Subnational Economic Development and Environmental Policy in an International Context

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Abstract

Over the past two decades, there has been a growing recognition that subnational actors are playing an increasingly energetic role in foreign affairs. The once robust notion that U.S. foreign affairs rest solely within the purview of the central government has become a relic of a bygone era. States, in particular, both out of necessity and as a result of new opportunities, have stepped onto the international stage in a variety of policy areas--including economics, environmental protection, politics and culture--not as stand-ins for the federal government, but as sovereign actors with their own unique role.

Using Event History Analysis, this study draws on general policy adoption and diffusion theory to investigate the motivations of states adoption of international economic development (IED) and international environmental (IEnv) policy. The results of this analysis provide important insights into the similarities and differences in subnational environmental and economic development foreign policy adoption.

Introduction

Over the past two decades, there has been a growing recognition among international relations and federalism scholars that subnational actors are playing an increasingly energetic role in foreign affairs. Collectively, these scholars agree that the once robust notion that U.S. foreign affairs rest solely within the purview of the central government has become a relic of a bygone era. States, in particular, both out of necessity and as a result of new opportunities, have stepped onto the international stage in a variety of fora, including economics, environment, politics and culture, not as a stand-in for the federal government, but as a sovereign actor with its own role to play.

The primary focus of the burgeoning literature on the subject of subnational foreign affairs has been its impact on national foreign policymaking and international relations. Far less is being written, however, about subnational foreign affairs from a state policy viewpoint. In fact, many of those integrally involved in the design, adoption, and implementation of subnational policy with an international orientation do not recognize these activities as "foreign affairs" or "foreign policy". (1) The fact remains, however, that states are interacting with foreign regions and their actions are designed to create some response from those regions, either in a positive mode (as in the case of international economic development), or in a more coercive mode (as in the case of human rights activity). Rather than focusing on whether states have a legitimate role in this realm, the more useful analysis focuses on how the "different advantages" can be leveraged. This, however, requires that we understand "which functions and policy instruments are best centralized and which are best placed in the hands of state and local government (Oates, 1998: p. 3)."

Both the type of issues at play and the demand for action at a local level are forcing state and local governments to take a more active role in international policy. This is due, in part, to shifts in a variety of economic and social forces--economic globalization, devolution of federal responsibilities combined with decreased transfer payments to states, and overall increases in international connectedness. It may also be due in part to a shift in perspectives on what "national security" means. Although national security remains a fundamental function of the federal government, the definition of the term has moved away from the narrow concept of armed conflict, to a broader definition that includes economic security and physical health and well-being. Thus, national security now encompasses a broad array of issues from containing "mad cow disease" (BSE) to protecting intellectual property rights. These issues actively engage citizens on a local level both because they are issues that impact individuals' day-to-day existence and because they can have a significant effect on small and medium-sized commercial operations, rather than being distant issues that engage only the national policy elite and behemoth multinational corporations (MNCs).

The vast majority of the studies that have been undertaken to date have focused on understanding the effects of subnational foreign activity on the foreign policy of the federal government. Little attention has been given to the effects of this emerging state role on the states themselves. This paper is part of a larger research agenda that attempts to move toward the development of a new state-level perspective of global governmental interaction. This new perspective recognizes state governments as a full-fledged player in foreign affairs and attempts to develop a clearer understanding of the strengths and weaknesses of policy development at this level. Ultimately, it is necessary for state-level government administrators and policymakers to have a better understanding of their unique role in identifying, designing and implementing effective foreign policy--not as a subsidiary of the central government, haphazardly darting in and out of the international policy milieu, but as a mature, constant actor with a clear understanding of the global policy environment and knowledge of where and when state-level policy activity is most likely to be useful and successful. In a scarce resource environment, states need this type of informative research to help target their activities to best advantage.

The Evolution of State-level Involvement in Foreign Policy

State-level involvement in foreign policy has waxed and waned throughout the history of the U.S., and theory development has generally followed suit (see also Kincaid, 1984). Prior to the founding of this country, the colonies had a strong, primarily economic interest in international relations, and they actively pursued their interests abroad. Even after the establishment of the constitution, the states continued to build their individual economic bases by exporting their resources and seeking out foreign investment. As the nation coalesced, however, state-level interest in foreign affairs dwindled as local legislators and governors turned their attention to domestic issues. During this period the role of the U.S. president expanded through the increasing use of executive agreements to accomplish foreign policies goals and through U.S. Supreme Court decisions that interpreted federal powers over foreign affairs quite broadly.

