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Choosing among Options for Regulatory Cooperation.

1 Introduction

US and European Union (EU) competition officials have different sets of regulatory criteria by which they evaluate potential mergers between firms. (1) Given that many of the firms attempting to merge have operations in both jurisdictions, these differing regulations can affect commerce between them. One challenge these officials face is that if they arrive at divergent decisions, political principals are brought in, which is something those regulators would rather avoid. Therefore, one mechanism they have created is the EU-US Mergers Working Group, where regulators exchange information and ideas about procedures to help them reach convergent decisions so that they can mitigate the negative commercial and political implications of reaching divergent decisions while also reducing the likelihood of principal involvement. This is a good example of a cross-national regulatory difference that could abrade commerce, which the political actors involved responded to via networked governance.

In the 1970s, as European states were seeking greater economic integration, they found that the regulatory differences in product standards were making it difficult for firms to sell their wares across borders. The solution they arrived at was mutual recognition, whereby goods considered legally compliant in one state were considered compliant in all European Community (EC) countries. The states were effectively recognizing the validity of each other's regulatory approaches, which is how this policy option became known as mutual recognition.

Beginning in the late 1990s, the United States and the EU took vastly different approaches to regulating genetically modified organisms (GMOs) and this created regulatory barriers to the trade in GMOs. Despite repeated efforts, they never found a way to resolve their differences and so there was no agreement, which in turn led to a dispute that ultimately went before the World Trade Organization (WTO).

In each of these cases, states were faced with regulatory differences that were driving up trade costs, but the states involved ultimately chose different pathways by which to deal with those regulatory barriers. Why? That is, why did they choose mutual recognition in one instance, select networked governance in another case, and find no path toward cooperation in yet another?

This question is not limited to these three cases nor to these three policy options. On the contrary, given that trade and regulation increasingly intersect, states are finding trade to be more difficult and more expensive due to regulatory differences. Much analysis of trade and regulation speaks of harmonization or convergence; that is, states choosing to make their regulations identical or at least similar enough to smoothen commerce. But trade-abrading regulatory differences can be massaged in a variety of ways, of which convergence is only one, and even when convergence does occur, it can take a number of forms. What I am saying is that convergence is a regulatory cooperation outcome; this article, though obviously concerned with convergence or no convergence as an outcome, is principally aimed at elucidating the various drivers and implications of those different processes by which convergence may or may not take place.

When states face a regulatory trade barrier, they have seven basic options to choose from in dealing with that barrier: (1) unilateralism; (2) binding international agreements; (3) mutual recognition; (4) network governance; (5) private standards; (6) self-regulation; or (7) no cooperation. The choice of pathway can have big implications for the industries and interest groups involved and, thus, it is of more than academic interest.

In this article, I ask the following question: When are states most likely to choose each of these pathways, and why? My central argument is that this choice can best be explained by the domestic configurations of interest groups around the issue of regulatory convergence in each of the relevant states. Within each state, groups supporting convergence may be active or inactive, and groups opposing regulatory convergence may also be active or inactive. The specific combination of activated and inactivated groups in the two states each comes with a particular negotiating logic between the two states that drives them toward different options for handling regulatory trade barriers between them.

In this article, I proceed as follows. First, I review the seven main pathways by which states may respond to regulatory barriers and discuss the implications that each of these pathways has. Then, I engage with key scholarly works in regulation, trade, and lobbying to build a foundation for my argument. Finally, I analyze how domestic interest groups may be aligned with regard to regulatory convergence and explain how the combination of these alignments drives states toward particular pathways.

2 The Seven Pathways and Their Implications

2.1 Unilateralism

A state's first option is to regulate business as it sees fit and attempt to force foreign producers to meet their standards come what may in terms of trade costs. Unilateralism's central benefit is that it allows states to react quickly to new challenges. Its central drawback is that it may raise the cost of international commerce. If this cost is small, the regulation may not provoke much reaction from other states. If it is large, however, those who bear that cost will push for some form of regulatory convergence or cooperation. Either they can fight the state that issued the regulation (as the Mexican government, on behalf of fishermen, did against US tuna fishing regulations), or they can promote the regulation that was originally unilateral as a new multilateral standard (as Mercedes did through the German government with regard to US--and especially California's--car emissions regulations). (2)

2.2 Binding International Agreements

States' second option is to pursue a binding agreement. Binding agreements have significant benefits, but also serious costs. (3) Their primary advantage is that they create greater policy certainty and a level playing field. This can benefit participants who have a stake in reducing regulatory barriers, but do not trust others to implement a proposed regulation unless compelled to do so. Similarly, they can benefit constituencies, such as environmentalists or free traders, who want to tie their own states' hands. They can help governments institute and maintain necessary, but unpopular, reforms. Binding harmonization may also reduce regulatory barriers without encouraging a race to the bottom. (4)

Conversely, weak and strong states may be wary of binding agreements. Weak states may fear that they will lock in strong states' preferences and require extensive legal expertise. (5) Strong states may fear that binding agreements will constrain their ability to deploy their ample resources. Weak and strong states may worry that it will prevent them from flexibly responding to changing circumstances. This may be an especially prevalent fear in rapidly evolving areas such as internet governance. The binding agreement may require some states to significantly change their domestic regulations. Given that a state's regulations are the product of its political equilibrium, changing them may have implications for domestic constituencies and, thus, may be politically perilous.

