Analytical Framework

Regulatory reform is defined as a process in which the old regime of public ownership is replaced by a regime that is characterized by privatized enterprises, liberalized markets and new regulatory norms and institutions. Thus, each of the three reform dimensions, privatization, liberalization and reregulation, reflects a constituting element of regulatory reform. In the first place, they are individual reform policies. As such, they employ different instruments and produce different outcomes on the dependent variable. However, the three policy dimensions are also closely intertwined. In several instances, privatization is the prerequisite for liberalization. Reregulation, on the other hand, serves to provide the necessary institutional environment to ensure effective competition aimed at by liberalization policies.

1.4.1. Privatization

The globalization literature offers competing hypotheses about state retreat. Some authors argue that increasing internationalization of the economy leads to more competition among nation states. This, in turn, demands efficient markets and thus the need to downsize the public sector (Scharpf 1991; Strange 1996). According to this position, governments are forced to sell state assets in order to make the public sector leaner and to increase the competitiveness of their economies on the world markets. As a result, all countries are pushed on a similar development path. The opposite position is taken by authors who claim that even under conditions of globalization national governments retain a considerable capacity to act (Garrett 1998; Swank 2002). Among other factors they emphasize the continued importance of ideological differences, i.e. the party composition of the government. In other words, states are not pushed on the same development path and material state retreat might vary considerably across countries.

As outlined at the beginning, mainly privatization developments in infrastructures have been responsible for the reduction of government outlays since the mid-1990s.

Whether this development is representative for all sectors of state activity remains an open question. It does, however, reflect a changing role of the state at least in one important

area. Considering the impact of national factors for reform, we should expect the new EU member states to show similar diffuse reform patterns as it is the case for the OECD countries (cf. Schneider, Fink and Tenbücken 2005). In contrast to liberalization requirements, the acquis communautaire did not demand from the accession candidates the privatization of their infrastructure companies. Thus, in the new member states the decision to sell state assets is likely to have been subject to more specific national considerations, i.e. party orientation, or certain economic paradigms stemming from the internationalization of the economy.

1.4.2. Regulatory Reform and the Regime Approach

Prior to reform, all European countries showed similar regulatory regimes: the utilities were entirely owned by the state, there was no competition in the market for infrastructure services and regulation was exerted by a ministry that was often also the provider of infrastructure services.²⁹ When reforms began in the 1980s, a variety of different developments and outcomes were possible. Today, after two decades of reform we can observe these outcomes and interpret them accordingly: significantly different reform speeds and outcomes across countries or sectors could be interpreted as diversity, whereas similar reform results, expressed, for instance, through comparable levels of market opening or state ownership, can be regarded as regulatory similarity.

A similar logic also applies to reregulation. However, for this dimension it is much harder to identify a common starting point prior to reform since states possess different regulatory histories and traditions (cf. Richardson 1982). However, if we compare policies of reregulation by looking at the structures and functions of NRAs, we come to a similar conclusion as in the case of liberalization and privatization: since there existed no NRAs prior to reform, we can assess similarity or diversity of reregulatory institutions by comparing the organizational and functional characteristics and, thus, the level of independence of the newly created NRAs.

29 We have to differentiate between the situation prior to reform in the EU-15 and CEEC-10 countries. While in the latter all sectors were under public control, in the EU-15 public ownership was dominant only in network infrastructures; companies in other sectors were able to operate in a relatively free market system.

The concept of regulatory regimes thus offers a useful analytical framework for the analysis of cross-country and cross-sectoral regulatory diversity (Thatcher 2002a: 869-870). The integration of the three reform dimensions into the regime concept provides analytical flexibility in that it allows for different combinations of policy outcomes in different sectors of the same country. This is due to the fact that the reform policies are not necessarily dependent on each other although they are in many ways intertwined. While a country might on the one side proceed rapidly in privatizing its former state monopolist, it might on the other hesitate to open the market to competition or to create an independent sector regulator. By applying the regime concept we are able to flexibly map all existing configurations, regardless of the individual specifications, which in turn allows us to categorize regimes accordingly.

