This document is a thesis submitted for the award of a Doctor of Philosophy degree at the University of London. It examines the influence of voting rules in the Council of the European Union on the Common Agricultural Policy, past, present, and future. Through empirical analysis of negotiations over the Agenda 2000 CAP reforms and development of a mathematical model, the thesis aims to quantify the impact of qualified majority voting rules on the EU's decision-making efficiency and ability to reform the CAP. The results of both studies provide theoretical and empirical evidence that the voting rules exert strong pressure to maintain the status quo in the CAP and prevent necessary reforms.

1. MEASURING THE INFLUENCE OF VOTING
RULES IN THE COUNCIL OF THE EU
ON THE
COMMON AGRICULTURAL POLICY
PAST, PRESENT AND FUTURE
by
Jorge Núñez Ferrer
T.H. Huxley School
Imperial College of Science, Technology and Medicine
Wye, University of London
July 2001
Thesis submitted for the award of the Degree of Doctor of Philosophy at the
University of London
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2. Statement of Originality
I hereby certify that the work embodied in this thesis is the result of original research.
Some sections of the thesis have been already published jointly with work from other
authors, references have been included in the text. The work presented in this thesis
draws only on my own contribution. This thesis has not been submitted for a higher
degree to any other University or Institution.
Date Jorge Núñez Ferrer
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3. To Francesco
Acknowledgements
The greatest gratitude I owe to my son Francesco for surviving with a great sense of
humour all the ups and downs of a life with a research student. I would like to thank
my father for the financial help that allowed me to continue this research in difficult
times. I am very grateful for my wife Ana, for her patience and encouragement
especially in the final stages. I would like to give special thanks to Professor Allan
Buckwell, whose lectures on Agricultural Policy hooked me completely to this
subject. His enthusiasm was contagious, and his patience and support has been crucial
to keep me going on in this research. As with so many other students wishing to build
mathematical models and programmes, I have to thank Dr Kelvin Balcombe, who
helped me to make a mathematical idea into a usable reality. I also wish to show my
gratitude to Mario Alessi, whose help and encouragement in the past was instrumental
to help me to reach this level. I want to acknowledge the role of the Centre for
European Policy Studies (CEPS) for letting me continue working on this subject and
for the in depth knowledge I gained from my colleagues on the workings of the
European Union. I also thank the Centre for Agricultural Policy Studies (CEAS) for
offering me the grant that financed three years of my PhD research. Finally, a loving
welcome to little Clara.
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4. Abstract
The Common Agricultural Policy of the EU is widely considered to be an inefficient
and highly distortive policy. On the one hand, the result can be considered a
consequence of the democratic wishes of the population. On the other, there is a
widely held suspicion that the institutional setting of the EU has had a strong negative
impact on the policy. Various analysts have claimed that the voting rules at the
Agricultural Council of the EU foster the status quo in the Common Agricultural
Policy, preventing necessary reforms which might otherwise be accepted under a
proper democratic system. Proposals by the Commission to improve the policy are
highly diluted to the level of the ‘lowest common denominator’ between the member
states.
There has never before been an attempt to systematically quantify the impact of the
voting rules – implicit or explicit – on the quality of the policies negotiated at the
Council, nor has there been a convincing quantification of the influence of national
preferences on the outcome of negotiations in the Council.
This thesis presents two analyses of the behaviour of the Council. The first is an
empirical analysis based on the development of the negotiations over the Agenda
2000 CAP reforms. The second develops a mathematical tool which quantifies the
reduction in the probability of reform proposals by the Commission being adopted
and represents an indirect measure of the pressure on the Commission to dilute and
reduce the number of proposed changes. This model is then applied to the Agenda
2000 negotiations. The results of both studies show sufficient theoretical and
empirical evidence that the voting rules exert very strong pressure to keep the CAP
unchanged. Building on these results, possible reforms to the decision-making rules of
the Council and to the CAP are proposed in the concluding chapter.
4

