Is law beyond the nation-state possible? Does compliance in horizontal settings work sufficiently well? What are the building blocks for a successful elicitation of compliance beyond the nation-state? What is special about the EU in this respect? These questions have guided our study. In this chapter we discuss the empirical findings of our study, some lessons in designing institutions to achieve high rates of compliance, and some special features of the EU as a polity. In the first section, we reject the principal hypothesis that reliable law and legal equality can be expected only within a national setting. The next section discusses in detail how different theoretical perspectives on compliance contribute towards understanding successful compliance beyond the nation-state. In addition, we argue that the interactive effects between variables from different theoretical perspectives are decisive in understanding compliance records. Finally, we discuss the practical and theoretical implications of our findings.

The winner is: The EU

The preceding chapters report the findings of three sets of comparisons. In each set, regulations are compared that are located at different political levels but are of very similar content and type. By keeping the policy type and the underlying interest structures more or less constant, we studied the effects of different political settings on rule compliance. Regulations on the control of subsidies have been formulated by the WTO and by the EU as well as within Germany. Redistribution among territorial units is institutionalized in both the EU and Germany.

Da mihi facta, dabo tibi ius? Introductory observations on an interdisciplinary agenda

“Compliance is not a legal problem.” This is the traditional view of lawyers, which is by no means simply naive. Lawyers know of course about the problems of enforcement and the risks of litigation. But they are trained to find out whether some behavior is legal or illegal and they are paid to give good reasons that militate in favor of their client's viewpoints and interests. They can act on the assumption that no one will question that the enforcement of valid law in a Rechtsstaat is a matter of course, which is not susceptible to legal arguments and is hence beyond their professional responsibility. Compliance is something policemen, bailiffs and politicians should somehow ensure.

What is true for practicing lawyers is also true in legal academia. Research on compliance problems does not concern the validity of law and its normative contents. Such research could therefore be assigned to legal sociology – not a proper legal discipline. International law, however, has a different story to tell. In the account of Koh (1997), the issue of compliance constitutes the core problem of international law. The apparent contrast with the traditional perception of national legal systems is easy to understand. What lawyers can presume to exist within constitutional states, namely an authority that is entitled and committed to enforcing the law, is not available in the international system.

Is law – understood as a normatively meaningful form of social regulation – conceivable or indeed possible beyond the nation-state? This is the guiding question that informs our inquiries in Law and Governance in Postnational Europe: Compliance beyond the Nation-State. It is based on the conviction that governance beyond the nation-state must contain elements of law if it is to be considered legitimate. The focus therefore is on compliance as an element of social order, not only as a means of effective problem-solving. We will demonstrate that a record of good compliance in multilevel systems does not depend on an agent that is generally able to enforce rules on the basis of a superior availability of material resources. Our case studies show that with respect to some regulations the EU displays better compliance records than comparable regulations in the Federal Republic of Germany. Even compliance with WTO regulations can be compared favorably with compliance with German regulations. A high degree of legalization, combined with well-functioning verification and sanctioning systems, seems to be more important. However, smart institutional designs can cause their own problems. If the intrusions into the constituent units of a multilevel system are too strong and compliance works too well, then compliance crises may result, which involve an open, normatively-driven rejection of the regulation. This is especially true if social integration lags behind and a common public discourse is absent.

Introduction: Cross-level comparison

The aim of this chapter is to prepare the dependent (section 2.2) and independent (section 2.3) variables – as identified in the introduction – for the empirical analysis conducted in the case studies of chapters 3 to 5. Our approach to the analysis of compliance differs from other research in the field. Unlike the bulk of pre-existing studies, we aim to explain compliance by comparing similar rules at different levels. The main reason for our comparative approach is that it allows us to select cases based on variations in the independent variable and thus to approach our topic in a quasi-experimental fashion. Although the comparative method promises to provide new insights by systematically focusing on the distinction between politics in the nation-state and politics above the nation-state, we are well aware that the literature advances a number of reservations to such an approach. Some argue that the EU is a too specialized polity and therefore cannot be compared to either a nation-state or an international regime. Caporaso (1997: 1) has summarized this view: “Processes of integration in Europe are specialized, and qualitatively different from processes elsewhere. The historical thrust of the EC is so novel that it truly represents a Hegelian moment, a novelty that, however prescient in terms of future developments, has no current analogies.

Risk regulation in the EU and the WTO

The trade in foodstuffs is a particularly interesting candidate for the comparative analysis of compliance with inconvenient market-correcting rules. Analyzing foodstuffs policy underlines the fact that regulatory policy involves a number of difficult regulatory issues, such as the need to integrate expertise, the problem of dealing with conflicting points of view concerning those risks attributable to foodstuffs and/or nutritional habits, the growing importance of new concerns about animal welfare and the environmental dimensions of foodstuff production, as well as the impact of cultural traditions on production and consumption. Furthermore, because of their proximity to the everyday life of consumers, foodstuff issues rank prominently on the public agenda of domestic politics and, as such, can easily become politically sensitive issues.

