For a better global governance states preferences, regulation making and norm formation m a thesis

ĐẠI HỌC QUỐC GIA THÀNH PHỐ HỒ CHÍ MINH TRƯỜNG ĐẠI HỌC KHOA HỌC XÃ HỘI VÀ NHÂN VĂN HOÀNG THANH HẰNG FOR A BETTER GLOBAL GOVERNANCE STATE’S PREFERENCE, REGULATION MAKING AND NORM FORMATION THÀNH PHỐ HỒ CHÍ MINH - 2008 For a better Global Governance, States’ Preferences, Regulation Making and Norm formation Hoang Thanh Hang Kon Tum - Vietnam BA, National University of Social Sciences and Humanities – Hanoi - Vietnam, 2003 A Thesis presented to the Graduate Faculty of the University of Virginia in Candidacy for the Degree of Master of Arts Department of Politics University of Virginia May, 2008 Acknowledgment My inspiration for writing the thesis comes from the class Global Governance of Professor Evecherri – Gent My special thanks go to him for his valuable time as an instructor in the class and instructor during the time I was writing the thesis I’ m also thankful for Professor Schwartz for his time and consideration as a reader of the thesis My thanks go to all Professors in the department I have learned a lot during my two years at University of Virginia I’m so grateful for my beloved family and their support I also thank my friends for their encouragement and sharing Hoang Thanh Hang May 12, 2008 Charlottesville, VA For a better Global Governance, States’ Preferences, Regulation Making and Norm formation Contents Introduction Part I: The emerging of global governance as states’ preferences The emergence of Global Governance Global governance as a result of states preferences Part II: States’ Preferences, Regulations and Norms Institutions, rules making, and norms States’ preferences, regulatory outcomes and norms Part III: Global governance in Trade Trade Regimes Impact on Developed and Developing countries Part IV: Financial Global Governance The collapse of the Bretton Woods system The privatization of foreign exchange risk and Global governance as a response to risk Global Financial Institutions and Norms Impact on Developed and Developing countries Conclusion References Introduction No one doubts the political fragmentation of the world in which we live National states with their own history, culture, language, norms and political systems are still the main actors in international relations However, there have been increasing linkages among national states during the last few decades The process begins with the integration of national economies into the international economy through trade, foreign direct investment, capital flows, and the spread of technology (Jagdish; 2004) The moving closer and convergence in the international economy challenges the distance and divergence in international politics Or in other words, the growing integration of world markets affects domestic and world politics (Gartzke; 2003) In the world politics, there is an appearance of global governance to coordinate efforts to solve the problem of international markets and globalization National borders seem not to be an obstacle to international trade and investment In fact, global economy is defined by cross national networks of production and capital mobility The development of the international market creates a mutual benefit for every country when integrating domestic markets into the world market But along with the benefits, economic integration can also cause costs for domestic economies due to international market failure It is beneficial for every country to cooperate to remedy international market failures And there is a need for global governance to provide public goods and remedy the externalities of the international market The evolution of trade and financial regimes therefore results from the need to provide public goods for international markets International regimes create the focal points for cooperation and for facilitating the cooperation efforts International institutions, through the process of making rules and norms that coordinate and restrain behaviors, become the base of global governance Or as Keohance and Nye define governance is “the process and institutions, both formal and informal that guide and restrain the collective activities of a group” (Keohance and Nye - 2003) International institutions, with their rule and norms to curtail externalities in world market, become a public good for every country However, power still plays an important role in shaping the outcome of global governance Rules and norms in global governance mainly reflect the interests of powerful countries This damages the legitimacy of the international institutions And in the long run, it will threaten the existence of global governance Global governance evolves from the existence of global interest and mutual benefit But the fact that the world is still divided by nation states is a constraining force on the progress of global governance In the words of Kaler and Lake, at this point in history, globalization has not yet produced a fundamental change in the structure of political authority (Kaler and Lake; 2003) States are still the main political authority and responsible for their domestic economy and social stability When entering into global cooperation, each state has its own preferences, which is the result of the struggle and compromise in domestic politics Every country has good reason to try to establish its own preferences and standards on global governance and in global markets As Drezner pointed out, economic globalization increases the gross rewards for policy