THE ARCHITECTURE OF INTERNATIONAL COOPERATION
Kal Raustiala1
UCLA Law School
Raustiala@law.ucla.edu
January 2002
1 Acting Professor, UCLA Law School and Institute of the Environment. I thank the various
officials at EPA, DOJ, FTC, and the SEC for their assistance, and Jose Alvarez, Jeff Atik, Steve
Bainbridge, Eleanor Fox, Damien Gerardin, Andrew Guzman, Mark Lemley, Lisa Martin, Greg
Shaffer, Chris Sprigman, Richard Steinberg, John Wiley, the members of the UCLA Juniors'
Group, and especially Anne-Marie Slaughter for their comments on earlier drafts. Julie Remer,
Cheryl Kelly, and Sean Goldstein of UCLA provided very helpful research assistance.
I INTRODUCTION
The future architecture of international cooperation is the subject of
growing debate. Many scholars endorse liberal internationalism, the prevailing
form of cooperation in the 20th century, in which formally-negotiated
multilateral treaties, often coupled to international organizations, structure
inter-state relations.2
Others question liberal internationalism’s reach,
arguing that international organizations threaten national sovereignty and
their growth ought to be stopped. 3
Meanwhile in the streets—of Seattle,
Washington, Genoa—these organizations are increasingly attacked.
Yet
another set of scholars suggests that the era of liberal internationalism is
already ending. They claim that the structure of the international system is
changing deeply--deeper even than formulations like "the end of history"
suggest.4 Notions of "neo-medievalism",5 and the end of the nation-state, call
2 The United Nations is the paradigmatic example. The enduring strength of the liberal
internationalist program is reflected, for example, in calls for creation of a World Environment
Organization. See e.g, Frank Biermann, The Emerging Debate on the Need for a World
Environment Organization, 1 GLOBAL ENVN'L POL. 1 (2001).
3 The International Criminal Court is a salient recent example. On the general issues see
Symposium: Trends in Global Governance: Do They Threaten American Sovereignty? 2 CHI. J.
INT'L L. 1 (2000) (Proceedings of a conference at the American Enterprise Institute)
4 The End of History in Francis Fukuyama's sense was the end of ideological struggle: the
triumph of liberal capitalism on the world stage. It said little about the structure of the
international system, more about the particular geopolitical and ideological bipolarity of the
Cold War. Francis Fukuyama, The End of History, NAT. INTEREST (1989).
5 E.g. Philip G. Cerny: “Government per se will essentially become privatized, losing much of
its public character. The world will be a neo-feudal one, [with] overlapping and democratically
unaccountable private regimes…” Cerny, Globalization and the Changing Logic of Collective
Action, 49 INT’L ORG. (1995) at 624. The term originated in a classic work of international
relations by Hedley Bull; HEDLEY BULL, THE ANARCHICAL SOCIETY (1977), esp. 264-281; see
also ANTHONY CLARK AREND, LEGAL RULES AND INTERNATIONAL SOCIETY (1999) Chapter 5;
Jessica Tuchman Mathews, Power –Shift 76 FOR. AFF. (1997). I discuss neo-medievalism
further in Part II below.
2
into question the traditional statist foundations of liberal internationalism. 6
As these competing views reflect, "this is truly a time of perplexity in
international law."7
One notable response to this debate asserts the resilience of the state in
a globalizing world. Proponents of this view argue that the state— for purposes
of transborder cooperation--is in practice disaggregating into its functionally
distinct parts.8 Modern states are composed of legislatures, executives,
6 See, e.g. KENICHI OHMAE, THE END OF THE NATION-STATE (1995); see also SUSAN STRANGE,
THE RETREAT OF THE STATE: THE DIFFUSION OF POWER IN THE WORLD ECONOMY (1996);
SASKIA SASSEN, LOSING CONTROL? SOVEREIGNTY IN AN AGE OF GLOBALIZATION (1996); Oscar
Schacter, The decline of the nation-state and its implications for international law, 36 COLUM. J.
TRANS. L. (double issue) 7 (disputing the decline of the state and arguing, inter alia, that the
horizons of international law are simply expanding); (1997); THE DECLINE OF THE NATION
STATE AND ITS EFFECTS ON CONSTITUTIONAL AND INTERNATIONAL ECONOMIC LAW, 38 CARD. L.
REV. 903-1128 (symposium, 1996); WHAT FUTURE FOR THE STATE? 124 DAEDALUS 2 (special
issue, 1995).
7 David J. Bederman, Constructivism, Positivism, and Empiricism in International Law, 89 Geo.
L. J. 469 (2001) at 498. (Reviewing Arend, 1999, supra). As I discuss below, many of these
claims had precursors in the 1970s. However, the current wave of interest in alternatives to the
state-centric paradigm of liberal internationalism extends, sometimes markedly, these earlier
ideas and often tweaks them in novel ways.
8 See in particular TRANSATLANTIC GOVERNANCE IN THE GLOBAL ECONOMY (MARK A.
POLLACK AND GREGORY C. SHAFFER, EDS, 2001); Anne-Marie Slaughter, The Real New World
Order, FOR. AFF. (1997); Anne-Marie Slaughter, Agencies on the Loose? Holding Government
Newworks Accountable, in TRANSATLANTIC REGULATORY COOPERATION: LEGAL PROBLEMS
AND POLITICAL PROSPECTS (George A. Bermann, Matthias Herdegen, and Peter L. Lindseth,
eds., 2000); Anne-Marie Slaughter, Government Networks: The Heart of the Liberal Democratic
Order, DEMOCRATIC GOVERNANCE AND INTERNATIONAL LAW (GREGORY FOX AND BRAD ROTH,
EDS, 2000); David Zaring, International law by other means: the twilight existence of
international financial regulatory organizations 33 TEX. INT'L L. J. 281 (1998); Renaud
Dehousse, Regulation by networks in the European Community: the role of European agencies,
4 J. EUR. PUB. POL'CY. 246 (1997); Sol Piccioto, Networks in international economic integration:
fragmented states and the dilemmas of neo-liberalism, 17 NW J. OF INT'L L. & BUS. 1014 (19967); Spencer Waller, The internationalization of antitrust enforcement 77 B.U. L. REV. 343
(1997); Scott Fulton and Lawrence Sperling, The network of environmental enforcement and
compliance cooperation in North America and the Western Hemisphere, 30 THE INT'L LAWYER
111 (1996); Organization for Economic Co-operation and Development, REGULATORY COOPERATION FOR AN INTERDEPENDENT WORLD, (1994).
Transgovernmental relations were first
studied in Robert O. Keohane and Joseph S. Nye, Transgovernmental Relations and
3
agencies, and courts.9 These constituent parts--in particular, regulatory
agencies tasked with elaborating and enforcing the laws that manage complex
societies--are increasingly networking with their counterparts abroad. In the
process they are sharing information, ideas, resources, and policies. 10
As the
problems policymakers address have gone global, this argument claims, so
have the policymakers.
But their chosen vehicle is not the formal liberal
internationalist organization; it is increasingly the adaptable, and largely
decentralized, network model. 11 These networks of government officials are
said to be "the optimal form of organization for the Information Age." 12 As
such, they represent "the blueprint for the international architecture of the
21st century."13
International Organizations, 27 WORLD POL. (1974); see also Keohane and Nye, Transnational
Relations and World Politics: An Introduction, 25 INT’L ORG. (1971).
Througout this article I treat transgovernmentalism and liberal internationalism as
distinct modes of international cooperation. This view is not without its critics, however; as
Alvarez argues, "dichotomous descriptions of the respective worlds of 'traditional' versus
'transgovernmental' forms of law-making oversimplify complex realities." Jose Alvarez, Do
Liberal States Behave Better? 12 EUR. J. INT'L L. (2001) at 245. I agree that this dichotomy is
simple, but believe the simplification is valid and is worth employing in terms of expository and
analytic gains.
9 And increasingly, constitutions to delineate and structure these powers and functions. See
Bruce Ackerman, The rise of world constitutionalism, YALE LAW SCHOOL OCCASIONAL PAPERS
(2nd series, #3, 1997).
10 Slaughter 1997, supra at 189 ("the densest area of transgovernmental activity is among
national regulators."); Scott Jacobs, Regulatory cooperation for an interdependent world: issues
for government, in OECD supra, at 15 ("Regulation knows fewer and fewer boundaries.");
George Bermann, Matthias Herdegen, and Peter L. Lindseth, Introduction, in Bermann et al,
2000 at 1. (“while national authorities are still the principal actors in the regulatory arena,
regulation is increasingly an international affair.”
11 Even within the context of the European Union, the network model has often supplanted
more centralized alternatives; see Dehousse, supra at 254-55.
12 Anne-Marie Slaughter, Governing the Global Economy Through Government Networks, in
THE ROLE OF LAW IN INTERNATIONAL POLITICS: ESSAYS IN INTERNATIONAL RELATIONS AND
INTERNATIONAL LAW (MICHAEL BYERS, ED., 2000) at 204.
13 Slaughter 1997. at 197. It
4
Proponents of this argument, most notably Anne-Marie Slaughter,
claim that transgovernmental networks are expanding rapidly, especially in
regulatory cooperation--itself a rapidly-growing sector of international law.14
They are "transgovernmental" because they involve domestic officials directly
interacting
with
ministries.15
each
other,
often
with
little
supervision
by
foreign
They are “networks” because this cooperation is based on
loosely-structured peer-to-peer ties developed through frequent interaction.
The claims of network proponents can be critiqued on various grounds.
Transgovernmentalism may be important only in areas of “low politics,” such
as antitrust, where broader international ramifications remain weak. 16
Networks may limit transparency and reduce political accountability. 17 They
14 See e.g. Paul B. Stephan, Regulatory Cooperation and Competition: The Search for Virtue, in
Bermann et al 2000 at 202: “By almost any standard of measurement, international regulatory
cooperation has grown significantly in the past two decades promises to expand even further.”
and Kalypso Nicolaidis, Regulatory Cooperation and Managed Mutual Recognition: Elements of
a Strategic Model in Bermann et al at 571. : "Regulatory cooperation deserves analytical
attention both in its own right and as a forerunner for the effect of interdependenceon other
policy areas and international governance in general." See also REGULATORY COMPEITION AND
ECONOMIC INTEGRATION: COMPARATIVE PERSPECTIVES (DAN ESTY AND DAMIEN GERARDIN,
EDS., 2001)
15 As David Andrews, former Legal Adviser in the State Department, recently wrote with regard
to US participation in transatlantic regulatory cooperation, “[r]ealistically speaking, the State
Department has a very limited role to play on substantive aspects of transatlantic regulatory
cooperation. Since the political responsibility and technical expertis naturally reside in the
specialized agencies of the US Government, the Department of State typically does not take the
lead on such matters.” David R. Andrews, Listening in on the US-EU Legal Dialogue, in
Bermann et al.
16 Another critique is that transgovernmental cooperation occurs in the shadow of an implicit
veto by legislatures and/or foreign ministries,and hence is not as significant a change as it might
seem. This critique is plausible, but hardly fatal for either transgovernmental theory or the
arguments of this article. I am not centrally concerned with the claim that TGNs operate in a
radically free manner. Rather, I am interested in exploring where and why networks arise, the
nature of their impact of domestic regulation, proposing explanations for that process, and
assessing its significance for more the future of international cooperation.
17 See e.g., Robert Howse, Transatlantic Regulatory Cooperation and the Problem of
Democracy and Anne-Marie Slaughter, Agencies on the Loose? Holding Government Networks
5
may also reinforce the dominance of major economic powers.
While these
critiques have surface plausibility, our understanding of transgovernmental
cooperation is thin. Hence our ability to assess transgovernmentalism’s deeper
significance, in particular whether it is truly the "architecture of the 21st
century," remains limited. Understanding the operation and dynamics of these
transgovernmental networks (hereafter "TGNs") is consequently a crucial task
for international legal theory.
This
article
assesses
the
future
architecture
of
international
cooperation by evaluating transgovernmentalism and exploring its likely
influence on the primacy of liberal internationalism. It empirically examines
TGNs in three substantive regulatory areas: securities, competition (antitrust),
and environmental regulation. In each of these cases, TGNs are active and US
regulatory agencies are playing key roles. 18
My central claim is that
transgovernmentalism is likely to bolster liberal internationalism as much—or
more—than it will undermine or displace it. In some situations, for example,
the existence of TGNs should render liberal internationalist cooperation more
effective.
In other cases TGNs perform a gap-filling role: where liberal
internationalist solutions are politically or economically precluded, TGNs
provide an alternative approach to cooperation. 19 TGNs also may reduce the
Accountable, both in Bermann, et al 2000; Philip Alston, The Myopia of the Handmaidens:
International Lawyers and Globalization, 8 Eur. J Int'l. L. (1997); see also Alvarez, 2001.
18 See the discussion of methodology and case selection infra.
19 For example, in competition policy; see e.g. Andrew T. Guzman, Is International Antitrust
Possible? 73 NYU L. REV 1501 (1998) at 1504. ("The incentives facing individual countries
maike it extremely difficult-perhaps impossible-to negotiate substantive international antitrust
agreements.") In a recent article, discussed infra, Beth Simmons provides an overarching
theoretical framework for understanding the process of regulatory harmonization in financial
policy, an area where the US is highly dominant and therefore a regulatory innovator whose
decisions about policy are determined largely internally; that is, without regard for international
effects. She creates a two-by-two matrix with one dimension indicating the incentives of other
jurisdictions to emulate, and the other the externalities this creates for the US. Her concern is
whether harmonization occurs through market forces or through overt multilateral institutions.
This framework is discussed further below; what is critical here is that her theory predicts that in
many cases the role of such institutions is likely to be small because both the incentives to
6
need for some treaties and, to the degree they promote policy convergence,
actually
increase
Consequently,
the
the
most
likelihood
plausible
of
successfully
prediction
for
negotiating
the
future
others.
is
that
transgovernmental cooperation will supplement and strengthen, rather than
supplant, the traditional tools of international law and organization. The future
architecture of cooperation, in brief, is likely to be multifaceted and
institutionally heterogeneous.
This broad evaluation of the architecture of cooperation of the 21 st
century builds on two subsidiary claims. First, in practice, TGNs appear to
foster a process of "regulatory export": the export of regulatory laws, structures
and procedures from the US and other major powers to developing states and
economies in transition. While it is important not to overstate the case, this
process is promoting policy convergence in several arenas of regulation. 20
Processes of legal export are not unique to TGNs, and, as previous waves of
legal export illustrate, the transfer of legal structures is neither simple nor
necessarily successful.21 But TGNs are playing an important and unstudied
emulate and the externalities felt in the center are moderate. Here, she notes, without using the
framework of transgovernmentalism, MOUs and other bilateral agreements are common. This
prediction broadly accords with the gap-filling idea for TGNs that I suggest in this article. Beth
A. Simmons, The International Politics of Harmonization: the Case of Capital Market
Regulation, 55 INT'L ORG. 589 (2001).
20 There is a significant debate about the degree of policy convergence generally in the global
economy. See e.g. Beth Simmons and Zachary Elkins, Globalization and Policy Diffusion:
Explaining Three Decades of Liberalization (paper prepared for the Conference on Globalization
and Governance, La Jolla, March 2001; Esty and Gerardin, supra; PAUL N. DOREMUS, ET AL,
THE MYTH OF THE GLOBAL CORPORATION (1998); Geoffrey Garrett, Global Markets and
National Politics: Collision Course or Virtous Circle, 52 INT’L ORG. 787 (1998); NATIONAL
DIVERSITY AND GLOBAL CAPITALISM (SUZANNE BERGER AND RONALD DORE, EDS., 1996). I do
not engage this vast literature directly; rather, I note points of tangency where relevant but focus
on the role of TGNs in promoting some degree of convergence (if only by promoting the
creation of regulation in jurisdictions where none existed) and the specific efforts of US and
other agencies at regulatory export.
21 Jacques deLisle, Lex Americana? United States Legal Assistance, American Legal Models,
and Legal Change in the Post-Communist World 20 U. PA. J. INT'L. ECON. L. 179 (1999);
MERILEE GRINDLE, GETTING GOOD GOVERNMENT: CAPACITY BUILDING IN THE PUBLIC SECTORS
7
role in a new wave of technocratic export, one that has significant implications
for international cooperation.22 This article offers a theory of this process; this
theory, elaborated below, builds upon the special qualities of networks and the
role of network externalities.
Second, while TGNs may thrive best where liberal internationalism
fails, the two forms of cooperation interact. The convergence and capacity
building aspects of TGNs in particular are significant because they can build-in
the pre-conditions for better implementation and compliance with international
treaty rules. Compliance is both an important component of effective treaties
and an enduring concern of international lawyers.23
Treaties increasingly
require complex processes of domestic implementation to be complied with. 24
OF DEVELOPING COUNTRIES
(1997); Mark Galanter and David Trubek, Scholars in SelfEstrangement, Wisc. L. Rev.
22 As Eleanor Fox notes in the competition law context, "convergence of law and pracitce has
occurred and is occurring. Numerious meetings and workshops among competition officials,
scholars, and practioners, and technical assistance especially by the United States, the European
Union, and Germany to nations that are newly adopting competition laws, have provided crossfertilization and produced increasingly higher levels of common understanding." Eleanor M.
Fox, Antitrust and Regulatory Federalism: Races Up, Down, and Sideways, 75 NYU L. REV.
1781, at 1782. (2000).
23 Compliance and effectiveness are two distinct concepts that are often conflated. Compliance
generally refers to a state of conformity or identity between an actor's behavior and a specified
rule. While most common-sense notions of effectiveness relate to “solving the underlying
problem,” the factors that may influence the solution of a complex international problem are
myriad. In many cases disentangling them is impossible. Hence many analysts define and
assess effectiveness in more modest terms: as observable, desired changes in behavior.
Compliance is neither necessary nor sufficient for effectiveness. However, in general and ceteris
paribus, more compliance yields more effectiveness--particularly when high compliance is not
the result of a change in the legal standard but rather results from actual behavioral change
aimed at meeting that standard or that results in meeting that standard. For more on these
distinctions, see generally Kal Raustiala and Anne-Marie Slaughter, International Law,
International Relations, and Theories of Compliance, in THE HANDBOOK OF INTERNATIONAL
RELATIONS, WALTER CARLNAES ET AL, EDS, FORTHCOMING).
24 See e.g. THE IMPLEMENTATION AND EFFECTIVENESS OF INTERNATIONAL ENVIRONMENTAL
COMMITMENTS (David G. Victor, Kal Raustiala, and Eugene B. Skolnikoff, eds, 1998). The
relationship between compliance and implementation is also not straightforward; see Kal
Raustiala, Compliance and Effectiveness in International Regulatory Cooperation, Case West.
8
By fostering administrative capacity and learning in jurisdictions where
regulators are new, weak, or both, TGNs improve domestic regulatory power
and enhance treaty compliance. Thus there are good reasons to believe TGNs
will, at least at the margin, frequently make treaties more effective, and, ceteris
paribus, more desirable. This in itself would be a noteworthy effect. But TGNs
may also foster liberal internationalism in other ways that I discuss below. In
addition, some TGNs appear to rest on a foundation provided by liberal
internationalism.
This interaction is complex but should prove vitally
important in coming decades.
In sum, this article has three main tasks: it describes TGNs in three
areas, in particular their role in promoting regulatory export; it develops causal
hypotheses about transgovernmentalism; and, most importantly, it considers
the implications of the foregoing for cooperation in the 21st century.
My
analysis is broad in scope and, by necessity, often speculative: while the
literature on transgovernmentalism is growing, there is has been little
sustained analysis of the implications of this novel phenomenon for
international cooperation and organization generally. 25 The analysis in this
article hopefully will inform the emerging dialogue on TGNs and link it more
directly to the broader study of international law and organization.
The article is organized as follows. Part II lays out the core theoretical
debate and the main claims of transgovernmentalists. It also highlights three
factors that have given rise to contemporary TGNs: the changing nature of
domestic
regulation,
increased
interdependence
(or
globalization),
and
Res. J. of Int’l L. (2000). But generally speaking implementation is a critical step toward
compliance.
25 The topic is increasingly addressed in the public policy literature, less so in the legal
literature. Bermann et al, supra, address networks in many chapters but do not focus explicitly on
transgovernmental theory. A check of Westlaw journals database on August 20 2001 showed 2
articles containing the phrase "transgovernmental regulatory networks," (one by me), 9 articles
containing the phrase "transgovernmental networks" and 15 with the phrase "regulatory
networks" (some of these being articles with a domestic, rather than international, focus). The
vast majority in all three categories mention the concept only in passing and/or merely cite
Slaughter 1997.
9
technological innovation.
Part III presents three cases of TGNs--competition,
securities, and environment--with a focus on US agency involvement.
The
cases present three distinct "distributions of regulatory power." In securities
law, the US is the dominant global regulator. In competition law, the middle
case, regulatory power is more diffused: the US and the European Union each
possess significant regulatory power. In environmental regulation, there are
often public goods at stake that provide significant blocking power to otherwise
weak states, thereby even more widely diffusing regulatory power. In all three
cases, however, TGNs appear to be flourishing. Agencies in powerful states,
moreover, are seeking to use these networks to export their regulatory models.
The US Securities and Exchange Commission [SEC], for example, believes it
can better control the effects of globalization, and can benefit US firms and
investors, if the rest of the world's securities regulators resemble the SEC.26
Part IV then considers the phenomenon of TGNs and regulatory export
in more detail, and advances an account that addresses its pattern and
causality: why agencies like the SEC try to export their regulatory models, and
why agencies in states like Chile appear to import them. I argue that TGNs
exhibit some basic characteristics of "virtual networks" as these are
understood in contemporary economic theory, including network effects. 27 To
the
degree
they
exist,
network
effects
create
incentives
to
increase
26 SEC Speaks in 1998, infra; Paul Mahoney, Securities Regulation By Enforcement: An
International Perspective 7 Yale J. Reg. 305 (1990) at 320; James A. Kehoe, Exporting Insider
Trading Laws: The Enforcement of US Insider Trading Laws Internationally, 9 Emory Int'l L.
Rev. 345. (1995)
27 E.g Michael L. Katz and Carl Shapiro, Network externalities, competition, and
compatability, AM. ECON. REV. 75, 2 (1985); Mark A. Lemley and David McGowan, Legal
Implications of Network Economic Effects, 86 CAL. L. REV 479 (1998). A network effect exists
when "the utility that a user derives from comsumption of a good increases with the number of
other agents consuming the good." Katz and Shapiro, supra at 424. Lemley and McGowan
distinguish network effects and network externalities, but for my purposes this distinction is not
germane. See Lemley and McGowan, supra at 5, citing S.J. Liebowitz and Stephen Margolis,
Network Externality: An Uncommon Tragedy, 8 J. ECON. PERSP. 133 (1994).
10
convergence.28
Because different regulatory models confer distributionally-
distinct benefits, competition in regulatory “standard-setting” should occur.
The evidence to date is preliminary, but broadly consistent with this economic
logic.29
Part
V
then
examines
the
implications
of
TGNs
for
liberal
internationalism and the future of international cooperation. I focus in
particular on multilateral treaties, the primary building block of liberal
internationalism. While some theories of treaty compliance imply little about
the role of TGNs, "managerial" theories in particular imply that they may play a
major, positive role in enhancing compliance with, and the effectiveness of,
treaties.
Where such treaties cannot be negotiated, TGNs provide an
alternative mode of cooperation. And while TGNs may forestall the negotiation
of some treaties, in essence acting as substitutes, in other cases the policy
convergence they promote may make treaties possible where they were not
28 As Lemley and McGowan argue, the adaptation of network effects arguments to novel fields
is fraught with peril. Id. at 11. Cognizant of this risk, I use the network effects concept
metaphorically; (see id at 15, describing Liebowitz and Margolis, Uncommon Tragedy, as
treating language as a "metaphorical network" in which there may be direct interaction with
physical connections among network participants) . Future research may reveal more about the
network effects that exist in social networks of the kind I describe here. And as I discuss below,
there are obviously costs for regulators in converging on regulatory models that are
inappropriate for their jurisdiction. On the advantages of "off-the shelf regulation" for
developing countries, see Nancy Birdsall and Robert Z. Lawrence, Deep Integration and Trade
Agreements Good for Developing Countries? in GLOBAL PUBLIC GOODS: INTERNATIONAL
COOPERATION IN THE 21ST CENTURY (Inge Kaul et al, eds., 1999).