After World War I, the American economy was among the most robust and powerful in the world (Kincaid, 1999). However, in the early 1930s, as the nation sank into an economic depression, the capacity and interests of the states to be involved in foreign affairs again declined, and state policymakers' attention turned to more pressing local matters. By the end of World War II, through either voluntary withdrawal or federal preemption, state involvement in foreign affairs had become "nearly invisible" (Kincaid, 1984: p. 99).

As a result, the modern study of international relations has centered almost exclusively on the nation-state. Internal coherence in foreign policy (identification and articulation of a unified national interest) has been highly prized, and the conduct of diplomacy stressed the importance of nations speaking "with a single voice." Such coherence was considered crucial in the international arena to avoid misunderstanding and to avoid allowing other nation-states to exploit domestic divisions (Hocking, 1993).

Following the end of World War II, the global political climate changed dramatically. The U.S. had developed a network of political-security agreements, establishing a new, deep involvement of U.S. interests with other nations (Kline, 1984). The U.S. economy, aided by enhancements in international transportation and communication, remained exceedingly strong. The world economy was "going global." During this post-war period, "[international] trade grew nearly twice as fast as production, while foreign direct investment grew at a much faster rate than total investment. In the U.S., foreign trade increased ten-fold from around $20 billion in 1953 to over $200 billion in 1975. Goods, capital, people and ideas began moving across national boundaries with growing speed and increasing volume (Kline, 1984: p. 24)."

By the 1960s the world economy had been transformed. Multinational corporations (MNCs) multiplied and acquired political power that transcended nationality. They brought with them the creation of various international and multinational organizations in an effort to makes rules more stable, thereby reducing transaction costs associated with uncertain and inconsistent legal frameworks. International organizations also began to emerge to address other issues that were not bound by sovereign borders, such as the protection of the environment and human rights. With the unprecedented movement of people and products around the globe, it became increasingly difficult for central governments to keep international issues separate from domestic issues.

During this period the U.S. federal government was in an expansion mode domestically, taking the lead in managing the national economy and creating a variety of programs designed to aid local development through intergovernmental transfers (Kline, 1984). Some state policymakers--those who understood the opportunities presented by the emerging global environment--began to make forays into the international arena. In the early 1960s, for example, a handful of state governors began to arrange trade missions abroad in an effort to advance their own state's economies, and state development agencies began to work with the U.S. Commerce Department to establish small export programs to assist local firms to market products abroad.

Beginning in the late 1960s, the federal government began to enter into a more conservative period. Federal transfer programs began to diminish--a movement spurred on by the economic recession of the 1970s, while at the same time more and more of the burden was being shifted to the states to carry out what had been the responsibility of the federal government. State policymakers, dissatisfied with the uneven results of national economic policies (that not unexpectedly resulted in relative winners and losers), coupled with the increasing need to generate revenues to make up for dwindling federal dollars, began to actively pursue their own state's international interests, economic and otherwise.

International Economic Development policy (IED) reemerged as a state-level policy domain in the early 1970s, in response to the dual forces of increasing globalization of the economy and the rise of New Federalism in the U.S.. (2) Although a few states began actively pursuing their own economic development strategy prior to that time, most states were content to follow the tides of the national economy. However, as the nation entered a recession, followed closely by the twin oil shocks of the early 1970s, states began to seek ways to direct their own economies. And when the federal government began to cut federal grants, states needed to find new ways of generating income to bear the financial burden of these programs.

Thus a new era of state-level economic development was ushered in. Until this time, most state economic development was centered on "smoke-stack chasing"--providing various financial incentives to manufacturing firms from other states as an enticement to relocate. This form of economic development was largely unfulfilling for states because the number of large manufacturing firms was small, so relatively few states came out "winners" under this model (Peirce, et al., 1979). In the broader view this is a zero-sum game--while one state wins, another loses (Peirce, et al., 1979). State policymakers began to look for more creative (and hopefully lucrative) ways to grow business.

During this same period, states also began to take on a more significant role in international environmental policy (IEnv). Throughout the 1960s and of the 1970s, the federal government was the primary actor in environmental regulation. In fact, the federal Environmental Protection Agency (EPA) was created largely because states failed to protect their own environment prior to the 1970s (Ringquist, 1993). In the late 1970s and particularly in the early 1980s, this began to change. Citizens perceived the federal government as not fulfilling its environmental duty and states began to fill the void. In doing so, they demonstrated that at times states can create better transborder environmental policy because such policy can provide more flexibility to address local …