Global Rivalries: Standards Wars and the Transnational Cotton Trade 9780226050706

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Global Rivalries Standards Wars and the Transnational Cotton Trade AMY A. QUARK

The University of Chicago Press chicago a nd london

a m y a . q u a r k is assistant professor of sociology at the College of William and Mary. The University of Chicago Press, Chicago 60637 The University of Chicago Press, Ltd., London © 2013 by The University of Chicago All rights reserved. Published 2013. Printed in the United States of America 22 21 20 19 18 17 16 15 14 13

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isbn-13: 978-0-226-05053-9 (cloth) isbn-13: 978-0-226-05067-6 (paper) isbn-13: 978-0-226-05070-6 (e-book) Library of Congress Cataloging-in-Publication Data Quark, Amy A., author. Global rivalries : standards wars and the transnational cotton trade / Amy A. Quark. pages cm Includes bibliographical references and index. isbn 978-0-226-05053-9 (cloth : alkaline paper) — isbn 978-0-226-05067-6 (paperback : alkaline paper) — isbn 978-0-226-05070-6 (e-book) 1. Cotton trade—Standards. 2. International trade. 3. Cotton trade—Government policy. I. Title. hd9070.5.q37 2013 382′.1351—dc23 2013003410 This paper meets the requirements of ansi/niso z39.48-1992 (Permanence of Paper).

New [international] standards can be the source of enormous wealth or the death of corporate empires. With so much at stake, standards arouse violent passions. j a m e s b a r c i a , US congressman and member of the Subcommittee on Environment, Technology, and Standards (US House of Representatives 2001:19, as cited in Büthe and Mattli 2011:12)

Contents List of Illustrations • viii List of Acronyms • xi Acknowledgments • xv chapter one • 1 Introduction c h a p t e r t w o • 37 Standards Wars and the Original Competing Kings of Cotton c h a p t e r t h r e e • 85 A Project of Uneven Liberalization c h a p t e r f o u r • 119 The World Trade Organization and the New Competing Kings of Cotton c h a p t e r f i v e • 159 Imitate and Overtake? c h a p t e r s i x • 179 Switching Tracks c h a p t e r s e v e n • 221 Conclusion Notes • 245 References • 253 Index • 275

Illustrations

figur es 1.1. 2.1. 2.2. 2.3. 2.4. 3.1.

4.1.

4.2.

4.3.

The Cotton Trade within the Apparel/ Textile Commodity Chain. 32 Imports to Britain by Origin, 1811–84. Adapted from Ellison 1968 [1886]. 41 Liverpool Merchant–Dominated Trade Route, 1800–1915. 42 US Cotton Production, Exports, and Consumption, 1790–1930. Adapted from Mitchell (1992). 59 Emergence of an Alternative US Merchant–led Trade Route, 1915–23. Adapted from Farnie (2004); Killick (1981); Garside (1935). 71 Major Cotton Exporters, 1980–2009. Adapted from ICAC (2010a). Each year refers to a marketing year—that is, 2000 refers to the marketing year from August 2000 to July 2001. 89 Cotton Production and Consumption in China, 1990–2009. Adapted from ICAC (2010a). Each year refers to a marketing year— that is, 2000 refers to the marketing year from August 2000 to July 2001. 124 China’s Share of Total World Cotton Imports, 1990–2009. Adapted from ICAC (2010a). Each year refers to a marketing year— that is, 2000 refers to the marketing year from August 2000 to July 2001. 125 Total World Cotton Exports, 1970–2009. Adapted from ICAC (2010a). Each year refers to a marketing year—that is, 2000 refers to the marketing year from August 2000 to July 2001. 127

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illustr ations

acknowledgments

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4.4. US Cotton Production, Consumption, and Exports, 1980–2009. Adapted from ICAC (2010a). Each year refers to a marketing year—that is, 2000 refers to the marketing year from August 2000 to July 2001. 128 4.5. US Share of Total World Cotton Exports, 1997–2009. Adapted from ICAC (2010a). Each year refers to a marketing year—that is, 2000 refers to the marketing year from August 2000 to July 2001. 128 4.6. Approximate Structure of the Most Significant Cotton Trade Route, 2000–2010. Adapted from Alpermann (2010); Çalis¸kan (2010); Guitchounts (2003, 2008); ICAC (2010a). 134 4.7. Spinning Technology, Interest in Quality Standards, and Relationship to HVI System and Universal Standards. 138 4.8. Cotton Picking Technology, Quality Characteristics, and Relationship to HVI System and Universal Standards. 145 4.9. ECC Country Imports as Share of Total World Imports, 1990–2008. Adapted from ICAC (2010a). 156 6.1. India’s Cotton Imports and Exports, 1974–2008. Adapted from ICAC (2010a). Each year refers to a marketing year—that is, 2000 refers to the marketing year from August 2000 to July 2001. 203 7.1. Actors Controlling Key Governance Tasks in the Periods 1870–1922 vs. 1923–2004 vs. 2005–?, and Conflict-Driven Strategies of Institutional Change. 243

tables 1.1. 1.2. 2.1. 2.2.

2.3. 2.4.

Actors’ Institutional Positions and Strategies in Relation to Dominant Actors’ Liberal Economic Projects. 17 Key Tasks and Axes of Conflict in the Governance of Cotton Quality Standards. 29 Actors Controlling Key Governance Tasks from 1870–1922 vs. 1923–2004. 39 The Proliferation of Private Trade Associations (nonexhaustive list). Adapted from Cronon (1991); Cutler (2003); Daviron and Vagneron (2011); Jones (1958); Schmitthoff (1968). 48 Trade Associations Signatory to the Universal Standards Agreement in 1923. Adapted from Ramey (n.d.). 76 Quality Classifications in Cotton-Producing Countries. These are only examples and do not represent an exhaustive list of national classification systems. Adapted from Earlam 2003. 82

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acknowledgments

illustr ations

3.1.

x

Key Cotton Fiber Characteristics and Their Relationship to Processing Efficiency and End-Product Quality. Adapted from Cotton Incorporated (2010); Perkins et al. (1984); USDA (2001). 93 3.2. Manual Classification versus High Volume Instrument (HVI) Classification. 96 4.1. Cotton Trade Associations 2009. Rules of these associations are estimated to govern contracts for at least 90% of transnational traded cotton. These associations are members of the Committee for International Cooperation between Cotton Associations (CICCA). Adapted from ICAC (1996); CICCA (2009). 153 6.1. Actors Controlling Key Governance Tasks, 1923–2004 vs. 2005–? 182

box es 3.1.

Cotton Marketing in West African Countries after Independence. 107 3.2. Price Stabilization Efforts in the Cotton Trade. 111

Acronyms

AAA ABRAPA ACA ACFSMC ACSA AFCOT AMCOT AoA AQSIQ ARS ASTM ATC BCA CAI CCA CCC CFA

Agricultural Adjustment Act Associação Brasileira dos Produtores de Algodão, or the Brazilian Association of Cotton Producers African Cotton Association All China Federation of Supply and Marketing Cooperatives American Cotton Shippers Association Association Française Cotonnière, or the French Cotton Association American Cotton Marketing Cooperatives Agreement on Agriculture General Administration of Quality Supervision, Inspection, and Quarantine (China) Agricultural Research Service (US) American Society for Testing and Materials Agreement on Textiles and Clothing Bangladesh Cotton Association Cotton Association of India China Cotton Association Commodity Credit Corporation La Communauté Financière d’Afrique, or the Financial Community of Africa, includes Benin, Burkina Faso, Cameroon, Central African Republic, Chad, Côte d’Ivoire, Mali, Niger, Senegal, Togo, and Guinea-Bissau

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acronyms

CFC CFDT CFIB Chinatex CICCA CIETAC CIQ CIRAD

CIRCOT CNCRC COPACO CSITC DAGRIS ECC EPC EU GATT GCC HVI ICA ICAC ICCS ICE IEC IMF ISO ITC ITMF ITU LCA

Common Fund for Commodities La Compagnie Française pour le Développement des Textiles, or the French Textile Development Company China Fiber Inspection Bureau China National Textiles Import and Export Corporation Committee for International Cooperation among Cotton Associations China International Economic and Trade Arbitration Commission China Inspection and Quarantine Centre de Coopération Internationale en Recherche Agronomique pour le Développement, or the Center for International Cooperation on Agricultural Research for Development Central Institute for Research on Cotton Technology (India) China National Cotton Reserves Company The marketing arm of DAGRIS Commercial Standardization of Instrument Testing for Cotton Développement des Agro-Industries du Sud (formerly CFDT) European Cotton Confederation Electronic Product Code European Union General Agreement on Tariffs and Trade Global commodity chain High Volume Instrument International Cotton Association International Cotton Advisory Committee International Calibration Cotton Standards Intercontinental Exchange International Electrochemical Commission International Monetary Fund International Organization for Standardization International Trade Centre International Textile Manufacturers Federation International Telecommunication Union Liverpool Cotton Association

acronyms

MFA NCC NDRC NIEO NYCE RFID SAP SFI SPS STE TBT TRQ UN USDA WTO

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Multi-Fibre Arrangement National Cotton Council (US) National Development and Reform Commission (China) New International Economic Order New York Cotton Exchange Radio Frequency Identification Structural Adjustment Program Short Fiber Index Agreement on Sanitary and Phytosanitary Measures State trading enterprise Agreement on Technical Barriers to Trade Tariff Rate Quota United Nations United States Department of Agriculture World Trade Organization

Acknowledgments

It is daunting to consider the vast number of people that have made this book possible. The transnational scope of this research was facilitated by a number of contacts within the cotton industry who gave generously of their time, insights, and industry networks. Having the opportunity to follow the networks of power and resistance in the cotton industry was an experience in and of itself. I would like to thank all those who helped to make that possible, from those who opened their homes to me in Benin, including Fay and Simon Akindes and Ereeq Hermann and his family, to those who helped me maneuver through the linguistic and cultural differences in Beijing and Shanghai, and everything in between. A number of people have given of their time to read the entire manuscript in various forms and to discuss it with me at length. For this I want to extend great thanks to Neil Brenner, Jane L. Collins, A. Claire Cutler, Brent Kaup, Robert Keohane, John Ohnesorge, Gül Ozyegin, Elizabeth Ransom, Andrew Schrank, Gay Seidman, Michael Tierney, Maurits van der Veen, Erik O. Wright, and Jonathan Zeitlin. These folks have surely strengthened the book tremendously. Jane Collins, in particular, has been a constant sounding board and cheerleader in this project and has carefully read many drafts of the book. Over the years it took to complete this book, I have also had useful conversations with Michael Burawoy and Harriet Friedmann, which have refined my thinking. Others who have been less involved in this manuscript but have nonetheless had a lasting influence on my approach to sociology include Stephen Bunker and especially JoAnn Jaffe. I have been fortunate to have strong institutional support while working

