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Smart Library on Globalization > Smart Library on Law and Globalization > Sites and Types of Global Lawmaking > Overview: Coordinating Understandings, Expectations and Actions in the Regulation of Global Business
How Are Global Business Regulations Created?
There is no master mechanism to explain globalization of business regulation. However, some factors prove more important than others.
Scholars John Braithwaite and Peter Drahos examine the globalization of business regulation. There are three key components for explaining globalization.
Mechanisms Involved in the Globalization of Business Regulation
Mechanisms that globalize business regulations are the processes that increase the extent to which patterns of regulation in one part of the world are similar, or linked, to patterns of regulation in other parts of the world.
Based on interviews with 500 “key informants,” the authors identify a set of mechanisms for globalization used in business regulation. The authors point out that the mechanisms identified in their analysis were not based on abstract theory, but on patterns that were evident in the data.
Modeling goes beyond mere imitation (which is one actor matching their actions to those of another actor). In order to truly model, actors need to understand not simply what to do, but how to do it and why. Modeling involves sharing conceptions of actions through words and images. Modeling involves learning from observation in which the critical aspects of action are captured in symbols, templates and frameworks for action.
Modeling is the most consistently important mechanism for explaining the globalization of business regulation.
Reciprocity is a particularly important principle for understanding the mechanisms of globalization. Reciprocity indicates that each actor in an exchange has an interest in an action of the other. The actors “exchange” actions so that if the first actor performs a certain action, then the second actor agrees to carry out another action desired by the first actor.
There are two kinds of reciprocity:
Reciprocal adjustment is a situation where actors have similar interests and this leads them toward an agreement on the same rules. These similar goals and interests may lead to the creation of a new set of common rules, the harmonization of existing rules or mutual recognition.
Reciprocal adjustment is an important mechanism for explaining what happens when companies in two countries share responsibility for the negative consequences of their actions (for example, both U.S. And Canadian firms polluting the Great Lakes). In this case, both companies want to reduce pollution and they must work together to accomplish this.
When the firms from only one country are the source of the problem, contracts and non-reciprocal coordination are more likely sources of regulatory globalization.
Non-reciprocal coordination may occur in situations where actors have different (or, perhaps, even contradictory) interests on a particular issue, but the alliance itself benefits both actors. For instance, one actor may support the position of another actor on an issue in exchange for the first actor's support on a different issue important to the second actor.
An example of non-reciprocal coordination is Australia's support of the U.S. negotiations over the trade aspects of intellectual property rights. On the face of it, this did not make sense, since the U.S. position actually went against Australia's interests. However, Australia's actions did, in fact, make sense because Australia needed U.S. support on agricultural issues.
Globalization of regulation may occur through the threat or use of military force.
Up until the end of World War II, military coercion was an important force in the globalization of business regulation. Since that time, it has become much less important for explaining globalization.
Globalization of regulation may occur through the threat or use of economic sanctions.
As with military coercion, economic coercion was much more important before World War II as an explanation for business regulation globalization. Since that time, even though economic coercion is a tool available to strong actors, it is a mechanisms that is rarely used. Economic coercion may be threatened, but is used only in exceptional circumstances.
When it is used, economic coercion most often takes the form of:
Systems of Reward
While coercion raises the “price” of non-compliance, systems of reward work in an opposite fashion. Globalization of regulation may occur when the reward for compliance with regulation is increased.
The authors say that, based on their research, coercive strategies to enlist compliance are both less costly and more effective than promising rewards.
Actors may wish to comply with global standards, but may lack the ability to do so. In this case, globalization of regulation may provide these actors with the competence and ability to reach these standards.
While all the mechanisms described above have been used to facilitate the globalization of business regulation, there is no master mechanism that can be identified to explain globalization.
Data and Methods:
Braithwaite, John, and Peter Drahos. 2000. Global Business Regulation. New York: Cambridge University Press. Ch. 4, pp. 15-26.
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