These factors combined with other concerns, such as a reluctance to cede sovereignty, mean that negotiating binding agreements can be difficult. Governments can include escape clauses that make these agreements easier to negotiate, but those escape clauses dilute the benefits associated with policy certainty. (6) Even if states agree that a binding agreement is desirable, they are still left with the arduous tasks of determining the level of obligation that states will be subject to, how precise the rules will be, and the extent to which dispute settlement and other adjudicative functions will be delegated to third-party institutions. (7)

2.3 Mutual Recognition

States may choose to establish mutual recognition, whereby they recognize each other's regulatory effectiveness and thus any product in the agreed on industry that is legally sold in one jurisdiction may be sold in the other. Such an arrangement does not require a state to change its domestically agreed-on law and so avoids a protracted domestic policy fight. Thus, mutual recognition may obviate the need for an international struggle over whose regulations become the accepted standards. Given that the need to alter domestic regulations is often the largest hurdle in reducing regulatory barriers to commerce, this is a powerful advantage. This is one of the reasons why mutual recognition is often perceived to be easier to achieve than a binding agreement. (8)

One difficulty of mutual recognition is that, in many instances, full harmonization is necessary; products ranging from DVDs to railway gauges need to be the same for traded products to be compatible. Furthermore, some International Political Economy (IPE) scholars worry that the greatest threat to the multilateral trading system is not a return of Smoot-Hawley tariff levels, but instead increasing regional fragmentation. If this is the case, then mutual recognition may be the regulatory equivalent of regional free-trade agreements in that it creates deeper regional integration while erecting trade barriers between regions.

Another dilemma of mutual recognition is that it requires significant trust in the regulatory effectiveness of the other states. It is because of this issue that mutual recognition is often accompanied by a regulatory minimum standard. Without that floor, trust is frequently lacking, especially if there are significant development level differences. Even when there are not large development-level differences, cultural differences can lead citizens to trust their regulations more than those of other nations. The centrality of trust and the difficulty of cultivating it are why one scholar calls mutual recognition "a Janus-faced norm, usually branded as the 'easy option' and yet the hardest of all." (9) The most famous and most significant example of mutual recognition is within the EU.

2.4 Networked Governance

Governments may choose to have their officials transnationally cooperate in informal networks as in the merger review example. This may allow them to sidestep some of the fears inherent to more formal, high-profile mechanisms because the networks they negotiate through are frequently more politically insulated. The executive and legislative branches may cast a shadow over these networks, but they are usually not directly involved. (10) Networks are not inhibited by webs of procedural rules and, thus, may be able to proceed with greater speed. (11) Networks may be helpful in dealing with global problems that individual states cannot solve on their own. (12) Because networks are informal, they present strong states with a less constraining forum. (13) Whether that is a bug or a feature is in the eye of the beholder.

A drawback of networks is that because they have few enforcement mechanisms, if pressure from an aggrieved constituency mounts, it becomes difficult to prevent that state from reneging on an agreement made through networked governance. Therefore, compliance can become a real problem. (14) Also, because networks typically involve one issue, issue linkage is difficult. In other words, if a network is negotiating on Regulation X, within that network one state cannot offer a concession on Issue Y in exchange for a concession on Issue X because Issue Y is not on that network's agenda.

These networks are more likely to be captured and, thus, more likely to exhibit the disadvantages that accompany regulatory capture. (15) Consequently, it is not difficult to understand why unelected regulators who potentially are in league with big businesses setting rules away from the public eye may strike many observers as a threat to democracy and national sovereignty. One person's networked governance is another's shady backroom deal.

2.5 Private Standards

States may choose to delegate regulatory responsibilities to a private standards body such as the International Organization for Standardization (ISO). This may alleviate the concerns of regulatory capture that come with networked governance because these bodies tend to be more formalized and open. Because the private body is in theory neutral, some have argued that it is less likely to be captured and more likely to be transparent. (16) In practice, however, these private regulatory bodies may not always be neutral arbiters because they are often financed by business interests and are rarely subjected to public oversight. Thus, we should view the claim that private bodies are impartial technocratic referees with some skepticism. (17)

Private regulatory bodies are frequently employed as an option because they can deal with rapidly changing circumstances, they can possess an equal or higher level of technical expertise than national governments, and they are viewed by business as creating more cost-effective regulations. (18) An additional advantage is that they can save government resources, because if a government can outsource some standard setting to a private body such as ISO, it can save taxpayer dollars by not doing the certification itself.