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on this book. Work on this project began at the University of Wisconsin at Madison, where I enjoyed countless stimulating intellectual exchanges and developed many lasting friendships in the Departments of both Sociology and Rural Sociology (now Community and Environmental Sociology). I have since enjoyed the support of fantastic colleagues at the College of William & Mary, where much of the hard work of book-writing has occurred. I also had the privilege of spending seven months on a research fellowship at the Max Planck Institute for the Study of Societies in Cologne, Germany. The generous support of the Institute allowed me the luxury of time to revise the manuscript, and the engaging intellectual environment kept me inspired. In particular, I benefited from conversations with Sigrid Quack and her working group on Institution-Building across Borders. Finally, the arguments in the book have been consistently sharpened through engagements with insightful audiences at the University of Amsterdam, the Max Planck Institute for the Study of Societies, the University of Wisconsin, the American Sociological Association, and the Rural Sociological Society. This research has benefited from the financial support of a number of agencies and organizations, most prominently, the Social Sciences and Humanities Research Council of Canada and the Canadian Federation of University Women. I also received a variety of grants and fellowships through the University of Wisconsin at Madison, including the Wisconsin Distinguished Graduate Fellowship Award, an Evelyn T. Crowe Research Grant, and a Scott Kloeck-Jenson Travel Grant. The Institute for the Theory and Practice of International Relations at the College of William & Mary funded a very useful workshop to discuss a draft of the manuscript. This research, and particularly its transnational scope, would not have been possible without this generous assistance. Segments of the research presented in this book were previously published in journal articles and are used here with permission. Parts of chapters four, five, and six were published in two articles: “Global Governance as Contested Institution-Building,” which appeared in Politics & Society, and “Scientized Politics and Global Governance in the Cotton Trade,” which was published by Review of International Political Economy. The University of Chicago Press has made publication of the book an enjoyable and rather seamless process. Three anonymous reviewers provided constructive feedback, which sharpened the final manuscript. I am particularly grateful for the guidance and support of David Pervin, Shenyun Wu, and Mary Corrado as they helped turn the manuscript into a book. As in all things in my life, my friends and family have been a constant

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support throughout this process. While the list is long, I must mention Adam, Kat, Kevin, Kristin, Jenn, Jon, Lena, Mae, Matt, Monica, Nicole, Paul, Sarah, Shaun, Stacy, and Tony. My sister, Ashley, my brother, Quenton, and my parents, Lana and Dan, have been a constant and unshakeable source of love and support, no matter what I do and where life takes me, and for this I am truly lucky and grateful. Finally, there is no one who has believed in me more than Brent. We have laughed and loved and struggled through this process together. I cannot imagine having done it without him.

chapter one

Introduction Our demand is simple: apply free trade rules not only to those products that are of interest to the rich and powerful, but also to those products where poor countries have a proven comparative advantage. a m a d o u t o u m a n i t o u r é a n d b l a i s e c o m pa o r é , presidents of Mali and Burkina Faso, respectively

In a July 2003 op-ed in the New York Times titled “Your Farm Subsidies Are Strangling Us,” Touré and Compaoré made cotton the poster child for demonstrating how negotiations at the World Trade Organization (WTO) failed to address “development.” They charged that the hypocritical trade policies of the United States and European Union contributed to the poverty faced by thousands of small farmers in West Africa. At the same time, they pointed to a broader crisis: the legitimacy of global rules that privileged Western firms and states was quickly unraveling. These West African leaders were not alone in posing this challenge. Brazil had filed a complaint against US cotton subsidies through the WTO’s Dispute Settlement Body in 2002. With this challenge, Brazil made a similar charge: if the United States and its powerful corporate allies wanted the rest of the world to abide by its rule-governed system of “free” trade, the rules would have to apply to everyone. In the eyes of many, the Brazil-US dispute would be a test of the legitimacy of the WTO. The WTO was launched in 1995 to create binding rules to establish a liberalized trading environment on the global stage. Leaders of Western countries and international organizations insisted that a liberalized economy was in the best interests of the entire global community. The promise to countries in the global South was not just that neoliberal policies would increase trade, but that, in the words of WTO Director-General Renato Ruggiero, “most important of all, by opening their economies these countries accelerate their development” (1998). These promises, however, soon proved empty. As Touré and Compaoré

2

chapter one

attest, the trade policies of the United States and the European Union have been deeply hypocritical. They have aggressively pursued liberalization in services such as banking, insurance, and telecommunications—sectors in which the North holds a clear competitive advantage—while continuing to protect their agricultural sectors where the global South could make gains. While WTO rules compel African cotton producers to compete in markets dominated by powerful Western corporations and to privatize their state trading enterprises, the United States has continued to pour billions of dollars into subsidies for their cotton growers and exporters. Rather than deliver development, this asymmetrical application of trade rules has depressed global market prices for Southern export crops like cotton and allowed the United States to dump its cheap farm commodities on liberalized markets in the South. The deep conflict over US cotton subsidies loomed large at the annual meetings of the International Cotton Advisory Committee (ICAC) that I attended in September 2005. This conflict had been at the heart of the collapse of WTO negotiations in Cancun in 2003. Now, the ICAC, an international commodity organization, was meeting just months before further WTO negotiations in Hong Kong. Sitting in a session on government policy, I saw the Cancun stalemate reproduce itself before my eyes. Delegations from Brazil and the “Cotton-4” countries of West Africa (Mali, Burkina Faso, Benin, and Chad) pointed to US subsidies as “a blatant injustice” and called on the ICAC to issue a formal statement demanding their rapid elimination. The US delegation brushed off these charges, insisting that the ICAC “was not a negotiating body” and that they could not support such statements. While the US delegation wanted to avoid movement on the subsidy issue, they appeared to have a different priority for the ICAC meetings: to move toward an agreement on a single set of cotton quality standards, and a common instrument for measuring fiber quality, that would replace the existing mismatch of national standards and smooth global trade. The US Department of Agriculture (USDA) had been working with cotton fiber scientists in Germany to demonstrate that the standards and measurement system used in the United States could be extended on a global scale and still supply the reliable measurements demanded by the transnational merchants that dominated the trade. Resistance to the US proposal to extend their standards and measurement system on a global stage was unambiguous. Officials from various African countries repeatedly raised concerns that the capital-intensive measurement instrument used in the United States was not appropriate for

introduction

3

countries in the global South. “Isn’t there a moral duty to reduce the costs of implementing the system?” appealed a representative from Mozambique. Other delegations from the global South accused the USDA standards of being biased toward US cotton. Fiber scientists tried to cast quality standards as technical and apolitical rules that merely served to reduce the transaction costs of trade. However, for firms and states from the global South, it appeared that even if subsidies were eliminated and a so-called “unregulated” market was achieved, these new rules would still stack the deck against the global South. A few days later, however, I discovered that it was not the challenge from ICAC delegates that most concerned the US government delegation and the cotton producers, textile manufacturers, and merchants that it represented. One afternoon I found myself sitting amongst an audience of cotton merchants—the most powerful actors in the cotton trade—at the parallel conference held by the merchant-dominated association, the International Cotton Association (ICA). For merchants, the ICAC was a forum to influence states and national policies. The ICA conference, on the other hand, was about packing in business meetings with clients from around the world and schmoozing over drinks in the hotel lobby. Few people actually attended the conference presentations. But on this particular afternoon, the presentation hall was crowded for a talk by a representative from China. Since the early 2000s, China had become a textile and apparel powerhouse. Importing close to 40 percent of all transnationally traded cotton, it had acquired both significant sway in the cotton market and the listening ears of the merchant community. A key issue in the presentation was quality inspection for cotton imported into China. The representative from a quasi-private Chinese trade association, the China Cotton Association, ran through a host of problems that the government quality inspection office had found with recent imports, including seeds in cotton from Africa and rat excrement in cotton packing from the United States. As she continued down her list, a low grumbling could be heard from the crowd. Transnational merchants were looking for a piece of the Chinese pie, but this meant negotiating with the Chinese government and Chinese firms over trade rules—in this case, how cotton quality, and thus price, would be verified when cotton was imported into China. When the presentation was over, merchants jockeyed to ask questions but became unsettled by the Chinese representative’s vague responses. Finally, a merchant from one of the largest cotton trading companies in the world jumped to his feet, and audibly frustrated, questioned the Chinese represen-

4

chapter one

tative: would clear rules be posted for quality inspections? The Chinese representative smiled, unflustered, responding that rules would be posted on their website . . . in Mandarin. A few groans and sarcastic laughter emerged from the crowd. While comforted by the fact that it wasn’t just me who didn’t understand the rules for trade into China, I was struck by the palpable anxiety surrounding these rules among representatives of powerful transnational merchant firms, a handful of who controlled about 50 percent of the transnational cotton trade. Wandering back into the hotel lobby after the presentation, I ran into several USDA representatives. As they debriefed the Chinese presentation, I saw that it had also put them on edge. They wanted the Chinese government to adopt their cotton quality standards, they explained to me, and they would be heading to China to address this issue. Contestation over who makes the rules for the global economy—and who can enforce the rules—would not be easily resolved.

*

*

*

Conflicts in the cotton trade make this much clear: we are in an era of uncertainty over the rules that govern global economic integration. Historically, Western firms and states have largely set the rules for global trade. But today they face new challenges with the shift to an Asia-centered economy. The WTO is at a stalemate as a rising group of firms and states are questioning the legitimacy of trade rules that privilege the West. At the same time, the Chinese state is raising the ire of powerful transnational corporations who can no longer simply impose the rules of the game. These are not struggles unique to the cotton trade. These new axes of conflict are rippling across the economy. In the controversial case of censorship and cyber attacks between China and the global corporate giant Google, a representative from the Chinese Foreign Ministry warned that Google must adhere to China’s laws and regulations if it wanted to access the growing Chinese market (Wong et al. 2010). Trade disputes between China and the United States over exports of tires, chickens, steel, and autos have multiplied (Cha 2010). Put simply, this is a period of hegemonic rivalry. The United States and China are competing on a multitude of fronts over which states and firms will claim the dominance and legitimacy necessary to set the rules governing the global capitalist system. Nowhere are these tensions more evident than in the simmering standards wars between China and the West. “Chinese businesses, govern-

introduction

5

ment officials and experts have repeatedly enunciated a strategy that views standards as trade weapons,” explains political scientist Scott Kennedy (2006:45), in part due to a view that Western firms and states have used standards “to solidify Western dominance of markets and force developing countries such as China to remain in an inferior position.” Western firms and states have sounded alarms over Chinese efforts to set new standards not just for cotton and other agricultural products but also for a number of high-profile information and communication technologies, such as wireless security, cellular phones, and supply-chain management (Bach et al. 2006; Suttmeier and Yao 2004; Suttmeier et al. 2006). These are struggles not over whether global economic integration should advance, but over what kind of integration is desired and on whose terms in a period of hegemonic struggle. Despite deep conflicts, we also see new forms of engagement. Private, state, and civil society actors are rapidly constructing new transnational governance institutions to tackle a wide range of issues, from the harmonization of quality standards to the enforceability of contracts across borders. This transnational cooperation amid a crisis of Western legitimacy raises critical questions. Who makes the rules? How do powerful Western actors construct governance institutions that are enforceable? Under what conditions are the emerging non-Western corporate elite and their state allies, as well as more marginalized firms and states, able to recast the rules to better serve their interests? This book represents an effort to explore these questions through a study of negotiations over transnational quality standards in the contemporary cotton trade. In this book, I chart a new course for understanding how the rules of the game are made and remade in the global arena. Many attempts to map change in governance institutions emphasize the high degree of uncertainty and hybridity that characterizes institutional transformations in the current era. A rigid world of interstate treaties has been replaced by fluid interactions within more amorphous and diverse “transnational communities” or “webs of influence” (Djelic and Quack 2010; Braithwaite and Drahos 2000). New forms of “experimentalist” governance are emerging as actors try to respond flexibly to a shifting terrain (Sabel and Zeitlin 2010). It seems that the foundations of economic governance are “disaggregating” beneath our feet (see Slaughter 2004). These are not shock-like transformations in institutions but rather incremental changes that are nonetheless transforming the rules of the game. These accounts provide valuable descriptions of how institutional arrangements are changing. What they lack is a robust explanation of why

