Keeping the Agents Leashed: The EU’s External Economic Governance in the G20

Abstract

The functioning of the external economic governance of the European Union (EU) hinges on the functioning of the internal economic governance structure to ensure cohesion between the EU’s external voice and its internal actions. Consequently the debate has focused almost in its entirety on the internal aspect of economic governance reform. This article, swimming against this current of economic governance analyses, examines the EU’s external economic governance in the G20 during the Great Recession using a principal–agent framework. More specifically, it argues that although the terms of delegation in the G20 are incomplete and open to the agents’ interpretation, two important sources of agency control limit the discretion of the EU delegation. The system of multiple agents with its inherent inter-institutional rivalry and the presence of the G20/EU members ultimately increase the control of the collective principal at the cost of presenting a unified EU position. At the same time the current design of the EU’s external economic governance has fuelled tensions between the EU and underrepresented developing countries. Along similar lines, looking at the possibilities of interest representation, the terms of delegation, with an unequal collective principal, are biased towards large and powerful EU/G20 member states. On the basis of probit analyses it is argued that these states are likely to oppose the increased delegation that would enable the establishment of an external economic governance.