Über die Autorin bzw. den Autor

Walter Mattli is professor of international political economy and a fellow of St. John's College, University of Oxford. Ngaire Woods is professor of international political economy and director of the Global Economic Governance Programme at Oxford.

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"As the world seems poised to recalibrate significantly the respective roles of markets and authority, The Politics of Global Regulation offers timely analytical and experiential guidance about what works, what doesn't, and why. Combining keen general observations with informative cases drawn from international finance, human rights, corporate social responsibility, maritime safety, and international trade, this excellent volume should be required reading for anyone interested in the subject--and these days, that excludes few among us."--John Gerard Ruggie, Harvard University

"This is an important book. The financial crisis that began in 2007/2008 is the worst since the 1930s and the failure of global regulation is all too apparent. Already ten years ago when the East Asian financial crisis erupted it was clear that better rules and institutions were required at the global level. Powerful vested interests on Wall Street and in the financial sector prevented reform--a classic case of regulatory capture. This book explains systematically the conditions that make global regulatory capture possible and demonstrates through a wide range of case studies how it might be averted."--Joseph Stiglitz, Nobel Prize–winning economist

"As the world contemplates a new Bretton Woods system that will surely not look anything like the top-down U.S.-Britain system created after World War II, this excellent collection sheds important light on the demand for and supply of global regulation. The analytic framework Mattli and Woods lay out should give hope that the next epoch of global economic regulation will escape capture by self-interested financial institutions and further the common interest in stable and equitable economic growth and development."--Geoffrey Garrett, University of Sydney

"The editors have put together an outstanding set of contributors to tackle a critical and often under-explored feature of the global political economy--international regulation. This book is a needed theoretical contribution. I believe it will have wide appeal to those interested in international relations, international business, and global public policy more generally."--Abraham L. Newman, Georgetown University

"Mattli and Wood's volume is a timely collective examination of an important topic. Global regulation has received insufficient academic attention, because it is complex and doesn't sit easily with the traditional intellectual categories of international political economy. The essays collected in this book break ground in mapping out the new politics of regulation and helping us to understand how it is changing domestic and international economies."--Henry Farrell, George Washington University

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The Politics of Global Regulation

PRINCETON UNIVERSITY PRESS

Contents

List of Figures and Tables..................................................................................................................................................viiIntroduction................................................................................................................................................................ixChapter One In Whose Benefit? Explaining Regulatory Change in Global Politics Walter Mattli and Ngaire Woods..............................................................1Chapter Three Filling a Hole in Global Financial Governance? The Politics of Regulating Sovereign Debt Restructuring Eric Helleiner.......................................89Chapter Four From State Responsibility to Individual Criminal Accountability: A New Regulatory Model for Core Human Rights Violations Kathryn Sikkink.....................121Chapter Five The Private Regulation of Global Corporate Conduct David Vogel...............................................................................................151Chapter Six Racing to the Top ... at Last: The Regulation of Safety in Shipping Samuel Barrows............................................................................189Chapter Seven Regulatory Shift: The Rise of Judicial Liberalization at the WTO Judith L. Goldstein and Richard H. Steinberg...............................................211Chapter Eight Economic Integration and Global Governance: Why So Little Supranationalism? Miles Kahler and David A. Lake..................................................242List of Contributors........................................................................................................................................................277Index.......................................................................................................................................................................279

Chapter One

Walter Mattli and Ngaire Woods

Few topics are as central and of consequence to the lives and well-being of individuals as regulation, broadly defined as the organization and control of economic, political, and social activities by means of making, implementing, monitoring, and enforcing of rules. Regulation is increasingly global as elements of the regulatory process have migrated to international or transnational actors in areas as diverse as trade, finance, the environment, and human rights. This trend has triggered a fierce debate among economists about the impact of global regulation. On one side, Joseph Stiglitz argues that the rules of the game have been set largely by advanced industrial countries, and in particular by special interests within these countries. "[N]ot surprisingly, they have shaped globalization to further their own interests. They have not sought to create a fair set of rules, let alone a set of rules that would promote the well-being of those in the poorest countries of the world." He adds darkly, "[t]hose who benefit from the current system will resist change, and they are very powerful."