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chapter one

institutions change. We are instructed to expect incremental movements toward “something entirely new, unexpected, unanticipated and emergent” (Djelic and Quack 2003a:9). However, we are not given the tools to understand why such incremental yet transformational changes should be expected or why certain emergent outcomes might be more likely than others. The future trajectory of institutional change is indeed uncertain and the stakes are high. As diverse actors—from firms and government agencies to lawyers, scientists, and agricultural producers—struggle over what rules will prevail, profits are made and lost, jobs move from one country to another, and economic superpowers are born or wither away. It is thus imperative that we garner the theoretical tools to make sense of this uncertainty and chart the range of future possibilities. The crux of my argument is this: hegemonic rivalries shape strategies to change institutions. As coalitions of powerful firms and states create institutions to expand the scale and scope of the global economy, they unleash new competitive dynamics that both give rise to new rivals that seek to take control of these institutions and generate marginalized actors that seek to challenge their destructive effects. Periods of uncertainty over whose rules will prevail in the global economy are thus the result of the patterns of conflict generated by projects of market liberalization. Just as the hegemonic coalition led by the British state and firms faced challenges to its free trade imperialism in the early decades of the twentieth century, so too is the hegemonic coalition led by the US state and transnational firms facing challenges to its own free market project in the early decades of the twenty-first century. Actors’ positions within these broader conflicts over the organization of the global capitalist system shape their preferences, bargaining power, and thus strategies in institutional struggles. This conflict-driven process of institutional change is inevitably incremental in nature. New rivals remain dependent on the existing arrangements that stimulated their own rise to power, yet seek to redirect these institutions to privilege their own interests over those of already dominant actors. This was the situation faced by the US state as it sought to take control of the institutions governing the cotton trade in the early 1900s and is now the predicament of the Chinese state as it faces US-dominated institutions. These rivals must first imitate existing institutional arrangements before they can overtake them. The institutions that result from these conflict-driven processes are also inevitably hybrid as dominant actors are compelled to reconstitute their own rules to protect their institutional privileges. Facing growing chal-

introduction

7

lenges from both new rivals and marginalized actors, dominant actors do not simply cling to existing rules. Instead, dominant actors reconstruct the rules to at once appease their challengers and protect their institutional privileges. Just as Britain sought to retool its institutions governing the cotton trade to stave off challenges from both rivals and marginalized actors within the United States, the US state and transnational merchants reconfigured their existing arrangements in the contemporary era to appease rivals in China and marginalized actors in the global South. The new, hybrid institutions that emerge from these dynamic interactions reflect and instantiate the broader geoeconomic and geopolitical transitions among rivaling hegemonic coalitions. Forwarding this argument, I develop a theory of institutional change within the global capitalist system. In doing so, I intervene in the ongoing debates about globalization and institutional change in two ways. The institutionalist literature has emerged as a prominent approach to studying institutional change in the global arena. Institutionalist scholars have attempted to map “transnational governance in the making,” an approach that captures the complex dynamics among a wide diversity of actors operating within and across national and supranational governance arrangements (Djelic and Sahlin-Andersson 2006:2). These scholars offer compelling accounts of how institutions change and how new institutions are forged through trial-and-error processes of experimentation and innovation within the constraints of existing institutions and shared cultural frames. I build on these accounts by grounding them in a theory of conflict. I see struggles over institutions and institutional change as emerging out of the concrete class relations and material and ideological circumstances characterizing the actually-existing global capitalist system. I demonstrate how experimentation and innovation in rule-making processes must be embedded within an analysis of historically specific institutional and systemic power relations. In short, institutionalist accounts tell us how transnational rules are made. But it is only a theory of institutional change within the global capitalist system that can tell us why certain actors can redirect the rules of the game to serve their interests and why other actors accept or reject these rules. The lineages of this type of approach can be traced to scholars in the Regulation School, the neo-Polanyian tradition, and the world-systems approach, among others (e.g., Aglietta 1979; Arrighi 1994; Block 1994, 2007; Block and Evans 2005; Streeck 2009; Wallerstein 1974). The second intervention addresses those scholars who do place emerging transnational governance institutions within the dynamics of capitalism.

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chapter one

This scholarship often emphasizes the rise of transnational firms that can largely set the rules of the game as a defining characteristic of global economic integration (e.g., Robinson 2003; Sklair 2001). In doing so, scholars tend to focus on a singular axis of struggle between a global elite—a transnational capitalist class and its state allies—and the marginalized actors and social movements who may challenge dominant firms and institutions. Yet these accounts give little attention to the growing geoeconomic and geopolitical uncertainty in the global economy. The rise of the so-called “emerging economies” in China and India is recasting the terrain of struggle in new and complex ways that cannot be mapped by focusing solely on powerful Western firms and their state allies or even on the struggle between global elites and social movements. Rather, as I will demonstrate, the struggle over transnational rules of the game is at once a struggle among global elites and social movements, among powerful Western firms and emerging rivals in countries like China and India, and among states in a competition to transform their roles and activities to influence transnational governance. It is by understanding the dynamic interplay across these different axes of struggle within the historical development of the global capitalist system that we can make sense of institutional change in periods of hegemonic rivalry.

the limits of institu tiona lism How do existing institutions change and how are new institutions and rules constructed in the transnational arena? This question has become a central problematic in institutionalist approaches to globalization. Indeed, recent scholarship has refocused the analysis on institutional change, rather than persistence and reproduction, and on the strategic role of actors in creating change. These scholars have identified key mechanisms that illuminate how change occurs. Yet, they are limited in their ability to explain why institutions change and why they change as they do. The limitations of institutionalist accounts of change are rooted in their treatment of power. Alford and Friedland (1985) suggest that power operates at three levels: the situational level, the institutional level, and the systemic level.1 The exercise of power at the situational level represents contestation over the “plays of the game.” That is, actors struggle over direct power relations, or over their relative ability to command obedience from other actors. At the institutional level, contestation focuses on the “rules of the game.”2 Actors vie to influence institutional design such that their interests become reflected in rules for how the institution will operate, set

introduction

9

agendas, and make decisions. Finally, contestation at the systemic level means a struggle over the game itself. For example, the Cold War could be characterized as a struggle over the game, as the United States and the USSR competed over what game or system— capitalism or communism—should be played. Institutionalist scholars focusing on change lack a robust theory of conflict as they focus on situational and institutional power, largely to the exclusion of systemic power. A key contribution of change-oriented variants of institutionalism has been to move beyond a focus on institutional reproduction and persistence. Historical institutionalists have tended to see institutions as highly durable given that actors develop interests and strategies that serve to reinforce existing arrangements (e.g., varieties of capitalism approach of Hall and Soskice 2001). This approach emphasizes the path-dependencies that limit the likelihood of changes that will fundamentally transform social relations. Significant change occurs only in the event of an external shock or serendipitous incident that can reroute institutions onto a new path dependent trajectory (e.g., Krasner 1984). Historical institutionalists thus emphasize the power of institutions to shape behavior and tend to underemphasize the ability of actors to shape institutions and to intentionally shape them to serve their interests (Chorev 2007; Crouch 2005:chapter 2; Streeck and Yamamura 2001; Thelen 2004).3 Put differently, scholars critique historical institutionalism for focusing on institutional power while giving little attention to situational power. In contrast, scholars who have refocused on institutional change put situational power at the center of their analysis as a way to understand how institutions can change without an exogenous shock to punctuate its self-reinforcing equilibrium (Djelic and Quack 2003b, 2007; Mahoney and Thelen 2010; Sewell 1992; Streeck and Thelen 2005; Thelen 2009). From this view, sources of endogenous, incremental change can be found in the relation between institutions and the social activities they seek to govern. Specifically, these scholars see institutional change as emerging due to the gap between formal rules and the ability to enforce them, or, as Streeck and Thelen put it, the “gap between the ideal pattern of a rule and the real pattern of life under it” (2005:14, original emphasis). Formal rules are always incomplete and ambiguous, making implementation unpredictable. Rules can embody counterposing ideals, loopholes, or inconsistencies, which give actors—and particularly rule-takers— opportunities to resist implementation, or to reinterpret the rules to better serve their interests (Clemens and Cook 1999; Djelic and Quack 2003b; Halliday and Carruthers 2009). As

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actors creatively strategize around the contradictions within and between existing institutions, change is possible. Small, incremental changes can culminate in consequential change that does not just reproduce existing social relationships but instead transforms them (Streeck and Thelen 2005). In short, by refocusing attention on strategic action, these scholars demonstrate that, while the rules of the game shape the plays of the game, at the same time, the plays of the game can influence the rules of the game. The problem is that institutionalists focusing on change give little attention to the nature of the game itself, or the power relations defined by the system itself—in this case, the global capitalist system. This limits the explanatory power of their accounts. While these scholars recognize that resistance to existing rules can generate change, they are largely unable to explain why actors resist the rules to begin with. This is not to say that institutionalists do not account for conflict. To the contrary, many accounts see conflict as endemic to institutions. But, by ignoring systemic power, they lack a theory of what the conflict is about.4 They assume actors’ resistance to formal rules rather than providing a theory of conflict that would explain actors’ resistance, as well as their strategies to direct institutional change. Some scholars focused on institutional change do attempt to theorize conflict. However, their theories largely take the form of typologies that leave the systemic roots of power and conflict unspecified. For example, Halliday and Carruthers (2009) study the transnational harmonization of bankruptcy laws. These prominent sociologists of law see “global” and “local” actors clashing over the harmonization of governance arrangements.5 They argue that the conflict is shaped by two dimensions of power: the balance of power between the national and global; and the cultural and social “distance” between global and local actors. The “distance” between actors, they suggest, indicates “how far apart the two sides of the interaction are at the outset” (2009:22). The greater the distance in terms of institutional preferences, the greater the likelihood of conflict. The balance of power “helps to determine which side is more likely to be moving toward the other” in the process of negotiating (2009:22–23). But, one might ask, what is the source of the “distance” between “global” and “local” actors’ institutional preferences and how might that shape the circumstances under which one side would move toward the other? Is this “distance” simply due to the lack of interaction, thus requiring time for actors to come to common understandings? Or is it the kind of social and cultural distance that emerges from a specific history of unequal relations that breeds distance in institutional preferences as well as resistance and