coordination, but does not lessen the domestic adjustment costs that come from regulatory change (Drezner; 2007:32) Adjustment costs are involved when states change their domestic rules to comply with rules of global market and ensure regulatory coordination in global governance Or to put it differently, rules create beneficiaries whose interests lay in the status quo (Barton, Goldstein, Josling and Steinberg; 2006) States as the main authority in domestic politics face a demand to protect the interests of domestic actors for both political support and economic concerns And they have good reason to try to use their power and influence to establish their own standards on global governance Powerful countries with their capabilities are able to establish their own preferences and standards on the global rule - making process, and therefore decide regulatory outcomes This means adjustment costs will be imposed on others, especially developing countries whose domestic rules and institutions are very different from the global standards Norms adopted by developed countries also diverge from the developing countries’ norms and practices These norms and practices take time to transform, and involve transaction costs So there is a dilemma between the protection of domestic interests and the need to provide a better public good in global governance The future of global governance depends on how well it responds to the problem of globalization and the interests of all its member states Better global governance will be beneficial to all due to the fact of mutual interdependence and the characteristics of international networks of production and capital mobility But states and states' interests are still a decisive factor in deciding global governance outcomes Better global governance therefore needs more cooperation among states and more compromise on the costs and benefits of global rules, which are derived from adjustment and transaction costs And incorporating the interest of all member states in rule-making processes decides the legitimacy of international regimes I will argue that because the legitimacy of global governance regimes depends on the acceptance by member states, the rules- making process should take into account the interest of all member nations and fairly distribute the cost and benefits among those affected by the regulations and norms The paper is organized in the following order: first, I will mention the relationship between power and outcomes of regulatory and norm formation, then the empirical evidence and history of global governance, and finally, global governance in trade and financial sectors Part I: The emergence of Global Governance as State’s Preferences The emergence of Global Governance Global governance is defined as “the process and institutions, both formal and informal that guide and restrain the collective activities of a group” (Keohance and Nye 2003) This definition correctly describes the fact of daily life that global governance, with its institutions, affects the activity of people and states Global governance emerges with the appearance and new found importance of international regimes that strongly affect the policy or collective actions of nation states around the world But maybe to understand how global governance has its present shape, its past, and future, it is important to ask why global governance appears and what factors decide its outcome In other words, governance questions how authority emerges, comes so to be maintained, and has distributional effects (Kressler; 2007:316) Finding the source of the authority of international regimes is important to be able to construct a better governance for everyone and to predict its future With increasing networks of relations around the world, states, people, and markets in different states are intertwined with others on a dense level The process may begin with economic ties that exploit the comparative advantage of different countries The advance in technology increases opportunities for profit-earning The low cost of transactions created by the advance in communication and transportation can easily connect different places in the world They facilitate producers and capital abundance holders exploiting their comparative advantage by finding the place where their capital can have the highest return Due to the different level of exchange rates and the difference in the purchasing power of currencies, capital holder can find the place where the least amount of capital can buy the largest amount of input and labor In contrast, places with land, resources, and labor abundance can make more profits when they are invested in and best used The wish for exploiting comparative advantages, the tendency to specialize and increase the economy of scale by which profits can easily be earned, create the status of interdependence among different markets around the world Capital mobility and networks of production across national borders are the distinguished characteristics of globalization era The interdependence in production and investment leads to the cooperation and interdependence in politics Firms as individual profit - seekers face collective action problems They need many essential elements of input for production that their own firms can not produce For markets to come to existence there is not only the need to have the demand and supply but also rules to regulate firms' behaviors Markets need regulations and political framework in order to operate They need a stable society and a