Social integration of the European Union

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1 Social integration of the European Union European Business and Politcs Final Exam 2016 xxxx JUNE 21 ST xxxxx

2 INTRODUCTION Despite the fact that the basic constitutional features of the European Union have remained unchanged since the beginning of the 90 s, the activity within the Union has been extensive. Since the 90 s the number of Member States (MS) has increased from 15 to 28, the single market has become a monetary union, and the scope of the competences of the European Union has enlarged remarkably (Bickerton, 2015). The economic integration of European countries have resulted in further integration within previously national governed areas such as socioeconomic issues. This has happened despite the fact that nation states have been reluctant to extend the competences of EU within this field, and in favour of supranational bodies such as the European Court of Justice (ECJ) who tends to promote further coorporation. But why do nation states not want to harmonize social policy? What is the incentive of ECJ to push integration forward? And which of the two actors exerts the larger degree of power The Member States or the institutions they have created? First this article will examine to what extend the social integration of EU has increased over time. It seeks to investigate the division of social policy competences between the European Union and its MS, and in doing so a ruling of the ECJ will be presented as a reference. The analysis will be based on the theoretical framework of Neo- functionalism (NF) and Rational Choice Institutionalism (RCI). These two theories have similarities in explaining the drivers of EU integration, but they do have a somewhat different focus and thus complement each other well in analysing the process of social integration in EU. CONCEPTS AND TERMS In order to analyse the drivers behind social integration in EU, a clarification of the term political integration is necessary. In this article it will be considered a process of harmonization of policies and regulations between MS, and is thus not necessarily strict convergence. It reflects the delegation of competences, and will be defined as by Haas in 1958: Political integration is the process whereby political actors in several distinct national settings are persuaded to shift their loyalties, expectations and political activities toward a new center, whose institutions possess or demand jurisdiction over the pre- existing national states. The end 2

3 result of a process of political integration is a new political community, superimposed over the pre- existing ones (Cini, 2013: 62). Furthermore European social policy will be defined as proposed by Gerda Falkner: Actions that fall under the so- called social dimension of European integration (that is, any acts carried out under the social policy chapter of the Treaty), policies targeted at facilitating the freedom of movement of workers in the social realm, and, last but not least, action to harmonize the quite diverse social or labour law standards of the member states, whatever the treaty base (Cini, 2013: 269). What is meant by facilitating the movement of workers, stems from the establishment of the European Economic Community (EEC) in 1957, where the focus was an organized economic entity. In order to create a such, all restrictions on the free movement of people across national borders has to be eliminated: If the law of the Union guarantees a natural person the freedom to move to another member state, the mandatory consequence of this freedom of movement/mobility is that the life and integrity of this person will be protected in the member state to the same degree as would be the case for citizens or legal residents of this State (Pollack, 2003: 36). As we shall observe later this concept of free movement, despite its originally economic focus, intersects with the social policy area in various instances. It is thus an essential term when analysing the evolution of social integration in EU and the challenges facing this process. THEORIES NEO- FUNCTIONALISM NF is one of the first theories trying to explain the dynamics of the integration process of nations within Europe. As a theory explaining the dynamics of change, the core concept within neo- functionalism is the spillover effect. The basic idea is that integration in one policy area would create pressure on another policy area, leading to integration in this area as well, nevertheless not intended (Cini, 2013: 63). It is furthermore suggested that this process is happening automatically, but that it is subject to manipulation by actors and institutions as we will see examples of later on (Cini, 2013: 60). Another essential idea within NF is the important role of non- state actors, e.g. interest groups and institutions. This idea gives legitimacy to supranational bodies, acknowledging the influence they can have on EU integration, even in disagreement with MS. NF presents the idea that supranational institutions, once created by national actors, develop agendas of their own. NF theorists argue 3

4 that with time this agenda will be impossible for MS to control, thus leaving EU institutions important actors in the political integration process (Citi, 2016). Despite the fact that NF is still an important theory within the field of EU integration, it is important to note that it has lost a lot of its appeal. For example, the concept of spillover has been criticised in that it fails to express the role of MS in deciding the tempo of integration, here referring to events like the empty chair crisis where national actors affect the integration process pushed forward by supranational institutions at least to some degree (Cini, 2013: 60). However NF has experienced a revival after the creation of the Single European Market, as the unification fostered a new level of coorporation within EU. The concept of spillover gained new influence, with the increased amount of economic integration (Cini, 2013: 61). Even though NF can be considered a good theoretical framework for analysing the role of nation states and supranational institutions in EU integration, other theories like Rational Choice Institutionalism succeeds in explaining the process in another way, and with another focus. NF is considered a grand theory and thus works well when defining macro- level structures of EU, where RCI is both capable of explaining micro- level structures, as well as macro level phenomena like the EU integration process (Citi, 2016). The theory of RCI will be presented in the following, as a supplement to NF. RATIONAL CHOICE INSTITUTIONALISM RCI will be used in this article, as it is a theory that seeks to explain how integration in EU happens based on utility maximization of rational political actors and through the framework of the principal- agent model (Pollack, 2012). The key concept within RCI is utility maximization of all actors in the integration process. This resembles the view of neo- functionalists, seeing integration as a process driven by self- interest of groups and institutions, creating supranational bodies to act as a mediator between nation states in policy- making (Cini, 2013: 60). However, neo- functionalists have criticised the concept of state- centrism within RCI, as they argue that whenever a supranational body is formed it will act autonomously and without control of MS (Citi, 2016). RCI builds on the principal- agent model, explaining how MS as principals delegate power to supranational agents (like COM or ECJ) in order to show commitment to international agreements, and reap the benefits from the work of supranational actors, such as their expertise. Furthermore institutions are created 4