5. TABLE OF CONTENTS
ABSTRACT .....................................................................................................4
TABLES.........................................................................................................10
FIGURES .......................................................................................................12
ABBREVIATIONS..........................................................................................14
CHAPTER 1. THE AGRICULTURAL COUNCIL: A BROKER OR BREAKER
OF DECISIONS .............................................................................................16
1.1 Reasons for concentrating on the CAP and the Agricultural Council of the EU..............17
1.2 The importance of the research.............................................................................................20
CHAPTER 2.... APPROACHES TO POLICY DECISION-MAKING ANALYSIS
.....................................................................................................23
2.1 Approaches to Policy decision analysis.................................................................................24
2.2 Welfare economics..................................................................................................................24
2.2.1 Welfare Economics, the rational actor and the CAP.......................................................25
2.3 Political Economy models ......................................................................................................26
2.4 Political Preference Functions...............................................................................................28
2.5 Public Choice ..........................................................................................................................29
2.5.1 The power maximising-politicians, the voters and interest groups.................................31
2.6 Bureaucracy............................................................................................................................39
2.6.1 Organisational process and bureaucratic politics............................................................40
2.7 Political Market ......................................................................................................................42
2.8 Partisan Mutual Adjustment.................................................................................................42
2.9 Institutional Approach...........................................................................................................44
2.9.1 Functionalism .................................................................................................................44
2.9.2 Economic Institutionalism ..............................................................................................45
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6. 2.9.2.1 Transaction Cost Economics (TCE)...........................................................................45
2.9.2.2 Principal-Agent theory...............................................................................................46
2.9.3 Political Institutionalism .................................................................................................46
2.10 Functionalism and Neo-functionalism .............................................................................47
2.10.1 Liberal inter-governamentalism......................................................................................49
2.11 Dynamic policy-making approach ...................................................................................50
2.12 Game Theory .....................................................................................................................51
2.12.1 The Power Index Analysis for the EU ............................................................................52
2.13 Searching for the appropriate tools for the analysis.......................................................56
CHAPTER 3. THE PERFORMANCE OF THE CAP FROM 1958 TO 1998..58
3.1 CAP developments .................................................................................................................58
3.1.1 Productivity vs. overproduction......................................................................................60
3.1.2 Distribution of CAP benefits and farm incomes .............................................................63
3.1.2.1 The price support system as means to support farm incomes ....................................63
3.1.2.2 Farm income support distribution from the EAGGF among EU countries................64
3.2 The CAP and the EU Budget.................................................................................................68
3.2.1 The European Budget in the 1990s – the increase of a paradox .....................................72
3.3 Environmental effects of the CAP.........................................................................................75
3.4 Welfare costs of the CAP .......................................................................................................76
3.5 The increase in complexity ....................................................................................................77
3.6 Decision-making speed in the EU’s Agricultural Council of Ministers .............................78
3.7 Assessment and conclusions on the past development of the policy...................................79
CHAPTER 4. THE FORMAL AND INFORMAL EU DECISION-MAKING
PROCEDURES WITH SPECIFIC REFERENCE TO AGRICULTURE ..........81
4.1 The legislative bodies..............................................................................................................81
4.2 The Commission .....................................................................................................................81
4.3 The Council.............................................................................................................................83
4.3.1 Organisation of the Council Meetings ............................................................................85
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7. 4.4 Working Groups, COREPER AND SCA.............................................................................86
4.5 The European Parliament ..................................................................................................... 87
4.6 Economic and Social Committee (EcoSoc)...........................................................................87
4.7 Other statutory committees ...................................................................................................88
4.8 The creation of CAP legislation ............................................................................................88
4.9 The evolution of the Council of Ministers ............................................................................91
4.10 Voting Rules - their development, the formal procedures, actual behaviour...............93
4.10.1 Qualified Majority Voting for the CAP ..........................................................................94
4.11 The Sectoral Bias in the Council ......................................................................................98
4.12 The dominance of net budgetary balance considerations ..............................................99
4.13 Conclusions on QMV ......................................................................................................100
CHAPTER 5..........................................THE AGENDA 2000 NEGOTIATIONS
...................................................................................................101
5.1 Introduction ..........................................................................................................................101
5.2 Methodology of the budgetary analysis..............................................................................102
5.3 The Birth of Agenda 2000....................................................................................................103
5.4 The German Presidency – Setting the parameters for negotiation..................................108
5.5. CAP negotiations ..................................................................................................................110
5.6 The European Council Summit in Berlin...........................................................................113
5.7 The Final Agricultural Reform - An Analysis ...................................................................117
5.7.1 Price cuts and WTO commitments ...............................................................................118
5.7.1.1 Aggregate Measure of Support commitments..........................................................119
5.7.1.2 Export subsidy value and volume commitments......................................................120
5.7.2 The Budget for Agriculture...........................................................................................125
5.8 Consequences of the Berlin agreement on Enlargement...................................................127
5.8.1 Effects of CAP enlargement on production levels........................................................128
5.8.2 Towards a budgetary crisis ...........................................................................................131
5.8.2.1 The direct payments .................................................................................................133
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8. 5.8.3 Side effects of a failed CAP reform..............................................................................134
5.8.3.1 Future pressures on the enlarged EU budget............................................................136
5.9 Conclusions ...........................................................................................................................141
CHAPTER 6. FILTERING PROPOSALS THROUGH THE DECISION-
MAKING INSTITUTIONS - THE POWER OF QMV.....................................143
6.1 Development of a Model for the Council of Ministers ......................................................143
6.2 Statistical Consequences of the Bargaining Process - a Model.........................................145
6.3 Primary general results on the effects of the QMV system for the decision-making
efficiency of the EU’s CAP.................................................................................................................146
6.3.1 Base scenario ................................................................................................................146
6.3.2 Alternative Scenario I - Coalitions ...............................................................................149
6.3.3 Alternative scenario II - Implicit vetoes .......................................................................151
6.4 Incorporating specific preferences for the member states................................................154
6.5 The position of the member states vis-à-vis the original proposals..................................157
6.6 Calculating the preferences of member states ...................................................................162
6.6.1 The Calculation of pn - the probability of voting against or level of non-support for the
proposal for each member state .......................................................................................................167
6.6.1.1 Share of importance of the cereals, oilseeds, beef and diary sectors........................167
6.6.1.2 The Net Balances .....................................................................................................168
6.6.1.3 Shares of importance of individual changes proposed and the effect of farm income
changes 169
6.6.1.4 Shares of importance of individual changes proposed and the level of non-support172
6.7 The blockage or rejection probability of Agenda 2000 .....................................................176
6.8 The preferences of the final Berlin Agreement..................................................................178
6.9 Conclusions ...........................................................................................................................184
CHAPTER 7... THE EFFECTS OF ENLARGEMENT ON DECISION-MAKING
...................................................................................................186
7.1 Continuation of the present Decision-Making System in an Enlarged Union.................189
7.1.1 The Power of a CEEC coalition....................................................................................190
7.1.2 Implicit veto power for Poland .....................................................................................191
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9. 7.2 The effects of introducing the Nice Treaty changes to the QMV rules............................193
7.3 The effects of enlargement on future reform prospects ....................................................196
CHAPTER 8.SUMMARY AND CONCLUSIONS .........................................198
8.1 The selection of the analytical tools ....................................................................................199
8.2 The Council’s performance along the history of the CAP ................................................200
8.3 The decision-making system for agriculture......................................................................201
8.4 The Agenda 2000 negotiations.............................................................................................202
8.5 Modelling the decision-making process..............................................................................205
8.6 Results of the analysis on the decision-making procedures of the Council .....................207
8.7 Recommendations ................................................................................................................209
8.7.1 Reform of the decision-making procedures ..................................................................211
8.7.2 Reforming the CAP ......................................................................................................212
8.8 A view of the future..............................................................................................................215
REFERENCES.............................................................................................216
ANNEX A. THE AGRICULTURAL POLICY IMPACT MODEL....................235
ANNEX B. THE EU BUDGET MODEL ........................................................252
Annex B.I Budgets, year 1997 and Agenda 2000 proposals..................................................260
Annex B.II Negotiation of Agenda 2000 and decision ............................................................264
Annex B.III Longer term effects of the Agenda 2000 agreement............................................267
ANNEX C. ....................................................THE SHAPLEY - SHUBIK INDEX
.......................................................................................................271
ANNEX D. THE WEIGHTING OF VOTES IN THE COUNCIL AGREED AT
NICE ...................................................................................................272
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10. Tables
TABLE 2. 1 THE SHAPLEY-SHUBIK POWER INDEX FOR QUALIFIED MAJORITY VOTES
IN THE COUNCIL OF MINISTERS 54
TABLE 2. 2 THE SHAPLEY-SHUBIK INDEX FOR A PRIORI VOTING ALLIANCES WITHIN
THE COUNCIL OF THE EU 55
TABLE 3. 1 AVERAGE FARM NET VALUE ADDED PER COUNTRY 66
TABLE 3. 2 WELFARE EFFECT OF THE CAP ON THE EC MEMBERS AS % EC GDP 76
TABLE 3. 3 CSE AND PSE ESTIMATES FOR THE EU IN THE 1990S 77
TABLE 4. 1 VOTES IN THE COUNCIL OF MINISTERS UNDER QMV 91
TABLE 4. 2 THE DISTRIBUTION OF VOTES IN THE COUNCIL OF MINISTERS, 1997 95
TABLE 5. 1 AGENDA 2000 PROPOSALS 104
TABLE 5. 2 AGENDA 2000 PROPOSALS - BERLIN OUTCOME 118
TABLE 5. 3 AMS LEVELS IN 2000 UNDER DIFFERENT EXCHANGE RATE ASSUMPTIONS
120
TABLE 5. 4 EXPORT VOLUME COMMITMENTS AND EXPORTS OR EXPORTABLE
SURPLUSES 121
TABLE 5. 5 SUMMARY MEASURES OF PRICE VARIABILITY AND PRODUCTION OF
WHEAT IN THE 1990S 123
1
TABLE 5. 6 NET CONTRIBUTIONS AND GDP PER CAPITA, EU 15 , AT 1999 PRICES 127
TABLE 5. 7 DIFFERENCES IN SUPPORT PRICES EU-CEECS 129
TABLE 5. 8 THE EFFECT ON NET BUDGETARY BALANCES OF THE REBATES FOR NET
CONTRIBUTORS, EU 15 AND EU 20, MILLION € (1999 PRICES) 135
TABLE 6. 1 COALITIONS IN THE COUNCIL OF MINISTERS AND THEIR VOTES. 150
TABLE 6. 2 PREFERENCES, VETOES, QMV AND THE PROBABILITY OF A PROPOSAL
BEING BLOCKED BY THE COUNCIL 154
TABLE 6. 3 AGENDA 2000 PROPOSALS 157
TABLE 6. 4 VALUE OF FINAL AGRICULTURAL PRODUCTION (VAP), 1997 168
TABLE 6. 5 CHANGE IN NET BALANCES CAUSED BY THE PROPOSALS FOR
AGRICULTURE 169
TABLE 6. 6 CHANGE IN POTENTIAL GROSS FARM INCOMES FROM ORIGINAL AGENDA
2000 PROPOSALS, MIO € 171
TABLE 6. 7 CLASSIFICATION TABLES OF LEVELS OF NON-SUPPORT FOR THE
COMMISSION’S PROPOSALS 173
TABLE 6. 8 LEVEL OF NON-SUPPORT FOR THE CEREALS AND OILSEEDS PROPOSAL 174
TABLE 6. 9 LEVEL OF NON-SUPPORT FOR THE BEEF PROPOSAL 174
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11. TABLE 6. 10 LEVEL OF NON-SUPPORT FOR THE DAIRY PROPOSAL 175
TABLE 6. 11 CALCULATION OF PN - THE PROBABILITY OF VOTING AGAINST OR LEVEL
OF SUPPORT FOR THE PROPOSAL 176
TABLE 6. 12 THE PROBABILITY OF REJECTION OF THE ORIGINAL AGENDA 2000
PROPOSALS TO REFORM THE CAP 177
TABLE 6. 13 EFFECTS OF QMV AND IMPLICIT VETO, THE CO-FINANCE CASE 178
TABLE 6. 14 BERLIN AGREEMENT 179
TABLE 6. 15 CHANGES IN NET BALANCES CAUSED BY THE BERLIN AGREEMENT FOR
AGRICULTURE 180
TABLE 6. 16 CHANGE IN POTENTIAL GROSS FARM INCOMES FROM THE BERLIN
DECISION, 2006, MIO € 181
TABLE 6. 17 LEVEL OF NON-SUPPORT FOR THE CEREALS AND OILSEEDS PROPOSAL 182
TABLE 6. 18 LEVEL OF NON-SUPPORT FOR THE BEEF PROPOSAL 182
TABLE 6. 19 LEVEL OF NON-SUPPORT FOR THE DAIRY PROPOSAL 183
TABLE 6. 20 CALCULATION OF PN - THE PROBABILITY OF VOTING AGAINST OR LEVEL
OF SUPPORT FOR THE PROPOSAL 183
TABLE 6. 21 THE PROBABILITY OF REJECTION OF THE BERLIN AGREEMENT 184
TABLE 7. 1 COMPARATIVE DATA ON AGRICULTURE IN THE CEECS AND THE EU, 1996
187
TABLE 7. 2 VOTES AND BLOCKING MINORITY IN THE COUNCIL EU-22 189
TABLE 7. 3 VOTES AND BLOCKING MINORITY IN THE COUNCIL EU-22 AFTER NICE 194
TABLE 7. 4 THE EU-15 QMV BEFORE AND AFTER NICE 195
11

