Question

To what extent does globalization, in concert with the principles of anarchy, facilitate or hinder international cooperation?

Answer 1

• Economic globalization represents a major transformation in the territorial organization of economic activity and politico-economic power. How does it reconfigure the territorial exclusivity of sovereign states, and what does this do to both sovereignty and a system of rule based on sovereign states?
• Has economic globalization over the last ten or fifteen years contributed to a major institutional discontinuity in the history of the modern state, the modern interstate system, and, particularly, the system of rule?
• The term sovereignty has a long history, beginning with Aristotle, running through Bodin and Hobbes and the American and French revolutions, and arriving today at yet another major transformation. From being the sovereignty of the ruler, it became the will of the people as contained in the nation-state, that is,popular sovereignty.
• It was for a long time centered in a concern with internal order, a notion that influenced international law and politics for many centuries. Sovereignty often was "an attribute of a powerful individual whose legitimacy over territory . . . rested on a purportedly direct or delegated divine or historic authority."
• 1 The international legal system did not necessarily register these changes as they were happening. But by the end of World War II the notion of sovereignty based on the will of the people had become established as one of the conditions of political legitimacy for a government.
• 2 Article 1 of the un Charter established as one of the purposes of the un the development of friendly relations among states "based on respect for the principles of equal rights and self-determination of peoples"; the Universal Declaration of Human Rights of 1948, Article 21 (3), provided that the will of the people shall be the basis of authority of government . . . through elections. . . ."
• 3 What is significant here is that this was now expressed in a fundamental international constitutive legal document. "In international law, the sovereign had finally been dethroned."
• 4 The sovereignty of the modern state was constituted in mutually exclusive territories and the concentration of sovereignty in nations. There are other systems of rule, particularly those centered in supranational organizations and emergent private transnational legal regimes, and earlier forms of such supranational powers reigned on occasion over single states, as when the League of Nations gave itself the right of intervention for the purpose of protecting minority rights.
• Systems of rule need not be territorial, as in certain kinds of kinship-based systems; they may not be territorially fixed, as in nomadic societies; or, while territorially fixed, they need not be exclusive.
• 5 In the main, however, rule in the modern world flows from the absolute sovereignty of the state over its national territory. Achieving exclusive territoriality was no easy task. It took centuries of struggle, wars, treaties made and treaties broken, to nationalize territories along mutually exclusive lines and secure the distinctive concentration of power and system of rule that is the sovereign state.
• Multiple systems of rule coexisted during the transition from the medieval system of rule to the modern state: there were centralizing monarchies in Western Europe, city-states in Italy, and city-leagues in Germany.
• 6 Even when nation-states with exclusive territoriality and sovereignty were beginning to emerge, other forms might Losing Control? Sovereignty in an Age of Globalization:have become effective alternatives--for example, the Italian city-states and the Hanseatic League in northern Europe--and the formation of and claims by central states were widely contested.
• 7 Even now,there continue to be other forms of concentration of power and other systems of rule, for instance, nonterritorial or nonexclusive systems such as the Catholic Church and the so-called Arab nation.There have long been problems with the exclusive territoriality of the modern state. Inevitably, one thinks of Garrett Mattingly's account of the right of embassy in medieval Europe.
• After succeeding brilliantly at creating mutually exclusive territories, states found there was no space left for the protected conduct of diplomacy; indeed, diplomats often felt--and indeed were--threatened, as well as pelted with vegetables. Moreover, for activities not covered by specific immunities, diplomats could be tried in the courts of the host state, just like any other subject.
• 8 There were various intermediate forms granting specific immunities. For example, the right of embassy could often be granted without reference to a specific sovereign, allowing subject cities to negotiate directly with one another. This form of the right of embassy became increasingly problematic when the right to embassy became a matter of sovereign recognition. As Mattingly notes, having achieved absolute sovereignty, the new states found they could only communicate with each other "by tolerating within themselves little islands of alien sovereignty."
• 9 The doctrine of extraterritoriality was thus the answer, and its consequences are still evident today, as when a diplomat parks anywhere in the city with impunity, de jure.
• 10 In the long history of securing and legitimating exclusive territoriality, particularly in this century, a variety of extraterritorial regimes have accumulated. And then there is, of course, Hugo Grotius's doctrine of mare liberum, which remains with us today.
• 11 It is not enough simply to posit, as is so often done, that economic globalization has brought with it declining significance for the national state. Today, the major dynamics at work in the global economy carry the capacity to undo the particular form of the intersection of sovereignty and territory embedded in the modern state and the modern state system.
