MPIfG Working Paper 04/5
A New Form of Governance? Comparing the Open Method
Coordination to Multilateral Surveillance by the IMF and
Max Planck Institute for the Study of Societies
The Open Method of Coordination (OMC) has received
much attention in the recent EU-literature. The predominant view claims that the
OMC is not only a new but also an effective policy-making instrument. This
paper raises doubts about both claims by offering a comparison of soft law
policy coordination in three international organizations. More specifically,
this paper compares the European Employment Strategy – which was the first use
of the OMC – to the Broad Economic Policy Guidelines of the EU, the OECD
Economic Surveys, and the IMF Article IV Consultations. Based on expert
interviews, it seeks to demonstrate that these procedures are forms of
multilateral surveillance that do not differ in kind. Such a comparative
analysis of the OMC refutes claims to its novelty. Having compared the four
procedures, a more general model of multilateral surveillance consisting of six
elements is generated that facilitates further comparisons. This paper
concludes that governments select voluntarist procedures mainly to secure their
own competencies rather than to realize common goals. Effective problem-solving
is therefore not necessarily the dominant objective of soft law.
Die EU-Literatur der letzten Jahre hat der Offenen
Methode der Koordinierung (OMC) viel Aufmerksamkeit zukommen lassen. Die
vorherrschende Sichtweise behauptet, dass die OMC nicht nur ein neues, sondern
auch ein effektives Instrument der Politikgestaltung sei. Dieser Aufsatz stellt
beide Aussagen infrage, indem es einen Vergleich verschiedener soft law-Verfahren
von drei internationalen Organisationen vorlegt. Im Einzelnen vergleicht dieses
Papier die Europäische Beschäftigungsstrategie – mit der die OMC zuerst
entstanden ist – mit den Grundzügen der Wirtschaftspolitik der EU, den
Länderberichten der OECD sowie den Artikel-IV-Konsultationen des Internationalen
Währungsfonds. Auf der Grundlage von Experteninterviews wird gezeigt, dass alle
vier Verfahren multilateraler Überwachung zugeordnet werden können und kein
kategorischer Unterschied zwischen ihnen besteht. Eine solche vergleichende
Analyse widerlegt die angenommene Neuheit der OMC. Aufbauend auf dem Vergleich
der vier Verfahren wird dann ein allgemeines Modell multilateraler Überwachung
entwickelt, welches aus sechs Elementen besteht und zukünftige Studien
erleichtern wird. Dieser Aufsatz schließt mit der Beobachtung, dass Regierungen
voluntaristische Verfahren eher deshalb wählen, um ihre eigenen Kompetenzen zu
verteidigen als gemeinsame Ziele zu verwirklichen. Effektive
Problemlösungsfähigkeit erscheint nicht als vorrangiges Anliegen von soft law.
The study of the European Union has moved from the
question of what factors explain the integration process to how the European
polity functions. While the former question was at the heart of the debate
between neofunctionalism and intergovernmentalism, scholars in the nineties
began to ask how policy-making works in this multi-arena, multi-level system of
governance, analyzing the problem-solving capacity of the EU (Grande 2000:
11-12; Jachtenfuchs 2001). Taking this development one step further, the
question emerged how the European level impacted on pre-existing national
politics, policies, or even polities. Rather than looking at the reasons why
states choose integration, more recent analyses have focused on how decisions in
favor of integration, once taken, feed back into the national arena. Accordingly,
we have witnessed shifting foci from integration to governance to
“Europeanization” (cf. Risse/Cowles/Caporaso 2001).
As a consequence, less attention has been paid to
comparing EU policy-making to that of either states or other international
organizations. Since the European Union is treated as a unique entity – a
construction sui generis – comparisons to other political systems seem futile.
However, as Hix (1998: 54-55) points out, many features of the EU are open to
comparison if we do not aspire to find a general theory of the Union at large.
In the literature on the Open Method of Coordination (OMC)
the neglect of systematic comparisons is particularly pronounced. Attention is
paid almost exclusively to the question of whether and to what degree this mode
of governance enables policy-learning or even a convergence of welfare state
policies to occur (Ferrera/Hemerijck/Rhodes 2000: 67; Régent 2002: 20). Despite
a lack of empirical evidence of these effects, these studies maintain that the
OMC was created for these purposes and will achieve them in due course. Thus,
many studies implicitly follow a functional logic that accounts for the causes
in terms of their (anticipated) effects. For example, Radaelli (2003: 52)
maintains that the OMC as an “ideal type” could deliver better governance,
although he cites hardly any evidence that it has already done so. In fact, he
states that the actual practice differs considerably from the conceived ideal.
Even though it is frequently noted that the OMC is a form of peer review, there
are no studies to date comparing it to similar procedures in international
organizations. While scholars have detected a family resemblance with peer
review, we still lack an understanding of how similar or dissimilar these
procedures actually are.
This paper seeks to fill this void by comparing the
European Employment Strategy (EES) – the first use of the OMC – to the Broad
Economic Policy Guidelines of the EU, the OECD Economic Surveys, and the IMF
Article IV Consultations. It seeks to show that, despite differing emphasis,
they all are procedures of multilateral surveillance. They have common features
distinguishing this mode of policy-making from other ones, such as the
traditional Community Method of the European Union (see section 5).
