Domestic regulatory reform and transgovernmental networks: Brazil and China in the global competition regime

Abstract

Developing countries increasingly participate in transgovernmental networks of global regulatory governance, but they do so in different ways. This article aims to provide an explanation for this variation for two of the major emerging powers in the world economy, Brazil and China, in their transition toward more active players in the global competition regime. Distinguishing between bilateral and multilateral transgovernmental networks and examining the domestic factors conditioning the transition of their national competition agencies from rule-takers to rule-promoters or rule-makers through these networks, the article makes theoretical contributions to the linkage between transgovernmentalism and the regulatory state. I argue that differing political needs and the incomplete process of regulatory state formation push domestic agencies to join transgovernmental networks, with a need for greater legitimacy steering the Brazilian regulators to multilateral networks and facilitating their transition from rule-takers to rule-promoters. The Chinese agencies' primary need for expertise rather than legitimacy, by contrast, led them to pursue technical assistance and cooperation via bilateral relationships. The Chinese approach has slowed its transition from rule-taker to rule-promoter where its norms and practices are aligned with the established powers. Such approach will further impede its transition into a global rule-maker in areas of competition law and policy where China's preferences diverge.

Power transitions and the rise of the regulatory state: Global market governance in flux

“…31 In term of institutional design, our findings raise the question whether strongly legalized frameworks, such as the ailing World Trade Organization, may be insufficiently flexible to sensibly accommodate rising powers; even if sometimes this lack of flexibility may in the past have provided an opportunity for reformist elites in emerging economies to lock-in domestic reforms. More informal transgovernmental and transnational networks, which establish direct links between peer regulators and epistemic communities, may prove more viable as venues for mutual learning and consensus-building, as can be seen in the case studies where preference convergence has occurred over time, most notably in competition policy, as shown in the cases of Brazil, China, Mexico, South Korea, and Turkey by Aydin (2021), Cho andWang (2021).…”

“…Rather than treating divergence as given, we explicitly make the divergence in preferences between a rising power and the established power(s) a continuous variableand (in section 3, below) discuss domestic and international drivers of such divergence. In the empirical papers in this special issue, the process of preference formation (and contestation) is then analyzed in greater detail and separately for each emergent economy and for each regulatory regime: competition policy (for China : Wang 2021 2.2.4. The consequences of power transitions: Putting it all together Power transitions in the world economy therefore need not necessarily lead to conflict or destabilization of the existing regulatory regime(s).…”

“…For example, in the pharmaceutical sector there is a tradeoff between intellectual property rights and the cost of medicines, at least if strict enforcement of pharmaceutical patents limits the production of cheaper generic versions (Serrano & Burri 2021, in this issue). Similarly, the implementation of competition policy (Wang 2021, in this issue) and international government procurement rules (Križi c 2021, in this issue) create adjustment costs, including possibly increased unemployment, for example, due to the restructuring of state-owned enterprises. All of this leads us to expect that building regulatory capacity and capability will be met with domestic oppositioneven when it has substantial domestic support.…”