Environmental Regulations and Corporate Strategy: A NAFTA Perspective

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

11
Implications for Firm Strategy and Public Policy

The new conditions of complex institutional responsiveness are now the dominant reality for firms doing business in and from North America. These conditions require a major adjustment in the corporate and political strategies upon which firms have long relied to gain entry to the foreign markets now essential to ensuring their competitiveness in an increasingly global economy. These new conditions can appear to be obstacles to firms used to operating successfully within a North American market insulated from global competition. Yet these new conditions of complex institutional responsiveness, created by NAFTA, offer North American firms major new opportunities, at both the corporate and political level, to compete in the rapidly opening global market place.


The New Era of Environmental Regulatory Protectionism

The new conditions of complex institutional responsiveness have now become a dominant feature of the business environment for firms in North America. They have created a major new challenge for even the largest firms seeking to do business across international boundaries. During the 1990s they have made environmental regulatory protectionism more frequent, widespread, entrenched, complex, and costly.

In the first instance, the new politically grounded conditions of complex institutional responsiveness have led to an upsurge in the frequency and range of environmental regulatory protection. Those hoping that NAFTA would usher in a new era of transborder commercial and environmental harmony, have grounds to be disappointed with the record of its first five years. As Table 11.1 indicates, there have been substantially more trade-environment issues involving at least two North American countries that have arisen in the five years since NAFTA took formal effect, than in the five years when the FTA operated ( 1989-1993), and in the preceding five years when the three countries of North America could look only to the distant GATT for international relief.

The widespread nature of environmental regulatory protection in the NAFTA era is further seen in the broad range of sectors that have been affected by it. Such issues abound in the automotive sector (at the heart of the North American manufacturing economy), in the environmentally rich natural resource sectors of agriculture, fisheries, and forestry, in other manufacturing

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