The argument proceeds in five steps. The next section
looks briefly at some of the expectations directed at the Open Method of
Coordination. However, it points out that we lack a coherent understanding of
what kind of policy instrument the OMC is. Therefore, the subsequent section
juxtaposes four instances of economic policy coordination in international
organizations. This comparison is based on 30 expert interviews conducted by the
author in 2002 and 2003. Staff of the OECD, the IMF and the European Commission
as well as of national ministries were asked about the conduct of each procedure.
Based on this comparison, section 4 identifies six common elements of
multilateral surveillance. They delimit this form of governance from other ones,
particularly the Community Method. This leads in section 5 to the question of
why the EU, from the 1990s onwards, increasingly relies on soft law to achieve
its goals. A preliminary answer is that soft law offers distinct advantages
mainly for national governments. They are enabled to reach an agreement without
having to fear its consequences. Finally, the conclusion considers what we can
learn about the effectiveness of the OMC by comparing it to policy coordination
by other organizations.
2 Promises of the OMC
With the March 2000 Lisbon summit, the OMC became the key
to action in areas where a treaty base was lacking but a common concern was
perceived. Currently, it is applied to more than ten policy areas, e.g. social
inclusion, education, pensions, and R&D policies (Hodson/Maher 2001: 726). The
Lisbon European Council defined the core elements of the Open Method of
Coordination. It involves:
||fixing guidelines for the Union combined
with specific timetables for achieving the goals which they set in the
short, medium and long terms;
||establishing, where appropriate,
quantitative and qualitative indicators and benchmarks against the best
in the world and tailored to the needs of different member states and
sectors as a means of comparing best practice;
||translating these European guidelines into
national and regional policies by setting specific targets and adopting
measures, taking into account national and regional differences;
||periodic monitoring, evaluation and peer review, organized as mutual learning
Moreover, the OMC is seen as the appropriate way to secure the new strategic
goal agreed upon in Lisbon. Until 2010, the European Union will strive to become
“the most competitive and dynamic knowledge-based economy in the world, capable
of sustainable economic growth with more and better jobs and greater social
cohesion.” A particularly important role is assigned to modernizing the European
Social Model through the OMC. The ultimate goal is full employment in Europe
(European Council 2000: § 5+6).
Yet, it is not only politicians who pin their hopes on the OMC. In the
scientific literature, the following expectations are formulated (see also de la
Porte/Pochet 2004). The OMC is supposed to:
||enhance policy-learning through benchmarks and best practices (Pochet/Porte/Room
2001: 293; Zeitlin 2004);
||transform bargaining into deliberation (Eberlein/Kerwer 2002) and “eventually
create a European public sphere: a real-world approximation to the Habermasian
‘power-free’ discursive space that gives free rein to the public interest
precisely because it is not directly entangled in the strategic games of legally
enforceable rule-making” (Sabel/Zeitlin 2003: 25);
||foster social policy convergence in the long run (Trubek/Mosher 2001: 14-15;
Rodrigues 2002: 22);
||help create a new balance between supranationalism and intergovernmentalism (Jacobsson
||build Social Europe (de la Porte/Pochet 2002a);
||“recalibrate” European welfare states (Ferrera/Hemerijck/Rhodes 2000).
However, there is to date no convincing empirical base for
evaluating the effectiveness of the OMC in terms of its legislative output or
outcomes. Proving its effects is methodologically difficult because it is hard
to establish what would have happened without it, and possible positive effects
only become visible in the medium to long term. Even the official evaluation of
the EES after five years stresses the difficulty of isolating its effects from
the general economic cycle on the one hand and from policy initiatives that
originated from different sources on the other hand (cf. European Commission
2002c; Borrás/Greve 2004: 331-332).
An important empirical study shows that in Denmark and
Sweden (two good performers according to the Commission) the EES procedures have
little direct bearing on domestic policy-making. The authors use the notion of a
“diplomatic mission” to describe the relation between European and national
politics (Jacobsson/Schmid 2002: 87). From the perspective offered in this paper,
their results do not seem too puzzling. Rather than focus on the national impact
of this mode of governance, we first have to understand what kind of policy
instrument the OMC is. Thus, the following sections propose a hitherto neglected
approach. I seek to better understand the Open Method of Coordination by
analyzing similar procedures of multilateral surveillance of the IMF and the
OECD. While the similarity of the OMC to these organizations’ practices has been
noted (Borrás/Jacobsson 2004: 188) and though Wallace (2000: 32) calls the OMC
the “OECD technique,” no systematic comparison exists to date. This paper seeks
to demonstrate that the OMC does not differ in kind from other procedures of
multilateral surveillance, even though it is more stringently applied. Since
available evidence indicates that neither the OECD nor the IMF (where financial
incentives are lacking) have a strong impact on national policies, this paper
also questions the OMC’s putative effectiveness.
3 Procedures of Multilateral Surveillance
This section gives a summary of how international
organizations monitor their members’ behavior. Therefore, the OECD’s Economic
Surveys, the IMF’s Article IV Consultations, the Broad Economic Policy
Guidelines (BEPG) and the European Employment Strategy of the European Union
will be examined. This section is based on expert interviews and a study of the
available documentation on the organizations’ work. The aim is to construct for
future use a general model of multilateral surveillance which invites further
3.1 OECD Economic Surveys
Ever since its formation in 1961, the OECD has sought to
ensure that its member states follow the code of conduct for sound economic
policies laid down in the OECD Convention. This is achieved through regularly
monitoring and evaluating the economic situation in the member states and their
respective policies. Thus, every 12 to 18 months the OECD produces an Economic
Survey for each country. Such a report results from a detailed surveillance
procedure (cf. Marcussen 2004).
