The European External Action Service is the new institutional arm of EU diplomacy. It is headed by the High Representative of the Union for Foreign Affairs and Security Policy (HR/VP), currently an office held by the Baroness Catherine Ashton. Nick Cherrier takes a close look at the EEAS from a game theoretic perspective. He argues Member States with large networks and influence in foreign policy will initially find themselves empowered, while intra-EU bargaining will result in an utility redistribution benefiting those Member States with less influence. Member States need to specialize in countries where they have a ‘comparative advantage’ in their diplomatic network.

The birth of the European External Action Service (EEAS) and the reshuffling of the Directorates-General under its umbrella have altered the dynamics of EU diplomacy with its partners. Before the Lisbon Treaty, which established the EEAS, heads of delegations abroad did not speak with the aggregated voice of the Union. They did however speak on behalf of the Commission where the treaties allowed, and represented the Union when mandated to do so. Under the new institutional arrangement, it is expected that these delegations will serve as a greater focal point.

The added power and mandate of the EEAS, combined with the tendency of governments to reduce their representations’ budgets, has a direct impact on national resources allocation. It can be rationally expected that representations of Member States will shrink in size, at least where stakes are low. The added benefit of the EEAS as a coordination instrument with the ability to serve the interest of the Union and speak for all will turn diplomatic representations into inefficient duplicates, at least in non-EU countries where diplomatic activity was slow. The EEAS will serve as a justification for difficult budgetary cuts. This in turn will benefit the European service, as Member States will increasingly depend on its network.

A Battle of the Sexes variant of the Prisoners’ Dilemma provides a representative scenario to illustrate the mechanics behind foreign policy formation. Let us assume a conceptual game with two main players Hungary and Italy (chosen at random). The policy at stake concerns a third country in which Italy has key interests and is heavily involved diplomatically. In opposition, Hungary is only served by a small mission and indeed obtains most of its support and information through the EEAS and EU delegation. Hungary desires policy P1, while policy P2 is preferable to Italy. We allocate payoffs ranging from 0 to 2, where 0 indicates no change in utility for the given Member State, 1 indicates minor positive change and 2 indicates the preferred policy outcome. The relationship is however asymmetric. Whereas Hungary is dependent on an intergovernmental agreement between Member States to have an impact in the third country, Italy may decide to use its own diplomatic resources. While Italy’s preferred payoffs are dependent on Hungarian cooperation, its alternative to achieve the policy outcome unitarily tips the scale in its favor, as is illustrated below.

Figure 1 – Battle of the Sexes under unilateral dependence in third countries 

In the above model, rationality dictates Italy’s dominant strategy in choosing P2 would result in Hungary being left with little choice but to follow. By applying this game to policy formation in third countries we highlight the importance of status quo alternatives. Member States will maintain a lead in policy formation in countries where they are dominant.

A further dimension branching off from this model is that Hungary may ask for side payments in what would equate to a redistribution of payoffs. This leads us to reason that in a first instance, influential Member States may benefit from the erosion of diplomatic services in other Member States, as they find their influence augmented. In a second instance however, less influential Member States, or those that are less interested in third country policies, may free ride and in addition bargain for side payment in exchange for their support. Both strategies can produce benefits, however existing influence and bargaining power are variables that ultimately determine output. By backward induction, only States that are relatively powerful in the international arena or in their relations with specific third parties will find it favourable to continue their heavy investment in foreign policy. Others may draw on their veto capacity to extract rent.

While introducing the EEAS may bring efficiency gains, side payments and package deals allow for an alteration of payoffs, ultimately resulting in redistribution. In due course, the EU might benefit from a specialization of its diplomatic networks in non-EU countries. Perhaps, the United Kingdom should concentrate on relations with Commonwealth countries where it has a ‘comparative advantage’, and similarly France should focus its efforts on its former colonies. Governments need to start thinking in geostrategic terms in order to plan effective regional foreign policies for the future.

This article is based on Nick Cherrier’s article ‘EU Diplomacy at 27: United in Diversity?’ (2012) which can be de viewed here.

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Note:  This article gives the views of the author, and not the position of EUROPP – European Politics and Policy, nor of the London School of Economics.

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About the Author

Nick Cherrier – Simon-Kucher & Partners
Nick is a consultant at Simon-Kucher & Partners, a global strategy and marketing consulting firm. He initially studied business and international relations at Bond University in Australia, before developing an interest in European affairs at the LSE and Sciences Po. He is the author of EU Diplomacy at 27: United in Diversity? (2012).