Iso 14001

Racing to the Bottom? Trade, Environmental Governance, and ISO 14001
Aseem Prakash University of Washington Matthew Potoski Iowa State University
Globalization critics argue that international trade spurs a race to the bottom among national environmental standards. ISO 14001 is the most widely adopted voluntary environmental regulation which encourages firms to take environmental action beyondwhat domestic government regulations require. Drawing on a panel study of 108 countries over seven years, we investigate conditions under which trade linkages can encourage ISO 14001 adoption, thereby countering environmental races to the bottom. We find that trade linkages encourage ISO 14001 adoption if countries’ major export markets have adopted this voluntary regulation.

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hetherinternational trade hurts or harms the environment is an important question in academic and policy circles. In this article, we employ a panel of 108 countries over seven years to investigate whether international trade encourages firms to adopt ISO 14001, the most widely adopted nongovernmental environmental regime. In doing so, we provide an empirical test for Vogel’s (1995) “California effect” wheretrade serves as a vehicle for transmitting importing countries’ regulatory standards to exporting countries. Vogel’s (1995) argument applies to product standards as enshrined in governmental regulations. We test his argument for ISO 14001, a nongovernmental regulation that stipulates process standards. Empirically, we find that high levels of adoption of ISO 14001 in the importing countriesencourage firms in the exporting countries to adopt this voluntary environmental program. Our article makes theoretical contributions to debates about the race to the bottom and trade versus environment tensions, as well as the private authority literature (Cutler, Haufler, and Porter 1999; Garcia-Johnson

2000; Hall and Biersteker 2002; Haufler 2001; Mattli and Buthe 2003) which examines (among otherthings) factors that influence the diffusion of private authority or nongovernmental institutions. ISO 14001 is an interesting case to study because it outlines process or management-based standards that firms need to adopt. Environmentalists criticize the World Trade Organization (WTO) for preventing governments from imposing process standards on imports. These critics argue that the WTO’sapproach undermines domestic regulations because imports from countries with laws based on lax process standards (and therefore lower production costs) can flood a country with more stringent standards (Daly 1993). Unlike governments, firms themselves can impose process standards such as ISO 14001 on their suppliers, raising important questions about how cross-national trade influences the adoption of anongovernmental process regulation. The Geneva-based International Organization of Standardization (ISO) launched ISO 14001 in 1995. Although the costs for firms to become ISO 14001 certified

Aseem Prakash is associate professor of political science, University of Washington, Gowen Hall 39, Box 353530, Seattle, WA 98195 (aseem@u.washington.edu). Matthew Potoski is associate professor ofpolitical science, Iowa State University, 519 Ross Hall, Ames, IA, 50010 (potoski@iastate.edu). Previous versions of this article were presented at University of British Columbia, Boston University, Arizona State University, Aston University, the annual conferences of the American Political Science Association, the Midwest Political Science Association, and the Association of Policy Analysis andManagement. We thank Christopher Adolph, John Ahlquist, Liliana Andonova, Werner Antweiler, Patrick Brandt, Fred Cutler, Subhrajit Guhathakurta, Reiner Grundmann, Kathy Harrison, George Hoberg, David Jacobson, Marc Levy, Scott Long, Bob Lowry, Erik Lundsgaarde, Theresa Squatrito, George Thomas, Yves Tiberghien, Mike Ward, Carolyn Warner, the AJPS editors, and the AJPS reviewers for their input. Aseem...