The OECD’s multilateral surveillance is a two-tiered
process. It consists of a preparatory and a discussion phase. Any country report
is prepared by the Secretariat or, more specifically, a country desk in the
Economics Department of the organization. The process starts with a detailed
questionnaire being sent to the country concerned. In answering the
questionnaire, national administrations inform the OECD staff about recent
economic developments, their forecasts and the underlying assumptions. Moreover,
a country can state how it strives to solve economic problems or which policy
initiatives are currently being prepared.
However, since data demands explanation, a staff team
visits the country for a ‘scouting mission.’ On site they gather further
information and meet officials from key ministries, the central bank, social
partners and scientific institutes to gain a better understanding of the host
country. During the scouting mission few political discussions take place.
Instead, the mission is geared towards obtaining relevant information. The OECD
staff then prepares a first draft for the country survey. This draft already
includes an assessment of major problems and an evaluation of the
appropriateness of a government’s action. Any country survey follows a general
structure of (1) assessment and recommendations: recent trends, prospects and
macroeconomic policy requirements; (2) an overview of structural policy
developments, key challenges and implementation of structural reforms; and (3) a
country-specific special chapter (e.g. on public sector spending, aging,
environmental sustainability) (Nottage 2002: 21-22).
Approximately three months after the scouting mission
another one is scheduled. It follows up on the first and is based on the draft
Economic Survey. The OECD staff specifically addresses a country’s weaknesses
and vulnerabilities. There is a twofold purpose to the second mission: up-dating
information and initiating policy discussions. A mission ends with bilateral
discussions between the OECD and the national authorities. The OECD team
presents its assessment to high-ranking national officials, who respond in turn.
After returning to Paris, the team then prepares a final
draft of the Economic Survey. It will be distributed to all member countries
about four weeks prior to the multilateral discussion in the Economic
Development and Review Committee (EDRC). At this point, the bilateral
preparatory phase ends.
The discussion then moves to the EDRC. Each member state
sends representatives to this committee, which is an intergovernmental body that
decides on the principle of unanimity. Crucially, the EDRC is responsible for
publishing the Economic Survey, not the OECD Secretariat. Two reviewers are
assigned to every examined country to lead the discussion. An EDRC meeting
usually begins with a statement of the country under review. A government
delegation (ten to 14 people) explains its view of the OECD staff’s report,
pointing out disagreements, possible mistakes and generally defending the course
chosen. Subsequently, the reviewers get the chance to pose questions before a
general discussion starts. The entire procedure is motivated by peer review and
peer pressure. Any government has to come up with reasonable arguments for its
behavior and defend its own policies in the light of probing questions. While
diplomatic in tone, participants do not shy away from voicing concerns and
critique. These multilateral discussions are directed at redrafting the survey
in a way that all governments can eventually agree to it. Therefore, the chair
produces a summary of the discussion, on which the survey’s redrafting is based.
A country examination in the EDRC usually lasts between half a day and a day.
The redrafting takes place during the next couple of days.
In this regard, the first section of the Economic Survey – “assessment and
recommendations” – is all that counts as it summarizes the OECD critique. Any
country tries to amend this section of around twenty pages as much as possible,
haggling over the general message adopted and even over single phrases – a
feature common to all four procedures. However, once the OECD staff and the
examined country reach an agreement, the redrafted country survey will again be
sent to all other members. It can only be published after they too have
consented. This procedure serves as a safeguard against excessive redrafting and
thus a change in the stance the EDRC as a whole had taken.
Finally, an Economic Survey is published. A press
conference announces its publication to draw attention to it. The publication
ensures that public pressure supplements peer pressure.
3.2 IMF Article IV Consultations
The International Monetary Fund is best known for the
credits it grants to countries facing financial crisis. In these cases, the IMF
has considerable power to impose its policy advice. However, the most advanced
countries hardly ever have to make use of their drawing rights and, therefore,
it is much harder to influence their economic conduct (Bordo/James 2000: 24). At
the same time, it seems particularly desirable to make sure their policies are
not in conflict with the general growth objective of the world economy because
their behavior invariably has the greatest impact on this. The means chosen for
the coordination of national policies are, once more, monitoring and peer
pressure. The IMF is requested to exercise “firm surveillance” of the exchange
rates of its members who, in turn, shall provide the Fund with “all the
information necessary” (Articles of Agreement, Art. IV). Both goals are achieved
by an annual multilateral surveillance procedure. These so-called Article IV
Consultations were introduced with the second amendment of the original IMF
Articles of Agreement that came into force in 1978 (Boughton 2001: 68, 88-89; de
Vries 1985: chapter 43).
