Is the open method of coordination a new mode of governance?

Elisabeth Heid 13.06.2005

PK: New Modes of Governance in the European Union

Is the open method of coordination a new mode of governance?

The open method of coordination (OMC) is a governance process that brings together a variety of actors (including non-state) for the exchange of best practice and for the establishment of legally nonbinding targets and benchmarks. Class discussion centred on the question of whether the OMC can be considered a new mode of governance (NMG). Here, I begin by outlining the OMC policy cycle: its purpose, its actors and their preferences, and its processes. Drawing on this depiction, I conclude with a discussion of whether the OMC can be considered a new mode of governance by identifying the features of new modes of governance that the open method of coordination incorporates.

The open method of coordination draws its inspiration from European Council meetins in Luxembourg, Cardiff and Cologne, which set up supply-sided policy initiatives for the implementation of employment guidelines (Luxembourg), product, service, labour and capital markets and long-term public finances (Cardiff) and macroeconomic dialogue (Cologne – European Employment Pact). The Lisbon European Council (2000) first acknowledged the OMC as a mode of governance. Here, the OMC was also identified as the method to be applied to a variety of policy areas in order to reach the EU’s 10-year goal of becoming the most competitive and dynamic knowledge-based economy in the world, capable of both sustainable economic growth and social cohesion (the so-called ‘Lisbon Strategy’).

The OMC’s purpose, at the most abstract level, is to find solutions to complex problems. These problems are complex because the Commission and member states have failed to find adequate solutions to address them; nor have private actors on the free market been successful. Alternatively, they might be complex because the economic and social policy areas are characterised by deeply-founded (and thus frequently politically sensitive) national traditions, making traditional top-down, coercive policy-making problematic. For example, in the economic policy realm, ‘soft’ and ‘nation-state friendly’ coordination practices, such as the Commission and Council’s annual broad economic guidelines, have been used to respond to fears of institutional and regional spill-over resulting from the loss of national monetary sovereignty in the Euro-zone. Occasionally (though not necessarily, as is sometimes mistakenly claimed), the OMC may also be used in issue areas in which the Commission lacks formal policy-making powers.

As such, the OMC represents a means by which member states, private actors (civil society, business, social partners) and the European Commission come together address instances of state or market failure. Yet it is also a mechanism for actors to address these problems without surrendering authority to the Commission. Thus the “openness” of the OMC refers to the freedom that member states have in formulating national responses to Union targets, in the methods they apply to achieve them, and in their selective involvement in the process.

The OMC policy process begins by bringing together member states, the Commission and the relevant private sector stakeholders on a voluntary basis for the sake of policy formulation. This policy consist of, firstly, legally nonbinding goals or guidelines and, secondly, specific performance indicators.

The next step of policy implementation, a voluntary process invoking no sanctioning mechanisms, occurs at the national level: The governments of participating member states devise National Action Plans (NAPS), which set out the mechanisms to be used for reaching the specific goals. Countries are not only free to choose whatever mechanisms they wish, but they may also choose to pursue certain goals and not others (or some more than others), according to national needs and priorities.

The subsequent phase in the OMC process is that of performance review, which occurs by means of mutual peer review. One such review method is ‘benchmarking’, which was pushed as a tool for guiding EU policy by the European Roundtable of Industrialists. Benchmarking is a process that produces a ranking of member state performance. At the same time, benchmarking enables a flexible comparison of performance. Rather than assessing compliance/non-compliance, it can accommodate diversity by allowing for the contextualisation of performance mechanisms and outcomes. The performance review process has a dual purpose: On the one hand, the release of public data on member state efforts and progress aims to induce competition between member states. On the other, it seeks to identify best (and worst) practice for the purposes of mutual learning.

Ideally, what occurs next is a feedback process: Member states revaluate their to-date performance and emulate the best practice of better-performing states. Though harmonisation is certainly no goal of the OMC, it may be an indirect consequence of best practice imitation. When such ‘learning’ by diffusion occurs, the OMC process can be said to have turned into a policy ‘cycle’.

Can the open method of coordination be considered a new mode of governance? There is strong evidence suggesting that this is indeed the case, as the OMC incorporates three crucial characteristics of new modes of governance:

Firstly, the OMC is an inclusive governance process, in that it provides an opportunity for the involvement of a variety of actors, both public (member state governments, the Commission, regional and local levels of government) and private (business, civil society organisations, social partners), in policy making and implementation. As de la Porte and Nanz point out, however, there may be a difference between theory and practice: In reality, the contribution of social partners, both on the European and national level, has been limited. The unions’ association, ETUC, seems to lack commitment to the European Employment Strategy, and the employers’ association, UNICE, has been reluctant to become involved. The participation of national-level social partners has improved, but remains ambivalent due to the difficulty the social partners have in reaching agreement amongst themselves. Accordingly, in all but one country (Luxembourg), the NAPs have been governmental, rather than joint documents. Nevertheless, a theoretical level, the OMC is an inclusive governance process, and the Commission has actively encouraged social partners to become more involved.

Secondly, the OMC may be characterised as a NMG in that is produces non-binding ‘soft law’. This is to say that participation and implementation are voluntary and cannot be coercively induced. Finally, the OMC functions on the basis of subsidiary, another characteristic of NMG. Subsidiarity entails that the compilation and implementation of detailed action plans is delegated to national or sub-national governments or private actors.

Can the OMC be called a new mode of governance on these grounds? It seems to me that on a theoretical and normative level and, for the most part, in practice as well (though there are undeniable shortcomings), the OMC, as applied to European economic and social policy, can reasonably be called a new mode of governance.

Identifying these characteristics does not, however, say anything about the effectiveness of the open method of coordination as a governance mechanism. Inclusiveness is taken to be a positive because it is thought that the participation of affected stakeholders in the formulation of goals and indicators will increase compliance. On the other hand, the voluntary nature of the OMC might have the opposite effect – lessening compliance. Similarly, subsidiary and benchmarking allow for contextualisation and flexible comparison of implementation and performance. On the other hand, measuring public policy performance through benchmarks is not an easy or straight-forward task. One reason for this is that interdependence and regional spill-over within the EU mean that assessing member state performance independently from one another is difficult, and possibly, at times, unrealistic. Accordingly, assessing the effectiveness of the OMC in EU governance requires a set of criteria that goes beyond the ones identified here.