2.6 Self-Regulation

States may simply allow firms to regulate themselves. Unsurprisingly, businesses like this route. States sometimes like this route too because, as under private standards, foisting regulatory costs onto another actor saves them resources, and in fact businesses may actually implement and follow stringent self-regulation if their reputation gains from doing so. (19) To wit, Body Shop and Levi Strauss adhere to strict self-imposed regulations. (20) Businesses must be cognizant that governments sometimes take action against companies that claim to regulate themselves, but fail to abide by those advertised regulations. (21)

The central concern with self-regulation is that it may be ineffective, amounting to little more than Potemkin compliance. This is what makes nongovernmental organizations (NGOs) reluctant to accept self-regulation. In an interview with me, a representative of the Bureau of European Consumers Union (BEUC) was adamant in stating that the organization does not believe in self-regulation. (22) Even if a business is sincere in its self-regulation, the cloud of suspicion that it is being insincere still hangs aloft. And if Potemkin compliance is occurring, self-regulation may be worse than no regulation because, by giving the impression that all is well, it removes the issue from the political agenda.

2.7 No Agreement

States may reach no agreement whatsoever. (23) That option satisfies the defenders of the status quo. Regulations create vested interests. Firms protected by regulatory barriers may fear convergence. NGOs that view convergence as a malignant manifestation of globalization may fear that convergence will become a race to the bottom that guts hard-won environmental and consumer protection victories. No agreement avoids the costs that ensue from altering standards. Its central disadvantage is of course that it inhibits trade, which hurts exporters, raises prices for consumers, and can lead to mutually harmful trade disputes.

3 Previous Works on Regulation and Commerce

While the choice of which policy route is chosen to deal with regulatory barriers, to my knowledge, is not the primary research question of any of the extant works on regulatory trade barriers, existing scholarly works do speak to this question. For starters, there is a voluminous literature on regulatory cooperation within the EU context. (24) Beyond that, the work that sits closest to this question is Daniel Drezner's All Politics Is Global. (25) Drezner argues that the distribution of great-power preferences and the distribution of preferences between the great powers (the United States and the European Union) and other international actors are the key independent variables in explaining regulatory outcomes. (26)

Drezner's argument is self-consciously state centric. That is the source of both its strengths and its weaknesses. He is correct that the argument, popular among activists, that multinational corporations are puppet masters running roughshod over national governments and democracy is simplistic and overstated. He is also undeniably right in saying that the United States and the EU have been and still are the regulatory powerhouses of the world. They have the ability to set, enforce, and export regulations like no other polities. Even as India, China, and other developing countries gain economic clout, they often still lack the technical expertise, regulatory infrastructure, and political will to overtake the EU and the United States in terms of regulatory power, though that does not mean they will always follow the West's lead. (27)

Where Drezner's arguments become more problematic is in his discussion of the domestic political economy and its impact on state preferences. For Drezner, domestic actors are important only insofar as they raise the adjustment cost to regulatory coordination. In Drezner's telling, on a given issue government considers pursuing regulatory coordination and domestic actors become important only to the extent that they can and do make governments pay a price for pursuing that coordination. This fits with his dismissal of societal actors' importance. He specifically argues that NGOs and businesses "function as intervening variables, not as underlying causes" and that the accurate causal story on regulatory outcomes is one in which "corporations and transnational activist networks do not appear." (28)

On this point, I contend that Drezner is wrong. The business community is an important constituency. When it cares about an issue, its preferences matter. Though they are often (but not always) outgunned by business interests, nonbusiness groups such as consumer organizations and environmental advocacy groups matter too. (29) When Drezner discusses European and American governments' preferences with regard to finance, the internet, and GMOs, he treats those interests as a given, but in fact, businesses and other social actors on both sides of the Atlantic have a great deal of influence on the shape of those preferences. That is how democracies work. Conceptually, having a theory of international regulation that does not take into account the preferences of those groups who are affected by that regulation is a dubious proposition.

Drezner's other argument that I disagree with is his assertion that the process of regulatory coordination is unrelated to the regulatory outcome. He asserts that "smaller states and nonstate actors in the international system do not affect regulatory outcomes, but they do affect the processes through which coordination is attempted. The reason their effect on the process is irrelevant to the outcome is that global governance processes are substitutable." (30) No, they are not fully substitutable. Drezner is saying that it does not matter which policy

route is chosen with regard to reducing regulatory trade barriers but, as I demonstrated in the previous section, the choice of policy route does matter very much.