5 to avoid tasks like monitoring compliance and implementation of regulations of MS as well as interpreting incomplete or vague contracts (treaties). RCI scholars argue that the executive autonomy of these institutions vary depending on preferences of MS, the level of information between principals and agents, and lastly what decision procedure is applied to the policy in question. RCI stresses the extraordinary degree of discretion of ECJ when legal- binding policy is decided upon, as the Court has the ability to shape both legal and constitutional outcomes (Pollack, 2012). This argument will be elaborated in the following. THE EVOLUTION OF SOCIAL INTEGRATION At the time of the Treaty of Rome (1957) social policy was within competences of the MS, and not for supranational institutions to interfere with. When plans of the internal market arose, provisions to facilitate the labour market followed, and were thus the first step in expanding EU competences to social policy (Andersen, 2015). The functioning of the common market became a loophole for social policy harmonization, and even though there were almost no explicit social policy competences in the Treaty of Rome, interpretation of the four freedoms 1 allowed for EU influence (Cini, 2013: 270). However, for any legislation of significance to happen within the social area, unanimity voting in the Council was still demanded. This began to change with the adoption The Single European Act (SEA, 1987) and The Social Charter (1989) as it introduced QMV within the area of health and safety at the workplace (Leschke, 2016). After the SEA, as more social policy areas transferred to EU decision- making level, subsequently more issues were to be agreed upon using QMV, such as gender equality with regard to the labour market. However, some areas, such as social security, remain an unanimous decision. Since the Amsterdam treaty, the legislative process within social policy has been dominated by what is called The Open Method of Coordination. It is considered a softer form of intervention, than the widely used Ordinary Legislative Procedure. It is a way of EU to regulate the social policy area without making legally binding measures, and it is thus left to the MS to implement the guidelines decided by EU. This means that specific national 1 Freedom of movement, labour, people and capital (Johnson, 2015) 5

6 preferences and domestic situations can be taken into account when harmonizing social policy across Europe. Here the phenomenon of peer pressure comes into play as a tool for EU to secure implementation of social policy. However the effect of OMC is up to discussion, as it may be that in countries where policy reform is not wanted on the national level, the OMC guidelines will be nothing more than a symbolic measure (Cini, 2013: 276). On one hand EU competences within the social policy field has increased, as more and more social policy areas are decided using QMV rather than unanimous decision- making. On the other hand the introduction of OMC has left more competences to the national state, as institutions like the European Parliament (EP) and ECJ has no jurisdiction when decisions has been made using OMC. In order to address the assigned statement, the ability of ECJ to push forward integration despite wishes of MS will be examined in the following. THE BOSMAN- CASE AND THE FREE MOVEMENT OF SPORTSPEOPLE In discussing the claim that MS have no interest in further social integration, while ECJ pushes integration forward, I will reference an ECJ court ruling known as The Bosman- Case. This case is regarding a judgement delivered by ECJ on 15 December 1995, and it begins with the Belgian football player Jean- Marc Bosman whose contract with the Belgian football club RFC Liège club ended in He wished to transfer to the French club Dunkerque, but the transfer fell through, as his former club demanded a transfer fee from the new club, they were not able to pay. The former Belgian club cancelled the transfer, and furthermore suspended Mr Bosman from playing the season. As Bosman took the case to the Belgian Court, the national court referred following questions the ECJ for a preliminary ruling: Are Articles 48, 85, and 86 of the Treaty of Rome of 25 March 1957 to be interpreted as i. Prohibiting a football club from requiring and receiving payment of a sum of money upon the engagement of one of its players who has come to the end of his contract by a new employing club; ii. Prohibiting the national and international sporting associations or federations from including in their respective regulations provisions restricting access of foreign players from the European Community to the competitions which they organize? (Blanpain, 1996: XIV) 6