12. Figures
FIGURE 3. 1 AVERAGE FARM NET VALUE ADDED COMPARED TO PER FARMER
RECEIPTS FROM EAGGF, YEAR 1996 67
FIGURE 4. 1 LAYOUT OF COUNCIL MEETINGS 86
FIGURE 4. 2 THE AGRICULTURAL DECISION MAKING PROCESS 90
FIGURE 5. 1 NET BALANCES IN 1997 COMPARED WITH THE AGENDA 2000 PROPOSALS
IN THE YEAR 2006 (AT 1999 PRICES) WITH AND WITHOUT ENLARGEMENT AS
CALCULATED IN THE FINANCIAL PERSPECTIVES 107
FIGURE 5. 2 POSSIBLE EFFECTS OF GERMAN PROPOSALS ON NET BALANCES FOR
SELECTED COUNTRIES, AFTER FULL IMPLEMENTATION OF AGENDA 2000 109
FIGURE 5. 3 NEGOTIATING POSITIONS 110
FIGURE 5. 4 NEGOTIATING POSITIONS: BERLIN SUMMIT 115
FIGURE 5. 5 PRICE RESPONSIVENESS OF WHEAT 123
FIGURE 5. 6 RECEIPTS PER FARMER, 1997 126
FIGURE 5. 7 RECEIPTS PER FARMER, 2006 126
FIGURE 5. 8 THE BUDGETARY IMPACT OF AGENDA 2000 PROPOSALS COMPARED WITH
THE BERLIN OUTCOME IN THE YEAR 2006, EU 15 AND EU 20 (AT 1999 PRICES) 132
FIGURE 5. 9 EFFECT OF THE DELAY TO 2004 OF THE ENLARGEMENT ON THE
BUDGETARY ALLOCATION AVAILABLE FOR ENLARGEMENT 137
FIGURE 5. 10 EU BUDGET NET BALANCES UNDER SCENARIOS 1 AND 2, YEAR 2010 –
COMPARED WITH THE BERLIN FINANCIAL FRAMEWORK YEAR 2006 (1999
PRICES) 139
FIGURE 6. 1 PROBABILITY OF A PROPOSAL BEING REJECTED UNDER UNANIMITY,
QUALIFIED AND SIMPLE MAJORITY RULES 147
FIGURE 6. 2 STATUS QUO GAP 149
FIGURE 6. 3 PROBABILITY OF A PROPOSAL BEING REJECTED UNDER UNANIMITY AND
QMV WITH AND WITHOUT COALITIONS 151
FIGURE 6. 4 DIFFERENT IMPLICIT VETO EFFECTS 152
FIGURE 6. 5 EFFECTS OF DIFFERENT IMPLICIT VETO COMBINATIONS BY FRANCE AND
GERMANY 153
FIGURE 7. 1 EFFECT OF QMV IN AN ENLARGED UNION 190
FIGURE 7. 2 EFFECTS OF IMPLICIT VETOES IN AN ENLARGED EU 193
FIGURE 7. 3 THE NICE TREATY EFFECT FOR THE EU-15 195
12

13. FIGURE 7. 4 THE PRESENT SYSTEM COMPARED TO THE NICE TREATY AGREEMENT
FOR THE AN EU OF 22 MEMBER STATES 196
FIGURE 8. 1 ADAPTING THE EU DIRECT PAYMENTS TO ENLARGEMENT – A
TRANSITION SYSTEM 214
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14. Abbreviations
A Austria
AMS Aggregate Measure of Support
B Belgium
CAP Common Agricultural Policy
CEECs Central and Eastern European Countries
CKR Czech Crown
CoA Court of Auditors
COREPER Committee of Permanent Representatives
CSE Consumer Support Estimate
D Germany
DK Denmark
DG AGRI Directorate General for Agriculture and Rural Development
DP Direct Payments
DUP Directly Unproductive Profit-Seeking
€ Euro
E Spain
EAGGF European Agricultural Guidance and Guarantee Funds
EC European Community
ECU European Currency Unit
EcoSoc Economic and Social Committee
EU European Union
EEC European Economic Community
EFTA European Free Trade Agreement
EL Greece
EP European Parliament
F France
FEOGA French version of EAGGF
Fin Finland
GATT General Agreement on Trade and Tariffs
GDP Gross Domestic Product
GNP Gross National Product
HF Hungarian Forint
14

15. I Italy
IGC Intergovernmental Conference
ISPA Instrument For Structural Policies for Pre-Accession
Irl Ireland
Lux Luxembourg
MEP Member of the European Parliament
NL Netherlands
NVA Net Value Added
OECD Organisation for Economic Co-operation and Development
P Portugal
PSE Producer Subsidy Estimate
S Sweden
SCA Special Committee on Agriculture
SEA Single European Act
SLK Slovak Crowns
SMV Simple Majority Voting
TCE Transaction Cost Economics
TEU Treaty of the European Union
TOR Traditional Own Resources
UK United Kingdom
URAA Uruguay Round Agreement on Agriculture
USA United States of America
USD US dollar
QMV Qualified Majority Voting
UK United Kingdom
UN United Nations
VAP Value of Agricultural Production
VAT Value Added Tax
WTO World Trade Organisation
15

16. Chapter 1. The Agricultural Council: A broker or breaker of
decisions
I stared at him gloomily. ‘What is it all for, Bernard?’ I
asked. ‘What are we all doing? What is the point of it
all?’
He looked momentarily nonplussed. ‘I didn’t read
theology, Minister.’
I tried to explain my concerns to him. ‘What I mean,
Bernard, the waste of it all. Paying a lot of people to
produce masses of food. Paying another lot to destroy it.
And paying thousands of bureaucrats to push paper about
to make it all happen. Doesn’t the futility of it all depress
you?’
‘Not really,’ he replied slightly puzzled. ’I’m a Civil
Servant.’
Conversation between the Minister, Hacker, and Bernard,
his personal secretary, in ‘The Complete “Yes, Prime
Minister”’ by J. Lynn and A. Jay, BBC Books, 1986.
The objective of this research is to explore the idea that the decision-making
procedures at Agricultural Council of the EU not only have a negative effect on the
rationale and effectiveness of the Common Agricultural Policy (CAP), but also are
unfit for the future. The underlying hypothesis is that the CAP is strongly affected by
sectoral and national interests of the member states, and that this influence is
detrimental to European interests. The stress of the research lies in the analysis of the
mechanisms in the Council which allow sectoral, national interests to influence the
CAP excessively ensuring a sub-optimal policy outcome.
This research has the following aims:
1. To test the hypothesis that the decision-making procedures in the Council of
Ministers encourage the status quo for the CAP when reforming the policy and
that there is a drift towards the lowest common denominator.
2. To test the hypothesis that national interests and the sectoral character of the
Agricultural Council of the EU affect the efficiency of the CAP. Each member
state negotiates its position under the following conditions for itself:
a) Negative changes in net contributions should be minimised.
16

17. b) Changes in the distribution of the benefits should be minimised, i.e. target
groups should as much as possible remain unaltered.
c) Considerations, which transcend the agricultural sector, are often
neglected, due to the exclusive presence of Agricultural Ministers in the
Council.
3. To analyse the process of decision-making using the Agenda 2000 proposals by
the Commission as an empirical proof of the hypothesis.
4. To examine if the outcome of the Agenda 2000 negotiations left the EU
unprepared for its forthcoming enlargement and for the WTO negotiations.
5. To test the hypothesis that the enlargement of the EU will further delay the
possibility of reforming the policy after enlargement.
6. To discuss possible solutions to the institutional problem of decision making in
the EU.
1.1 Reasons for concentrating on the CAP and the Agricultural Council of
the EU
The CAP is a unique case of international co-operation. It is the first and only truly
common policy of the European Union, introduced in the Treaty of Rome of 1957.
The powers for drafting proposals and the implementation of legislation were given to
the European Commission and the decision-making capacity was delegated to the
Agricultural Council of the EU. It is remarkable that the founding Member States of
the EEC were ready to put their agricultural policies in the hands of an
intergovernmental or supranational body. This Council will be often referred to as the
Agricultural Council of Ministers.
The member states gave up the ability to introduce separate national policies. The
reasons for such a pooling of sovereignty for the agricultural sector were multi-
dimensional, but three points seem to be the most important:
1. The depressed and inefficient state of the agricultural sector in Western Europe in
the 1950s. Farms were in general small and farmers incomes low. Moyer and
Josling (1990) and Tracy (1989) describe clearly the poor state of agriculture in
Western Europe.
17

18. 2. It was thought that trade liberalisation in Europe would reduce the low incomes in
agriculture even further without improving productivity. With this belief in mind,
agricultural policy had to create a common system that avoided competition
between the members of the European Community in agricultural products
(Fennell, 1987), as well as protecting the farmers from adverse market
developments in the international markets.
3. The need for a trade-off between the Federal Republic of Germany and France.
Germany was interested in free access to the French industrial market. In
exchange, France would be able to enter the German agricultural market. The
CAP would allow the entrance of French agricultural products in Germany while
protecting the German farmers from the cheaper French produce. This was
achieved by lifting trade barriers and simultaneously introducing relatively high
intervention prices (see Swann, 1988; Tracy, 1989; and Moravcsik, 1993).
The Treaty of Rome establishing the EEC set out the objectives of the CAP in
Art.39.1:
(1) to increase agricultural productivity by promoting technical progress and by
ensuring the rational development of agricultural production and the optimum
utilisation of the factors of production, in particular labour;
(2) thus to ensure a fair standard of living for the agricultural community, in particular
by increasing the individual earnings of persons engaged in agriculture;
(3) to stabilise markets;
(4) to assure the availability of supplies;
(5) to ensure that supplies reach consumers at reasonable prices.
These are the most quoted objectives. However, there are other objectives in the
Treaty and in subsequent reforms of the CAP. In Art. 41, provision was made for
measures to be taken in the fields of vocational training, research and dissemination of
agricultural knowledge, as well as for promotional activities for the consumption of
certain products. Particular attention should be given to Art.43, which lays down that
decisions should be made under qualified majority voting (QMV) in the Agricultural
Council. Nevertheless, it took thirty years to enforce this rule. Until 1986, the use of
18

