Recent advances in trade liberalization and new forms of environmental regulation present both strategic opportunities and obstacles for firms engaged in international trade and investment. The elimination of the traditional border barriers of tariffs and quotas under multilateral and regional trade agreements has opened new markets abroad, but at the same time removed the major instrument some firms have used to protect themselves at home from international competition. Thus, firms and governments are aggressively seeking alternative and innovative strategies to keep open access to international markets, while maintaining shelter at home.
The classic strategy for securing shelter has been the capture of the administration of domestic regulation, including the new generation of environmental regulations, by domestic industry. The industries seeking shelter often form alliances with environmental groups and seek protection through the discriminatory application of national and local environmental regulation, at times in violation of internationally guaranteed national treatment provisions and other trade disciplines. However, the recent emergence of international trade and environment regimes with substantial powers for dispute settlement, management and prevention, and international regulatory convergence, give outward-looking firms new opportunities at the international level to challenge and circumvent this growing phenomenon. The broader array of corporate strategies which results has flourished in North America under the innovative trade and environment rules and institutions created by the North American Free Trade Agreement (NAFTA).
This study develops a model of complex institutional responsiveness and demonstrates how it identifies and guides firm strategy in this new era of opportunities for national regulatory capture and international institutional regulation. It applies this model within the context of North America and explores its implications for Europe and Asia by relating the NAFTA experience to that of other regional trade arrangements and the World Trade Organization (WTO). Drawing on the disciplines of management studies, economics, political science, and law, it examines 24 leading and 84 relevant cases of efforts by firms to benefit from, or defend against, such capture through the use of international institutions. The research is based on 230 confidential interviews with senior executives and officials in North American and European companies, national governments, environmental