A comparative analysis of compliance with foodstuffs regulations, however, is difficult to conduct across all three of the levels employed in this project. Due to the increasing relevance of European and international policies to the member states, important regulations are often authored by either international or European authorities (cf. Schlacke 1998; Hilf and Reuß 1997; and Ritter 1997) without reserving many competencies for the federal level. This chapter accordingly avoids conducting a comparison across all three levels and instead concentrates on comparing compliance with the rules of the World Trade Organization (WTO) with the compliance enjoyed by the rules of the European Union (EU).

Intergovernmental redistribution

Intergovernmental redistributive arrangements have to date been largely neglected in analyzing international relations and researching questions of international compliance. Game theorists argue that the paucity of intergovernmental redistribution is explained by the fact that redistributive policies are appropriately modeled as zero-sum games in which any gain for one party corresponds to an equivalent loss for the other (Morrow 1994). Since states are taken to be self-referring agents, which “develop their own strategies, chart their own courses, make their own decisions” (Waltz 1979: 96), the emergence of a redistributive regime and compliance with it, on the part of those who have to pay into it, must be regarded as extremely unlikely. Since the enlightened self-interest of the addressees of the regulations cannot be relied upon to ensure payment, an intergovernmental central body is required which is able, in doubtful cases, to enforce compliance even against resistance. It may thus be argued that the fact that there is no significant international redistributive regime is ultimately attributable to the anarchical nature of the international system.

Alongside this state-oriented explanation, one can also find an explanation in the literature that is informed by the communitarian theoretical tradition. Miller (1988) and Goodin (1988) point out that questions of justice can meaningfully be dealt with only in the context of a political community which has a shared understanding of the content of sound policy.

Any integrating or already integrated market that encompasses several jurisdictions or states is usually confronted in one way or another by the problem of state aids or subsidies, which are handed out by governments or governmental agencies to businesses that settle or have already settled in their jurisdiction. Economic theory posits that such measures distort the markets for investment and employment because they influence the decision making of enterprises, luring them into allocating resources according to political rather than economic, market-driven reasons (Färber 1989; Zippel 1993). Other strands of economic theory, however, disagree with this assessment of the impact of political interference on market forces. Whereas Keynesian demand-side approaches favor such interventions in order to correct for market failures, as well as smooth out and stabilize the steady growth of the economy (Hall 1989; Ikenberry 1993; Franz 1992), neoclassic supply-side economics considers such financial support to be part of the problem. Significant financial support requires big government, high taxes and equally high budget deficits. These usually lead to higher inflation and unnecessarily high interest rates, which – taken together with the high taxes – reduce investment in the real economy and, hence, lead to unemployment (Siebert 1990, 1995, 2000).

As far as empirically oriented economic literature goes, it is difficult to settle this debate once and for all because the decision of an enterprise about where to locate its investment seems to be based on a very complex set of reasons, including market access, transaction costs (infrastructure, suppliers), taxes, labor costs, and the amount of state aid available (Liemt 1992; Heise et al. 1998).

Monetary integrationhas long played a central but complicated part in Belgian politics. Exchange rates and their stability are important: the country depends on transformation of intermediate goods, and its industry exports approximately two-fifths of its output to neighboring countries (France, Germany, and the Netherlands). Belgium thus had a high stake in the first wave of EMU – to have failed would have meant pressures on its currency, inflationary tendencies, high interest rates, and increased unemployment – all with political costs. As a founding member of the European Community (EC), Belgium has been one of the strongest supporters of political integration, with an electorate which is one of the most pro-EU among the member states. Failure to qualify for EMU at its inception would have therefore discredited Belgium's claim to more European (federal) integration. Failure might also have undermined a source of national cohesion, as Europe, and the constraints imposed by monetary integration, have counterbalanced long-standing regional divisions. European monetary integration and its effect on the Belgian labor regime are thus tightly connected with Belgian political integration and national identity.

Belgium is divided into three regions: Dutch-speaking and largely Catholic Flanders, Francophone and largely secular Wallonia, and the bilingual capital region, Brussels. Cultural differences have coincided with changing economic conditions. Wallonia was the more prosperous region in the early postwar period but its old industries have suffered continuing decline.

The system of governance in the EU gives national governments a central role. Brussels has not supplanted nor replaced national capitals, and thus the EU co-exists with powerful national political systems. While governance takes place in Brussels, government takes place in the member states. It is there that electoral accountability, legitimacy, and identity are anchored (Sbragia 2002). Even those who argue that the EU “bears a growing institutional resemblance to the established multi-tiered systems of traditional federal states” accept that national governments “remain extremely powerful” (Pierson and Leibfried 1995: 6).