7 The court ruled in favour of Mr. Bosman, concluding a breach on Article 48 of the treaty, as the transfer fee infringes the player s freedom of movement, and furthermore the restrictions on how many foreign players can be in a national competition is discrimination by reason of nationality and thus not compatible with the free movement of workers (Blanpain, 1996: XIV). As this is a matter of primary legislation (free movement of workers) the outcome is legally binding, and the Courts decision must be abided by MS. The result of the preliminary ruling however, was not consistent with national interests of Belgium. The Belgian Prime Minister, Dehaene, wished to make amendments in the treaty in order to change the outcome of the ruling. The Prime Minister argued that the transfer fee was righteous as national clubs spend a lot of resources training players and he furthermore argued that sport in general has points of similarity with culture, and this should thus not be a matter of international regulation, as it would contradict Article 128(1) of the EC Treaty stating that The Community must respect national and regional diversity of the cultures of the member states (Blanpain, 1996: 29). The ruling was however legitimized on economic basis as sport is seen as an economic activity, and to remove an economic activity from Community powers is not compatible with the essential objectives of the Community. Such a Treaty change would mean voting by unanimity and chances of success in the matter are thus limited (Blanpain, 1996: 28). This is in line with neo- functionalist theory claiming that when competences are first transferred to EU level they can no longer be controlled by MS (Citi, 2016). Seen from a neo- functional perspective, this ruling is a symptom of a supranational institution that has created its own agenda and thus rules in order to complete this. The free movement of labour is originally one of the four freedoms within the Single European Market, but when creating this economic integration a functional spill- over happens, as the intervention interferes with social policy within the sports world. We here see how legal interpretations can be important drivers of change, and politics lacks the capacity to override unwanted jurisprudence (Martinsen, 2011: 1628). The reaction from the Prime Minister can be seen as an example of what NF scholars call the virtuous circle. This circle has three links, which begins with interaction between social actors calling for a third party resolution, in this case a preliminary ruling from the ECJ. This outcome will push for further legislation, seen here as the Prime Minister s proposal of amendments of the Treaty. This legislation, if codified, will 7

8 result in further interaction between actors, and thus lead to more resolution and legislation, as a spillover effect (Martinsen, 2011: 1628). However, as seen here, it is in practice unlikely that unwanted judicialization regarding primary legislation will be overturned by national actors, as power has been delegated to autonomous supranational bodies. Had the legislation been decided by QMV however, the chances of new legislation in favour of the Prime minister had been more likely, though given that the commission wish to propose the amendments to EP and The Council (Martinsen, 2011: 1632). Rational choice institutionalists would explain the drivers of this case somewhat differently. Within this field of studies, the supranational institutions are seen as competence- maximizers seeking to increase the competences of EU (Pollack 2003: 35). One of the main differences of this view compared to the neo- functionalist is the incentive of creation of these institutions. Nevertheless both RCI and NF scholars claim that these institutions to a greater or lesser extent detach themselves from the control of MS. The reasoning for more integration within RCI, and the explanation of the phenomenon we observe in the Bosman- case is the principal- agent model. In this case, MS acts as principals giving mandate to the ECJ to interpret the incompleteness of the treaties in order to avoid the extensive administrative work themselves. However, according to RCI theory, these supranational bodies have an agenda of their own and thus what we see here is an example of shirking, meaning that the legislative outcome moves away from the original intention of the MS that created them (Pollack 2003: 35). The agent can use imprecision of Treaties to pursue its own interests and exploit the mandate, or power, given by the principal in the first place. When the ECJ rule against the will of the Belgian nation state, it misuses its mandate of power to push forward more integration. RCI theorists also explain that it is very difficult to control shirking as treaty reform is a both rather lengthy and challenging procedure (Citi, 2016). This is exactly what we see in the Bosman- case, as the Prime Minister is unsuccessful in overriding the ruling of ECJ even though the outcome is clearly against national economic and cultural interests. COMPETENCE- MAXIMIZING PREFERENCES OF ACTORS As we have seen, social integration is evolving in a greater or lesser extent, despite the fact that nation states often tries to limit the social dimension of EU. This can be explained by both 8