19. unanimity was the rule and even today, QMV is still not applied strictly. The reasons
for the use of unanimity in the Council are explained in Chapter 4.
Another important point in the Treaty is the claim in Article 39 that the Common
Agricultural Policy “... recognises the need to take account of the social structure of
agriculture and of the structural and natural disparities between the various
agricultural regions.”
In general, the CAP was supposed to be build upon three principles which were to
guide every Community policy:
A single market: the free movement of agricultural products within the Community.
Community preference: protection from world market competition.
Financial solidarity: Sharing the cost of the CAP and centralisation of the funding.
Subsequent Council decisions have added other objectives such as lately
environmental sustainability or the protection of rural areas. These objective are,
however, not included in the Treaty and are just part of Council Regulations. It
requires a revision of the Treaty to change or add Articles, the Council can
nevertheless approve objectives which become an integral part of the set of
regulations of the CAP.
Despite the fact that the budgetary outlays of the CAP have steadily increased and that
the number of norms and regulations have grown to ‘Byzantine’ proportions (Rieger,
1996), the general view is that the CAP is inadequate to face the realities of the
market and achieve efficiently a number of the objectives stated. The dissatisfaction is
at all levels from politicians and researchers to consumers, even beneficiaries
complain of its inadequacy. There is a very large literature which documents the
inefficiency of the CAP. Whilst the CAP has its defenders, principally amongst
groups representing the beneficiaries, there is a general presumption that the policy is
not a cost-effective way of delivering its objectives.
The decision-making procedures of the European Union (EU) have been recurrently
criticised as being the source of inefficiencies and inappropriate agricultural policies
19

20. (Scharpf, 1988, 1994; Kirman and Widgren, 1995; Swinbank, 1989; and many
others).
There are clear symptoms, which point to the conclusion that the Council is unable to
handle the problems of European agriculture. The agricultural sector is dynamic and
influenced by an array of shifting variables caused by changing weather conditions,
falling employment levels, technical change, farm restructuring, strong productivity
increases and fluctuating world prices. Nevertheless, most of the main features of the
CAP survived unaltered from the foundation of the policy in 1968 until 1992, and any
changes which were made occurred only after painful crises and difficult bargaining
in the Agricultural Council of Ministers. It therefore seems reasonable to question the
effectiveness of the decision-making process.
1.2 The importance of the research
The future of the agricultural sector faces difficult challenges in the future. The
Uruguay Round Agreement on Agriculture (URAA), agreed under the General
Agreement of Trade and Tariffs (GATT) and now incorporated into the World Trade
organisation (WTO), restricted agricultural support and introduced a real ceiling on
the level of subsidies to agriculture in the Union. Export subsidies for surpluses are
constrained in both value and volume. The costs of the CAP are not any more a
‘simple’ problem of finding willing contributors to pay for the surpluses through a
bargaining process among the members, it has also become an important part of trade
negotiations at WTO.
The AMS (Aggregate Measure of Support) limit agreed at the URAA is high enough
not pose an immediate threat, but for how long? If intervention stocks pile up, there is
a strong probability that the costs of the CAP will soon drift up. This is even more
likely with the prospect of a future enlargement with the applicant Central and Eastern
European Countries (Bulgaria, Czech Republic, Estonia, Hungary, Latvia, Lithuania,
Poland, Romania, Slovenia), Cyprus, Malta and Turkey.
It is questionable if the EU's CAP is the appropriate tool for the applicant states, all
having incomes per capita below (often considerably) the Union’s average GDP.
These countries also have (with the exception of the Czech Republic) a higher
20

21. proportion of the population in an underdeveloped, problem-ridden agricultural sector.
Under these circumstances, it is important to have a well-designed policy, as well as a
decision-making body, which is ready and able to react swiftly and efficiently to
problems emerging from the enlargement process. The present situation in the
agricultural sector seems to validate the belief that the decision-making procedures are
unable to react to unexpected developments. Given the ample evidence of the failures
of the CAP, it seems reasonable to suggest that at least some of the deficiencies
originate at the level of decision-making.
It is not enough to find inefficiencies in the policy to prove that the Council is unable
to handle agricultural policy; these do not represent sufficient proof that they originate
from the Council. Apparently policy failures may exist because the policy transfers
involved represent the democratic will of the population.
This research argues, however, that the decision mechanisms of the Council distorts
the democratic process and increases a drift towards a kind of ‘agrosclerosis’. The
term is borrowed from ‘Eurosclerosis’ that has been widely used to describe the
stagnation of EC until the 1980s. This ‘agrosclerosis’ cannot be justified solely by the
interaction of voters, interest groups and politicians, but has allegedly been fostered
by the decision-making institutions of the EU and in particular the Council of
Ministers. Sectoral and national interests and the rules of unanimity voting until the
1980s, and QMV since, are suggested to be an underlying cause for the stagnation of
the integration of the EU in general and the CAP in particular.
This research shows strong evidence that the CAP decision-making procedures are
inefficient. The voting model developed in chapter 5 and the empirical evidence from
the Agenda 2000 negotiations, leave little doubt that an reform of the decision-making
process is necessary if the EU wants to enlarge and face the growing demands of a
dynamic open world market in agriculture.
The thesis has eight chapters. After this introduction, Chapter 2 reviews the literature
on public choice. This is followed by a review of the historical development of the
CAP (Chapter 3), a theoretical description of the decision-making procedures
(Chapter 4), a description of the Agenda 2000 negotiations (Chapter 5), a
21

22. mathematical model of the Council’s voting system (Chapter 6), an analysis of the
situation after an enlargement (Chapter 7), and the conclusions (Chapter 8). The
combined explanatory power of the formal voting model and the less formal analysis
of the Agenda 2000 negotiations provides the basis for the judgement that the future
feasibility of the decision-making process is in severe doubt.
22

23. Chapter 2. Approaches to policy decision-making analysis
“Not the least of the reasons that public policy has proven
so unwieldy is that it is the property of everyone and no
one. The disciplines required to understand public policy
cut right across the old academic lines of demarcation.
(...) But the flipside of such splendid single market of
ideas and techniques wherein all the borders between
disciplines and sub-disciplines are breached is that the
subject is verging on complete fragmentation. This
becomes very evident when public policy is taught.”
Parsons (1995, p. XV)
This chapter searches for an analytical framework capable of explaining the role of
decision-making on the CAP. There is a large literature concerned with the way
policy decisions are taken by governments or international organisations. This chapter
presents a general review of various approaches to policy analysis. The reason for
reviewing all these frameworks follows the opinion of Parsons (1995) that the analyst
should accept the pluralistic nature of research in policy analysis.
The importance of this exercise can be appreciated following Allison (1971), who
demonstrated how different methodologies can give conflicting accounts of the same
phenomena. His analysis of US decision-making in the Cuban missile crisis from
three different perspectives gave three different explanations for the same events, each
apparently as convincing as the others. Policy analysis is a multi-disciplinary subject,
a fact that often seems to be forgotten by researchers. Given the volume of the printed
work on policy choice it is certainly a great temptation to stick closely to the known
framework and to avoid entering the confusing world of interdisciplinary research, a
move that would force the analyst to digest decades of results by numerous authors. It
is logical to fear such a move, as it would certainly put into question many of the
analytical techniques and assumptions in the familiar framework. However, by
embarking upon a review of the different approaches to policy analysis, researchers
can improve their own framework by complementing it with the strengths of other
schools of thought.
23

24. 2.1 Approaches to Policy decision analysis
There are numerous analytical frameworks that attempt to give insights into public
policy decision-making. This section revises a large number of those as well as some
of their sub-disciplines:
• Welfare economics
• Politico-economic models
• Political Preference Functions
• Public Choice
• The theory of Bureaucracy
• Political Market
• Partisan Mutual Adjustment
• Institutional Approaches
• Functionalism and Neo-functionalism
• Game Theory
2.2 Welfare economics
Welfare economics has always constituted a core component of policy analysis.
Gravelle and Rees (1992) give it a short description: “The subject matter of welfare
economics is the ethical appraisal of economic systems.” It is the branch of economics
dealing with normative issues, not describing how but how well it works. Two main
themes are researched in welfare economics, allocative efficiency and equity. An
equity test for the CAP would be the analysis of the ability of the policy to make
incomes in agriculture comparable to incomes in other sectors in the economy. The
allocative test would study the capacity of the policy in place to improve overall
welfare in the economy. For the CAP welfare economics would study the existence of
a market failure in the agricultural sector and advocate for a correction which would
maximise total welfare.
Generally speaking, welfare economics categorises markets and policies by their
ability to maximise welfare. The origins of this term can be traced back to Adam
Smith and his advocacy of a free market in which the “invisible hand” of competition
would allocate efficiently resources maximising the welfare of the economy
(Nicholson, 1992). The role of the authorities is to help create a competitive market
and only intervene were a market failure or imperfection occurs, i.e. where particular
24