Two other works in this area are John Braithwaite and Peter Drahos's Global Business Regulation and Walter Mattli and Ngaire Woods's The Politics of Global Regulation. (31) The most significant problem with Braithwaite and Drahos's work, as other scholars have pointed out, is that their framework is unwieldy and could accommodate practically any explanation. (32) They present global business regulation as a contest among seven kinds of actors (international governmental organizations [IGOs], states, business organizations, corporations, NGOs, mass publics, and epistemic communities) using seven kinds of mechanisms (military coercion, economic coercion, systems of reward, modeling, reciprocal adjustment, nonreciprocal international governmental organizations coordination, and capacity building) on behalf of thirteen principles (lowest-cost location, best practices, deregulation, strategic trade, rule compliance, continuous improvement, national sovereignty, harmonization, mutual recognition, transparency, national treatment, most-favored nation, and reciprocity) to further their interests. To give just one example of how broad and unwieldy their work can be, they claim to have forty-four (!) key findings. (33)

Mattli and Woods's The Politics of Global Regulation is primarily focused on the extent to which regulatory policy is made for the benefit of the common interest or captured by narrower special interests. To explain this variation, they examine factors that affect the supply of broad-based institutions and the demand for common interest regulation. On the supply side, regulatory institutions with participatory mechanisms that are fair, transparent, and accessible are more likely to produce common interest regulations; on the demand side, these three guiding factors are information, interests, and ideas. (34) Though much of my analysis builds on theirs, because the question they are attempting to answer and the one I am attempting to answer are significantly different questions, it would be inappropriate to say that my analysis can refute or bolster what they have said.

4 My Argument

My argument advances in three stages building on previous works in lobbying, regulation, and trade. First, I modify James Q. Wilson's conceptual framework for analyzing how groups coalesce around domestic regulatory policy and map it onto Frank Baumgartner et al.'s finding on the status quo division of policy disputes. (35) Second, I examine states' policy objectives through this modified framework. Third, I analyze the choice of policy route as a product of the configuration of the stances held by the two in a hypothetical bilateral negotiation.

Wilson argues that the distribution of costs and benefits of regulation illuminate how interest groups are likely to coalesce around a given regulatory issue. (36) In his typology, there are four types of preference distribution: client politics (concentrated benefits and diffuse costs), interest group politics (concentrated benefits and costs), majoritarian politics (diffuse benefits and costs), and entrepreneurial politics (concentrated costs and diffuse benefits). For the purposes of analyzing regulatory trade politics, it is helpful to modify these concepts.

Whereas Wilson focuses on the concentration of costs and benefits, I propose that we instead focus on whether a political group's interest is activated. I define a group's interest as being activated when it wants and has influence in the policymaking process. This is helpful because there are many cases in which a purely cost-benefit analysis cannot explain a group's political engagement. Consumer and environmental groups are generally considered classic examples of diffuse interests and they each sometimes influence trade policy. Conversely, relatively concentrated interests can see their ability to influence policy dashed if they are perceived to be illegitimate political actors or are excluded from the policy process.

The change from concentrated costs and benefits to activated and inactivated interests has an additional advantage; it allows for the incorporation of both rationalist and constructivist motivations. Relatedly, businesses and nonbusiness groups are not automatically destined to be opposed to each other; they can work together in a Baptist-bootlegger coalition as a united activated interest. (37)

Building on Baumgartner et al.'s work that shows that policy fights often divide between defenders and attackers of the status quo, we can conceptualize the struggle over reducing regulatory barriers as between those in favor of regulatory convergence and those who are opposed. (38) When an activated interest seeks regulatory convergence, but there is no activated opposition, we are likely to see champion politics. Regulators and legislators have an incentive to listen to the activated supporters who are able to marshal electoral resources and information, both of the technical variety and of politically useful talking points. This information provision is likely to be efficacious because there is no one providing information to counteract the policy preferences of the activated supporters. Given this, the activated interest's preferences become the state's preferences. In its foreign economic policy, the government becomes a champion of that activated interest. The activated interest has effectively captured that state's regulatory trade policy.

When an activated interest seeks convergence, but another activated interest opposes convergence, the most likely result is contested politics. In these cases, regulators and legislators are pulled in opposite directions with the two sides' lobbying to counteract each other. The state is unlikely to lead the charge for regulatory convergence, but importantly does contain a constituency that will push for regulatory cooperation should other states pursue such a policy. (39)

When there is neither an activated supporter nor an activated opponent of convergence, apathy politics is likely to occur. The state is unlikely to push for regulatory convergence, but is also unlikely to vehemently oppose it. This is the scenario in which considerations other than the configuration of domestic interests, such as the preferences of regulators and legislators or geopolitical considerations, are more likely to drive states' policies.

