Environmental Regulations and Corporate Strategy: A NAFTA Perspective

By Alan Rugman; John Kirton et al. | Go to book overview

2
The Analytic Framework of Capture

This chapter develops a general framework for the analysis of the relationship among trade liberalization regimes, environmental regulation, and firm competitiveness. Using NAFTA as an empirical testing ground, these relationships are explored from three different disciplinary perspectives. First, the issue is examined from a corporate strategy perspective, that is, an exploration of the problems facing, and responses of, firms subject to the administration of discriminatory environmental regulation, with specific reference to the theory of shelter. A twenty-cell matrix is used to describe how five different levels of environmental regulation can affect four various types of firms. Second, the legal implications of regulatory capture/shelter are explored to better understand the legal processes at play within NAFTA and the legal instruments firms have at their disposal. Specifically, both the national treatment obligations and the legal frameworks that govern environmentally related trade disputes are analysed. Third, political science perspectives are employed, such as the theory of complex interdependence and neo-liberal institutionalism, in order to illustrate how corporations and other stakeholders can influence regulatory processes, and how international regimes can constrain the protectionist regulatory actions of national governments.

These three perspectives are combined into a new and unified model relevant for the analysis of trade and the environment. The strength of this framework lies in the fact that it is not limited to NAFTA but can be extended to a wide variety of regional and global contexts that span all levels of environmental regulation and all types of firms, functioning within different trading regimes.

The North American Free Trade Agreement (NAFTA) is the first international trade agreement to incorporate environmental regulations ( Globerman 1993). It does this in several provisions within the core NAFTA text but, above all, through the side agreement establishing the Commission for Environmental Cooperation (CEC). The institutional fabric of NAFTA, and the CEC in particular, is of great interest to researchers, since it provides an on- going laboratory to examine propositions from the newly emerging field of trade and the environment ( Rugman 1995). The work of the CEC is of great relevance for Canadian business as the CEC is a legally and institutionally powerful body charged with the review and harmonization of environmental regulations in North America ( Richardson 1993; Munton and Kirton 1994; Johnson and Beaulieu 1996; Winham 1994; Kirton 1998).

The CEC will have an important impact on corporate strategy and Canadian

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