29 As Simmons and Elkins note, gathering data on networks and their impact are "daunting
tasks, and when they are complete, one is left with a sense of where governments may have
gotten their menu of possible policy approaches, but with very little theory about how and why
certain approaches were actually chosen over others." Simmons and Elkins, supra at 23. This
paper proposes some hyptheses that take a step toward providing that theory, even if the data
that would support these theories remains spotty and often anecdotal.
11
before.30 On balance, I conclude that the rise of TGNs should improve treaties
as a tool of global governance. 31
A word on methodology: the three empirical cases of described in this
paper are neither randomly selected nor are they “least-likely cases” for TGNs
to be active.32 Rather, they represent regulatory arenas with significant global
dimensions, which vary in some important ways, and in which TGNs are wellestablished and US agencies active.33
This case selection is useful for
describing a novel phenomenon, but problematic for causal inference.
As a
result, I cannot make robust claims about variation in the existence of TGNs,
the depth of regulatory convergence, or the influence of TGNs on the future of
liberal internationalism.34 But I can and do use these cases descriptively (to
chart transgovernmental cooperation), to probe the plausibility of various
causal explanations, and to speculate deductively about TGNs’ larger impact.
Further descriptive and causal claims will require additional research in new
issue-areas.
30 In some cases, as I discuss further below, treaties and international organizations are unlikely
to ever arise and hence the impact of networks on liberal internationalism's reach is neglible.
31 Improve in the sense of change state behavior more effectively. Normatively, this is not a
clearly advantaegous…to the degree treaties are collusive [macey etc.]
32 See GARY KING, ROBERT O. KEOHANE, AND SIDNEY VERBA, DESIGNING SOCIAL INQUIRY:
SCIENTIFIC INFERENCE IN QUALITATIVE RESEARCH (1994), 209-210. For a case study of an issue
in which TGNs have only minimally developed, see Marney L. Cheek, The Limits of Informal
Regulatory Cooperation in International Affairs: A Review of the Global Intellectual Property
Regime, 33 GEO. WASH. INT’L L. REV. 277 (2001).
33 Because the arguments in this paper largely address novel issues in the literature (while a
rapidly growing literature exists on TGNs, very little of it explicitly addresses the issue of
regulatory export), I have chosen three cases that describe the phenomenon of interest: networks
of regulators engaged in a process of regulatory export. The degree to which my descriptive
claims are generalizable beyond these cases is unclear. But even if these cases represent the
universe of TGNs they merit study. Antitrust, securities, and environment are issues-areas
which are tremendously important as domestic policy, and increasingly important in
international law.
34 See King, Keohane, and Verba, supra; Lee Epstein and Gary King, The Rules of Inference,
U. CHI. L. REV. (forthcoming). Testing the hypotheses I advance will require new cases and new
data.
12
II THEORIES OF TRANSGOVERNMENTAL NETWORKS
Contemporary transgovernmental theory offers a distinctive approach
to international cooperation, one keyed to the empirical and theoretical context
of the 21st Century. Grounded in the twin hallmarks 35 of our era-"globalization" and "the information revolution"--it asserts the resilience of the
state in the face of rapid change while it simultaneously reconceptualizes
international cooperation. The notion of “disaggregated sovereignty” is at the
center of this reconceptualization.36 Transgovernmentalists argue that the
state is not disappearing as the major force behind international law. Rather,
domestic regulators are reaching out to their foreign counterparts regularly
and directly, through TGNs, rather than through the traditional centralizing
media of foreign ministries and international organizations. 37 They further
claim that TGNs will be a primary mode of international ordering in the
future.38
Unbundling the state--and reconnecting the constituent parts
35 “Buzzwords” may be more apt.
36 But see the seminal work of Robert O. Keohane and Joseph Nye, Transnational Relations and
World Politics: An Introduction, 25 Int’l Org. (1971); Transgovernmental Relations and
International Organizations, 27 World Pol. (1974). As Pollack and Shaffer note,
"transgovernmental relations were the subject of intense interest for a brief period in the 1970s,
when scholars began to challenge the unitary state model of international relations, and they
returned to the scholarly agenda in the 1990s as a possible model for a "real new world order" of
governance by transgovernmental networks of government experts." Mark A. Pollack and
Gregory C. Shaffer, Transatlantic Governance in Historical and Theoretical Perspective, in
Pollack and Shaffer, 2001, supra, at 5.
37 Slaughter, supra at 184 ("the state is not disappearing, it is disaggregating into its separate,
functionally-distinct parts.")
38 Id. It is important to note that transgovernmentalism as a theory draws on what is known in
international relations as "liberal theory." Liberal internationalism, as used in this article and in
the work of Slaughter, is a specific normative vision; liberal theory is a positive approach to the
study of world politics. See Andrew Moravcsik, Taking Preferences Seriously: A Liberal
Theory of International Politics, 51 Int'l Org. (1997); Jose Alvarez, Do Liberal States Behave
Better? A Critique of Slaughter's Liberal Theory 12 EUR. J. INT'L L. (2001).
13
across borders--creates a reconfiguration of state power that, while markedly
new, retains the state as the pivotal actor of the international system.
A. The Rise of TGNs
While transgovernmental cooperation, by all accounts, has expanded
enormously in recent years it is not a new phenomenon. The 1936 Convention
for the Suppression of the Illicit Traffic in Dangerous Drugs, 39 for example,
mandated that the parties create new national agencies to coordinate, with
comparable agencies in other parties, international efforts at drug control. 40
Such communications were to be carried out directly between these agencies,
rather than through normal diplomatic channels.41 The 1936 Convention thus
attempted to create a TGN for drug control.
While this is a notable early example--and unusual in its explicit
fostering of a TGN by a treaty--more limited networks likely have existed
throughout history.
For example, antitrust is an area where US regulators
have a long history of promoting US-style laws abroad through peer to peer
contacts that are broadly network-like. As Brian Portnoy describes, “a network
of American antitrust regulators and their allies in foreign countries developed
after [World War II]. Djelic (1998) labels them ‘missionaries’ and ‘modernizers’
respectively. They formed, collectively, a principled transnational network
geared toward restructuring various national economies.” 42 While there is
little direct evidence, it seems reasonable to assume that in other policy areas
officials saw advantages in maintaining regular contact.
Undoubtedly
technology was a major limiting factor. Reliance on mail, telegraph, and ship
39 L.N. Doc.C. 286(1). M. 174(1).1936.XI (January 1 1937)
40 S.K. CHATTERJEE, LEGAL ASPECTS OF INTERNATIONAL DRUG CONTROL (1981), 168-185.
41 Id.
42 Portnoy, 2000 at 64, citing MARIE-LAURE DJELIC, EXPORTING THE AMERICAN MODEL: THE
POSTWAR TRANSFORMATION OF EUROPEAN BUSINESS (1998).
14
and train travel placed severe bounds on extensive and recurrent long-distance
communication in the pre-World War II period. 43 The rise of the telephone, the
jet, the fax and now email and the internet have progressively made
international communication, and thus TGNs, far easier and, ceteris paribus,
more prevalent.44
Indeed, in every interview with present and former US
regulators, advances in information technologies were highlighted as a central
permissive cause of the contemporary network phenomenon.
Technological innovation is thus one major factor behind the rise of
TGNs.
A second factor is rising interdependence and the onset of
globalization.45 Interdependence in turn interacts with the third factor, the
great postwar expansion in domestic regulatory law. 46
Rising economic
43 Language barriers may have been important as well. While French and later English were
common languages for diplomatic personnel, only in the last several decades has English
become the lingua franca for educated persons. English is now the de facto standard for most
international organizations when translators are not available; a shared language base allows
decentralized contact--via networks--to develop and persist in the absence of formal, translated
negotiations.
44 Good data on the prevalence of TGNs is unavailable. But there is little evidence of TGNs in
the pre-World War II era, and anecdotal data indicates that network activity has grown in the last
decade.
45 Indeed, an earlier incarnation of transgovernmental theory was developed by Keohane and
Nye, who also pioneered the study of interdependence in modern international relations theory.
Keohane and Nye, 1974, supra.
46 On the early development of the regulatory state in the U.S. see STEPHEN SKOWRONEK,
BUILDING A NEW AMERICAN STATE: THE EXPANSION OF NATIONAL ADMINISTRATIVE CAPACITIES,
1877-1920 (1982) and Robert L. Rabin, Federal Regulation in Historical Perspective, 38 STAN.
L. REV. 1189 (1986). Wabash v. Illinois, 118 US 557 (1886) precipitated the creation of the first
major federal regulatory agency, the Interstate Commerce Commission, in 1887. See generally
GABRIEL KOLKO, RAILROADS AND REGULATION, 1877-1916 (1965). The history of U.S.
regulation is presented via biography in THOMAS K. MCCRAW, PROPHETS OF REGULATION (1984)
(presenting biographies of Adams, Brandeis, Landis, and Kahn). The New Deal and World War
II introduced a marked acceleration of the creation of the regulatory state; see Rabin, supra at
1253 ("In historical perspective, the New Deal appears as a distinct break from the past...even
the more traditional regulatory aspects of the New Deal conceived of government activity as a
permanent bulwark against deep-rooted structural shortcomings in the market economy.");
CHARLES SCHULTZE, THE PUBLIC USE OF PRIVATE INTEREST (1977) at 8 ("Even as late as the
middle 1950s the federal government had a major regulatory responsibility in only four areas:
15
interdependence in the postwar period, coupled with the "compromise of
embedded liberalism"47 that marked the Bretton Woods accords, compelled
states to engage in ever-increasing amounts of international regulatory
cooperation as they increasingly regulated at home.
Globalization, a hallmark of the current era, remains an amorphous
concept but that one that captures some important aspects of contemporary
life: the world is growing smaller and more connected, and older forms of
demarcation--such as territorial boundaries--appear to have diminished in
importance. As globalization has accelerated, it has created further incentives
for regulators to extend their reach abroad. It has also brought domestic
regulatory differences to the forefront of world politics. One consequence is a
greater level of participation in international cooperation by domestic
regulators--who have issue-specific expertise--and a correspondingly lower
profile for generalist diplomats than is typical of traditional international
antitrust, financial institutions, transportation, and communications. In 1976, eighty-three federal
agencies were engaged in regulating some aspect of private activity. Thirty-four of those had
been created since 1960 and all but eighteen since 1930."). Another, though distinct, fertile
period occurred beginning in the 1960s; see e.g. CASS R. SUNSTEIN, AFTER THE RIGHTS
REVOLUTION: RECONCEIVING THE REGULATORY STATE (1990) at 24: "The most notable set of
initiatives since the New Deal period occurred during the 1960s and 1970s. This period marked
a revolution in the category of legally protected rights--a revolution that build on and materially
expanded the New Deal;" also ADMINSTRATIVE LAW 9th ed. (Peter L. Strauss, Todd Rakoff, Roy
A. Schotland, and Cynthia Farina, 1995) at 464 ("The Environmental Protection Agency, the
Occutional Safety and Health Administration, the Consumer Product Safety Commission, and
the Equal Employment Opportunity Commission all date from the 1960s-70s, a period of
regulatory blossoming that rivaled the New Deal"). The "rights revolution" era agencies--with
the exception of the EPA--tend to be involved in transgovernmentalism to a far lesser degree
than their New Deal era counterparts.
Internationally, the signal political achievement of the aftermath of World War II was what John
Gerard Ruggie famously termed the "compromise of embedded liberalism." Modern western
democracies sought international economic liberalism yet domestic economic stability achieved
through the regulatory state. Liberalism was thus embedded in a structure of domestic
interventionism and the welfare administration; regulation--both domestic and international--was
central to the quest of avoiding the destructive unchecked liberalism of the 1930's. See John
Gerard Ruggie, International regimes, transactions, and change: embedded liberalism in the
postwar economic order, in INTERNATIONAL REGIMES (Stephen D. Krasner, ed., 1983)
16
accords. The discovery of novel shared problems, such as transboundary
environmental threats or money laundering, has added to this trend toward
regulatory cooperation.48
In
short, three core factors—technological
innovation,
increased
interdependence and the rise of globalization and the changing nature of
domestic regulation—have promoted the rapid expansion and deepening of
TGNs.
These factors are, to be sure, not wholly new.
Indeed,
the
transnationalism/"sovereignty at bay" debates of the 1970s presaged much of
the current debate.49 But they appear to be intensifying and perhaps even
accelerating. Thus while technological advances have provided the means for
TGNs to develop with greater frequency and at lower cost, the overarching rise
in complex transboundary problems provides increasing incentives for
domestic regulators to create and expand networks with their foreign
counterparts.
The incentives to create liberal internationalist regimes are not static,
however; they vary across regulatory issue-areas. In many regulatory arenas
these incentives are weak, either because substantive regulatory differences
are large or (often relatedly) regulators do not want to compromise their own
domestic systems. Regulators may be forced by the rise of the global economy
to engage with foreign jurisdictions, but they often do not want to create fullblown liberal internationalist regimes.
Competition law provides a good
47 Ruggie, 1983, supra.
48 The majority of international environmental treaties have been negotiated in the last three
decades. See David G. Victor, Kal Raustiala, and Eugene Skolnikoff, Introduction, at 1 in
Victor, Raustiala, and Skolnikoff, supra.
49 Yet another analogous line of work looks at the impact on international cooperation of
communities of experts who share positive and normative notions about a particular issue-area.
These “epistemic communities” are not, however, solely or even mostly composed of
government officials; rather, they typically comprise scientific experts drawn from academia,
think tanks, and NGOs who, when able to gain access to policymaking positions, influence
policy in line with their expert consensus. See in particular the work of Peter Haas: PETER M.
HAAS, SAVING THE MEDITERRANEAN (1990); Peter M. Haas, ed., Knowledge, Power, and
International Policy Coordination 46 Int’l Org. (1992).
17
example: as described further below, the many efforts at creating a global
competition treaty have foundered on strongly-held national differences.50 In
securities regulation, the second area of law examined in this article, the US is
so dominant a player that it faces almost no incentives to modify its own
domestic regime in favor of foreign interests, an almost necessary component
of any international treaty regime.51 In the last case, environment, there are
frequently global or regional public goods at stake that motivate states to
create liberal internationalist agreements.52 That is the main reason that, as I
describe further below, the environmental arena is the best exemplar of a
positive, facilitative relationship between TGNs (and their attendant regulatory
export processes) and liberal internationalist treaties.
B. Transgovernmentalism in Theoretical Context:
Three Visions of International Cooperation
The dominant contemporary paradigm for international cooperation is
liberal internationalism, in which states formally negotiate multilateral treaties
and create international organizations. The core of the liberal internationalist
project is the United Nations system and the Bretton Woods institutions: the
World Bank, the International Monetary Fund, and now the World Trade
Organization. While still robust, liberal internationalism is increasingly facing
challenges.
yield
real
The deepest has been the persistent unwillingness of states to
power;53
the
most
recent
is
the
growing
clamor
against
unaccountable and undemocratic international bureaucrats. The slow pace,
formal procedures, and high bargaining costs of multilateral institutions
increasingly discourage their use.
To some, liberal internationalism is
50 Guzman, NYU, supra.
51 Simmons, 2001.
52 Kaul et al, Global Public Goods volume, supra.
18
incapable of rising to the new challenges on the global agenda and
subsequently will fade in importance.54
Neo-medievalism and transgovernmentalism present two prominent
alternative visions of international order.55
Neo-medievalism signifies the
radical idea that the world is reverting to a system of overlapping, nonterritorial authority and political identity. The medieval order in Europe
comprised multiple, layered power centers. 56
the primary
sovereignty.57
Exclusive territoriality was not
principle it came to be under the institution of state
The
Treaty
of
Westphalia
commonly
denotes
the
extinguishment of medievalism and the birth of the system of territoriallybased state sovereignty.58
Neo-medievalists believe that the information
53 Slaughter, "Real New World Order", supra.
54 Slaughter, "Real New World Order" at 183.
55Like most strains of international theory, neo-medievalism is not wholly new. The late Hedley
Bull prophetically asked--over two decades ago (and well before the rise of the internet as a
social phenomenon)--"[i]s there any evidence that the states system may be giving place to a
secular reincarnation of the system of overlapping or segmented authority that characterized
mediaeval Christendom?" Bull, supra at 264.
56 On the contingency of the transformation from the medieval and Renaissance systems of
order in Europe to the modern (post-Westphalian) states system see e.g. HENDRIK SPRUYT, THE
SOVEREIGN STATE AND ITS COMPETITORS (1995) and GIANFRANCO POGGI, THE DEVELOPMENT
OF THE MODERN STATE: A SOCIOLOGICAL INTRODUCTION (1978). The parallel and fascinating
rise of nationalism is explored in BENEDICT ANDERSON, IMAGINED COMMUNITIES (1983). A
particularly illuminating study of the antecedents and birth of modern international law and
diplomacy is Mattingly, supra. Most of these studies focus upon Europe, the birthplace of the
modern nation-state. THE EXPANSION OF INTERNATIONAL SOCIETY (Hedley Bull and Adam
Watson, eds., 1984), explores the gradual expansion of the sovereign states system beyond
Europe and the integration of non-Western polities and territory into what is now a global
system of political and legal order; see also MICHAEL W. DOYLE, EMPIRES (1986).
57 On the importance and history of territoriality for the concept of international sovereignty see
John Gerard Ruggie, Territoriality and Beyond: Problematizing Modernity in International
Relations, 47 INT'L ORG. 139, 151 (1993) (" ...the distinctive feature of the modern system of
rule is that it has differentiated its subject collectivity into territorially defined, fixed, and
mutually exclusive enclaves of legitimate dominion. As such, it appears to be unique in human
history").
58 Leo Gross, The Peace of Westphalia, 1648-1948, 42 A.J.I.L. 20 (1948); see also KALEVI J.
HOLSTI, PEACE AND WAR: ARMED CONFLICTS AND INTERNATIONAL ORDER, 1648-1989 (1991).
19
technology revolution is empowering individuals, connecting societies, and
blurring territoriality, bringing back a pre-Westphalian political order.59 This
view builds on more common claims that borders are being erased, the state is
fading in importance, and power and allegiance are shifting to nongovernmental and supranational institutions. 60 It also parallels an earlier
debate in international relations over the role of non-state actors, which first
The opening line of the leading international law casebook by Henkin, Pugh, Schacter and Smit
presents the canonical view that Westphalia gave birth to international law as we know it:
"Traditionally, international law is seen as the law of the international community of states,
principally governing relations among states, the basic units of the world political system for
more than 300 years." LOUIS HENKIN, ET AL, INTERNATIONAL LAW, 3RD. ED. (1993) at xvii. (But
see Krasner, supra)
59 Mathews, supra; Arend, supra. But see Robert O. Keohane and Joseph S. Nye, Jr., Power and
Interdependence in the Information Age, 77 FOR. AFF. 81, 81 (1998).
60 In my view the neo-medievalist view misperceives much. State power is still formidable and
shows little sign of diminishment. Most importantly, state power and non/supra/sub state power
are not necessarily at odds; these actors are not mutual claimants for a fixed supply of power or
influence. Power, in an increasingly complex and interdependent society, is elastic and can
often be created and shared as well as divided. See e.g. Kal Raustiala, States, NGOs, and
International Environmental Institutions, INT'L STUDIES Q. (1997); Thomas Risse-Kappen,
Structures of governance and transnational relations: what have we learned?, in Risse-Kappen,
"Transnational Relations" supra; Janice E. Thomson and Stephen D. Krasner, Global
Transactions and the Consolidation of Sovereignty, in GLOBAL CHANGES AND THEORETICAL
CHALLENGES (1990); and M.J. Peterson, Transnational Activity, International Society, and
World Politics, 21 MILLENNIUM 371 (1992)
On the role of non-state actors in contemporary international law and politics generally
see P.J. Simmons, Learning to Live with NGOs, 87 FOR. POLICY (1998); Kobrin, supra;
Raustiala, "Participatory Revolution", supra; NGOS, THE UN, AND GLOBAL GOVERNANCE
(Thomas Weiss and Leon Gordenker, eds., 1996); Steve Charnovitz, Participation of
Nongovernmental Organizations in the World Trade Organization, U. PA. J. INT'L ECON. L. 17
(1996); Philip G. Cerny, Globalization and the changing logic of collection action 49 INT'L ORG.
595 (1995); Paul Wapner, Politics beyond the State: Environmental Activism and World Civic
Politics, 47 WORLD POL. 3 (1995); Peter J. Spiro, New Global Communities:
Nongovernmental Organizations in International Decision-making Institutions WASH.Q. 18
(1994); Lester M. Salamon, The Rise of the Non-profit Sector, 73 FOR. AFF. 4, 109 (1994);
Benedict Kingsbury, Whose International Law? Sovereignty and Non-state Groups, 68 AM. L.
SOC'Y INT'L L. PROC. 1 (1994); HENRY J. STEINER, DIVERSE PARTNERS: NON-GOVERNMENTAL
ORGANIZATIONS IN THE HUMAN RIGHTS MOVEMENT (1991); THE ROLE OF NON-GOVERNMENTAL
ORGANIZATIONS IN THE PROMOTION AND PROTECTION OF HUMAN RIGHTS (G. Castermans, et al,
eds., 1990); PRESSURE GROUPS IN THE GLOBAL SYSTEM (Peter Willets, ed., 1982).
20
presented the notion that state sovereignty was increasingly under siege by
non-state actors.61
For example, neo-medievalists claim that "the end of the Cold War has
brought no mere adjustment among states but a novel redistribution of power
among states, markets, and civil society."62 Technology is seen as a driving
force behind this transformation.63
Information technology has “literally
made it possible to ignore borders and to create the kinds of communities
based on common values and objectives that were once almost the exclusive
prerogative of nationalism.”64 In short, neo-medievalists claim our traditional
understanding of the state, with its territorial base, is obsolescent. 65
Consequently, international cooperation in the 21st century will not revolve
primarily around states.
This view, like that of liberal internationalism, is
challenged by transgovernmental theory.
61 E.g. Vernon, supra; Keohane and Nye, supra; see also the discussion in Paul Wapner, Politics
Beyond the State, 47 WORLD POL. 311 (1995)
62 Mathews, supra at 50.
63“the most powerful engine of change in the relative decline of the states and the rise of nonstate actors is the computer and telecommunications revolution." Mathews, supra at 51. See
also Stephen J. Kobrin, The MAI and the Clash of Globalizations, 87 FOR. POLICY 97 (1998)
(discussing the power of non-governmental organizations in the debate over the proposed
Multilateral Treaty on Investment). This claim is common to most challenges to state-centric
paradigms; Thomson and Krasner, supra at 195-196 ( "One thread that runs through most of
these arguments is that technological innovation is the most important factor explaining changes
in the international system. Technological change is itself an exogeneous variable...The basic
causal sequence is as follows: technological change leads to increased economic flows, which
erodes state control.")
64 Leon Gordenker and Thomas Weiss, Pluralizing Global Governance, 16 Third World Q. 357,
365 (1995).
65 Mathews, supra at 75. For Mathews' and other neo-medievalists (see below) a critical
assumption is that power gained by non-state actors is power lost by states: a zero-sum view of
power. Yet many of the issues she identifies are fundamentally new (e.g. global environmental
management). Moreover, it may be that states retain significant powers as non-state actors gain
new powers--the loss then is to individual autonomy and sovereignty forced to accomodate a
complex, crowded, and interdependent world. See Raustiala, "States, NGOs" supra.
