INTRODUCTION

When the Council of Ministers had to decide on the so-called chocolate directive in 1999, its plan to allow vegetable fat in the production of candy products met with fierce opposition from Belgium, France, and the Netherlands. These three member states objected to the usage of vegetable fats other than cocoa in chocolate. Although they advanced some consumer-friendly arguments, continental manufacturers also tried to avoid competition from the British chocolate industry and to protect some of their traditional trading partners in the African, Caribbean and Pacific (ACP) countries. They particularly protested against the proposed derogations that would have allowed the United Kingdom and Ireland to continue the production of ‘household milk chocolate’, which contains a large amount of milk. While the Belgian government spoke of ‘à la carte harmonisation’ benefiting ‘the industries of only certain member states’ (Europe Daily Bulletins, No. 7583, 29 October 1999), French chocolate makers demonstrated against the measure during the plenary session of the European Parliament in January 2000. The massive lobbying by the Belgian and French interest groups was, however, only partially successful. The European Parliament accepted the common position of the Council, allowing some sorts of vegetable fats in chocolate as well as the derogations favouring British and Irish ‘family milk chocolate’. The legislature nevertheless added a ‘fair trade’ requirement. This successful amendment granted the industry the right to sell chocolate containing up to six sorts of vegetable fat everywhere in the European Union, as long as these ingredients came from developing countries (Europe Daily Bulletins, No. 7677, 16 March 2000).

In spite of the growing sophistication of the principal-agent (PA) literature, it still contains a remarkably thin view of agent behavior. That is, PA theorists have made surprisingly few direct claims about agents. Almost twenty years after it was written, Williamson's (1985: 30) pithy formulation – that agents are “self-interest seeking with guile” – remains the classic statement, and most current formulations do not go far beyond it. Mainly, the field has focused on what principals can do to control such agents. These controls – including detailed rules, screening and selection, monitoring and reporting requirements, institutional checks, and sanctions, as detailed in the Introduction – give us an indirect picture of agents as seen through the eyes of principals. While the indirect picture reinforces Williamson's original notion of potentially troublesome agents, it also suggests that principals have many tools to control these agents.

Scholars have paid less attention to the strategies that agents use to try to circumvent these controls. Agents often do more than just attempt to hide their information and their actions, as discussed in the Introduction. In fact, as we discuss below, some agent strategies are not very hidden at all. Other strategies are indeed hidden, but agents use different methods to cover their tracks. Though scholars have made great efforts to articulate and describe a range of principal control strategies, as summarized in the Introduction, a parallel effort needs to be made to understand agent strategies.

Obtaining information from policy area experts was essential in this research project given that decision-making in the European Union, and particularly in the Council, is often a secretive and specialised affair. Documentation on Council decision-making on politically sensitive dossiers has, until very recently, not been available. Many experts we interviewed spoke of an unwritten rule, according to which information on other member states' positions in the Council should not be divulged. Still, many were willing to provide this information, given the scientific nature of our inquiry, and under the condition that they would be thanked not by name, but by institutional affiliation. We obtained Council documents on the discussions on some of the Commission proposals included in our selection, and these provided fascinating information that supplements, rather than substitutes the information provided by experts. Policy discussions in the Council, particularly at working group level, are often of a technical nature. This makes it difficult and often impossible to distinguish between peripheral technical matters and political issues that form the most important elements of the debate. Consultations with experts are essential to making such distinctions, and to drawing our attention to the links between apparently separate points that are in fact parts of the same issue. Furthermore, content analysis of documentation does not offer acceptable operationalisations of some of the concepts contained in our models: for instance, the level of importance actors attach to the issues being discussed.

INTRODUCTION

Why do countries sometimes use multilateral strategies and institutions for pursuing their foreign policies? Since World War Two the advanced industrial countries – basically, the OECD countries – have chosen to distribute part of their foreign aid through multilateral organizations, such as the European Union (EU), World Bank, IMF, UN, and regional development banks (RDBs). In particular I want to understand why these countries have chosen to delegate varying amounts of aid to these international organizations over the past 40 years. The delegation of aid-giving to multilateral organizations is surprising; it reduces a country's control over its own foreign policy and has the potential to increase principal-agent problems associated with all spending programs. The other choice that these countries had was to use their own bilateral aid agencies to select projects and oversee aid expenditures, which was the traditional practice prior to the 1960s. So the question addressed is why delegate the provision of foreign aid to a multilateral organization instead of using traditional bilateral channels.