Finally, when there is no activated supporter, but there is an activated opponent of convergence, we are likely to see obstructionist politics. This scenario is the opposite of champion politics. Here, regulators and legislators are pulled away from agreeing to regulatory convergence with no countervailing pressure in favor of reducing those barriers.

5 Leveling Up: Considering the Possible Combinations of Trade Policy Stances

Because we are examining international regulatory cooperation, it is not enough to examine a single state's position in this typology. We must consider the configuration of domestic interests in multiple states simultaneously. (40) Therefore, we need to consider the possible combinations of these four policy configurations: champion, contested, obstructionist, and apathy. I argue that each of these combinations promotes and facilitates a specific policy route.

5.1 Champion-Champion

When both states' trade stances are characterized by champion politics, many of the normal obstacles to regulatory cooperation are absent. There are fewer squeaky wheels that need to be pacified or marginalized. Because both states want to reduce regulatory barriers, compliance concerns are alleviated. Given that there are no activated constituencies opposing cooperation, cooperation that is focused on speed and flexibility is actually possible. Because no activated opponent needs to be bought off, issue linkage is not necessary. Furthermore, the activated interests that states are championing often see themselves as working on common problems and, therefore, distributional consequences are reduced. (41) Thus, when two states are each animated by champion politics, we are most likely to see them pursue regulatory cooperation through networked governance. Regulatory capture of these networks is entirely possible and, from the perspective of the activated interests supporting convergence, that is precisely the point. They want to capture the process, and they can since there is no activated opposition. An example of champion-champion politics leading to networked governance can be seen in the Strategic Approach to International Chemicals Management (SAICM) adopted in 2006 by over 100 governments to network on chemical safety regulations. (42)

5.2 Champ ion-Contested

When one state acts as a champion, but the other state contains activated supporters and activated opponents, the consensus needed to promote networked governance no longer exists. The champion state wants to reduce regulatory barriers, but now must find a way to neutralize the activated opposition in the other state. The champion state is likely to be concerned by the activated opposition's ability to change or violate the regulations later. Importantly, the activated supporters in the contested state are likely to share these concerns. Given the presence of the activated opposition, the flexibility of networked governance is undesirable from the point of view of the activated supporters in both states. Their desired route is most likely to be a binding agreement. The activated opponents may be able to slow negotiations or exact concessions but, for those activated supporters, this is likely to be an acceptable price. A binding agreement that reduces regulatory barriers, even if not as much as the activated supporters would like, is still a step in the right direction from their perspective. The Trade Related Aspects of Intellectual Property Rights Agreement (TRIPS) demonstrates this dynamic quite well. In the negotiations over that agreement, intellectual property-intensive businesses pushed the US government to take a strong position on intellectual property in the Uruguay Round (champion). Other countries, particularly in the developing world, were much more ambivalent on this issue (contested). Knowing that sooner or later those developing countries would be tempted to reduce intellectual property protection, the United States demanded the inclusion of TRIPS as part of the price for liberalization in textiles and agriculture.

5.3 Champion-Apathy

Those concessions from the champion state are unnecessary if the other state is characterized by apathy because there is no activated opposition that must be constrained or bought off. Conversely, neither is there an activated supporter that will help the champion create a binding agreement. The champion state cannot accept doing nothing; its activated interests demand that it "do something." The champion state may be strongly tempted to go it alone in hopes that it can convince or coerce the second state into changing its regulations. Thus, in these configurations, we are most likely to see the champion state pursue a unilateral strategy. (43) It is under these conditions that the United States has tried to internationalize its domestic environmental regulations on endangered species, air pollution, and fisheries conservation. (44)

5.4 Champion-Obstructionist

The champion state is likely to have the least success in its drive to reduce regulatory trade barriers when the other state's trade policy is guided by an activated opposition with no activated supporters. This will also be the case when interests within the two states might favor convergence, but are faced with large distributional implications in deciding whose standards to use. The champion-obstructionist configuration may sometimes appear at first glance to be champion-champion if both states want a single standard, but they each want their own preferred standard. In such a situation, it is better to think of the relationship as champion-obstructionist because that is, in fact, the configuration for each proposed standard. Allow me to illustrate this. If State A and State B want convergence based on Standard A and Standard B respectively, then with regard to Standard A, State A is a champion and State B is an obstructionist. The reverse occurs on Standard B. In these situations, State A is a champion for using its standard and an obstructionist against using State B's standard while State B is the opposite on both counts. Champion-Obstructionist configurations are where we are likely to see the most intransigent disputes. Because the champion state wants convergence, regulatory cooperation is on the agenda, but because the obstructionist state opposes convergence, the champion is left frustrated and may seek legal recourse. Likewise, the obstructionist may seek a legal injunction against the champion state to stymie unilateral action. An example of this configuration is the long-running dispute between the EU and the United States over GMOs.