21
C. Transgovernmentalism: Theory
Transgovernmental theory builds on several strands of research in
international relations, most notably Robert Keohane and Joseph Nye’s
pioneering work in the 1970s on transgovernmental relations.66 Keohane and
Nye defined transgovernmental relations as "sets of direct interactions among
sub-units of different governments that are not controlled by the policies of the
cabinets or chief executives of those governments."67 Like neo-medievalists,
contemporary exponents of transgovernmentalism believe international affairs
are undergoing significant change. 68 They also believe technological change is
an important driver of this change. But transgovernmentalists argue the state
has adjusted to change by functionally disaggregating.
The result is less a
shift in the locus of power--from states to something else--than a shift in the
modes by which state power is deployed and in the meaning of sovereignty
itself.
As Scott Jacobs claims,
[A]n interdependent world requires new forms of governance...Regulatory
actors and processes are crossing national, regional, and local borders...As a
result,
a
web
of
formal
and
informal
intergovernmental
regulatory
arrangements is emerging in the OECD area (and beyond) that simultaneously
empowers and constrains governments with respect to their ability to solve
66 Keohane and Nye, 1974 supra. See also Peter Haas’ conception of “epistemic communities”.
Haas, supra. Epistemic communities are communities of like-minded experts who foster policy
coordination
67 Keohane and Nye, 1974 supra at 43.
68 E.g. Picciotto, supra, at 1020 ("The difficulty of reaching agreement, except at the most basic
level of common state interests, means that general international law establishes only a very
loose framework of coordination...An alternative, but in many ways complementary, response
has been the construction of a complex maze of regulatory or administrative networks...);
Slaughter, supra at 184 ("A new world order is emerging, with less fanfare but more substance
than either the liberal internationalist or new medievalist visions.");
22
problems through regulation.
Although it is as yet uneven and fragile, this
web of regulatory relationships signals the evolution of the sovereign state
toward a state that is, de facto, somewhat less sovereign, but is better adapted
to promote its citizens' interests within the realities of the contemporary era. 69
In this argument, rising transnational activity has led domestic regulators to
follow their regulated entities as they have internationalized. 70
"globalization
jeopardizes
the
effectiveness
of
domestic
This
regulatory
institutions,”71 creating new problems and new issues for regulators. 72 At the
same time, states themselves are increasingly organized in similar ways--not
only
Weberian
rationalist
bureaucracies,
but
corresponding
functional
divisions within the broader state bureaucracy.73 This development affords
regulators counterparts in foreign jurisdictions.
Technological change in turn has fostered the development of TGNs.
For neo-medievalists, information technology enhances the decline of state
power.74 Transgovernmentalists turn this argument on its head, positing that
69 Jacobs, supra at 16-17
70 For an account for some early efforts at the regulation of transnational practices see Janice
Thomson, Explaining the regulation of transnational practices: a state-building approach, in
GOVERNANCE WITHOUT GOVERNMENT: ORDER AND CHANGE IN WORLD POLITICS (James N.
Rosenau and Ernst-Otto Czempiel, eds., 1992)
71 Cheek 2001 at 277.
72 Rising world trade levels have made these issues more salient. Regulatory rules and
procedures "have long been recongized to be potential impediments to international trade even
when justified by legitimate national concerns." Jeffrey Atik, Science and International
Regulatory Convergence, 17 Nw. J of Int'l L. & Bus. (1996-7) at 739. These changes are not
trivial in the eyes of network theorists: Jacobs, for example, argues that "they are part of a
profound and long-term change, stretching across a widening spectrum of policy issues, in the
way governments define and solve problems." Jacobs, supra at 22 (emphasis in original).
73 See generally Martha Finnemore, Norms, Culture, and World Politics: Insights from
Sociology's Institutionalism, 50 INT'L ORG. 2, 325 (1996).
74 Yet another take on the information revolution and the state is Keohane and Nye, "Power
and Interdependence in the Information Age", supra. They suggest that the claims of
technological "modernists" are overstated: "geographically based states will continue to structure
23
these same technological changes allow government officials to interact
regularly, rapidly, and without direct oversight by their putative foreign policy
gatekeepers.75
By
introducing
the
notion
of
disaggregation,
transgovernmentalism recasts the state as a supple actor able to capitalize on,
rather than be circumvented by, the information age.
The technological changes of the information revolution also suggest
new structures of political organization: decentralized networks of peers vs.
hierarchical, stratified and linked organizations. 76 Transgovernmentalists
argue that regulators have created flexible new legal innovations keyed to the
challenges of a more interdependent regulatory environment. "Positive comity,"
for example, reworks the traditional legal theory of comity of nations in a more
dynamic manner.77
Rather than simply signifying deference to another
sovereign and its laws, positive comity entails an active agreement to
undertake investigations and employ state power and authority at the behest
of
a
partner
government.78
Non-legally
binding
"Memoranda
of
Understanding" [MOUs] structure much of transgovernmental cooperation.
While regulators do employ Mutual Legal Assistance Treaties (MLATs), binding
treaties that may address a wide array of legal issues, 79 MOUs are frequently
politics in the information age, but they will rely less on material resources and more on their
ability to remain credible to a public with increasingly diverse sources of information" Keohane
and Nye, supra, at 94.
75 E.g. Slaughter, supra.
76 Echoing the work of sociologists such as Manuel Castells. CASTELLS, THE INFORMATION
AGE: SOCIETY, ECONOMY AND CULTURE (three volumes, 1996-2000)
77 Comity was defined by the Supreme Court in Hilton v. Guyot as "the recognition which one
nation allows within its territory to the legislative, executive, or judicial acts of another nation."
159 US 113, 163-4 (1895).
78 See Eleanor M. Fox, Toward World Antitrust and Market Access, 91 AMER. J. INT'L L. 1, 1
(1997) at 1; 14.; Eleanor M. Fox, Competition Law: Linking the World, in Bermann, et al
(2000). (Fox 2000b); Slaughter, Agencies on the loose, at 538-9.
79 Regulators have also negotiated treaties that are specific to a particular subject, such as
antitrust. For example, the US has legally binding executive agreements with Germany,
Australia, Canada, the EU, Israel, Japan, Brazil, and recently Mexico. See ICPAC REPORT,
24
used to create a loose and adaptable framework in which to share information,
ideas, procedural innovations, and resources.
A 1993 MOU between the US SEC and its Chilean counterpart is
representative. It contains principles for consultations,
mutual exchange of
information, enforcement assistance, confidentiality, and cost-sharing,80 and
has an extensive section devoted to U.S. technical assistance. 81
Regulators
have also created their own transgovernmental organizations, which act as
centers or focal points for TGNs.
The Basle Committee on Banking
Supervision, for example, consists of representatives of the world's twelve most
important
central
banks;
the
International
Association
of
Insurance
Supervisors (IASC) comprises nearly 100 insurance regulatory agencies; and
the International Organization of Securities Commissioners (IOSCO) over 100
securities commissions.82
These organizations are not international
organizations under international law:83 they instead occupy a "twilight" legal
existence.84
Annex 1-C, US Experience with International Antitrust Enforcement Cooperation at 4; DOJ
Press Release, DOJ and FTC Sign Antitrust Cooperation Agreement with Mexico (July 11,
2000) at www.usdoj.gov/opa/pr/2000/july/390at.htm
80 See "Memorandum of Understanding between the United States Securities and Exchange
Commission and the Superintendcia de Valores Y Seguros of Chile on Consultation, Technical
Assistance, and Mutual Assistance for the Exchange of Information," June 3 1993; SEC DOCKET
vol. 54, no.5 (June 15 1993) at 542.
81 Ibid at 544.
82 Zaring, supra. See also Geoffrey R. D. Underhill, Keeping Government Out of Politics:
Transnational Securities Markets, Regulatory Cooperation, and Political Legitimacy, 21 REV.
INT'L STUD. 251 (1995).
83 The definition of international organization used by the Restatement (Third) of the Foreign
Relations Law of the United States is an organization "created by an international agreement
[with] a membership consisting entirely or principally of states." RESTATEMENT (THIRD) OF THE
FOREIGN RELATIONS LAW OF THE UNITED STATES S. 222; see also INTERNATIONAL LAW: CASES
AND MATERIALS, 3rd Ed.(Louis Henkin et al, 1993) at 344: ("In international law, the term
'international organization' is generally used to refer to organizations composed entirely or
mainly of states and usually established by treaty.") [but see Alvarez, draft]
84 Zaring, supra.
25
Transgovernmentalists point to these innovations as evidence of an
important evolution in international law.
Characteristically legal entities--
domestic regulatory agencies--are engaging one another across political
boundaries without using traditional international law.
MOUs, for example,
have only a quasi-legal authority; they are by their terms not legally binding. 85
Groups like IOSCO fit none of the traditional categories of public international
law.86 The decisions of the Basel Committee are private, made by consensus,
and purely advisory.87
TGNs are not only pervasive, proponents argue; they offer significant
advantages. Multilateral organizations are cumbersome and bogged down by
procedural rules. Fundamental concerns over sovereignty are endemic. TGNs,
they argue, are by contrast flexible, adaptable, and dispense with the juridical
equality
and the time-consuming
organizations.88
formality
of
traditional
international
The rise of TGNs is aided by the perception that many
regulatory issues are technocratic. Much as the belief in agency expertise has
reinforced judicial deference to agency decisionmaking in the US, political
deference to agency actions in international affairs appears aided by a sense
that the issues are narrowly technical--and thus appropriately controlled by a
domestic agency--rather than broadly political, and thus best guided by the
foreign affairs bureaucracy.89 Such cooperation is largely self-enforcing, in
that each agency can better implement its domestic mandate as a result of the
85 Cite to Aust on distinguishing bindingness.
86 As Jose Alvarez has pointed out to me, this characterization depends on a relatively
traditional view of IOs, one that some more expansive contemporary visions of international
organization reject.
87 The Basle Committee's recommendations nonetheless have significant regulatory impact. See
e.g. ETHAN KAPSTEIN, GOVERNING THE GLOBAL ECONOMY 103-28 (1993) (discussing the 1988
Capital Adequacy Accord); Kapstein, 1992, supra .
88 Slaughter supra.
89 The sense that regulatory law is technical and apolitical also fosters greater success in legal
export efforts. See de Lisle, supra, at 285.
26
network.
While incentives to "violate" "obligations" exist, common interests
predominate.90
In short, transgovernmentalists argue that the liberal internationalist
era is ending, but that neo-medievalists misread the legal and political
landscape.
TGNs, they claim, are an increasingly significant form of
cooperation that is growing in importance in its central domain--regulation-even as it expands into new areas like judicial cooperation. TGNs solve the
paradox of an increased need for uniformity coupled with resistance to further
international centralization.91 The result, transgovernmentalists argue, is the
harnessing of state power to the flexible, decentralized forms employed by
NGOs.92 For transgovernmentalists, this is the "real new world order." 93 As
Slaughter argues,
Disaggregating the state into its functional components makes it possible to
create networks of institutions engaged in a common enterprise even as they
represent distinct national interests.
Moreover, they can work with their
subnational and supranational counterparts, creating a genuinely new world
order in which networked institutions perform the functions of a worldgovernment--legislation, administration, and adjudication--without the form.94
III. TRANSGOVERNMENTAL REGULATORY NETWORKS: THREE CASES
90 Slaughter, 1997. 217
91 Dehousse, supra at 259; Jacobs, supra 16-17.
92 And organized crime. On the generic advantages of the network model see DAVID RONFELDT,
TRIBES, INSTITUTIONS, MARKETS, NETWORKS: A FRAMEWORK ABOUT SOCIETAL EVOLUTION
(1996) and Mark Granovetter, The strength of weak ties, 78 AMER. J. SOC'LY ( 1973), cited in
Phil Williams, The nature of drug-trafficking networks, 97 CURRENT HIST. 618, 154 (1998) at
155.
93 Id.
94 Id. at 195.
27
Transgovernmentalists consider regulation the leading edge of the
network phenomenon. In this Part I examine three regulatory policy arenas in
which TGNs have arisen.95 Each case comprises a wide array of regulatory
agencies and jurisdictions. In each, US regulatory officials in particular have
been actively involved.
In the process, as I describe, US officials have
promoted the export of US regulatory laws and practices.
The underlying contexts of these cases vary in important ways.
In
competition policy, and in securities law, major multilateral treaties and
organization do not exist. These areas represent "gaps" in the larger liberal
internationalist project. In environmental regulation, the need to protect
shared or public goods has resulted in the creation of numerous formal
institutions to guide collective international action. 96 The public goods nature
of many environmental problems, however, grants significant blocking or veto
power to otherwise weak states. Consequently, regulatory power is diffused.
In competition policy, by contrast, extraterritorial applications of domestic law
by major players (in particular the US) is common and regulatory power is
concentrated in the US and EU, and to a lesser extent Japan. Multilateral
solutions have not succeeded in part because of these fundamental differences
in the economic and political bases of antitrust. In securities law, regulatory
power is the most concentrated. The US is by far the dominant actor. Those
international rules that do exist typically mirror US domestic rules.97
Despite
these
differences,
each
case
suggests
that
transgovernmentalists have identified an important phenomenon: regulators
are actively collaborating in information sharing and enforcement, as well as in
95 There is no clear and accepted definition of a network that would permit objective
verification. But as the cases reveal, if networks do in fact exist, these surely fall within the
class.
96 On public goods provision see KAUL ET AL, GLOBAL PUBLIC GOODS, supra
97 See the discussion infra.
28
technical and legal assistance. TGNs are a growing reality in these issue areas,
though the path of growth varies.
A. Securities regulation
Securities regulation governs the sale and marketing of financial
instruments,
such
as
stocks
in
publicly-held
corporations.
Securities
regulation was once an almost purely domestic concern. However, rising
interdependence and the globalization of capital markets have made securities
law increasingly international, to the point where "international cooperation...is
blossoming among the world's regulators."98 Nonetheless, there are no major
multilateral securities agreements or organizations on par with those found in
monetary affairs (e.g the International Monetary Fund) or in trade (e.g. the
World Trade Organization).99 In the US, the world's leading capital market,
the SEC began to actively cooperate with agencies abroad in the 1980s as more
enforcement actions involved foreign actors. 100
At this time securities
regulation did not exist in many foreign jurisdictions or, if it did, often was not
well developed.
While this is particularly true for developing countries and
countries with economies in transition, even a state as economically advanced
as Germany only recently established a securities agency. 101
While the SEC is in practice at the center of a web of transgovernmental
contacts and MOUs, the International Organization of Securities Commissions
(IOSCO) is a forum for global securities cooperation that gives structure to the
emerging
network
of
regulators.
IOSCO
comprises
over
130
member
98 Zaring, supra at 282.
99 Simmons, 2001, supra.
100 See Mahoney, supra.
101 James H. Freis, Jr., An Outsider's Look into the Regulation of Insider Trading in Germany:
A Guide to Securities, Banking, and Market Reform in Finansplatz Deutschland, 19 B. C. INT'L
AND COMP. L. REV. 1, 1996
29
commissions and meets regularly.102 IOSCO is not a traditional international
organization--no members are states.
Founded in 1984, 85% of the world's
capital market is under IOSCO member supervision. 103 Among IOSCO's main
current activities are the promulgation of core principles for domestic
securities regulation, the development of international accounting standards,
and the regulatory impact of the internet.104 IOSCO provides an arena for
discussion, policy coordination, and technical training for regulators in
emerging markets. SEC officials note the importance of IOSCO as a forum for
promoting greater cooperation and the spread and strengthening of securities
law to new areas of the globe.105 The success of the IOSCO model has led to
regional spinoffs; the Council of the Securities Regulators of the Americas,
formed in 1992, is a regional version of IOSCO, as is the Forum of European
Securities Commissions, formed in 1997.
Through IOSCO working groups, as well as through MOU’s and regular
interaction, securities regulators share information, policy innovations, and
enforcement resources, as well as coordinate research and responses to new
regulatory challenges posed by globalization.
In the process,
securities
regulators from the US are providing extensive technical advice, training
personnel, and drafting legislation for regulators in emerging markets. 106
While the EU is also active in technical assistance efforts, the SEC is the most
important securities commission in this regard. In the words of one
commentator,
102 See Underhill, supra; Zaring, supra.
103 Id. at 292.
104 THE SEC SPEAKS IN 1998: INTERNATIONAL DEVELOPMENTS (1037 PLI/Corp 149, February
1998) at 11.
105 Interviews.
106As Joel Trachtman notes, "as securities law is a relatively immature area of law in most nonU.S. jurisdictions, their policies and methods may be more malleable than they might be, for
example, in contract law." See Joel P. Trachtman, Unilateralism, Bilateralism, Regionalism,
30
the SEC has responded to internationalization of the securities markets with
calls for uniformity in securities regulation, a uniformity that is to be based on
the American model. Internationalization has also provided the SEC with
opportunities to use its enforcement powers as a lever to press for greater
cooperation and uniformity among the world's securities regulators. As foreign
markets grow and attract a greater share of worldwide investment, the SEC's
desire to maintain the primacy of the American model of securities regulation
may lead to an increase in the SEC's efforts to export regulation, resulting in
greater friction between the SEC and foreign regulators. 107
As of 1998, the SEC had entered into more than 30 MOUs with foreign
authorities.108 Many emerging market states have also been quite active in
entering into similar MOUs; for example, Brazil has entered into in 23 MOUs
as of 2000, including one with the SEC creating a joint monitoring system for
companies traded in both jurisdictions.109 These MOUs describe the kind of
assistance and cooperation that the parties intend to engage in. For example,
the SEC MOU with the Superintendencia de Valores Y Seguros of Chile
discusses the general need for cooperation, principles for assistance, and
Multilateralism, and Functionalism: A Comparison with Reference to Securities Regulation, 4
TRANSNAT'L L. & CONTEMP. PROBS. 69, (1994) at 90.
107 Mahoney supra at 320. See also Policy Statement of the Securities and Exchange
Commission on the Regulation of International Securities Markets, Securities Act Release No.
6807 (Nov. 1988), cited in Kehoe, supra, at 351.
108 THE SEC SPEAKS IN 2001: INTERNATIONAL AFFAIRS, 1235 PLI/Corp 977 (2001), at 1000.
See also Faith Teo, "Memoranda of Understanding Among Securities Regulators: Frameworks
for Cooperation, Implications for Governance" (unpublished paper, Harvard Law School, May
1998) at 14; Trachtman, supra at 88 ("MOUs are the leading example of international
cooperation in securities regulation.")
109 See MOU, at www.cvm.br/ingl/inter/mou-e.asp. The SEC notes that "cooperative
arrangements modelled after the SEC's are now used by securiteis regulators around the world.
Consequently, with growing ease, the SEC is able to obtain enforcement-related information
from numerous jurisdictions, including emerging and developed markets." SEC Speaks in 2001
at 996.
31
procedures for requests from one agency to the other. 110
The MOU also
discusses technical assistance from the SEC on a number of topics, including
clearance and settlement mechanisms; trade recording and comparison
systems; order handling systems; privatization of state-owned companies;
regulatory mechanisms related to accounting and disclosure; and regulatory
requirements relating to market professionals and capital adequacy. 111 This
list is suggestive, not exhaustive, and is typical of SEC MOUs.
The widespread use of MOUs largely arose from functional regulatory
imperatives. Existing treaty arrangements for judicial cooperation "were seen
as inadequate because they are too general and inflexible for highly technical
and rapidly evolving securities markets in which intense surveillance of legal
activities
is
needed
to
detect
illegal
activities."112
Extraterritorial
investigations or assertions of power were either difficult or, increasingly,
diplomatically-troublesome. MOUs evolved as an attempt to circumvent these
obstacles and introduce a more flexible, lower profile alternative. 113 And by
predicating SEC cooperation on reciprocal authority abroad, this approach
helped replicate important informational features of US law. 114
MOUs
provided the framework, for instance, within which Canadian and US
regulators gained the legal authority to undertake investigations on behalf of a
foreign regulatory body.115 This form of cooperation has since been extended
110 SEC Docket 54, 5, (June 15 1993) at 542.
111 Id.
112 Porter, supra at 114.
113 See id; also Trachtman, supra at 88.
114 Former SEC Chair David Ruder stated in 1988 congressional hearings that the requirement
of reciprocity provides " a substantial incentive for foreign securities authorities to enter into
mutual assistance arrangements with the [SEC] or to make commitments to provide information
in similar situations." 1988 Banking Comm. Hearings at 38, HR Rep. No. 100-1065 (1988).
115 Teo, supra, at 12-13. In the US, necessary provisions were enacted via the Insider Trading
and Securities Fraud Enforcement Act of 1988, Pub. L. 100-704, 102 Stat. 4677 (1988) and the
International Securities Enforcement Cooperation Act of 1990, Pub. L. 101-550, 104 Stat. 2714
(1990).
32
to many other jurisdictions. 116
The SEC has also employed MLATs, which
permit the SEC to reach abroad more effectively in criminal prosecutions. 117
Where "dual criminality" requirements have stymied the SEC, as in the case of
Switzerland, the SEC lobbied effectively to alter Swiss law. 118
The SEC view is that transgovernmental cooperation through IOSCO,
MOUs and
interests.119
MLATs,
and technical assistance all
serve important
US
The extend of SEC technical assistance is marked. The SEC
hosts a major training program each year for foreign securities regulators, the
"International Institute for Securities Market Development," which is taught by
SEC officials and outside experts. As of 2000, nearly 800 participants from
101 countries had taken part.120 This training provides grounding in the
basic principles and approaches employed by the SEC (such as the merits of
disclosure-based
vs.
merit-based
regulation
and
the
importance
of
transparency) and provides opportunities for regulators to share problems and
solutions.
SEC
also
holds
an
International
Institute
for
Securities
Enforcement and Market Oversight, in which some 670 regulators from 65
countries have participated.121 In fiscal year 2000 alone, some 460 securities
regulators from 71 countries were trained by the SEC. 122
While the direct
impacts of these SEC efforts are difficult to trace, it seems implausible that
116 Id.
117 MLATs tend to be negotiated with major banking centers and havens, such as Switzerland
and the Caymans. See e.g. Treaty on Mutual Assistance in Criminal Matters Between the Swiss
Confederation and the United States, May 25, 1973, US-Switz, 27 USTS 2019; Treaty
Concerning the Cayman Islands Relating to Mutual Legal Assistance in Criminal Matters, July 3
1986, US-UK, 26 ILM 536. The SEC's efforts at negotiating agreements were aided by the
International Securities Enforcement Cooperation Act of 1990, Pub. L. No. 101-550, 104 Stat.
2714.
118 Kehoe at 369.
119 Interviews, 2000.
120 THE SEC SPEAKS IN 2001 at 991.
121 Id.
122 Id.
33
they have had no impact on the policies and practices of new and
inexperienced regulators.123 These sessions also help to build important ties
and contacts for future cooperation on concrete cases. 124
It is worth underscoring that foreign officials are not forced to attend
training programs, nor to take part in the IOSCO network or MOU-based
cooperation generally.125
Indeed, SEC officials indicate that they are
inundated with requests from foreign jurisdictions for training—and to date
have only been able to satisfy about 10% of the requests. 126 But the SEC has
required that recipients of technical assistance have in place legislation that
permits them the same margin of independence from legislators that the SEC
possess in the US.127
The SEC push for US-oriented securities law also
extends to advanced industrial democracies. The SEC has pressured Japan
and Switzerland, for instance, to develop insider-trading regimes similar to that
in place in the US.128 The SEC has, since 1997, worked with the US Agency
for International Development (USAID) to strengthen its overseas export effort.
The two agencies entered into a five year agreement to share technical training
duties, about which USAID Associate Administrator Sally Shelton-Colby noted
"who better than the SEC and USAID to team up to export US expertise in this
area and protect the interests of the US investor?" 129
123 Argentina's Comision Nacional de Valores's new rules on disclosure requirements, for
example, specifically credit the SEC. Comision Nacional de Valores, Resolucion General 363 at
http://www.cnv.gov.ar/Principal.htm.
124 Interviews.
125 But see Mahoney, supra, arguing that in enforcement actions with other advanced industrial states
(such as the UK) the SEC may be coercive.