25. circumstances do not allow an efficient competitive market to exist, for example in
the case of natural monopolies. The welfare economic framework of policy research is
intrinsically connected to the rational choice theories. The rational political actor, a
central national actor, possesses complete information and the power to create and
implement policies. Policies are devised with the objective of correcting imperfect or
missing markets. These models are easy because they do not require any information
on the workings of the policy process.
The dominant school of welfare economics is the Paretian one. The search for “Pareto
efficiency” is the core of the welfare economics. Pareto optimal solutions maximise
the overall welfare of the economy. A perfectly competitive market will equate
demand and supply for goods at certain prices. The market will be Pareto optimal,
hence the central importance of Pareto efficiency in welfare economics. At this point
no change can make anybody better off without making someone else worse off. The
problem of Pareto optimality is that it does not concern itself with equity issues. The
allocation of resources may be efficient but not ‘fair’.
Welfare economics therefore usually analyses the capacity of a relocation of resources
of achieving its intended equity goals with the best allocative efficiency. Welfare
economics has had a very big impact in economic policy. For example, the
privatisation of public utilities has been done following the welfare economic
theories. Welfare economics is often used to calculate the effectiveness of the CAP,
estimating the costs and efficiency of the policy to attain the desired results.
2.2.1 Welfare Economics, the rational actor and the CAP
It is not necessary to be an expert in the CAP to understand that welfare economics
can only measure the welfare costs of the policy but not explain the reason for the
particular selection of policies. It is true that to a certain extent, the aim of agricultural
policies is to eliminate a supposed number of market failures in the agricultural sector.
There has always been a widespread belief that agricultural markets suffer from a
market failure and that prices for agricultural products do not reflect the real costs of
the product. However, the CAP was not only introduced to correct for this failure, but
also to stabilise markets, increase productivity and ensure a ‘fair’ standard of living
for farmers (see section 1.1). Agricultural policies are therefore not solely conceived
25

26. to correct for market failures and target the maximisation of economic welfare of the
whole economy. In fact, the actual impact of the policies is largely far from the
allocative efficiency required by welfare economic considerations. The rational actor
would eliminate the commodity price and income support, as these create distortions
in the economy, causing considerable efficiency and welfare losses. However,
defenders of the CAP claim that it is important to consider the “non-economic”
objectives and that the overall policy effect is welfare maximising, but given their
nature (e.g. landscape effects, avoidance of rural depopulation) these cannot be valued
in pure economic terms.
Winters (1990) criticises heavily the notion used by decision-makers in the EU and
other OECD countries that agricultural policy has “non-economic” objectives. His
article shows that the policies have an economic impact and furthermore it is negative.
Thus according to him the “non-economic” objectives are economic. Winters defends
his position further asking how efficiently the policies reach their objectives.
Economic or not, agricultural policies should be efficient and cost effective in
achieving specified goals. According to Winters the CAP as well as other OECD
agricultural policies are sub-optimal. Most policies fail to target the problems of the
sector efficiently and to fulfil the stated objectives. His analysis does not answer or
even address, however, why the decision-makers have opted for these apparently
irrational policies.
In any case, the way in which CAP support regimes are devised actually violates the
assumptions based on the notion of the ‘benevolent dictator’ in welfare economics
and rational choice models.
2.3 Political Economy models
The main category of models dealing with the interaction between voters and
government that consider politicians as real decision-makers are the political-
economy models. According to Frey and Schneider (1979, p.203): “The basic idea of
a politico-economic model is that the voter’s evaluation of government performance,
and therefore government chance of staying in power, depends substantially on
economic conditions; and that the government in turn seeks to manipulate the
26

27. economy in order to stay in power and to maximise its utility”. This theory follows the
economic assumption that voters are rational utility maximisers.
The voters evaluate the government’s performance and vote for the incumbent
government if they are satisfied or for the opposition if they are not. The need for the
government to please the voters causes it to choose policies that boost the economy
before an election, even though these may be distortionary and inflationary. For the
beginning of its mandate, the next government will then have to adopt disinflationary
restrictive policies to reduce inflation and bring the economy nearer to equilibrium.
When the elections approach again the government will be tempted to reintroduce an
economic boost to the economy. This behaviour is partly responsible for the so-called
‘business cycle’.
The classical authors for the business cycle phenomenon are Nordhaus (1975),
Lindbeck (1975) and Mc Rae (1975). They suggested a trade-off between
unemployment and inflation as an important factor in generating the business cycle.
Frey and Schneider (1978; 1979) included growth in the equation. All authors with
the exception of Mc Rae assume that the voters are myopic, while for Linbeck (1975)
the voters are furthermore irrational in their expectations, a contradiction of the
assumption of rationality of the voters. The myopia argument allows the government
to manipulate the economy during election years, aiming to boost employment or
growth. This provides an incentive to create cyclical economic conditions and Fair’s
(1988) empirically based model of voters’ myopic behaviour for US elections seems
to support this.
Fair developed an econometric model for the USA that estimates the outcome of
elections based on past inflation and per capita income growth in the election year. He
predicted that the voters look back six to nine months regarding the real (per capita)
growth rate and two years regarding inflation rates to decide on the party to elect. The
predictions for the model were only wrong in three of 19 past elections, and predicted
the re-election of the Republican Party in 1992.
Politico-economic models have mostly been used to study macroeconomic
relationships. The importance of this analytical tool is that many other schools on
27

28. public policy derive their methodology from the politico-economic models. In fact,
most models presented in this chapter fall under the category of ‘new political
economy’, denoting their origins. However, in this thesis the term ‘new political
economy’ has been avoided, as there does not seem to be a precise definition of what
should be included under this title or not. More precise terms have been used to avoid
this vague and unnecessary classification.
2.4 Political Preference Functions
Political Preference Functions (PPF) are popular with agricultural economists. This
methodology assumes that current policies are a result of past political bargaining
processes. Policy actions are observable and therefore it is possible to estimate a
governance criterion function through ‘revealed preferences’. Rausser and Freebairn
(1974) list the steps necessary to specify and estimate a PPF. First, it is necessary to
determine the relevant variables, such as consumer and producer welfare, budget
expenditures and foreign influence (e.g. trade). The second step is to find the
appropriate mathematical model describing the relationship between the variables.
This allows the analyst to perform the next step of estimating the parameters. PPFs
enable analysis of economic policies to avoid the use of (unobservable) utility
functions. Incomes of individuals are used as a measure of utility and policies are
assumed to affect the PPF only by influencing people’s incomes.
A problem arises from the use of individuals’ incomes as a proxy of their utility, i.e.
in measuring the impact of non-income related policy targets. Gardner (1989) solves
the problem by aggregating the individuals in interest groups, thus e.g. environmental
benefits can be valued as an increase in the “income” of environmental groups. While
the losers, e.g. farmers, suffer a fall in income because of the costs of complying with
the new regulations. The level of political success by interest groups is measured by
the change in their aggregate “income” brought by a policy change. Gardner does not,
however, explain how to measure the environmental benefits for example. He just
stresses the need to quantify the value of non-economic objectives.
Preferences of individuals and interest groups are assumed to be stable, like the utility
functions derived in consumer theory. Gardner (1989) argues that this is a reasonable
assumption, policy preferences are generally very stable, in any case not less stable
28

29. than consumer preferences. The model uses convex political indifference (PI) curves
which describe the welfare or “income” combinations of two groups, which are
politically equally acceptable. Convexity follows Peltzman’s (1976) argument that the
political weight rises, when people’s incomes fall. This has been generally accepted as
true for the agricultural sector, so that as farmers’ incomes fall relative to incomes in
other sectors their political weight increases.
There is a possible paradox that contradicts Peltzman’s assumptions. If the political
weight of the interest groups depends on their expenditure in lobbying, then the richer
the group, the stronger its political influence. This could cause concave political
indifference curves with no internal maximum. Peltzman considers that the result
would be the unlikely but theoretically possible event of one interest group getting all
the income, i.e. dominate the economy. To avoid this paradox, Peltzman assumed that
the marginal costs of a policy increase and that marginal income gains decrease when
incomes of the interest group increase. Marginal dead-weight losses rise as a
consequence. These assumptions guarantee the convexity of the PI. Most studies,
however, have used linear indifference curves. Baffes and Chambers (1989) have
criticised this approach because it neglects the importance of having second-order
conditions. In any case, the biggest problem lies in determining the PPF. Rausser et al.
(1982) complain that the estimation of the policy behaviour equation is largely
determined by the beliefs of the analyst.
2.5 Public Choice
“Public Choice can be defined as the economic study of non-market decision-making,
or simply the application of economics to political science. The subject matter of
public choice is the same as that of political science: the theory of the state, voting
rules, voter behaviour, party politics, the bureaucracy and so on. The methodology is
that of economics, however” (Müller, 1979, p.1). The main characteristic of this
methodology is the assumption of rational self-interested individuals who try to
maximise their utility subject to certain constraints.
The public choice framework is the most widely used tool used to try to understand
the policy choice in the agricultural sector. The focus on bureaucracy is a basic
element of the public-choice school. The theories had strong influences in setting the
29

