Getting Hedge Funds Regulation into the EU Agenda - AperTo：让对冲基金监管在欧盟议程-阿朗

1、This is an author version of the contribution published on:Journal of European Integration, 2021, 33(3), pp. 251-266. doi: The definitive version is available at: HYPERLINK :/ tandfonline /doi/abs/10.1080/07036337.2021.546844?journalCode=geui20#.UxYhmaXnXG4 :/ tandfonline /doi/abs/10.1080/07036337.2

2、021.546844?journalCode=geui20#.UxYhmaXnXG4 Getting Hedge Funds Regulation into the EU Agenda:The Constraints of Agenda DynamicsManuela MoschellaAbstractWhy did the issue of hedge fund regulation enter the formal EU agenda in response to the subprime crisis? Building on existing literature on agenda

3、dynamics in the EU, this paper argues that framing and issue expansion were key in getting the issue into the formal agenda, and that issue expansion does not necessarily imply public mobilization. Going beyond existing scholarship, however, the paper also shows that framing processes are closely as

4、sociated with the characteristics of the issue for debate and that issue expansion is intimately related to the arrangements governing the specific issue domain. In other words, whereas framing and issue expansion are traditionally conceived as a strategic choice or as the outcome of an exogenous ev

5、ent, this paper shows that framing may also be shaped by the nature of the issue at stake and that issue expansion may result from the unintended consequences of previous governance choices.Keywords: Agenda-setting; European Union; hedge funds; regulation; policy subsystemThe financial crisis that s

6、tarted in the summer 2007 in the small segment of the US subprime market but quickly became global in scope has triggered a variety of reform proposals to improve the functioning of domestic and international financial markets, making them more resilient to shocks. The European Union has been one of

7、 the most active actors in the reform efforts that followed the crisis, repeatedly calling for a regulatory framework that covers all financial markets, products and participants (Bryant 2021; EU Commission 2021b). Among other measures, the EU institutions have developed a number of proposals to cen

8、tralize supervision of financial firms at the EU level (de Laroisiere 2021) and to tighten controls on derivative trading, tax havens and credit rating agencies (EU Commission 2021c; Quaglia 2021). This paper focuses on one of the regulatory initiatives formulated in response to the crisis, that is

9、to say, the proposal to regulate hedge funds managers activity within the EU. Specifically, the paper asks why such a regulation entered the EU policy agenda in response to the subprime crisis although the deep-seated roots of the crisis cannot be precisely traced back to hedge funds activities but

10、lie in a long period of economic growth, low interest rates and lax financial regulation (Bank for International Settlements 2021; IMF 2021). In answering this question, the paper draws attention to the impact of framing strategies and issue expansion processes. Specifically, the paper argues that t

11、he issue of hedge fund regulation catalyzed EU policy-making institutions attention because of the EU Commissions reframing of the issue in light of the subprime crisis and because of issue expansion to the private sector. In other words, in line with the findings of existing literature (Baumgartner

12、 and Jones 1993; Schattschneider 1960), I argue that framing and issue expansion are key in getting an issue into a politys formal agenda, and that issue expansion does not necessarily imply public mobilization, the public being only one of many potential audiences to which conict may be expanded to

13、 (Princen 2007). Going beyond existing explanations, however, the paper shows that the way an issue is framed is constrained by the specificities of the issue at stake, thereby escaping the full control of strategically-driven issue proponents that seek to get an issue on the agenda (Cobb, Ross, and

14、 Ross 1976). Furthermore, the paper argues and illustrates that issue expansion does not exclusively materialize as a reaction to exogenous shocks (Birkland 1998) but also results from the unintended developments of previous governance arrangements in the specific issue subsystem. In short, the pape

15、r brings to the surface two constraining factors to agenda-setting dynamics: the characteristics of the issue being debated, which constrain framing strategies, and the existing governance features in the specific issue subsystem, which constrain the process of issue-expansion. On the one hand, the

16、international dimension that the issue of hedge fund regulation took on in the aftermath of the subprime crisis influenced the Commissions reframing strategy of its regulatory proposal. That is to say, the fact that regulating hedge funds became an issue of global cooperation rather than simply an i

17、ssue of EU harmonization limited the range of solutions to the problem posed by the activities of hedge funds, leading the Commission to frame the proposal in terms of the G20 consensus on the topic. On the other hand, the existing institutional features of the EU financial services governance also

18、influenced the trajectory of hedge fund regulation toward the EU formal agenda by providing the foundations for issue expansion. Indeed, issue expansion, that is to say, the activation of actors interest in a specific policy proposal that can lead to both support and opposition to the proposal, can

19、take different forms. To start with, in line with most of existing literature, issue expansion can be the deliberate act of policy entrepreneurs that reach out to other groups of actors in order to build support around their preferred proposal or oppose rival proposals (for instance, Baumgartner and

20、 Jones 1993). Nevertheless, as this paper is going to show, issue expansion can also be inadvertent, that is to say, it can happen automatically without the mediation of strategic entrepreneurs. For instance, inadvertent issue expansion can take place as a result of an economic crisis or a natural d

21、isaster, when different groups of actors become aware of a specific problem (Birkland 1998). Still, as explained at greater length below, inadvertent expansion can take place as a result of the historical legacies deriving from the formal and informal governance mechanisms in a specific issue area.