126 Interviews, 2000. In fiscal year 2000, SEC staff responded to 222 written technical
assistance requests and provided analysis and commentary on securities laws in China, Croatia,
Egypt, Ghana, Macedonia, Russia, and Trinidad and Tobago. SEC Speaks in 2001 at 993.
127 Slaughter, 2000 (Bermann) at 534.
128 Choi and Guzman at 1890.
129 Press Release, USAID and SEC to advise emerging securities markets across globe under
new agreement signed today, September 2, 1997, at www.sec.gov/news/press/97-71.txt
34
SEC officials point out several benefits for the US that flow from their
participation in the TGN. The spread of securities law generally, and of US
regulatory structures specifically, strengthens the rule of law abroad.
It
“exports capitalism” worldwide. 130 And it promotes the stability and
embeddedness of financial markets that American firms and investors covet.
In the wake of the Asia financial crisis in particular, the stability of foreign
markets has taken on new importance. 131 An SEC official argued that the
USAID program "reflects the SEC's commitment to strengthening global
securities markets and making them safer for both American and foreign
investors."132
All investors may be said to gain from the security and stability that
strengthened securities law abroad represents. But the gains are not limited to
such general ends; an important outcome of the SEC networking is the
dissemination of what one interviewee termed the “regulatory gospel” of US
securities law.133 As Paul Mahoney argues, this gospel includes the following
elements:
strict insider trading rules; mandatory registration with a
governmental agency of public securities issues; a mandatory disclosure
system;
issuer
liability
regarding
registration
statements
and
offering
documents; broad anti-fraud provisions; and government oversight of brokers,
dealers, exchanges, etc.134 When foreign jurisdictions mirror or approximate
these elements of US law, US firms, dealers, and investors are on familiar turf.
130 I borrow this term from an interviewee, July 2000
131 Simmons, 2001.
132 Press release USAID and SEC to advise emerging securities markets across globe under
new agreement signed today, September 2, 1997, at www.sec.gov/news/press/97-71.txt
133 I borrow this term from an interviewee, July 2000.
134 See Mahoney, at 305; also Theodore Levine and W. Hardy Callcott, The SEC and Foreign
Policy: The International Securities Enforcement Cooperation Act of 1988, 17 Sec. Reg. L. J.
115, 123 (1989), cited in Kehoe, supra, at 354: "The SEC raised foreign consciousness about the
harmful effects of insider trading, and this directly led to legislation criminalizing insider trading
or increasing enforcement in countries such as Switzerland, Japan, Canada, and England."
35
Because they are knowledgeable about such a regulatory structure already,
they can readily compete in new markets.
In the SEC’s own words,
Because the world's markets are closely interwoven and cross-border securities
transactions are commonplace, the SEC has forged an international approach
to ensure high regulatory standards and protect against fraud in the US. The
SEC has developed formal and informal relationships with foreign authorities
for regulatory and enforcement cooperation, and has developed mechanisms
for information-gathering so that international borders cannot be used to
escape detection and prosecution.
The SEC has entered into over 30
arrangements, generally known as "memoranda of understanding," with foreign
authorities. Cooperative arrangements modeled after the SEC's are now used
by securities regulators around the world...135
In addition to MOUs, the SEC uses other information-gathering mechanisms
[including] direct contacts with foreign criminal authorities, and indirect
contacts with criminal authorities through US mutual legal assistance treaties,
administered by the Department of Justice...In 1997, the SEC made 240
requests for assistance to foreign regulators and responded to over 360
requests from abroad.136
The SEC conducts a comprehensive technical assistance and international
training program for emerging and developed securities markets. The program
is designed to benefit both the United States and recipient countries. Benefits
to the US include an improved foreign investment climate and regulatory
foundation for foreign offerings in the United States. The encouragement of US
style market structures and regulatory principles also promotes open entry
135 SEC SPEAKS IN 1998: INTERNATIONAL ACTIVITIES, at 1
36
and competitive market conditions that may be enjoyed by US participants and
service providers.137
In short, the securities TGN is active and growing. For the SEC,
networking with foreign regulators is a conscious strategy aimed at enhancing
its
enforcement
powers
while
at
the
same
time
promoting
the
institutionalization of US-style securities laws abroad.138 The SEC's approach
is to bring other jurisdictions into the US model, not to modify the US model.
This is even true of the SEC's cooperative efforts with regulators from other
advanced industrial states.
The US/Canadian Multijurisdictional Disclosure
System, for example, "does not evidence significant regulatory compromise on
the part of the SEC...the principle of mutual recognition...is followed only to
the extent that the foreign rules satisfy the SEC's regulatory goals...in some
cases, other jurisdictions are changing their laws to get into a position to reach
[similar] agreements with the SEC."139 SEC officials confirm that the SEC is
far less interested in learning from its foreign counterparts than it is in
imparting the accumulated wisdom of its many years regulating the world’s
largest financial markets. A statement by Richard Breeden, then Chairman of
the SEC, reflects the SEC's dim view of convergence as a two-way street: "I'm
interested in knowing the capital rules in other countries to know how big their
buffers are.
I'm not at all interested in what the French think US capital
standards ought to be." 140
B. Competition policy
136 Id. at 5
137 Id. at 17
138 Mahoney, supra; interviews.
139 Trachtman, supra, at 95.
37
Competition policy seeks to ensure that markets and competition are
not subverted through private power and restraints on trade.
Through
selective intervention, it attempts to ensure that consumer welfare and
economic efficiency are maximized.141 Like securities regulation, competition
policy aims to regulate a central component of modern market economies.
Rising economic interdependence in the 1980s and 1990s has led to a
internationalization of many competition problems. 142 One result has been
increased cooperation and convergence (as well as conflict) among regulators,
and the expansion of competition law itself to new jurisdictions. 143
Like
securities regulation, the existence of competition law is new for many states.
Of the 80 states today with competition laws, more than half adopted their
laws in the last decade, and over 20 have significantly reformed their
competition systems.144
Similarly, of the 13 states with competition laws in
140 Cited in Trachtman, supra, at 112. See also Mahoney; James R. Doty, The Role of the
Securities and Exchange Commission in an Internationalized Marketplace, FORD. L. REV. 60
(1992).
141 This is the dominant US view today, though in the past there was a strong element of
protectionism toward small and medium-size firms. Eleanor M. Fox, Antitrust and Regulatory
Federalism—Races Up, Down, and Sideways, 75 NYU L. Rev. 1781 (2000) at 1789-90
142 While the problem is not new, see American Banana v. United Fruit Co., 213 US 347
(1909), and led to the development of extraterritorial application of domestic competition law—
in particular in the US, see US v. Alcoa, 148 F2d 416 (2nd Cir. 1945)—globalization has led to a
marked increase in the international dimensions of competition law.
143 Fox, 2000b at 244-5.; Gary Horlick and Michael Meyer, The International Convergence of
Competition Policy, 29 INT'L LAWYER (1995); Spencer Weber Waller, The Internationalization
of Antitrust Enforcement, B.U.L. REV. 77,2 (1997) at 347 ("Most commentators have failed to
note the extent to which harmonization has already taken place. Already, most nations have
antitrust rules that are substantially similar on a textual level, and most do their best to enforce
them.")
144 Fox, NYULR at 1782. ; Saskia Sassen, The Locational and Institutional Embeddedness of
the Global Economy, in Bermann et al, 2000, at 86. The latter figure is from Portnoy, 2000 at
75. Portnoy argues that there are 83 states, as of 2000, with antitrust laws. Id. at 74. Some of
these states are hardly developing; Italy first created its competition law in 1990. Id. at 77. Mark
R. A. Palim claims that there as of 1996 there were 70 states with competition laws, and 79% of
38
the Western Hemisphere, the majority created their competition laws after
1990.145 Approximately 20 states are currently drafting competition laws. 146
Antitrust regulation is thus spreading around the globe rapidly. While this
diffusion is broadly positive, it has created its own problems: more
jurisdictions reviewing mergers,147 more extraterritorial assertions of domestic
competition law,148 and more enforcement efforts to coordinate. And while "a
consensus is beginning to emerge within the transnational community of
lawyers and competition officials who have learned to think, speak, and write
about competition issues in a similar way,"149 significant differences remain.
The spread of competition law and its impact on international trade has
led to proposals for a multilateral competition treaty, perhaps under the
auspices of the WTO. 150
At least five prior efforts at the creation of an
multilateral regime have occurred--none successful.151
The development of
those dated from 1980 or later. Palim, The Worldwide Growth of Competition Law: An
Empirical Analysis, 43 The Antitrust Bull. 106 (1998) at 109.
145 Robert H. Lande, Introduction, in SYMPOSIUM: CREATING COMPETITION POLICY FOR
TRANSITION ECONOMIES, BROOK. J. OF INT'L L. 23,2 (1997) at 339-340. See also Susan K. Sell,
Intellectual Property Protection and Antitrust in the Developing World: Crisis, Coercion,
Choice, INT'L ORG. 49, 2 (1995).
146 Fox, NYULR at 1783.
147 Diane P. Wood, United States Antitrust Law in the Global Market, 1 Glob. Legal. Stud. J.
(1994) 427-8.
148 The US in particular has asserted extraterritorial reach for the Sherman Act. See e.g.
Hartford Fire Ins. Co. v. California, 113 S.Ct. 2891 (1993); U.S. v. Alcoa, 148 F. 2d 416 (2d Cir.
1945).
149 Waller, 1997 (BU) at 396.
150 E.g. Eleanor M. Fox, Toward World Antitrust and Market Access, AM.J. INT'L. L. 91,1
(1997), proposing a Trade-Related Aspects of Antitrust Measures (TRAMs) accord within the
context of the WTO.
151 As Andrew Guzman notes, “At present…no meaningful international agreement exists to
govern the application of antitrust policies to cross border activities.” Guzman, Is International
Antitrust Possible? at 1535. The League of Nations, the ill-fated ITO, ECOSOC, the OECD,
and UNCTAD have all tried and failed to harmonize competition law; Spencer Weber Waller,
Neo-Realism and the Internationalization of Law: Lessons from Antitrust, KAN. L. REV. 42,2
(1994). One reason for the demise of the ITO was Congressional concern over the antitrust
39
an international treaty faces serious obstacles, not least of which is the myriad
of
principles
and
objectives,
some
contradictory,
that
undergird
the
competition laws of the main economic powers. While the push for a liberal
internationalist solution is in stasis, enforcement-oriented cooperation and
information sharing
through TGNs is occurring with frequency.152
As in
securities regulation, the US in particular is active in this regard. 153 The US
Dept. of Justice has over 20 MLATs in place, which permit and foster a range
of cooperative activities with foreign regulators. 154 MOUs are also a common
networking tool of competition officials.
As in securities regulation, enforcement actions with international
dimensions have led the way to more cooperation with foreign jurisdictions.
For example, DOJ prosecutions of international cartel activity in fiscal years
1997-1999 totaled over $1.3 billion--over 90% of the total fines DOJ obtained
in that period.155 The Hoffman-La Roche vitamin prosecution alone netted a
provisions. See Diane P. Wood, The Internationalization of Antitrust Law: Options for the
Future, DEPAUL L. REV. 44, 4 (1995); also Ruggie 1995, supra, at 509.
152 See Symposium, BROOK. J. INT' L.; Wood, 1995; Waller, 1997 (BU); Nina Hachigian,
International Antitrust Enforcement, ANTITRUST (Fall 1997).
153 "The US has committed a substantial amount of its prestige and resources to promoting
greater enforcement cooperation. The other major players may not be as enthusiastic as the [US],
but they do not have serious objections to cooperating on a case-by-case basis." Waller 1997
(BU) at 400.
154 Address by Doug Melamed, US DOJ, to the WTO, "International Cooperation in
Competition Law and Policy: What Can be Achieved at the Bilateral, Regional, and Multilateral
Levels (April 17 1999); Interviews, DoJ.
155 See USDOJ, Antitrust Division, Annual Report, FY 1999 at 5. See also Gary Spratling,
Deputy Assistant Attorney General, "Negotiating the Waters of International Cartel
Prosecutions" presented at the National Institute on White Collar Crime, 1999
(www.usdoj.gov/atr/public/speeches/2275.pdf. See also "Company Agrees to Pay $110 Million
Fine for International Conspiracy: Fine is Largest in Antitrust History" Dept. of Justice Press
Release of Tuesday, April 7 1998, cited in David M. Knight, "Global Antitrust Cooperation: The
Role of Transnational Networks in Competition Policy Formation and Enforcement"
(unpublished paper, Harvard Law School, 1998).
40
fine of $500 million in 1999; there were 2 other international cartel
prosecutions that year with fines totaling $360 million.156
The development of a competition TGN has been aided, in the case of the
US, by the passage of the International Antitrust Enforcement Assistance Act
of 1994.157 The Act expanded the range of activity of the DOJ and FTC (for
example, to share confidential information) to antitrust regulators in foreign
jurisdictions. The Act authorizes the Attorney General and the FTC to conduct
investigations and provide assistance to foreign authorities regarding a
possible violation of the foreign antitrust laws (regardless of legality under US
law) if US authorities are confident that the foreign authorities will
reciprocate.158
This is a similar dynamic to that in securities law. 159
Participating foreign agencies must give protection to antitrust evidence that is
“not less than the protection provided under the laws of the [US].” 160
In
theory the passage of the Act will further accelerate the development of
transgovernmental cooperation, though few states have taken advantage of its
provisions to date.161
In addition to enforcement cooperation, US competition officials, like
their SEC counterparts, routinely consult with foreign regulators about the
156 See USDOJ, Antitrust Division, Annual Report, FY 1999 at 7.
157 15 USC s.6201-6212. The Act is phrased in terms of US assistance to foreign competition
offices, but cooperation cannot proceed unless an "antitrust mutual assistance agreement" has
been negotiated with the state in question. In essence, states must agree to cooperate with the US
in order to receive assistance from US antitrust officials. See also Waller, 1997 (BU) at 370-4.
158 Fox, 2000b at 247.
159 See discussion supra.
160 ICPAC Report, Annex 1-C at 8.
161 Australia appears to be the only state to have signed such an agreement; Stuart M. Gerson,
Extraterritorial Enforcement of US Antitrust Laws, SF63 ALI-ABA 187, 195 [date?] See also
Fox 2000b at 247 (suggesting that “Nations have been reluctant [to cooperate under the Act], for
they fear that the United States, not they, will be the beneficiaries, and they fear that the shared
information might be used against their firms for purposes that go beyond the US request (e.g.
for private class actions and treble damages cases)).
41
structure and enforcement of their antitrust laws. 162 DOJ and FTC officials
have been stationed abroad to assist foreign regulators for extended periods of
time.163 In the 1993-1998 period, the only period with complete data on these
activities, the DOJ Antitrust and FTC Technical Assistance Programs spent an
average of $787,473 and $585, 989 per year, respectively, in an average of 51
missions per year.164 Some 35 foreign regulators were trained in the US, on
average, in each year of these programs. 165 In some cases US technical
assistance has been quite long-lived: US antitrust officials were in Poland for
four years.166
There they provided extensive, hands-on advice concerning
draft legislation as well as the interpretation and implementation of existing
laws.167 More advanced economies receive similar treatment at times: when
in 1998 New Zealand sought to reformulate sections of its antitrust code, for
example,
the
New
Zealand
Ministry
of
Commerce
elicited
extensive
commentary from the US DOJ and FTC. 168 US officials also participate in a
welter of regularized meetings and forums for antitrust discussion, such as the
OECD Competition Law and Policy roundtables and the annual Fordham Law
School conference.
As Spencer Weber Waller notes,
162Spencer Weber Waller, Comparative Competition Law as a Form of Empiricism, BROOK. J.
INT'L L. 23,2 (1997). The US and the EU are particularly active in this regard; between 1991 and
1999, EU and US officials consulted each other in 689 different cases. See Youri Devuyst,
Transatlantic Competition Relations, in Pollack and Shaffer, supra, at 127.
163 Id. See also DevTech report, 1996, supra.
164 As with the SEC, this is often budgeted out of USAID, but employs DOJ and FTC officials.
These figures were calculated by Cheryl Kelly using data in the ICPAC Report, Appendix 6A.
165 Id.
166 Interviews, DOJ.
167 Devtech report, supra at 6-7.
168 Knight 1998, supra, at 30-31.
42
the rest of the world looks to the United States as one of the most important
sources of learning about competition law.
Foreign legislators considering
antitrust legislation often turn to the US enforcement agencies and the
American Bar for comments on the best path to choose. Foreign enforcement
officials read U.S. cases...attend international conferences, and frequently
interact with their foreign counterparts.
Attorneys and experts, frequently
Americans, are often involved in foreign competition proceedings at various
levels. Foreign case reports and agency decisions are filled with citations to US
cases, guidelines, and scholarly commentary.169
Like SEC officials, DOJ and FTC regulators claim that regular
engagement with foreign regulators, technical assistance efforts, and the
accompanying export of US regulation directly benefits the US. For example,
former FTC Chairman Janet Steiger argued that the competition reforms
pursued by the FTC and DOJ in developing economies "not only benefits the
citizens of the region, but will enhance the competitiveness of American
industry by helping to open new markets and investment opportunities."170
Technical assistance is generally seen as promoting the rule of law in economic
affairs, which has positive spillovers for free markets and trade. US (and other)
business interests often have a preference for convergence in competition law,
both substantively and procedurally. 171
The more familiar the competition
laws in place in a foreign jurisdiction, the easier it is for US firms to compete
169 Id. at 457-8. See also "Justice Department, FTC Receive Funds to Support Competition
Counseling Aid," Int'l Trade Rep.(BNA) 8, 871 (1991). Waller elsewhere claims that "national
competition law systems do not easily transfer from place to place…" Waller 1997 (BU) at 348.
170 Id at 871.
171 Waller 1997 (BU) at 385-6. This is particularly so in the area of mergers, where differing
rules and requirements can stymie transactions. But as Waller notes, some firms will not be
advantaged by convergence because they want to engage in opportunistic behavior that will be
blunted by the increased cooperation that is both cause and consequence of convergence. Id. at
387.
43
and ensure that they are not disadvantaged vis-à-vis competitors who may
have powerful political and economic connections.172
One important difference between competition and securities regulation
is that in securities the US is tremendously dominant, while in competition the
US is one of two or three major world markets.
Consequently, while US is
actively pursuing the export of its competition policy, so is the European
Union. In Eastern Europe, which is particularly important for the EU, the EU
has largely won this competition. 173 As a precondition for consideration in EU
enlargement
the
so-called
“Visegrad
states”
have
signed
the
"Europe
Agreements," in which they agree to adopt or approximate EU competition law
for any matters affecting trade or competition with the EU. 174
Thus
regulatory restructuring in these states is explicit and is driven by an EU,
rather than a US, model.
The US in particular has been criticized for its
failures in Eastern Europe, where the zealousness of US efforts allegedly
worked to their detriment.175 As Eleanor Fox argues, there is “a particular
competition between the [US] and [EU] for expanding the geographic scope of
their [antitrust] law.”176 Moreover, “this competition regards exporting law,
172 At least, many nations believe this to be the case and thus have created analogous
competition laws. Fox, NYULR at 1784.
173 Fox, NYULR at 1799 ("In any event, the European Union is winning the competition. More
nations are finding the EU model, in contrast to the US model, congenial to their economies and
polities."). Not that the US didn’t try; see Kathleen McDermott, US Officials Provide
Competition Counseling to Eastern Europe, ANTITRUST (Fall/Winter 1991) at 4. This effort
involved $7.2 million in USAID funds and visits (often measured in months) by DOJ and FTC
regulators.
174 Eleanor M. Fox, The Central European Nations and the European Union Waiting Room:
Why Must the Central European Nations Adopt the Competition Law of the European Union?,
BROOK. J. OF INT'L L. 23,2 (1997).
175 De Lisle, supra at 287.
176 Fox NYULR at 1799; see also Sassen, supra at 88; Karl M. Meesen, Competition of
Competition Laws, 10 NW J. INT’L L. & BUS. (1989) As the Report of the ABA Sections on
Antitrust Law and International Law on the Internationalization of Competition Law Rules:
Coordination and Convergence (1999) notes, "The recent trend…is to adopt competition laws
along the style either of the United States or the European Union, with variations that include a
44
not importing law. The dominant exporter will have the stronger position in
the world if, and when, multinational businesses find it no longer tenable not
to have one overarching set of rules of the game.”177 At the same time, there
is significant cooperation between the EU and the US on cases of shared
interest. As one observer puts it, "the daily interaction between [competition]
agencies…fostered increasingly cooperative attitudes among officials on both
sides of the Atlantic as they came to redefine their roles as members of a
transatlantic community of professionals dealing with common problems." 178
Like the EU, Japan has distinctive views on competition policy that it
has sought to disseminate through a process of networking, though less
aggressively than the EU and US. The Japan Fair Trade Commission initiated
in the mid 1990s what it termed a "familiarization plan," under the auspices of
APEC, in which senior officials from APEC states were invited to training
sessions run by Japanese antitrust regulators. 179 Other international actors
are also involved in competition law development. The OECD has issued
several recommendations regarding cooperation on enforcement, and has
created an OECD Outreach Program. 180 In addition, the UN Conference on
Trade and Development's Restrictive Business Practice code has been
larger fairness component (fairness to weaker firms as against more powerful ones), as in the
Asian economies. The EU model has attracted many more adherents than the US model." Id at
19. The EU has even influenced Mexican competition law; see Jorge Witker, Ley Federal de
Competencia, BOLETIN MEXICANO DE DERECHO COMPARADO, (May-Aug. 1998) at 584. The
competition notion is not completely accepted; see e.g. Waller, 1997 (BU) at 392 ("despite the
United States' general geopolitical power, it does not appear to be a hegemon for antitrust
purposes. If there is a competition between models of antitrust law, the United States is not
winning.")
177 Id. at 22.
178 Devuyst, supra, at 127-8.
179 JFTC Will Provide Training for APEC Officials, BNA ANTITRUST & TRADE REG. REP.,
Sept. 19, 1996.
180 E.g. OECD Doc. C(86)44(Final) (May 21 1986), cited in Hachigian, supra at 137.
International conferences on competition law have begun to occur; in 1996, for example, a
conference on "Competition Policies and the Economic Reform Process in Latin America" drew
regulators from most Western Hemisphere states. Lande, 1997, supra.
45
revitalized in recent years. "Since 1989, developing countries have been
flocking to UNCTAD to learn more about the operation of antitrust
policies."181
In short, competition
regulators are interacting extensively, and
regulation is spreading to new jurisdictions at a rapid rate. In particular,
developing and transitional economies have readily adopted competition law
and become engaged in the competition TGN with their more experienced
counterparts.182
Despite this, no one model of competition law is
predominant globally. As a recent ABA report argued,
clusters of nations are tending to adopt one or another of the different
models…[Mexican law] appears on its face to be quite close to US law. The
laws of certain South American countries (Argentina, Brazil, Chile, Columbia
[sic], Venezuela), adopted in recent years, combine aspects of EC and US law,
as do longer-established laws in Australia and New Zealand…On the European
continent, EC law is the general standard…Many of the smaller, trade-oriented
Asian nations tended to model their competition laws along the lines of the
Japanese and Korean laws.183
As transgovernmental cooperation proliferates, competition among competition
laws has developed. The leading economic powers are engaging in regulatory
networks while seeking to export their preferred model into the regulatory
bureaucracies of other, less powerful states, many of whom are only now
creating competition laws as they liberalize their economies.
C. Environmental Regulation
181 Sell, supra at 317-318.
182 Portnoy, 2000 at 75.
46
Unlike the first two cases described in this article, environmental
regulation
is
an
area
with
widely
diffused
regulatory
power
and,
correspondingly, a myriad of international treaties in place. Multilateral
environmental agreements were negotiated at a rapid pace in the 1980s and
1990s.184
While accords continue to be developed, implementing existing
commitments has become a major focus. 185 This focus has drawn attention
to the capacity—or lack—for environmental regulation that many states
possess.
A contemporaneous and related development has been the rise of
TGNs. As in the securities law area, where IOSCO is the primary forum for
networking, the emerging environmental network has been solidified—though
not dominated or controlled by—a forum organization: the International
Network for Environmental Compliance and Enforcement (INECE). The US EPA
is at the core of INECE.
