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CHAPTER 3
Intergovernmentalism
From Realist to Liberal Intergovernmentalism
The origins of intergovernmentalism are tightly linked to the first period
of stagnation in European integration. In the mid-1960s, the presidency
of General de Gaulle and the ‘empty chair crisis’—France’s representatives
refused to attend any intergovernmental meetings because of a conflict
over the financing of the Common Agricultural Policy—appeared to mark
the limits of supranational integration and the resilience of state interests
and power. It was then that Stanley Hoffmann (1966,1982) formulated
the major assumptions and expectations of intergovernmentalist integra-
tion theory. Intergovernmentalism, however, is not confined to explaining
the limits of integration. Historian Alan Milward (Milward 1984,1994)
later argued that European integration had worked as an intergovern-
mentalist project from the very start. In his view, it was designed as
the ‘rescue of the nation-state’ from the shambles of World War II.
And Andrew Moravcsik’s liberal intergovernmentalism (Moravcsik 1993,
1998) claimed to explain the new momentum of European integration in
the 1980s and 1990s as well.
These are the core tenets of traditional intergovernmentalism:
•States are and will remain the dominant actors in the process of
European integration: they shape European integration according to
their national interests.
© The Author(s), under exclusive license to Springer Nature
Switzerland AG 2022
D. Leuffen et al., Integration and Differentiation in the European Union,
https://doi.org/10.1007/978- 3-030-76677- 1_3
63
64 D. LEUFFEN ET AL.
•The extent of European integration is limited by the states’ interest
in autonomy, the interest in self-preservation of nation-state bureau-
cracies, the diversity of national situations and traditions, the domi-
nance of national identities, and by external actors and influences
(such as the United States or NATO).
•European integration does not undermine the European nation-state
but has strengthened it in the post-World War II reconstruction and
in the global competition with other economic powers and emerging
markets.
•Integration is limited to the economic sector and related ‘low
politics’. States anxious to preserve their autonomy will resist the
integration of the core functions of the sovereign state (the ‘high
politics’ of internal and external security or foreign policy).
•For the same reason, the supranational organizations of the EU are,
and will remain, weak. They lack the expertise, the resources, and
the popular support to expand their power at the expense of the
member states.
Because the unitary state, its power, and its quest for autonomy—core
assumptions of realism in International Relations—is placed at the centre
of theorizing about European integration, we will refer to this traditional
version of intergovernmentalism as ‘realist intergovernmentalism’ (RI).
Intergovernmentalism received fresh impetus from the renewed
interest in European integration in the second half of the 1980s. It
also reflected recent developments in IR theory. In the 1990s, Andrew
Moravcsik developed ‘liberal intergovernmentalism’ (LI), which follows
in the footsteps of the realist variant in so far as it puts states, state
interests, and state bargaining centre stage but gives societal actors and
international institutions a more prominent theoretical role. LI is based
on ‘neoliberal institutionalism’ in IR (Keohane 1984; Keohane and Nye
1977). In line with the liberal component of this IR theory, LI assumes
that the foreign policy of the state results from a domestic policy process
and reflects the issue-specific interests of the dominant domestic groups.
In line with its institutionalist component, LI emphasizes the relevance
of international institutions for facilitating and stabilizing cooperation
between states. In his book ‘The Choice for Europe’ (1998), Moravcsik
analyses the major steps in European integration ‘from Messina to Maas-
tricht’, i.e. from the establishment of the EEC to the foundation of the
EU.
3 INTERGOVERNMENTALISM 65
More recently, a group of EU scholars proposed a ‘new intergov-
ernmentalism’ (Bickerton et al. 2015) that seeks to capture the post-
Maastricht development of the EU. In line with intergovernmentalist
thinking in general, these authors attribute progress in European integra-
tion in this period to the intensification of policy coordination between
member governments (rather than delegation to traditional supranational
institutions such as the Commission). However, this ‘new intergov-
ernmentalism’ also integrates building blocks associated with suprana-
tionalism (deliberative decision-making norms) and postfunctionalism
(domestic politicization pressures).
Because Moravcsik’s is the most prominent, up-to-date, complete,
and theoretically elaborate intergovernmentalist integration theory, our
presentation will be mainly based on LI but highlight the differences to
RI where appropriate. Table 3.1 presents the main building blocks of
intergovernmentalist integration theory, which will be discussed in more
detail in the coming sections.
In this chapter, we will climb down the ladder of abstraction in three
steps. We begin our presentation of intergovernmentalism by explicating
its theoretical roots in rationalist institutionalism in IR and by identifying
four more middle-range rationalist theories that intergovernmentalism
uses to explain international cooperation. We then apply this framework
to European integration in general and specify liberal and realist intergov-
ernmentalist hypotheses. Finally, we extend intergovernmentalism to the
phenomenon of differentiated integration.
Tabl e 3.1 Building blocks of intergovernmentalism
General assumptions Rationalist institutionalism in International Relations
Rational states in an interdependent and anarchical
international system
Explanatory theory Endogenous trade theory, bargaining theory, club theory,
functional theory of institutions
Factors of integration Interdependence, constellations of national preferences and
state power, collective action problems
LI: sector-specific societal welfare preferences, issue-specific
bargaining power, severity of enforcement problems
RI: geopolitical state autonomy preferences, overall power
resources
66 D. LEUFFEN ET AL.
Rationalist Institutionalism
General Assumptions: International Interdependence and Rational
Choice
Intergovernmentalism starts from the assumption that European inte-
gration is similar enough to general international politics, and the EU
is sufficiently like other international institutions, that it can be prof-
itably studied and explained from an IR perspective. Indeed, Moravcsik
maintains that the ‘EC is best seen as an international regime for policy
co-ordination’ (1993: 480; cf. Hoffmann 1982: 33) and that European
integration represents ‘a subset of general tendencies among democratic
states in modern world politics’ (1998: 5). IR theories traditionally
assume that states are the central actors in international politics and
that they act in a context of anarchy, i.e. in the absence of a central-
ized authority making and enforcing political decisions. Policy-making
in international politics generally takes place through intergovernmental
negotiations, and agreements require the consent of all state participants.
