Unbundling Globalization:Agent of Policy Convergence?

Jacob Park

Daniel W. Drezner’s article, “Globalization and Policy Convergence”(International Studies Review3, No. 1 [2001], pp. 53–78), discusses ifand how globalization affects the convergence of regulatory policies,

particularly concerning environmental and labor standards. He argues that thetheories of convergence as defined as “the tendency of policies to grow morealike, in the form of increasing similarity in structures, processes, and perfor-mances” (p. 53) are largely unsupported by empirical evidence. He advocates amore nuanced approach to the examination of globalization, one that is notbased on deterministic “race to the bottom” or convergence assumptions. Dreznercontributes solidly to this contested nexus of globalization, political economy,and international relations, particularly in the way he debunks the often-mentioned “race to the bottom” metaphor. Yet he makes the unfortunate mis-take of devoting the bulk of his analysis to the convergence of traditional,state-based environmental, labor, and other regulatory standards.

The traditional neoliberal question about the ability of states to cooperate inmanaging the negative externalities that the globalization of economic produc-tion induces is still important. Some of the best examples of globalization andpolicy convergence now occur among nonstate actors and institutions, a pointthat is largely absent in Drezner’s article. Although he elaborates on the possi-ble impacts that international government organizations like the United Nationsand what Peter Haas calls “epistemic communities” have had on policy con-vergence, these impacts do not necessarily represent the best examples of hownonstate actors and institutions are starting to involve themselves in the gover-nance of global regulatory standards.

In an increasingly global economy, focusing on the convergence of state-based regulatory mechanisms—as Drezner does—fails to clarify how nonstateactors, particularly corporations, have become important policy agents in estab-lishing and monitoring regulatory standards. Two points guide my argument.First, alternative regulatory mechanisms are becoming an important supple-

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ment, if not a substitute, for traditional, state-based government policymaking.Second, there are too many important microdifferences among industrial sec-tors to allow for any broad macroconclusions on policy convergence.

My first point is that alternative regulatory mechanisms, particularly envi-ronmental ones, are rapidly becoming an important supplement to, if not asubstitute for, traditional, national government policymaking. Alternative reg-ulatory mechanisms, including industry-specific voluntary agreements, self-regulatory standards, and information-based disclosure requirements, can becompletely outside the framework of the state or can be mediated by the state.Unlike in traditional public regulations discussed in Drezner’s article, the statedoes not play a central role in implementing and enforcing these alternativeregulatory mechanisms. As Cary Coglianese and Jennifer Nash note in theirnew book,Regulating from the Inside: Can Environmental Management Sys-tems Achieve Policy Goals?, traditional environmental regulations have resultedin considerable improvements in some of the more visible and pressing envi-ronmental impacts of industrial activity. Yet the demand for more effective andsensible environmental protection increases attention to new policy tools, whichfall somewhere between the free market and conventional public regulation.

Traditional public regulations, in which the state plays a central role in theregulatory life cycle, still have a role to play in the global economy. Yet newmodels of policy stewardship exist, including what Virginia Haufler inA PublicRole for the Private Sector: Industry Self-Regulation in a Global Economycalls “industry self-regulation.” In these models, companies themselves designand enforce the rules that govern their behavior in a wide assortment of regu-latory settings. The speed in which the new models of policy stewardship havebecome critical features of global governance has been rapid, and consequentlythey lie outside the scope of academic scholarship. For example, so-called “glo-bal regulations,” which govern the use of the Internet, information, and com-munication technologies—including the Internet Engineering Task Force, W3Group, and Internet Corporation for Assigned Names and Numbers (ICANN)—are largely nongovernmental and operate outside the state-based public regula-tory framework.

My second point is that differences among industrial sectors have an enor-mous impact on policy convergence. Multinational corporations (MNCs) basedin North America, the European Union, or Asia are under increasing pressure toglobalize their business operations. Consequently, many MNCs are benchmark-ing their environmental management and workplace practices to a single globalstandard and have realized important environmental and labor dividends ineco-efficiency, stakeholder ties, and supply chain management practices. In herstudy, Exporting Environmentalism: U.S. Multinational Chemical Corpora-tions in Brazil and Mexico, Ronie Garcia-Johnson challenges the notion thatonly national and international policy are effective tools to promote environ-mental practices. She shows that multinational corporations have incentives to

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raise the environmental, health, and safety standards of domestic companies intheir host countries to maintain their competitive advantage.

