The politics of state compliance with international “soft law” in finance

Why do jurisdictions comply (or not) with international soft law in finance? This research systematically links international and domestic explanations of compliance by highlighting the “disjuncture” between the international standard‐setting process and the process of domestic compliance. Two causal mechanisms that affect compliance are identified. In the uploading stage, elected officials delegate the making of international soft law to domestic regulators; large, internationally active financial institutions mobilize extensively and, to a large extent, successfully. In the downloading stage, domestic interest groups team up with elected officials in order to resist compliance with international soft law that has negative distributional implications for domestic constituencies. These arguments are illustrated through a structured, focused comparison, and process tracing of the mixed record of compliance of the two main jurisdictions worldwide—the United States and the European Union—with the main international banking standards, the Basel Accords.     

Horses for courses: China's accommodative approach to food standard‐setting in response to the internationalization of regulation

This paper examines the evolution of China's food standard‐setting procedures from both domestic and international perspectives, particularly in the context of the internationalization of regulation. After the reform and opening‐up in 1978, state actors and leading enterprises monopolized the process of national food standard setting. With further participation in the global economy in the 21st century, China has become familiar with the international standard‐setting procedures and has modeled its domestic policymaking on these practices. This has resulted in a more transparent, inclusive, scientific, pluralized, and consensus‐based form of decisionmaking. By contrast, the standards of the strategic industries have been harmonized to the standards of international counterparts through a top‐down and authoritarian approach. This paper argues that China uses an accommodative approach, trichotomizing suitable standards and decisionmaking procedures in terms of inclusiveness and transparency, which suits the developmental needs of the domestic market, food export markets, and strategic industries.     

What can Post‐Democracy tell us about TNCs and Extraterritorial Violations of Human Rights?

This article considers the problem of extraterritorial human rights violations committed by transnational corporations (TNCs), and draws on Crouch's framework in Post‐democracy to illustrate why the issue has proved so difficult for states to regulate. I begin by examining the problem of corporate regulation more generally, and set out Crouch's analysis to show why and how corporations have become so influential. The second section considers the area of business and human rights, and explains why there is ‘a governance gap’ in relation to extraterritorial human rights violations committed by corporations. The third section describes efforts at the international and domestic levels to regulate corporations in relation to this issue. It concludes that while new international principles and innovative hybrid schemes are playing a valuable role in norm creation and standard‐setting, the enforcement of these principles remains limited. Corporations have largely succeeded to date in their lobbying efforts to remain free of any direct obligations under international law.     

Failure of auditors: The lack of compliance for business combinations in China

This empirical study investigates the compliance of 344 Chinese listed companies with the Accounting Standard for Enterprises No. 20‐Business Combination, a mandatory reporting standard applicable to companies involved in business combinations. China has recently reformed its auditing sector, enabling private firms to provide auditing services. The results of the study show a low level of compliance by Chinese listed companies. While companies audited by Chinese domestic auditors have significantly lower compliance than companies audited by Big Four auditors on supplementary disclosure that is mandatory under the Chinese accounting standards, compliance remains low even after companies receive unqualified reports from these international auditors. There appears to be a lack of commitment, and possibly expertise, among Big Four auditors, in fully applying the reporting requirements of the business combination standard in a Chinese setting. This raises concerns about the independence of Chinese auditing in disclosing reliable information about business combinations. Broader theoretical contributions of the paper go beyond the Chinese context by problematizing whether well‐resourced international auditors uphold internationally expected standards or succumb to local non‐compliant practices.     

The Curious Incident of Mr Cameron and the United Kingdom Defence Budget: A New Legacy?

During 2015 Prime Minister Cameron found himself under intense domestic and international pressure over his apparent reluctance to maintain United Kingdom defence spending at the NATO target level of 2 per cent of GDP. Most commentators attributed this reluctance to the inevitability of defence cuts if the government wished to meet its deficit reduction targets. However, the aftermath of the general election saw a sudden decision to maintain UK defence spending at the NATO target level. This u‐turn is one of the more curious episodes in recent British defence policy. In this article we explore the reasons why, at a time of continuing cuts and austerity measures and against all the political signals, a decision was made to meet the 2 per cent target, and what this means for the UK's defence policy. In doing so, we analyse why most commentators assumed that defence cuts were inevitable, the domestic and international factors that explain the government's apparent u‐turn and what this revised defence budget settlement meant for the new 2015 National Security Strategy and Strategic Defence and Security Review.     

