able to exploit reliable policy techniques in order to pursue political goals. It is due to the linking-up of the Commission as a promoter of biotechnology to the European regulation of genetic engineering and, similarly, to linking-up energy policy to environmental policy and market liberalisation that regulating powers of the Commission were reinforced. Thus, the Commission became much more relevant for those actors, who, before the SEA was introduced, had shown only little incentive to engage in European policy-making: the private companies. Ever since SEA facilitates the encroachment of the Commission for issues that lie at the core of business interests, large enterprises have developed direct lobbying strategies and re-structured their organisation with the intention to realize as many political options within the EU system as possible(Greenwood/Ronit 1992; Greenwood/Ronit 1994; Coen 1997a; Coen 1998). Though political scientists generally observe that there is a growing lobby in Brussels and that extremely close relationships between big enterprises and the Commission become more and more important (e.g. Sandholtz/Zysman 1989; Andersen 1993; Jachtenfuchs/Kohler-Koch 1996a; McGowan 1996, Wallace 1996), the role the concept of package deals plays in such relationships has not yet been systematically analysed. This also holds true for the preconditions and the results of package deals.

The policy fields of biotechnology and energy clear up the preconditions for package deals: the Commission has competencies in several policy fields and is able to offer package deals to the partners it negotiates with; on the other hand the "trader" needs to be able to co-ordinate solutions between several policy fields in order to come to a general solution. In bargaining processes on European level only the Commission and large firms show this specific characteristic. Because interest groups are much more restricted in their action to the preferences and ideologies of their members, some of the options offered by such bargaining procedures can impossibly be pursued. The result is that interest groups are restricted to the conciliation of compensation agreements. Another limitation for interest groups regarding their capability to conclude issue linkages is their inability to give their members — neither in one policy field nor in several policy fields — a guarantee that agreements will be fulfilled (cf. Ulrich 1994).

As a matter of fact, the relevance of package deals, side payments and logrolling procedures for decision-making on the European level is often stressed by political scientists (e.g. Abromeit 1997; Weidenfeld/Jung 1997), but only for decision-making procedures within the European Council. In this particular case package deals are a strategy to surmount blockades of decisions between the Member States. The possibilities of national governments to conclude package deals with the Commission are narrowed down by distinct domestic interests. One important restriction lies in inherent legitimatory demands (elections), another in complex responsibilities (federalism/regionalism).

The developments of biotechnology and energy policy expounded here reveal yet another requirement for package deals. The degree of resources of the Commission, i.e. financial and/or regulative competencies, influences its chances to succeed in package deals. We assume that the question of how important package deals as an instrument to achieve supranational competencies will be in the future, depends on the resources the Commission holds. Early energy and biotechnology policies illustrate how inferior the role of the Commission was as a partner for negotiations because it had no competencies. Again both policy fields demonstrate that the more resources the Commission has as its disposal and the more influential it is, the more important it becomes as a partner for bargaining. It is only since the Commission has been able to fall back on explicit regulative powers, that its position in bargaining procedures with business could be institutionalised (Coen 1998). Now the Commission can strategically utilise package deals in negotiations with large firms. Package deals are interesting for large enterprises because they offer direct access to the resources of the Commission and because they allow to influence the regulatory decisions. Thus big companies are thus able to use these deals in order to compensate disadvantages of political decisions on a supranational level in one policy field with advantages in other policy domains.

Additionally to the fact that the examples of biotechnology and energy policy make the prerequisites for package deal behaviour among the Commission and large firms more transparent, they also point to the risks these bargaining strategies bear. Over and above the consequence to undermine parliamentary responsible politics and policies in the Member States, agreements on package deals can prove to be a rather problematic matter with regard to the democratic potential of European integration. Following our earlier argumentation, the political and economic actors signalise different requirements and options for an engagement in bargaining processes and for the conclusion of package deals. Consequently, new strategic options with an asymmetrical design will develop in the field of representing European interests, called for by David Coen as a form of "elite pluralism" (1998, 77). "This elite pluralist system requires that firms develop 'European credentials' and establish pan-European political alliances in exchange for access to restricted entry policy forums at the European Commission" (Coen 1997a, 96-9). Small and medium-size companies are, just like non-specific interests, in contrast to large enterprises unable to operate directly as political actors on the European level. Thus their interests will be systematically underrepresented in the decision-making process in the future. The institutional development of the future EU, supposedly oriented at greater transparency and democratic legitimacy, should not neglect the divergent strategic options of actors resulting from package deals.

The following concluding exposition will propose some ideas how the risks of package deals can be minimised and how such agreements can be integrated into the future tasks of the enlargement and democratisation of the European Union.