5.5 Contested-Contested

When the two states are influenced by activated supporters and activated opponents, those states' officials have an incentive to find a way to reduce regulatory barriers, but may face backlash if they are perceived by activated opponents to be doing the activated supporters' bidding. The solution for them is to delegate regulation setting to a private standards body. For governments, these bodies limit the extent to which the policy struggle becomes explicitly politicized. Furthermore, each group may like private standards as a policy route because it avoids the worst possible option (i.e., that the state sides with their opponents). Businesses like that the technocratic bent of these bodies limits the efficacy of demagoguery. Some scholars are more critical of this technocracy and argue that it is a cynical gambit "to keep outsiders both under-informed and stigmatized." (45)

Businesses also value their ability to directly interface with them. Nestle, Coca-Cola, and Unilever all have delegations at the Codex Alimentarius, the major private standards body in food regulation. (46) NGOs often support these bodies because they see private regulations as giving them leverage over business and an additional tool besides naming and shaming. (47) It is because they are adept at managing these contested interest configurations that the use of private regulations began growing rapidly in the 1990s, precisely when regulatory trade politics became increasingly contested in many states. (48) The Cocoa Industry Protocol in conjunction with the International Cocoa Initiative demonstrates how private regulations can serve as an effective means of reconciling activists' demands with business concerns as well as the competing interests for and against regulatory convergence (49)

5.6 Contested-Apathy

In the contested state, the activated supporters want regulatory convergence, but the activated opposition resists changing the state's regulations. The best way to square this circle is to create a mutual recognition agreement (MRA). The activated opposition may need to be pacified with a minimum floor so that it has confidence that the MRA will not create a race to the bottom. For example, the BEUC worked hard to ensure that the mutual recognition that spawned from the Cassis de Dijon decision occurred on an upward rather than downward trajectory. (50) The lack of activated interests in the other state means there is room for cooperation (unlike if the configuration were obstructionist), but there is no demand for harmonization (as there might be if the configuration were champion or contested). An example of an MRA outside of the EU that arose from these interests is the Trans-Tasman Mutual Recognition Arrangement between Australia and New Zealand.

5.7 Contested-Obstructionist

In this scenario, cooperation is unlikely. Since there is little chance of convergence given the obstructionist politics in the second state, the contested state is unlikely to do much to try to reduce regulatory barriers. At most, there may be a token attempt by the contested government to placate the activated supporters of regulatory convergence without angering the opponents.

5.8 Apathy-Apathy

When both states lack activated supporters or opponents, officials have little incentive to create new regulations themselves and so, given their limited resources, the easiest option is to allow businesses to regulate themselves. This route is possible because there are no NGOs activated to oppose industry being allowed to set its own rules. Meanwhile, the industries themselves do not actually care all that much about regulatory convergence or they would be pushing their states to try to reduce regulatory barriers. Being allowed to regulate themselves also helps businesses prevent the activation of other interests that may seek to impose stricter regulations. Keeping potentially opposing interests deactivated is a frequent goal of business self-regulation. The 246 self-regulation corporate conduct codes analyzed by the Organisation for Economic Co-operation and Development (OECD) were dominated by labor, safety, and environmental regulations, the exact kind of issues most likely to lead to an activated opposition. (51) This may be an especially important strategy in the wake of a scandal that risks politicizing the industry. An example of this interest configuration generating business self-regulation is Mattel's choice to impose strict safety and labor regulations on itself and its suppliers in China. (52)

5.9 Apathy-Obstructionist and Obstructionist-Obstructionist

In both of these scenarios, the low likelihood that convergence can happen, along with the lack of any activated interest even lobbying for such convergence, means that reducing these regulatory barriers is unlikely to even make it onto the political agenda.

These dependent variable pathways are Weberian ideal types. I analyzed them in that manner to help spell out the logic that drives the choice thereof, but with that being said, there are two ways in particular in which the choice can deviate from these ideal types that bear remarking on. First, the pathway by which a commerce-abrading regulatory difference is dealt with may, of course, migrate from one path to another; the choice of pathway once taken is not irrevocably stuck in that pathway. Traditionally powerful interests can be deactivated (as cattle farmers were in the aftermath of the UK mad cow scandal in 1996) or new interests can be activated, thus shifting the overall interest configuration. (53)

States have agency in activating and deactivating interests domestically and in other states. For instance, leveraging market access is a good way to activate exporting interests in another state. Not all states are created equal in this regard, however. Economic and political power gives strong states a greater ability to move the politics surrounding a given regulatory barrier to a different configuration. If a strong state is a champion state, it has a greater ability to activate latent interests in that smaller state and, thus, move the configuration from champion-obstructionist to champion-contested or move it from champion-apathy to champion-champion. It is important to note that moving configurations is not cost-free. Each policy route comes with real consequences. The United States' choice to locate intellectual property protection in a binding TRIPS agreement meant that Western drug companies and their governmental champions faced considerable constraints a few years later during the height of the AIDS epidemic.