• But does this mean that sovereignty or territoriality are less important features in the international system?Addressing these questions requires an examination of the major aspects of economic globalization that contribute to what I think of as a new geography of power.
• One much-noted fact is that firms can now operate across borders with ease; indeed, for many, this is what globalization is about. But I wish to examine three other components in the new geography of power.
• The first of these components concerns the actual territories where much globalization materializes in specific institutions and processes. What kind of territoriality does this represent? The second component concerns the ascendance of a new legal regime for governing cross-border economic transactions, a trend not sufficiently recognized in the social science literature.
• A rather peculiar passion for legality (and lawyers) drives the globalization of the corporate economy, and there has been a massive amount of legal innovation around the growth of globalization. The third component I wish to address is the growing number of economic activities taking place in electronic space. Electronic space overrides all existing territorial jurisdiction.
• Further, this growing virtualization of economic activity, particularly in the leading information industries such as finance and specialized corporate services, may be contributing to a crisis in control that transcends the capacities of both the state and the institutional apparatus of the economy.
• The speed made possible by the new technologies is creating orders of magnitude--in, for instance, the foreign currency markets--that escape the governing capacities of private and government Losing Control? Sovereignty in an Age of Globalization: overseers.
• Adding these three components of the new geography of power to the global footlooseness of corporate capital reveals aspects of the relation between global economy and national state that the prevalent notion of a global-national duality does not adequately or usefully capture.
• This duality is conceived as a mutually exclusive set of terrains where the national economy or state loses what the global economy gains. Dualization has fed the proposition that the national state must decline in a globalized economy.
• Territoriality in a Global Economy To elaborate on these three components of the new geography of power, I will begin with the question of the spaces of the global economy. What is the strategic geography of globalization or, more conceptually, the particular form of territoriality that is taking shape in the global economy today?
• My starting point is a set of practices and institutions: global financial markets; the ascendance of Anglo-American law firms in international business transactions; the Uruguay Round of the GATT and the formation of the World Trade Organization (WTO); the role of credit-rating agencies and other such delightful entities in international capital markets; the provisions in the GATT and NAFTA for the circulation of service workers as part of the international trade and investment in services; and immigration, particularly the cross-border circulation of low-wage workers.
• In my earlier research I did not think about these subjects in terms of governance and accountability; here, I seek to understand the spatial configuration and legal/regulatory regimes that specify them.
• An aspect of economic globalization that has received the most attention from general and specialized commentators is the geographic dispersal of firms' factories, offices, service outlets, and markets.
• One of many versions of this is the global assembly line in manufacturing, perhaps most famously dramatized by the infamous case of ibm's personal computer carrying the label Made in the usa when more than 70 percent of its component parts were manufactured overseas, typically in low-wage countries.
• 12 Yet another version is the export-processing zone--a special tariff and taxation regime that allows firms, mostly from high-wage countries, to export semiprocessed components for further processing in low-wage countries and then to reimport them back to the country of origin without tariffs on the value added through processing.
• There are now hundreds of such zones; the best-known instance is the Northern Industrialization Program in Mexico, the so-called maquiladoras. In Mexico, there are plants from many different countries, including Japanese plants making auto parts and electronic components shipped to Japanese plants in the United States. Another common example is the offshoring of clerical work
• So-called clerical factories are growing rapidly in both numbers and types of locations: they can now be found in China even though workers do not necessarily know English.
• The clerical work that is offshored involves largely routine data entering and is, in many ways, an extension of the common practice in the highly developed countries of locating back offices in suburban areas or shipping clerical work to private households.
• There are several other variations of this trend toward worldwide geographic dispersal and internationalization. Indeed, national governments have reason to know this well: they are forever struggling to capture the elusive taxes of corporations operating in more than one country.
• From the perspective of the national state, specifically the state in highly developed countries, offshoring creates a space economy that goes beyond the regulatory umbrella of the state. And in this regard, the significance of the state is in decline.
• Here we can point only to the different ways in which globalization brings about this partial denationalizing in developing and highly developed countries. In much of the Losing Control? Sovereignty in an Age of Globalization:developing world, it has assumed the form of free trade zones and export manufacturing zones where firms can locate production facilities without being subject to local taxes and various other regulations;such zones exist in many Latin American and Asian countries.
• In these cases, an actual piece of land becomes denationalized; with financial operations, the process assumes a more institutional and functional meaning. Conceivably, the geographic dispersal of factories and offices could have gone along with a dispersal in control and profits, a democratizing, if you will, of the corporate structure.
