Institutional Choices Under Globalisation
New Perspectives on the Modern Corporation series
Edited by Silvia Sacchetti and Roger Sugden
Chapter 3: Harmonization, Differentiation, and Development: The Case of Intellectual Property in the Global Trading Regime
Kenneth C. Shadlen One of the most enduring points of conflict in the global political economy is whether international economic rules and regulations should accommodate diversity or encourage harmonization of regulatory institutions. The logic of differentiation is that optimal regulatory design differs according to national needs and conditions. The logic of harmonization, in contrast, is that the transaction costs imposed by regulatory diversity impede crossborder investment and trade. Though international economic regimes in the decades following World War II reflected both the logics of differentiation and harmonization, the former largely prevailed. Members of the General Agreement on Tariffs and Trade (GATT), for example, established basic rules and procedures for coordinating ‘trade’ policies, but the issue-area was narrowly defined such that countries retained virtually unlimited discretion over national regulatory institutions – even those regulatory arrangements that might affect trade flows. The logic of differentiation was even more evident with regard to developing countries: many were not members of GATT, and those that were received ‘special and differential treatment’ (SDT). By exempting developing countries from obligations of reciprocity, for example, poorer countries could undertake activities that were prohibited in the case of wealthier countries (Finlayson and Zacher, 1981; Tussie, 1987). Since the early 1980s, the logic of harmonization has increasingly come to inform international economic regimes. Multilateral trade negotiations have broadened the definition of ‘trade’ and introduced international disciplines on a variety of regulatory practices defined as ‘trade-related’. Countries are now subject to multilateral supervision not just in the form of tariffs and...
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