This framework points to an important exception to the trend that economically strong states dominate negotiations. In Braithwaite and Drahos's analysis, the most powerful mechanism that traditionally weaker states have is modeling; this mechanism is likely to be most effective when it is employed by a champion weak state and it shifts the scales of a contested stronger state. (54)

The second significant caveat is that some solutions may combine two different pathways. The different options can certainly be mixed and matched. I have divided them here so that they may serve as Weberian ideal types for analytic purposes, but of course Weberian ideal types do not constitute all cases in the real world. For example, Codex Alimentarius promotes trade via private standards but, importantly, one of the main ways that it does that is through reference to the WTO's Sanitary and Phytosanitary Standards (SPS) Agreement, which is a binding international agreement. So, here we have a binding agreement being combined with private standards.

6 Conclusion

I have attempted to sketch out a framework for understanding the dynamics that incentivize states' choice of one pathway over another in their attempts to reduce commercial costs emanating from cross-national regulatory differences. Let me repeat here and stress that this framework is a probabilistic, not deterministic, theory. There will certainly be some cases that do not entirely conform to the expectations of this framework. Yet I would argue that it helps structure our understanding of why different pathways to regulatory cooperation are chosen in different contexts.

This article was self-consciously an exercise in conceptualization and theory building. I contend that the theoretical framework that I presented helps explain regulatory cooperation pathways. I provided examples in defense of the frameworks, but obviously example provision and hypothesis testing are not synonymous, far from it. This article, then, is the first avenue for further study that I as well as, hopefully, other scholars can engage in. As other scholars have pointed out, the paucity of good data on regulatory trade barriers makes statistical analysis all but impossible, which means that case studies and process tracing are the most fruitful research methods in this area. (55) Meticulous case studies are needed, then, to evaluate the theory that I have presented here.

As Abbott et al. note, efforts to promote international cooperation, regulatory or otherwise, vary in the extent to which they obligate states to comply with collective decision-making, the extent to which their provisions are precise rather than flexible, and the extent to which they delegate adjudicative roles and other powers to third parties. (56) The alignment of activated and inactivated interests regarding the issue area at hand in multiple states and the coalitions that those alignments create may play a significant role in determining just how much obligation, precision, and delegation those efforts at cooperation will have.

Finally, given the extent to which regulatory differences comprise the main impediments to trade and also because of the increased centrality of regulation in trade agreements and trade politics, the more prominent the politics around regulatory matters and regulatory convergence are likely to become and, thus, the more important it is for us as scholars to be able to explain those political dynamics.


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Gary Winslett

Middlebury College


(1) On EU and US merger review cooperation, see Damro 2011.

(2) Vogel 1995, 63-72, 95, 107-111.

(3) See, for example, Abbott and Snidal 2000; Shaffer and Pollack 2010.

(4) Kahler and Lake 2003, 22.

(5) Busch, Reinhardt, and Shaffer 2009.

(6) Rosendorff and Milner 2004.

(7) Abbott et al. 2000.

(8) Pelkmans 2007.

(9) Nicolaidis 2007, 685.

(10) Raustiala 2002, 24. This may be especially helpful to the regulators if their view of regulatory convergence differs from that of the public.

(11) Raustiala 2002, 24.

(12) Slaughter 2005, 8-9.

(13) Raustiala 2002, 25; Verdier 2009, 163.

(14) Verdier 2009, 115-116.

(15) Raustiala 2002, 25; Kahler and Lake 2009, 274.

(16) Vogel 2009, 156-157.

(17) Buthe and Mattli 2011, 10.

(18) Buthe and Mattli 2011, 5; OECD 2013, 11-12.

(19) Haufler 2001, 26-27.

(20) Abbott and Snidal 2009, 76-77.

(21) Farrell 2003, 287.

(22) Lea Auffret, trade policy officer at the European Consumer Organization (BEUC), interviewed by the author, 1 December 2016, Brussels and Florence.

(23) It bears noting that, as I am using the terms here, unilateralism and no agreement are different pathways because in unilateralism one state is attempting to impose its regulatory will on other states, whereas in no agreement the trade-abrading regulatory difference is simply not on the political agenda.

(24) Within this literature, see among others, Egan 2001; Schmidt 2007; Holmes 2006; Weiler 1991.

(25) Drezner 2007.

(26) Drezner 2007, 72.

(27) On developing states, especially China, not following the West's lead, see Quark 2013.

(28) Drezner 2007, xii-xiii.

(29) Baumgartner et al. 2009, 11.