The second fundamental is a rationalist framework that puts actors
centre stage and explains collective outcomes such as integration as a
result of the interaction of rational individual choices. (Bounded) rational
choice means that, on the basis of their knowledge about the world and
their preferences, actors calculate the utility of alternative courses of action
and choose the one that maximizes (or, at least, satisfies) their utility
under the circumstances. Rationalist institutionalism in IR theory, then,
explains the establishment of international cooperation and international
institutions as a collective outcome of interdependent (‘strategic’) rational
state choices and intergovernmental negotiations in an anarchical context.
The fundamental starting point for rationalist institutionalism in IR
is international interdependence. An international constellation is char-
acterized by interdependence, if states are unable to fulfil their secu-
rity or welfare needs alone—or if it would be inefficient for them to
act autonomously. Take, for instance, the case of international trade:
according to liberal economic theory, societies as a whole benefit if they
open up for international trade and allow for a division of labour in which
they can concentrate on their most efficient economic sectors. In sum, in a
situation of international interdependence, states are better off collectively
if they cooperate.
Yet international cooperation can be problematic for at least three
reasons. First, there is a transaction cost problem. It is costly for states
3 INTERGOVERNMENTALISM 67
to get information about the preferences and capabilities of other states
in order to determine the most efficient cooperative solution, and it is
costly to negotiate this solution. Under unfavourable circumstances, these
transaction costs can be so high that states prefer not to cooperate at all.
Second, even if states find an efficient solution that benefits all partici-
pants, they are often faced with the problem of how to distribute the gains
and costs of cooperation among them. States try to maximize their own
share of the gains—and they might forgo a deal that they consider unfair
or lopsided. For instance, the Doha round of trade negotiations in the
World Trade Organization has failed because developing and emerging
economies reject deals that they perceive to benefit the ‘North’ dispropor-
tionately. Third, international cooperation is complicated by the problem
of enforcement. It is often rational for a state to ‘free-ride’, i.e. defect
from cooperation and exploit the cooperative behaviour of others. For
instance, states would benefit from protecting their own unproductive
economic sectors against foreign competition while all others open up
their markets.
Explanatory Theories: The Functional Theory of Institutions,
Endogenous Trade Theory, Bargaining Theory, and Club Theory
Rationalist institutionalism offers four substantive theories that specify
how and under which conditions rational state actors cooperate in an
anarchical but interdependent international system. The functional theory
of institutions shows how international institutions help states overcome
the transaction costs and enforcement problems of international coop-
eration. Endogenous trade theory accounts for the policy preferences
of states; bargaining theory explains the substantive outcomes of inter-
national negotiations; and club theory explains the size of international
institutions.
Functional theory of institutions. States establish international institu-
tions because they are functional in dealing with fundamental problems
of international cooperation. Efficient, welfare-maximizing solutions to
international interdependence require reliable information on the state
of the world, cause-effect-relationships, and other actors’ preferences and
capabilities. For instance, what are the obstacles to the liberalization of
international trade? How much would states benefit from removing them?
What are other states willing and able to do to lower trade barriers?
Because of their expertise and impartiality, international organizations
68 D. LEUFFEN ET AL.
are often better at providing this information than governments alone.
Furthermore, they reduce transaction costs by offering a forum for multi-
actor negotiations and services for effective and efficient communication.
Finally, the enforcement problem requires effective monitoring and sanc-
tioning. Again, international institutions are established because they fulfil
these tasks more effectively and efficiently than individual states. Different
institutional designs then reflect the need to deal with different problems
of collective action (Koremenos et al. 2001). The demand for central-
ization increases with uncertainty about the preferences of other states
or about the (future) state of the world and with the severity of the
enforcement problem caused by incentives to free-ride.
Endogenous trade theory . The preference of a state for or against an
international policy depends on the effect that this policy has for the
state. For the paradigmatic case of trade policy, ‘endogenous trade (or
tariff) theory’ (see Nelson 1988 for a political scientist’s survey) tells
us under which conditions states prefer free trade arrangements (low
or no tariffs) to protectionist policies (high tariffs). This has mainly to
do with the state’s economic endowments and structure. According to
the Heckscher-Ohlin model, trade liberalization benefits the relatively
abundant factor, i.e. capital-owners gain and workers lose when capital
is abundant, whereas workers gain but capital-owners lose in labour-
abundant countries. If we assume that the factors are specific to industries
(the Ricardo-Viner model) because capital cannot easily move from one
industry to another in pursuit of higher returns, it is industries rather than
factors that gain or lose from trade liberalization. Export-oriented indus-
tries gain from trade liberalization whereas import-competing industries
lose. In both cases, the winners will lobby for free trade, whereas the
losers will lobby for protection. The success of lobbying in turn depends
on how well the groups can organize. Small groups with concentrated
gains or losses are better able to organize and lobby than large groups
with dispersed gains or losses. This is the reason why producers are usually
better lobbyists than consumers and why highly concentrated industries
do better than those with a large number of small enterprises. Finally, the
theory tells us that the power of large and small countries differs. Whereas
large countries (with large domestic markets) can affect the world market
unilaterally with their domestic policies, small countries are unable to do
so. This already leads us to bargaining theory.
Bargaining theory. The substantive outcomes of international nego-
tiations—how the gains from international cooperation are distributed
3 INTERGOVERNMENTALISM 69
among the actors—depend on the actors’ relative bargaining power.