22、For instance, the paper shows that the institutionalization of private sector involvement in the issue area of financial services regulation, as a consequence of past governance choices in 2005-6, pushed the issue of hedge fund regulation to the private sector, although the Commission refrained from

23、 mobilizing the sector because of its likely opposition to the Commission-sponsored regulatory proposal.To advance my argument, in the following empirical sections, I am going to trace the process that led hedge fund regulation from its initiation to formal entrance into the EU policy agenda, passin

24、g through the stages of formulation and issue expansion (Cobb, Ross, and Ross 1976; Princen and Rhinard 2006). Specifically, the paper traces the Commissions proposals on hedge funds regulation from 2005 to the directive proposal in the spring of 2021 in contrast, the committee process and the inter

25、-state negotiations initiated in the late 2021 that will amend the legislation, leading to its acceptance or rejection, are left out from the picture. Focusing solely on the agenda-setting time span, the paper will bring to the surface how the Commission framed the issue over time and how the mobili

26、zation of the private sector was one of the crucial factors that led the issue of hedge fund regulation into the EU policy agenda. In sum, the paper argues that the dynamics that led hedge funds regulation into the EU policy agenda in 2021 was sustained by the Commissions formulation of hedge funds

27、regulation as part of the international regulatory reform efforts, in a reflection of the international dimension of the issue, and by issue expansion to the private sector, as a result of the unintended developments of the EU financial governance. Drawing attention to the characteristics of the iss

28、ue that tries to get onto the agenda and to the governance arrangements of the policy subsystem in which the issue is debated, this paper thereby calls for a research agenda that links general theories of agenda-setting with issue types (Princen 2007). Still, the paper contributes to the comparative

29、 research on agenda-setting (Albk, Green-Pedersen, and Nielsen 2007; Baumgartner, Green-Pedersen, and Jones 2006) by introducing a cross-time comparison of agenda dynamics, such as the one exemplified by the dynamics that preceded and followed the subprime crisis. The paper is organized as follows.

30、In the next section, I build on the literature on the agenda-setting in the EU to develop the analytical framework used in the empirical analysis. Section 2 illustrates the early stages of the agenda-setting process in 2005-06, when the Commission started advancing the regulatory proposal and brough

31、t the private sector into the regulatory debate. Section 3 illustrates the process through which hedge fund regulation became an issue in the EU policy agenda. In the conclusions, I reflect on the empirical findings connecting them with existing hypotheses and suggesting how the findings might spur

32、future research. 1. The EU and Agenda-Setting DynamicsWhile studies on agenda setting were originally developed for the analysis of domestic settings, they have also recently advanced a number of interesting propositions regarding agenda dynamics in the EU. Among others, scholars have cast light on

33、several political and institutional factors (Pollak 2003; Princen 2007), and on the strategies used by a variety of actors and institutions that help explain why an issue enters into the EU policy agenda (Jabko 1999; Mazey and Richardson 2001; Tallberg 2003; Wendon 1998). At the risk of simplifying

34、what it is a variegated and complex literature, it is possible to group existing studies according to whether they support or question the rationality assumption behind agenda-setting dynamics. This assumption is all the more evident in the treatment of the stages of formulation and issue expansion,

35、 which contribute to the process that leads an issue from its initiation to entrance in the formal policy agenda. On the one hand, the stage of formulation and issue expansion are conceived as the result of strategic choices. Specifically, building on most of the studies on agenda dynamics at the do

36、mestic level, according to which shifts in framing and social mobilization are key elements in the process through which an issue compels attention by a governmental entity (Baumgartner and Jones 1991; Cobb, Ross, and Ross 1976), several scholars working on the EU have emphasized the strategic natur

37、e of the agenda-setting process. For instance, in their attempt to systematize EU agenda-setting dynamics, Sebastian Princen and Mark Rhinard have elaborated two models in which the drivers of issue formulation and issue expansion lie in the actions of strategically-oriented actors. Indeed, both the

38、ir inside-out model (i.e. where issues emerge from below through officials and experts) and the outside-in model (i.e. where issues arrive on the agenda from above, through heads of state in the European Council) feature issue proponents that strategically frame issues and that either contain or exp

39、and issues to selected groups in order to win support around their pet solutions. Princen (2007, p. 34) has further specified this position by concluding that the EU agenda-setting process is a highly political process, that is to say, it is a strategic choice by political actors to move issues to t