legitimate authority as a third parties to solve conflicts that emerge in trading activities A stable social order and a legitimate authority that markets need in order to operate cannot be produced by the market itself It is the product of political processes and the function of legitimate political representatives In the international relations, states and their governments are considered the political representatives for their people and their domestic politics and markets Firms rely on governments to establish and enforce the rules of the game for economic interactions The emergence of international markets requires these rules and norm The interdependence of the economy creates international efforts to provide regulations and public goods for the world market This requires the cooperation of states around the world to provide rules and regulations They enact their cooperation through international institutions International institutions create the focal points in coordination games and facilitate cooperation In Keohance’s words, in a world of rapidly growing interdependence, intergovernmental institutional arrangements are established to correct market failures stemming from asymmetric information, moral hazard risk and uncertainty (Keohnace; 2001) The existence of mutual benefit in the emergence of international markets makes states prefer to join international markets and international institutions rather than isolating themselves They create global governance to enhance common benefits and meditate the differences In the words of Duvall and Barnett, Governance has, after all, three overriding objectives: the management of power, the promotion of common interest, the mediation of difference (Duvall and Barnett; 2005:35) But mutual benefit can not explain the source of authority of international institutions States around the world see potential profits in the world market and want to be a part of international markets and institutions The greater the convergence of the benefit of states the easier to get the cooperation on global governance States' preferences can better explain the source of authority of global governance In addition to that, all the products that developing countries export are of low value in the international economy because of the low level of technology used in the product World markets put a high price on the high tech products not low tech and simple manual products The world output for low tech commodities is also limited and the world prices are fluctuated In Stiglitz and Charlton’s words, in practice LDCs are often not able to realize much of the benefit promised by market access preferences (Stiglitz and Charlton; 2005) And market access on its own is not sufficient to bring the benefits of trade to developing countries In short, trade liberalization increases both economic and societal costs, reduces tariffs revenues, and exposes countries to additional risks (Stiglitz and Charlton; 2005) Any developing country that wants to upgrade the economy, have the capacity to export, and take advantage of the open and liberal world economy therefore faces enormous obstacles They need more economic resources and capital to invest for long term economic development Meanwhile, the traditional method of using national currency to stimulate the economy is eroding under the era of capital mobility and also encounters many problems under global financial governance Part IV: Global Financial Governance Global governance in finance is the result of the cooperation of states as a response to systemic risk after the collapse of the Breton Woods system The Breton Woods system that played a role as a stabilizer and ensured the fixed exchange rate in order to bring stability and equilibrium to the world finance market The International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (WB) assisted countries with short term deficits by making loans on the conditions of the Fund That function of the Fund and the requirement of IMF members to maintain official par values of their currencies reduced the volatility in currency markets, which led to improved macroeconomic growth and to a period of relative financial stability in most Organization for Economic Cooperation and Development (OECD) countries (Alexander, Dhumale and Eatwell; 2007) However, the world finance market entered a period of intensive threats of crisis when President Nixon closed the gold window in 1971 Every national currency faces threats from foreign exchange speculation and hedging strategies As a result of removing the capital control from the Bretton Woods system, countries are forced to deregulate their bank system and liberalize the capital movement as the banks requirement to respond to risk Capital mobility in turn forces nation states to coordinate their regulation efforts to provide rules and standards to reduce the system risk The collapse of the Bretton Woods system resulted in capital mobility and volatility The autonomy that private sectors found in global financial markets increased the systemic risk in the banking system Deregulation and Liberalization on the national level failed to regulate effectively the banking behaviors on the international level Every country suffers from foreign exchange risk There is a need to coordinate regulations at the international level to supervise and reduce risk in banking systems 1.The collapse of the Bretton Woods system The Bretton Woods system set an example of a fully negotiated monetary order intended to govern monetary