INECE is jointly sponsored by the EPA and the Netherlands' Ministry of
Housing, Spatial Planning and Environment (VROM), and began with the
signing of an MOU between those two agencies in 1985. 186 Requests to EPA
by the Dutch government for technical training and assistance were followed
by similar requests from Poland in 1991 and a plethora of other nations
since.187 A series of international conferences were organized, the first held in
Utrecht in 1990.188 INECE itself was christened in 1997, "to signal the
commitment to an ongoing network and set in place an ambitious two year
183 ABA Report, 1999 at 36-7
184 See the partial list in the ENTRI database at www.ciesin.org
185 Victor, Raustiala, and Skolnikoff, 1998
186 See www.inece.org/history.htm One result of the MOU was a series of seminars in
Washington for Dutch officials, introducing them to US techniques of enforcement and
compliance assurance.
187 Id.
188 Id. Subsequent conferences were convened in Budapest, Hungary in 1992, Oaxaca, Mexico
in 1994, Bangkok, Thailand in 1996, and Monterey, California in 1998. One outgrowth of the
47
work program."189
While the conferences are a central part of INECE, and
permit regulators to meet, exchange ideas, and make connections, information
technology is expanding its reach. INECE maintains a website which will soon
have streaming training videos that can be downloaded by regulators around
the world.190
INECE conferences grew dramatically in scope during the
1990s, and the EPA's technical assistance and training activities followed suit.
The EPA maintains a powerful presence in INECE, co-chairing the Executive
Planning Committee and serving as a motive force behind the network. 191
EPA itself has developed an elaborate series of technical training and
capacity-building programs aimed at introducing US regulatory practices to
foreign jurisdictions. EPA offers 24 "courses" for foreign regulators, touching
upon a wide range of regulatory issues.192 In EPA's words,
EPA's international technical assistance, training, and information exchange
programs play a key role in fulfilling the Agency's mission.
Exchanging
environmental management, regulatory, and technical expertise with other
nations can help solve environmental problems around the world...In the
1990s, responding to an enormous need for environmental training and
1994 meeting was teh "Oaxaca Declaration" in which participants from the Americas commited
themselves to work together to establish a regional network of regulators.
189 Id. There is now a twice-yearly newsletter, an elaborate internet presence, access to
confidential lines of communication for regulatory officials, a databank and technical assistance
to enable officials to maintain communication with other network members.
190 Interview, Cheryl Wasserman, Executive Planning Committee, INECE, and US EPA, July
2000.
191 The Executive Planning Committee membership at present includes representatives from a
diverse group of domestic agencies, international organizations, and non-governmental
organizations : inter alia, Nigeria; Mexico; US; the World Bank; India; South Africa; the United
Kingdom; and the Environmental Law Institute. See www.inece.org/Structur.htm
192 www.epa.gov/oia/modules.htm. These courses include, inter alia, Chemical Safety
Auditing at Industrial Facilities; Ecological Risk Assessment and Decision-making;
Environmental Compliance and Enforcement: Principles; Managing an Environmental
Organization; Economic Incentives for Environmental Decision-making; Principles of Pollution
Prevention; and Principles of Risk Management for Hazardous Waste Sites.
48
assistance in the emerging democracies of Central and Easter [sic] Europe,
EPA developed an initial set of training modules to impart this information on
key environmental management techniques employed in the United States.
Using a facilitated, train-the-trainer approach, these modules have been
successfully updated and supplemented with new training courses.
The
modules are now being successfully applied in other regions as well, including
large parts of Africa, Asia, Latin America, and Russia and the Newly
Independent States.193
In 1997, for example, EPA delivered 27 courses in 13 countries. 194
Some are quite general: one course entitled "Principles of Environmental
Enforcement" covers a wide array of regulatory issues, ranging from the basic
("What is Compliance?" ; "What are the Components of a Successful
Enforcement Program?"; ) to the more advanced ("When Should Civil or
Criminal Responses be Used?"; "What Enforcement Responses are Appropriate
for Government-Owned and/or Operated Facilities?") to the structural
("Dividing Responsibilities Among Government Levels"; "Staffing Level"). 195
Courses such as these essentially provide a handbook--"environmental
regulation in a nutshell"--that is closely tied to US practice.
In addition to direct training, EPA officials actively showcase US
environmental technologies to their foreign counterparts. 196
By creating
demand for US environmental services and products abroad, EPA nudges
193 www.epa.gov/oia/modules.htm.
194 See US ENVIRONMENTAL PROTECTION AGENCY, EPA STRATEGY FOR PROMOTING US
ENVIRONMENTAL EXPORTS: A REPORT TO CONGRESS, (Washington, DC, May 1998) available at
www.epa.gov/oia/exp420.htm. In the same report, EPA claimed that its web site receives 5.5
million page requests per month, and that in January 1998 alone individuals from over 40
foreign nations used the site. Exactly what percentage were students researching third-year
papers while on vacation abroad was not estimated.
195 US EPA, PRINCIPLES OF ENVIRONMENTAL ENFORCEMENT (EPA/300-F-93-001) (July 1992).
49
foreign regulatory rules and practices toward American ones.
Indeed, EPA's
export promotion activities are tied to the training programs described above.
As EPA acknowledges, "increasingly, these training programs prepare the way
for the introduction of US technologies." 197 While EPA is assisting US firms
through its technical assistance activity, it is also incrementally aiding its goal
of greater convergence in foreign regulatory practices--convergence that is
based explicitly on US regulatory approaches.
In addition to its activity within INECE, and its generalized training
efforts, the EPA is actively involved in a more narrowly-focused TGN involving
the parties to the North American Free Trade Agreement, or NAFTA. A North
American network of environmental regulators began to develop bilaterally
(with the US at the core), prior to NAFTA, through cooperation engendered by
the La Paz and Boundary Waters Treaties. 198 NAFTA, and its environmental
side agreement, the North American Agreement on Environmental Cooperation
(NAAEC), have given a significant political spur to this cooperation. 199
Mexican environmental regulation was a major political issue in the NAFTA
debate. The NAAEC provides important mechanisms to further environmental
cooperation and help ensure compliance with NAFTA’s environmental goals. At
the same time, in practice the NAAEC provides a medium through which a
196 EPA Strategy for Export-Promotion, supra.
197 Id.
198 The primary area of cooperation for the US and Canada is the Great Lakes Region,
governed by the Treaty on Boundary Water, Jan. 11 1909, US-Can, 36 Stat. 2448. The
International Boundary and Water Commission was established in 1944 by the Treaty on the
Utilization of Waters of the Colorado and Tijuana Rivers, and of the Rio Grande (February 3
1944 US-Mex., 59 Stat 1219). In 1983 the Agreement on Cooperation for the Protection and
Improvement of the Environment in the Border Area, Aug. 14 1983, US-Mex, TIAS No 10,827
(the La Paz Agreement) was signed, and since then five annexes to the accord have been
negotiated.
199 See especially Scott C. Fulton and Lawrence Sperling, The Network of Environmental
Enforcement and Compliance in North America and the Western Hemisphere, 30 THE INT'L
LAWYER 1, 111 (1996). At the time of publication Fulton and Sperling were, respectively,
Principal Deputy Counsel and Senior Attorney-Advisor, U.S. Environmental Protection Agency.
50
TGN has developed. US regulators, as described further below, have been
actively cooperating with and training their Mexican counterparts, in the
process shaping the structure and process of Mexican environmental
regulation.
Mexico's first major step in the wake of NAFTA was to create a new
enforcement office, the PROFEPA.
In 1992 Mexican and US environmental
inspectors also announced their first coordinated effort at enforcement actions
in the border area. Since then regulators from both federal agencies, as well as
local and state officials, have met frequently to coordinate investigations and
surveillance efforts.
As a result, US observers believe Mexican enforcement
and compliance programs have improved in sophistication. 200
As Scott Fulton and Larry Sperling describe, between 1992 and 1994
the EPA conducted seven inspector training courses in Mexico as well as a
train-the-trainer
workshop.201
These
efforts
trained
561
PROFEPA
inspectors--nearly all of Mexico's enforcement personnel--and helped build
Mexican inspector training capacity significantly.202
The EPA trained
PROFEPA personnel in the use of aerial surveillance techniques, the
preparation of environmental impact assessments (pioneered by the US
through the National Environmental Policy Act of 1969), 203 volatile organic
compound inspection techniques, and other techniques of inspection and
assessment.204 The EPA also created a bilingual training video for Mexican
customs inspectors on compliance with the bilateral controls on hazardous
200 Personal Communication with Lawrence Sperling, supra.
201 Fulton and Sperling, 1996, supra at 120
202 Richard H. Steinberg, Trade-Environment Negotiations in the EU, NAFTA, and WTO:
Regional Trajectories of Rule Development, AM. J. OF INT'L L. 91, 2 (1997).
203 42 U.S.C. Sec. 4321-4370d
204 Fulton and Sperling, 1996, supra at 120. Customs officials have also been trained in the
identification of hazardous waste materials and ozone-depleted substances. Interview with Tim
Whitehouse, Office of Enforcement and Compliance Assurance, EPA, Washington DC, March
25 1999.
51
waste movements developed under the La Paz agreements on border
cooperation. By August 1995 bilingual training sessions on hazardous waste
management had been conducted at several border customs sites.205
As Richard Steinberg argues,
Mexico appears to have drastically improved its environmental enforcement
regime [in the wake of NAFTA]...Mexico has created a new agency, the Office of
the Attorney General for Environmental Protection, which has built a staff of
over five hundred inspectors operating out of ten regional offices. Almost all of
these inspectors were trained with help from the US Environmental Protection
Agency....This has led to at least a four-fold increase in the number of annual
environmental inspections of firms operating in Mexico. 206
EPA efforts at training Mexican officials in US enforcement and compliance
assurance techniques has not been limited to lower-level inspectors. In May of
1995 the EPA presented a major training course on the "fundamental
principles
for
designing
and
implementing
environmental
enforcement
programs" for Mexican policymakers, held at PROFEPA headquarters. 207 EPA
presented their philosophy on the design of rational environmental regulatory
instruments,
and appropriate inspection, enforcement,
and compliance
assurance techniques. Revisions of Mexican environmental statutes have as a
result been modeled on US statutes.208
More recently, EPA has been
promoting the use of innovative hybrid enforcement-regulatory techniques,
such as "supplemental environmental projects" (SEPs), to Mexican officials. 209
SEPs essentially trade a penalty reduction from a specified compliance failure
205 Id.
206 Steinberg 1997, supra at 251.
207 Fulton and Sperling, 1996, supra
208 Interview at EPA, supra.
52
for an often unrelated but desired environmental project, such as a land setaside.210
While its interest in deeper integration with the US is clearly a
major factor behind Mexico's transformation of its environmental regulatory
apparatus, it is noteworthy that the process has relied heavily on extensive
regulator-to-regulator contact, personnel training, and exchange of laws and
regulations, both bilaterally with EPA and under the auspices of INECE.
To far lesser degree, regulators from the EPA and Environment Canada,
the Canadian environmental ministry, have also cooperated for enforcement
and inspection purposes.211 The Commission on Environmental Cooperation,
created by the NAAEC, has also undertaken a number of activities aimed at
promoting cooperation.
The Commission has established a standing North
American Working Group on Environment Enforcement and Compliance
Cooperation, composed of regulators from the three NAFTA parties. 212 The
group
has
convened
workshops
on
a
number
of
topics,
often
with
representatives of the public in attendance. 213 Thus NAFTA has provided a
framework as well as an impetus for the emergence of an active TGN.
As in the competition and securities cases, the emerging TGN in the
environmental arena has served as a conduit for the export of regulation from
209 Interview at EPA, supra.
210 [citations from Farber in ELR 99]
211 Fulton and Sperling, 1996 supra at 120.
212 One frequent activity is the preparation of reports on environmental policy, e.g. North
American Working Group on Environmental Enforcement and Compliance Cooperation,
ENVIRONMENTAL MANAGEMENT SYSTEMS AND COMPLIANCE (June 1998). The Commission
Secretariat itself also produces related studies; e.g, Secretariat of the CEC, VOLUNTARY
MEASURES TO ENSURE ENVIRONMENTAL COMPLIANCE: A REVIEW AND ANALYSIS OF NORTH
AMERICAN INITIATIVES (March 1998).
213 I was a participant in one of these workshops, on the development of indicators of effective
environmental enforcement (convened in Puebla, Mexico in May of 1998). The meeting
involved 3 days of presentations by government officials, NGO leaders, and academics. The top
Federal-level environmental officials in attendance (who were members of the North American
Working Group on Environment Enforcement and Compliance Cooperation) met privately on
the last day.
53
the US and other developed states.
And, as in the securities context, an
organization of regulators (IOSCO, INECE) has developed to structure and
promote the network. Here, the pattern of export and import was also strongly
influenced by the NAFTA context.
NAFTA provided additional incentives for
regulatory cooperation and an institutional structure within which regulators'
collaborative and capacity-building activities could be organized.
IV Transgovernmental Cooperation & Domestic Regulatory Regimes
The three cases described above illustrate the contemporary activities of
TGNs. In each, US agencies are actively engaged in cooperative activities with
foreign counterparts.
This cooperation is guided by informal, non-binding
agreements, and takes place through frequent peer-to-peer collaboration-sometimes in person and sometimes virtually.
While there are differences
among the cases, each embodies the kind of decentralized interaction
highlighted by transgovernmental theorists.
In each network there is also
substantial technical assistance activity, through which US agencies assist
partner jurisdictions in building capacity and creating regulatory frameworks.
Many of the descriptive claims of transgovernmentalists are supported
by the cases I have described. At a minimum, the antitrust, securities, and
environmental cases described above are consistent with the claim that TGNs
exist and that domestic regulators are actively engaged in them. However, it is
not clear from this evidence alone that TGNs are a major component of
international cooperation yet, or that TGNs are rapidly expanding to the
detriment of more traditional forms of international law. 214
In this Part I
consider more closely the role of TGNs in the process of regulatory export and
214 See also Mark A. Pollack and Gregory C. Shaffer, Who Governs?, in Pollack and Shaffer
2001 at 297 (arguing that their cases studies suggest "at best patchy support for Slaughter's
ideal-type image of a transgovernmental world order.")
54
regulatory convergence, phenomena which have significant implications for
international cooperation.
A. Regulatory Export & Transgovernmental Networks
A core aspect of the transgovernmental cooperation charted in this
article is that national regulators are, through the practices associated with
transgovernmentalism,
exporting
and
importing
regulatory
rules
and
structures. This diffusion process is of potentially great importance; as John
Ruggie has argued, domestic regulation and restructuring "is what the trade
policy agenda increasingly has come to be about."215
Although international
trade law is often seen as the most powerful lever of regulatory convergence,
TGNs may prove an alternative source.
In TGNs, policy and institutional
convergence occurs, to the degree it does, through a decentralized, incremental
process of interaction and emulation, rather than an explicit, multilateral
process
of
negotiation
and
agreement. 216
This
aspect
of
transgovernmentalism implies that TGNs represent a complement to, or
perhaps even substitute for, the liberal internationalist model that has
dominated international cooperation for most of the last century.
215 John Gerard Ruggie, At Home Abroad, Abroad at Home: International Liberalisation and
Domestic Stability in the New World Economy, 24 MILLENNIUM 510 (1995) at 516; BRUCE
STOKES AND PAT CHOATE, DEMOCRATIZING US TRADE POLICY (Council on Foreign Relations
Paper, 2001) at 37: "In the 21st century, trade negotiations and international commercial
agreements are less and less about tariffs, quotas, and other formal at-the-border impediments to
foreign commerce, and more and more about domestic regulatory environments and how they
impede or enhance international competition."
216 See also Simmons and Elkins, 2000, supra (at 3), who argue that their data "provides strong
prima facie evidence that liberalization is in some sense 'contagious.'" They later suggest that
"social networks may complement or even supplant economic explanations in important ways,
especially if we alter our assumptions about the nature of the information environment in which
policy decisions are made…contacts at the intergovernmental level may reflect network effects:
frequent intergovernmental meetings at multiple official levels can transmit information to
policymakers about 'what works' in other settings." Id at 9-10.
55
The notion of legal export has many historical antecedents.
The law
and development movement in the 1960s and 1970s sought to transfer legal
models to developing states, with limited success.217 The export of US law
accelerated with the end of the Cold War, with former communist states at the
forefront of the importing jurisdictions.
This latter wave overlaps with the
activities described in this article. As Jacques de Lisle has recently argued in a
survey of US legal export efforts, two developments have accorded the US "a
new and uniquely important role in international processes of legal change" in
the 1990s: globalization and democratization. 218 According to de Lisle,
The opening of new areas (both geographic and substantive) to American
influence, the removal of the principal rivals to US power and Americansupported ideologies, and the seemingly sweeping embrace of principles that
official and unofficial US actors have seen as congenial (or even as proprietarily
American) thus have provided the setting for countless US legal exportpromotion and advice-offering activities…219
These developments also suggest that, ceteris paribus, US legal export efforts
should be more effective now than they have been in the past. With regard to
the three cases I have described, the degree to which active efforts at
regulatory export are the cause of observed policy change is uncertain--and
will remain so in the absence of substantial empirical research and longer
timescales to gauge impact. But it is implausible, and inconsistent with the
evidence that does exist, that the export efforts of the SEC, DOJ, FTC, and EPA
have had no impact on foreign regulators.220
217 Galanter and Trubek, supra.
218 De Lisle, 1999 supra at 180-1.
219 Id. at 181.
220 The DevTech evaluation, at supra note X, analyzed the activities of DOJ and FTC staff in
Eastern and Central Europe. That report assessed the program very positively, calling it
56
Indeed, the one extensive empirical study of the impact of the US
foreign technical assistance efforts relevant to this article, in the area of
competition policy, found the impact to be sustained and significant. 221 Other
evidence, as described in Part III, is largely anecdotal but is consistent with the
claim that TGNs incrementally re-cast and socialize domestic regulatory
bureaucracies. Important components of Mexico's environmental enforcement
and compliance assurance program are now modeled on that of the US; the
securities regulatory structure of many emerging markets parallels that of the
US in important respects; and both the US, EU, and Japanese models of
competition have been embraced by various developing (and industrialized)
states around the world.222
On the other hand, "importing" jurisdictions
inevitably alter models from abroad. The Japanese Constitution, designed by
the US during the occupation, clearly operates differently than intended.
Other historical examples suggest that some export efforts are entirely
wasted.223 The degree of indigenous adaptation will vary in each country and,
in all likelihood, over time as well. One critical factor, discussed further below,
is the incentives importers face to emulate regulatory practices in the US and
other powerful jurisdictions.224 The stronger these incentives, the more likely
is successful regulatory export (or, at the limit, the less likely is the need for
active export efforts).225
"extraordinarily effective" and have achieved a "very high degree of sustained impact." DevTech
at i. Moreover, the report argued that "The American advisors' extensive role in helping draft or
amend relevant laws was freely acknowledged and universally appreciated. In no country had
there been a subsequent attempt to weaken or repeal the laws drafted with their help." Id at 7.
221 Id.
222 Part III, supra. As Fox notes with regard to export efforts by the US and EU, while different
techniques are used in some cases, "the common vehicle is advocacy in the course of advice and
technical assistance for implementing competition laws." Fox, NYULR at 1799.
223 De Lisle.
224 Simmons, 2001, supra.
225 Id.
57
In the remainder of this Part I discuss the relationships between TGNs,
regulatory export, and policy convergence. I then present an account of this
process that draws on the concept of network effects in economics.
B. Mimesis in the International System
The international emulation of institutions has been analyzed in many
other contexts. Arnold Toynbee long ago termed this "mimesis": "the reception
and adoption of elements of culture that have been created elsewhere and have
reached the recipient by a process of diffusion." 226 Paul DiMaggio and Walter
Powell influentially advanced several hypotheses relating to organizational
homogeneity and "institutional isomorphism," many of which apply to
international processes.227 Others have examined "policy bandwagoning" and
"social learning."228 And, as noted, legal scholars have argued that the US
has undertaken an "extraordinarily ambitious and multifaceted drive…to
226 ARNOLD J. TOYNBEE, A STUDY OF HISTORY: RECONSIDERATIONS (VOLUME 12, 1948) at 343.
227 Paul J. DiMaggio and Walter W. Powell, The Iron Cage Revisited: Institutional
Isomorphism and Collective Rationality in Organizational Fields, 48 Am. Soc. Rev. (1983).
("isomorphism is a constraining process that forces one unit in a population to resemble other
units that face the same set of environmental conditions." Id at 149).
228 G. John Ikenberry, The International Spread of Privatization Policies: Inducements,
Learning, and "Policy Bandwagoning," in THE POLITICAL ECONOMY OF PUBLIC SECTOR REFORM
AND PRIVATIZATION, (E. SULEIMAN AND J. WATERBURY, EDS., 1990). The social learning
concept was first introduced by Ernst Haas. Haas, Why Collaborate? Issue-Linkage and
International Relations, 32 World Pol. 357 (1980). The spread of Keynesianism in the mid-20th
century has also been analyzed as a process of policy and ideational diffusion. THE POLITICAL
POWER OF ECONOMIC IDEAS: KEYNESIANISM ACROSS NATIONS (PETER HALL, ED., 1989). More
recently, students of advocacy have described "a model of transnational change that is not just
one of 'diffusion' of liberal institutions and practices, but one through which the preferences and
identities of actors engaged in transnational society are sometimes mutually transformed through
their interactions with other." MARGARET KECK AND KATHRYN SIKKINK, ACTIVISTS BEYOND
BORDERS (1998) at214.
58
transplant laws and legal ideas and to foster legal reform or development
abroad." 229
I draw on and extend these notions of diffusion by examining a specific,
contemporary manifestation of diffusion: the export of regulation via TGNs.
This form of legal export is similar to the more general legal export described
by analysts such as de Lisle.230 But much of the 1990s wave of legal export
efforts focused on legislation rather than institutional capacity.231
The
activities described in this article address legislation, but go well beyond to
touch on issues such as the structure of enforcement and the training of
personnel. This an important distinction that previous analyses suggest may
render the impacts of export much more lasting and consequential. 232
Before going further, it is important clarify the relationships among
three concepts referred to above: regulatory export, TGNs, and policy or
institutional convergence.
Regulatory export can occur without a TGN.
Neither conscious emulation nor explicit attempts at regulatory diffusion are
necessarily dependent upon the existence of TGNs. Nor is the existence of a
network sufficient to produce efforts at export or import. But the cases
described in Part III, as well as deductive reasoning, suggest that TGNs
promote these dynamics.
TGNs provide a means for transfer of ideas and
policies. TGNs also, as I will argue further below, increase the gains for states
to engage in mutual capacity-building efforts.
Building capacity and
disseminating regulatory approaches is particularly advantageous if both
229 deLisle, supra, at 180.
230 De Lisle, supra.
231 Id. In his survey of various US legal export efforts, de Lisle argues that four conditions
accentuate the impact of legal export: the exercise of power by the US that presses the recipient
state to conform to US standards; high regard in the importing state for the US law(s) in
question; low political controversy over the substantive issues; and a relatively small gap
between US-favored standards and pre-existing indigenous rules. Id. at 274
232 Id.
59
parties to the transaction plan to cooperate on regulatory matters and
enforcement actions in the future.
Institutional and policy convergence in turn is an outgrowth of
regulatory export. But just as a TGN is neither necessary nor sufficient for
regulatory export to take place, convergence can occur with or without a TGN,
and with or without active efforts at regulatory export.
controversial topic in international political economy. 233
Convergence is a
It is often attributed
to broad pressures resulting from globalization, though some studies case
considerable doubt on this claim. 234
This article does not challenge any of
these claims; rather, I argue that processes of regulatory export, which are
facilitated and fostered by TGNs, aim to, and often succeed at, producing some
convergence.