The total amount of such multilateral aid is not inconsequential. For instance, the World Bank gives aid in two main forms. The International Bank for Reconstruction and Development (IBRD) uses its donor subscription base as collateral to borrow money on world capital markets, which it then lends at below market interest rates to developing countries. In 2001 the IBRD committed roughly $10.5 billion in low interest loans (World Bank 2001a).

INTRODUCTION

Principal-agent theory has proven a powerful tool for analyzing delegation relationships in a wide variety of settings, yet it remains under-developed in the study of international relations. Conventional wisdom holds that state principals face special, and often insurmountable, difficulties in realizing their interests when they delegate to international organizations (IOs). In this chapter we examine delegation to multilateral development banks (MDBs) and ask whether they are faithful agents. We demonstrate that analytic shortcuts commonly employed in the study of IOs can lead researchers to misleading conclusions about the faithfulness of IO agents.

In order to accurately assess whether delegation to IOs routinely leads to inordinate agency losses, analysts must first identify the actual principal(s) who has authority to delegate. This requires careful attention to formal institutional rules, the structure of the principal, and the preferences of the principal(s). In this chapter we introduce the idea of complex principals – principals with more than one actor individually or collectively delegating to the same agent – and argue that these common conditions must be considered when assessing IO behavior. When we employ models that more accurately reflect the structure of the principal in a specific empirical setting, we find that delegation to IOs closely resembles delegation to domestic agents. Both domestic and international agents shirk under similar conditions, and principals employ familiar tactics in an attempt to rein in errant agents.

INTRODUCTION

The Treaties of Maastrict, Amsterdam, and Nice are milestones of European integration. In each case, the negotiation and ratification processes attracted widespread media and popular attention. More recently, the Treaty Establishing a Constitution for Europe also drew sustained interest from broad sectors of European society until it failed ratification in several member states during 2005. Academics are drawn to stirring events just as the press and public are, and thus many political scientists have written engagingly about the ‘grand bargains’ embodied in the successive EU treaties (e.g. Moravcsik 1998).

Day to day, however, the business of the EU does not make front-page headlines. Like any government, the EU spends most of its time deciding routine matters, such as the wording of health warnings on tobacco products or the funding of student exchanges in Europe. Indeed, both tobacco label and student exchange decisions appear in the data set used in this book. The EU's own organs decide these issues—the Commission, the Council of Ministers, and the European Parliament (EP). Mid-level civil servants and ordinary Members of the European Parliament (MEPs) may play critical roles. Prime ministers and chancellors, who loom so large in the grand bargains, do not.

In this volume, we have directed our energies toward the explanation of everyday EU decisions. We make no apology for doing so. Although some legislative acts are merely technical correctives or minor bureaucratic rule-making, the great majority of the decisions examined here affect the lives of many Europeans.

Chapter 2 describes the criteria used to select the Commission proposals included in our study. They had to be subject to either the co-decision or consultation procedures, be pending in the years 1999 and/or 2000, and be to some extent controversial.

With regard to 14 of the 26 co-decision proposals, a change to the legislative procedure nevertheless did occur. The significance of this change is open to debate. Proposals subject to the co-decision procedure were included in the selection, even if they had been introduced as co-decision proposals before the Amsterdam Treaty came into effect, and were decided upon afterwards. Such proposals underwent a procedural change, since the co-decision procedure was amended by the Amsterdam Treaty. In particular, the previous (Maastricht) version of the co-decision procedure allowed the Council to reaffirm its common position in the face of protracted disagreement between the Council and the European Parliament (EP). The proposal was then adopted in accordance with the Council's common position unless an absolute majority of all Members of European Parliament (MEPs) voted to reject it. The Treaty of Amsterdam removed what some have interpreted as the Council's ability to make a ‘take it or leave it’ offer to the EP. In the new version of the co-decision procedure, the Council and the EP have to reach an agreement if the legislation is to pass.