Regulatory regimes cannot only be used as a dependent variable for mapping cross-country and cross-sectoral differences in the outcomes of regulatory reform. The regime concept can also be employed for the analysis of the factors that cause these differences.

Variation in actors’ policy ideas or interests can produce quite different policy outcomes (Eisner 2000). While one government might adhere to reform-oriented ideas, the successor government might instead be guided by an ideology that opposes programmes of infrastructure privatization and liberalization. The same logic applies to the interests of the actors in the policy-making process, i.e. business or consumer interest groups. Cross-national variation or variation over time of these interests can be used to explain potential differences in the reform process and also in the resulting regime configurations.

Especially interesting in this context is the situation in the new member states and applicant countries. Due to pressure for legal conformity exerted on them in course of the accession negotiations, diversity should be weaker within this group of countries. In course of the enlargement process the applicant CEECs were demanded to completely take over the acquis communautaire within a short period of time. This requirement should have mediated the diversity of national regimes. In addition, the CEEC-10 have lost many of their national regulatory traditions during the period of Soviet rule and build up new governance structures in course of political transition. As a consequence, national mechanisms are both less resilient and lacking in established procedures. They might thus

be more susceptible to the pressures of regulatory alignment than the old member states (McGowan and Wallace 1996: 573). Since regulatory traditions seem to be much more deeply rooted in states of the West, we should therefore expect more diversity among the EU-15 than among the new member states.

1.4.3. Explanations for Diversity: The Role of Exogenous and Domestic Factors

The explanatory part discusses those factors that might have caused regime diversity among the CEECs. As Meseguer (2003) argues, while international forces are better equipped to answer the question of timing and the number of countries involved, domestic variables are better suited for the explanation of differences in the intensity and pattern of the reform process. With the help of statistical methods, we are able to single out countries from the ten CEECs which show dissimilar regime configurations or privatization patterns.

In a second step, a systematic cross-national comparison of the reform processes in form of focused case studies shall provide explanations for the observable differences in national regulatory regime configurations of those countries.

All EU member countries are subject to top-down Europeanization pressures which impact on national administrations and jurisdictions (cf. Knill 2001). EU accession also implies the transposition of the acquis communautaire into national law. With regard to regulatory reform in specific, the CEECs had to comply with liberalization and reregulation requirements inherent in the Treaty. One could now argue that Europeanization is not a one way street, and that such top-down pressures are not purely exogenous since EU law is shaped by negotiations between member states. In other words, to a certain extent the emergence of national policies and administrations at the EU-level originates in the preferences of member states’ governments. This logic, however, does not apply in case of enlargement because applicant countries did not have the chance to influence EU Secondary law prior to accession. The latter was exclusively shaped and formulated by the old members. Thus, processes of Europeanization in the context of enlargement can indeed be regarded as a purely exogenous top-down imposition of the acquis.

Domestic Factors (i.e. party ideology,

veto players) Horizontal Policy Diffusion

(i.e. emulation, learning) Vertical Policy

Transference (i.e. mechanisms of

Europeanization)

Country C Country

B Country

A

Supranational Level

DF1 DF2 DF3

Figure 1.1 Factors Impacting on Domestic Regulatory Reform

By analyzing the impact of vertical policy transference and diffusion processes on the one side and domestic factors on the other, we should be able to single out those variables that have caused cross-national differences among the CEEC-10. The relationship between those categories of variables is depicted in Figure 1.1. While vertical and horizontal transfer processes assume interdependent policy-making, domestic categories stress the impact of independent national variables (Simmons and Elkins 2004:

172). However, all three are linked to each other. Together, they form a set of country-specific variables which determine the reform propensity in the CEEC-10. Hence, the working hypothesis posits that the combined impact of vertical policy transference, horizontal policy diffusion and domestic variables, i.e. party ideology or the role of veto players, is responsible for the diversity among regulatory regimes in the CEEC-10.