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mistrust (e.g., Roberts and Parks 2007)? Halliday and Carruthers offer us a typology of actors and their potential orientations but, as Burawoy might put it, provide no “basis or source for particular patterns of conflict” (Burawoy 1979:9). The lack of attention to systemic power further limits the ability of institutionalists to explain why changing institutions ultimately take the form that they do. These scholars emphasize the potential for highly novel institutional arrangements to emerge in the global arena. In doing so, they critique cultural institutionalists, such as world society scholars, who see organizations worldwide converging onto similar institutional forms through a process of mimetic isomorphism (e.g., Boli and Thomas 1999; Drori et al. 2003; Meyer et al. 1997). For institutionalists focused on change, actors do not simply adopt common institutional designs to gain legitimacy on the global stage, nor are institutions simply becoming more similar. Instead, institutions can take diverse and innovative forms through the dynamic interplay between the rules of the game and the plays of the game. Strategic actors, such as institutional entrepreneurs (DiMaggio 1988) or bricoleurs (Campbell 2004), manipulate meanings and symbols, organize key constituencies, and create “new solutions out of an admixture of preexisting elements” as they actively cultivate the legitimacy of their preferred rules (Halliday and Carruthers 2009:28; Campbell 2004; Djelic and Quack 2003b). The problem with this account is that the possible forms that new institutions might take seem endless. Innovation is limited by actors’ abilities to imagine new combinations of existing institutional fragments. By neglecting systemic power, institutionalists do not explain how the game itself puts limits on what kind of institutional change is possible. Moreover, they overlook important factors that shape why some actors are better institutional entrepreneurs than others or why some are particularly adept bricoleurs. Part of the problem is that institutionalist approaches tend to theorize history rather than historicize theory in their approach to institutional change.6 Theorizing history is the common approach to modern social science. From this view, the problem to be explained is cast in general terms: how do institutions change? The answers are transhistorical: institutions change through the interplay of cultural frames, institutional path dependencies, and strategic action. In short, institutionalists provide a theory of the general properties of institutions that is considered applicable across space and time. In accounts at this level of abstraction, the underlying causes of institutional change remain a mystery. Wolfgang Streeck argues that what institutional analyses “failed (and in fact never intended) to do

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was to account for the historical emergence and the pervasiveness of the sort of change that it had been developed to capture—its location in time and space as well as its direction and driving forces” (2011:139). Streeck (2009, 2010, 2011) has recently sought to embed his earlier institutionalist analyses (e.g., Streeck and Thelen 2005) within a theory of capitalism. In short, institutionalist approaches to transnational governance have generated a rich conceptual vocabulary for understanding institutional change and institution-building. But they are divorced from the specificities of the socioeconomic orders that construct and are constructed by these institutions. That is, institutions are abstracted from the global capitalist system. If our goal is to understand why institutional change occurs and why new institutional arrangements take the form that they do, “these are questions a framework that takes capitalism for granted cannot even pose, let alone answer” (Burawoy 1979:12). What is needed is a historicized theory of institutional change as it is constituted by and constitutive of a socially and spatially specific economic system.

embedding institu tions in the global capitalist system A theory of institutional change in the global capitalist system focuses on understanding why the rules of the game change and what form those changes take. Institutional power cannot be understood in isolation from situational and systemic power. Rather, these levels of power must be understood as necessarily intertwined and in dynamic interplay. Struggles over the rules of the game will be influenced both by the plays of the game and the game itself. The rules of the game can change as actors challenge or circumvent them through their strategies in the plays of the game. Moreover, the nature of the game itself—in this case, global capitalism—and broader struggles over how it should be organized shape the range of possible institutional rules and achievable goals (Wright 1994:93). In short, struggles over the rules of the game must be understood as embedded within material and discursive contestation at all three levels. This requires theorizing the specificities of institutions within the global capitalist system. Institutions emerge and change in relation to the particular dynamics of global capitalist development—that is, institutions and the economy are mutually constituting spheres of activity, neither of which can function without the other (Block 1994; Block and Evans 2005). This perspective runs counter to institutionalist scholarship (Streeck 2009) but also to orthodox economics and neo-Marxist accounts that ignore the role of in-

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stitutions in the construction of capitalism. Rather than seeing the capitalist economy as expanding according to an internal and independent logic, capitalism must be understood as a “constructed system” (Block 2002:223). The global economy is made and remade through political struggle over the institutions that shape capitalist relations and the distribution of the benefits and costs of capital accumulation. From this perspective, we can understand capitalism as an expansionary system but also emphasize that, as a product of political struggle, the potential trajectories of capitalist development are diverse. As such, understanding institutional change is critical as it is tantamount to understanding the development of capitalism. This approach has the potential to ground the abstract conceptualizations of institutional change offered by recent variants of institutionalism. Institutions must be understood not in abstract form but as constructed to facilitate certain configurations of capitalism. As Karl Polanyi (1957 [1944]) suggests, the historical trajectory of capitalism as an institutionalized social order can be understood as unfolding through successive political projects in which powerful firms and states attempt to extend capitalist market relations in ways that serve their perceived interests in market liberalism. On a global stage, hegemonic coalitions of states and firms have historically pursued liberal market projects to expand capitalist markets across space and to capture the benefits of this expanded trade (see Arrighi 1994; Silver and Arrighi 2003). Just as the hegemonic coalition led by the British state and firms sought to secure their geoeconomic dominance over potential rivals in the United States and Europe, the contemporary neoliberal coalition led by the US state and transnational firms has sought to capture the benefits of expanded global trade for themselves over competitors in China. In order to pursue these projects, firms construct—and compel states to construct—a constellation of governance institutions that facilitate and enforce privatization, commoditization, and market liberalization on an ever more extensive scale. Rules that foster market expansion, such as quality standards, can be understood as embedded within such broader projects of market liberalism. This conceptualization of institutions runs counter to historical institutionalist accounts that see institutional design as a product of historical contingency and serendipitous events (see Mahoney 2000). While institutions are historically specific and contingent, they are also intentionally planned. This does not mean that a single institutional entrepreneur or small group of actors can just willfully construct an institution in order to secure their preferences. Institutions are always the product of political struggle and compromise. Moreover, intentionally constructing an institution does not

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mean that the rule-makers must fully understand the problems to be solved at the outset (or at any time during the rule-making process), nor that they accurately identify the solution that would best achieve their preferences. Institutionalists are correct in suggesting that rule-makers construct institutions through processes of experimentation. However, seeing institutions as designed within the global capitalist system means that actors’ perceived interests in institutional design, and their ability to pursue these interests successfully, are structured by their position within the competitive dynamics of capitalism. In short, projects of market expansion are often lopsided, scattered, and pieced together in a trial-and-error way as actors seek to solve the problems they face given their position within historically and spatially specific processes of capital accumulation. Liberal market projects are both material and discursive in nature. Actors construct discursive legitimations in particular contexts and with the aim to inform, steer, and legitimate particular projects of liberal market development. Drawing on the work of Edward Said (1978), Ngai-Ling Sum (2000) demonstrates how particular historical configurations of capitalism are constructed through processes of “othering,” or the discursive construction of certain people, places, practices, and governance arrangements as fair, just, or superior, while constructing the rest as “others,” that is, people and practices that are unfair, inferior, or even dangerous. For example, US discourses promoting neoliberal trade policies in the 1970s and 1980s “othered” Japan’s more protectionist economic and political institutions as “unfair” trade practices. This view of the role of ideas departs significantly from much of the literature on institutional change. Like their conceptualization of institutions more generally, cultural and change-oriented institutionalists see the role of discourse in institution-building in highly abstract terms. They see “world cultural scripts” or “legitimation mandates,” such as science, representation, or procedural fairness, as shaping actors’ ability to construct institutions as legitimate (Black 2008; Halliday and Carruthers 2009; Meyer et al. 1997; Quack 2010). However, these discursive constructs seem to appear from nowhere (Schwartzman 2006) and/or are presented as transhistorical principles of legitimacy that can be applied at any time and place. Discourses must be understood as constituted in particular places and periods in relation to the historical development of the global capitalist system. Constructed in relation to concrete patterns of social struggle, these discourses shape how actors come to understand the problems posed by the existing economic organization and the rules that support it.

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n e w pat t e r ns of con f l ic t w i t h i n p roj e c t s of m a r k e t e x pa ns ion The trajectory of capitalist development is never wholly constructed by these political projects of market liberalism and the material relationships and discursive constructs that define them. When powerful actors construct governance institutions to support a project of market expansion, these institutions can mold the real pattern of economic life to serve their aims to a significant degree. But they also generate new dynamics that can make the enforcement of formal rules difficult. Because capitalism is a relational and thus conflictual system, institutions that facilitate it create particular patterns of social conflict. Understanding institutional change thus requires grasping the types of social conflict that market-facilitating institutions generate, particularly on a global scale. These new patterns of conflict reshape actors’ preferences, bargaining power, and strategies to challenge and reconstruct existing institutions. Liberal market institutions generate new axes of conflict that destabilize the institutions themselves. While taking historically and spatially specific forms, there are two key axes of conflict that liberal market institutions generate: conflicts emerging from the creative and the destructive dynamics of liberal market expansion. As both Karl Marx (1976 [1867]) and Joseph Schumpeter (1976 [1942]) have emphasized, the extension of market discipline has both creative effects, which stimulate technological and organizational change and provide new opportunities for some actors to improve their competitive position, and destructive effects, which undermine competitive positions and livelihood strategies. As actors’ competitive positions and relative bargaining power shift, these creative and destructive dynamics generate distinct types of conflict. The creative dynamics of liberal market institutions generate conflict by giving rise to new rivals capable of challenging the institutional privileges of dominant actors. Market-facilitating institutions intensify interfirm competition. In doing so, they set off a creative process that stimulates technological and organizational innovation. Firms seek to create new technologies and products, design new strategies to minimize costs and control workers, and attain new economies of scale and speed to ensure their survival. In David Harvey’s words, “The struggle to maintain profitability sends capitalists racing off to explore all kinds of other possibilities” (1995:106). In this competitive process, it is not necessarily already-dominant firms who win out. To the contrary, the unintended outcome of the creative moment

