How is Inter-Institutional Order Possible in Global Governance?

Book Cover Faude "Von Konkurrenz zu Arbeitsteilung"Global governance consists of a multitude of international institutions. Although these institutions regulate only individual areas of transnational governance like trade, security, climate change, and financial assistance, they do not operate in isolation from each other, but overlap in their competences. With regard to international financial assistance, for example, the competences of the International Monetary Fund, the World Bank, and regional development banks overlap. In the realm of international security, NATO overlaps with the Common Security and Defense Policy of the European Union. The trade-environment-nexus features overlap between the WTO and several environmental institutions, such as the United Nations Framework Convention on Climate Change (UNFCCC), the Ozone Protection Regime, and the Biodiversity Regime.

In contrast to nation-states and to the EU, the international system however lacks a meta-authority that coordinates the governance activities of overlapping international institutions, mediates in case of inter-institutional conflicts and, in the end, makes a final decision. How does this patchwork-structure affect the ability of global governance arrangements to solve cooperation problems among states and to provide global public goods?

Prominent authors claim that institutional overlap weakens rule-based cooperation among states. Daniel Drezner diagnoses a ‘Tragedy of the Global Institutional Commons’. He argues that the proliferation of international institutions and the emergence of institutional overlap paradoxically undermines rule-based cooperation and throws states back into anarchy. David Held and co-authors see institutional overlap as an important factor contributing to the under-provision of global public goods and to the current gridlock they observe in the multilateral system.

In contrast to these authors, I argue in my book that institutional overlap provides an opportunity structure for introducing inter-institutional order into global governance. More precisely, my argument is that overlapping international institutions tend to develop a functional division of labor, which creates a new (inter-institutional) dimension of political order beyond the nation-state.

To grasp how inter-institutional order is possible, we have to understand that institutional overlap affects global governance in two decisive and inter-related ways. First, institutional overlap changes world politics, because states gain new possibilities to strategically pursue their interests. They can choose among two or more overlapping institutions to pursue a political goal – states can go ‘forum-shopping’. That is, they can decide within which institution they table a policy proposal, which of the overlapping institutionalized rules they implement, and even which dispute settlement mechanism they use to resolve inter-state disputes. They may even use international institutions to contest the governance activities of other international institutions, a phenomenon that was described as ‘contested multilateralism’ by Julia Morse and Robert Keohane. The problem is that, by pursuing cross-institutional politics, states may compromise the ability of international institutions to provide global public goods, for example, if they comply only with those of the institutionalized rules that create the least costs. Second, institutional overlap implies that international institutions do not operate in isolation from each other but mutually influence each other’s normative development and governance effectiveness. This calls their regulatory coherence into question. Institutional overlap therefore establishes inter-institutional competition for competences (turf wars). To preserve their competences, international institutions are dependent on resources which are at the disposal of states. If international institutions do not supply what states demand, the latter withdraw their resources and the former lose relevance. Think of the NATO and its endeavor to find a new raison d’etre after the end of the Cold War.

How is inter-institutional order possible against such a backdrop?

My analytical point of departure is that those states that are members of all overlapping institutions (‘overlapping members’) find themselves in a situation that George Tsebelis coined ‘nested games’. In essence, this implies that, when exploiting their forum-shopping possibilities, they take into account how their behavior affects the production of global public goods in all overlapping institutions. Thus, they become the advocates of the collective interest of all overlapping institutions and try to preserve the functionality of all of them. My background assumption is that states are dependent on international institutions to realize important policy goals, such as economic prosperity, environmental protection, and even national security. Thus, while being inclined to pursue their interests cross-institutionally, they are also interested in preserving overlapping international institutions’ capacity to produce global public goods.

‘Nested Games’ create an opportunity structure for the differentiation of governance tasks among overlapping institutions. I hypothesize that institutional overlap triggers inter-institutional adaptation, which is expressed in unilateral decisions by overlapping institutions that are collectively binding for their members. Inter-institutional adaptation either consists in mutually complementary institutional specialization or in the adaptation of existing institutionalized rule sets. Institutional specialization allows international institutions to avoid inter-institutional competition for state resources by taking over regulatory tasks or operational areas that they are better placed to provide than their competitors. Adaptation of existing rule sets implies that the overlapping institutions anchor each other’s central regulatory objectives within their institutionalized rules. In sum, inter-institutional adaptation dissolves institutional overlap, deprives overlapping members of their forum-shopping opportunities, and renders inter-institutional competition latent.

Unintended by states, inter-institutional adaptation leads to the emergence of a functional division of labor. The latter coordinates the governance activities of the overlapping international institutions and therefore serves as the organizing principle of an inter-institutional order.

The global governance of public-health-related intellectual property rights illustrates the development towards inter-institutional order in global governance. The authority to govern intellectual property rights was originally assigned to the World Intellectual Property Organization (WIPO). In the 1980s, a major WIPO diplomatic conference ended in deadlock. Thereupon, countries from the Global North shifted their regulatory efforts to the Uruguay round of the General Agreement on Trade and Tariffs (GATT). The resulting Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) envisages detailed and comprehensive standards. The partial relocation of the governing authority over intellectual property rights therefore resulted in institutional overlap between WIPO and the WTO. The strengthened protection of patents for pharmaceuticals yielded detrimental effects for public health, as it reduced access to essential medicines. Thus, a coalition of developing countries, supported by public health NGOs, successfully strived to put drug-related intellectual property rights on the WHO agenda and thereby deliberately created institutional overlap. In reaction to the construction of institutional overlap, the WHO, the WTO and WIPO adapted to one another in a mutually complementary way: The WHO specialized on the regulatory instrument of knowledge creation. It started publishing reports on the implications of the TRIPS agreement on public health. The WTO adapted its rule set. It adopted the ‘Doha Declaration on the TRIPS agreement and public health’ which, in essence, stipulated that public health related concerns trump the protection of intellectual property rights. WIPO specialized on assisting countries in the Global South to implement their national regulatory system in a manner that is compatible with the TRIPS-agreement. These processes of inter-institutional adaptation are mutually complementary and establish a functional division of labor among WTO, WHO, and WIPO to govern public-health-related intellectually property rights.

Seen from the perspective developed here, the ‘Tragedy of the Global Institutional Commons’ and ‘Gridlock’ are not the end state, but an intermediate state in a dynamic development of appropriate global governance structures.

Von Konkurrenz zu Arbeitsteilung: KomplexitÀt und Dynamik im Zusammenspiel internationaler Institutionen
by Benjamin Faude
Campus, 2015.

Written by

Benjamin Faude is Research Fellow of the Research Unit Global Governance at the WZB Berlin Social Science Center. He is a participant of the Global Constitutionalism Colloquium.
Website at the WZB

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