Bargaining power results from the asymmetrical distribution of informa-
tion and of the benefits of a specific agreement (compared to those of
the status quo or alternative agreements or ‘outside options’). Generally,
actors that have more and better information are able to manipulate the
outcome to their advantage (cf. Schneider and Cederman 1994). In addi-
tion, actors that are less in need of a specific agreement, because they
are more satisfied with the status quo or have alternative options, have
more bargaining power: they are able to threaten the others credibly with
non-agreement and thereby force them to make concessions. If all actors
benefit from cooperation, those with the highest bargaining power can
impose their preferred distribution of the costs and gains of cooperation
on the others.
Club theory . Finally, club theory deals with the issue of organiza-
tional size. A club is a voluntary association deriving mutual benefit from
producing and sharing collective goods such as a common market or a
healthy environment. Membership in clubs can be limited—and often
needs to be because new members are not only additional contributors
to the club goods but can also become rival consumers who restrict
the old members’ access to the club goods (causing so-called crowding
costs). When states integrate their economies, they may produce external
effects for non-member countries (for instance, by diverting trade and
investments away from them). However, third countries can also produce
externalities for the integrated states. For example, lower taxation or social
regulation attract business away from the integrated market and thus
bring its rules and policies under pressure. If this is the case, it would be
useful to enlarge the club or, at least, negotiate common rules to create
a level playing field. In addition, a larger size might produce economies
of scale and increase the budget of the international organization. Thus,
in a rationalist perspective, the question is whether a given integrated
area already has optimal size or whether collective welfare may benefit
from admitting further countries. The core hypothesis of club theory
posits that a club will expand (only) until the marginal costs of admit-
ting a new member equal the marginal benefits. Since clubs are voluntary
associations, all old and new members must derive a positive utility from
expansion lest they use their veto.
LI draws on all four theories to analyse European integration. Endoge-
nous trade theory accounts for state preferences on integration (and not
only on issues of commercial policy); bargaining theory explains who
70 D. LEUFFEN ET AL.
gets what in intergovernmental negotiations on integration; the func-
tional theory of institutions tells us when and why governments delegate
power and competences to European supranational organizations; and
club theory sheds light on the conditions of enlargement.
Intergovernmentalism and European Integration
Which specific propositions on European integration does intergovern-
mentalism derive from these general rational-institutionalist assumptions
and theories? Andrew Moravcsik proposes a three-stage analysis: domestic
politics generates national preferences; intergovernmental negotiations
produce substantive bargains; and governments pool and delegate state
competences in common institutions to secure these substantive bargains.
In its most condensed form, Moravcsik’s argument is that
EU integration can best be understood as a series of rational choices made
by national leaders. These choices responded to constraints and opportuni-
ties stemming from the economic interests of powerful domestic constituents,
the relative power of each state in the international system, and the
role of institutions in bolstering the credibility of interstate commitments
(Moravcsik 1998: 18, italics added).
National Preferences
RI assumes that there is a ‘national interest’ defined by the state. It
most fundamentally consists in preserving and increasing the autonomy,
security, and influence of the state. National preferences on the EU
thus depend on how beneficial or detrimental integration is to national
autonomy. In this perspective, small states are more integration-friendly
than large states. Larger states need international cooperation less than
smaller states because their autonomy and security is less threatened in an
interdependent world. In particular, integration offers smaller states the
possibility to bind larger states to collective rules and to increase their
limited power by joining forces with others (Grieco 1996). In addition,
integration follows the realist logic of alliance formation: European states
are the more willing to integrate the more they feel threatened externally.
By contrast, LI follows a liberal theory of preference formation. Liber-
alism as a theory of foreign policy assumes that governmental preferences
vary between policy issues and reflect the interests and power of societal
3 INTERGOVERNMENTALISM 71
groups (intermediated by domestic political institutions). To the extent
that European integration has focused on economic policies, state prefer-
ences have also been predominantly economic. While general demand for
European integration results from interdependence, the pressure to coop-
erate for mutual benefit in an expanding and ‘globalizing’ international
economy, concrete integration preferences emerge primarily from ‘the
commercial interests of powerful economic producers’ (Moravcsik 1998:
3). As a consequence, governments pursue integration as ‘a means to
secure commercial advantages for producer groups, subject to regulatory
and budgetary constraints’ (Moravcsik 1998: 38). Depending on how
competitive these powerful producers are on the European market, states
demand either the opening and deregulation of markets or protection and
compensation. This is in line with endogenous trade theory.
In policies that deal with non-economic issues or affect business only
indirectly, other societal actors have a stronger role and state prefer-
ences will be more strongly shaped by their concerns. In public policies
such as environmental policy or immigration policy, the strength of
environmental or immigration interest groups and the distribution of
environmental and immigration preferences in the electorate comple-
ment and may even override economic interest. In addition, domestic
economic interests most clearly shape state preferences, the ‘more
intense, certain, and institutionally represented and organized’ they are
(Moravcsik 1998: 36) and the less ‘uncertainty there is about cause-effect
relations’ (Moravcsik 1999: 171). This applies, for instance, to agri-
cultural policy with its concentrated, well-organized, and well-informed
producer lobby. Conversely, ‘the weaker and more diffuse the domestic
constituency behind a policy’ (ibid.) and the more uncertain and modest
‘the substantive implications of a choice’, the less predictable are national
preferences and the more likely ideological preferences will be influ-
ential (Moravcsik 1998: 486–89; Moravcsik and Nicolaïdis 1999: 61).
According to Moravcsik, this is the case, among others, for macro-
economic policies such as monetary policy, where preferences are based
on ‘the macro-economic preferences of ruling governmental coalitions’
(Moravcsik 1998:3).
LI regards interest groups as the relevant domestic constituency of
European integration. Mass publics only become relevant under two
conditions: that European integration creates strong and concrete cost
and benefits affecting large groups of society and that these groups
find a way to affect the government’s integration policy and decisions.