The unstable core of global finance: Contingent valuation and governance of international accounting standards

Accounting standards are the foundations of the financial regulatory edifice, and global financial governance is no more stable than the asset valuations that feed it. Yet for two decades and up to this day, no international accounting rule for financial instruments – the bulk of banks' balance sheets – has emerged that was more than a temporary fix, to be succeeded by further reforms. We show how banking regulators have been central to this dynamic and how their support for applying fair value accounting to financial instruments, the cornerstone of regulatory debate, has oscillated throughout the whole period. The two common international political economy approaches to global financial governance, which analyze it either as interest‐based bargaining or as ideas‐driven expert governance, fail to account for this pattern. In contrast, we show how the contingency of financial valuations itself has made it impossible for regulators to embrace or reject a stable set of accounting rules.     

Accounting for coalition‐building in the European Union: Budget negotiations and the south

Which parameters affect coalition building in budgetary negotiations? In this article, three distinct levels of analysis are identified to account for coalition building patterns, associated with domestic politics, domestic socioeconomic structures and EU politics. At the level of domestic politics, ideology points to cross‐governmental affinity of a partisan nature; at the level of socioeconomic structures, similarity of policy interests, generated by cross‐national socioeconomic convergence with EU policy standards, informs coalition formation patterns; at the EU politics level, the intergovernmental power balance influences the political aspirations of each Member State in the integration process and coalition‐building decisions. Two sets of parameters affect the evolution of EU coalition patterns, corresponding to the integration impact on the EU (new cleavages) and on the Member States (the impact of Europeanisation). This analytical framework is used to examine the southern coalition (Spain, Greece, Portugal) in the four multi‐annual financial frameworks (1988, 1992, 1999 and 2005).     

The role of independent regulators in policy making: Venue‐shopping and framing strategies in the EU regulation of old wives cures

This article addresses debates on the formulation of public policy, building upon a body of literature which has focused on the interconnectedness between the venues of policy action and the way issues are defined. It does so by focusing on the strategic role of policy actors in a policy subfield and their attempts at manipulating either frames or venues in order to shape policy. The novelty here consists in pointing to the involvement of regulators in such strategic action. An emerging body of research has indeed shown that the activity of formally independent regulators is not necessarily limited to the implementation of delegated regulatory competencies and that they are increasingly engaged in policy‐making activities. Thus, by resorting to the agenda‐setting and framing literature, the article sheds light on novel pathways through which regulators intervene in policy‐making activities, making a claim that they have very good ‘tools’ at their disposal in order to shape policy. These dynamics are examined in the case of the last piece of the EU's pharmaceutical framework – the 2004 Directive on Traditional Herbal Medicines – which provoked intense debate among manufacturers of herbals, retailers, consumers, and both EU‐level and domestic‐level regulatory authorities.     

Licensing,Accreditation and Quality Improvement

This article provides an explanation of why consideration is needed of historical practice issues when designing new regulatory regimes. It also suggests some practice techniques that can be applied both to existing and new regulatory regimes to enhance the effectiveness of the regulation. It does so by exploring the problems faced by existing service providers and regulators following the introduction of a new regulatory regime intended to raise the standard of out‐of‐home care services in NSW. This involved agencies making the transition from a licensing regime based on minimum standards under the Children (Care and Protection) Act 1987 to accreditation, employing optimum practice standards, under the Children and Young Persons (Care and Protection) Act 1998.     

The Limits of Policy Diffusion: Introducing International Norms of Anti‐Money Laundering into China's Legal System

This article examines the contribution of policy diffusion to create a regulatory system against money laundering in China. A two‐level analysis of transnational interactions and domestic law making shows how Communist Party prerogatives shape the insertion of multilateral norms into the legal system. In a contentious process of local accommodation, transnationally engaged technocratic bodies, turf‐conscious bureaucracies, and powerful party organs struggle to reconcile the goals of promoting global economic expansion, gaining international recognition, and absorbing innovative regulatory tools while preserving tight domestic control. In effect, Chinese policymakers try to utilize policy diffusion as a mechanism for negotiating and promoting the nation's global rise. Yet, when it comes to implementation, global regulatory standards are weakened or even neutralized through discretionary enforcement. The depth and robustness of normative assimilation therefore remain uncertain.     