Federalism has been an attractive referent for scholars precisely because the national governments retain so much power within a system of governance in which an important “center” is nonetheless present (Sbragia 1992b: Rodden 2002). That center is so strong that the EU is no longer simply a sophisticated international organization, but it is weaker than the center found in the decentralized federations of Canada and Switzerland (McKay 2001, 2002; Nicolaidis and Howse 2001: Börzel and Hosli 2002).

Although placing the EU within the universe of federal states certainly presents analytic problems, it does permit useful although not rigorous comparisons. In particular, it highlights features of the process of European integration which might not seem significant if analyzed in isolation.

The issue of policy change is particularly interesting in both the EU and the US. Both systems of governance must cope with a large population, a territorially diverse economy, and the dispersal rather than the centralization of power.

The political structure of the European economy has been fundamentally transformed by the two decades of monetary integration culminating in Economic and Monetary Union (EMU). Centuries-old national currencies were replaced by the Euro and monetary policy, a core function of the modern state, was transferred to a supranational European Central Bank (ECB). The ECB was endowed with more autonomy from EMU's member states than any other European Union (EU) institution except the European Court of Justice (ECJ) and greater independence than any other central bank in the world. The Stability and Growth Pact (SGP), also applicable to member states remaining outside EMU in addition limited member states' discretion over fiscal policy, their remaining macroeconomic policy instrument. There is no other policy domain where centralization of power in EU institutions has gone so far.

In contrast, the EU's treaty/constitution leaves authority over welfare state and employment relations institutions in member state hands. These institutions largely shape individuals' relation to the economic life of their societies throughout the life course, before, during, and after participation in the labor market. Despite important national differences, these institutions have enough in common in European countries, Britain excepted, to be understood as variants of what Europeans typically refer to as a “European social model.” This model is distinguished from the American, or Anglo-Saxon, model by its greater protection against economic insecurity, inequality, and unilateral employer power. Much domestic political conflict and partisan competition is focused on the distributive and normative issues raised by these social models.

The Netherlands is an exemplar of peaceful nationhood, democratic stability, and commercial prosperity. It has followed a small-state development strategy of export-led growth, partnership among government, capital, and labor, a mixed economy, and pragmatic crisis management (Katzenstein 1985). Since 1945, it has withstood major changes such as decolonization, the emancipation of citizens and households, European unification, immigration, and the globalization of markets and communications. Beginning in the mid-1970s, however, the Netherlands came to be seen as a model of European sclerosis. Exploitation of natural gas drove up domestic producer costs through currency appreciation and there was rapid expansion of social security and public transfer expenditures (Ellman 1984a, 1984b, 1986). Unemployment rose to 11 percent by 1983 and stayed high for the entire decade.

Since the mid-1990s, however, the Polder model has been praised far and wide because of a complete turnaround created by wage restraint, welfare state reform, and seamless entry to monetary union. Unemployment was 2.8 percent in 2000, employment having risen by more than 2.5 million people between 1983 and 2000 (more than 25 percent in labor-years) (Wolfson 2001: 209). There was price stability, a trade surplus, and moderate wage and income inequality, relative to both the Dutch past and to other Western countries today. Indeed, the Dutch record of economic growth, declining unemployment and inflation in the 1990s approached the outstanding performance of the American economy, while public policy remained broadly in line with embedded liberalism – that is, public coverage of the basic risks of an open economy and ongoing internationalization (UNDP 2001).

Much of contemporary French history is about defining and maintaining the French version of the European social model in changing economic conditions. By the early 1970s, a solid, if comparatively idiosyncratic, employment relations system balanced weak, politicized, competitive unions and anti-union employers, both reticent about bargaining, with a strong state and legal order. The French welfare state was a Gallic translation of Bismarckian social insurance with “paritary” management, once again backed by a strong state.

In the 1980s, however, French politicians took the lead in consolidating the European Monetary System (EMS), in making it happen, and opening the road to EMU. As the major actors in renewing and changing the shape of European integration, they also were the instigators of new European-level economic constraints that would force reforms to France's employment relations system and welfare state. In the 1980s, when France committed to achieving price stability within EMS, labor market and welfare state changes were largely improvised in the face of a rapidly changing economic environment. In the 1990s EMU “convergence” period old and new leaders partially absorbed these new constraints to conform to the new situation, in large part through significant reforms. French leadership toward EMU thus paralleled developments in French social policy.

The French postwar economy was successful until the 1970s. Growth, state-stimulated and state-centered, then boosted by the coming of the Common Market, was so robust (5.6 percent annually) that in the 1960s, France became the international model of the day, despite chronic inflationary propensities managed by periodic devaluation (Shonfield 1965).