INTRODUCTION

Quantitative analysis of European Union decision-making can be divided into two distinct traditions. First, there is a camp representing the cooperative approach; this includes the power index approach, the compromise model and cooperative bargaining and coalition formation models. A common feature of these models is that they do not consider explicitly how the outcome of the decision-making process is arrived at. Instead, it is assumed that a compromise among the actors is reached that is a result of their formal or informal capabilities, their information-gathering capacities, and/or the interaction and coalition formation among them. Using rather general assumptions about these elements, the cooperative approach derives solution concepts that also give predictions of decision outcomes.

As noted in Chapter 4, many studies of governmental decisions divide the process into two stages. The first stage is that of compromise-seeking or coalition-formation and has very few formal rules. The second stage consists of the application of the decision-making procedure, where there are explicit written rules and the sequence of moves is specified. The co-operative approach corresponds roughly with the first stage. It makes either no assumptions concerning the second stage at all, or it (implicitly) assumes that all aspects of the second stage of relevance to compromises or coalition formation have been taken into account during the first stage of the process. This approach also presumes that the compromises made in the first stage are binding.

HOW WELL DO THE MODELS FORECAST?

The previous chapters in this book have elaborated many different models of political decision-making in the European Union. To make their forecasts, some of these models focus on the incentives created by EU legal regulations or decision-making rules. Other models emphasise the power of bargaining in political decision-making. Still others start from logrolling, coalitions, or the spatial theory of voting.

The aim of this book is to set out all these models of EU decision-making, and then to evaluate how well the models predict actual decisions. Most of the discussion is quantitative. Yet in important respects, we mean to integrate prior case studies, formal theory, and statistical methods. For example, each of the modelling approaches represented in this book builds on one or more central aspects of political life known from dozens of skilful case studies of political decisions. All competent model-building depends on careful qualitative research in which explanatory factors are identified and tentative empirical generalisations are formulated. No model is worthwhile if, like some formal theorising, it applies to nothing in particular. Case studies have generated most of the interesting hypotheses in political science. They are the essential foundation for most model building.

Moreover, case studies play a crucial role in evaluating theory.

INTRODUCTION

The 2003 military intervention against Iraq inspired numerous commentators to lament the failure of the United Nations (UN) Security Council during the episode. Supporters of the Bush Administration policy argued that the Council's unwillingness to explicitly endorse military action amounted to a failure to confront threats to international order and exposed the organization as weak, or even “irrelevant” and “impotent.” Less predictably, some members of the international law community offered a critique on legalistic grounds. The Security Council, they argued, did not stop the United States from intervening unilaterally, thereby failing to fulfill its role as defender of international law and promoter of international peace. In a talk before the American Society of International Law, for example, Richard Falk (2004: 2) judged the Security Council “deficient” with respect to the “war prevention goals of the Charter.” In a more sweeping critique, international law scholar Michael Glennon (2003: 16) laments the “rupture of the UN Security Council,” which failed “to subject the use of force to the rule of law.”

These criticisms can be challenged on their own terms: After all, the Security Council did not endorse the war, and its mandated inspections appear – especially in retrospect – to have been very useful in containing and defanging Iraq. But they also rely on a narrow and largely inaccurate view of the Security Council's role in coercive military intervention.

These days, IOs seem to have few friends and many critics. Their detractors alternately portray them as witless tools of the United States and other powerful states (Mutume 2005; Oatley and Yackee 2000) or as rogue actors who, in escaping the control of the states that created and comprise them, threaten national sovereignty (Miller 2005). Like most of the chapters in this volume, we reject such oversimplifications. The institutional design of some IOs allows them to engage in behavior undesired by their member states, while others are highly constrained and incapable of such independence. Nevertheless, even those agents capable of slack usually act as their principals intend. In 2003, the World Health Organization (WHO) took the unprecedented step of directly warning travelers away from countries with significant outbreaks of Sudden Acute Respiratory Syndrome (SARS). Both before and after this radical step, however, and for much of its history, the WHO staff eschewed actions that violate its contract with its members. In recent years, similarly, the World Trade Organization's (WTO) Appellate Body (AB) granted non-state actors standing in the WTO dispute settlement process, despite clear evidence that the member states saw the IO as overstepping its authority. Like the WHO actions, however, WTO behavior proved the exception to the rule; the WTO most often carries out its delegated functions in much the way its members intend.