A different view proposes that global regulation helps to break down inefficient and discriminatory domestic regulatory schemes as well as old-fashioned value systems subservient to the interests of corrupt national elites. As Jagdish Bhagwati put it, "[Anti-globalization] protesters do not adequately appreciate that, as has been documented by numerous development economists who have studied both the working of controls and the rise of corruption in developing countries, far too many bureaucrats impose senseless restrictions just to collect bribes or to exercise power. Letting markets function is therefore often an egalitarian allocation mechanism." This more optimistic view assumes that global regulation is less susceptible to capture; technocrats at the international level can get on and do their job without having to bother about rent-seekers. This theme is echoed by some international legal scholars who argue that governments risk becoming "prisoners of the sirene-like pressures of organized interest groups unless they follow the wisdom of Ulysses (when his boat approached the island of the Sirenes) and tie their hands to the mast of international guarantees." In short, the key difference between the critics and optimists is that whereas the former argue that global regulation intensifies the capture problem, the latter view it as an effective remedy.

Given the prominence of these debates, it is surprising that no sustained attempt has been undertaken in the field of international relations (IR) to take stock of the broad picture of the politics of global regulation by systematically tackling questions such as: What major global regulatory changes have taken place in key issue-areas over the past few decades and what drove these changes? What institutional forums are selected for regulatory activities and what explains these choices? How is compliance monitored and enforced? Who are the winners and losers of global regulation and why? What explains variation across issue-areas? Although economists and political scientists have explored similar questions at a national level, few have attempted to address them at the global level.

We distinguish global regulation from domestic regulation in terms of where the regulatory activity takes place. Recognizing that regulation is a process comprising several stages (including agenda-setting, negotiation, implementation, monitoring, and enforcement), we emphasize that global regulation does not necessarily imply a shift of the whole regulatory process to the global level. In some instances, formal negotiations are moved beyond the borders of the state where public and private actors cooperate in the setting of rules, while the other stages of regulation remain at the national level. For example, human rights standards have been negotiated internationally but their enforcement is taking place nationally. As documented by Kathryn Sikkink, some 88 percent of human rights trials have taken place in the domestic legal system of the country where the crime was committed, and only 4 percent of cases have been prosecuted in international tribunals. A central point of our study is that a thorough assessment of the effectiveness of any piece of global regulation necessitates an examination of the politics at each stage of the regulatory process: what actors are in or out at key junctures, why, and with what distributional consequences?

Global regulation also differs from national regulation in the nature of rules being set. National regulation is primarily about hard rules, that is, laws made, implemented, and enforced by governments. By contrast, much of global regulation has traditionally been soft law, that is, voluntary standards, best practices, and their like. Differences in the detail and quality of regulation at the global level may reflect differences in the way regulation is created and subsequently implemented. Soft law is often created by public-private or purely private networks to which no rule-making authority has been delegated. Some such forums are small, secretive, and closed, whereas others are large, transparent, and inclusive. Over the last decade or so, governments have increasingly endorsed soft law issued by various forums, thereby hardening it and giving it real bite. Assessing global regulation thus also requires an analysis of the broader institutional context in which rules are produced and enforced.

We seek to fill some of the gap in the international relations literature by developing an analytical framework capable of assessing major regulatory changes at the global level. We illustrate the framework's central propositions with examples from a wide range of areas of global regulation.