As with the OECD Economic Surveys, we can distinguish a
preparatory and a discussion phase. The procedure also involves a mission,
bilateral consultations, a staff report with recommendations, and multilateral
discussions. As a first step, the country desk produces a ‘mission brief’ with a
general assessment of the reviewed country. Various departments check this
document to make sure it is in line with the overall IMF policy. Already at this
early stage, the stance of the staff team takes shape (Crow/Arriazu/Thygesen
The actual mission to the member country begins roughly
two weeks later. An IMF delegation, consisting of four to five people, visits
the country for one or two weeks. Very much like the OECD team, they meet
officials from different ministries, the central bank, the social partners, and
scientists. Originally, the IMF also sent a questionnaire to gather information,
but nowadays this is done during the mission itself. Country officials inform
the IMF delegation about recent economic and political developments, planned
activities and their current forecast for taxes, unemployment, public spending,
etc. A good deal of the work done during a mission consists of “getting the
numbers right.” The mission concludes, however, by bilateral discussions with
high-level officials (both the Minister of Finance and the head of the central
bank usually participate). The IMF delegation presents its ‘concluding statement,’
which summarizes its views on fiscal and economic policy and contains policy
recommendations. In turn, the officials comment on the concluding statement. If
there are differences in opinion, the IMF team has to report on them afterwards.
In Washington, the head of the mission writes a
‘back-to-office report’ that informs the Fund management of the mission’s
results. Additionally, the country desk writes a staff report containing (1)
information on the economic situation of the reviewed country, (2) policy
recommendations, (3) an account of the policy discussions, and (4) the final
‘staff appraisal.’ The preparatory phase ends with the staff report. About a
month later, the Executive Board discusses this report. This is the occasion
when multilateral discussion takes place. However, this peer review is less
formalized than in the OECD’s EDRC as there are no pre-appointed reviewers and
no government delegation participates. Instead, the permanent representatives of
the reviewed country take on that role. Member state’s policies are discussed
for about half a day on the basis of the staff report.
Unlike the OECD, there is no need to come to an agreement.
In many cases, Executive Directors disagree and different views enter the
chair’s ‘summing up,’ a document subsequently sent to the national authorities.
This summary account is also published as a Public Information Notice.
Discussions are freed from the need to reach a consensus and can therefore be
frank. Another difference to the OECD is that the Staff Report is published
unchanged by and independently of the member states. The EDRC – that is, the
member states – publish an OECD Economic Survey. In contrast, in Article IV
Consultations, the Public Information Notice and the Staff Report are published
separately to allow for differences. Hence, the IMF is transparent in terms of
its discussion and how views differ. Moreover, member states can voluntarily
consent to having the mission’s ‘concluding statement’ published. An annual
consultation cycle concludes with an IMF press conference reporting its results
and announcing the publication of the relevant documents.
3.3 European Union I: Broad Economic Policy Guidelines
The following two sections turn to multilateral
surveillance in the European Union. There are broad similarities in the way the
EU strives for economic policy coordination with the OECD and the IMF despite
differences in the institutional setting. After assessing the Broad Economic
Policy Guidelines (BEPG) – an early parent to the OMC introduced with the
Maastricht Treaty – in this section, the next section examines the European
The BEPG have gained in importance since they were
introduced with the Maastricht Treaty. Today, they are supposed to be at the
heart of the European Union’s economic policy coordination (cf. European
Commission 2002b: 6):
Figure 1 Economic Policy Coordination in
the European Union
The central role of the BEPG is to ensure a sound policy
mix for the European economy as a whole through “multilateral surveillance”
(TEC, Art. 99/3) (cf. Hodson 2004). They deal not only with member states’
policies in isolation but also with their combined effect on inflation, growth,
and unemployment. Accordingly, the BEPG contain a general as well as a
country-specific part each year. They focus on macroeconomics, wage policy,
public finances, labor, product and financial markets, entrepreneurship, etc.
The main instrument employed is the issuing of recommendations. For the period
from 2003 to 2005, there are 28 general recommendations plus three to eleven
specific ones for each country (Council of the European Union 2003). A ranking
of the member states follows from the number and type of country-specific
recommendations. Such a ranking can increase the public pressure on governments.
As with the Article IV Consultations and the European
Employment Strategy, the Broad Economic Policy Guidelines follow a yearly cycle,
which in this case starts in January. It also consists of two parts, a policy
formulation and a policy implementation/ evaluation phase. The first commences
with the Spring Summit of the European Council, which defines general political
guidelines for the EU on the basis of a ‘Key Issues Paper’ from the acting
Presidency. In April, the European Commission presents its draft for the Broad
Economic Policy Guidelines, taking into account the European Council’s
conclusions. It entails both kinds of recommendations. As with the OECD and the
IMF, the Secretariat has the task of producing a template for the subsequent
discussion. While producing its draft, the Commission relies on bilateral
contacts with national administrations to gather the required information. There
are no missions as the exchange of data happens continuously.
Eventually, the ECOFIN Council has to adopt the BEPG.
However, this is normally a formal act involving no further discussion because
the substantial work and policy discussions have already taken place in three
committees preparing the ECOFIN’s work. These committees are the Economic Policy
Committee (EPC), the Economic and Financial Committee (EFC) and the ECOFIN
Alternates. They are the primary location for multilateral discussions and peer
pressure, even though these are less formalized than in the OECD’s Economic
Development and Review Committee. In practice, each member state mainly
considers those recommendations that relate to it directly. National
representatives try to correct mistakes and water down criticisms. The process
of revising the BEPG – which mainly means redrafting country recommendations –
resembles the OECD’s redrafting of an Economic Survey subsequent to the EDRC
meeting. Most discussions take place between the member country concerned and
the Commission, but all others monitor and, if need be, amend the changes
introduced. In controversial cases, there is an open discussion, but ultimately
– also in line with the OECD – a consensus has to be reached. The procedure
allows for adjustments but limits their magnitude as Table 1 demonstrates:
Table 1 BEPG Country Recommendations 2002
After prior discussions in the committees, the Council
accepts the Broad Economic Policy Guidelines, forwarding a report to the
European Council that then formally concludes its work on the BEPG. In June, the
Council formally adopts them. This is when the policy formulation phase ends.
