The Role of the State in Disrupting the Distribution of Power within GVCs

The Role of the State in Disrupting the Distribution of Power within GVCs

NB: This post is part of a symposium on law and global value chains co-convened with the Institute for Global Law and Policy’s Law and Global Production Working Group.

Ioannis Kampourakis–

The research Manifesto on the role of law in global value chains highlights the centrality of legal regimes for the ‘creation, structure, geography, distributive effects and governance of Global Value Chains’. The recognition of law’s constitutive role in the chain means that law is not simply an institutional backdrop for the operations of the chain but rather endogenous to GVCs. Indeed, transnational corporations that coordinate GVCs are not mere ‘context-takers’ but rather play an important role in producing the rules that govern their own operations. This jurisgenerative capacity of private corporate actors weakens democratic control over the production process and creates the potential for dis-embedding the transnational economy from social values and relations. Yet, the law that is endogenous to GVCs is not impenetrable to attempts to introduce such values within it, as recent “corporate sustaintability laws” imposing transparency requirements have illustrated. The normative project of ‘politicizing’ the endogenous law of GVC capitalism by injecting public values within regimes of private governance has the capacity to limit corporate rationalities of profit-maximization and to generate progressive social reforms across the chain. However, such attempts can only incompletely realize the goal of subjecting GVCs to democratic accountability, while they might reinscribe a neo-colonial dynamic, in which it is up to consumers and investors in the Global North to police the practices of firms exploiting workers and extracting resources from the Global South. Insofar as national and international law remain powerful inscriptions of democratic legitimacy with the capacity to steer collective life beyond market rationalities, any normative undertakings that seek to disrupt the current distribution of power within and across GVCs must also be channeled through them.

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Labor Law and Economic Governance in the EU

This post comes out of the early career workshop ‘Law and Political Economy in Europe’which took place at the Centre for Socio-Legal Studies, at the University of Oxford, on the 7th of October 2019. For all the posts this series, click here.

Marco Rocca –

PoliticsineuropeAt the Oxford Workshop, I explored the relationship between the EU economic governance and labor law. In particular, I looked into legal tools of austerity politics and analyzed the role of the Court of Justice of the European Union (CJEU) in cementing this agenda.

During the economic crisis, leadership at the European Central Bank, and the EU Commission resorted to new tools of economic governance across the EU. Their implementation shows how the law can be instrumentalized to actively reduce the ability of trade unions and labor regulations to bring about the decommodification of the factor of production that is labor. This of course builds upon power imbalances in a given situation, in this case, between ‘creditors’ and ‘debtors’, ‘core’ and ‘periphery’ of the European Union.

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Free Trade Free for All: Market Romanticism Versus Reality

Jamee K. Moudud – 

The drama surrounding President Trump’s decision to impose import tariffs on steel and aluminum has roiled the Republican Party and wide swathes of the corporate elite. The tariff decision comes on the heels of political bluster about the US being treated “unfairly” by other countries. This accusation of “unfairness” when it comes to US trade deficits is well worn. In a previous era, Japan was the alleged culprit of “unfair” trade practices because of its persistent trade surpluses with the U.S.

This type of political theater draws on a romanticized view of international trade and its persistent conflict with empirical reality. As an explanation of global trade relations,  the Heckscher-Ohlin-Samuelson (HOS) model of foreign trade relies on both of the standard neoclassical assumptions about “efficient” markets. First, it assumes perfectly competitive markets, composed of many, small firms, each without any  ability to set prices. Second, it assumes that there are zero externalities to economic transactions, meaning that transactions do not have any un-priced, third-party effects. And of course, the model assumes the economy  is fundamentally based on barter, according  no roles for money, credit, and effective demand. The absence of money implies that there is no possibility of an increase in liquidity preference (a term coined by Keynes to describe the desire to hold cash rather than illiquid assets) in uncertain times and thus no possibility of shortfalls of effective demand. Together, these propositions of the HOS model predict that a legal framework of “free trade” will produce balanced trading relationships on the international level and full employment in each domestic economy. Significantly, assuming that there is perfect competition implies that firms in each country, regardless of its level of industrialization, have access to the same technology needed to produce goods for the international market. Perfect competition implies that no firm injures others, a point of view that has been challenged by many authors. (See the edited volume by Moudud, Bina, and Mason Alternative Theories of Competition: Challenges to the Orthodoxy). The core aspect of the broad alternative perspectives is that firms do seek to damage each other by attempting to take away market shares via price-setting and cost-adjusting processes. This has nothing to do with either “perfect” or “imperfect” markets.

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