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of liberal market projects is often the emergence of challengers who rival the economic power of previously dominant firms as competition drives the consolidation of capital. In short, liberal market projects generate new rivals that enjoy increasing bargaining power vis-à-vis dominant actors. These new rival firms can use their enhanced bargaining power to circumvent or challenge existing rules. The second axis of conflict emerges out of the destructive dynamics of liberal market institutions. Political projects to extend market relations across the globe seek to secure the rights of capital over labor and other marginalized actors. Firms use political power to protect rights to private property at the expense of the rights of workers and other marginalized groups. As Gill puts it, the central goal of market liberalization is to “subject the majority of the population to the power of market forces whilst preserving social protection for the strong” (1994:407). By privileging the pursuit of profit over societal well-being and sustainability, liberal market institutions threaten established ways of making a living. As Karl Polanyi (1957 [1944]) has argued, the destructive dynamics of deepening market relations generate social conflict, which can make the enforcement of liberal market institutions difficult. That is, these actors marginalized by liberal market projects are compelled to defend “established and widely accepted social compacts on the right to livelihood—in other words, [they are] in part fueled by a sense of ‘injustice’” (Silver 2003:18). This argument follows Polanyi’s claim that liberal market projects generate social conflict and spur countermovements for societal protection. However, I argue that distinct types of “push-backs” against liberal market projects often derive from different axes of conflict and thus are more diverse than Polanyi suggests and can take competitive rather than protective forms. In essence, a more complex terrain of struggle must be mapped in order to understand the trajectory of institutional change. To do this, I draw on both neo-Marxist and especially world-systems analyses of systemic chaos during periods of hegemonic rivalries (e.g., Arrighi 1994; Arrighi and Silver 1999; Wallerstein 1974).

str ategies for contesting liber a l m a r k et institu tions By identifying the underlying causes of conflict, we can understand not only why actors contest institutions but also the types of strategies they pursue. Given their particular positions within these shifting dynamics, different actors develop distinct institutional strategies, or efforts to reconstruct in-

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t a b l e 1 . 1 . Actors’ Institutional Positions and Strategies in Relation to Dominant Actors’ Liberal Economic Projects. Actors

Position within Liberal Market Projects

Institutional Position

Institutional Strategy

Dominant

Established institutions to facilitate their interests in market liberalism

Privileged by the existing institutions

Preservation Strategy to reconstruct institutions in ways that preserve existing institutional privileges

Rival

Improved bargaining position due to creative dynamics of market liberalism

Disadvantaged by existing institutions but capable of competing for institutional privileges

Redirection Strategy to reconstruct institutions to privilege their preferences rather than those of currently privileged actors

Marginalized

Deteriorated bargaining position due to destructive dynamics of market liberalism

Disadvantaged by existing institutions but not capable of competing for institutional privileges

Protection Strategy to reconstruct institutions to minimize their disadvantages

stitutions to achieve their preferences. In particular, I identify three types of institutional strategies that are stimulated by these axes of conflict. This argument is depicted in Table 1.1. Emerging Rivals and Redirection Strategies The bargaining power of emerging rivals increases through the creative dynamics of liberal market projects. From this enhanced position, new rivals pursue redirection strategies that aim to transform institutions to privilege their interests over those of dominant actors. But why would these emerging rivals want to change the rules of the game if they rose to power through the use of these rules? The answer to this question lies in the nature of market-facilitating institutions themselves. That is, firms generally do not attempt to construct institutions that intensify market discipline in general but rather develop institutions that serve their particular interests. Firms pursuing a project of market liberalism prefer institutional designs that create advantages not just for capitalists over workers but for certain capitalists over others and certain places over others. Rules that facilitate market liberalism thus represent what Santos (1995) terms globalized localisms, or

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rules developed in a particular context to serve specific interests that are then imposed on others. Because of this, emerging rivals face the problem of institutional incongruities, or a mismatch between the social, cultural, material, and technological conditions assumed by the existing institutional arrangements and the actual conditions in which rivals are embedded. Institutions are constructed in a particular place and time and carry with them a host of social, cultural, material, and technological conditions that cannot necessarily be replicated with ease. Thus, as the power of rival firms and states grows, we are more likely to see effective challenges to the enforcement of dominant rules. In their study of private, transnational arbitration, Yves Dezalay and Bryant Garth (1995, 1996) elucidate this point. They demonstrate how Western firms, lawyers, and arbitrators sought to build a system of private business dispute settlement as part of the legal framework to facilitate market expansion on a global stage. However, even though all the players involved had a common interest in creating a transnational legal field that would be autonomous from state courts, firms and arbitrators struggled over which firms and which places would be privileged by these governance institutions. By successfully prevailing over the continental European arbitral tradition, Anglo-American lawyers, arbitrators, and the firms they represented won the ability to “play by their own terms” (Dezalay and Garth 1995:52). This goes against the grain of many accounts that focus on the rise of transnational firms and private authority as the defining characteristic of globalization. In this view, a transnational capitalist class is characterized as triumphing over states and workers in its unified goal to push a liberal market agenda across the globe (Robinson 2003; Sklair 2001). However, this overwhelming focus on the power of transnational firms neglects the contestation among these firms and their implications for governance institutions. As Schrank suggests, we must consider “the possibility of a cosmopolitan-but-combative capitalist class” (2005:94; see also Kaup forthcoming; McMichael 2001). Firms do not simply create institutions to privilege the interests of capital over labor nor do they create a level playing field for competing firms. Rather they create institutions that serve their specific—and geographical—interests over those of competing firms. Even quite powerful firms and/or states, however, do not easily prevail over the institutionalized power of already-dominant firms and states. In their redirection strategies, rivals face the problem of institutional dependence. That is, rivals are dependent as they remain reliant on the existing

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arrangements even as they attempt to redirect them. It was the institutions established by the dominant actors that created opportunities for rivals to emerge. Rivals are thus unlikely to simply replace these institutions. Instead, they incrementally reconstitute these institutions to better privilege their preferences. Nowhere is this clearer than in the debate over voting power in the World Bank and International Monetary Fund. Emerging rivals like China and India do not seek to dismantle these institutions of US hegemony. They seek to gain greater influence within them and redirect them in their favor. From this view, conflict-driven processes of institutional change are inevitably incremental as rivals must retool and revise the existing rules. In his provocative book, Playing Our Game, MIT political scientist Edward Steinfeld argues that the ability of Chinese firms and the Chinese state to change the rules of the game to better serve their interests is complicated by the fact that their economic and political power has grown within “a game created and defined by the world’s advanced industrial economies, most notably the United States” (2010:24). China has willingly, or through the stipulations of outside organizations like the WTO, engaged in what Steinfeld calls institutional outsourcing. That is, in order to facilitate its spectacular economic growth, the Chinese state and Chinese firms have imported a range of institutions from a currency management system to, as we will see, a system of cotton quality classification. Just replicating these institutions domestically is a daunting task. It requires that certain practices, technologies, expertise, people, tools, and standards must be transferred from one context to another.7 Adopting a new currency management system, for example, requires not only new technologies but also new forms of formal and tacit knowledge and even new types of bureaucrats. The ability of the Chinese state or Chinese firms to not only replicate but also redirect such institutions to serve their interests is highly uncertain. From this view, historical institutionalists’ attention to path dependencies of existing institutions is critical, so long as we contextualize them within particular trajectories of institutionalized global capitalist development. Actors construct governance institutions to solve the problems they face given their historically and spatially specific position within processes of accumulation. These institutions then carry with them complex and historically specific constellations of knowledge/expertise, technology, materiality, discursive legitimations, social roles, and relationships that cannot be cast aside, transplanted elsewhere, or redirected to serve different interests in a simple and straightforward way.

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Marginalized Actors and Protection Strategies While emerging rivals may pose the greatest threat to the institutional privileges enjoyed by dominant actors, marginalized actors too advance challenges that can be effective. Marginalized actors’ bargaining power is undermined by the destructive dynamics of liberal market projects. Lacking the bargaining power to compete for institutional privileges, these actors pursue protection strategies, which seek to reconstruct institutions to minimize the disadvantages marginalized actors face. Rachel Schurman and William Munro (2010) demonstrate these dynamics in their study of struggles between activists and agribusiness firms over the governance of biotechnology. They reveal how agribusiness firms, and particularly the biotech giant Monsanto, sought to piece together a global legal framework to privatize and commodify life forms through the protection of intellectual property rights for genetically modified (GM) seeds. Activists from the United States to Zambia, however, saw these institutions as having destructive effects, linking them to a range of issues from the loss of genetic diversity to the intensification of rural poverty and inequality by forcing small farmers to purchase rather than save and replant their seeds. These were not simply struggles over material well-being but also discursive struggles to define what is fair and just. Biotech proponents saw GM seeds as “good technologies” that were profitable and had the potential to feed the world’s growing population. Opponents, in contrast, saw Monsanto’s aggressive attempts to sell their seeds around the world as evidence of “greed and economic rapaciousness” (2010:189). As such, these activists launched what we might call protection strategies to contest these governance arrangements that privileged a small group of corporate elite over the environment, food security, and farmers around the world. In this way, we can see how more marginalized players, particularly as they organize together, can be “strategic actors” or “institutional entrepreneurs” who search out loopholes and weak points in existing institutions in order to challenge them, much as institutionalists would suggest. However, by understanding these challenges as resistance to the destructive effects of market liberalism, we are able to understand why this contestation occurs. Marginalized actors contest governance institutions that they perceive as threatening their established livelihoods and their ideas about what is fair and just. Marginalized actors will not necessarily be successful in their attempts to challenge liberal market institutions. Contrary to institutionalist accounts

