The Irony of International Business Law: U.S. Progressivism and China’s New Laissez-Faire


As the financial crisis draws U.S. business overseas and developing countries rise in influence, the regulation of international business has never figured so prominently in federal law. But the dominant paradigm through which academics and policymakers continue to view that law—the so-called Washington Consensus—proves deeply misleading. A more accurate account of the components, origins, and aims of U.S. international business law reveals two striking ironies.

First, in discrete but critical ways, the United States no longer represents the comparatively laissez-faire approach to federal business regulation. Rather, owing to its origins in the Progressive Era, U.S. federal law directs corporations toward noneconomic social goals, particularly combating corruption (for example, the Foreign Corrupt Practices Act) and promoting human rights (for example, the Alien Tort Statute or economic sanctions). By contrast, the alternative legal regime to which the United States is frequently compared—China—largely allows companies to pursue profits internationally without regard to their impact on corruption and human rights. Though it remains true that the U.S. regime and its principal alternative are distinguished by the extent to which the state restricts business conduct to achieve social goals, the roles are now reversed.

Second, the rise of an alternative model now substantially thwarts the goals of U.S. progressive regulation. Empirical research in political science and economics demonstrates that because the U.S. regime increases the costs of doing business in emerging markets, U.S. companies tend to invest less. The resulting void in capital is filled by companies from China and other countries that similarly lack prohibitions on bribery and human rights violations. Ironically, enforcement of U.S. progressivism creates the very conditions in which corruption and human rights violations occur.

About the Author

Visiting Assistant Professor at the Chicago-Kent College of Law

By uclalaw