Subsequently, during the second half of the year, the
implementation and evaluation begins. Governments are supposed to take the BEPG
into account in national policy-making. Specifically, they are urged to take the
recommendations seriously. Yet, as with all soft coordination processes, no
transfer of sovereignty exists. All action has to be taken at the national level,
the European level only monitors and comments on what happens. This task falls
to the European Commission that has to keep member states’ policies under firm
Accordingly, the Commission presents the ‘implementation package’ in January –
ending the yearly cycle. It consists of an implementation report of the BEPG, a
progress report on the common market strategy, and a report on the functioning
of the Community product and capital markets. The surveillance of economic
policy through the BEPG thus differs from both the OECD and the IMF in that it
monitors more closely whether and how states follow the recommendations given.
In the other organizations this follow-up is less consistent. Therefore, there
is a stronger basis on which to criticize governments for not sticking to their
own commitments since they themselves had agreed to the recommendations. At the
same time, the BEPG are not as stringently targeted at peer pressure as OECD
3.4 European Union II: The European Employment Strategy
As mentioned in the introduction, the European Employment
Strategy was the first instance of the OMC – although this name did not exist at
the time. However, of the four cases of multilateral surveillance compared in
this paper, it was the last to be conceived. The EES, too, is a process of
reciprocal monitoring of national policies. It is probably the most elaborated
version of multilateral surveillance because it specifies detailed goals (Employment
Guidelines), asks member states to draw up National Action Plans (NAPs), entails
recommendations, and makes use of indicators to review their implementation. The
EES was created in 1997 and has passed through five full cycles before being
transformed from an annual to a triennial cycle in 2003. Additionally, it was
synchronized with the BEPG schedule to harmonize both procedures. As it is too
early to assess how this change influences the process, the focus here is on the
In line with the other processes, the international
organization’s secretariat initiates a cycle. In September, the European
Commission presents a draft for the Joint Employment Report (JEP), which
discusses the general employment outlook for the Union and the member states.
Usually, it contains two to six recommendations for each country. These
recommendations are based on an evaluation of the NAPs and the actual policies
pursued. They can lead to a ranking of member states and therefore are used for
‘naming and shaming.’ When the recommendations were first introduced, member
states feared negative consequences domestically. However, as Meyer (2003) shows,
recommendations receive hardly any attention in national newspapers and the
general public has presumably never even heard of the European Employment
The Commission’s draft of the Joint Employment Report has
to be accepted by the Council. In line with the Broad Economic Policy Guidelines,
various committees discuss it first. The most important one is the Employment
Committee (EmCo). Yet the Economic Policy Committee also comments as the
Employment Strategy has to be consistent with the BEPG. Both committees have to
accede to the JEP before the Council can approve in autumn. The European Council
considers the economic situation in the Union as a whole and shall adopt
conclusions thereon (TEC, 128/1). The policy formulation phase ends in January
when the Council agrees upon a new set of Employment Guidelines as well as the
Over the next few months, member states have to transform
the objectives defined by the guidelines into a National Action Plan. Ideally,
writing the NAP is a concerted effort that brings together various actors (e.g.
from different ministries and the social partners) to strategically set out the
goals for employment policy. However, empirical studies cast doubts on how
embedded this exercise is in national policy-making (cf. Büchs/Friedrich 2004).
In May, each country sends its NAP to the Commission, which analyzes them and
incorporates its evaluation into the drafting of the JEP.
EmCo discusses these documents in June. Members assess
each other’s NAP in a peer review called the ‘Cambridge Process.’ Biagi (1998:
XXIX) describes this peer review as very similar to the EDRC procedure: There is
a cross-examination, whereby each country examines and is examined by its peers.
On this occasion, multilateral surveillance proper takes place, although less
than an hour is spent on each NAP (Trubek/Mosher 2003: 48). In addition to this
multilateral exchange, there are bilateral ones, with the Commission and the
member states concentrating on sections relating to individual countries in the
draft JEP. Similarly to the OECD’s second mission, their purpose is to make sure
all data is correct and up-dated. The Commission then produces a final draft of
the JEP before it is handed over to the committees in September, when the cycle
Whereas EU states have dynamically developed the EES into
elaborate soft coordination with many specific goals and more then a hundred
indicators measuring progress, multilateral discussion is not as strong as in
the OECD. However, discussion in the committees and even in the Council is more
steady and frequent than in the OECD. Noaksson and Jacobsson (2003) argue that
the policy advice provided by the Commission and the Council is less detached
from the countries experiences at home than is the case with OECD
recommendations (cf. also Visser 2002). They distinguish analytically between
the OECD as an expert organization and the EU as a political one. The latter is
more able to adapt to new themes and concerns of the member states. However,
there is a downside to politically malleable procedures. The EES depends on a
supportive actor constellation. If this vanishes, the process could well run
aground (see section 6).