Global nanotechnology regulatory governance from a network analysis perspective

Over the last decade, there has been a proliferation of nanotechnology regulatory initiatives, developed to ensure the responsible development of nanotechnology applications. This article examines the emergence and diffusion of environmental, health and safety (EHS) policies dealing with nanotechnology. Drawing on a citation network analysis of global nanotechnology regulatory governance, the article analyzes the role of key organizations at multiple levels and their interplay in initiating and diffusing occupational safety and health policies. It shows that private international standard‐setting organizations become “centers of information,” which play a strategic role as intermediaries that diffuse national policies globally. Through this process, these centers help to shape supranational policies. Such an understanding of the role of international private standard‐setting organizations sheds new light on the current debate over the privatization and internationalization of EHS governance.     

Constraints, states, and wars

Abstract. The rational choice assumption is already disputable at the individual level of decisionmaking. At the level of collective decision-making unitary rational action is an unrealistic assumption. It neglects the transitivity of collective preferences issue, the logic of collective action and freeriding, the agency problem, and the human tendency to agree with each other irrespective of the facts. While unitary rational action is rejected as a basis for theorizing on international relations and war, the idea of decision-making under constraints seems as valid in the interstate context as in economics. The most important constraints on national security decision-making are the anarchical character of the international system and the corresponding need for self-help, the security and the territorial delimitation dilemmas, the presence or absence of plausible blueprints for victory, and the presence or absence of domestic constraints on bellicosity. A simple explanatory model of war built on these ideas is suggested and tested with dyadic data for the 1962–1980 period. In addition, there is some discussion of why collective security is doomed to fail, and why hegemony rather than balance improve the prospects of peace.     

Escaping the International Governance Dilemma? Incorporated Transgovernmental Networks in the European Union

This article investigates the role of transgovernmental networks of national regulators in addressing collective action problems endemic to international cooperation. In contrast to recent work on transgovernmental actors, which emphasizes such networks as alternatives to more traditional international institutions, we examine the synergistic interaction between the two. Building on the broader premise that patterns of “dual delegation” above and below the nation‐state enhance the coordinating role of networks of national agencies in two‐level international governance, the article examines the formal incorporation of transgovernmental networks into European Union (EU) policymaking. The focus on authoritative rule‐making adds a crucial dimension to the landscape of EU governance innovations while connecting to the broader study of transgovernmental networks in international governance. The article develops an analytical framework that maps these incorporated networks across different sectors in terms of function, emergence, and effectiveness. Two case studies of data privacy and energy market regulation are presented to apply and illustrate the insights of this mapping.     

Timing as a source of regulatory influence: A technical elite network analysis of global finance

Rules governing the international financial system are the subject of some of the most intense distributional battles waged in any area of global governance. Who wins and who loses such battles – and why? I develop a novel analytical framework – technical elite network (TEN) theory – which explains the widely varying levels of influence that stakeholders enjoy over global financial standards. TEN theory draws attention to how issue‐specific characteristics of international finance – in particular, its highly technical and complex nature – shape the distributional consequences of global regulatory processes. It posits that such characteristics influence distributional outcomes by (i) affecting who claims first‐mover position and, thus, sets the agenda in global financial rulemaking, and (ii) ensuring that proposals made by first movers are increasingly difficult to alter at later stages of rulemaking. I provide empirical evidence for the theory by examining two regulatory regimes that are central to the efficiency and stability of the global financial system: the Basel Committee on Banking Supervision and the International Accounting Standards Board.     

Climate Change Policy Implementation: A Cross-Sectional Analysis

Why would countries invest resources to protect the global atmosphere, a global common‐pool resource? After all, this is an open‐access resource with no restrictions on appropriating its benefits. Furthermore, why would they do so under the aegis of a weak global regime (the United Nations Framework Convention on Climate Change, UNFCCC) that has virtually no provisions for sanctioning noncompliance and when the largest contributor to the problem is not participating in the regime? This article examines why a number of countries have implemented the UNFCCC. I hypothesize that countries implement UNFCCC because they corner domestic environmental benefits, namely reduction in local pollution. In my empirical analysis of 127 countries, employing an ordinal logistic regression model, I find that local air pollution is associated with higher levels of implementation of the UNFCCC. Thus, I conclude that the incentives to implement a relatively weak global regime can be found in the domestic political economy.     

