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This chapter argues that the policy equilibrium established by the Treaty is unlikely to be sustainable due to several challenges. These are the relaunching of multilateral trade negotiations under the World Trade Organisation, the Eastward enlargement of the EU, and the proliferation of bilateral and plurilateral agreements between the EU and its trading partners. Existing policy mechanisms that should be replaced are discussed.

This chapter examines the relationships of the European Union with the United States and the rest of the world, focusing on trade policies, preferential trade agreements with various countries, and common foreign and security policy (CFSP). It argues that the EU remains a political dwarf despite being an economic giant. European political cooperation in the form of the CFSP was aimed at paving the transition to an international political role. However, many Europeans were not ready to accept the consequences for national sovereignty, and failed to agree on how the CFSP would operate in the context of the Atlantic alliance. Deepening integration and rapid changes in the external environment could accelerate the pace.

The ability of supranational agents such as the European Commission and Court of Justice to influence policy outcomes in the European Union varies as a function of the control mechanisms established by member governments to limit supranational discretion. Examines three cases of market liberalization representing a range of control mechanisms, in the areas of external trade (negotiation of the Uruguay Round), competition policy (the De Havilland merger decision) and the free movement of goods within the Union (ECJ jurisprudence from Cassis de Dijon through Keck). Taken together, these three case studies suggest that the Commission and the Court have indeed been activist in their mission to establish a single European market, but also that their successes have been limited as a function of the control mechanisms established by member governments to control their discretion.

The last two decades have seen a major expansion in the scope of the European Union’s foreign economic policies. Repeatedly, EU member states both formally and informally have delegated significant powers to carry out these policies to the European Commission and other agents at the European level. What consequences does this delegation of competencies to European institutions have for the control that member states can exert over EU foreign economic policies? A sizeable literature suggests that delegation has led to a loss of control by member states. This chapter, however, argues that member states have maintained control over EU foreign economic policies even in the presence of far-reaching delegation. This is so because delegation has been accompanied by control mechanisms that make sure that the agents’ scope for autonomous action is tightly circumscribed. The chapter illustrates the plausibility of this argument in an analysis of the main changes in the EU’s institutional set-up for foreign economic policy-making from the Treaties of Rome to the Treaty of Lisbon.

This chapter introduces the volume’s argument and establishes the significance of its subject. In particular, it sets out how important the EU is in international trade and global trade governance and how important trade policy is to the EU as a constitutive policy, source of legitimacy, and instrument of foreign policy. It also sets out some unresolved tensions regarding the EU’s trade policy—Is it liberal or protectionist? Is it a champion of multilateral rules or a scofflaw?—and contends that a policy sub-system approach helps to resolves these apparent tensions.

Chapter 9 concludes by highlighting how variation in politics across trade policy instruments—trade policy sub-systems—produces distinctive policies. It reflects on the implications of this analysis for the EU’s capacity to act strategically and to be an effective global actor. In addition, it considers the implications of treating trade policy as being composed of multiple policies for the broader IPE literature on trade policy. Our central argument is re-stated: explaining the European Union’s behavior as an economic superpower requires understanding policy sub-systems, some of which conspire to encourage Europe to behave very parochially even as it seeks influence globally.

The second case study zooms in on the case of the Canadian system of multilevel government. In contrast to the US case, Canada has demonstrated remarkable adaptability in its patterns of vertical power-sharing. The chapter finds that despite the provinces’ initial lack of voice in its self-rule setting, the Canadian federation has been able effectively to construct a regime of ongoing, constructive, and trusting vertical dialogue in the field of international trade policy. Against the backdrop of increasing domestic market integration and a generally low degree of politicization, their increased voice has eventually incited subcentral executives to forego their sovereign right to exit. Ultimately, the Canadian case demonstrates that, under certain conditions, self-rule systems can adapt to their increasing embeddedness in multilevel trade governance. Despite being built on a delineation of central and subcentral spheres of competence in ‘watertight compartments’, the Canadian system integrated means of shared rule to deal with pressures from the international realm while preserving a substantive measure of subcentral autonomy. The concomitant increase in subcentral voice leads to two observations of immediate relevance to the theorizing of multilevel trade governance. First, despite the systematic inclusion of subcentral executives in trade policy-making, the destructive side-effects of the joint-decision trap can be avoided. Second, multilevel systems are dialectically capable of integrating certain fields while decentralizing authority.

The concluding chapter of Trade Policy in Multilevel Government not only elaborates on the theoretical model’s explanatory power and its limits in the light of the three analysed polities, but also turns to raising questions as to the democratic legitimacy of the multilevel pattern of trade policy described in the book. Questions of democratic legitimacy in multilevel systems are complicated by the fact that a popular and a territorial logic of representation coexist and, at times, compete. Both citizens and constituent units are entitled to input into the system. The ensuing tension between popular and territorial logics of representation also permeates multilevel trade governance. In the EU and the Canadian cases, territorial legitimacy clearly takes precedence over popular representation. Seen from this perspective, the US case appears in a somewhat different light. In the face of adaptational pressures arising from economic and political globalization, popular representation could also be regarded as an additional layer of autonomy in self-rule systems of multilevel government.