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that have difficulty specifying why some actors are more effective than others, situating them within processes of capital accumulation helps us to understand the relative abilities of different players to effectively operate as institutional entrepreneurs. Protection strategies are, by nature, waged by actors who have relatively little power compared with dominant firms and states and who see their rights and resources undermined by liberal market projects. Given the limited bargaining power of marginalized actors, protection strategies are only rarely the decisive factor in struggles over institutions. However, as social movement scholars have demonstrated, the kinds of claims that such movements make and the discursive frames that they construct can influence the strategies of more powerful firms and states and shape the form that the resulting governance institutions will take (see Smith and Wiest 2012). Despite the influence that protection strategies can wield in struggles over governance institutions, we cannot assume that their strategies will take progressive forms. Recent analysts have argued that both the global justice movement and the religious Right in the United States can be seen as reactions to the destructive effects of liberal market projects (see Evans 2008; Block 2007, respectively; see also Harvey 2005). This is because both of these protection strategies are shaped by actors’ positions not only within social and spatial patterns of accumulation pursued by a given liberal market project, but also within historically and contextually specific social and cultural dynamics. Indeed, marketization and commoditization projects generate historically and spatially specific protection strategies that can take a wide diversity of forms (see also Brenner et al. 2010; Mansfield 2004). Dominant Actors and Preservation Strategies It is not only emerging rivals and marginalized actors who seek to reconstitute the existing institutional structure. Dominant actors, too, play a critical role in spurring institutional change. This at first seems counterintuitive. Dominant actors create institutions like quality standards to facilitate trade and reflect their preferences over those of workers, other marginalized actors, and rival firms and states. These actors are thus privileged by the existing institutional structure and the organization of the global economy it engenders and would be reticent to change it. However, the challenges from both rival and marginalized actors destabilize the existing institutional structure and make the enforcement of rules difficult. In this context, even dominant actors are compelled to reconfigure

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existing arrangements in an effort to protect their institutional privileges. Dominant actors develop preservation strategies that aim to reconstruct institutions in ways that both appease challengers and protect their institutional privileges (cf. Gramsci 1971). These are not strategies to simply deflect challenges and preserve institutions in their existing form. Rather, given the growing bargaining power of rivals and the potential for marginalized actors to disrupt accumulation patterns, dominant actors are compelled to actively reconfigure the institutional structure in an effort to quell these challenges and maintain what institutional privileges they can. These conflict-driven processes result in institutions that are inevitably hybrid. This is not because challengers are guaranteed success in their efforts to reconstruct the existing rules but rather because dominant actors’ preservation strategies attempt to pacify the challengers by offering some palatable changes. For example, scholars point to the efforts of the World Bank and the IMF to roll out a kinder, gentler neoliberalism in the face of growing popular movements around the globe that challenge their role in upholding the US-led neoliberal project (e.g., Jessop 2002; Barra and Dello Buono 2009). The conflicts generated by liberal market projects thus compel dominant actors to take an active role in stimulating institutional change. States and Geopolitical Competition The axes of conflict I identify represent conflictual relationships among private actors operating in the market. Indeed, these institutional positions (dominant, rival, and marginalized actors) and institutional strategies (preservation, redirection, protection) can be occupied and pursued by private actors. At the same time, however, it is common for private actors to implore states to support their strategy and to pursue it on their behalf. Capitalist firms can—indeed, must—rely on states to create and enforce much of the institutional infrastructure necessary for the functioning of global markets (Block 2007; Chorev 2007; Fligstein and Merand 2002). Because of this, firms and other actors in society compete to influence not only state policies but also state roles in shaping and/or regulating other governance bodies, such as private regulatory agencies or supranational institutions. Actors marginalized by liberal market projects also turn to the state as a site to contest institutions that destabilize their livelihood strategies. Thus, while projects of market expansion necessarily privilege certain actors over others, states often face domestic contestation both over whether market

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expansion is desirable and over whose preferences institutions supporting market expansion will privilege. From this view, global economic integration does not reduce the role of states in the economy. Instead, it creates new demands on states, or particular branches of states. States are compelled to transform their roles, activities, and even institutional forms in order to participate in or contest particular projects of market expansion in ways that protect its citizens and/or enhance the competitiveness of its domestic firms. As such, states, or coalitions of states and private actors, can also occupy institutional positions as dominant, rival, or marginalized actors. Moreover, coalitions of states and firms can pursue preservation, redirection, or protection strategies, or strategies that attempt to balance several of these elements. States, however, play a dual role, in that they not only shape the institutional terrain on which firms compete and more marginalized actors secure a livelihood, but also may emerge as competitors in their own right as they compete with other states to capture mobile capital and/or facilitate the competitiveness of domestic over foreign firms. Many accounts of transnational governance institutions tend to underplay the competitive dynamics among states. Anne-Marie Slaughter (2004), for example, provides what is in many ways a paradigmatic study of states’ efforts to transform their roles in an effort to participate in global economic governance. She argues that government officials disaggregate state sovereignty by building transnational networks with their counterparts around the globe to address common concerns such as the harmonization of regulations and crossborder enforcement. While acknowledging that government officials from different countries may have conflicting interests in governance networks, Slaughter insists that they can and do work together effectively by agreeing to “constitutional norms” that ensure “an inclusive, tolerant, respectful, and decentralized world order” (2004:27,29). However, by underplaying the competitive dynamics among states, her account leaves us with unanswered questions. For instance, why would branches of “disaggregating states” choose this high-road strategy rather than pursue dominance within new governance institutions? Why would weaker states choose to participate if a “high-road” approach is not assured? In short, Slaughter’s account overlooks how geopolitical competition shapes the operation and form of networked governance institutions. This type of approach is short-sighted because emerging rivals—both firms and states—are not only interested in changing existing rules to serve their interests. They also seek the power that comes from controlling the

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rules into the future (cf. Strange 1989). Over time, firms’ and states’ interests in what rules prevail can change in relation to their own shifting competitiveness and due to changes in broader historical circumstances beyond their control. Emerging rivals thus may seek the agenda-setting power that comes from occupying key coordinating roles within institutions. We will see that the Chinese state sought to supplant US control over quality standards. It recognized that the US state gained power from creating the physical representations of quality standards that all others must use. As Drezner insists, we need to consider “the competition by the economic superpowers to win the standard-setting game” (2005:842). State preferences, however, may or may not align neatly with the preferences of any particular social group in its territory. While coalitions of states and domestic elites are common, these coalitions are neither automatic nor unproblematic. They can be made difficult both by competing elite class fractions within a state with different interests in what institutional strategy to pursue and by the protection strategies of marginalized actors. Thus, critical to a successful preservation, redirection, or protection strategy is coalition building. Actors must develop tactics to reconstruct the existing institutional arrangements to advance and gain broader support for/acquiescence to their project. Particularly with the rise of transnational firms who are increasingly unmoored from particular state spaces, building a coalition that can successfully restabilize the rules of the game is far from straightforward. Indeed, we will see that transnational cotton merchants, historically aligned with the US state, faced a conundrum given the hegemonic rivalries between the United States and China. While the US state’s support for their agenda of private transnational governance could be secured, transnational merchants were reticent to tie themselves to a sinking ship. In this context, transnational merchants attempted to position their private governance as geographically neutral and thus compatible with either Chinese- or US-led hegemony in the future. Institutional Change and Hegemonic Rivalries In sum, I argue that conflict over institutions like quality standards must be understood as constituted by and constitutive of broader struggles over the organization of the global capitalist system. Both challengers and dominant actors attempt to use strategies institutionalists identify in their efforts to transform institutions. Actors draw on, reconstitute, and mix historically

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specific institutional fragments in the struggle to create and legitimate new rules in their interests. They engage in discursive bricolage as they seek to shape ideas about who can legitimately set rules (e.g., states vs. firms); what kind of rules can be set (e.g., those that facilitate or hamper trade); and how they can be set (e.g., on the basis of scientific findings, or through democratic procedures). In short, the dynamic interplay between institutions and strategic action that institutionalist scholars emphasize remains critical in this account. However, it is only by understanding the underlying conflict that we can understand why institutional change inevitably involves this dynamic interplay and results in hybrid institutions. Actors’ preferences and relative bargaining power in a particular institutional struggle are shaped by their positions within a broader conflict generated by the efforts of dominant firms and states (or hegemonic coalitions) to establish institutions that extend market discipline on a greater scale and in a geographical configuration that benefits them. In response, other firms and states (emerging rivals for hegemonic power and weaker actors) attempt to challenge and redirect these institutions to reconstruct the global capitalist system in their favor. By identifying the underlying causes of conflict and the strategies actors pursue, my approach allows a careful analysis of the (possible) transition from one hegemonic coalition to another as struggles across a multitude of sectors ultimately instantiate this broader geoeconomic and geopolitical transition.

w h y cot ton? The struggle over who makes the rules for the global economy is being fought on a myriad of battlegrounds across a wide range of sectors. Yet, cotton is in many ways an ideal lens through which to explore the dynamics of institutional change. In the contemporary era, conflict in the cotton trade cuts across critical fault lines in the global economy. Western transnational firms and states face challenges to their position as rule-makers not only from some of the weakest actors in the global economy, such as states and cotton producers in West Africa and their social movement allies, but also from some of the emerging giants, most importantly, China. But cotton has long been a commodity at the center of historical transformations in global capitalism. Cotton was one of the most important commodities linking the industrial revolution in Britain with slavery in the United States and the social, economic, and political devastation that the slave trade wrought on communities in West Africa. In an ironic twist, we

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see these same nations linked by cotton again, yet this time in a different constellation of social relationships. West African producers now compete with those in the United States on the global market. They do not, however, compete as equals. The farms of US producers are much larger (averaging around 1,000 acres) with highly mechanized operations. Their counterparts in West African countries work small plots of land (2–7 acres), which they plant, weed, and harvest by hand. While US producers are known for providing reliable supply in great volumes, it is widely agreed that West African producers not only grow cotton at a lower cost ($1.32/kg vs. $1.42/kg of lint) (Chaudhry 2008)8, but also produce cotton of some of the highest quality (Fok 2005). Although cotton exports are a rather insignificant slice of US trade, West African states accrue between 30 percent and 40 percent of their foreign exchange earnings from cotton exports (Baffes 2004). With privatization and the liberalization of markets in the 1990s and 2000s, these two sets of cotton producers were drawn into more direct competition and were increasingly linked to the same powerful middlemen. A handful of transnational merchants were coming to dominate the trade in not just cotton but a diverse portfolio of agricultural commodities. As these merchants competed to construct global sourcing networks and to manage the risks of commodity trade on the futures market, they claimed control over the critical link between geographically dispersed cotton producers and geographically dispersed and relatively small-scale textile manufacturers as textile and apparel production shifted from Western Europe to Asia. This position as key middlemen gave them significant power to direct the benefits of trade in their favor. The growing dominance of transnational firms vis-à-vis states, workers, and agricultural producers in the global economy has itself been deemed a critical shift in historical social relations. But in the early 2000s, the cotton trade became a key battleground for another potential shift: would the balance of power in the global economy shift increasingly to Asia, and particularly to China? The phase-out of the Multi-Fibre Arrangement (MFA) from 1995 to 2005 liberalized trade in apparel and, paired with the accession of China to the World Trade Organization (WTO) in 2001, shifted the geography of apparel and textile production. China burst on the scene as the largest producer of textiles and apparel—and the largest importer of cotton—in the world. For China, cotton was a critical commodity that linked the fate of its agricultural producers with the competitiveness of its textile and apparel firms, the foreign exchange that they earned, and the millions of workers that they employed. Approximately 20 million people are directly involved

