The Intersection of Private Regulation and State Sovereignty in International Bu...

The Politics of Private Regulation and State Sovereignty

• Firms are interested in private regulation for reputation-building and risk management, rather than for coordination and market expansion.
• Firms face demands from activists, which can be accommodated through rules for operations or supply chains, rather than true standards creating uniformity.
• Convergence on a single set of standards in an industry is unlikely due to fundamentally different goals of firms and challengers.
• Analysis of the politics of credibility involves tracing the revision of rules and oversight over time, support for industry-driven and NGO-endorsed initiatives, and development of new approaches and technologies.
• Large companies have a privileged position in power struggles over private regulation.
• Transnational private regulation clashes with pre-existing cultures of production, national strategies for economic growth, and domestic law when put into practice.
• The clashes generate a power struggle known as the "politics of grounding."
• The central players in the politics of grounding are transnational private regulatory initiatives and domestic government agencies at the point of implementation.
• Governments at the point of implementation have sought to "repurpose or replace" transnational private regulatory initiatives.
• A notable example is the resistance from the Bangladeshi government to the Accord on fire and Building Safety, leading to a transfer of operations to the state.
• In China, the State Forestry Administration and Chinese Academy of Forestry formed a competing initiative, the China Forest Certification Council, and tightened rules for foreign certifiers, impacting the Forest Stewardship Council's operations in the country.
• The amount of FSC-certified land in China fell significantly, while certification under the Chinese standard grew rapidly after affiliating with a global competitor, the Programme on the Endorsement of Forest Certification.

Test your understanding of the complex interplay between private regulation and state sovereignty in the realm of international business with this quiz. Explore the dynamics of power struggles, the impact on industry standards, and real-world examples of clashes between transnational private regulatory initiatives and domestic government agencies.