Briefly summarized, our account of global regulatory change contrasts outcomes that do little more than entrench narrow interests (regulatory capture) and those that fulfill broader public purposes (common interest regulation). The theoretical framework we develop to explain shifts toward one or the other outcome focuses on the demand for regulation and how it is affected by varying institutional contexts. The institutions within which regulation takes place vary widely in openness and commitment to proper due process. Regulatory institutions that supply participatory mechanisms that are fair, transparent, accessible, and open (case of "extensive" institutional supply) are more likely to produce common interest regulation. That said, these are difficult conditions to fulfill in global politics. Even when extensive participatory mechanisms are in place, common interest regulation is not assured unless key demand-side conditions are satisfied; these can be summarized as "information, interests, and ideas."

First among demand-side factors is information. Without information on deficiencies and biases of the regulatory status quo, negatively affected constituencies will have no motivation to demand change. Disasters or demonstrations of failure can reveal to the public the negative externalities of no or poor regulation, triggering a demand for better regulation. But actual change will require at least two other conditions to be in place, one relating to (converging) interests of key actors and the other to ideas. Change is a protracted battle, pitting potential winners and losers and fought over multiple stages as the detail of regulation is negotiated, then implemented, monitored, and enforced. Change requires the sustained support of "entrepreneurs" offering technical expertise, financial resources, and an organizational platform if it is to succeed. Entrepreneurs know how to capitalize on a crisis or failure; they may be public officials, nongovernmental groups, or private-sector actors. The latter group has often been ignored. Yet private-sector actors may become powerful entrepreneurs for regulatory change if they are suffering from existing regulation either as corporate consumers of poorly regulated services or products; as newcomers to an industry whose regulation has been captured by established firms; as firms at risk from the negative publicity and fallout from an industry disaster; or from the fact that other firms with whom they must compete are not on a level playing field.

Entrepreneurs will be most successful in changing regulation where they can form a broad coalition against defenders of the status quo. To this end, a shared set of new ideas about how to regulate will often be crucial. When a disaster or failure triggers change, it also undermines the legitimacy of the ideas that supported the old order, opening up space for a battle over competing alternative ideas. Successful change is made more likely where new ideas provide a way to regulate that both offers a common ground to a coalition of entrepreneurs pressing for change and fits well with not-discredited existing institutions.

The main propositions that derive from our framework can be summarized as follows (see figure 1.1 on page 16): An intersection of limited institutional supply of global due process and weak demand for change because of suppressed information about the social cost of poor regulation or failure of other demand-side conditions will favor sustained regulatory capture. The emergence of broad societal demand for change in a context of extensive institutional supply will produce common interest regulation. Broad demand for change that has been shut out because of closed regulatory forums (i.e., limited institutional demand) may take to the street or engage in naming and shaming or other "pinprick" strategies in an effort to obtain regulatory concessions and compromises from capture actors. Finally, extensive institutional supply that is not met by broad demand because of failings on the demand side will also favor narrow interests rather than broader ones—the "haves" at the expense of the "have-nots." The result is de facto capture even though the institutional context may have been designed with the objective of serving the common interest.

Building on Existing Explanations Of Global Regulation

In considering the politics of global regulation, the wide-ranging analysis of the impact of globalization on business regulation offered by John Braithwaite and Peter Drahos is an important early contribution, influenced primarily by approaches and methods in sociology and anthropology. More closely anchored in the field of international political economy, two other recent contributions stand out, one by Beth Simmons and the other by Daniel Drezner.

The work by Braithwaite and Drahos is remarkable not only for its many detailed and informative case studies, but also for its rich and wide-ranging conceptual discussions. Using examples from history and some five hundred interviews, Braithwaite and Drahos trace the complex ways in which contests involving multiple and sometimes conflicting principles (including transparency, reciprocity, rule compliance, and national sovereignty), various public and private actors, and diverse "mechanisms" (including coercion, rewards, and modeling) have produced very uneven outcomes in global regulation. While globalization has "ratcheted up" regulation concerning the environment, safety, and financial security, it has "ratcheted down" most economic regulation, with the powerful exception of intellectual property. Braithwaite and Drahos conclude that frequently globalization of regulation is a story of domination: "The global lawmakers today are the men who run the largest corporations, the U.S. and the EC." However, they also provide many episodes where regulation has been successfully strengthened to protect communities from the abuse of corporate power, or where successful deregulation has reduced corporate monopoly power. Although the eclecticism of their approach is highly suggestive, Braithwaite and Drahos present in the end a rather unwieldy framework for analysis. It accommodates all possible influences on global regulation and excludes none. Our approach, by contrast, is anchored in the political economy tradition and seeks to bring some parsimony to explaining global regulation.

