The literature on unionized oligopoly has demonstrated that unions will generally ben t from cooperation. Despite these bene ts, most initiatives towards Europeanization of collective bargaining have been unsuccesful. Some noteable exceptions can be found in the European metal industry. The European Metalworkers Federation can claim several path-breaking precedents of cross-border coordination, and is being monitored closely by scholars of European industrial relations. Despite this abundant attention, the reasons for success or faillure have not been analyzed analytically.
In this paper, we present a model that takes speci c charachteristics of the metal industry into account, such as product di¤erentiation, imports from low-wage countries and di¤erences in reservation wages. We predict that cooperation will be easier when reservation wages are
similar and when imports are imperfect substitutes. In contrast to the common truth that an external threat encourages cooperation, we nd that under speci c circumstances unions will be less eager to cooperate when faced with a foreign competitor. Our predictions are in line
with the various levels of transnational cooperation in the automobile, electrical equipment and steel industries. Furthermore, our results indicate that the opposition of rms and the reluctancy of the European Commission to support transnational bargaining are generally
justi ed by predicted changes in pro ts and overall welfare.