The third case study investigates the case of the European Union. It finds that the EU’s constituent units enjoy an unusually influential role in its council model of subcentral representation. Member states shape EU trade policy at both stages of formal decision-making. In-between these formal veto points, collaborative relations between supranational and national executives are supported by a dense and formalized network of committees as well as a clear-cut division of procedural authorities. Turning to the two theorized intervening factors, the chapter finds that the nexus between European integration and international liberalization has been particularly close in procurement, reinforcing member states’ openness. Politicization of procurement liberalization, in turn, has remained low despite recent years’ contestation against CETA and TTIP. Ultimately, the EU case corroborates the initial expectation that shared rule systems are institutionally and procedurally well-equipped to adapt flexibly to the demands of multilevel trade governance and organize openness more effectively than self-rule models. EU member states have developed strategies to avoid the joint-decision trap’s propensity to decision-making blockades and lowest common denominator outcomes. Among these means rank a clear-cut division of procedural competences with the Commission, a densely institutionalized system of IGR largely secluded from domestic public and party political pressures, and the adoption of legislative proposals by qualified majority. This general institutional and procedural set-up has allowed the Union to act as a ‘market-making polity’ both internally, forging an integrated procurement market, as well as externally, pursuing an offensive agenda in the WTO and in preferential trade agreements.

The second chapter constructs a theoretical framework to account for the introduced research puzzle. Building on a central line of work on ‘federal dynamics’, it argues that the institutions and procedures of intergovernmental relations bear a decisive impact on a multilevel system’s ability to organize openness to international trade. While self-rule systems build on power-hoarding and the delineation of spheres of competence, shared rule systems rely on collaborative power-sharing between central and subcentral executives. In reference to Hirschman’s seminal concepts of exit and voice, the chapter then posits that any multilevel polity endows subcentral executives with a specific amount of voice in the making of trade and procurement policy. This voice it expects to be inversely related to exit: the more voice subcentral executives are equipped with, the less they dispose of an incentive to exit from a system-wide policy or international commitment. As shared-rule systems endow constituent units with more voice in polity-wide trade policy-making, they should organize openness more effectively than self-rule systems. At the same time, the inverse relationship between voice and exit does not unfold in an experimental vacuum. Depending on the specific policy sector, intervening factors can come to affect constituent units’ propensity to seek exit without affecting the amount of their voice. In the specific field of trade and procurement policy, the book expects two such policy-specific factors potentially to affect constituent units’ degree of exit. These are the amount of domestic procurement market integration and the politicization of international procurement liberalization.

The first of the three case studies looks at the United States. It finds that while the states’ opportunities for individual exit have remained unconstrained in the non-coercive field of procurement in which federal pre-emption is not an option, no serious attempts have been made to systematically increase their voice. This is due, firstly, to the mechanics of the US senate-type system of multilevel representation and, secondly, to the lack of an institutionalized procedure of vertical collaboration in a policy environment characterized by ‘coercive federalism’. Persisting barriers in the internal market and a widespread politicization of international procurement liberalization as a threat to state sovereignty have further contributed to constituent units’ high propensity to seek exit from international constraints. Ultimately, the US case highlights the limits of self-rule systems in organizing trade openness across multiple levels of government. Endowing the states with little voice in polity-wide policy-making, the US model shows a marked tendency to breed resistance to internationally driven adaptational pressures among constituent units. As self-rule systems are built on a delineation of central and subcentral spheres of competence, they generally tend to lack the institutional means and ideational underpinnings to effectively organize collaborative power-sharing by establishing patterns of shared rule.

The introductory chapter to Trade Policy in Multilevel Government commences by elaborating the empirical puzzle of subcentral executives’ varying openness to trade liberalization. In multilevel government, it is unusual for lower-level executives to sit at international negotiating tables. At the same time, the latter increasingly hold competences of relevance to contemporary trade policy. The ‘deep trade’ agenda of recent decades has progressively subjected subcentral governments’ prerogatives to international rule-setting, thereby constraining their policy space. Interestingly, subcentral governments in different multilevel polities have reacted with widely varying degrees of openness to this development. How can this variance in subcentral openness be explained? The remainder of the introductory chapter sketches out the book’s theoretical and methodological approach. After elaborating on its contribution to existing scholarship on trade policy and the dynamics of multilevel government, and emphasizing the empirical significance of public procurement liberalization for the political economies of multilevel polities, the chapter presents a brief summary of the book’s empirical findings. It concludes with an overview of the book’s general structure.