72 D. LEUFFEN ET AL.
According to Moravcsik, this is unlikely in the EU’s core commercial poli-
cies because the interests of consumers and taxpayers are too diffuse to
become effectively mobilized (Moravcsik 1993: 488). It is more likely in
the case of ‘public goods issues’ such as environmental or social policy,
about which mass publics care more strongly and where powerful societal
organizations exist (Moravcsik 1993: 493).
Even in these policy areas, however, Moravcsik does not expect effec-
tive political pressure because the public policies that voters care about
most (welfare-state policies) are not integrated and because European
integration strengthens national governments and weakens the influence
of democratic politics (Moravcsik 1993: 514–515). First, the lack of trans-
parency of EU politics weakens the domestic accountability of national
governments. Second, national parliaments are only weakly involved in
European-level policy-making and have few opportunities to decide on
EU issues. If they do, as in treaty ratification, they can only say ‘yes’
or ‘no’—and in a parliamentary system, the government can usually rely
on the majority to support the European deals it has negotiated. Finally,
voters only get a chance to ratify European decisions if they are put to
a referendum, and referendums are only used in a few countries on the
occasion of treaty changes.
Interstate Bargaining
Intergovernmentalism describes the most relevant negotiation processes
in European integration as processes of intergovernmental bargaining
concerning the distribution of gains from cooperation. Because the
costs and benefits of any cooperative arrangement are likely to differ
across member states, the national preferences of the member states
usually diverge, and because integration decisions often have binding and
substantial material consequences for governments and market actors, the
stakes are high. Negotiations therefore consist in hard bargaining,
in which credible threats to veto proposals, to withhold financial
side-payments, and to form alternative alliances excluding recalcitrant
governments carried the day. The outcomes reflected the relative power of
states – more precisely patterns of asymmetrical interdependence. Those
who gained the most economically from integration compromised the
most on the margin to realize it, whereas those who gained the least
or for whom the costs of adaptation were highest imposed conditions.
(Moravcsik 1998:3)
3 INTERGOVERNMENTALISM 73
This account has two negative implications for the impact of supra-
national organizations. First, Moravcsik argues that efficiency is not a
serious collective action problem in European integration. Transaction
costs are generally low, and information is plentiful and symmetrically
distributed among states (Moravcsik 1998: 479–480) so that intergovern-
mental negotiations reliably produce efficient outcomes. In other words,
governments normally do not need supranational organizations such as
the Commission to help them find a feasible and efficient deal. Second,
and as a corollary, the bargaining power of supranational organizations is
low because they are thus deprived of their main potential bargaining
resource: scarce and asymmetrically distributed information. Suprana-
tional entrepreneurship is not necessary to reach efficient agreements,
and supranational organizations lack the power to bargain successfully for
concessions by the member states. For these reasons, governments remain
in control of the integration process. Supranational organizations do not
get more power than the states want them to have and deem necessary
to provide for stable intergovernmental cooperation.
By contrast, the LI analysis of interstate bargaining is open to the
effects of domestic politics on intergovernmental negotiations (Moravcsik
1993: 514–517). These are captured by the metaphor of the ‘two-level
game’ (Putnam 1988). In the two-level game, national governments
negotiate simultaneously at two tables—one with other governments and
the other with domestic veto-players. In order to reach an agreement,
governments need to find terms that are acceptable both to the other
governments and to those domestic actors that need to ratify the agree-
ment. In doing so, they face a trade-off. A large domestic ‘win-set’, i.e. the
set of domestically acceptable agreements, facilitates intergovernmental
agreement because it makes it easier for governments to accommodate
the divergent interests of other states. At the same time, however, the
agreement may be far away from their preferences. By contrast, a narrow
domestic win-set makes it more difficult to reach international agreement
but increases the government’s bargaining power. If a government can
credibly threaten other governments with the non-ratification of an agree-
ment that they value highly, these governments will accommodate the
preferences of the constrained government in order to secure ratification.
By the same token, the constrained government will achieve a negotia-
tion outcome that is close to its ideal. This is also known as Schelling’s
‘paradox of weakness’. Under conditions of uncertainty, governments can
also exploit the ratification constraints strategically (see Schneider and
74 D. LEUFFEN ET AL.
Cederman 1994). Since a government usually knows better than other
governments what its own domestic win-set is, it can present its ratifica-
tion constraints as more severe than they really are in order to get a more
beneficial deal.
Institutional Choice
Institutional choice is again driven by governments—and by their concern
about each other’s future compliance with the substantive deals reached.
In other words, whereas EU governments do not need or want suprana-
tional organizations to define their preferences, to provide them with the
information necessary to reach efficient agreements, or to devise the rules
of distribution, they rely on them to solve the problems of monitoring
and sanctioning. Even in this respect, however, the supranational orga-
nizations remain instruments and agents of the governments rather than
autonomous actors.
Whether such enforcement problems arise, depends first of all on the
nature of the collective action problem at hand (Scharpf 1999: 165–
166). On the one hand, there are issues of coordination: here, actors
need to agree on a common standard but have no incentive to defect
unilaterally once this standard is in place. In these cases, there is no
enforcement problem, and governments delegate decisions to common
decision-making or supranational organizations mainly in order to reduce
transaction costs. By contrast, when states do have an incentive to defect
and an enforcement problem exists, governments are willing to centralize
decision-making and delegate more extensive powers to supranational
organizations such as the Commission, the Court of Justice, or—in the
case of monetary policy—the ECB.