6 Outlook

We have described the conditions for package deals between the European Commission and big companies in two different policy areas. What could be the possible implications for the future development of the Union? Before answering this question we have to look a little closer at the potential welfare effects of package deals. There still remains the problem of finding an objective criterion for welfare effects in our examples. Even the formalised public choice theory which takes stable interests and certain effects of decisions for granted, shows considerable disagreement on the welfare effects of "vote trading". While during the 1960s and 1970s an optistimic view dominated the discussion (Coleman 1966; Tollison/Willett 1979), more recent research stresses the possible risks (for example Benz/Scharpf/Zintl 1992). Before a judgement on potential welfare effects via package deals involving EU-institutions can be achieved we have to define what positive welfare effects mean. Neo-classical economy applies the "pareto-criterion" in order to evaluate welfare effects. This criterion defines that positive effects only occur when at least one person is better off and no one is off worse. This is the result that applies to ideal market situations only — and in the political context — to the rule of an unanimous vote: If one actor will experience a loss there will be no deal.

Nonetheless, package deals may result in decisions which do not fulfil the "pareto-criterion" but the "kaldor-criterion", which states that a net benefit occurs when the sum of the benefits is big enough to offset the costs, whether or not those benefits are used to compensate those who have to bear the costs (Benz/Scharpf/Zintl 1992). Like the "pareto-criterion" this rule provides ground for criticism: Net benefits may be positive although the social benefit may be negative. Robbing the poor to give to the rich may turn out to result in a net benefit. Thus, we must stress the point that allocative efficiency of package deals is a controversial issue.

Largely neglected by public choice literature is the fact that these arrangements have distributive external effects (Scharpf 1991). Package deals can lead to an imposition of costs on "non-traders". If these costs outweigh the benefits achieved the deal can be assumed to reduce the social welfare (Stratmann 1997). Considering distributive as well as allocative results of package deals makes clear that it is necessary to find ways to reduce the risk of those arrangements which impose costs on non-participating groups of the society. Other problems that are of interest to political scientists are low public visibility and a lack of democratic input-legitimacy (Abromeit 1997). Neither the Commission nor the representatives of big enterprises are directly elected and thereby democratically legitimated. Both problems are not easily solved, but it seems clear that we need more public control through a clearer political polarisation of competing parties which is particularly absent in Brussels.

The absence of competing European political parties or party blocks leads to a further normative problem: In parliamentary systems with proportional representation we normally have governing coalitions which can be regarded as formalised forms of logrolling. In non-parliamentary systems package deals may not be stable. Instable and shifting coalitions are assumed to lead to a decrease in welfare (cf. Stratmann 1997).

What our preliminary results show is that package deals may have positive effects on the progress of policies. Therefore, it would not be sensible to ban or prevent package deals, although there may be negative effects as well. The future development of the European institutional setting should bear these effects in mind. There are at least three aspects which should be considered:

Package deals have to be negotiated openly in the light of media and public.

It must be guaranteed that these deals and partnerships are stable.

While stable coalitions are needed it must be guarenteed that package deals will not lead to lasting or even permanent shifts of cost to non-participating groups.

One possible solution for these problems is trust, which is built-up by iteration and institutionalisation of package deals (Benz/Scharpf/Zintl 1992). Also utilising other social factors is a possibility to gain coalition stability (Ferejohn 1986; Zafonte/Sabatier 1998). Recent public choice theory and empirical studies have pointed to the role norms play for package deals. Co-operation and the distribution of gains received by these deals are important as well (Benz/Scharpf/Zintl 1992).

Focussing on legislature, one of the main empirical results has been the role that is assigned to parties and (different) party-memberships of actors — especially within parliamentary systems like Germany. The main advantage of parliamentary systems is the existence of two stable groups: the government and the opposition. To a certain degree an opposition in parliament guarantees control and political competition. The European Union still lacks such a stable opposition. While governments represent their national interests in the Council and while the Commission is primarily a bureaucratic institution, the Parliament is the only institution where an opposition could be established. Consequently there is a demand for an opposition as an institution of control where package deals are likely to occur. For the parliament this implies to enhance its influence on the appointment of the Commission and, especially, its leader. What we need is the choice for parliament to decide between two alternative candidates. This would lead to a "polarisation" in the Parliament and helps the EC build up a European party system. Seen through a "package deal lens" this may be more important than extended legislative competencies of the European parliament. What is needed is a parliamentary government in which the leader of the European Commission is a member of the European Parliament and depends on the support of its majority vote. Only such institutions of parliamentary government will produce a polarisation of political camps — government and opposition — which have a "natural" interest in controlling each other. In other words, only parliamentary systems can transform unstable package deals into stable coalitions that may increase welfare.

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