introduction

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in the textile sector in China, and apparel and textiles accounted for 15 percent of China’s total export value in 2005 (Alpermann 2010; FAS 2006). More than a hundred million farmers and farmworkers are involved in the production of cotton in China (Alpermann 2010). As these policy shifts augmented the economic power of China, they also gave new teeth to the crisis of Western legitimacy in the cotton trade. These policy shifts consolidated the power of three key actors: the Chinese state, the US state, and transnational cotton merchants. As of 2012, none of these actors has been capable of setting new rules of the game. Rather, the first decade of the twenty-first century was a period in which the Chinese state, the US state, and transnational merchants were competing over who could claim authority in the global cotton trade. That is, they competed over who could translate their economic power into legitimate and enforceable institutional rules. The contemporary cotton trade lets us explore two stories that are critical to understanding both the crisis of Western legitimacy and emerging forms of transnational cooperation for economic governance. First is the story of weaker actors—in this case, cotton producers, small merchants/ginners, and states in West African countries (and other cotton-producing countries around the globe)—who are challenging the Western liberal market project that again subordinates them, albeit in new ways, in the global economy. The second story is of increasingly powerful actors, such as the Chinese state and Chinese textile manufacturers, who aspire to set their own rules for global trade. Perhaps most interesting is how the two stories intertwine. Together, these stories allow us to explore how the growing power of transnational corporations, and their allies in Western states, is upset by shifting geopolitical dynamics. And they allow us to consider what this means for the construction of new transnational governance institutions and the ability of weaker actors to have their voices heard in these negotiations. In essence, these stories reveal the diverse axes of conflict and institutional strategies—redirection, protection, and preservation—that are generated by liberal market projects, and the hybrid institutions that result.

w h y qua lit y sta nda r ds? It is this varied group of firms and states in cotton-producing and -importing countries, as well as an amalgam of scientists, arbitrators, and trade association representatives, who negotiate economic governance in the cotton trade. And it is within these broader shifts in the power dynamics among

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them that I explore negotiations over a key economic governance institution: quality standards, and the mechanisms to settle disputes over quality. Admittedly, at first glance, quality standards seem to be a terribly mundane, technical issue that should hardly demand our attention. The reality, however, is quite the opposite (see Busch 2000). Economic sociologist Jens Beckert (2009) sees quality standards as solving the problem of valuation—a key coordination problem that must be solved to allow the creation of markets and their continued operation. Trade requires actors to come to an agreement over how the quality of a commodity will be evaluated and thus what price it will command. As such, Beckert considers understanding quality standards as one of the “founding problems for the sociology of markets” (2009:247). How an agreement on quality is reached is far from a straightforward, technical problem to be solved. Quality standards do not evaluate the “intrinsic qualities” of a good or service; rather they make some qualities visible while obscuring others (Daviron and Vagneron 2011; Thévenot 2009). Quality standards thus serve as rules of exchange that “define who can transact with whom and the conditions under which transactions are carried out” (Fligstein 1996:659). As different actors have distinct interests in what standards should be, they have critical distributive consequences. Quality standards are mechanisms of economic governance that are used in the trade of a vast array of commodities, from bulk agricultural goods like cotton or wheat to sophisticated electronic goods or fine wines. Indeed, some estimates suggest that up to 80 percent of trade is affected by standards or associated technical regulations (Mattli 2001b). Standards do, however, take particular form in relation to specific commodities. Cotton is highly heterogeneous, and the differences in the material characteristics of different types of cotton matter because they influence processing. That is, the material characteristics of cotton influence how cotton fibers are spun into yarn and woven or knit into textiles. Raw material is the most important factor influencing yarn quality, and represents about 50 percent of the cost of yarn (Estur 2004b). Quality is thus the main source of differentiation in end-markets (Larsen 2003), and knowing the quality of the cotton one is buying or selling is key to profitability. The governance of quality standards involves three key tasks (see Table 1.2). The first is defining quality. This involves determining what characteristics of the cotton should be evaluated to determine its price and establish grades, or the categories used to implement the standards. This is a contentious task as different actors, from Chinese textile manufacturers

introduction

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t a b l e 1 . 2 . Key Tasks and Axes of Conflict in the Governance of Cotton Quality Standards. Key Governance Tasks

Description

Definition of Quality

Determining which characteristics of cotton should be evaluated in establishing grades and thus price

Benchmark Standards

Creating physical representations of the ‘‘true’’ value of the grades which are used as a basis of comparison in manual classification or to calibrate measurement instruments in automated classification

Dispute Settlement

Adjudicating a conflict over quality and technical terms in a contract

and large cotton producers in the United States to transnational merchants and small cotton producers in Benin, have different interests in how quality should be defined. The second task is the creation of benchmark standards. Benchmark standards are physical representations of the “true” value of the different grades or categories. This is considered a critical coordinating function as it is subject to considerable manipulation and serves as the basis for classification and dispute settlement. When cotton is classed for sale on the market, it is compared with these benchmark standards to determine its quality and price. The final task is dispute settlement. If a merchant ships cotton from Benin to China and the Chinese buyer argues that the cotton delivered was not what she ordered, who will settle the dispute, authoritatively determine the quality of the cotton, and enforce this definition? Historically, the settlement of quality disputes has been intrinsically linked with the governance of contracts more broadly and thus rules for “quality terms” in a contract have often been elaborated in conjunction with rules for “technical terms,” such as who will be responsible for storage, transportation, and insurance or how payment will be made. These tasks for the governance of quality standards must be conducted regardless of whether trade in cotton occurs within a face-to-face market or clear across the globe. However, these tasks and the social relationships that they embody can take distinct form in different locations, at different historical moments, and in relation to the changing economic organization of trade. As we will see in the subsequent chapters, these three governance tasks have also been the key axes of struggle over quality standards throughout history. I consider negotiations over these governance tasks from 1970 to 2012 in comparison with a similar struggle over quality standards that occurred from 1870 to the 1920s. As we will see, negotiations over these forms of

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economic governance are conflictual because who makes the rules matters. Whoever can successfully claim authority over quality standards has considerable influence over how the benefits of trade are distributed. As Tim Büthe and Walter Mattli explain, struggles over standards matter for firms and states as “to lose may mean higher production costs, steeper costs of switching to international standards, lower international competitiveness, loss of export markets, and even risk of corporate demise” (2011:12). And for weaker actors, such as small farmers in West Africa, to lose may mean greater livelihood instability—greater difficulty sending one’s children to school and putting food on the table.

r esea rch str ategy The research forming the core of the book captures the years following two critical turning points in the cotton trade: the shift to liberalized trade in the apparel sector with the end of the Multi-Fibre Arrangement (MFA) in 2005 and the accession of China to the WTO in 2001, which together created an increasingly transnational but China-centered cotton trade. This book follows key actors—transnational and regional merchants, government officials, fiber scientists, contract lawyers and arbitrators, and trade association representatives—from countries around the globe as they navigate this new trading environment and negotiate new global rules to govern their transactions. When I describe my research on the cotton trade to family, friends, and other scholars, I am commonly asked, what region or country did you focus on? This question reflects what continues to be a deeply embedded methodological nationalism in social scientific research—that is, our tendency to frame research, even research on transnational processes, in nation-state– centric terms. This is not to say that nation-states are no longer pertinent to study. Indeed, the chapters of this book will repeatedly refer to states and state agencies and their roles in transnational governance. Overcoming methodological nationalism means not seeing nation-states as containers for social activities. To move beyond methodological nationalism in the study of transnational processes, we need to demarcate transnational space as our area of focus. To this end, I used the global commodity chain (GCC) approach as a methodological tool to track actors that are at once linked in the global cotton trade and embedded in place-specific constellations of labor, technology, materiality, science, culture, and discourse (see Collins 2005; Gereffi

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1994). Hopkins and Wallerstein (1977, 1986) first introduced the concept of the commodity chain as an alternative to the methodological nationalism that characterized much research at that time. The commodity chain is defined as “a network of labor and production processes whose end result is a finished commodity” (Hopkins and Wallerstein 1986:159). The commodity chain represents a useful analytical tool to study global standard-setting by helping one trace the relationships among diverse actors involved in the sector for which the standards are being made. As Jane Collins explains, commodity chains can help one “grasp the evolving organizational aspects of international trade, the linkages that animate it, the coordination that makes it possible and the new global bodies that regulate it” (2005:4). In particular, commodity chains can be used to facilitate Philip McMichael’s (1990, 2000) “incorporating comparisons” historical comparative method for studying the capitalist world-system. McMichael argues that by comparing the subparts of the world-system, an understanding of the world-system as a whole emerges. McMichael suggests that such comparisons can occur along two axes: space and time. Cross-time comparisons assume that any era in the history of the world-system can be thought of as consisting of particular historical instances or moments that can be compared. Cross-space comparisons, on the other hand, involve comparing subparts in spatially specific locations of a global configuration. McMichael suggests that comparison along either of these axes is sufficient; however, creative combinations of the two are preferred. The commodity chain serves as a unit of analysis through which to facilitate cross-time and cross-space comparisons. My research methodology involved cross-time comparisons as I compare contemporary negotiations within the commodity chain with those from the 1870s to the 1920s. As well, I compare social relationships along the commodity chain at different points in time within each of these periods. My research also involved cross-space comparisons. Using the GCC methodology, I sought to capture variation both within different nodes of the commodity chain and across different geographic locations. I collected and analyzed three main types of data guided by this sampling strategy. First, I conducted document analysis of news articles, annual reports, minutes from meetings, and policy documents. Second, I analyzed descriptive statistics on changes in cotton production, consumption, and trade globally from 1970 to present from a data set obtained from the International Cotton Advisory Committee (ICAC). Finally, I used a multisited ethnographic research strategy (Collins 2003). This involved conducting approximately 80 semistructured interviews, as

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well as observation at four international cotton industry conferences: the 2005 and 2006 annual meetings of the ICAC and the 2005 and 2006 annual meetings of the International Cotton Association (ICA). These conferences brought together state and private sector representatives from cottonproducing and -consuming countries around the world. My sampling strategy for interviews aimed to maximize potential diversity among actors in terms of their interests and roles in standard-setting. To this end, I interviewed actors in each of the key nodes or positions within the cotton trade: cotton producers, transnational and local cotton merchants, and yarn/textile manufacturers, as well as representatives from trade associations representing these actors (see Figure 1.1). I also sought to maximize geographical diversity by interviewing actors during field visits to China, Benin, and the United States, as well as during the cotton industry conferences I attended in Brazil and England. However, these firms involved directly in the trade are themselves embedded in webs of relations

f igu r e 1 . 1 . The Cotton Trade within the Apparel/ Textile Commodity Chain.