relations among independent nation-states During its heyday, the Bretton Woods system involved relatively free trade, stable currency values, and a high level of international investment (Frieden;2006) So, it is reasonable to say that Bretton Woods was a success in monetary relations (Frieden; 2006) The world economy in the Bretton Woods era ran on dollars and the domination of the dollars' strength After WWII, the world economy was in reconstruction The world economy was in depression except the American economy The economy of Europe and Japan were seriously damaged after the war The currencies of Europe and Japan were too weak to return to full convertibility into gold or dollars, so until 1958, the world economy ran on dollars (Frieden; 2006) The Betton Woods system governed the international economic relations of the advanced capitalist countries from World War Two until the early 1970s This order oversaw the most rapid rates of economic growth and most enduring economic stability in modern history (Frieden; 2006) So stable financial markets are desirable The Bretton Woods system was able to stabilize the world financial market due to the dominant strength of dollars and the American economy after WWII The late Bretton Woods period, which led to the collapse of the Bretton Woods system, went along with the relative decline of American economy and the dollar As Frieden put it, so long as people around the world lost confidence in the dollar and sold dollars for gold, stopgap measures would not suffice There was not enough gold in the world, let alone in American reserves, to buy up all the world’s dollars Eventually the United States would run out of gold, and the promise that the dollar was as good as gold would not be honored (Frieden; 2006) The collapse of the Bretton Woods system had a huge impact on the world financial market The Bretton Woods system ensured an equilibrium in the world economy, by helping member countries finance their imbalances in the short run IMF members therefore had an incentive to restrict foreign exchange speculation that might drive the value of their currencies outside their par values This led many countries to adopt or maintain capital controls, which improved their ability to manage foreign exchange risk in their financial systems (Alexander, Dhumale and Eatwell; 2007) With the closing of the gold window, came the floating of the major of reserve currencies against the U.S dollar That created risks in the bank systems, or Alexander, Dhumale and Eatwell called it “the privatization of foreign exchange risk” (Alexander, Dhumale and Eatwell; 2007) 2.The privatization of foreign exchange risk and Global governance as a response to risk The floating of currencies against the U.S dollar and the removal of capital control created risks in the banking system and drove the bankers to take new steps to respond to this new challenge The removal of par value exchange creates a fluctuation in the foreign exchange rate Banks have to diversify their assets into multiple currencies and create portfolios held in foreign and offshore jurisdictions (Alexander, Dhumale and Eatwell; 2007) That hedging strategies allow banks to respond to risks that the fluctuation in foreign exchange rates created So in the era of post Bretton Woods system, private sectors have to be responsible and respond to the foreign exchange risk The hedging strategies and privatization of risk in turn put pressure on governments to liberalize their national controls on cross border capital flows and to deregulate banking practices so that banks could spread their risks to foreign assets and diversify their business (Alexander, Dhumale and Eatwell; 2007) As more and more states adopted the hedging strategies, liberalizing and deregulating their financial sectors, national financial systems became increasingly vulnerable to increased systemic risk and to a growing number of financial crises (Alexander, Dhumale and Eatwell; 2007) The privatization of risk also increases systemic risk in financial markets The systemic risk inherent in international banking includes first, global systemic risk – the risk that the world’s entire banking system may collapse in response to one significant bank failure; second, safety and solvency risks that arise form imprudent lending and trading activity; and third, risks to depositors though the lack of adequate bank insurance (Cranston; 1996) The privatization of risks and deregulation process not only shifts foreign exchange risk to the private sectors but also grants them more autonomy in their actions This brings in the systemic risks in the financial markets The increased autonomy of the private sectors can lead them to some irrational behaviors and activities that threaten the whole system Systemic risks can result from the failing to internalize the full costs in private actions or their excessive risk taking and speculation behaviors As Alexander, Dhumale and Eatwell said, often those private actors who create financial risk not internalize its full cost, leading to excessive risk that may take the form of substantial exposures accumulated by banks and derivative – dealing houses in foreign exchange markets and in speculating in financial instruments whose values depend on variations in interest rates in different markets (Alexander, Dhumale and Eatwell; 2007) The new found autonomy of private banking sectors also led to the increasing linkages among the world’s financial markets Capital mobility is said to bring efficiency to