4 A Model of Multilateral Surveillance
Multilateral surveillance rests on peer review, i.e. on
the mutual monitoring and evaluation of national policies by other governments.
It is targeted at bringing states to behave in accordance with a code of conduct
or specific goals, at developing common standards and at acquiring best
practices through international comparison. Precisely because there are no
sanctions, this mode of governance builds on a cooperative effort to criticize
existing policies and generate new ones. In the absence of other means of
leverage, any impact on national governments has to result from the (mild)
pressure of having to justify one’s action in the light of a common evaluation
of the compliance of this action with joint goals (cf. Nottage 2002: 4). This
was already noted by an early study on the OECD:
“The significant result of having the members compare,
analyze, and discuss their policies is a better understanding of each other’s
problems and a growing recognition of the interdependence of national policies.
This is a rather impalpable process that nonetheless has recognizable effects.
One effect, to use the analogy of a physical phenomenon, is a kind of ‘osmosis’
– a diffusion of ideas, a better understanding of one country’s policies by
responsible officials in other countries, and the anticipation of more
sympathetic response by others to these policies (and vice versa). This calls
for the periodic personal contacts that also engender mutual appreciation and
trust. Participants in OECD meetings agree that this intangible element has
given them much better insight and influenced their thinking materially.” (Aubrey
The possible effectiveness of multilateral surveillance
depends on establishing peer pressure and persuading reluctant actors. Pagani
(2002: 5-6) lists three elements which can foster peer pressure: “(i) a mix of
formal recommendations and informal dialogue by the peer countries; (ii) public
scrutiny, comparisons, and, in some cases, even ranking among countries; and
(iii) the impact of all the above on domestic public opinion, national
administrations and policy makers.” More specifically, based on the preceding
sections, we can identify six elements that define this mode of policy-making,
distinguishing it from the Community Method (cf. Figure 2). They apply to all
four surveillance procedures described above.
Figure 2 Six Elements of Multilateral
Whenever these characteristics are present, we can speak
of soft coordination through multilateral surveillance. Of course, each
procedure differs in its emphasis on particular elements, and those described
above also differ in their application. However, these are variations in style,
not in kind.
What are these differences? Multilateral surveillance in
the EU defines common goals more precisely. Rather than just relying on a
general code of conduct, the EU makes use of concise guidelines. It also more
stringently monitors their implication. The EU processes aim at continuously
advancing clearer goals and more systematic monitoring devices (e.g. through
indicators or best practices).
Both the IMF and the OECD are less specific in defining
goals and, consequently, monitoring is less detailed. This is especially true of
the Article IV Consultations, which, however, supersede the other procedures in
terms of transparency since even the staff report itself is published. Emphasis
is thus put on public pressure rather than peer pressure, while the Executive
Board’s discussions are quite detached from national policy-making. In terms of
peer discussion, the IMF Consultations clearly fall short of the other
In general, the OECD procedure most resembles the OMC. One
major difference is, of course, that, for the latter, governments have to draw
up National Actions Plans, which are supposed to increase their commitment.
Discussions in the EDRC are, however, more consistently geared towards peer
review and peer pressure as they rely on an elaborate process of
cross-examination. The downside of this procedure is that the discussion of any
particular country is only sporadically intense, namely every 12-18 months, when
a review or missions are due. Both the EES and the BEPG entail more continuous
debates. Economic Surveys receive a relatively high attention in the national
media and could at times increase public pressure.
Additionally, OECD Economic Surveys are by far the most
comprehensive and detailed accounts of national economies, followed by the IMF
Staff Report. An OECD Economic Survey offers a comprehensive review of economic
trends, recent policies, and current reform agendas. They are good guides to a
country’s political and economic outlook. In contrast, both the Joint Employment
Report and the Broad Economic Policy Guidelines only have relatively short
sections on each member state. More emphasis is put on the EU economy as a whole.
In sum, I would argue that with the European Employment Strategy and the Broad
Economic Policy Guidelines multilateral surveillance is applied more stringently
than with either the Article IV Consultations or the Economic Surveys (see also
Begg/Hodson/Maher 2003: 71). While EU member states do rely on instruments
employed by international organizations, they have been more willing to
reinforce them through clearly defined, testable guidelines. The difference
remains a gradual rather than categorical one, however.
5 Why Soft Law?
The empirical account of the previous sections leads to the conclusion that the
Open Method of Coordination is but a special form of multilateral surveillance.
It does not differ in kind from the instruments deployed by international
organizations. As such, it can be described as intergovernmental and
voluntaristic (cf. Streeck 1995): Governments can choose whether and to what
degree they take European guidelines into account. With the OMC neither the
European Commission nor the European Court of Justice can take decisions.
Instead, the prerogative for action rests with the member states. The European
Parliament enjoys a marginal influence at best. Furthermore, the goals agreed to
at the European level are not binding, and there are no sanctions other than
‘naming and shaming’ if a national government decides not to act on them.