(30) Drezner 2007, 5.

(31) Braithwaite and Drahos 2000; Mattli and Woods 2009b.

(32) Mattli and Woods 2009a, 6.

(33) Braithwaite and Drahos 2000, 27-33.

(34) Mattli and Woods 2009a, 17-32.

(35) Baumgartner et al. 2009; Wilson 1980.

(36) Wilson 1980, 364-372; Wilson 1989, 76-83.

(37) A Baptist-bootlegger coalition is when one group supporting a policy for economic reasons forms a coalition with another group supporting the same policy for normative reasons. It came from the phenomenon of Baptists (who believed alcohol was sinful) and bootleggers (who wanted to continue profiting from illegal liquor) both supporting laws in the South that kept alcohol illegal after Prohibition's repeal. Yandle 1982, 12-16; Vogel 1995, 20-22, 196-217.

(38) Baumgartner et al. 2009, 147.

(39) NGOs and businesses are not monolithic. It may be the case that activists do not care about a particular regulatory issue, but there is still conflict if promoting regulatory convergence pits export-oriented interests that support convergence against import-competing interests that oppose it.

(40) For parsimony and clarity's sake, I explain these configurations as they involve two countries, but I would argue that the logic of activated and inactivated interests driving the choice of pathway continues to hold multilaterally as well.

(41) On the potential importance of distributional conflict, see Krasner 1991.

(42) Perrez 2006.

(43) It is worth pointing out here that, in practice, a successful unilateral strategy may lead to standards being harmonized in line with the preferences of the champion.

(44) DeSombre 2000.

(45) Jullien and Smith 2011, 375.

(46) Braithwaite and Drahos 2000, 407-408.

(47) Vogel 2009, 165-166.

(48) Biithe and Mattli 2011, 6-10; Vogel 2009, 158.

(49) Schrage and Ewing 2005.

(50) Vogel 1995, 32-33.

(51) OECD 2001, 47-71.

(52) Barboza and Story 2007; Haufler 2003, 226.

(53) Vogel 2012, 121-124.

(54) Braithwaite and Drahos 2000, 539-541, 589-590.

(55) Drezner 2007, 25-26.

(56) Abbott et al. 2000.
TABLE 1 Implications and examples of the seven policy routes

                  Implications                      Examples

Unilateralism     Makes policy innovation           US environmental
                  easier, maintains domestic        rules, EU data
                  sovereignty, raises cost          privacy, labeling
                  of trade                          requirements
Binding           Increases policy certainty,       TRIPS, SPS, CITES
agreement         weak and strong state
                  fears, limited flexibility,
                  higher adjustment costs,
                  difficult to negotiate
Mutual            Lower adjustment costs,           Trans-Tasman MR A,
recognition       negotiation may be easier,        US-EU MRA in 1998
                  not always possible, may
                  be similar to regional
                  fragmentation, trust is
Networked         More insulated process,           SAICM, U.S.-EU
governance        fewer procedural rules,           merger review
                  more informal, compliance
                  can be a challenge,
                  issue linkage is more
                  difficult, regulatory capture
                  is more likely, strong
                  states are freer to deploy
Private           Agile, cost effective, can        ISO, IASB, Codex
standards         bypass veto points, rarely        Ali-mentarius
                  subjected to public oversight,
                  standards bodies can
                  develop their own agenda,
                  may not be neutral in
Self-regulation   Cheap for businesses and          Kimberley Process,
                  governments, may or               responsible care
                  may not be effective,
                  NGOs do not trust it
No agreement      Satisfies defenders of            US-EUGMOs, pre-2011
                  status quo, inhibits trade,       patent regulations
                  avoids adjustment cost,
                  can lead to trade disputes

Note: NGOs, nongovernmental organizations; EU, European Union; TRIPS,
Trade Related Aspects of Intellectual Property Agreement; SPS, Sanitary
and Phytosanitary Standards; CITES, Convention on the International
Trade in Endangered Species; MRA, mutual recognition agreement; SAICM,
Strategic Approach to International Chemicals Management; ISO,
International Organization for Standardization; IASB, International
Accounting Standards Board; GMOs, genetically modified organisms.

TABLE 2 Four potential configurations of interests on regulatory

Opposes convergence   Supports regulatory convergence
                      Activated   Inactivated

Activated             Contested   Obstructionist
Inactivated           Champion    Apathy

TABLE 3 The combinations of domestic interest configuration and chosen

              Champion                    Contested

Champion      Network governance
Contested     Binding agreement           Private standards
Apathy        Unilateralism               Mutual recognition
Obstruction   Regulatory trade disputed   Tokenism

              Apathy            Obstructionist

Apathy        Self-regulation
Obstruction   Not on agenda     Not on agenda
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Date:Jan 1, 2019
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