world capital markets because capital mobility is characterized by the process that capital is assumed to have a single, cross nationally ideal policy, defined simply as that which maximizes its returns (Rogowshi; 2003) The networks of multi national relations in finance markets create the need for the cooperation of nation states and local authority around the world to regulate financial markets The increased connections among financial markets capital mobility result both from the seeking of the highest return and the need to reduce risk by expanding cross – border financial services This trend results in the establishment of complex organizations, known as financial conglomerates (Adam, 1999; Walker, 2001) Their scope and activity across national borders create difficulties in creating efficient regulations to supervise and restrain their actions to reduce systemic risks And bad policies from a country can have an impact on the whole system Cooperation is required for nation states to regulate international financial markets Good norms and good practices in financial markets are desirable 3.Global Financial Institutions and Norms The collapse of Bretton Woods system, the shift of foreign exchange risks to private sectors which force them to diversify assets and expanding cross border financial services as a response to risk result in the increasing interconnection of financial markets These international links of banking activities require the cooperation of different countries to provide an international financial architecture, including institution and regulations for international financial markets The need to coordinate regulations for international financial markets is also the result of major banking collapses in Great Britain, West Germany and United States in the post Bretton Wood system and the financial and currency crises in the1990s There were many official efforts to coordinate regulations at the international level in the post Bretton Woods system The best known is the Basel Committee on Banking Regulation and Supervisory Practices (Basel Committee), founded in 1974, which consists of the central bankers and bank regulators of the thirteen G10 countries (Alexander, Dhumale and Eatwell; 2007) There are also many other international supervisory bodies that have played a key role in developing international standards and rules for the regulation of financial markets, such as the International Organization of Securities Commissioners (IOSCO), the International Association of Insurance Supervisors (IAIS) and the Financial Action Task Force (FATF) In 1999, the leading industrial states also created the Financial Stability Forum which meets twice a year to examine potential threats to the international financial system Among them, the Basel Committee is probably the most influential international financial standard setting body (Alexander, Dhumale and Eatwell; 2007) The Basel Committee is composed of the G10 central bank governors and national bank regulators who meet periodically at the Bank for International Settlements in Basel to negotiate and agree on international banking norms The Basel Committee formulates broad supervisory standards and guidelines and recommends statements of best practice in banking supervision in the expectation that the member authorities and other nations' authorities will take steps to implement them through their own national systems The purpose of the committee is to encourage convergence toward common approaches and standards The Basel committee has been releasing revised drafts of its New Capital Accord over a period of several years The new framework, known as Basel II, provides a spectrum of approaches for the measurement of both credit risk and operational risk in determining capital levels The new Accord consists of three mutually reinforcing pillars, which together contribute to safety and soundness in the financial system (Alexander, Dhumale and Eatwell; 2007) The first pillar is minimum capital requirements, the second: Supervisory review, and the third: market discipline The minimal capital pillar is based on bank’s own internal ratings Although the framework builds in rewards for stronger and more accurate risk measurement, it also provides a flexible structure in which banks, subject to supervisory review, can adopt the approach that best fits their level of sophistication and their risk profile(Alexander, Dhumale and Eatwell; 2007) Therefore, the autonomy of private banks is still very large Banks' operations and response to risk depends on their capabilities With increasing linkages in international financial markets, bad polices from a country can have spillover effects on the system, so good practices and norms are desirable However, states when going into international cooperation have their own preferences and the wish to have others to follow their standards This creates a gap in global financial governance The need to reduce risk and have better supervisory systems in global financial governance therefore requires the participation of more countries in the rule making process When states coordinate better, they can produce better regulations However, the current financial governance and norms only reflect the needs of developed countries As Alexander, Dhumale and Eatwell said “In reality, the institutional structure of international banking regulation is controlled by the world’s richest countries (the G10) and the standards they produce often reflect the needs and interests of developed