The convergence that occurs may be simple, as when one
jurisdiction creates a regulatory agency for the first time, and in so doing
broadly converges its (previously implicit) policy and institutions with those of
other states. Or convergence may be deeper, as when the Visegrad states
explicitly adopted EU-style competition laws. Convergence is interesting in its
own right, but it also has important implications for the future architecture of
cooperation.
These implications are considered in Part V below.
In the
remainder of this part, I focus on regulatory convergence in the context of
TGNs.
C. Incentives for Diffusion and Convergence
Policy
externalities,
fed
in
part
by
expanding
economic
interdependence, create much of the need for TGNs. From the perspective of
US
regulators,
enforcement
is the
233 [cites
234 Simmons and Elkins, supra.
60
major
driver
of
transgovernmental
cooperation.235
Cooperating
directly
with
peer
regulators
in
other
jurisdictions permits US and other regulators to maximize their ability to fulfill
their domestic mandates and enforce domestic law. Transgovernmental
cooperation helps to preserves regulators' power in the face of increasing
economic interdependence.
1.
Leaders and Followers.
Beth Simmons has recently proposed a framework for the study of
harmonization in financial markets which usefully categorizes the incentives of
regulators in areas in which regulatory power is asymmetric.236 Simmons’
analysis treats the US as a dominant player who innovates in capital market
regulation based purely on domestic concerns. 237 Other jurisdictions react to
this innovation based on the degree to which they face functional incentives to
emulate it; these reactions then produce policy externalities for the dominant
player. How the dominant regulator in turn reacts to these externalities helps
explain the type of cooperation that occurs. The following figure illustrates
Simmons’ core argument:
insert Simmons matrix here.
235 Interviews.
236 Simmons 2001.
237 "US regulators can be thought of as unconditional first movers: financial regulatory
innovation will be motivated by and respond to internal regulatory needs and politics." Id at 595,
emphasis in original.
61
Simmons' framework explains many aspects of capital market regulation. It
also has important implications for transgovernmental theory. Consider first
the cases Simmons identifies as falling in Quadrant I. In these cases, TGNs,
by facilitating information flow and technical assistance among jurisdictions,
may play a role alongside some forms of liberal internationalist institutions. In
Quadrant II TGNs are unlikely to be important because of the need for more
overt political pressure to stem the incentives of weaker jurisdictions to reject
the dominant jurisdiction's regulatory choice. Simmons' primary example here
is money laundering.
In Quadrant III her analysis predicts that TGNs may
play a subsidiary role in propelling what is largely a market driven process.
Accounting rules are an example: firms eager to be listed on US exchanges will
adopt US accounting practices on their own. As the number of firms doing so
grows, the incentives for other states to codify the US standard grows. TGNs
can provide some political cover for this convergence process by masking the
emulation of US rules in a quasi-multilateral framework (that of IOSCO).238
Quadrant IV is where TGNs are most likely to be significant.
While
Simmons' framework predicts a minimal role for multilateral institutions and
no policy harmonization, she in fact finds this area is the "most uncomfortable
fit" for her model.239 In her words,
The framework suggest little harmonization and a minimal role for multilateral
institutions. The first part of this expectation is not quite met here: the issue
area is in fact characterized by a series of bilateral agreements that represent a
segmented form of harmonization. The prediction for the role of multilateral
institutions does hold up. The relevant institution in this case is [IOSCO], a
relatively passive organization whose primary role has been to encourage
238 Id. at 611.
62
regulators to negotiate and fulfill bilateral information-sharing agreements. It
also provides technical advice where necessary and offers "model agreements"
to interested parties…240
Moreover, she notes that despite her expectations
Clearly,
there
are
some
moderate
externalities
associated
with
the
prosecutorial practices in other jurisdictions…the key point here that negative
externalities are easily targeted; it makes sense in this case to negotiate
agreements that constitute bilateral "club goods" that provide benefits (mutual
access to information) for members only. 241
Simmons’ amended analysis is broadly consistent with the analysis of this
article. In situations where the incentives to create traditional international
institutions are very low, Simmons' schema predicts little cooperation or policy
harmonization. Yet empirically she finds a higher level of cooperation.
The
best account of that fact is that globalization, by increasing externalities, has
also increased the gains from certain forms of cooperation and policy
convergence—in particular enforcement efforts that involve the assistance of
foreign jurisdictions. The rise of TGNs--for all the reasons elucidated in Part II,
and as Simmons argues in part--provides a new and attractive form for this
cooperation to take.
Hence in practice the chosen cooperative response in
securities law is a moderate degree of transgovernmental cooperation, broadly
guided by IOSCO, and organized around technical assistance and bilateral
MOUs.
Put differently, TGNs appear to perform a gap-filling role where the
incentives for liberal internationalist solutions are weak. In situations that fall
239 Id. 616.
240 Id at 613-614.
241 Id at 613-614.
63
within Simmons' Quadrant IV, rather than little or no cooperation, as a
straightforward focus on international institutions would suggest, there is a
moderate degree of transgovernmental cooperation. But an equally important
point is that this TGN activity is concentrated in particular issue-areas, not
spread across the spectrum of potential cooperative issues.
As Pollack and
Shaffer note in the transatlantic context, the "new world order of governance
by [TGNs] is limited to specific issue areas…" 242 These issue-areas are those
that fit within Quadrant IV, and to a lesser degree within Quadrants I and II.
Elsewhere, this logic suggests, TGNs are unlikely to arise, and if they do are
unlikely to play important roles. This is hypothesis is testable; such testing will
help to better establish the limits of transgovernmental cooperation.
2.
Convergence.
US regulators believe that regulatory convergence generally improves
and fosters transgovernmental cooperation. For example, Douglas Melamed of
the US DOJ Antitrust Division recently stated that "cooperation in specific
cases 'can be successful only among countries which have relatively similar
legal systems [and] common economic experience and trust each other.'" 243 In
Melamed's view, cooperation can in turn encourage the evolution of “common
views
and
understandings”
about
substantive
and
procedural
issues,
facilitating shared enforcement responsibility and leading to still deeper
cooperation.244 Similarly, a top FTC official stated that "the constant contacts
242 Pollack and Shaffer, Who Governs?, in Pollack and Shaffer, 2001 at 298.
243 Melamed (WTO address), quoting Frederic Jenny, at 20.
244 Id at 5. As the DevTech study describes with regard to antitrust regulation, "A Lithuanian
staff professional described, for example, how the American advisors had "opened her eyes" to
the difference between regulation or prevention of price 'speculation,' versus assuring that the
prices advertised were not deceptive. This type of change in 'mentality' or outlook, resulting
from interaction with the American advisors,was described frequently by staff in respect to their
understanding of key competition and consumer protection concepts, such as product and
geographic market definition, barriers to entry,price collusion [etc.]. Its importance for
64
[with foreign regulators] enable us to understand each other's analysis, lead to
convergence in our approaches toward competition matters--in some measure
due to an increasingly common economic analysis--and benefit parties insofar
as we are often able to arrive at complementary remedies." 245
Consequently, for jurisdictions like the US regulatory export is likely to
be beneficial because it permits greater and deeper cooperation across borders,
which in turn renders US regulators' domestic tasks easier.246 To be sure, US
regulators do not always favor convergence.
But often convergence is
attractive. Differences in procedural rules, for example, can be major
impediments to regulatory cooperation. Different requirements and timelines
for merger review, for instance, inhibit cooperation among competition
regulators.247
Convergence in
environmental
regulations
can
reduce
transboundary spillovers that exacerbate local pollution problems, if the
convergence is broadly upward. (Convergence downward would create more
spillovers). Differences in confidentiality rules similarly constrain the degree to
which US regulators can actively cooperate with foreign regulators. 248 As the
Department of Justice ICPAC Report notes with regard to a US-Australian
competition agreement, “from a US perspective, it was feasible to enter into
such an agreement with Australia because of two features of the Australian
sustainability lies first in the fact that these concepts underpin the fundamental re-orientation of
the public sector institutions being assisted. Second, it was clearly the case that the persons who
described their understanding of the concepts conveyed by the American advisors were quite
capable of training other staff in these concepts." DevTech supra at 8.
245 Debra Valentine, General Counsel of the FTC, commentary at a 1998 American Bar
Association panel, cited in Knight, supra, at 30.
246Melamed address at 5 supra. As the DOJ ICPAC Report notes, “Substantive and procedural
differences between the US and non-US legal systems can also generate frictions between
nations.” ICPAC Report, Annex 1-C at 3. See also Slaughter, Agencies on the loose at 540
("[MOUs] have led not only to greater cooperation between states, but also to more effective
enforcement of the antitrust statutes of both parties.")
247 Merit Janow, 'Soft Harmonization' and Multilateralism, in Bermann, et al 2000 at 258.
248 The ICPAC Report, Annex 1-C, notes that the US entered into it’s first and only IAEAA
agreement with Australia in 1999:
65
system. First, Australia has a strong regime of confidentiality laws that will
protect non-public information obtained from US companies. Second, its laws
authorize entry into agreements under which such information may be
exchanged in antitrust matters.”
Perhaps the most basic, but highly important, issue of policy
convergence
in
practice
is
the
requisite
meaningfully with foreign regulators.
legal
authority
to
cooperate
In securities, for example, the US
enacted legislation in the late 1980s that permitted the SEC to provide
information and assistance to foreign regulators pursuing fraud enforcement
actions.249
Hong Kong did the same in the early 1990s;250 the United
Kingdom in 1990.251 “Numerous jurisdictions have enacted legislation that
has facilitated cooperation among securities regulators; these enactments are
similar, to varying degrees, to the facilitating legislation in the [US].” 252 These
enactments typically require reciprocity by the requesting jurisdiction.
While regulatory convergence can enable regulators to better achieve
their domestic mandates, it may also benefit firms.253 Convergence benefits
firms and investors to the degree it renders disparate regulatory landscapes
similar, and provides regularity and predictability across borders.
3.
Distributional and Other Issues.
249 the Insider Trading and Securities Fraud Enforcement Act of 1988, Pub. L. 100-704, 102
Stat. 4677 (1988) and the International Securities Enforcement Cooperation Act of 1990, Pub. L.
101-550, 104 Stat. 2714 (1990).
250 Teo, supra at 39. See also Speech by Helen Lee, Director of Enforcement, Hong Kong
Securities and Futures Commission, 18 August 1997, at
http://www.hksfc.org.hk/eng/press_releases/html/index.html (visited Nov. 2 2001).
251 Id at 41
252 Id. At 43
253 This is not to ignore the losses, from a social perspective, inherent in convergence.
Regulatory competition has many advantages; for an example of a pro-competitive argument
relevant here see. eg. Stephen J. Choi & Andrew T. Guzman, Portable Reciprocity: Rethinking
the International Reach of Securities Regulation, 71 S. CAL. L. REV. 903 (1998).
66
It is important to underscore that the strategic interactions Simmons
presents is not the entire story of regulatory convergence: US regulators also
typically believe in the efficacy of their own regulatory models and seek to
diffuse them for this reason.
Indeed, interviewees at times spoke of the
“gospel” of their regulatory system and the normative desire to export that
gospel.254
Thus both the belief in substantive regulatory superiority and the
advantages of regulatory convergence for domestic regulatory needs appear to
drive regulatory export processes.
A second, and more critical point, is that in practice the common
understandings that US regulators refer to are not neutral: they reflect specific
national practices and thus have distributional implications. As Saskia Sassen
argues:
[A]n enormous amount of government work has gone into the development of
standards and regimes to handle the new conditions entailed by economic
globalization.
Much work has been on competition policy and on the
development of financial regulations, and there has been considerable
willingness to innovate and to accept whole new policy concepts by
governments around the world.
The content…is clearly shaped by the
frameworks and traditions evident in the North Atlantic region…[but] we
cannot simply speak of “Americanization” since in some cases Western
European standards emerge as the ruling ones. 255
254 Interviews…
255 Sassen, 2000 at 96. Paralleling the argument made here, Portnoy asserts that “For the most
part, LDCs [Less Developed Countries] imitated western competition rules. However, imitation
implies independent choice…Instead, antitrust ideas and institutions were transferred through a
well-organized transnational dialogue between antitrust experts and willing LDC policymakers.”
Portnoy, 2000 at 108-9.
67
As regulators in the US or EU persuade other jurisdictions to develop or modify
regulatory laws and practices, they frequently encourage the replication of their
regulatory structures. Regulators in developed jurisdictions may benefit from
learning about innovations abroad.256 But the degree to which the US (or the
EU, or Japan) is an importer rather than exporter appears quite limited.
What incentives exist for weak jurisdictions to import regulation? In a
complex and uncertain economic environment, the strategy of adopting
successful foreign models reduces costs. 257 As Birdsall and Lawrence argue,
importing jurisdictions do not bear the (often considerable) costs of creating
the regulatory institutions they adopt.258 While these institutions “may not
match domestic conditions precisely…[they] are ready-made, pre-tested, and
provide international compatibility.”259 Foreign regulatory rules and systems
also may come "pre-interpreted"--with a body of case law and other decisions
that have elaborated and improved the rules over time. 260
To be sure, when the costs of regulatory change are high, the benefits
to importers may not suffice to justify change. But where the costs of change
are low--or zero, as in the case of a newly created regulatory system--there can
be substantial gains from choosing off-the-shelf regulatory models. "The costs
of independent invention (including the 'trial and error' of pursuing blind alleys
already explored by others or the expenses of devising genuinely new laws and
institutions) can easily outweigh the expected marginal gains from an
256 The EPA, for example, has argued that "EPA staff…benefit from working with partners
outside of the US. International capacity-building programs expose staff to alternative
approaches to environmental management and, in turn, help inject creativity and innovation into
our domestic programs." EPA, Best Practices for EPA's International Capacity Building
Programs: Report of an EPA Task Force (November 1999) at 8.
257 Giandomenico Majone, Cross-National Sources of Regulatory Policymaking in Europe and
the United States, 11 Journal of Public Policy (1991)
258 Birdsall and Lawrence, 1999, supra at135-6.
259 Id. Birdsall and Lawrence do not discuss networks per se.
260 I thank Damien Gerardin for making this point.
68
indigenously crafted arrangement that might better suit local needs and
circumstances."261
Regulators also gain power and prestige through their association with
foreign regulators.262 As they do so, they may consciously or unconsciously
import regulatory models. DiMaggio and Powell argue that "organizations tend
to model themselves after similar organizations in their field that they perceive
to
the
more
legitimate
or
successful." 263
In
their
early
work
on
transgovernmentalism, Keohane and Nye argued that "coalition building" was a
central aspect. By coalition-building, they meant agencies building "coalitions
with like-minded agencies from other governments against elements of their
own administrative structures."264
The prestige that foreign regulators can
offer can help regulators, particularly those in newly-created agencies, to
increase their own political power.
Perhaps most importantly, in some cases regulators in foreign
jurisdictions will import innovations from leading jurisdictions because of
market pressures, as Simmons’ analysis argues. Firms in a global market will
foster convergence on particular regulatory rules, such as accounting rules, in
order to reduce the transaction costs of multinationality.
They may also
pressure governments toward a perceived optimum rule. And they respond to
assertions of extraterritoriality from jurisdictions such as the US--a particular
issue in the competition law context.265 The debate on races to the bottom and
the top is long; the key point here is simply that where races to the top do
261 De Lisle, supra at 289; see also Birdsall and Lawrence.
262 Simmons and Elkins, supra, note a process of "social emulation" that is related to that
discussed here. Most interestingly, that claim that states that share the same religion (a proxy for
many social and cultural ties) also share many policy orientations. Id. at 19.
263 DiMaggio and Powell, supra at 152. They also stress the importance of professionalization
and professional norms--for example, among economists involved in securities regulation. Id.
264 Keohane and Nye, 1974 at 44.
265 See e.g Fox, NYULR at 1799. The US has a long history of asserting extraterriorial effect
for the Sherman Act. See e.g Hartford Fire [x]
69
occur, regulators are often "importing" regulatory rules. 266 Where these kinds
of market pressures are neutral or uncertain, the factors discussed above will
play a larger role in driving the choice to import regulatory rules. Collectively,
these varied incentives to import help offset some important countervailing
concerns—such as sovereignty costs—that surely exist.267
4. The Theory of the Regulator
The
preceding
discussion
of
regulatory
export
and
transgovernmentalism does not rest explicitly on a specific motivational theory
of regulators, such as the public choice conception of regulators as selfinterested utility maximizers.268 Rather I have presented a wide-ranging set
of reasons why regulators from both putative exporting jurisdictions and
putative importing jurisdictions might participate in TGNs and might seek to
try to export or import regulatory models.
While my approach has been
catholic in terms of motivation, it is not inconsistent with either a public choice
or a public interest theory of regulators.269 The public choice approach, for
example, suggests that regulators create and participate in TGNs to strengthen
266 Vogel on the california effect.
267 I borrow this phrase from Kenneth Abbott and Duncan Snidal, Hard and Soft Law in
International Governance, INT'L ORG. (2000). As Giandomenico Majone argues, “an agency that
sees itself as part of a transnational network of institutions pursuing similar objectives and facing
analogous problems…is more motivated to defend its policy commitments and professional
standards against external influences.” By external, Majone means actors outside the regulator’s
field of expertise, such as politicians or other agencies. Giandomenico Majone, International
Regulatory Cooperation: A Neo-Institutionalist Approach, at 138-9 in Bermann, et al, 2000
supra
268 Macey.
269 A public choice approach might push toward even more focus on the venal motives that
regulators may have. Tto be sure, for example, some measure of participation in a
transgovernmental network, and specifically in technical assistance programs, is likely generated
simply by the desire to interact with foreign officials and travel to other countries. But that
incentive, while casting doubt on the motivations of putative importers, does not necessarily
imply that legal export is unlikely to succeed.
70
their power vis-à-vis political rivals and regulatees--and perhaps to collude
among themselves in the process. (Regulators even might engage in TGNs, and
specifically technical assistance programs, because they represent nothing
more than a nice travel perk.) 270 The public interest approach suggests that
regulators, as rational problem-solvers, use TGNs to address the negative
externalities of economic interdependence. Both these approaches are broadly
consistent with the case studies I have described.
D. Explaining Transgovernmentalism and Regulatory Export
Despite the connection between TGNs and central issues on the global
agenda such as regulatory convergence, there are few positive theories of
transgovernmental regulatory cooperation.271 Building on the cases charted
above,
I
propose
an
account
of
the
pattern
and
process
of
transgovernmentalism and regulatory export. This account builds on theories
of network effects in economics.272
I do not claim to fully "explain" transgovernmental cooperation--a task
that requires extensive and difficult cross-national research. Moreover, the
research design of this article--in which I have selected cases where TGNs (and
US regulatory agencies) are active--does not permit any firm causal claims.273
270 This might underlie a sizeable chunk of international law-making in many areas; as John
Jackson wrote about the international trade order, for example, "the chance to go 'tooting off in
private jets to negotiate with other national leaders at comfortable locations or three-star
restaurants' is a key plum of otherwise dull government jobs, a high government ex-official once
indicated." JOHN H. JACKSON, THE WORLD TRADING SYSTEM: LAW AND POLICY OF
INTERNATIONAL ECONOMIC RELATIONS (1989) at 84.
271 Exceptions include Slaughter 1997; Zaring, 1998.
272 Michael L. Katz and Carl Shapiro, Network externalities, competition, and compatability,75
AM. ECON. REV. 2 (1985).
273 This paper has explored a relatively new and largely unstudied phenomenon. As a result,
the paper has both descriptive and causal goals. For the latter, because I have in effect selected
on the dependent variable (networks in which regulatory export has been promoted or taken
71
Rather, in order to advance our understanding of transgovernmentalism, I
present an explanatory schema that is suggestive and, in principle, testable.
This account addresses the causality of regulatory export through TGNs. This
account is not inconsistent with the framework Simmons’ presents; it presents
an alternative and largely complementary set of incentives that are operate
most powerfully when the incentives to create liberal internationalist solutions
to interdependence problems are weak.
1.
The Economic Theory of Network Effects
My account is based on the thesis that the attributes of networks--in
particular, the role of network effects as they are understood in contemporary
economics—can help explain why states engage in regulatory export and
import. 274
In other words, the form of organization has specific attributes
that help explain behavior within it.
Network effects exist when "the utility that a user derives from the
consumption of a good increases with the number of agents consuming the
good."275 Networks can be evaluated along a continuum, with actual (literal)
networks at one extreme, simple positive-feedback loops at the other, and
"virtual" networks in between.276 The telephone system is an actual network:
one phone is worthless, only valuable when directly linked with others. The
more phones, the more valuable each phone is. Actual networks are
place) my claims are necessarily limited to proposing plausible causal arguments that could be
tested through future cases. See generally King, Keohane and Verba, supra, Chap 4.
274 This account is basically functional. "Functional explanations in social theory are generally
post hoc in nature. We observe such institutions and then rationalize their existence. Rationalchoice theory, as applied to social institutions, assumes that institutions can be accounted for by
examining the incentives facing the actors who created and maintained them. Institutions exist
because they could have reasonably been expected to increase the welfare of their creators."
Keohane, 1984, supra at 80.
275 Katz and Shapiro, 1985 supra.
72
empirically rare. Positive feedback loops are essentially economies of scale.
Virtual networks exist when increasing numbers of members increases the
utility of other members, even though a single item or member is not useless.
Computer software exhibits virtual network externalities: a program on its own
is useful to the owner, but one shared by millions of other is far more useful.
Credit cards and languages also exhibit virtual network characteristics. 277
For the purposes of article, the notion of virtual networks is most
applicable. But it is worth underscoring that TGNs are at the limit of what we
might consider virtual networks. While analogizing TGNs to the general class of
virtual networks involves a high degree of abstraction, it yields some
interesting insights.
The concept of network effects is important because it challenges a
central tenet of economic theory: that returns to scale diminish.278
In a
setting characterized by network externalities returns to scale increase rather
than decrease. The more individuals that have the same or compatible
software, for example, the more useful that software is. Networked markets as
a result exhibit "lock-in," or "tipping" effects: once a standard emerges it can
rapidly dominate a market. Once that occurs there is little incentive for actors
to change standards, even if a more efficient alternative exists. 279 This set of
claims has important implications for international cooperation and the rise of
TGNs.
276 Lemley and McGowan, supra, 13-23; Michael L. Katz and Carl Shapiro, Systems
Competition and Network Effects, 8 J. ECON. PERSP.1 (1994).
277 See Lemley and McGowan, supra at 15, 20. As with other virtual networks, languages
demonstrate a quasi-standard-setting dynamic when coupled with interdependence. As global
interdependence has grown, two noteworthy effects have occurred: English has become the de
facto international standard, and many of the world's languages have begun to disappear as
potential new speakers instead learn more widely spoken languages such as Spanish. More than
50% of the world's languages are in danger of dying out in the next century. See Cultural Loss
Seen as Languages Fade, NEW YORK TIMES (May 16 1999 A12, Nat. Ed.)
278 Lemley and McGowan at 23.
279 Id at 26-27.
73
2.
Tipping,
Standard-Setting,
and
Policy
Convergence
in
Transgovernmental Cooperation.
The notion of tipping or lock-in is central to network economics. For
example, the videotape market is a virtual network. VHS and not Betamax is
the dominant standard in videotape. This is not because VHS is the superior
technology, but because VHS secured more "members" in its network--more
owners of VHS-compatible VCRs, more films, and so forth--and tipped the
market in its favor.
While an entirely new technology, DVD, may dislodge
videotape altogether, it is unlikely that another videotape standard will
dislodge VHS. Similarly, the continued dominance of the QWERTY keyboard
has frequently been taken to demonstrate (with some controversy) that in
networked markets inferior technologies can thrive and persist if they attain
sufficient market dominance.280
Consequently, one hypothesized result of
this form of pathdependence is first-mover advantages. As Lemley and
McGowan claim, when network effects are present, "being the first seller in a
market may confer an important advantage over later entrants."281
Transposed to international law, the concept of network effects helps
illuminate why both powerful and weak jurisdictions which are members of
TGNs might engage in regulatory export and import. TGNs are characterized
by extensive sharing of information, coordination of enforcement efforts, and
joint policymaking activities. These activities plausibly exhibit network effects:
the more regulatory agencies that participate in coordinating and reciprocating
enforcement efforts, for example, the better off are all the other agencies. To
the degree these network effects exist, they create incentives for weak
280 Paul A David, Clio and the Economics of QWERTY, 75 Am Econ. Rev. 332 (l985); but see
SJ Liebowitz and Stephen Margolis, The Fable of the Keys, 33 J. L. & Econ. (1990).
