Regulation in Asia

Pushing Back on Globalization

John Gillespie, Randall Peerenboom, John Gillespie, Randall Peerenboom

• Publisher: Routledge
• Year: 2009
• Print ISBN: 9780415490030
• eBook ISBN: 9781135249144
• Edition: 1
• Topic: Law
• Subtopic: Administrative Law
• Index: Law

Unlike much analysis about regulation in Asia which focuses on globalisation and the transplant effect, leaving domestic influence over commercial regulation under-researched and under-theorized, this book focuses on how local actors influence regulatory change. It explores the complex economic and regulatory factors that generate social demand for state regulation and shows how local networks, courts, democratic processes and civil society have a huge influence on regulatory systems. It examines the particular circumstances in a wide range of Asian countries, provides transnational comparisons and comparisons with Western countries, and assesses how far local regulatory regimes increase economic value and convey competitive advantages.

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Pushing back on globalization

An introduction to regulation in Asia

John Gillespie and Randall Peerenboom

Much of the discussion about legal globalization focuses on the transnational regulatory arena. It ponders the interaction between international law and nation-states, legal harmonization within regional trading communities such as the European Community, and the regulatory power of international organizations such as the World Trade Organization (WTO). It also discusses regulatory competition among the great trading powers. But it seldom considers regional responses to global regulation. What little is written in this area primarily focuses on Western countries, leaving legal globalization in Asia comparatively under-researched and under-theorized.

This volume aims to redress this gap in the literature by broadening our understanding about how state and non-state actors in Asia influence legal globalization. The chapters shed light on the way in which state and non-state actors adopt, adapt, and resist global commercial law scripts, as well as the complex economic and regulatory factors that generate social demand for global laws and principles while at the same time often resulting in their transformation within the local context. Contributors demonstrate how Asian countries are beginning to create their own modes of regulation that are influential in the region and increasingly have an impact on global regulatory systems, even though, overall, Asia remains an importer of legal knowledge.

Despite being home to a third of the world’s population and its fastest growing economies, Asian countries remain secondary players in the international debates that shape global regulation. Although some Asian countries, especially China and Japan, are beginning to assume a more prominent role in international forums such as the WTO, they remain under-represented in the committees that formulate and refine global laws. Overwhelmingly, most global regulation circulating in Asia is Western (especially American) in origin.¹ This is unfortunate as many Asian countries have been remarkably successful in recent decades in achieving sustained growth, reducing poverty, and establishing effective institutions capable of providing good governance.

Nevertheless, there are signs of change. Japan is now a major supporter of legal reforms from The Philippines to central Asia. It also exerts a strong influence over law reforms sponsored by the Asian Development Bank (ADB). More recently, the so-called “Beijing Consensus,” which promotes economic development without democratization, is gaining prestige within Asia and beyond.²

Chapters in this volume consider the role that courts, democratic processes, civil society, and local networks play in giving local actors—including business associations and business people (whether local or foreigners investing in the country), social and political groups, and international agencies operating in-country—opportunities to localize and influence global regulation. The chapters combine “micro” or interpretive methods that generate finely grained analysis with “macro” or structural approaches that give a broader picture of state and non-state regulation. By contrasting experiences in East Asia with Western countries, this volume investigates to what extent demand for regulation is path dependent and how much is a function of economic and institutional development.

More specifically, the chapters in this volume address a number of issues, including:

•Who are the most influential global and local players, and how do they interact?

•How does demand for regulation and access to regulators combine to shape the substance and style of state regulation?

•What drives regulatory change? When is there local resistance and adaptation, and when is there not?

•Does locally responsive regulation generate economic value and competitive advantages?

Before summarizing our results, we provide a brief overview of the evolving regulatory theory field, noting parallels with the evolving law and development field. Many of the authors have either explicitly or implicitly used regulatory theory to conceptualize the interaction between global regulation and domestic regulatory systems. It is therefore useful to outline the main ideas they employ and consider how regulatory theory advances our understanding about domestic engagement with legal globalization and the efforts to export particular regulatory forms and paradigms of development.

Globalization and domestic regulation

Authors locate the interaction between global and domestic forces in a regulatory domain. This is a notional space where state and non-state actors variously compete and collaborate with each other to steer the domestic adoption and implementation of global regulation.³ As Veronica L. Taylor observes in her chapter, “the regulatory space metaphor is illuminating because it suggests a suspended sphere with multiple planes, rather than the vertical channel of state–citizen command and control regulation, or a purely horizontal axis of private player interactions.”

A brief account of regulatory development explains how changes in the regulatory space influence how global regulation is localized. For much of the twentieth century, commercial regulation was regarded by Western and Asian governments, both empirically and normatively, as a state function.⁴ A narrow range of state bodies were responsible for commercial regulation; they included legislatures, the executive and, to a lesser extent (especially in Asia), the courts. The dominant feature of statecentered regulation was that it was a form of command-and-control or top-down regulation, built on Weberian institutions of the modern state and guided by principles of rational and efficient governance, and in Northeast Asia by the twin goals of rapid economic growth combined with social stability.

