Response to D. Zaring

by Pierre-Hugues Verdier

I would first like to thank David for his thoughtful reply to my initial post. I will address his three main points briefly and in order.

First, David raises a very fair set of questions regarding the choice and emphasis of my case studies. I deliberately chose three networks that were widely seen as successful in the literature, so that they would constitute “hard cases” from the perspective of my own rationalist framework. Another choice I made was to focus on “core” independent TRNs—excluding, for instance, networks formed to facilitate the implementation of European directives and other formal instruments, as well as expert networks not composed primarily of national regulators. These choices were, to a significant extent, driven by the objective of addressing directly Slaughter’s argument that TRNs are legitimate and effective precisely because they are made up of domestic regulators. The argument, it will be recalled, is that national regulators are held accountable by domestic mechanisms, and can ensure effective implementation of international standards through their existing domestic legal authority. It seems to me that this argument would play out quite differently when looking at the kinds of networks I excluded from the scope of my article. Nevertheless, as David’s mention of networks of human rights lawyers illustrates, a recurrent difficulty in the literature is that these different networks to be lumped together. In my view, both proponents and skeptics of networks would benefit from a more granular debate, one that better account for the significant differences between the various phenomena that sail under the “network” flag.

As regards my evaluation of each case study, this is ultimately a question for each reader of the article to judge. This being said, I would vigorously defend my emphasis on the failures of the Basel Committee. I would do so in light both of the disagreements of the 1990s and of the Committee’s resolute insistence, throughout the 2000s, in going forward with a capital adequacy model that is now widely regarded as theoretically flawed and overly responsive to the banks’ preferences. For more detail, I highly recommend Daniel Tarullo’s recent book on Basel II.

Second, David raises the crucial question of alternatives—TRNs, he argues, may fail, but do they fail more often than other institutions? This question is, of course, extremely difficult to answer empirically, but I believe it is also somewhat misdirected. My article is a response to what I see as an overstated normative claim about TRNs—namely, that they can provide effective and accountable global governance in a wide range of regulatory areas, without the undesirable features of more formal institutions. This claim, I argue, is flawed because regulators acting in TRNs are subject to pressure from domestic constituencies, many of the “technical” issues they attempt to address have significant distributive implications, and their informal structure struggles to achieve effective implementation and contain opportunistic defection. Once we acknowledge that TRNs suffer from such limitations, the question is not: “Are they better or worse than—say—the WTO or the UN?,” but rather: “In what circumstances are the various available models of global governance—treaty-based institutions, TRNs, non-governmental networks, and others—most likely to produce the best outcomes?” The question, in other words, becomes one of institutional design.

My article suggests part of the answer: TRNs are well-suited to address regulatory coordination problems, but not distributive and enforcement problems. This brings me to David’s third point. There is emphatically nothing wrong with coordination, and I am positively delighted that TRNs have effectively addressed some regulatory coordination issues. There is, however, a difficulty with suggesting that TRNs can achieve much more than that: it tends to conceal the institutional trade-offs—greater formality, rigidity, and international constraint on state sovereignty—that are inevitably required to deal with distribution and enforcement. This difficulty becomes more significant once we realize that so-called “technical” areas of international regulation are in fact rife with such distributive and enforcement problems, rather than being primarily coordination problems that can be solved by a rational consensus of disinterested experts.

On a more positive note, I also believe that the stark choice David posits between TRNs and the traditional “grand bargain” model—embodied by institutions like the ICJ, the UN, the UN Convention of the Law of the Sea, and the WTO—does not exhaust the possibilities. In an upcoming paper, I will argue that a more modest approach to international regulatory cooperation—based on mutual recognition among countries with comparable levels of regulation, continuous review of the adequacy of foreign standards, and credible reciprocity in rulemaking and enforcement—may be more promising in many areas. The SEC’s recent efforts to promote bilateral mutual recognition arrangements may turn out to be an important step in that direction.

Thank you again, David, for participating in this online symposium. My own perspective on TRNs is, as you pointed out, more skeptical than that of other scholars in the field. Nevertheless, I sincerely hope that my article will contribute to clarifying the issues and arguments on both sides, and that the case studies will be useful even to scholars who are more optimistic regarding the global governance potential of TRNs.

http://opiniojuris.org/2009/04/09/response-to-d-zaring/

One Response

  1. Pierre, a pleasure debating this with you.

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