Environmental Regulations and Corporate Strategy: A NAFTA Perspective

By Alan Rugman; John Kirton et al. | Go to book overview
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8
MMT and Investment Dispute Settlement

The new conditions of complex institutional responsiveness in general, and the new network of NAFTA institutions in particular, offer firms of different scale and scope a rich array of specific incentives for overcoming national and local environmental regulatory protectionism in critical foreign markets and thus for enhancing their overall competitiveness. To what extent have these new opportunities actually been identified and employed by firms? With what skill have they been implemented? And what success have they enjoyed? In short, are the rational incentives offered by the new conditions of complex institutional responsiveness a powerful predictor of, and explanation for, actual firm behaviour?

To address these questions, and test the logic outlined in the previous chapter, this chapter, along with the following two chapters, conducts detailed case studies of three particular environmental regulatory issues that have involved industries from the three North American countries and that have engaged in varying degrees and ways NAFTAs' environmentally related institutions. The first is the case of MMT, an apparently environmentally harmful automobile fuel additive whose importation was banned by the Canadian government, leading its US-owned exporter into and distributor within Canada to activate NAFTA's Chapter 11 investment dispute settlement mechanism. The second is the case of agriculture, where disputes over the often discriminatory application of sanitary and phytosanitary standards have restricted trade throughout North America and beyond. The third is the case of the automotive industry, with a particular focus on efforts to reduce vehicle emissions on the part of original equipment manufacturers, fuel suppliers, and those involved in operational inspection and maintenance.

Together, a detailed exploration of these three cases allows a careful, disciplined process tracing and test of how complex institutional responsiveness is practised-- how firms actually employ the NAFTA institutions and other instruments, as a matter of corporate and political strategy, to overcome, reduce, and circumvent environmental regulatory protectionism and thereby enhance competitiveness. These three cases embrace all four types of firms at their different levels of internationalization. The agricultural case centres on domestic producers faced with competition from imports, and often competing with small home-based exporters seeking to take advantage of the newly opened NAFTA market place. The MMT case deals with a US home-based exporter and multinational, Ethyl Corporation. And the automotive case has at its core the US-owned big three automakers and their major suppliers who are transnational MNEs operating on a global scale.

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