country financial systems Countries outside the G10 are increasingly finding themselves subject to banking regulation standards promulgated by exclusive international standard setting bodies and implemented through IMF and World Bank assistance programs This global regime is ill suited to address the economic needs of many financial systems of non – G10 countries” (Alexander, Dhumale and Eatwell; 2007:16) Therefore, global governance in finance has different effects on developed and developing countries Impact on Developed and Developing countries Impact on Developed countries Capital mobility and volatility will not be in the interest of every country However, with a large amount of foreign currency reserves, a country can have suitable steps against speculation and hedge fund efforts Money, in turn, is related to trade Economic gains can increase the possibility for seigniorage (Cohen; 2003) Seigniorage is a powerful source of revenue to underwrite public expenditures Developed countries usually well at trade, which helps them on the struggle against financial volatility and capital mobility In addition to that, the Internal Ratings Model and Private Credit Rating Agencies can cause competition pressures Competitive pressures could cause financial centers to become engaged in competitive deregulation This could lead to a bare essential approach to financial regulation as authorities compete to have firms locate within their jurisdictions, resulting in a less restrictive and less costly jurisdiction (Alexander, Dhumale and Eatwell; 2007) This in turn favor large firm with the ability of mobility and the threat of their market exit as well as political voice In the context unholy trinity, with the capital mobility and fixed exchange rate, which countries usually adopt to stabilize their economy, the traditional role of stabilizing of macroeconomic stability is reduced States have to find a way to stabilize their economy and currency One way is to stabilize and enhance the performance of the economy In Mosley's words, to see how markets affect government decisions, we can look at the interest rate of national bonds Bad decisions by the government can be punished by lowing the interest rate of governments’ bond When making investment decisions, investors will look at some indicators of the micro and macro economy What affect their decision most is the macroeconomic indicator of inflation and deficit Mosley said if we compare a nation’s local currency bonds with its foreign currency bonds, we should find that investors worry about inflation or currency risk, but not default risk (Mosley; 2003: 54) The level of inflation in turn depends on the nation’s productivity and employability Nations with higher level of productivity will face less the danger of high inflation and currency risk In short, capital mobility brings the threat of speculation and hedge funds for every country Norms in global governance are very flexible The ability to respond to risk depends on the capabilities of banking system and the power of national currencies This only favors hard currencies and large banks Developed countries with their strong currency have an advantage when dealing with financial capital mobility risk over developing countries Impact on Developing countries The exposure to global financial markets brings risks to every country But the situation will become worse if a nation owns a weak currency and a loose banking system This is true in developing countries Capital mobility brings competition between hard currencies and the local currencies To Cohen, Popular currencies are used outside their country of origin, competing directly with local rivals for both transactions and investment purpose Governments compete to shape and manage the demands for their currencies (Cohen; 2003) Reduced demand for the national currency will damage the domestic economy The purchasing power of the national currency will be reduced and the threat of inflation and economic stagnation is real With capital mobility and foreign investment and the free choices of using currency, the less competitiveness of local currencies will cause harm to the economy in the long run Moreover, weak local currencies are under constant threats of speculation and hedge fund strategies Speculation flows can easily destroy the value of weak local currencies in countries with weak local bank systems The threat of financial bubble will become real if the economic performance is in the poor condition This is also true in developing countries The high level of dependency of developing countries on the outside source of finance also makes the threat of capital mobility more severed To Mosley, because developing nations long have relied on capital from abroad, the existence of external economic influences in emerging markets is not unique to the contemporary era (Mosley; 2003) In addition to that, with the trend of capital liberalization, the independence of central banks, and the removing of capital control, developing countries have less control over the inflows and outflows of the currencies To Mosley, inflows are sometimes associated with overborrowing, with financial sector difficulties, with greater constraints on national macroeconomic policies, and with exchange rate volatility At the extreme, inflows can contribute to the destabilization of political regimes and the social order Moreover, removing restrictions on capital outflows deprives governments of a captive market for their bonds (Mosley; 2003) A small economy