• Instead, it takes place as part of highly integrated corporate structures with strong tendencies toward concentration in control and profit appropriation. Large corporations log many of these operations as "overseas sales," and it is well known that a very high share, about 40 percent, of international trade actually occurs intrafirm, and, according to some sources, the proportion is even higher than that.
• 13 There are two major implications here for the question of territoriality and sovereignty in the context of a global economy. First, when there is geographic dispersal of factories, offices, and service outlets in an integrated corporate system, particularly one with centralized top-level control, there is also a growth in central functions. Put simply, the more globalized firms become, the more their central functions grow: in importance, in complexity, and in number of transactions.
• 14 The sometimes staggering figures involved in this worldwide dispersal demand extensive coordination and management at parent headquarters. For instance, in the early 1990s U.S. firms had more than 18,000 affiliates overseas; less known is the fact that German firms had even more, 19,000, up from 14,000 in the early 1980s or that well over 50 percent of the workforces of firms such as Ford Motors, gm, ibm, and Exxon are overseas.
• 15 A lot of this dispersal has been going on for a long time, and it does not proceed under a single organizational form: behind these general figures lie many types of establishments, hierarchies of control, and degrees of autonomy.
• 16 The second implication in terms of territoriality and sovereignty in a global economy is that these central functions are disproportionately concentrated in the national territories of the highly developed countries.
• This means that an interpretation of the impact of globalization as creating a space economy that extends beyond the regulatory capacity of a single state is only half the story.
• It is important to clarify here that central functions involve not only top-level headquarters but also all the top-level financial, legal, accounting, managerial, executive, and planning functions necessary to run a corporate organization operating in more than one and now often several countries.
• These central functions partly take place at corporate headquarters, but many have become so specialized and complex that headquarters increasingly buy them from specialized firms rather than producing them in-house.
• This has led to the creation of what has been called the corporate services complex, that is, the network of financial, legal, accounting, advertising, and other corporate service firms that handle the difficulties of operating in more than one national legal system, national accounting system, advertising culture, etc., and do so under conditions of rapid innovations in all these fields.
• 17As a rule, firms in more routinized lines of activity, with predominantly regional or national markets, appear to be increasingly free to move or install their headquarters outside cities, while those in highly competitive and innovative lines of activity and/or with a strong world market orientation appear to benefit from being located at the heart of major international business centers, no matter how high the costs.
• Both types of firms need some kind of corporate services complex, and the more specialized Losing Control? Sovereignty in an Age of Globalization:complexes are most likely to be in cities rather than, say, suburban office parks.
• Thus the agglomerations of firms carrying out central functions for the management and coordination of global economic systems are disproportionately concentrated in the highly developed countries, particularly, though not exclusively, in the kinds of cities I call global cities, such as New York, Paris, and Amsterdam.
• 18 Another instance today of this negotiation between a transnational process or dynamic and a national territory is that of the global financial markets. The orders of magnitude in these markets have risen sharply, as illustrated by the estimated 75 trillion U.S. dollars in turnover in the global capital market, a major component of the global economy.
• These transactions are partly dependent on telecommunications systems that make possible the instantaneous transmission of money and information around the globe. Much attention has gone to the new technologies' capacity for instantaneous transmission.
• But equally important is the extent to which the global financial markets are located in particular cities in the highly developed countries. The degrees of concentration are unexpectedly high. For instance, international bank lending by countries increased from 1.9 trillion dollars in 1980 to 6.2 trillion dollars in 1991; seven countries accounted for 65 percent of this total in both 1980 and 1991.
• What countries? Yes, the usual suspects: the United States, the U.K., Japan, Switzerland, France, Germany, and Luxembourg.
• 19 Stock markets worldwide have become globally integrated. Besides deregulation in the 1980s in all the major European and North American markets, the late 1980s and early 1990s saw the addition of such markets as Buenos Aires, São Paulo, Bangkok, Taipei, etc.
• The integration of a growing number of stock markets has contributed to raise the capital that can be mobilized through them. Worldwide market value reached 13 trillion dollars in 1995. This globally integrated stock market, which makes possible the circulation of publicly listed shares around the globe in seconds, functions within a grid of very material, physical, strategic places: that is, cities belonging to national territories.
• New Legal Regimes The operation of worldwide networks of factories, offices, and service outlets and the deregulation and global integration of stock markets have involved a variety of major and minor legal innovations.
• Earlier,I discussed the struggle to nationalize territory and form mutually exclusive sovereign territories, in particular the question of the right of embassy, which evolved into a form of extraterritoriality through which to resolve the tension between exclusive territoriality and the need for transactions among states.