Another example of this corporate-led upgrading of environmental and work-place standards can be seen in the advanced technology sector. Environmental,health, and safety issues have become a mainstream bottom-line business con-cern that goes beyond regulatory compliance because the cost of building anew, state-of-the-art semiconductor chip plant can run as high as $4 billion.Moreover, the semiconductor manufacturing process relies heavily on chemicalsolvents that are toxic to human health.

For a company like Intel, the environmental, health, and safety businesspractices it has developed for its manufacturing facilities in North America orWestern Europe are often identical to the ones it has in emerging and develop-ing economies. When critics charge that corporations practice a regulatory “raceto the bottom,” it is frequently overlooked that it is more expensive for MNCsto maintain different regulatory standards than to maintain one global standardand to upgrade the environmental standards of the laggard facilities. As a result,we are likely to find similar environmental quality standards in an Intel semi-conductor plant, whether the facility is located in the state of California, CostaRica, or Malaysia.

The “race to the bottom” metaphor is a more apt description of certainindustrial sectors, particularly those with incredibly small profit margins. Inthese cases, there is much pressure to maintain labor flexibility, due to uncer-tain demand, as well as a great distance in geography and the number of sub-contractors in the production chain between manufacturing and consuming acertain product. Many of these conditions are endemic in the apparel and foot-wear industries, where some of the heated corporate responsibility and account-ability debates have occurred in recent years. In such industries and those ofother low-margin, high-volume consumer products, globalization has made iteasier for—without necessarily causing—MNCs to overlook social and envi-ronmental safeguards. Workplace standards, environmental and health/safetycodes, and collective labor bargaining are tightly interwoven in the culture andvalues of many industrialized countries.

Glen Dowell, Stuart Hart, and Bernard Yeung observe in “Do CorporateGlobal Environmental Standards Create or Destroy Market Value?” (publishedin Management Science(46, No. 8 [2000]), that it makes business sense forMNCs to adopt global standards that exceed those required by local law orregulation. They also show that the stock market favors companies that imple-ment uniform and high global environmental standards. By investing in state-of-the-art technologies and management processes, MNCs may be able to achievesuperior economic and environmental performance simultaneously. Theirresearch also suggests that developing countries may be able to attract foreigndirect investment by lowering environmental standards. Yet this measure islikely to attract already financially weak companies that are looking for ways to

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minimize short-term costs and stay afloat, such as by extending product lifecycles and exploiting low labor costs. Again, these are conditions much morepronounced in low-margin, high-volume industries like footwear, apparel, andtoys.

The larger question embedded in globalization and policy convergence ishow the public interest can best be protected in a globalizing economy. Forexample, assuring the best safety of airline passengers is going to be differentthan ensuring the best environmental and health/safety of genetically modifiedorganisms. State-based regulatory standards will continue to be an importantfactor in global governance, but the sources for effective change and policyinnovation are likely to come outside traditional public regulations. It makessense that this is where scholars should spend more of their time.

ReferencesCary Coglianese and Jennifer Nash, eds.,Regulating from the Inside: Can Envi-

ronmental Management Systems Achieve Policy Goals?(Washington, D.C.:Resources for the Future, 2000).

Ronie Garcia-Johnson,Exporting Environmentalism: U.S. Multinational Chem-ical Corporations in Brazil and Mexico(Cambridge, Mass.: MassachusettsInstitute of Technology Press, 2000).

Virginia Haufler,A Public Role for the Private Sector: Industry Self-Regulationin a Global Economy(Washington, D.C.: Carnegie Endowment for Inter-national Peace, 2001).

David Wheeler et al.,Greening Industry: New Role for Communities, Markets,and Governments(New York: Oxford University Press, 2000).

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