By transferring competencies to international institutions, governments
remove issues from the influence of domestic actors, which might build
up pressure for non-compliance if their costs deriving from integration
are high. They also remove them from decentralized intergovernmental
control, which may be too weak to secure compliance, in particular if
powerful member states violate the rules (Moravcsik 1998: 9, 73). The
degree to which governments favour the pooling (majority voting) and
the delegation of competences to supranational institutions depends on
the value they place on the issues and substantive outcomes in question
and on their uncertainty about the future behaviour of other govern-
ments. The more a government benefits from a cooperative agreement,
3 INTERGOVERNMENTALISM 75
and the higher the risks of non-compliance by other governments are,
the higher is its readiness to cede competences to the EU to prevent
policy losers from defecting (Moravcsik 1998: 9, 486–487). The inten-
sity, clarity, and predictability of a state’s institutional preferences depend
on how certain or strong their welfare or autonomy implications are.
When institutional effects are uncertain or weak, governments’ institu-
tional preferences will also be weak or follow ideological attitudes. Only
in such cases will federalist or anti-federalist preferences shape the powers
of supranational organizations.
In contrast with the liberal variant, realist intergovernmentalism
assumes that states are primarily concerned about autonomy and influ-
ence in institutional choice—and not so much about issue-specific gains.
They only consent to transferring competences to the EU if they expect
net gains in overall autonomy and influence. This is the essence of
Joseph Grieco’s ‘voice-opportunity’ thesis, which posits that weak states
are particularly interested in European integration and willing to sacri-
fice formal sovereignty because they see it as a way to bind the stronger
states and to enhance their influence on international outcomes (Grieco
1996). The ‘new intergovernmentalism’ concurs with the older, realist
intergovernmentalism in that governments are generally reluctant to dele-
gate authority to supranational institutions. Yet this is because they are
concerned about the domestic legitimacy of such delegation in a politi-
cized EU—and not about the loss in state autonomy. In this respect,
the ‘new intergovernmentalism’ overlaps with postfunctionalism (see
Chapter 6).
General Hypotheses
Intergovernmentalism assumes that states (governments) are the rele-
vant actors in European integration. They initiate, steer, and control
the process of European integration as an instrument to realize national
preferences under conditions of international interdependence. The level
of centralization and the territorial extension of European integration
result from intergovernmental negotiations and reflect the extent of
interdependence, the severity of collective action problems, and the inter-
governmental constellation of preferences and power. Indeed, integration
is fundamentally driven by patterns of interdependence, which trigger not
only a general demand for international cooperation but also shape state
preferences, bargaining power, and institutional choice.
76 D. LEUFFEN ET AL.
•The strength of interdependence explains how much demand there
is for cooperation.
•The position (e.g. stakes and competitiveness) of domestic society in
international interdependence explains state preferences.
•The asymmetry of international interdependence (and of domestic
ratification constraints) produces differential bargaining power.
•The nature of the collective action problem generated by interde-
pendence shapes institutional choice.
Demand for integration increases with the strength of interdependence.
When international interdependence increases in an issue-area and
promises to increase the utility of member state governments from inte-
gration, demand for extending the scope of integration will arise. In
addition, the more uncertain governments are about the future state of
the world and the future rule-compliant behaviour of their cooperation
partners (relative to the utility of cooperation), the more willing they
are to centralize decision-making and enforcement powers in the EU.
Likewise, whenever the non-integration of a state generates externalities
and expectations of gains from integration, member governments and
non-member governments will demand increasing the territorial exten-
sion of integration. Conversely, there will not be any integration in the
absence of interdependence because states will not derive any utility from
cooperating.
In the case of LI, the issue-specific interests of powerful domestic
actors define the utility of integration. In the case of RI, utility is defined
by the overall interest of the state in autonomy and security. The higher
that the expected gains from integration are, the stronger the demand
for integration will be. Whether and how this demand for integration will
be translated into actual integration, however, depends on several supply
conditions: the constellation of preferences and bargaining power, as well
as the availability of adequate institutions.
The likelihood of integration increases with the convergence of national
preferences. Agreement on integration requires that all states reap net
benefits from it—otherwise they would use their veto. The more that the
preferences for integration converge, i.e. the win-set of the negotiations
expands, the easier it is for the states to find a point of agreement.
The substantive terms of integration result from the international distri-
bution of bargaining power. The more powerful a state is, the more
it shapes the terms of integration according to its interests: it is able
3 INTERGOVERNMENTALISM 77
to make other states accept its preferred sectoral regulation (e.g. its
preferred degree of market liberalization or product regulation), distri-
bution of gains from territorial expansion, and level of centralization. For
LI, bargaining power increases with satisfaction with the status quo, the
availability of outside options and the strength of domestic ratification
constraints. It decreases with the intensity of issue-specific societal pref-
erences for European integration. By contrast, in the realist perspective,
bargaining power increases with overall power resources—such as the size
of the territory, population, economy and, ultimately, military capabilities.
Intergovernmentalism
and Differentiated Integration
According to the intergovernmentalist account, successful integration
depends on mutual international interdependence and overlapping
national policy and institutional preferences. If governments are not
mutually dependent on each other for achieving their policy goals and
increasing their utility, there is no need for integration. If they are inter-
dependent, but pursue incompatible policy goals, there is no basis for
integration either. The same is true if governments are interdependent
and have compatible goals but lack the financial, technical, or adminis-
trative capacity to provide for effective cooperation. In such situations,
there may still be opportunities for issue linkages and package deals
(Moravcsik 1993: 504–506). If one government needs the cooperation
of another government on one issue, and the other government needs
help on another issue, they can agree on a package deal, in which the first
government cooperates on the second issue in exchange for the second
government’s cooperation on the first issue. Yet the international hetero-
geneity of interdependencies, preferences, and capacities may be so large
that agreement on integration becomes elusive (Schimmelfennig 2019:
179–180).
Under the constraints of uniformity and unanimous agreement, the
most status quo-oriented government determines the limits of integra-
tion. This state could and would block any vertical or horizontal integra-
tion going beyond its most preferred outcome. Differentiated integration
expands these limits by overcoming the rigidities of uniform integration.