9 RCI and NF scholars, as the autonomous element of supranational bodies exploiting the power they have been given by nation states, for one reason or another. Mark A. Pollock is one of the scholars examining the reasons why institutions within EU exhibit pro- integrationist preferences. He claims that such organizations seek more Europe essentially because they are able to choose pro- integrationist personnel when establishing the organizations, and furthermore a socialization process will take place within the organization, promoting EU interests even more (Pollack, 2003: 36). One of the core ideas of neo- functionalism is that officials and politicians within the decision- making process in EU will develop European loyalties and preferences. On the other hand, this view on why institutions like ECJ promote more EU integration can be regarded rather one- dimensional. As the ECJ consists of a judge from each MS, who is allegedly chosen on the basis of impartiality and neutrality, is it then fair to assume that all judges will behave coherently according to the preferences of the ECJ as whole? The answer to this must depend on the extent and depth of our analysis, but with reference to the Bosman- case and the theories developed by both RCI and NF scholars, it however seems reasonable to claim that on a general basis ECJ will act on behalf of European rather than national interests (Pollack 2003: 37). This tendency can be seen all over EU, as for example Members of the European Parliament (MEPs) are organized based on political standpoint rather than nationality. According to neo- functionalist theory, as MEPs work across national boarders, they will be less likely to protect national interests and instead work for the wellbeing of the Union (Cini, 2013: 62). Officials from different kind of EU institutions take part in decision- making processes, be it a litigation or formulation of a legislative proposal, and it thus engage them in supranational problem- solving and governance on an international level (Cini, 2013: 64) This could be part of an explanation of why institutions like The Commission or ECJ foster Europeanization of political issues. As in the case of the reluctance of the MS, EU faces increased socioeconomic heterogeneity of an Union now consisting of 28 MS, and thus ideological controversies, economic differences and cultural variance tend to cause divergent political positions, especially within the field of social policy (Martinsen, 2011: 1626). There are all sorts of reasons why national states might have different interests regarding social policy, which could be cultural as well as economic. Where Germany has previously argued for a neoliberal, free market approach to social affairs, other countries like France, with high social charges and gender equality on the labour 9

10 market, feared to be competitively disadvantaged without harmonization at the European level (Cini, 2013: 269). The culture of working, productivity level and wages can be challenges to harmonized social policies across national boarders. Even if some countries wants to increase the social dimension, institutional structures like unanimity voting and the challenges of OMC might be in the way of this. However, as we live in an increasingly globalized world, facing more and more transnational issues, demands for converged policy of all sorts arises. The completion of the common market demands some aspects of social policy harmonized, and this is thus a trade- off the MS have to accept in order to achieve fully economic coorporation. CONCLUSION Based on an analysis of the division of competences between MS and supranational actors, and a discussion of the evolution of social integration in the European Union it can be concluded that both MS and the ECJ has influence in making decisions within EU social policy. This has resulted in a continually increasing enlargement of the EU social dimension, however not at a pace resembling for example the economic area and the creation of SEM. It can furthermore be concluded that even though the incentive of the creation of supranational bodies is different from RCI- theorists to neo- functionalists, both theories agree that such institutions has succeeded in creating their own agenda and pushing forward integration even when MS does not support it. Furthermore an extensive range of social policy fields are now agreed upon using QMV giving a lot of power to ECJ in Europeanising the social policy, by interpreting incomplete treaties and ruling in favour of more integration. Pulling in the other direction is the increased use of OMC in policy- making, leaving MS with the power to decide the degree of integration on the national level, as ECJ cannot push for more harmonization when decisions are not legally binding. Lastly we can conclude that because all actors are essentially self- interested and utility- maximizing, supranational bodies will act in favour of more social EU integration as it will expand their competences, whereas MS often will oppose more social harmonization as this field tends to contradict cultural and economic national advantages. 10

11 LITERATURE Andersen, K Social Policy in the European Union. 1 st Edition. Palgrave Macmillan: The European Union Series. Bickerton, C., Hodson D., and Puetter, U The New Intergovernmentalism: European Integra- tion in the Post- Maastricht Era. Journal of Common Market Studies 53(4): Cini, M European Union Politics. 4 th Edition. Oxford University Press. Citi, M. (Director) 2016, May. Theories of European integration. Lecture conducted from Copenhagen Business School, Copenhagen. Johnson, D. and Turner, C European Business. 3 Edition. Routledge. Martinsen, D Judicial Policy- Making and Europeanization: The Proportionality of National Control and Administrative Discretion. Journal of European Public Policy, Vol. 18(7), pp Montanari, I European Journal of Political Research 27: Harmonization of social policies and social regulation in the European Community. Kluwer Academic Publishers. Leschke, J. (Director) 2016, May. EU labour market and social policy. Lecture conducted from Copenhagen Business School, Copenhagen. Pollack M., The Engines of European Integration: Delegation, Agency, and Agenda Setting in the EU. 1 st Edition. Oxford University Press. Pollack, M Rational Choice and EU Politics. [ONLINE] Available from: m- 09a.pdf 11

12 Pollack, M Oxford Handbooks online: Realist, Intergovernmentalist, and Institutionalist Approaches [ONLINE] The Oxford Handbook of the European Union. Available from: web.lib.cbs.dk/view/ /oxfordhb/ /oxfordhb e- 1#oxfordhb div1-4 12

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