To enforce or not to enforce? Judicialization,venue shopping,and global regulatory harmonization

The regulation of intellectual property rights takes place in a range of international venues. This proliferation of international venues greatly enhances the potential for venue shopping. We argue that different levels of domestic regulation and differing degrees of judicialization account for actors' preferences over institutional venues. We take into consideration two scenarios. Conceiving of judicialization as the delegation of adjudication to an independent third party and the enforcement through multilaterally authorized sanctions, we show that: (i) upward regulatory harmonization leads actors preferring weak regulatory intellectual property rights standards to strive for venues with low degrees of judicialization, whereas those favoring stringent intellectual property rights protection prefer highly judicialized venues; and (ii) downward harmonization leads to the opposite constellation of institutional preferences. We show how these expectations hold by way of in‐depth case studies of two instances of global intellectual property rights regulation: the regulation of plant genetic resources and intellectual property rights for medicines.     

The Evolution of a Global Labor Governance Regime

During the last decade, the approach by businesses and governments toward labor and social issues at the global level has fundamentally changed. Industrial relations are rapidly internationalizing by developing new actors and forms of governance to deal with the regulation of labor. This article looks at the evolution of self‐regulatory standards in the global labor governance debate. Key is that notwithstanding problems with the lacking legal framework of global regulation and enforceability, patterns of local self‐regulation, norm‐setting, and international codes lead not only to higher expectations of the behavior of transnationally operating firms but also to an indirect pattern of regulation. The article argues that particularly the adoption of the core labor standards by the International Labour Organization (ILO) and the setup of the Global Compact by the UN serve as points of convergence. A plethora of voluntarist initiatives that converge over time toward a shared understanding of labor standards is part of the transformation of global labor governance institutions.     

Examining the Scope for National Lesson‐drawing on Climate Governance

The need to understand the scope for comparative lesson‐drawing on national‐level climate mitigation policy has acquired added significance due to the current impasse in international‐level governance. Greater policy learning or lesson‐drawing among peers at the national level could, to an extent, foster meaningful developments by overcoming generalised international apathy and inaction. In this respect, we analyse the features of one significant example of national climate policy in order to examine the scope for lesson‐drawing, thereby setting out a normative research agenda. The UK Climate Change Act 2008 remains one of the few examples of legally enshrined national mitigation legislation and hence provides a relevant, but surprisingly under‐researched, source of learning for policy‐makers worldwide. By analysing its development, critical features and implementation, this article shows that—despite criticism of the sustainability and implementation effectiveness of the Act—some aspects of the policy could provide lessons for other states, and hence are potentially transferable extraterritorially, although lesson‐drawing itself is conditional on contextual constraints.     

Domestic drivers of transgovernmental regulatory cooperation

Transgovernmental cooperation among domestic regulators has generated considerable interest among scholars and policymakers. While previous research has focused on describing such regulatory networks, we know very little about what drives individual jurisdictions to join them. The question of membership is important because it determines the reach of rules and standards promulgated by a given network, and because it is logically prior to understanding the rulemaking dynamic within a network. We develop a set of hypotheses that highlight the role of domestic political factors in shaping network membership. Our empirical analysis, using an original data set for transgovernmental cooperation in securities and insurance regulation, finds that the institutional form of domestic market regulation, as well as the relative domestic weight of the industry, are closely correlated with membership. All else equal, jurisdictions with independent regulatory agencies and those where the industry in question represents a large share of gross domestic product are much more likely to join the respective network than jurisdictions without these characteristics. The paper underscores the important interactions between domestic and international factors for informal cooperation, an issue that has become increasingly central to global governance.     

Explaining regulatory autonomy in EU network sectors: Varieties of utility regulation?

This article explains variation in the autonomy in the range of activities that European regulators perform. By focusing on 102 regulators of four network sectors (electricity, gas, telecom, and railways), we test for functional and institutional explanations. The findings indicate that the inclusion of institutional factors matters for our understanding of recent changes in the governance of European network sectors. Reforms toward the independent agency form of governance and the range of competencies granted to sector regulators seem to be shaped not only by international functional pressures but also by domestic institutional factors. Beyond the credibility hypothesis, we find that national governments grant less regulatory autonomy to utility regulators the more coordinated an economy is and the more veto players are present. On the contrary, common law countries are associated with higher levels of regulatory autonomy.