It creates opportunities for policies and groups of countries to be inte-
grated at different levels of centralization. It is thus an efficient strategy
for accommodating international heterogeneity and avoiding deadlock
78 D. LEUFFEN ET AL.
when intergovernmental consent is required. In line with its general
assumptions and hypotheses, intergovernmentalism explains differentiated
integration by differences in interdependence and cooperation problems,
state preferences, bargaining power, domestic ratification constraints,
and—in the case of RI—autonomy costs and benefits.
Realist Intergovernmentalism: Autonomy-Driven Differentiated
Integration
In the RI perspective, differentiated integration results from different
autonomy costs across sectors and countries. In contrast to LI assump-
tions, according to which states have no problem trading in their
autonomy to increase their welfare, realists assume that states value their
autonomy for its own sake and would rather accept reduced welfare
than compromising autonomy—in particular those autonomy rights that
constitute the core of their sovereignty.
In the 1960s, Stanley Hoffmann introduced the distinction between
‘high politics’ and ‘low politics’ to explain the limits of integration and
spillover. ‘High politics’ include those policy areas that concern the
sovereignty, security, and status of a state in the international system. In
these policy areas, it is hard to identify a common good that could be
furthered through integration. Rather, the logic of relative gains and zero-
sum games dominates: one state’s gain is another state’s loss. By contrast,
in the areas of ‘low politics’, states can pursue a common good and realize
mutual gains without compromising their national sovereignty, security,
and power status. In general, foreign policy, defence, justice, and home
affairs policies are the core domains of high politics but taxation, energy,
and monetary policy can be considered key areas of national sovereignty
as well (Hoffmann 1966). By contrast, market economies (which make up
the membership of the EU) generally grant businesses a high degree of
autonomy in the market—and agencies independence in technical regu-
lation. In his later work, Hoffmann conceded that variation between
absolute-gains or common-good issues and relative-gains or zero-sum
issues could be found in principle across the entire range of policies (1982:
29). It is thus the nature of the collective action problem rather than the
substantive policy area that determines whether it is high or low politics.
In line with this reasoning, we should expect a high level of vertical
integration first and foremost in areas of low politics, whereas areas of
high politics are either unlikely to be integrated at all or will be integrated
3 INTERGOVERNMENTALISM 79
later and at significantly lower levels of centralization than low-politics
domains. In addition, horizontal integration is likely to vary with the
policy characteristics of a sector. The integration of high-politics sectors
will be less territorially extended than policy integration in low-politics
sectors—especially if the level of centralization is high. The reason is that
states shy away from integration if autonomy costs are high. This applies
to the big and powerful member states in particular. They are in general
less affected by international interdependence, possess higher autonomy
as well as a higher status in the international system, and are more capable
of providing for their own security, whereas small states have less de facto
sovereignty in the first place and stand to gain rather than lose autonomy
from integration.
In the RI perspective, then, vertical and horizontal differentiation
across policies reflects variation in the autonomy and power costs of inte-
gration. High-politics areas are less vertically and horizontally integrated
than low-politics areas, and small or weak countries are more likely to be
integrated (at a higher level of centralization) than large and powerful
countries. As a corollary of these considerations, we are likely to find
external differentiation in low-politics areas, which attract non-member
states that shy away from the autonomy costs of full membership, and
internal differentiation in high-politics areas in which some member states
are reluctant to commit to deep vertical integration.
Liberal Intergovernmentalism: Heterogeneity of Interdependence,
Interests, and Capacities
In the LI perspective, demand for differentiated integration increases with
the heterogeneity of interdependence, interests, and capacities across poli-
cies and states. As for the heterogeneity of interdependence, policies with
early and high international interdependence are likely to be integrated
earlier than those sectors in which interdependence is weaker or develops
later. That trade policy was integrated earlier than immigration policy and
that defence policy is extremely weakly integrated today, would there-
fore be explained by earlier and stronger interdependence in trade (in
comparison with migration) and by the absence or weakness of security
interdependence. In addition, some policies are characterized by severe
enforcement problems, whereas others merely require international coor-
dination. Both kinds of heterogeneity in interdependence give rise to
vertical differentiation across policies.
80 D. LEUFFEN ET AL.
Moreover, policies vary with regard to the territorial extension of
interdependence. Some issues—such as the pollution or biodiversity of
international rivers and lakes—only affect a few bordering countries;
others such as trade or climate change generate region-wide or global
interdependence. Accordingly, variation in the territorial extension of
interdependence produces demand for horizontal differentiation. Where
the region of critical interdependence is smaller than EU, we should see
internal differentiation; and external differentiation where the region of
critical interdependence extends beyond the EU. Demand for the external
differentiation of the internal market would thus be explained by the
reach of significant market interdependence beyond the organizational
boundaries of the EU.
The same reasoning applies to the historical development of integra-
tion. In this perspective, the integration of the original six member states
would have to be explained by the fact that interdependence among them
was high—and higher than their interdependence with the non-member
countries. According to the same reasoning, countries apply for member-
ship after their interdependence with the EU rises substantially. European
countries that do not want to join the EU should typically be those that
are least dependent on cooperation with the EU.
Even if international interdependence affects all countries and poli-
cies equally, demand for differentiated integration may still result from
heterogeneity of state interests and capacities—in particular, in the EU’s
signature economic policies (Moravcsik 1993: 487; Schimmelfennig
2019: 182). In market-making commercial policies, competitive posi-
tion is paramount. Export-oriented sectors support market expansion
and liberalization, whereas import-competing sectors seek protection
from outside competitive pressures. To the extent that market-correcting
policies affect competition, a similar logic prevails. Producers from high-
regulation, high-standard national economies prefer a similar level of
regulation in the EU to counter the competitive advantage of competi-
tors from low-regulation states; those from states with weak regulation
or weak standards oppose high-level harmonized standards to keep their
competitive advantage in a system of ‘mutual recognition’. Finally, net
contributors to the EU budget oppose the extension of EU subsidies,
whereas net recipients favour an increase in EU expenditure (Moravcsik
1993: 495; Thomson 2011: 136–137).