30. political agenda in the 1970s and 1980s. The approach originates in the works by
Downs (1957 and 1967) Buchanan and Tullock (1962), Tullock (1965) and Niskanen
(1971). These state that the characteristic of the modern state is that the bureaucracy
has gained power by serving itself rather than the public. This is one of the main
focuses of Galbraith (1974), who describes the bureaucracy as a technostructure that
increases its power by planning the state system for its own purposes. He makes
comparisons between the maximising behaviour of firms and the behaviour of the
state as a ‘seller’ of public goods and policies.
Downs (1957) wrote the first positive theory of political economy for a democracy.
He assumed that agents in the society are rational, that there exists uncertainty and
that information has a price. Politicians make political decisions with the objective of
remaining in power. They need to win votes and therefore need to maximise popular
support. Voters vote for the politicians they perceive will defend their interests best.
The existence of absenteeism and interest groups is explained through the transaction
cost of acquiring information. The benefits of voting and being a member of a
political group have to be higher than the costs, otherwise the voter will not vote.
Pressure group formation is a cause of the asymmetries of information. They are
better informed about voters’ preferences and government policies, thus becoming a
sort of mediator between the two. Interest groups seek to exploit their informed
position to influence political decisions.
Buchanan and Tullock (1962) writings on party competition and its consequences,
and the later work by Tullock (1965) on the self-serving nature of bureaucracy in the
US State Department are considered to be the foundations of the public choice school.
For Tullock, the analysis of policy-making has to follow the same set of theories as
the behaviour of the firm and consumers. Self-interest, i.e. the maximisation of utility,
is the key. The monopolistic position of the state is a market failure that has to be
solved by introducing market forces into the bureaucratic process, by contracting out,
privatisation and competition among government departments. This debate has been
of great importance since the 1980s. Many countries are adopting the principles of
privatising state owned utilities and contracting out.
30

31. Downs (1967) offered a more complex set of bureaucratic behaviour laws.
Bureaucratic decision-making follows a set of 16 laws in the pursuit of self-interest.
The laws derive from the structure and life cycle of a bureau. The size and age of the
bureau affects its behaviour. The objective of a bureau is to grow bigger. Niskanen
(1971) who applies neo-classical economics to the bureau follows a similar line of
thought. Bureaucrats are interested in maximising their budgets in a similar manner as
profit-maximising firms. The maximisation of their budgets is the only way in which
bureaucrats can maximise their utility. According to Niskanen, the politicians are
pressurised to make spending promises. The bureaucrats’ behaviour is rational
because of the absence of a way to calculate the returns for extra bureaucratic input. It
is impossible to calculate the difference between marginal costs and marginal revenue
to maximise profit as firms do.
From these origins, public choice theories developed in different directions searching
for answers to the relationships between voters, pressure groups and politicians as
well as for the workings of international organisations. An independent bureaucratic
school developed, which is presented in Section 2.6.
2.5.1 The power maximising-politicians, the voters and interest groups
In a public choice framework, politicians are assumed to want to maximise their
power and prestige. They all face the re-election constraint in their home countries.
For the CAP this assumption is very important, as the final stage of the negotiations
on a policy proposal is the approval at the Agricultural Council of the EU. This
Council is composed of the ministers of the member states. As ministers, they are
accountable in their home countries to parliament for their actions, and thus implicitly
under the scrutiny of the voters. The ministers’ interest is to secure the re-election of
their party to office. Thus they will be interested in maximising the benefits in the
negotiations for their home country. Hence, they will protect and foster the interests of
the most influential and powerful domestic pressure groups.
Vaubel (1986) uses a public choice framework to analyse the origins of international
organisations and in particular of the EC. He presents a new model, in which he
pinpoints the importance of the power-maximising behaviour by the politicians, the
significance of voters and in particular, the lobbies. He argues that the conventional
31

32. theories for the reasons of the existence of international organisations were based on
three pillars that neglected these dimensions. The original pillars are the following:
• The international organisation allows reducing the negative international
externalities in the form of underproduction of international public goods and the
over-exploitation of common resources.
• International economies of scale in the production of national public goods would
not be exploited in the absence of such an organisation.
• International co-operation can improve the benefits for the participants compared
with policy decisions in a national game framework. This theory is based on the
results of game-theoretic approaches.
Vaubel considers that politicians at international negotiations are not completely
dependent of the wishes of their voters, as often assumed in the literature on
international negotiations. National aspects are neglected. Politicians are able and
biased towards pursuing their own interests which are not shared by the voters.
Vaubel presents his own model, in which politicians attempt to maximise their utility
by maximising their power through the introduction and implementation of policies
they favour in the international organisation.
Constrained by the need to stay in power in their home countries, politicians are
effectively restricted in their actions by the need of being re-elected. The freedom of
the politicians in the international organisation is limited further by the rules
governing the organisation itself and the binding nature of agreements. Politicians will
therefore only participate in the international organisation if:
• it allows them obtain agreements which satisfy him/her personally, or
• it helps their party getting re-elected, or
• it reduces the cost (in the form of lost votes) of implementing his/her preferred
policies domestically.
32

33. International agreements increase the information costs for the voters and thus reduce
the unpopular effects of policies as voters lose touch with the decision-making
process. Politicians can use the international agreements to draw attention to other
more popular policies, to hide unpopular policies or to disseminate false information.
Vaubel builds on these points, in particular claiming that the member countries try to
shift the unpleasant and unpopular tasks to the international organisation. The treaties
and the machinery of the organisation are used as ‘policy dustbins’. Vaubel gives
examples in the EC of such a shift of unpleasant policies from the national level to a
supranational common policy. The CAP is his preferred example. The controversial
and distortive policies such as higher prices, intervention buying, degrading,
destroying or dumping the excess output, have been transferred to a supranational
level. There seems also to be ample evidence in the EU of politicians shifting the
blame on EU institutions for such unpopular measures. Blaming ‘Brussels’ for the
evils in one’s country has become common throughout Europe.
International organisations also introduce various costs that are either none existent or
smaller at the national level. Brooks (1996) claims that voters are generally ignorant
of the consequences and causes of agricultural policy. This is in part caused by the
information costs induced by an international organisation like the EU due to the
reduced transparency and the distance of the decision-making institutions. Vaubel also
mentions the information costs for politicians, the multitude of languages and the
distance of the international institutions all affect the policies. Consequently, these
organisations have more slack in their policies. Brooks (1996) goes as far as to claim
that the lack of transparency created by international agreements and therefore the
increase in information costs, give an incentive to politicians to participate in the
organisations.
As for the role of civil servants, international bureaucrats have the same utility
functions as national bureaucrats and the international setting of the organisation
allows them more freedom in pursuing their interests of maximising power (Vaubel,
1986). Applying these theories, Vaubel (1994) makes a critical appraisal of the
different approaches in the public choice framework of the integrative process of the
EU. Vaubel’s theories are not aimed directly at the CAP, but he used the CAP
33

34. explicitly as an example of his theories. His main interest lies in analysing why the
politicians of the member states transfer powers to the EU and permit or even promote
centralisation. In his opinion, the problems of the CAP are a combination of the
‘policy dustbin’ effect and the economically inefficient distribution of benefits which
have been fostered by the unanimity principle followed during most of the existence
of the EU. As all governments have the same voting weight under the unanimity
principle, each member is likely to claim an equal share of benefits regardless of its
population size. Thus the per-capita receipts from the budget tend to be largest for the
smaller countries.
Vaubel also attempts to explain the situation the effects of QMV. He discusses the
voting power of the members and the importance of the decisive members. Further he
discusses the power of lobbies and their crucial importance. Vaubel claims that the
EU suffers from a democratic deficit that increases the power of lobbies at
Community level. Information costs for individual voters are too high, thus leaving
the policy-making arena to an exclusive club of politicians and lobbyists. Lobbyists
represent groups of individual voters, but this does not guarantee that these lobbies
represent the views of the majority.
However, Garcia Raoul-Jourde (1997) criticises Vaubel’s approach, which assumes
that the EU institutions work like other international organisations, e.g. the UN. In
Vaubel’s view international organisations consist of bureaucracies, which have as
their only goal the increase in their influence and budget. The Commission would also
only be a ‘taker’ of policies, completely dependent on the Council’s preferences. The
Commission should therefore not have any interest in the work it is supposed to do,
i.e. protect the interest of the European Union. Garcia Raoul-Jourde’s thesis shows
evidence that the Commission is not a pure bureaucracy as Vaubel presents. The
Commission consists of the bureaucratic services and the political structure of the
College of Commissioners. The link between the Commission and the Member States
is also closer than in other international organisations. She shows that the goals of the
Commission are more complex and do incorporate interests well beyond
centralisation of power and increase in budgets. The Commission has also the power
to influence the decision-making process due to the sole power of initiative in the
conception of the proposals for the Council. According to her, the Commission is
34

