Crowding Out or Ratcheting Up?: Fair Trade Systems, Regulation, and New Governance

Abstract

The Corporate Social Responsibility (CSR) movement and Fair Trade systems have grown in the past decade, reflecting a belief that corporations operating at a global level must voluntarily assume the role of raising production and trade standards and that consumers should play a role in pressuring industry to behave responsibly. This chapter discusses the multi-level interaction of corporate social responsibility (CSR) and Fair Trade regimes with state-based legal systems. It opens with an analysis of the potential problems arising when multiple systems are overlaid upon each other. In particular, the chapter explores two conflicting arguments concerning how regulatory approaches coincide with ‘softer’ private efforts: firstly, that regulation can crowd out voluntary private efforts, thereby diminishing their effectiveness and legitimacy; and the second, countervailing argument that Fair Trade systems and regulation can be complimentary and mutually reinforcing. It then discusses ways to better synthesize state and non-state governance initiatives, analyzing the examples of highly visible multinational corporations (MNCs) such as Nike and Wal-Mart, as well as examples from recent policy developments in the United States in the areas of safety, discrimination, and environmental regulation.

Keywords: international law, governance, regulation, fair trade, soft law

JEL Classification: K31, K32, K33, K42, K23, K4