Transnational feedback, soft law, and preferences in global financial regulation

Abstract

Pre-crisis global governance of finance was marked by considerable preference alignment between the two regulatory great powers, the US and the EU. The article's explanation of this surprising pattern in regulatory preferences takes the institutional context of global finance seriously. It highlights the endogenous, temporal effects of inter-national institutions at the core of global economic governance: transnational regulatory networks and the soft law they produce. Transnational soft law is not simply an articulation of a focal point, we demonstrate, but also a political resource that may be employed by reform-minded agents dissatisfied with their domestic policy status quo. We label such feedback processes ‘templates-as-disruptors,’ meaning that the establishment of transnational soft law by regulatory networks at t1 creates policy templates that disrupt pre-existing internal (e.g. domestic) political contests at t2. In addition to improving an understanding of historical events and great power preference alignment, the paper highlights the temporal effects of informal cooperation and domestic--international interaction in global governance.

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