35. actually a counterweight to the inter-governmentalist structure of the Council and
avoids the creation of the ‘junk’ policies Vaubel refers to.
This brings us to the issue of lobbies and their influence. The origins of the research
on the importance of lobbies can be traced to Olson (1965), who analyses the power
and formation of lobbies. According to him, smaller lobbies have greater power than
bigger lobbies as the bigger ones suffer from free riding and a lack of a strong set of
core interests. However, he fails to explain what the optimum size is, and it seems that
this varies according to the sector. The agricultural lobby has been very influential
despite its large size. Recently, moreover, the importance of the farmers’ lobbies
seems to be decreasing even though their size has been steadily falling. Olson’s theory
also does not explain the following paradox: If the government needs to gain a
majority of votes to stay in power, it will not be interested in granting favours to a
small group if their views are not well accepted by the general public. On the
contrary, large groups have often a strong influence on the voting patterns. It will be
in the interest of the politicians to please the larger lobbies.
Olson’s work nevertheless influenced the work of many economists. For example, the
economists Barro (1973), Peltzman (1976) and Stigler (1971, 1972 and 1974) of the
Chicago School determined that the politicians do not act for altruistic reasons with
the interest of eliminating negative externalities in the economy. The reasons for their
protectionist and regulative policy decisions are to be found in the trade of votes
between the government and the demands by industry. Their work, together with the
findings by the Public Choice School founded by Buchanan and Tullock (1962),
paved the way for the rent-seeking theories.
The most influential works on the rent-seeking society are Krueger (1974), who
describes the government as a discriminating monopolist allocating import licences,
and Bhagwati (1982) who created the famous DUP term, the Directly Unproductive
Profit-seeking activities. DUP activities by bureaucrats for personal gains create
distortions in the economy. This theory is of great importance for the analysis of
decision making in countries where corruption is high.
35

36. The outcome of the interest group theories is that lobbies are the cause of inefficient
and distortive policies. The lobbies encourage increasing governmental protection at
the cost of taxpayers and consumers, by obtaining from the state a number of
protectionist policies and subsidies. The harms done by the policies are then
subsequently compensated by other policies instead of removing the cause. For
Vaubel (1994) the lobbies are a prime cause for the selection of distortionary policies
in the EU. The democratic deficit incites the lobbies to ‘rent-seeking’. Senior Nello
(1984), Andersen and Eliassen (1991), De Gorter and Tsur (1991), Swinnen (1994)
and Adshead (1996) (as well as many others) have discussed in detail the importance
of the interest groups in agriculture. Senior Nello’s (1984) application of the public
choice and pressure groups theories for the CAP concludes that there is a drift to
increased protection for agriculture in individual Member States and at the EU level.
However, in the 90s this drift was been attenuated due to the URA. Nevertheless,
from 1997 to 1999 the PSE (Producer Subsidy Equivalence) level has increased in the
EU and other OECD countries (OECD, 2000).
The fact that all Member States of the Union are to a lesser or grater extent
beneficiaries from the agricultural budget makes them also less inclined to seek
reforms while more interested to attempt increasing their own benefits at the costs of
other members. The costs of information also play an important role. The benefits of a
reduction in protection are lower for the individual consumer than the cost of
gathering the necessary knowledge on the technicalities of the CAP to lobby for
reforms. This is not so for farmers who would lose proportionately much more from
any reductionist change (Koester, 1978, 135-139; Moyer and Josling, 1990, pp. 8-9;
Senior Nello, 1984, p.265).
Senior Nello (1984) also uses Hirshman’s (1970) concepts of ‘exit’ and ‘voice’.
Farmers have difficulties to ‘exit’ agriculture and many are unwilling to do so. This
does not mean that there has not been a drastic reduction in agricultural employment,
but this reduction is not as smooth as in sectors where assets are easily transferred, i.e.
skills. The outcome is a ‘sub-optimal’ and difficult exit rate. As Moyer and Josling
(1990) point out, the farmers cannot easily shift their fixed capital resources out of
farming to more productive endeavours and so are often reluctant to leave the land.
These farmers rely heavily on the use of political ‘voice’. This explains why they have
36