A good approximation of the major cleavage generating heterogeneity
of interests and capacities is wealth (Bailer et al. 2015; Thomson 2011:
3 INTERGOVERNMENTALISM 81
148–155). Wealthier countries are more likely to have competitive,
export-oriented sectors, to start from higher regulatory standards on
issues such as production and product safety, social security, and the envi-
ronment, and to be net contributors to the EU budget. In addition,
wealth goes together with higher administrative, regulatory, and tech-
nical capacity as well as more scope for independent policy-making. By
contrast, poorer countries typically have less competitive sectors, lower
standards, and lower capacity. Conversely, they rely more on interna-
tional assistance such as the EU’s agricultural and infrastructural subsidies.
Accordingly, LI expects heterogeneity to arise mainly between rich and
poor states. In market expansion and liberalization as well as EU-wide
regulatory standards, the richer countries should favour more integra-
tion, whereas the poorer countries will seek protective exemptions to
reduce market pressure and regulatory costs. By contrast, when it comes
to budget expansion and EU subsidies, the poorer countries are likely to
favour ‘more Europe’, whereas the richer countries prefer to remain at a
lower level of integration.
Correspondingly, the heterogeneity of interests and capacities produces
both vertical and horizontal differentiation. For one, international hetero-
geneity reduces vertical integration. Policies characterized by similar state
preferences and capacities enjoy higher levels of integration than those
characterized by substantial heterogeneity. In this perspective, the weak-
ness of vertical EU defence integration might thus not (only) result from
weak interdependence but from incompatible preferences on the form
and substance of integration and from vastly different military capacities.
Alternatively, international heterogeneity reinforces horizontal differen-
tiation. States with similar interests and capacities group together and
integrate separately from those with different preferences and capacities.
In this perspective, the differentiated membership of member states in
EMU would reflect different monetary policy preferences or different
levels of fiscal and financial capacity.
In part, RI and LI arrive at different propositions because they assume
different geopolitical environments and policy contexts. To the extent
that European integration takes place in a benign international environ-
ment, in which security threats are weak or taken care of by NATO, and
to the extent that it focuses on low-politics areas—market-making and
market-correcting policies, in particular—states do not need to worry
82 D. LEUFFEN ET AL.
primarily about their autonomy and security but can prioritize economic
gain. Furthermore, the overall size of state resources and capabilities loses
relevance. Instead, issue-specific interdependence and capabilities increase
in importance (Moravcsik 1998:6,60).
The Supply Side of Differentiated Integration: Size, Externalities
and Bargaining Power
Differentiated integration as a remedy for deadlock caused by interna-
tional heterogeneity works under the condition that all participating states
regard differentiation as more beneficial than the uniform status quo.
Generally, that should be the case: all states can choose a level of sectoral
and vertical integration that is in line with their level of interdependence
and their integration preferences. This demand may not be met, however,
because of three supply conditions: size, externalities, and bargaining
power.
First, the feasibility of differentiation depends on the size of the group
of countries seeking to integrate. Evidently, this group needs to be large
enough to deal effectively with the policy problem at hand. Moreover, the
benefits of integration need to exceed the transaction costs, which consist,
among others, in negotiating an additional agreement and creating and
sustaining additional or separate institutions. If the criteria of homo-
geneity of interdependence, interests and capacities produce a too small
group of countries willing and able to integrate, vertical and horizontal
differentiation lag behind demand.
Second, differentiated integration may be undermined by externalities
between vertically differentiated policies and horizontally differentiated
groups of countries. The fact that two policies are integrated at different
levels may create costs and inefficiencies for one or both, and the fact
that two groups of countries cooperate at different levels of integration
may negatively affect at least one them. As an example of externalities in
vertical differentiation, take the freedom of movement of persons (strong
vertical integration) and weakly integrated police competences. The effec-
tiveness of the national police is undermined if criminals can easily cross
borders but police officers in their pursuit cannot. In this case, the more
integrated policy creates negative externalities for the less integrated one.
By contrast, the combination of a supranational monetary policy and an
intergovernmental fiscal policy is often seen as an example of a less inte-
grated policy undermining the more integrated policy, because the EU
3 INTERGOVERNMENTALISM 83
cannot strictly enforce fiscal discipline nor decisively support states in
economic crisis.
In the case of horizontal differentiation, the more integrated group
can produce either positive or negative externalities for the less integrated
group in the same policy sector (Kölliker 2001,2006). Positive exter-
nalities allow the less integrated countries to free-ride. This is the case if
the integrationist group creates a pure public good, from which non-
contributors cannot be excluded (at reasonable cost). To take up the
example of monetary policy, the eurozone’s banking union and rescue
funds also benefit banks from non-eurozone member states operating in
the eurozone, even though their home states do not contribute. Alter-
natively, horizontal differentiation may impose negative externalities on
the outsiders. In the police example, in case that one group of member
states was willing and able to integrate their police forces whereas another
group was not, transnational organized crime would have an incentive
to move its activities to the less integrated countries. In this case, the
outsiders are not only excluded from the public good (security) of the
insiders; but being excluded creates an extra burden in comparison with
the pre-differentiation status quo.
Differentiated integration affected by significant externalities is hard
to sustain. In vertical differentiation, it leads the more integrated policy
to be abandoned or the less integrated policy to be upgraded. In hori-
zontal differentiation, positive externalities create incentives for insiders to
defect—why contribute to deeper integration if you can enjoy the benefits
outside?—and negative externalities makes outsiders want to join. Either
way, differentiation disappears (Schimmelfennig 2019: 186–187; Kölliker
2001).