also has difficulty in competing with popular currencies To Cohen, nothing demonstrates the power of economies of scale more than money, whose usefulness is a direct function of the size of its functional domain The larger of a currency’s transactional network, the greater will be the economies of scale to be derived from its use (Cohen;2003) Strong currency has to be backed up by a strong economy and is related to high productivity and high level of employment Developing countries are in a circle of low productivity, low level of employment, and weak national currencies Trade and finance are related Doing well at national production and increased productivity is what developing countries need to deal with the threat of financial crisis and financial collapse Conclusion With the characteristics of the increasing linkages in the international financial markets, bad polices from a country can have spillover effect on the system, good practices and norms are desirable However, rules and norms are not politically neutral Or in other words, rules and norms have distributional effects Different choices will differentially privilege different actors States when going into international cooperation have their own preferences and wish to have others follow their standards States, when coordinating their behaviors in the international relations, have their own preferences The preferences result from the different interests of domestic groups It is highly unlikely that the interests of domestic groups from different countries are the same, so that the rules in the international level will benefit all the same Moreover, efforts to comply with international norms and regulations involve costs Drezner called those costs “adjustment costs” (Drezner; 2007) It is better for every state to follow the same rules when performing economic exchanges The problem is deciding which standards and rules that all actors should follow Every country with its own domestic institution system has different rules and norms It would be ideal for one country to have the others comply with its national standards when performing an economic exchange That way, it will have no costs in changing the rules in the domestic institutions However, if it does that it will impose costs for other countries The political process defying the rules and norms for international markets involves a competition for who will get the benefits and who will suffer the costs Powerful countries and large firms have good reason to use their influence and power to establish their standards in international markets Global financial governance, with rules and norms promulgated by industrial countries and reflecting their needs, is hard to be suitable for all countries The fact that the level of international financial market integration and trade integration is on the global scale, but the regulations are provided by a small group of countries reflects the short - comings of global governance As Drezner said, the preference for relying on club IGOs to promulgate common regulatory standards explains the lack of progress made on other aspects of the architecture exercise To have progress in global governance requires more compromise among states Better compromises on the relative gains and the distribution of costs and benefits when regulating international norms and rules will make states cooperate better and produce better commitment to the global rules When states coordinate better, they can produce better regulations and better global governance for everyone Reference: John L Campbell and Ove K Pedersen (ed.), 2001, The rise of Neoliberalism and Institutional Analysis, Princeton University Press Michael Barnett and Raymond Duvall (eds.), 2005 Power in Global Governance Cambridge University Press Daniel Drezner All Politics is Global: Explaining International Regulatory Regimes, 2007 Princeton: Princeton University Press, John H Barton, Judith L Goldstein, Timothy E Josling and Richard H Steinberg, 2006 The Evolution of the Trade Regime Princeton: Princeton University Press Jeffrey Friedan, 2006, Global Capitalism: Is Fall and Rise in the Twentieth Century New York: W.W Norton Miles Kahler and David A Lake (eds.), 2003Governance in a Global Economy Princeton: Princeton University Press Alexander Kern Alexander, Rahul Dhumale and John Eatwell 2006, Global Governance of Financial Systems Oxford University Press Jonathan Kirshner (ed.), 2003 Monetary Orders: Ambiguous Economics, Ubiquitous Politics Ithaca: Cornell University press Layna Mosley Global Capital and National Governments Cambridge U.P, 2003 10 Susan K Sell 2003, Private Power, Public Law: the Globalization of Intellectual Property Rights Cambridge UP 11 Joseph Stiglitz and Andrew Charlton, 2005, Fair Trade for All Oxford: Oxford University Press 12 Martin Wolf, 2004 Why Globalization Works Yale UP 13 Ngaire Woods, 2006 The Globalizer: The IMF, the World Bank and Their Borrowers Cornell University Press, 14 Gilpin, Robert 1981 War and Change in World Politics, Cambridge: Cambridge University Press 15 Krasner, Stephen 1978, Defending the National Interest: Raw Materials Investments and US Foreign Policy, Princeton: Princeton University Press 16 Rosecrance, Richard 1986, The Rise of the Trading State: Commerce and Conquest in the Modern World, New New York: Basic Books 17 Augusto de la Torre and Sergio L Schumukle, Emerging Capital Markets and Globalization 18 Nelson, the limit of the market 19 Mosley, Financial Market – Government Relations in Emerging Markets