40、he EU level. On the other hand, the rationality that is assumed to guide agenda-setting processes in the EU has been questioned. Building on the work of John Kingdon (1995), who conceives of the policy process as made up of the three independent streams of problems, policy, and politics, Nikolaos Za

41、hadiaris (2003) has suggested an understanding of framing and issue expansion that moves beyond rational-institutionalist accounts of EU policy. Specifically, although he analyses the entire process of policy formation and not properly the process of agenda-setting, Zahadiaris has drawn attention to

42、 the non-rational conditions under which policy-making takes place: the difficulty in distinguishing between relevant and irrelevant information, unclear actors preferences, and severe time constraints. Under these circumstances, problem definitions, that is, framing, is often more vague than is com

43、monly assumed and mobilization is more the result of focusing events rather than of strategic choices (see also Birkland 1998). Despite their differences, the two groups of studies analyzed thus far share the view that framing and issue expansion are crucial factors in catalyzing policy makers atten

44、tion, facilitating issue entrance into the formal policy agenda. Furthermore, both groups suggest that issue expansion does not necessarily entail mass mobilization because of the fragmentation of the EU public sphere and because of the limited accountability of EU institutions as compared to their

45、domestic counterparts. Still, the complexity of the EU institutional structure, where there is no institutional hierarchy but power is diffused (Fabbrini 2021; Moser, Schnider, and Kirchgassner 2000), provides for multiple access points in the EU policy-making process (Peters 1994; 2001; Richardson

46、2006), with the consequence that getting an issue into the EU agenda involves the expansion of conflict to increasingly wider circles of participants.This paper takes stock of existing literature on EU agenda-setting processes suggesting that framing and mobilization are key in getting an issue into

47、 the agenda and that mobilization does not necessarily entail the expansion of conflict to the public. Nevertheless, the paper adds to such a literature by bringing to the surface some important constraints to framing strategies and issue expansion dynamics. Specifically, by distinguishing between t

48、he stage of framing and that of issue expansion, what this paper argues and illustrates is that room of manoeuvre that issue proponents have in framing an issue may be significantly limited by the characteristics of the issue that attempts to get into the agenda. Furthermore, issue expansion to acto

49、rs and groups may be driven by the formal and informal arrangements that govern the specific issue domain rather than by the conscious strategy of issue proponents. Indeed, not all issues are equal in agenda-setting processes (Peters 2006). Some issues appear almost automatically on the agenda annua

50、l budget or programs that must be authorized on a frequent basis (Walker 1977). Other issues are likely to be placed quickly or slowly on the agenda depending on the social groups they affect. For instance, issues touching children are likely to be easily placed onto the agenda, while those affectin

51、g traditional pariah groups, such as drug abusers, will take much longer (Rochefort and Cobb 1994). Still, the propensity and the speed with which issues are likely to enter the agenda seem to depend on the losses they entail (Zahadiaris 2003, p. 88) and the visible harm they cause (Birkland 1998).

52、Building on these insights, the paper draws attention to the characteristics of the issue as a variable affecting agenda-dynamics in the EU. In particular, the hypothesis is that the specificities of the issue may affect framing strategies by restricting the range of feasible options for solving a p

53、roblem. In the case under investigation, the expectation is that the international dimension that the issue of hedge fund regulation acquired after the subprime crisis influenced the framing of the EU Commission. In particular, the fact that the G20 gave specific guidelines on international regulato

54、ry cooperation delimited the range of potential solutions to the problem of hedge funds activities in the EU. In this connection, the EU Commission framed the EU regulatory proposal as a means to ensure international stability rather than simply EU harmonization. This does not mean that using the G2

55、0 consensus did not serve the strategic interest of the EU Commission to make the regulation of hedge funds acceptable among EU policy-makers. However, what the use of the G20 consensus also indicates is that the way in which the Commission framed its regulatory proposal was constrained by the inter

56、national dimension that the issue had taken on over time. Next to framing strategies, issue expansion is also constrained by the formal and informal governance arrangements that characterize the issue policy subsystem. Specifically, these arrangements may constrain the decision on issue expansion/co

57、ntainment and on the identity of the actors the issue should be expanded to. Following Paul Sabatiers (1998, p. 99) definition, the policy subsystem consists of actors from a variety of public and private organizations who are actively concerned with a policy problem, and who regularly seek to influ

58、ence public policy in that domain. In this connection, several policy studies have shown that the characteristics of the subsystem, including the cohesiveness of certain types of advocacy coalitions, help shape the extent of resistance to policy change and the response to external shocks (Birkland 1

59、998; Howlett and Ramesh 2002; Williams 2021). In the EU, for instance, policy subsystems and networks vary according to issue areas. The subsystem of environmental policy, for instance, is different from the subsystem of competition policy. They involve different actors and groups of actors as well

60、as the dynamics of interaction among these groups vary from one subsystem to another. Furthermore, policy subsystems vary according to the institutional structure through which policy takes place. Although such differences are the most evident in the institutional features through which policy is de