Simmons focuses more specifically on why particular modes of regulation are taken up by financial regulators in different countries. She examines regulation in four areas: capital adequacy, accounting, anti–money laundering, and information sharing among securities regulators. Her analytical framework focuses on the strategic interaction between a hegemonic "regulatory innovator" and the rest of the world. The hegemon in finance is argued to be the United States; it is in a position unilaterally to change the context for financial markets worldwide. Regulators in other countries can choose to emulate new U.S. regulation or diverge. If divergence is costly to the United States, in other words, it is a source of negative externality for the United States, then the hegemon will mobilize political pressure to coerce foreign regulators to fall in line with U.S. rules. Specifically, when the sources of externalities are distinct or the externality is divisible, the United States will target its pressure through unilateral action or bilateral agreement. When the source of externality is uncertain or shifting and thus not easy to target, the United States will create and back multilateral institutions to exert overt political pressure on diverging jurisdictions. The Simmons account departs from the traditional "liberal functionalist formulations" of global cooperation. "There is nothing ... Pareto-improving [in the account] ... Regulators elsewhere may not even have been consulted or have participated in any meaningful way in decisions that fundamentally alter their regulatory landscape. Smaller financial centers may have to adjust decisions made by the U.S. to avoid worse outcomes, but many have preferred no innovation by the dominant center to begin with."

Simmons's analysis is a highly valuable contribution to the study of global regulation. Nevertheless, it suffers from three limitations: First, as Simmons readily concedes, "[F]ew ... areas of international activity [other than finance] are so profoundly dominated by only one or two countries." If finance is unlike most other areas and thus unrepresentative, we would expect the insights derived from studying regulation in this area to be of limited generalizability. Second, Simmons offers a theory not of the emergence but of the diffusion of a given regulatory model. "The framework ... takes U.S. regulatory innovation itself as ... exogenous." 16 In other words, the framework explains when and how U.S. financial regulation travels across jurisdictions; it does not explain the domestic political process by which such regulation comes about or changes in the first place. Finally, the impetus for global harmonization is assumed to be regulatory innovation in a dominant state—an assumption common in the literature on regulatory diffusion. However, transnational regulation may emerge as the collective response by key actors—public or private—to a transnational problem or crisis.

A third major contribution to the study of global regulation is recent work by Daniel Drezner. Drezner proposes a theory of transnational regulatory processes and outcomes and tests the theory on cases from a wide range of issue-areas, including the Internet, international finance, genetically modified organisms, intellectual property rights, and pharmaceuticals. Similarly to Simmons, Drezner posits that (1) great powers (mainly the United States and the European Union) are the key actors forging the rules of the global economy; (2) great powers coerce others into compliance when necessary; and (3) governments' "ideal points" are their "own pre-existing national regulatory framework[s]"—frameworks that developed in response to domestic problems and predate globalization. Who shapes the preferences of great power governments? Drezner explains: "[I]t is the groups that face the greatest barriers to market exit or internal adjustment—in other words, the least globalized elements of domestic politics—who exert a stronger influence on government preferences. These actors, by exercising their political voice, raise the adjustment costs to governments of regulatory coordination." Drezner thus hypothesizes that regulatory coordination is less likely when the regulation directly affects mature or nontradable economic sectors—sectors expected to generate the highest level of adjustment costs. "Even as globalization increases gross benefits, the costs relative to other sectors or factors of production remain relatively high. Coordination is therefore a less likely outcome." His case studies shed corroborating light on the theory proposed.

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