The OMC is a new form of governance only in the context of the European Union: a
less supranational, less integrationist one than the Community Method, which –
in contrast – is characterized by a) the Commission’s monopoly of the right of
initiative; b) widespread use of qualified majority voting in the Council; c) an
active role for the European Parliament; and d) the uniform interpretation of
Community law by the Court of Justice (cf. Wallace 2000: 28-29). At the same
time, OMC-type soft policy coordination has been well established in the OECD
and the IMF for decades. This raises the question of why the European Union of
the 1990s was more ready to rely on the same instruments as other international
Multilateral surveillance was introduced to the OECD and the IMF at times when
there was little agreement in substance. Similarly, as Rodrigues (2001: 4)
stresses, the European Employment Strategy was tailored to overcome differing
views on how (if at all) to fight unemployment at the European level during the
1997 special summit in Luxembourg. Relying on soft law facilitated coming to an
agreement. Rather than search for a compromise on substantive issues,
governments opted for a procedural solution. They initiated a process of
mutually monitoring their otherwise discrete decisions. Hence, a reason for the
choice of soft law is that it seems particularly suited to overcoming
Moreover, soft law is attractive for national governments as it limits
sovereignty losses. States rely on multilateral surveillance to coordinate their
policies in the absence of enforceable, binding rules.
In contrast, “[t]he term hard law … refers to legally binding obligations that
are precise (or can be made precise through adjudication or the issuance of
detailed regulations) and that delegate authority for interpreting and
implementing the law. Although hard law is not the typical international legal
arrangement, a close look at this institutional form provides a baseline for
understanding the benefits and costs of all types of legalization. By using hard
law to order their relations, international actors reduce transaction costs,
strengthen the credibility of their commitments, expand their available
political strategies, and resolve problems of incomplete contracting. Doing so,
however, also entails significant costs: hard law restricts actors’ behavior and
even their sovereignty.” (Abbott/Snidal 2000: 421-422)
In reducing the degree to which rules are binding, precise and authoritative
soft law offers a number of advantages to governments which avoid the costs of
hard law. In particular, the Open Method of Coordination:
||allows for flexibility (policy initiatives can be adapted to the diverse
institutional arrangements, legal regimes and national circumstances in the
||minimizes sovereignty losses (member-state compliance remains essentially
voluntary. Compliance is not enforceable);
||helps to overcome political resistance (flexible agreements may surmount
member states’ opposition to EU mandates considered too disruptive of or alien
to national arrangements);
||facilitates the shifting of blame (it enables domestic actors to blame the EU
for unpopular decisions);
||offers symbolic politics (new initiatives foster the impression of
determination. European governments jointly take action against unemployment,
social exclusion, and sluggish growth);
||avoids a loss of control (governments stay firmly in control of politics.
Rather than enabling supranational organizations to follow their own agenda [principal-agent
problem], member state’s governments use the OMC to shield them from outside
interference – unless this interference turns out to be domestically useful. An
internationalization of domestic decisions strengthens executive actors [Wolf
1999; Moravcsik 1997]).
In sum, governments willingly adopt soft law because it increases their
strategic room for maneuver in two-level games. Governments can effectively use
their privileged position as agents of their national constituencies and
principals to supranational actors (Schäfer 2002: 29-30).
6 Conclusion: Effective Governance?
This paper has compared the Open Method of Coordination to other procedures of
policy coordination both within the European Union and in other international
organizations. In contrast to the existing literature, it has argued that the
OMC is but a subtype of multilateral surveillance. While this form of
policy-making was not introduced to the EU until the 1990s, it has long been
used in the OECD and the IMF. Hence, studies that exclusively focus on the EU
have not only overstated the novelty of the OMC but also misread its potential
consequences. Since the OMC resembles OECD and IMF procedures, it might not
initiate further integration but instead turn out to assimilate the EU to more
traditional international organizations. This outcome does not seem unlikely if
we consider the EU’s growing membership after enlargement. More diversity might
block hard law in the future and leave soft law procedures as a feasible
alternative. Multilateral surveillance is not primarily chosen for its
effectiveness but for its capacity to facilitate compromises, substituting
substantial agreements for procedural ones.
In comparison to IMF and OECD multilateral surveillance, the OMC’s major
innovation is the introduction of National Action Plans. They assign a more
active role to national governments than the Economic Surveys, the Article IV
Consultations or the Broad Economic Policy Guidelines do. However, the prime
shortcoming is a lack of public awareness. As section 4 has argued, multilateral
surveillance always builds on peer pressure as well as public pressure. Yet the
second seems to be almost entirely absent from the European Employment Strategy
and the Broad Economic Policy Guidelines. Instead, the message these processes
convey is diverted: the recommendations are too numerous and too diverse.
Despite claims to its openness, the OMC is a process only known to experts.
Moreover, there are further shortcomings to a predominantly voluntary process
that have not received enough attention. Most importantly, any potential impact
depends more on the will of national governments than it does with harder forms
of policy-making. There is nothing in the OMC that impedes welfare retrenchment.
It neither prevents regime competition nor overcomes purely national alliances
of “competitive solidarity” (Streeck 1999). Hence, the aim of the recent Dutch
agreement to keep wages below the level of yearly inflation plus productivity
gains could be to beggar its neighbors, opting for price competition rather than
quality competition. This strategy of course only works if the neighbors do not
respond in kind. If they do, the competitive edge won by this move will be lost
– necessitating further action. If ‘Social Europe’ is about avoiding a
competitive lowering of national welfare standards, the OMC cannot be the
Furthermore, the effectiveness of the OMC depends on supportive actors. Between
1997 and 2001 – when many of the OMC processes were initiated – there was a
historical high of governments led by social democrats (see Schäfer 2004). In 1999, eleven out of
15 member states had social democratic prime ministers. In Lisbon, led by Prime
Minister Guterres of Portugal, there were still nine center-left governments.