Regulatory approaches are not static, however, and have always waxed and waned in line with changing endogenous political contingencies and global influences.⁵ From the 1950s to the 1980s, developmental states in Asia used regulation to increase national competitiveness.⁶ Take Japan, for example. A form of collaborative capitalism developed during the high-growth period (1960–90) that commanded considerable prestige within and beyond Asia. Although its precise workings remain a matter of controversy, in essence the system consisted of an elite bureaucracy staffed by the best managerial talent working closely with big business to develop regulatory policy.⁷ The state, represented by the Ministry of International Trade and Industry (MITI), used negotiated policies to guide industries in their investment decisions and marketing practices through formal and informal directives known as administrative guidance. Precisely how administrative guidance shaped business outcomes is debated. What is clear is that state officials negotiated with non-state actors to shape official policy regarding the adaptation of global regulation.

Meanwhile, a different regulatory history developed in the US. Cass Sunstein has described the explosion of legislation that followed the “rights revolution” of the 1960s and 1970s.⁸ In addition to enhanced protection of civil and political rights, the rights revolution increased the role of the state as the provider of social welfare. This period, reflecting the transition in Euro-America from classical Millian liberalism to Rawlsian social welfare liberalism, corresponds to the “First Moment” of law and development described by Trubek and Santos, where the state was seen as playing a prominent role in managing the economy, achieving social goals, and modernizing traditional societies.⁹

This idealistic period was followed by the rise of neoliberal economic thinking in the late 1970s, corresponding to the “Second Moment” in law and development. Neoliberalism advocated a smaller state, emphasizing deregulation, privatization, and decentralization to combat the perceived “inefficiencies” caused by state interference in market regulation in the economic sphere and limitations on welfare in the social sphere, with an emphasis on trickle-down economics as the way to address poverty and the needs of the most vulnerable members of society.

Although the neoliberal deregulatory movement reached its zenith in the Anglo-American world, it made modest inroads elsewhere. What neoliberalism meant in practice varied from place to place. For example, in the Anglo-American world, it sought to roll back the welfare state. But more generally it aimed to reduce state control over particular industries in an attempt to make them more responsive to market forces.

By the 1990s, the work of New Institutional Economists such as Douglass North began to challenge the notion that left alone markets always yield optimal results.¹⁰ In a landmark report in 1993 entitled The East Asian Economic Miracle, the World Bank moderated its deregulatory mantra and conceded that states play a vital role in regulating markets.¹¹ The economic success of Japan and the newly industrialized Northeast Asian states, combined with the failures of developing countries that adopted neoliberal policies and complied with the International Monetary Fund (IMF)’s structural adjustment policies, provided the impetus to bring the state back into the regulatory arena.¹²

During the 1990s and especially following the Asian financial crisis in 1997, administrative guidance lost prestige in Japan and South Korea.¹³ Japan and South Korea responded to their economic problems by re-regulating. They not only enacted a raft of new commercial laws, but also sought to judicialize administrative processes by shifting discretionary power from bureaucrats to judges and citizens, a process that was occurring globally and in other East Asian states as well.¹⁴

This period of re-regulation in Northeast Asia coincided with, and was influenced by, what has been termed the rise of the “regulatory state” in the West.¹⁵ States that had moved to privatize companies, reduce red tape, and use market-like incentives were not really deregulating, but rather finding new ways to regulate the economy. Neoliberal deregulation moved in tandem with regulatory reforms that have spread new institutions, technologies, and regulatory instruments around the globe. For example, the World Bank advocates neoliberal reforms, but also promotes re-regulation throughout Asia as a method of stabilizing private markets through a range of measures bundled together as “good governance.”¹⁶

In contrast with previous regulatory periods, the regulatory state challenges the convention that norms must be imposed by the public sphere on the private sphere. It developed new forms of “responsive” regulation that involve privatization, market competition and increased state reliance on self-regulating organizations and regimes.¹⁷ In short, it re-engineers the way in which state and non-state actors think about who is permitted within the regulatory space and who is excluded from exercising regulatory power.

In a related development, empirical work by John Braithwaite and Toni Makkai, among others, has challenged the assumptions regarding the relationship between compliance and the certainty or severity of sanctioning.¹⁸ They favor a flexible approach that combines different strategies that rely on persuasion and more cooperative regulation. Thus, the flexible regulator’s toolbox includes a wide range of tools, both formal and informal, legal and non-legal. In addition to the previously mentioned privatization, deregulation, centralization, and decentralization, there are corporatist and negotiated rulemaking approaches that involve key stakeholders in the lawmaking and implementation processes; self-regulation and other informal (non-state or quasi-non-state) approaches, including restorative justice programs; public disclosure and sunshine laws that emphasize transparency and openness; increased participa...

Table of contents

• Routledge law in Asia
• Contents
• Tables
• Contributors
• Preface
• Acknowledgements
• 1 Pushing back on globalization
• 2 The role of state, non-state, and hybrid actors in localizing global scripts in East Asia
• 3 Pushing against globalization
• 4 Traditional knowledge in Asia
• 5 Giving content and effect to competition rules
• 6 Resistance, revision, and retrenchment in the transition to a competitive market economy in China
• 7 Regulatory learning and its discontents in China
• 8 Unacknowledged legislators
• 9 Pushing against globalization
• 10 Globalization and Japanese regulation
• 11 Rehabilitating Korea’s corporate insolvency regime, 1992–2007
• 12 The people’s prosperity?
• 13 Law reform and corporate governance in Malaysia
• Index