From grocery stores to aeroplane manufacturers multinational corporations are involved in value chains that crisscross the globe bringing products and services to consumers and necessitating an elaborate network of contracts and agreements to be managed and controlled. During these chains of contracts the meaning and value of the product changes as well as its economic value. But GVCs also have profound social implications because there may be negative external factors which are not priced into the products – like environmental, labour and human rights challenges. They also have power that goes way beyond individual companies and consumers.
“The control of GVCs is a powerful tool of global dominance – part of the competition and power struggle between China, the EU and the US. There are hard-core global power interests,” said Poul Kjaer of the Department of Management, Politics and Philosophy, Copenhagen Business School.
“Ongoing tensions concerning cross-border supplies of medical equipment and products such as HIV medicines and COVID-19 vaccines as well as the implications of the Ukraine war for global energy and grain prices illustrate the pivotal importance of GVCs,” he added. “Some 80% of global trade unfolds within GVCs making them a vital part of the infrastructure of global society and a central institutional framework for the creation and distribution of norms, power and wealth globally.”
“GVCs are also interesting as an access point to study the degree to which we have a global society,” he added.
Kjaer was presenting a seminar on his project which proposes a historical sociology of law approach to the challenges of GVCs. The project has received a five-year Advanced Grant from the European Research Council, involves a team of seven researchers, and will focus on how to rethink the regulation of GVCs. Kjaer is undertaking the preparation work at STIAS.
The fieldwork will include mapping GVCs in pharma, the wine industry (including Stellenbosch) and trade fairs. This will include interviews with all stakeholders including employers, employees, unions and others – “asking them if GVC law is a tool, an obstacle or completely irrelevant”.
Soft to hard law
Kjaer pointed out that although legal scholarship has started to recognise the existence of GVCs, “the law still struggles with the implications of the creation of value in multi-contextual and multi-jurisdictional networks”.
“For lawyers there is no such thing as a GVC – they work with individual contracts. It’s hard to regulate GVCs because they cross borders with different jurisdictions and no comprehensive regulations from start to finish. So there is no systematic legal approach, No one system. We need a new legal field for GVC – the GVC of GVC law.”
He highlighted that we have had 25 years of ‘soft’ law regarding GVCs – including the 2000 United Nations Global Compact, the ISO 26000:2010 Guidance on Social Responsibility, the 2011 OECD Guidelines for Multinational Corporations and the 2013 Bangladesh Accord.
But increasingly in Europe and the US ‘hard’ laws have emerged including the 2015 Modern Slavery Act in the United Kingdom and the 2021 US Uyghur Forced Labor Prevention Act. In February the European Commission released long-awaited draft regulations on due diligence which require European companies and others doing significant business in Europe, to assess the human rights and environmental impacts throughout their operations and supply chains, and take action to prevent, mitigate and remedy harms. Companies that don’t comply face penalties and civil liability.
But asked Kjaer: “Does the move from soft to hard law make a difference? And, if so, what difference – is it positive or negative, intended or unintended, or is it just whitewashing? What are the effects of legislation? Does it deliver fundamental change?”
“Also who decides, and with what rights, on the new rules. Is it just the EU making rules for someone else?” he added.
Kjaer believes that unpacking these complex questions requires going beyond studying the laws themselves. “We need to go beyond law to study law. Law is like chess – lawyers play the game without questioning the rules.”
At least nine disciplines are involved in a comprehensive understanding of GVCs – business administration and management, development studies, economics, geography, international relations, philosophy, political economy, political science and political theory – each with different outlooks and understanding. His project adds another three – history, sociology and law.
The approach will unfold in three steps. First, by countering the a-historic understanding of GVCs dominating mainstream social-science approaches through an exploration of the relationship between colonial law and contemporary GVC Law. Second, by developing a sociology of law perspective on the function and normative grid of GVCs in general and GVC law specifically through an understanding of GVCs as oriented towards the synchronisation of time across multiple contexts. Third, by developing a coherent legal conceptuality of GVC law spanning multiple legal fields such as competition, contract, corporate, environmental, human rights and labour law.
Kjaer hopes that this will also influence our understanding of concepts central to global society such as ‘contracts’, ‘democracy’, ‘human rights’ and ‘norms’. The project hopes to offer a reformulation of the concept of norms and coherency in this field; new notions of what such contracts look like; a critique or unpacking of individualistic notions of human rights and analysis of the accepted definition of democracy – “what touches all should be approved by all”.
“International human rights rely on a United Nations/US understanding which is individual-based,” he explained. “We need to look more at collective institutional rights. Legal practices often don’t take into account those affected by the laws. The chances of an individual suing a large multinational are very small. Individual notions of human rights have the possibility of increasing not decreasing regulatory fragmentation especially in developing countries. But this is hard to solve and may require new institutional platforms.”
“GVC law currently is fragmented, non-coherent. Successful economic development needs a consistent regulatory system. Regulations are crucial. You can’t assume it will just happen. We have to ask what will it take and what level of regulation you need?”
“The EU directive on due diligence will be revised in five years – hopefully the project can influence this,” he added.
In discussion he pointed to the need for understanding of where the norms come from. “For example, Denmark had no child labour laws until about 15 years ago. These are often new rules but we think the rest of the world should be doing the same – based on European and Western perceptions and understanding. We need real global discourse.”
He also noted that more regulation could cost European countries and put them in a disadvantaged position. “Increased legislation may cause suppliers to have to choose between China, the US or Europe.”
He stressed the very long history of GVCs. “This has origins back to pre-modern times. The Transatlantic Slave Trade is a classic GVC. But 98% of GVC studies assume it only emerged from the 1980s. This is obviously absurd but, of course, you would need a lot more research funding to go right back.”
He also commented on the challenges of customary law: “Any formal legal system only sees other formal systems. Decisions are made within the formal system to decide on customary law which remains outside the system. It must be legislated that customary law should be taken into account. But this requires more research. It’s difficult to make universal law that accounts for all the nuances and subtleties in individual settings. You need a localised focus and diversity.”
Michelle Galloway: Part-time media officer at STIAS
Photograph: Ignus Dreyer