ABSTRACT
As each other’s most important investment and trading partner, the European and US American economies are closely interlinked. The turmoil in the wake of the financial and current debt crisis reveals that when times
are rough, economic interdependence transforms economic relations into a community of fate. Before the crisis, however, it was mostly rules and standards that could possibly pose non-tariff barriers to trade and investment and thus these were subject to efforts of transatlantic coordination.1
While market-making regulation (or negative integration) aims at eliminating barriers to further market integration, market-shaping regulation (or positive integration), focused on standards of consumer, investor and environmental protection, is increasingly recognized as an impediment to further transatlantic market integration. Since the 1990s, the character of EU-US cooperation has changed sub-
stantially. We have witnessed a dramatic increase in both formal and informal cooperation among the authorities of the EU and the United States, in the framework of the 1995 New Transatlantic Agenda (NTA) and the 1998 Transatlantic Economic Partnership (TEP). In April 2007, the Transatlantic Economic Council (TEC) was established by an agreement between US President Bush, EU Council President Merkel and Commission President Barroso. The Council was meant to be a high-level political forum consisting of European Commissioners and US Cabinet members responsible for directing and managing economic cooperation with the aim of removing regulatory barriers to EU-US trade. These activities were due to the maturation of the EU as an economic and political actor, and the expansion of transatlantic economic exchange, which created pressure (exercised especially bymultinational business groups) for joint management of the emerging transatlantic marketplace. While these developments represent an upgrading of the EU-US relationship, it still remains doubtful whether the last decades of ‘bigemony’ have effectively eliminated the regulatory barriers to a transatlantic marketplace. Despite a growing variety of government-to-government efforts to dismantle existing differences in regulatory approaches, the transatlantic business community still considers ‘standards and regulationswherepolitics andother considerationsplay a major role’ (TABD, 2010a: 3) to be the main challenge for cross-border investments. In trade, transatlantic arrangements are not necessarily seen as stepping stones to the multilateral easing of market barriers, but rather as stumbling blocks. In finance, the failure in regulatory coordination between two of the world’s closest allies is perceived to have triggered the spread of the global financial crisis rather than prevented it (Drezner, 2010). In fact, the growing intensity of transatlantic ties notwithstanding, the
EU and the United States have frequently clashed over each other’s regulatory policies. Because their economic ties are so strong, a significant portion of the regulations of one partner affects the competitive position of the other, as well as relative costs or market share of foreign producers. Regulations cease to be a purely domestic business and enter the sphere of international and transatlantic relations. Moreover, many problems faced by European or US exporters and investors on each other’smarkets are not
necessarily the result of protectionist legislation but rather the unintended outcome of measures adopted for valid domestic reasons or the outcome of the differences between the regulatory systems in the EU and the US. It is exactly for this reason that the domestic structures of the political econ-
omy have become major stakes in transatlantic regulation, as an increasing number of researchers have recently pointed out (Bach andNewman, 2007; 2010a; 2010b; Farrell andNewman, 2010; Posner, 2009; 2010; Ziegler, 2011). However, scholars, such as Peter Katzenstein (1978a) and Peter Gourevitch (1978), seeking to bridge the gap between domestic/comparative political economy and international political economy, advocated the study of the interrelation of domestic structureswith international developments as early as the 1970s. Peter Katzenstein (1978b: 11) argues that domestic structures become evenmore important when the hegemonic economic order is in decline. Katzenstein muses that this was the case because US economic power had decreased relatively since the end of the Second World War. In light of the 2008-2009 global economic crisis and the emergence of China and other BRIC countries as growing economic forces, this reasoning may apply even more strongly today. In a similar vein, Helleiner and Pagliari (2011) recommend a closer view of the domestic political dynamics of great powers to study post-crisis developments, in particular the transformation of financial market regulation. We consider the European Union and the United States as relatively
symmetrical actors in terms of economic power. The transatlantic economic relationship culminates in intense interdependence in which elements of cooperation and conflict have become inextricably intertwined. The aim of this Special Issue is to explore the domestic sources of the bilateral transatlantic regulatory relationship. To this end, we draw on the ‘domestic sources’ and ‘second image reversed’ literatures (Evans et al., 1993; Gourevitch, 1978; 2002; Katzenstein, 1978a) to link perspectives of domestic/comparative politics with studies of international relations and international political economy. This approach differs from three strands of the literature on (transatlantic) regulation and governance: first, from authors who observe the global diffusion of a single model of ‘regulatory capitalism’ (Levi-Faur, 2005) across borders; second from those who emphasize the prevalence of different regulatory cultures, public values and regulatory approaches seen as still influential enough to make the goal of regulatory convergence elusive (Vogel, 2003); and, third, from those who study the varying forms and institutions of transatlantic governance (Pollack and Shaffer, 2001), transatlantic networks of regulators (Bermann et al., 2000) or the mechanisms of dispute resolution that operate within or in the shadow of international regimes (Petersmann and Pollack, 2003). The papers presented in this Special Issue cut across the existing research
to the extent that they focus, implicitly or explicitly, on the role of three core variables of policy analysis and comparative politics – interests, ideas
and institutions – in order to account for the (non)management of interdependence. In theoretical terms, we do not promote a single theoretical approach to explain patterns of conflict and cooperation (see the Special Issue on ‘Historical Institutionalism’ edited by Farrell and Newman, 2010 on this point). The contributions, however, share a theoretical view of economic pluralism and rational institutionalism, broadly speaking, and analyze the role of domestic factors in transatlantic regulation through three theoretical lenses that are well-established in the study of multilevel systems: the principal-agent approach, Robert Putnam’s two-level game, and a wider concept of institutionalism that highlights how societal interests and (regulatory) ideas are inextricably linked to the institutional framework of regulatory politics in Europe and the United States. In empirical terms, the papers examine three types of domestic actors with seemingly the most leverage in transatlantic regulation – the EU Parliament and US Congress, independent regulatory agencies, and societal actors such as firms and interest groups – in a large number of regulatory fields (merger review and competition policy, auditor oversight, software patent regulation, anti-terrorism cooperation and GMO regulation), some of which have not yet been at the forefront of research on transatlantic regulation. The following section of this introduction presents an overview of
transatlantic economic relations and the development of the bilateral regulatory governance arrangements since 1995. Afterwards, the main theoretical and empirical findings are discussed against the background of the recent theoretical debate on transatlantic regulation. The introduction concludes with an outlook on the likely future of transatlantic governance. I argue that transatlantic regulatory relations will undergo a ‘double movement’ of being simultaneously shifted upwards and downwards. On the one hand, the EU and the US are increasingly enmeshed in the global governance architecture, with transatlantic regulation being subjected to bargaining processes at a higher international level, such as in ‘nested regimes’ or ‘overlapping fora’, but also at the G20 level. One the other hand, a shift downwards towards broader involvement of legislators in regulatory cooperation is likely, following the broader co-decision power inmatters of trade and investment policymaking that the European Parliament has received with the adoption of the Lisbon Treaty. Hence, transatlantic regulation is undergoing a process of ‘politicization’ shaped by political leaders, rent-seeking interest groups and legislators rather than by networks of technocrats.