This situation by now has ceased. Presently, their number has declined to four
in the EU-15. That might well mean that the momentum for combining equity and
efficiency in welfare state reform is lost. If governments opt for further
retrenchment, the OMC will not stem the tide.
Hence, in terms of effectiveness a comparative account of soft coordination
leads to a less sanguine interpretation than the one suggested by the current
literature. A recent book on “The OECD and European Welfare States” (Armingeon/Beyeler
2004) reveals the extremely modest influence of the OECD Economic Surveys on
national policies. This finding also raises doubts as to the potential of the
EU’s procedures of multilateral surveillance to induce change. Their capacity to
do so seems severely limited by the inherent voluntarism of soft law, which is
unable to oblige reluctant governments to change their policies. Further
research will have to answer the question of whether the differences of the
procedures outlined in section 3 suggest a greater impact on the part of the OMC.
Considering the OMC as a subtype of multilateral surveillance opens up a range
of new questions and research avenues. If EU policy coordination does not
categorically differ from the work of other international organizations, we are
inclined to ask why the EU adopts their instruments at a time when integration
in monetary and fiscal policy is superseding traditional forms of inter-state
cooperation. What explains this asymmetry: a functional logic or political
imperatives? Furthermore, an empirically derived model of multilateral
surveillance invites further comparison. For example, the WTO Trade Policy
Review Mechanism resembles the procedures described in this paper. A more
detailed study could draw on the six criteria put forward in section 4 to
analyze this policy-making instrument. In addition, there are a number of other
OMC procedures within the European Union which can be compared to the BEPG and
the EES, or to the OECD and IMF procedures. Does their effectiveness co-vary
with the emphasis on certain elements of multilateral surveillance? Another
strand of research might investigate why these organizations introduced soft law
procedures at very different moments in time. Are there any common reasons
across cases/ organizations? Distancing ourselves from a sui generis vision of
EU policy-making allows us to tackle these questions, which must for now be left
to subsequent research.
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An earlier version of this paper was presented at
the Conference of Europeanists: ‘Europe and the World: Integration,
Interdependence, Exceptionalism?’ Chicago, March 11-13, 2004. I would like to
thank Burkhard Eberlein, Susanne Schmidt, and Cornelia Woll for their helpful
For a similar account, see Börzel (2003: 1-3).
For a discussion of the sui generis assumption of EU studies, see Verdun (2003:
In a more critical vein Trubek and Mosher (2003: 47-48) stress that the OMC has
got a potential for policy-learning which as yet has not been realized, however.
More generally on functional explanations, see Stinchcombe (1968: 80-93).
“To date, most analyses on OMC have underlined the difficulty of evaluating its
effects nationally. Indeed, OMC’s effects on Europeanization – the manner in
which domestic policy areas become subject to European policy-making – and
European Integration – the process in which countries pool sovereignty under the
auspices of the European Union – are difficult to discern” (de la Porte/Pochet
Brief comparisons of the EES and the OECD Jobs Strategy can be found in Visser
(2002: 3-4) and Noaksson/Jacobsson (2003). See also recently Dostal (2004).
The adjective “multilateral” can refer either to the object or the subject of
surveillance. I take it to mean the former as these processes are geared towards
multilateral discussion of national policies. The latter would in contrast mean
the discussion of several states’ policies and their interdependencies. Of
course, all three organizations conduct both kinds of surveillance.
For an example, see OECD (2002b).
In interviews with OECD staff it was stressed that in future they will put even
more emphasis on the bilateral discussion to sharpen the organization’s profile
in policy advising. As the OECD faces competition in this area by the European
Union, they want to use the presumed comparative advantage of economic expertise.
The conduct of EDRC multilateral surveillance is described in OECD (2002a).
For a vivid account of a mission, see Harper (1998: chapter 8).
Notions like “most,” “many,” “some” or “a few directors” indicate how great a
This is, however, a recent development and results from a conscious effort to
increase transparency. Cf. IMF (2002; 2003).
If the EPC or the EFC do not agree, they transfer the controversial issue to the
ECOFIN-Alternates. In rare cases, even the ECOFIN Council will discuss
contentious recommendations. In principle, a qualified majority decision is
possible, but in reality members seek consensus.
For an account of its origins and development, see Goetschy (1999) and de la
For example, they also apply to the WTO’s Trade Policy Review Mechanism. See
For example, the publication of the most recent Economic Survey of Germany was
the second news item on the main German news program (Tagesschau, 5 August
2004). It included an interview with an OECD official as well as reactions of
both government and opposition parties. To my knowledge, neither the EES nor the
BEPG have ever received similar attention in Germany.
However, an OECD economist argued during an interview that he considered the
length of the Economic Surveys to be disadvantageous. He commended the EU for
producing short accounts with a clear message.
However, an OECD economist argued during an interview that he considered the
length of the Economic Surveys to be disadvantageous. He commended the EU for
producing short accounts with a clear message.
Kenner (1999) characterizes the Employment Strategy as “soft law.”
This does not mean that voluntarist procedures are necessarily ineffective or
mere “cheap talk” (Borrás/Greve 2004). Sometimes multilateral surveillance might
be effective because governments strongly support the goals or encounter little
domestic opposition. However, if this is the case, a joint European approach
might be neither necessary nor the most efficient way to distribute information.
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