37. a strong tendency to group into more homogeneous and efficient lobbies to protect
their interests. Farm groups can also form successful lobbies more easily than other
social groups, because they are more homogeneous, and therefore suffer less from
Olson’s (1965) free rider problems.
The large farmers generally run farm organisations. Smaller farmers join
organisations because of the large information costs, which fall considerably through
membership (Moyer and Josling, 1990). This dominance of the large and wealthier
farm owners can explain why the CAP has been devised in a way that benefits
primarily large farmers. This follows Downs’ (1957) theories, in that the information
and signalling costs involved in forming and expressing policy preferences are large
for the single individual. Unless the benefits are larger than the costs, the individual
farmer will not participate directly in the political lobbying process. The owners of
large farms, i.e. rich farmers, have an incentive to lobby and to rally the small farm
owners to their cause by making the costs of participating lower and financially
rewarding. The benefits that can be acquired through the lobbying group are higher
than the costs. The outcome, however, is that the policies lobbied for will be largely
influenced by the interests of the richer farmers who obtain higher benefits then the
poorer farmers.
Lobbying in the EU also becomes even more important than at national level.
Andersen and Eliassen (1991) and Adshead (1996) defend the theory that membership
of the EU reinforces rather than weakens interest groups of the member states.
Another approach to explaining the size of the agricultural policies in the EU has been
presented in De Gorter and Tsur (1991) and Swinnen (1994). Their research sheds
some light on the situation of the highly protected agricultural sector in the EU and
the origin of the CAP. The strong increase in protection until the early 1990s is based
on the relationship between voters and politicians. Their models divide voters into
interest groups wishing to maximise values which are important to them as
individuals, while the politicians are interested in maximising the support by voters.
Politicians are assumed to try to find the balance between the demands for higher
protection by the agricultural sector and the demands for lower taxes by the general
population. Voters and politicians are assumed to be rational and fully informed. The
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38. models are based on a model of a two sector economy, agriculture and manufacturing.
The individuals in the economy have identical preferences and maximise their indirect
utility functions. It is assumed that each sector has identical individuals with a ‘pre-
policy endowment’ income. Income transfers are possible between the two sectors
using redistributive policies which represent the total size of the income transfer from
industry to agriculture. Swinnen deduces that “agricultural protection will increase if
agricultural income falls relative to income outside agriculture” (p.4), that “an
increase in industrial employment and/or a decrease in agricultural employment will
increase agricultural protection (...)” (p.5) and that the share of income spent on food
is negatively correlated with the production subsidy, i.e. the richer the consumers the
easier it is to ask them to pay for subsidies to agriculture. The model does not explain
the developments at the supranational level, but does present an explanation for
Member States having a preference for high protection in the agricultural sector. It
can also explain why the UK is less protectionist than France or Germany. The
average incomes from farmers compared with incomes in other sectors are less
favourable in these two countries than in the UK. However, it can hardly explain the
position of countries like Denmark, which have farm incomes higher than or equal to
the average incomes in the economy (Hill, 1996).
In a later article, Swinnen (1995) argues that the decision-making system for the CAP
fosters the status quo. According to him, only “minimal damage” reforms have been
done until now, and everything indicates that this will continue to be so in the future.
There is no incentive for politicians to press for substantial changes, as these would
still be against their political interests at home. He argues that there is no pressure on
the politicians to push for reform. The agricultural lobbies will push for the
preservation of the CAP, and there is no counterbalancing pressure by similarly sized
interest groups by consumers or taxpayers in the member states to take a different
stance. Reforms will therefore follow the road of ‘minimal changes’ under budgetary
considerations and will only reflect partially environmental and social concerns that
interest some other pressure groups. Swinnen therefore predicts only changes that
narrowly allow the EU to keep its agreements in the Uruguay Round and to admit the
CEECs to the EU.
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39. The public choice school in all its different analytical forms can give important
insights on the influence of different groups on the choice of policies. It can give
coherent explanations of the reasons for the CAP being particularly protectionist and
why the agricultural lobbies are able to obtain political concessions. However, the
arguments fail to address a whole dimension in the political process. In particular, the
institutional setting of decision-making is neglected. The rules under which decisions
are taken seem to affect the outcome considerably as well as the strength of the
influence of lobbies. To limit the explanation to a relationship between voters, lobbies
and politicians on the basis of income relationships (Swinnen, 1994), size of lobbies
(Olson, 1962) or the information costs in an international setting (Vaubel, 1986) fails
to explain the distortions caused by the decision-making procedures such as QMV in
the EU. This also does not allow the models to give any precise reasons for the
magnitude of CAP protection.
2.6 Bureaucracy
While public choice further developed into the relationship between politicians, voters
and lobbies, another branch of research continued concentrating deeper into the
workings of bureaucratic structures and their efficiency. While public choice theories
discuss the reasons for politicians to favour or not certain policies or other ones, the
bureaucratic models concentrate on the intermediate stage, the relationship between
the politician and the bureaux in charge of implementing policies.
Niskanen (1971) was the pioneer of the bureaucratic framework. Bureaucrats can
affect the level of expenditure given their power to manage funds. Bureaucratic
theories are important for the implementation stages of policies, these probably have
the potential to clarify some aspects of the decisions taken by the European
Commission. However, the literature on bureaucratic behaviour is scarce. Most of the
theories are based on the assumptions that the bureaucracy wants to increase the
budget in one way or another (Migué and Berlanger, 1974; Aubin et al., 1987).
However, the movements of privatisation in Britain and the USA in the 1980s
contradict this.
Dunleavy (1986 and 1991) shows in his bureau-shaping model that the budget and the
types of bureaucrat and differences in power are much more complex than the theories
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40. based on Niskanen (1971). Senior bureaucrats are more interested in shaping their
departments and budgets to get advancement. Their bureaux therefore suffered from a
reshaping following the interests of politicians and the trends in the successful areas
of the business sector. Contracting out and privatising was a power maximising move
by the top civil servants at the expense of the rank and file: “Rational officials want to
work in small, élite, collegial bureaux close to political power centres. They do not
want to head up heavily staffed, large budget but routine, conflictual and low-status
agencies” (Dunleavy, 1991, p.202).
2.6.1 Organisational process and bureaucratic politics
The ‘organisational process’ and ‘bureaucratic politics’ models presented by Allison
(1971) can also shed some light into policy decision-making. He relaxes the
assumptions of neo-classical models on maximisation and perfect information and
introduces the concepts of processes at the organisational level as well as bureaucratic
considerations. Organisations deal according to inflexible rules and procedural
changes are difficult, thus in Allison’s models, the actors do not search to find a
solution that maximises their utility, but which satisfies their minimum requirements.
They will stop when they find a solution that is good enough. He argues that the more
complicated and decentralised and the larger the number of actors in a bargaining
process, the higher the bargaining costs of any change. These facts create, following
his assumptions, a strong bias towards maintaining the status quo in large decision-
making institutions.
One of the most relevant factors that emerges from his analysis is the importance of
power by the actors at the negotiating table, considering their ability to find like-
minded members. The previous decisions of the decision-making body are important
to understand what it will do in the future. According to Allison, the past record sets
the future constraints.
Organisations tend to act on the basis of standard procedures and rules. Allison
introduces an interesting theory, the government politics paradigm (Allison, 1971, Ch.
5). This paradigm focuses on the bargaining process among players in positions. The
bargaining stance of each player depends on his or her role and interests. The political
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41. decision is the outcome of the bargaining. Different actors are likely to have different
perceptions of the problem, what is at stake, and the feasible options. However, they
will adapt their perceptions and demands to the bargaining process. Acceptability of a
policy becomes the most important criterion and the players will not maximise their
interests. Given these circumstances, knowing the rules and procedures of the
bargaining process is important. Another important factor is the need to build winning
coalitions. To build such a coalition, and because the preferences of different players
are seldom identical, the player that actively seeks to form a coalition will have to
accept the need to make compromises or side payments for other players who join.
What is clearly crystallised from Allison’s work is the fact that the institutional
framework has an important impact on the type of policies that are decided in the
process. For the EU, this would mean that the bargaining process itself affects the
outcome.
Recent research on bureaucracy and organisational choice can be found in the thesis
by Garcia Raoul-Jourde (1997) on the European Commission’s role in policy choices
for agriculture. She describes the policy process for agriculture from the moment the
European Commission initiates the process of putting together a proposal to the
moment it is voted in the Council. She shows how the organisational structure of the
Commission and the different stages in the process to define it, influence the
preferences of the Member states in the Council. By carefully designing policy
packages which attempt to balance the interests of member states and by linking
particular issues to overall policy packages, the Commission is able to ensure enough
support for proposals which would otherwise fail to pass the Council.
Interestingly, she finds evidence that the combined political and bureaucratic structure
of the Commission preserves the EU from the more narrow-minded interests of the
Council’s inter-governmentalist structure. Nevertheless, Garcia Raoul-Jourde is not
complacent. The system has loopholes, and the College of Commissioners, which
represents the political arm of the Commission, faces problems in agreeing on policies
and is often influenced by the link the Commissioners often have with their country of
origin. The pressures to incorporate national priorities into the policy formulation
stage are strong and the Commission is under constant pressure to conform to the
inter-governmental model of decision-making.
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42. 2.7 Political Market
According to Magee et al. (1989) there is a political market that operates in a similar
manner to an economic market. In this market, policies take the role of prices. Interest
groups spend resources to gain political influence until the marginal gains equal the
marginal costs of lobbying. Politicians will similarly redistribute welfare in the
economy in favour of interest groups, until the marginal loss of support by the taxed
equals the marginal gains in support from the beneficiaries. The market is in
equilibrium when these two points are reached.
The political process chosen by Magee et al. to find the equilibrium is divided into
three levels, political parties, interest groups and voters. The political parties behave
as Stackelberg leaders towards interest groups and voters, the former in their turn
behave as Stackelberg leaders towards the voters1. For Magee et al. the political
market is perfectly competitive, i.e. if a party in power fails to deliver the policies
wanted by the pressure groups it will be replaced. This forces the government to
introduce distortionary policies in favour of the interest groups.
There are problems in these theories. The perfect competition assumption is
questionable. Furthermore, supply and demand for policies have to be independent to
follow the micro-economic theory of markets. The Stackelberg leader theory violates
this rule. Politicians (suppliers) are Stackelberg leaders for the interest groups and
voters (demand). Furthermore, this analytical tool does not take into account the
decision-making institutions and their influence.
2.8 Partisan Mutual Adjustment
This approach originates from Lindblom (1959, 1965) and Baybrooke and Lindblom
(1963). Partisan mutual adjustment model analyses policy decisions reached under
bargaining and consensus building. The model arrives to the conclusion that the
bargaining process will be more successful and efficient than policy decisions under a
comprehensive cost-benefit analysis (CBA). The reasons are that CBA tends to fail
for complex situations where there is no agreement on the objectives. There are
1
The Stackelberg model originates from the Cournot oligopoly model. Contrary to Cournot’s
assumption that each firm reacts to the price decisions taken by the other firms, Stackelberg analyses
the case of a firm knowing the reaction curves of its competitors (for a summary of the models see
Nicholson, 1992).
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43. problems with the selection of variables. This means that there is no perfect
information available.
Partisan mutual adjustment allows for a dialogue permitting a consensus on the means
and the objectives of policies. As different people with different perceptions and
knowledge participate, it allows them to find a better solution. It reduces the influence
of special interest, and the process will reflect better the wider interest of the public.
This gives the outcome a higher degree of legitimacy, maybe with a sacrifice in
economic efficiency.
However, Moyer and Josling (1990) question the optimism of the partisan mutual
adjustment theory. Bargaining has high costs and encourages the status quo, and it is
easy for players to avoid change by preventing the reaching of consensus. When the
institution is a legislative body of politicians, the players are often more interested in
taking a visible position (i.e. populism) and get themselves noticed than they have in
seeking the development of effective policies. For the EU’s Council this would mean
that the ministers are more interested in publicity for their domestic constituency (see
also Vaubel, 1994). Reforms and changes only come at times of acute crisis and the
forced response is often less than optimal and incremental, i.e. a new policy is added
instead of abolishing damaging policies already in place.
Scharpf (1988) also questions the partisan mutual adjustment. The bargaining process
in the EU is just this: bargaining. There is no real interest in problem-solving: the
players’ objective is to reap the highest benefits for their own constituency. The
policy target becomes secondary. Scharpf (1988) notes that “ (...) unanimity and
Pareto optimality (...) seem to be restricted to single-shot decisions. In ongoing
decision-making systems, by contrast, unanimity is likely to be associated with a
systematic deterioration of the ‘goodness of fit’ between public policy and relevant
policy environments - unless there should be very powerful mechanism of consensus
formation” (p.257). The mechanisms of consensus formation among independent
sovereign nations, with an interest in showing as much as possible their influence in
the Council, are certainly of varying strength. The long history of unsolved issues in
the EC is a proof of the lack of consensus building mechanisms. Fennell (1997), who
claims that the objectives of the CAP are often forgotten by the decision-makers
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44. provides further support of this idea. Under a properly functioning system, such a
development should not have happened.
2.9 Institutional Approach
What is particularly clear from the bureaucratic models of Allison (1971), is that
while all other socio-economic factors have an important influence, the decision-
making outcome is strongly affected by the institutional setting. The failure to do so in
the public choice literature has already been mentioned. Three analytical frameworks
on the influence of the institutional setting will be presented:
• Functionalism
• Economic institutionalism
• Political institutionalism
2.9.1 Functionalism
The concern of the developers of this framework was to go beyond the formal
structures of institutions and examine how these work in practice, abandoning the
ideal rational actor assumptions. The approach is very empirical, and Parsons (1995)
remarks on its simplistic language and the use of case studies, contrary to the
theoretical model building that constitutes most of the economic approaches to policy
analysis. It prefers the use of historical approaches to case studies and focuses on
actual public institutions rather than on theories of the ‘firm’ or the ‘bureau’.
The origins of this framework can be traced to Selznick (1948, 1949, and 1957).
According to this author, organisations adapt to their external environment to survive,
rather than existing solely for the pursuit of some objectives. This creates a tension
between the ‘rational’ formal goals of an organisation and the need to maintain the
system which is often not ‘rational’ or consistent with these goals. Apart from the
external environment, organisations encounter problems from within. The individuals
within the organisations have their own personal objectives and problems. This can
disrupt or alter the type of decisions actually taken at the end. Decision-making may
be driven by an inner logic created by the values and interests of its members rather
than by rational calculation.
44