Finally, the chance to realize differentiated integration depends on the
intergovernmental constellation of bargaining power. On the one hand,
states can use their bargaining power to impose differentiation on others.
In negotiations about integration, the most status quo-oriented member
states can threaten to use their veto against any unwanted change. Such a
veto threat will force the integrationist governments either to conclude a
separate treaty outside the EU framework (as in the cases of the original
Schengen Agreement or the Fiscal Compact) or to grant the integration
sceptic an opt-out from vertical integration. In addition, countries with
higher ratification constraints can more easily attain opt-outs. To achieve
the higher level of integration that they desire, states are more willing
to let countries with credible non-ratification threats free-ride rather than
84 D. LEUFFEN ET AL.
jeopardizing the entire agreement. This explains the concessions made
to countries like Denmark or Ireland after the negative referendums on
the Maastricht and Lisbon treaties. Moreover, powerful member states
can exclude those that do not share their integration preferences or have
insufficient integration capacity. For instance, the old member states have
repeatedly used their superior bargaining power in accession negotia-
tions to impose discriminatory transition arrangements on new member
states such as restrictions on the free movement of persons or agricultural
subsidies (Schneider 2009).
On the other hand, states might also use superior bargaining power to
prevent unwanted differentiation—especially if they fear being exploited
by free-riding behaviour or suffering from negative externalities. For
instance, the EU has used its superior material bargaining power to
prevent a renegotiation of the freedom of movement agreement with
Switzerland after the Swiss voted in favour of a popular initiative
restricting immigration and discriminating against foreigners in 2014.
In the withdrawal negotiations after the British Brexit vote, it has like-
wise sought to ensure that the UK could not cherry-pick from market
integration and would not be better off as a non-member state.
Conjectures
According to intergovernmentalism, the main factors driving and
constraining vertical and horizontal integration and differentiation are
international interdependence, the constellation of state preferences and
capacities, the severity of compliance problems, and—at least according to
RI—the extent of states’ autonomy concerns and costs. Table 3.2 provides
an overview.
These conjectures also have implications for the development of inte-
gration over time. For one, policies characterized by higher international
interdependence, more preference homogeneity, less severe compliance
problems, and lower autonomy costs are integrated earlier. Likewise,
countries that are more dependent on the (other) integrated countries
and have more mainstream preferences participate in integration earlier
and are more likely to be part of the insiders in differentiated integration.
3 INTERGOVERNMENTALISM 85
Tabl e 3.2 Intergovernmentalist conjectures
Integration outcomes Explanatory factors
Vertical and horizontal integration increase
with
• International interdependence
• Homogeneity of state preferences and
capacities
• Severity of compliance problems
• Low-politics’ policy characteristics
Vertical differentiation increases with
variation in
• International interdependence
• Homogeneity of state preferences and
capacities
• Severity of compliance problems
• High and low politics
• Absence of externalities
between policies
Horizontal differentiation increases with • Heterogeneity of states’ international
interdependence
• Heterogeneity of state preferences and
capacities
• ‘High-politics’ policy characteristics
• Size of the integrationist group
• Absence of externalities between
groups
• Bargaining power of states preferring
differentiation
Self-Test and Discussion Questions
1. Which are the three steps in a liberal-intergovernmentalist explana-
tion of European integration? Which are the relevant explanatory
factors at each step?
2. Consider three different policy areas in European integration: agri-
cultural, environmental, and monetary policy. Which are the rele-
vant domestic interest groups and how would you characterize their
integration preferences? Whose interests will shape the integration
preferences of the government?
3. What are the sources of bargaining power in intergovernmental
negotiations on integration? Do the big member states generally get
the most out of European integration?
86 D. LEUFFEN ET AL.
4. Why are governments capable of keeping the integration process
under their control according to intergovernmentalism? Which
factors or developments might undermine their control?
5. Commercial policy is more integrated than defence policy. How
would intergovernmentalists explain this vertical differentiation?
6. France and Germany participate in all EU policies, whereas the UK
(when it was still a member state) and Romania are not part of the
eurozone and the Schengen area. How could intergovernmentalism
explain this variation?
Further Reading
Moravcsik, Andrew. 1998. The Choice for Europe: Social Purpose and State
Power from Messina to Maastricht. Ithaca: Cornell University Press, is
the most complete outline of liberal intergovernmentalism and provides a
detailed analysis of major steps in European integration from the Treaties
of Rome to the Treaty of Maastricht.
For an earlier and shorter presentation of liberal intergovernmentalism,
read Moravcsik, Andrew. 1993. Preferences and Power in the Euro-
pean Community: A Liberal Intergovernmentalist Approach. Journal of
Common Market Studies 31 (4), 473–524.
You can also find a textbook overview of the theory with applica-
tions to the recent crises of the EU in Moravcsik, Andrew, and Frank
Schimmelfennig. 2019. Liberal intergovernmentalism. In European Inte-
gration Theory, ed. Antje Wiener et al., 3rd ed., 64–84. Oxford: Oxford
University Press.
A special issue on liberal intergovernmentalism in the Journal of Common
Market Studies. (Liberal Intergovernmentalism and Its Critics, ed. by
Mareike Kleine and Mark Pollack 2018) revisits the empirical evidence
for liberal intergovernmentalism and has a concluding article by Andrew
Moravcsik.
Finally, see Schimmelfennig, Frank. 2019. The Choice for Differentiated
Europe: An Intergovernmentalist Theoretical Framework. Comparative
European Politics 17 (2) 176–191, for an outline of an intergovernmen-
talist theory of (horizontal) differentiated integration.
3 INTERGOVERNMENTALISM 87
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