281 Lemley and McGowan at 24. As they note, this may make risky strategies, such as
predation, rational.
74
jurisdictions
to
import
regulatory
models
in
line
with
the
emerging
international "standards" in regulation, and for powerful jurisdictions to try to
export their standards. By adopting the emerging standards (understood here
as rules, policies, enforcement practices, and the like), regulators maximize the
depth of their engagement with other regulators and the effective reach of their
own regulatory efforts.282
As de Lisle argues, for seemingly technical, apolitical regulatory laws
and standards, "[e]mulating US examples or following US prescriptions can
seem to involve either making no choice at all or making the only
instrumentally rational choice." 283 As Simmons demonstrates, the dominance
of the US in a given policy arena is one reason this can be true; the existence
of network effects is another. These two arguments are not mutually exclusive,
but rather are complementary. US dominance (or any marked asymmetry in
regulatory power) can be reinforced by the presence of network effects.
For
powerful
jurisdictions--the
regulatory
standard-setters--export
efforts increase the number of jurisdictions with which the powerful state can
usefully cooperate. If US officials like Melamed are correct that "cooperation in
specific cases can be successful only among countries which have relatively
similar legal systems," then the more jurisdictions resemble the US, the more
cooperation can take place.
(Adding to these incentives is the belief that
regulatory export increases the welfare of national firms.) 284 For weak states,
and especially for states newly adopting regulation in a particular area, the
import of regulatory rules and structures in line with those in dominant states
may be "the price of admission" to the valuable benefits provided by the TGN.
Particularly when regulatory bodies are new, the costs of change may be
neglible (or zero, or even negative, if the jurisdiction is introducing regulation
282 See [this part, subsections b/c supra]
283 De Lisle, supra at 286.
284 See Part III, supra.
75
for the first time).
These costs are likely to be outweighed by the benefits of
rough harmonization with others in the TGN.
It is important to underscore that network effects arguments highlight
tipping and convergence, but they do not imply that multiple regulatory
standards are impossible. In fact, the more a network is virtual rather than
actual, the more likely are multiple standards.285
But they do imply that
convergence on one or more standards is likely and this convergence is likely
to be relatively sticky. Once actors in a network setting adopt a standard,
switching to a new standard requires extensive and costly (and hence rarely
achieved) collective action.
Network tipping or lock-in effects suggest at least two additional things.
One, even if switching regulatory structures and processes to approximate a
new potential international "standard" is beneficial on balance for a given state,
processes of tipping may occur in which a less efficient standard dominates a
more efficient one. That is the stylized Betamax story (or, in the view of many
Mac users, the Macintosh-wintel story): network externalities permit inferior
technologies to defeat superior technologies. 286
Consequently, and this is
vitally important, the stickiness network effects produce is, in aggregate
welfare terms, indeterminate.
Two, as the term lock-in implies, deviation from the standard is costly
for an individual actor.
Thus unlike a international institution in which
defection from the agreed standard is a central problem, 287 if network effects
exist cooperation in TGNs may resemble coordination games, which are largely
self-enforcing. Slaughter, for example, has previously argued that agreements
285 Lemley and McGowan at 173. Moreover, the note that "Network effects are not always
absolute; sometimes multiple products can each build a core of users with its own partial
network effect." id.
286 But it is still often superior, from a welfare perspective, to an inferior standard than to have
no standard at all. Arguably that is the case in both these examples, though it may not be so in
other cases.
287 [some IR cite]
76
to cooperate among regulators are self-enforcing. 288
Network effects help
explain why that is likely to be true.
3. Distributional Issues
In short, in this account, regulatory export within TGNs occurs because
of the gains to reaped through a regulatory analog of "interoperability.” The
existence of a TGN creates incentives for jurisdictions to seek convergence.
Powerful jurisdictions compete as standard-setters; weak jurisdictions often
import these standards. This account can help explain why TGNs form and
persist,289 while it also helps explain why convergence occurs among
members. Exporting jurisdictions reap the gains of convergence around their
preferred outcome (avoiding the costs of change in the process) and the gain
the benefits of access to a wide array of peer regulators.
Importing
jurisdictions gain access to peer regulators, but bear the costs of change. Yet,
because they are often newly formed or in the process of formation, importing
jurisdictions can gain rather than lose from the adoption of tested, off the shelf
regulatory rules and processes. 290 Moreover, the import of US regulation not
only assists a new jurisdiction in cooperating with the US; by extension, it
288 Slaughter, 1997?
289 In transaction cost-based functional theories of international institutions, such as that of
Keohane, the institutions of interest are international. Here, while networks are in some sense
international, the institutions of interest are largely domestic. Because the institutions involved
in networks are domestic and have a dual role--both internal and external--the costs of change
are much higher than for purely international institutions. If this is true, the policy changes
associated with network-induced regulatory export may be more robust--or rigid--than
comparable policy adjustments associated with the operation of traditional international regimes
for two reasons. First, networks promote lock-in around a standard. Second, because the
location of the change is domestic regulatory bureaucracies, institutional stickiness may be
greater than the institutional stickiness associated with international institutions.
290 As Ikenberry argues, often the guiding rule for states is "copy what works." Ikenberry 1990
supra at 103; see also Birdsall and Lawrence; supra; Di Maggio and Powell, supra.
77
promotes cooperation with other, similarly-situated jurisdictions that also
embrace US approaches.
Consequently, this account addresses the distributional consequences
flowing from the choice of one regulatory "standard" over another. Functional
theories
of
international
institutions
have
been
criticized
for
overly-
concentrating on "the cheating problem," failing to account for distributional
concerns, and thus failing to explain where on the Pareto frontier cooperation
ultimately rests.291 But a network economics-based theory of TGNs suggests
that first-mover advantages can help explain observed distributional outcomes.
In markets with network effects, being first in a market and establishing the
dominant standard often provides important advantages over later would-be
standard-setters.292
Transposed to international relations, first-mover
advantage implies that those regulators who engage in TGNs and seek to
export their regulatory models first will set the international regulatory
standard and reap whatever distributional gains that come from being the
standard-setter. In this conception, regulatory bureaucracies in other states
are converging on US or EU regulatory models via the operation of TGNs not
only because those models are the most efficient, or because the US is using
its power directly to coerce other regulators, but also because US and EU
regulatory agencies are the most actively engaged in TGNs and are exporting
their models to foreign regulators.
Lastly, the incentives to export or import regulatory structures
described above revolve around the advantages of convergence. They ignore the
possibility that the exported regulatory rules are objectively, normatively
superior. To the degree that US regulatory rules are objectively superior--an
291 Krasner, 1991
292 Stanley Besen and Joseph Farrell, Choosing How to Compete: Strategies and Tactics in
Standardization, 8 J. ECON. PERSP. 1 (1994). Because the returns to the standards-winner will be
higher in a network market than in normal markets, risky strategies such as predation can be
rational in a networks market where they would irrational elsewhere. Mark A. Lemley, Antitrust
and the Internet Standardization Problem, CONN. L. REV. 28, 4 (1996)
78
obviously contested notion, but one that might garner significant assent in the
US--the global benefits of regulatory export are even greater. 293
*
* *
To be sure, regulatory "standards" are different than software
standards; TGNs are certainly a very weak form of virtual network.
Consequently, the arguments above are largely metaphoric. But nonetheless
there are comparable elements in TGNs and virtual networks, and both
deductive arguments and empirical evidence suggest that regulatory agencies
are likely to be better able to cooperate on a wide range of issues if they are
similarly-structured than if they are differentially-structured. Given this, an
assumption of weak network effects is plausible.
Analogizing to network
economics provides a theoretical basis for a novel account of TGNs and
regulatory export.
Clearly there are other possible accounts; the pattern
described in Part III of this article is also consistent with many aspects of
realist as well as constructivist theories in international relations.294 But the
network-effects-based account advanced here, which reflects the particular
organizational form highlighted by transgovernmentalists--networks, not
hierarchies--provides a fruitful range of hypotheses for future research.
V The Implications of Transgovernmentalism for Future Cooperation
Transgovernmental cooperation is an evolving phenomenon.
For the
foreseeable future, whatever development of TGNs takes place will occur
293 The belief that US antitrust, environment, and securities rules are generally the best in the
world appears common both among regulators and among US-based scholars.
294 On realism and constructivism see Hasenclever et al, supra.
79
against
a
rich
backdrop
of
liberal
internationalist
cooperation.295
Consequently, a key question is whether liberal internationalism will remain
the dominant form of cooperation in the 21st century, or whether alternative
architectures, such as transgovernmentalism, will move to the fore. As Mark
Pollack and Gregory Shaffer ask in the context of transatlantic economic
cooperation, "are we witnessing the development of a new form of governance
by transgovernmental networks?" 296 The cases in this article, as well as the
growing body of research on transgovernmentalism, suggest that the answer is
a guarded and qualified yes. If so, what are the implications for international
cooperation as we now know it?
Treaties are the core of contemporary international law. They are the
foundation for liberal internationalist cooperation, and hence an important site
for consideration of transgovernmentalism's influence. Do TGNs improve the
effectiveness of treaties? Will TGNs reduce the importance of treaties as a
cooperative tool, or even replace them? Or do they encourage the negotiation
of even more treaties? In this Part I explore these questions in order to better
assess the impact of TGNs on traditional international law and organization.
A. Transgovernmentalism and International Treaties
Treaty compliance is a central, enduring, and contested topic in
international law.297 Compliance is often considered one of the primary
weaknesses of the international legal system, a system which by definition
295 Alvarez, 2001 at 212. Even major proponents of transgovernmental theory, such as
Slaughter, do not claim that networks are currently the major form of international cooperation;
rather, they are asserted to be the leading form of the future.
296 Pollack and Shaffer, "Transatlantic Governance in Historical…" at 29.
297 Raustiala and Slaughter, forthcoming. Scholars of international law and of international
relations increasingly focus on compliance as a central issue in international law. See e.g. John
Norton Moore, Enhancing Compliance with International Law: A Neglected Remedy, 39 Va. J.
Int'l L 881 at 884. (" I believe that the greatest challenge for the future of the rule of law
internationally is to enhance rates of compliance")
80
lacks a centralized enforcement mechanism.
Some scholars claim that
compliance with international law is far more prevalent than commonly
believed; others concur but suggest there is less significance to this than meets
the eye. 298 But nearly all analysts agree that compliance is an critical aspect
of international cooperation.299
There are many theories of compliance with treaties.300 Consequently,
an analysis of the influence of transgovernmental cooperation on compliance
with treaty commitments depends heavily upon the particular theory of
compliance one embraces.
I consider four leading theories: legitimacy theory;
transnational legal process; enforcement theory; and managerial theory. While
most of these theories are agnostic about the impact of TGNs on compliance,
managerial theory in particular suggests that the influence of TGNs may be
significant. As I argue below, this bolsters the claim that transgovernmentalism
and liberal internationalism are better thought of as mutually beneficial, rather
than oppositional, modes of cooperation.
1. Legitimacy Theory
Legitimacy theory, most associated with the work of Thomas Franck,
emphasizes the intrinsic qualities of international legal rules and their
298 Downs, Rocke, and Barsoom; 1996. While more compliance with international treaties is
almost universally viewed as preferable to less, even that basic claim is not universally true. See
Id.; Raustiala, "compliance and effectiveness;"
299 See e.g. David Kennedy, The International Style in Postwar Law and Policy, UTAH L. REV
7 (1994) at 70: "the problem of 'compliance' with international norms and the importance of
dispute resolution mechanisms in the process of rule implementation has become a central
preoccupation of the public international law field." In previous work I have been critical of the
prevailing focus in international law scholarship on compliance; see Raustiala, compliance and
effectiveness. However, as I discuss below, the major problems with compliance as a normative
concept are less present in the context of this article. Moreover, compliance is empirically of
great concern to the international legal community, and hence an analysis of the impact of TGNs
on compliance a necessary topic.
300 Raustiala and Slaughter, forthcoming.
81
influence on compliance. The core idea is that compliance is largely a product
of rule legitimacy. Rule qualities (such as pedigree and determinancy), in
conjunction with the process by which states arrive at rule-based solutions to
collective problems, determine compliance levels.
Rule qualities and “right
process” create legitimacy, which then creates "compliance pull" for states.301
For Franck, each legal rule or obligation has "an inherent pull power that is
independent of the circumstances in which it is exerted, and that varies from
rule to rule."302
Thus legitimacy theorists argue that states comply more with rules and
treaties that are legitimate and exhibit right process, less with rules that lack
these qualities.
While legitimacy theorists do not claim that qualities like
coherence are the only factors that may influence compliance (no matter how
legitimate an obligation may be, they acknowledge that obligations may
ultimately be ignored), they do identify legitimacy as the primary determinant
of compliance-pull.303 One implication of the theory is that these key
characteristics cannot be altered ex post without creating a new agreement or
rule: once a rule is developed, it either does, or does not, exhibit the requisite
qualities that create compliance-pull. Similarly, the process of creating a rule
either did, or did not, exhibit right process. Ex post, that process by definition
cannot be changed, except to create a new rule or treaty.
Consequently,
legitimacy
theory
implies
that
transgovernmental
cooperation is not particularly relevant to treaty compliance.
Whatever
cooperation might occur between governments at the agency level cannot
directly effect the variables the theory identifies as critical for treaty
compliance. Nor would processes of regulatory export and import that TGNs
might promote be particularly relevant for treaty compliance. Both the
301 Id.
302
Franck 1988 at 712.
303 Id.
82
existence of TGNs and the process of regulatory export might raise or lower the
costs of compliance with existing treaties in similar issue areas, but they could
not alter the "right process" (and resulting legitimacy) by which the treaty rules
in question were formed. Moreover, legitimacy theory casts doubt on the
likelihood that MOUs, and transgovernmental cooperation in general, will
exhibit high compliance.
MOUs, because they are flexible and often vague,
frequently lack the indicia of determinancy, coherence and so forth that
legitimacy theory identifies as important. Because many of the "obligations"
that exist in TGNs are avowedly non-legal, it may be a category mistake to
apply legitimacy theory at all.
But the interesting point is that the formal,
procedural thrust of legitimacy theory is in tension with the nature of
cooperation embodied in transgovernmentalism.
2. Enforcement Theory
Enforcement
theories
take
a
fundamentally
different,
more
economistic, approach to treaty compliance. 304 States are conceptualized as
rational utility-maximizers that enter into agreements willingly ex ante but
often act opportunistically ex post. Compliance, for enforcement theorists, is a
function of state interests, and their interests are determined by the relative
costs and benefits of compliant and non-compliant behavior.
Whereas
legitimacy theory focuses on norms and rule-specific factors such legitimacy,
here enforcement and deterrence are central to ensuring compliance. 305
Different states face different cost-benefit structures, partly determined by the
level and certainty of enforcement; they will in turn comply at different rates.
304 See e.g. George Downs, David Rocke, and Peter Barsoom, Is the Good News about
Compliance Good News about Cooperation? 50 Int'l Org. (1996)
305 See Downs, Rocke and Barsoom, supra at 397: "It is possible, of course, that deeper
cooperation (e.g. stricter arms control or environmental regulation) can be ensured without much
enforcement. This can occur whenever the underlying game changes in such a way that there is
less incentive to defect from a given agreement."
83
Consequently,
enforcement
a
marked
theory
is
distinction
that
legitimacy
between
theory
legitimacy
focuses
on
theory
and
rule-specific
characteristics which largely apply to all relevant states equally; enforcement
theory, conversely, shifts the focus to state-specific factors.306
As a result, the enforcement theory of compliance suggests a greater
role for TGNs than does legitimacy theory. By altering the domestic structure
through which international commitments are implemented, the operation of
TGNs might change the cost-benefit calculus of compliance with a treaty rule,
leading to a change in behavior. In other words, to the degree the incentive
structure facing a state is dependent upon or shaped by domestic variables,
change in those variables will in turn change the incentive structure and hence
compliance.
For example, enforcement theory suggests that incentives to
comply with a particular treaty rule, such as "do not permit transboundary
toxic pollution releases," will be higher if compliance with a domestic
regulation on toxic chemicals production is improved. If this improvement in
the enforcement of domestic toxics laws is the result of information-sharing
through a TGN, or regulatory techniques imported from foreign jurisdictions,
then participation in the TGN would have altered the cost-benefit calculation
for treaty compliance and hence altered observed levels of compliance.
More generally, transgovernmental efforts at regulatory export involve a
large measure of technical training and assistance. This is likely to upgrade the
professional capacity of a regulatory body, improving its ability to perform
many tasks, at least some of which will be related to treaty compliance. The
more these export efforts are successful, the more compliance should improve,
ceteris paribus.307 As a result, on balance enforcement theory implies a
positive, compliance-enhancing role for TGNs.
306 See Raustiala and Slaughter, forthcoming.
307 All these factors have the potential to improve treaty compliance. It is plausible, though
arguably less likely, that these factors might also inhibit treaty compliance. If, in a treaty with
weak enforcement, transgovernmental cooperation leads to changes in domestic rules, these
changes may oppose as well as support pre-existing treaty commitments. If so, they will make
84
3. Managerial Theory
In contrast to enforcement theory, which stresses the incentives to
defect from cooperation and the need for coercion, the managerial theory of
compliance, most associated with the work of Abram and Antonia Handler
Chayes, argues that states have a propensity to comply with their international
commitments. 308 Managerialists argue that coercive enforcement is rarely
available and, more importantly, rarely useful. In many treaties, in particular
regulatory treaties, the primary drivers of non-compliance are rule ambiguity
and especially lack of capacity.
Consequently, managerialists argue that
compliance is best promoted through assistance and encouragement, not
deterrence and punishment. When assistance fails, states can be coaxed back
into compliance through an interactive, facilitative process that focuses on the
primary drivers of non-compliance.
Because managerial theory emphasizes bureaucratic capacity as a key
variable, it suggests a significant role for transgovernmental cooperation--even
more significant than does enforcement theory. If indeed, as managerialists
argue, the most effective methods to improve treaty compliance are facilitative,
interactive, and discursive, than TGNs should often improve treaty compliance-especially when they involve technical assistance that upgrades or improves
existing regulatory standards and practices at the domestic level. Much of the
managerialists' proposed process for managing non-compliance is aimed at
rectifying domestic shortcomings, in particular a lack of administrative
compliance less likely. But because many contemporary regulatory treaties are broadly
multilateral, it seems less likely than not that the key states involved in TGNs—such as the US-would promote policies that run counter to multilateral treaty rules.
308 See ABRAM CHAYES AND ANTONIA HANDLER CHAYES, THE NEW SOVEREIGNTY (1995);
Abram Chayes and Antonia Handler Chayes, On Compliance, International Organization 47
(1993); Ronald Mitchell, Compliance Theory: An Overview, in IMPROVING COMPLIANCE WITH
INTERNATIONAL ENVIRONMENTAL LAW (JAMES CAMERON, JACOB WERKSMAN, AND PETER
RODERICK, EDS., 1996)
85
resources or information.
Both of these factors seem far more likely to be
promoted, rather than inhibited, by TGNs.
Moreover, the compliance
management process itself, if it is to be effective, is explicitly cooperative and
interactive.
If TGNs serve to bring regulators from diverse jurisdictions
together on a regular basis, and to foster convergence as regulators adopt
rules, techniques and methods pioneered elsewhere, then TGNs may perform-or facilitate--much of the what passes for non-compliance management
without intending it to be doing so.309
Preemptive or “preventative
management” of this sort--propelled by TGNs, but not necessarily intended to
influence treaty compliance per se--may successfully forestall many episodes of
non-compliance with international treaties.
Generalized efforts to reform and strengthen regulatory administrations
can serve this compliance role even if there is not an explicit intent to do so.
In the securities law and competition law contexts, of course, there are
currently no major multilateral treaties that participation in a TGN might be
said to prevent non-compliance of. Nor, given the incentives facing regulators,
are such treaties likely.310
But given the continuing interest in the
development of future multilateral rules, which is particularly strong in
competition policy, existing TGNs may ultimately improve compliance with any
future treaty that is negotiated. More importantly, transgovernmentalism may
make such treaties more likely. By narrowing the differences between national
systems, TGNs may make the negotiation of treaties more feasible--in
309 Chayes and Chayes 1995 discuss three core tasks of compliance management: 1] reviewing
and assessing the performance of parties and discrimination between intentional and inadvertant
violations; 2] ensuring that appropriate responses to non-compliance produce and maintain an
acceptable overall compliance level; and 3] adjusting the rules of a regime to improve regime
performance. Of these three, networks are most likely to influence #2, though without the
explicit tie to a regime rule or set of rules implied by the authors' formulation. Capacitybuilding, which is central to their approach, and most closely tied to the activities of networks,
need not take place only in the wake of a compliance failure; it can, as they indeed discuss, occur
in a preventative fashion or have a preventative effect.
310 See the discussion supra…
86
particular regional or "minilateral" agreements. 311 Consequently, the impact of
TGNs on international treaties in competition and securities fields is likely to
be varied but perhaps positive, in the sense that existing treaties may work
better and new treaties may become more numerous. It is in the third case I
have examined, the environmental context in North America, that the
immediate potential for such preventative compliance management for existing
treaties is highest.
The North American environmental network that Fulton and Sperling
describe has been strongly influenced by the existence of NAFTA. 312 The TGN
in turn strengthens compliance with NAFTA. NAFTA and the NAAEC contain a
number of provisions aimed at maintaining high domestic environmental
standards and ensuring that those standards are adequately enforced. 313
Subject to certain qualifications, for example, a "persistent failure to enforce"
domestic environmental law constitutes non-compliance with the NAAEC. 314
The primary political reason for this legal standard was the belief that Mexico's
environmental laws, while nominally strong, were underenforced, sometimes
dramatically so.315
Any improvement in the regulatory capabilities of a
NAFTA party--such as Mexico--will, ceteris paribus, reduce the likelihood that
persistent enforcement failures will occur and thus reduce the likelihood of
non-compliance with the NAAEC
While not overwhelming, there is certainly evidence that the cooperative
and technical assistance activities of the North American TGN have bolstered
Mexico's regulatory capacity while also inducing changes in its regulatory
approach and organization.316 These changes should, if managerial theory is
311 [On minilateralism see Miles Kahler]
312 Fulton and Sperling, supra.
313 See e.g. Thomas and Tereposky, supra; Saunders, supra.
314 See NAAEC at www.cec.org
315 Raustiala, "Political Implications," supra.
316 Steinberg, supra;
87
correct, create the preconditions for greater Mexican compliance with the
environmental provisions of NAFTA and the NAAEC. This link is particularly
strong because of the special structure of the NAAEC's obligations. Because a
critical portion of those obligations are based themselves upon a standard of
effective enforcement--subject to an exemption for bona fide resource-based or
prosecutorial discretion317--a network whose activities are focused on the
improvement of enforcement will have a high likelihood of positive influence
upon compliance with that standard. 318
This line of argument implies that TGNs should also help create the
preconditions for compliance with future treaties.
Competition law may
present such a situation. The terms of a multilateral competition treaty are
hard to predict given the widely varying foci of the leading economic powers'
competition laws. But if substantive rules emerge, managerial theory suggests
that the existence of competition TGNs will enhance the operation of the treaty
and compliance with it. Greater convergence in competition law principles and
practices,
greater
familiarity
with
the
laws
and
practices
of
foreign
jurisdictions, and enhanced capacity and professionalization in new regulatory
bodies should serve to bolster the robustness of compliance with a wide array
of potential substantive treaty norms.