• The impact of economic globalization on national territory and state sovereignty could be yet another form of such extraterritoriality, only on a much larger scale. My discussion about territory in the global economy posits that much that we describe as global, including some of the most strategic functions necessary for globalization, is grounded in national territories.
• Is this a form of extraterritoriality that leaves the sovereignty of the state fundamentally unaltered? Or is it a development of a different sort, one that affects the sovereignty of the state and partially transforms the notions of both territoriality and sovereignty.
• To address these questions, it is necessary to examine the particular forms of legal innovation that have been produced and within which much of globalization is encased and further to consider how they interact with the state or, more specifically, with the sovereignty of the state.
• These legal innovations andchanges are often characterized as "deregulation" and taken as somewhat of a given (though not by legal scholars). In much social science, deregulation is another name for the declining significance of the state. But, it seems to me, these legal changes contain a more specific process, one that along with the Losing Control?
• Sovereignty in an Age of Globalization:-reconfiguration of space may signal a more fundamental transformation in the matter of sovereignty,pointing to new contents and new locations for the particular systemic property that we call sovereignty.
• As with the discussion of territory in the global economy, my beginning point is a set of practices and minor legal forms, microhistories, that can, however, accumulate into major trends or regimes--and I am afraid are about to do so.
• Firms operating transnationally need to ensure the functions traditionally exercised by the state in the national realm of the economy, such as guaranteeing property rights and contracts.
• 20 Yet insofar as economic globalization extends the economy--but not the sovereignty--of the nation-state beyond its boundaries, this guarantee would appear to be threatened.
• In fact, globalization has been accompanied by the creation of new legal regimes and practices and the expansion and renovation of some older forms that bypass national legal systems.
• Globalization and governmental deregulation have not meant the absence of regulatory regimes and institutions for the governance of international economic relations.
• Among the most important in the private sector today are international commercial arbitration and the variety of institutions that fulfill the rating and advisory functions that have become essential for the operation of the global economy.
• Over the past twenty years, international commercial arbitration has been transformed and institutionalized as the leading contractual method for the resolution of transnational commercial disputes.
• 21 Again, a few figures tell a quick and dirty story. There has been an enormous growth in arbitration centers. Excluding those concerned with maritime and commodity disputes--an older tradition--there were 120 centers by 1991, with another 7 established by 1993; among the more recent are those of Bahrain, Singapore, Sydney, and Vietnam. There were about a thousand arbitrators by 1990, a number that had doubled by 1992.
• 22 In a major study on international commercial arbitration, Yves Dezalay and Bryant Garth find that it is a delocalized and decentralized market for the administration of international commercial disputes, connected by more or less powerful institutions and individuals who are both competitive and complementary.
• 23 It is in this regard a far from unitary system of justice, perhaps organized, as Dezalay and Garth put it, around one great lex mercatoria, which might have been envisioned by some of the pioneering idealists of law.
• 24 Another private regulatory system is represented by the debt security or bond-rating agencies that have come to play an increasingly important role in the global economy.
• Two agencies dominate the market in ratings, with listings of 3 trillion U.S. dollars each: Moody's Investors Service, usually referred to as Moody's, and Standard and Poor's Ratings Group, usually referred to as Standard and Poor.
• 25 Ten years ago Moody's and Standard and Poor had no analysts outside the United States; by 1993 they each had about a hundred in Europe, Japan, and Australia. In his study of credit-rating processes, Sinclair found that they have leverage because of their distinct gate-keeping functions for investment funds sought by corporations and governments.
• 26 In this regard they can be seen as a significant force in the operation and expansion of the global economy.
• 27 And as with business law, the U.S. agencies have expanded their influence overseas; to some extent, their growing clout can be seen as both a function and a promoter of U.S. financial orthodoxy, particularly its short-term perspective.
• Americanization Losing Control? Sovereignty in an Age of Globalization: Transnational institutions and regimes raise questions about the relation between state sovereignty and the governance of global economic processes. International commercial arbitration is basically a private justice system, and credit-rating agencies are private gate-keeping systems.
• With other institutions, they have emerged as important governance mechanisms whose authority is not centered in the state. The current relocation of authority has transformed the capacities of governments and can be thought of as an instance of Rosenau's "governance without government."
• 28 This is a subject I will explore in greater detail in the next chapter. It has also spurred the formation of transnational legal regimes, which have penetrated into national fields hitherto closed.
• 29 In their turn, national legal fields are becoming more internationalized in some of the major developed economies. Some of the old divisions between the national and the global are becoming weaker and, to some extent, have been neutralized. The new transnational regimes could, in principle, have assumed various forms and contents