More generally, the impact of transgovernmental cooperation on
domestic regulation raises important questions about the fundamental drivers
of international cooperation. As Downs, Rocke, and Barsoom note, "[o]ne of
the points too rarely made by either the managerial or political economy (i.e.
enforcement) school [of compliance] is that changes in technology, relative
317 See NAAEC at www.cec.org
318 Fulton and Sperling characterize the network explicitly as an enforcement network, and that
is also the focus of INECE. See Fulton and Sperling, supra; INECE webpage, supra. EPA
officials are aware of the links between the network’s activities and NAFTA and NAAEC
norms, though they are hesitant to denote this linkage an explicit strategy. This hesitancy is
politically-motivated; the more this activity is implicit rather than explicit, the less it should raise
the sovereignty concerns that often plague US-Mexican relations.
88
prices, domestic transitions, and ideas have inspired more international
cooperation and regulatory compliance than have all efforts at dispute
resolution and enforcement combined."319 TGNs, by facilitating the export of
ideas, technologies, and procedures, would seem to further these cooperative
forces.
Part of what makes the proliferation of TGNs an important
phenomenon from the perspective of international law is their potential impact
on "non-legal" and contextual factors. If enforcement theorists are right that
the depth of cooperation in any given issue-area is endogenous and that deeper
cooperation will require more enforcement--and if managerialists are right that
effective enforcement tools are rarely available--then the prospects for
improving
treaty
compliance
through
conventional
efforts
are
dim.
Consequently, the significance of tapping into the alternative bases of
cooperation
Downs,
Rocke,
and
Barsoom
describe
may
be
powerful.
Transgovernmentalism is one pathway for the influence of these alternative
bases, and one that can, subject to the many normative critiques raised
against transgovernmentalism, be used prescriptively.320
4. Transnational Legal Process
The fourth and last theory of compliance examined here, that of
"transnational legal process," looks to the interface between international
norms and domestic legal processes.321 Developed primarily by Harold Koh,
transnational legal process theory focuses not on "right process" at the rulegenerative stage, as in legitimacy theory, but rather on the incorporation of
international rules and norms into domestic legal systems.322 Transnational
319 Downs, Rocke, and Barsoom, supra at 397-398.
320 E.g. Alston, Handmaidens; Alvarez, 2001, supra
321 See e.g. Harold H. Koh, "Bringing International Law Home" Houston Law Review 35, 3
(Fall 1998) at 628; see also Koh, Why Nations Obey…
322 While these rules and norms may be articulated in an international treaty, they need not be.
89
legal
process
has
three
components:
interaction,
interpretation,
and
internalization. States comply with international rules because of variations in
this process of "vertical internalization"--vertical because rules that are
articulated at the international level are incorporated and internalized at the
national level. Full domestic incorporation of these rules produces "obedience"
rather than simply compliance. 323 Much of the inspiration for the theory, and
many of the examples, derive from the arena of international human rights
law.324 In addition, while the theory applies to treaty rules, its scope includes
international norms that are not codified in a treaty.325
Transnational legal process is frequently catalyzed “norm entrepreneurs”
and “issue-networks.”326
Norm entrepreneurs seek to mobilize issue
networks—networks of advocacy groups and other interested actors—to
promote the adoption and diffusion of new norms. These transnational actors
require stages upon which to interact--"law-declaring fora"--and it is in these
courts, legislatures, and international organizations that an “interpretive
community” develops.
This interpretive community has some surface
similarities to a TGN. Once such an interpretive community construes a norm,
and collectively comes to view a state to be in violation of the norm, “a complex
process occurs, whereby international legal norms seep into, are internalized,
and become embedded in domestic legal and political processes."327
One implication of the transnational legal process approach is that treaty
compliance is driven by the efficacy of domestic law and the degree to which
international norms become embedded in this law. What creates compliance
323 Koh, Why Nations Obey.
324 See id; Harold H. Koh, Transnational Legal Process, NEB. L. REV. 75 (1996)s
325 For example, the relevant norms may be customary law norms, or may even be norms that
have not yet attained customary status. The role of transnational legal process and customary
international law norms is discussed in passing in Harold Koh, Is International Law Really State
Law? 111 HARV. L. REV. 1824 (1998)
326
Keck and Sikkink, supra.
327
).
90
with an international rule is its transformation into a domestic rule. However,
like legitimacy theory, transnational legal process theory argues that the
effectiveness of norm internalization depends primarily on the characteristics
of the rule in question, not on the domestic institutions. 328
Like managerial theory, transnational legal process theory can be read to
imply that TGNs will largely promote compliance with international treaty
rules. First, TGNs may promote the sort of transnational legal process Koh
describes. Interaction is a central attribute of cooperation by network and a
central part of Koh’s theory; ceteris paribus, more TGNs should provide more
opportunities for transnational legal processes to take place. Moreover, if, as
the theory suggests, a key part of the transnational legal process is
socialization--the engagement of governments, on a regular basis, in the
articulation, interpretation, and promotion of norms and rules--then it is
plausible and even likely that TGNs will generally assist and strengthen that
process. A world with many active TGNs is one in which "law declaring fora"
should be common and
"norm entrepreneurs", at least those within
government agencies, able to work more readily. With those key features in
place, Koh's theory implies that improved compliance (perhaps even obedience)
should follow.
On the other hand, TGNs may undermine transnational legal processes.
Many of the examples employed by legal process proponents, such as the
spread and incorporation of international human rights norms, rely heavily on
the actions of norm entrepreneurs that are part of the global NGO community.
To
the
degree
that
TGNs
exclude
these
private
actors,
and
render
intergovernmental policymaking opaque, transnational legal processes may be
inhibited rather than fostered.329 On the whole, however, the best assessment
This emphasis has been critiqued on the grounds that it ignores the central role of domestic
politics and institutions; see e.g. Robert Keohane, When Does International Law Come Home?,
HOUSTON L. REV. 35,3 (1998
329 This argument reflects a larger set of normative concerns about TGNs, which primarily
revolve around their perceived lack of accountability and secrecy. See e.g Alston, supra.
91
is that transnational legal process suggests a mild positive influence for
transgovernmentalism.
Treaties should exhibit somewhat higher compliance
the more TGNs exist and flourish, because TGNs strengthen transnational
legal processes.
*
*
*
Treaty compliance is a highly contested topic, and few broad
generalizations can safely be made. As the preceding demonstrates, however,
there is good reason to believe that, at least under several prominent theories
of compliance, transgovernmentalism will prove a positive force for those who
favor stronger international institutions and agreements. TGNs will continue to
operate most strongly in areas where international legal agreements are
precluded. Thus the dominant pattern is one of gap-filling rather than
direction interaction. But in many cases there is scope for some interaction,
and at times, as in the North American context, the interaction between TGNs
and existing treaty rules can be significant. Given this, it is difficult to argue
convincingly that , at least with regard to treaties, transgovernmentalism and
liberal internationalism are competitive architectures. Rather,
transgovernmentalism is best seen as a complementary form of cooperation
and that will often enhance treaty compliance and effectiveness.
B.. The Cooperative Architecture of the Future
Proponents of transgovernmentalism assert that "an interdependent
world entails new forms of governance."330 Liberal internationalists counter
that "much of [TGN] activity arises under the shadow of an intricate web of
obligations arising from obligations assumed under treaties and international
330 Scott H. Jacobs, Why Governments Must Work Together, OECD OBSERVER NO. 186
(Feb./Mar. 1994) at 16.
92
organizations."331 In the near term, to be sure, formal, multilateral treaties
will continue to increase in number and political saliency, and TGNs will
continue to "coexist and interact with traditional international agreements." 332
But ultimately, transgovernmentalists argue, TGNs represent the "real new
world order."333 For example, Slaughter claims that:
The United Nations cannot function effectively independent of the major
powers that compose it, nor will those nations cede their power and
sovereignty to an international institution.
Efforts to expand supranational
authority, whether by the UN Secretary-General's office, the European
Commission, or the World Trade Organization, have consistently produced a
backlash among member states.334
Conversely,
Dissagregating the state into its functional components makes it possible to
create networks of institutions engaged in a common enterprise even as they
represent distinct national interests.
Moreover, they can work with their
subnational and supranational counterparts, creating a genuinely new world
order in which networked institutions perform the functions of a world
government--legislation,
administration,
and
adjudication--without
the
form.335
331 Alvarez, 2001 at 212.
332 Slaughter, "Government networks" at 217
333 Slaughter, "Real New World Order" supra. See also Portnoy, 2000, supra (“…the network is
creating the institutional foundations for modern global capitalism…contrary to popular wisdom,
the state remains an important actor in the world economy.”) Jacobs, supra;
334 Slaughter, "Real New World Order" supra at 183.
335 Id. at 195.
93
In other words, transgovernmentalists assert that the primacy of the liberal
internationalist
tools
of
the
multilateral
treaty
and
the
international
organization will gradually be displaced in the face of rising interdependence
by greater reliance on TGNs. 336
This does not contradict the arguments I
have made about treaties above; it does, however, suggest that the golden age
of the treaty may be ending.
This is one possible outcome for the 21st century; there are others.
Below
I
briefly
chart
five
different
ways
to
think
about
how
transgovernmentalism and liberal internationalism may interact and influence
one another.
Much like the discussion above, these are hypotheses rather
than claims, generated both from the premises of transgovernmental theory
and from the cases described in this article.
1. Changing "Market Shares" of Cooperation
Throughout the 20th century liberal internationalism expanded rapidly.
The number of formal international organizations rose from 123 in 1951 to 251
336 Neo-medievalists largely concur in this critique of liberal internationalism, arguing that "if
current trends continue, the international system 50 years hence will be profoundly different.
During the transition, the Westphalian system and an evolving one will exist side by side." (
Mathews, supra. Fascination with the evolution of the state is growing within the legal academy
as well; THE DECLINE OF THE NATION-STATE was the title of a recent symposium in the Cardozo
Law Review). The neo-medievalist vision, however, is one in which the state recedes from its
central place of power, to be replaced by overlapping, non-territorial forms of political
organization. While alternative forms of global governance appear to be on the rise, in many
respects the state's role is also growing and evolving, not receding, as globalization gathers
steam and the shared nature of many social problems becomes apparent. (See e.g. Raustiala,
"States, NGOs" supra; In most advanced industrial states, the state's presence in the economy
has remained constant at somewhere between 30%-50% percent control over GDP. See
Keohane and Nye, "Information Age," supra at 82.) For this reason, because neo-medievalism is
a much more radical prediction, and because the focus of this article is on transgovernmentalism
and its connection to liberal internationalism, I do not consider neo-medievalist visions of the
future further in this article. But the neo-medievalist claim is worth noting because it
underscores the degree to which the form international cooperation will take in the first decades
of the 21st century is contested.
94
in 1999.337
In the area of environmental protection alone, the number of
multilateral
treaties
(often
with
accompanying
secretariats
and
other
organizations) grew from a handful in the pre-World War II period to several
hundred today.338
While the growth rate of multilateral environmental
agreements is quite rapid, a perusal of the United Nations treaty database
illustrates that liberal internationalism has expanded across many fronts.339
The current era is the golden age of the treaty.340
One plausible scenario of the future is that liberal internationalism will
remain
the
primary
form
of
global
cooperation,
but
the
rise
of
transgovernmentalism will (perhaps increasingly) reduce the growth rate of
liberal internationalist institutions. In other words, the number of treaties and
formal international organizations may continue to grow, but at a slower pace
as TGNs reduce the need for future multilateral treaties and institutions. This
argument does not rely on the displace existing treaties. But by encouraging
convergence in domestic regulatory structures and practices, TGNs could
decrease the incentives for the creation of new treaties.
If policy goals can be
met through decentralized processes, then centralized solutions will not be
created, for it is costly to do so.
In this scenario, liberal internationalism and
transgovernmentalism exist in conjunction, though liberal internationalism is
of decreasing importance as a share of overall international cooperation.
Transgovernmentalism, by contrast, would claim a growing share.
337 Eric Stein, International Integration and Democracy: No Love at First Sight, 95 AM. J. INT'L
L. (2001) at 489.
338 The precise number of environmental treaties is unclear largely for definitional reasons.
The UN Environment Programme’s ENVIRONMENT AND TRADE: A HANDBOOK uses the figure of
“about 200.” See http://iisd1.iisd.ca/trade/handbook/5_10.htm.
339 http://untreaty.un.org/English/treaty.asp
340 Indeed, the rapid growth of treaties has led many conservatives to reconsider underlying
doctrines and assumptions of foreign relations law in the US; see in particular the special issues
of the Chicago Journal of International Law (2000 and 2001) for many essays on this and related
topics.
95
2. TGNs as Cooperative Gap-Fillers
A second scenario, related to the first and discussed at length above, is
the continued expansion of transgovernmental cooperation in a largely gapfilling role.
TGNs will be most prevalent in those areas in which liberal
internationalism is politically infeasible.341 Regulatory frictions, for example,
may arise in issue-areas marked either by deadlock among states (where no
agreement is possible because of oppositional preferences) or where one or two
states is highly dominant and faces few incentives to modify its domestic
regime yet, because of its relative power, strongly influences the regulatory
environment of other states.342
Securities law is an example of the latter;
competition policy of the former. In these kinds of cases, TGNs may thrive
where liberal internationalist institutions cannot.
Rather than low or no
cooperation, the rise of TGNs provides an alternative form of cooperation that
governments—or specific administrative agencies—face incentives to embrace.
This prediction does not imply any quantum leap in the role of TGNs in
the future; rather, as states become more closely knit economically, and as
domestic regulatory arenas increasingly take on international implications,
TGNs should play an important and growing, but in many respects subsidiary,
role in international cooperation.
first::
both
imply
the
In this sense this scenario is similar to the
co-existence
of
liberal
internationalism
and
transgovernmentalism, and a rising share of transgovernmental cooperation,
but for subtly different reasons.
3. More, and More Effective, Treaties
A third scenario is suggested by the discussion of treaty compliance
above, in particular the claims of managerial theory.
341 See the discussion infra…
342 See e.g. Simmons 2001 supra.
96
Managerialism is
consistent with the claim that transgovernmental cooperation will lead to
improved compliance with treaty rules. By improving administrative capacity
and providing much needed technical assistance, treaty implementation
should, if managerialists are correct, be enhanced and overall compliance
promoted. Ultimately, these trends should increase treaty effectiveness. (More
compliance does not equal greater effectiveness. If effectiveness is understood
in terms of changes in state behavior, however, then improved compliance
produced by more thorough implementation and enhanced regulatory capacity
will in fact produce a more effective treaty.)343 This suggests that TGNs can
strengthen treaties; this argument was made at greater length above.
While this is a potentially significant outcome in its own right, it has
impacts beyond treaty compliance and effectiveness. If effectiveness is what
states seek from international treaties—that is, treaties are attempted
solutions to international problems--ceteris paribus, treaties should be a more
attractive option the more effective they are in practice. This outcome should at
the margin encourage further creation of treaties.
In other words, if TGNs
enhance the operation of treaties, this logic suggests increased demand for
treaties. Thus transgovernmentalism may feed liberal internationalism rather
than undermining it, encouraging its growth. This argument is distinct from,
but not inconsistent with, the changing “market share” scenario.
4. Treaty Growth and Regionalization
Fourth, TGNs may help create the underlying circumstances that
permit the negotiation of future treaties. I argued that TGNs, by improving the
effectiveness
of
treaties,
may
promote
the
robustness
of
liberal
internationalism. But TGNs may also strengthen liberal internationalism by
343 On these distinctions see Raustiala, Compliance and Effectiveness, supra. Compliance per
se does not improve effectiveness, because compliance has many potential causes. But
97
narrowing the substantive differences that in many issue-areas currently
preclude the negotiation of treaties. A salient example is competition law.
Multilateral competition treaties have not been successfully negotiated
to date. Yet if many states have, as Spencer Weber Waller argues, "look[ed] to
the United States as one of the most important sources of learning about
competition law,"344 and some states have even changed their laws in
response,345 they should be more likely to embrace a treaty that substantively
reflects US norms and practice than they would had they not modified their
domestic regulatory regime.
Such a treaty should also be correspondingly
easier to negotiate and implement, and, ceteris paribus, should exhibit higher
levels of compliance.346 Even without the explicit importation of US law, if
EU-US cooperation transgovernmental cooperation continues to grow it may
create more trust and more understanding across the Atlantic. 347
This
process should at the margin make a truly multilateral competition agreement
more likely.
Alternatively,
because
there
are
in
practice
several
competing
international "standards" for competition policy, the impact of processes of
regulatory export upon the negotiation of a multilateral competition treaty
could be the opposite. As the respective domestic regulatory standards of the
EU and US are extended to more and more jurisdictions, and grow more
entrenched, the costs of change will grow.
This may result in greater
resistance, rather than greater receptivity, to a universal, substantive set of
rules codified in a multilateral treaty regime. Rather than agree on a "global
standard," competing standard-setting states may simply chose to fight it out
compliance produced by better implementation and enforcement should improve effectiveness as
conventionally understood.
344 Waller, supra.
345 Id.; DevTech Report, supra.
346 The more a treaty maps onto preexisting state practice, the higher compliance is likely to be.
See Raustiala, 2000.
98
in the "marketplace"--or, draw a different analogy, engage in peaceful
coexistence within their respective spheres of regulatory influence. 348
Regionalization is a widespread phenomenon in international relations
and in particular in international trade. If regulatory interdependence and the
corresponding growth of TGNs is linked to depth of trade ties, the result may
be regionalized diffusion of specific models of regulation, drawn from and
reflective of the dominant regional power. The EU's success in spreading its
competition model in Eastern Europe--which is clearly linked to its desiderata
for the admission of new states--is emblematic of the potential for regionalized
convergence. Some regional trade treaties also contain specific language about
policy harmonization. For example, NAFTA Chapter 15 contains four articles
addressing competition policy. (NAFTA parties must, inter alia, "adopt or
maintain measures to proscribe anticompetitive business conduct" and must
"cooperate on issues of competition law enforcement policy, including mutual
legal assistance, notification, consultation, and exchange of information
relating to the enforcement of competition laws in the free trade area." 349)
TGNs may promote more use of traditional treaty and organizational forms in
the future, but to the degree they do, these may increasingly reflect regional or
other groupings of states rather than the broad-based or even universal
institutions frequently seen today. In short, many more multilateral treaties
may be one outcome of rising transgovernmental cooperation.
5. Liberal Internationalism and the Promotion of TGNs.
Fifth and lastly, liberal internationalism can itself promote more
transgovernmental cooperation.
The NAFTA-environment network described
by Fulton and Sperling might have arisen without NAFTA's passage, but it is
347 See e.g. Devuyst, supra, on the current extent of transatlantic cooperation.
348 On regulatory competition generally see Esty and Gerardin, 2001, supra.
349 ICPAC Report, Annex I-C at 9.
99
clear that NAFTA gave a substantial impetus to the TGN and promoted--and
continues to promote--a wide array of regulator-to-regulator ties in North
America.350 The NAFTA environmental side agreement, for example, created
the Commission on Environmental Cooperation, which organizes meetings and
working groups among environmental and trade officials.351 In so doing, the
emergent North American TGN has been strengthened and has expanded as
regulators interact more and more frequently.
This example illustrates that
liberal internationalist institutions can provide a foundation upon which
transgovernmental cooperation arise and flourish.
* *
*
The preceding five scenarios describe, without being exhaustive, some
of the ways that transgovernmentalism and liberal internationalism may in
practice interact.
On balance, and in consideration with the analysis
presented in this paper, they suggest that the most plausible prediction about
the future is that liberal internationalism and transgovernmentalism will be
mutually supportive forms of cooperation.
TGNs should largely supplement
and strengthen, rather than supplant, the traditional tools of international law
and organization.
The promotion of treaty compliance and effectiveness is of major
importance, and is perhaps the most striking way that TGNs may promote
more traditional modes of international cooperation. But the other interactions
describe above, such as TGN's gap-filling role, are also significant: as
globalization deepens the connections among states, TGNs may thrive where
liberal internationalist institutions cannot. While the preceding analysis has
350 Fulton and Sperling, supra. See also Alvarez 2001 at 211-213 for a similar kind of
argument.
351 Id.
100
not addressed the many normative concerns that TGNs raise, 352 it provides a
positive basis on which to rest any normative evaluation. In all, the varied
claims
made
above
point
toward
a
complex
future
for
international
cooperation, in which institutional heterogeneity, and interaction among
different cooperative architectures, is commonplace.
VII Conclusion: Transgovernmentalism and the Evolution of
International Cooperation
This article has sought to extend the rapidly growing literature on
transgovernmental cooperation by describing TGNs empirically and evaluating
a number of important theoretical issues they raise. This analysis supports the
broad claims of transgovernmentalism's proponents that the development of
linkages among regulators from diverse jurisdictions—peer-to-peer, using
informal, often non-binding agreements, and without extensive oversight by
foreign ministers--is now an important component of international cooperation
in several policy
arenas.
The rise of transgovernmentalism is also
demonstrative of the resilience of the state in an evolving international order.
Moreover, it appears to be accelerating in depth and in importance, as
regulatory issues rise higher on the global agenda.
The chief underlying
factors driving the move to transgovernmentalism--globalization, regulatory
expansion, and the information revolution—show little sign of abatement.
Consequently,
the
key
question
for
the
future
is
whether
transgovernmentalism is truly the cooperative architecture of the 21st century
or merely a sidelight modality confined to a relatively small number of
technocratic areas. While it is too soon to answer this question conclusively,
there is much suggestive evidence already.
352 See e.g. Robert Howse, Transatlantic Regulatory Cooperation and the Problem of
Democracy and Anne-Marie Slaughter, Agencies on the Loose? Holding Government Networks
Accountable, both in Bermann, et al 2000; Philip Alston, The Myopia of the Handmaidens:
International Lawyers and Globalization, 8 Eur. J Int'l. L. (1997); see also Alvarez, 2001.
101
One important facet of this inquiry is the role of TGNs in shaping
domestic regulatory policies.
Contemporary international affairs are marked
by a tremendous intersection with traditionally domestic areas of law and
policy.
Transgovernmental cooperation in regulatory affairs, as the cases
presented in this article demonstrate, often involve efforts at fostering the
convergence of domestic law and institutions. In this article I have described
this process with a particular emphasis on the legal export efforts of US
regulatory agencies, and advanced an account of this process that draws upon
theories of network effects in economics. The analogy to virtual networks and
network effects is I believe at least plausible, and generates hypotheses that
may help explain both the pattern of regulatory export and the incentives
facing regulators in differing jurisdictions. The ultimate depth and breadth of
the resulting policy convergence, and the propulsive role of TGNs, nonetheless
remain topics for future research.
The potential impact of transgovernmentalism on broader issues of
international law, while quite unclear today, may be marked in years to come.
This article has suggested several ways that transgovernmentalism and liberal
internationalism may interact. Most notably, existing theories of compliance
imply that by promoting capacity-building and more thorough implementation,
TGNs will in some cases enhance compliance with existing treaties.
This
improvement in compliance, moreover, is not subject to the selection bias
critique leveled by social scientists, because it stems from changes in domestic
capacity and commitment rather than the easing of legal standards. 353
Transgovernmentalism should also continue to fill gaps in the international
regulatory
system,
permitting
cooperation
in
situations
of
asymmetric
regulatory power, such as securities regulation, where liberal internationalism
cannot flourish or is highly unlikely to provide a meaningful and lasting
solution. The impact of TGNs on the negotiation of future treaties--whether
353 Downs, Rocke and Barsoom, supra.
102
there will be more or fewer treaties as a result of the rise of TGNs—nonetheless
remains indeterminate.
On balance, then, transgovernmentalism appears to be an important
development in international law, one that is as likely to supplement liberal
internationalism as it is to supplant it. In their prescient article 25 years ago,
Keohane and Nye sought to demonstrate--against those who saw the early rise
of transgovernmentalism as the death of the international institution--the
significance of international organizations as arenas for and members of
transgovernmental coalitions. 354 This article argues that the obverse is also
true. A dynamic transgovernmentalism is significant, not only in its own right,
but for the efficacy and evolution of international law and institutions.
354 Keohane and Nye, 1974, supra; cf. Huntington 1973, supra.
103