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with a range of other actors, such as states, lawyers, and scientists, who also intervene in standard-setting processes. To capture these actors, I further interviewed government officials, fiber scientists, lawyers, arbitrators, and various firms that provide services to the cotton trade (e.g., inspection firms, shipping firms, insurance firms). This research strategy was critical not only for capturing institutional change over time through cross-time comparisons but also for capturing diverse axes of conflict. I was able to examine divergent interests in standardsetting between actors at more dominant or powerful nodes of the commodity chain, such as transnational cotton merchants, and those in more marginalized nodes, such as cotton producers. It allowed me to trace the patterns of social conflict between actors within the same node, such as between cotton producers in the United States versus those in West African countries. And finally, it oriented me toward struggles between powerful firms and states, in both competitive and client-based relationships, such as the struggle between Chinese textile manufacturers and transnational merchants and between the US and Chinese states.

outline of the book The chapters of the book explore struggles over quality standards in the global cotton trade. As I trace these struggles, I aim to demonstrate how contestation over specific institutions, such as cotton quality standards, must be understood as constituted by and constitutive of broader conflicts in the organization of the global capitalist system. Actors’ preferences, bargaining power, and institutional strategies in these struggles reflect their position within the dynamics of global capitalist development unleashed by liberal market projects. And these conflict-driven institutional strategies generate new, hybrid institutions. Chapter 2 begins the analysis by turning to an earlier period of globalization from the 1870s to the 1920s. This chapter demonstrates how episodes of institutional change are best understood when situated within broader material and discursive struggles over the organization of the global capitalist system. Merchants from Liverpool constructed their private authority over quality standards and dispute settlement as part of a broader project of British-led market liberalism in the 1870s. While this liberal market project remade the cotton trade in its image to a significant degree, it also unleashed the creative and destructive dynamics of capitalism and generated both new rivals and marginalized actors, particularly in the United States,

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who sought to challenge these governance institutions. These challenges brought a conflict-driven process of institutional change. Rivals such as the US state remained dependent on the Liverpool standards and thus needed to master the existing standards before pursuing a redirection strategy to recast them to reflect their preferences. This institutional dependence ensured that the process of institutional change unfolded incrementally. As challenges to the Liverpool standards grew in intensity, Liverpool merchants were compelled to pursue a preservation strategy to reconstitute the rules in ways that would appease challengers while retaining their institutional privileges. The resulting institutions were thus hybrid in nature as the product of the iterative and competitive reconstitution of the rules. Ultimately, the broader shift in the balance of economic and political power toward the United States aided the US state in securing control over quality standards, if in a hybrid governance arrangement that integrated Liverpool merchants in an oversight role. The United States replaced private standards for economic liberalism with national standards for embedded liberalism that nonetheless preserved private authority over dispute settlement. In sum, institutional change was a process shaped by path dependencies, strategic efforts on the part of actors, and their embeddedness in broader, historically specific processes of capital accumulation on a world scale. In chapter 3, I turn to the contemporary struggle over quality standards. This chapter demonstrates that projects to create new institutions are often trial-and-error, ad hoc efforts, as institutionalist scholars suggest, but they are also driven by competitive efforts to shape the terrain of market competition. Actors create new institutions to solve the problems they face given their historically and spatially specific position within patterns of capital accumulation. The chapter begins by tracing the rise of a US-led liberal market project in the 1970s and the efforts of the US state and transnational merchants to recast quality standards and dispute settlement to privilege their preferences in this liberalizing environment. As the textile and apparel trade became increasingly global, a new US cotton classification system became the de facto global system. However, it was also met with skepticism given the patterns of conflict that emerged in response to the United States’ liberal market project. The United States’ project was seen as a highly uneven liberalization project that required countries in the global South to liberalize markets while the United States continued to protect its textile and cotton producers from market discipline. At the same time, US and European merchants took advantage of market liberalization to extend their cotton supply and distribution networks, as well as their private authority over dispute settlement, on a global scale. Yet, while trans-

introduction

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national merchants gained greater power to impose the rules of the game, they also faced limits to the enforceability of their preferred rules. Particularly in a context of growing inequality between trade partners, merchants’ private authority over dispute settlement was contingent on the support of states and a transformation in states’ organizing logics to serve transnational firms rather than domestic cotton producers or textile manufacturers. In this chapter, we see how actors searched for institutional arrangements that solved particular problems or helped them pursue new opportunities given their particular positions within the US liberal market project. At the same time, the efficacy of these institutions was limited by the patterns of conflict that they generated. Chapter 4 focuses on a critical turning point in the struggle over quality standards and dispute settlement mechanisms: the creation of the World Trade Organization (WTO). The WTO transformed the dynamics of struggle in the cotton trade in three key ways. First, it intensified the creative and destructive dynamics of the US liberal market project. Perhaps most decisively, this created the conditions for China to ascend to a dominant position in the cotton trade. Three kings of cotton became rivals for rule-making power: the Chinese state, the US state, and transnational merchants. Second, these shifting competitive positions crystallized both a redirection strategy on the part of the Chinese state to reconstitute the rules of the game in its favor and a protection strategy by marginalized cotton producers against the power of US firms, producers, and the state. The Chinese state, as well as more marginalized actors, saw US quality standards and merchants’ dispute settlement mechanisms as globalized localisms that cast rules designed to serve the preferences of US cotton producers and textile manufacturers onto the transnational stage and created disadvantageous institutional incongruities given the different social, cultural, legal, material, and technological conditions in their countries. Finally, the creation of the WTO shifted the logic of decision making over standards and dispute settlement. The Agreement on Technical Barriers to Trade (TBT) narrowed the debate over standards through a commitment to base decisions on science and market integration rather than the socioeconomic and distributive implications of standards and technical regulations. At the same time, China’s accession to the WTO limited the role of the state in the economy and generated new challenges for both China and transnational merchants in negotiations over dispute settlement. In chapter 5, I demonstrate why we should expect conflict-driven processes of institutional change to inevitably be incremental in nature. Emerging rivals remain dependent on existing arrangements even as they pursue

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redirection strategies to reconstitute them in their favor. China emerged as a powerful rival in part due to the United States’ liberal market project and the institutions—from quality standards to the WTO—that facilitated it. Yet, in its redirection strategy to retool existing rules, the Chinese state found itself dependent not only on aspects of the existing standards and dispute settlement rules but also on the broader institutional framework at the WTO that shaped how rules could be made. This institutional dependence made the Chinese state’s redirection strategy necessarily focused on incremental changes as it first had to master the existing arrangements before trying to introduce changes. Thus, through its redirection strategy, the Chinese state sought to import and imitate institutional forms from the United States as a way to solve the problems of institutional dependence and institutional incongruities and ultimately overtake these institutions. Chapter 6 reveals why conflict-driven processes of institutional change result in new arrangements that are inevitably hybrid. Facing challenges from both rival and marginalized actors, dominant actors are compelled to retool institutional arrangements in an effort to preserve their institutional privileges and stabilize existing rules. Indeed, we see that the USDA and transnational merchants launched preservation strategies that aimed to reconstitute the institutional arrangements in ways that would both appease challengers and maintain their institutional privileges. Institutional change thus results in hybrid arrangements as even dominant actors participate in the reconstruction of rules and contribute to a process of track-switching, or the redirecting of these institutions along a new path-dependent trajectory. Finally,the concluding chapter discusses the implications of this analysis of shifting quality standards and dispute settlement mechanisms for broader debates in the literatures on institutional change and the governance of the global economy. Drawing on comparisons with the historical standards war at the turn of the twentieth century and with other cases of Chinese standard-setting, this chapter demonstrates that specific instances of institutional change must be understood as constituted by and constitutive of broader transformations in the organization of the global capitalist system. Conflicts over the rules of the game in the cotton trade can be understood as reflecting and instantiating the shift from a British-led to a US-led hegemonic coalition, as well as the potential rise of a new hegemonic coalition in which both China and transnational firms are likely to play prominent roles. A theory of institutional change in the global capitalist system thus sheds light on the broader competitive dynamics and power relations that shape who will set the rules of the game into the future.

ch apter t wo

Standards Wars and the Original Competing Kings of Cotton

In the spring of 1923, a heated exchange over cotton quality standards appeared in subsequent issues of the International Cotton Bulletin, a publication of the International Federation of Master Cotton Spinners’ and Manufacturers’ Associations. Just days after the passage of the new Cotton Standards Act in the United States, Charles J. Brand, the chief of the Bureau of Markets of the United States Department of Agriculture (USDA), published an article explaining the national standards for cotton quality that the Act established. These standards were meant to replace the private system of quality classification that had long been dominated by powerful cotton merchants in Liverpool. Brand hoped to persuade European textile manufacturers’ and cotton merchants’ associations to adopt the USDA standards and accept the authority of the USDA as the new standard-setter. Despite the burgeoning domestic market, the competitiveness of US cotton exports was critical to the US government. As Brand put it, “Raw cotton is the largest single item in our foreign commerce. The approximate annual value of the part of the crop that is exported is $600,000,000. . . . The importance of cotton to the exchange situation and to our trade balances is such as to make this product a national and not a sectional issue” (Brand 1919:37–8). The goal of the new cotton quality standards was to ensure that this critical national product was properly valued on the world market and that some of this value trickled down to cotton producers who had long alleged manipulation within the private system of quality classification operated by cotton merchants. Brand cast his appeal to European cotton buyers in technical terms, stressing the efficiencies to be gained if the European associations adopted

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the new US standards for cotton quality. “If the spinners in Europe, the merchants in Manchester and Liverpool, exporters and interior merchants in the United States and the farmers of the American cotton belt can speak in identical terms so that each grade name will mean the same everywhere,” he wrote, “an enormous advantage will be gained promoting economy and efficiency from first to last” (Brand 1923a:369). These technocratic claims, however, were not well received. The subsequent issue of the Bulletin featured a scathing response, warning that “the results of this Act are farreaching and serious for buyers of cotton in Europe” (International Cotton Bulletin 1923:418). This response echoed the opposition of many of the largest cotton merchants in the United States, who, in Brand’s words, “take the position that wherever the government takes a hand it harms rather than helps, and that ‘It is none of the government’s business’” (as cited in Howard et al. 1923:213). The ability for the US government to legislate its control over transnational quality standards was uncertain.

*

*

*

In this chapter, I explore the struggle over quality standards in the cotton trade from the 1870s to the 1920s. This chapter demonstrates the leverage gained by embedding theories of institutional change within the global capitalist system. I situate struggles over standards within the broader material and discursive conflicts regarding the organization of the world economy in order to explain why quality standards and dispute settlement shifted in this period and why institutional change took the form that it did. I first trace the rise of private authority over quality standards and dispute settlement as part of the institutional arrangements supporting the broader project of British market liberalism. This is not to say that quality standards were part of an entirely deliberate and coherent project. Rather, they were constructed by actors—Liverpool merchants—who were empowered by these policies and needed to create new institutional arrangements in order to take advantage of liberalized markets. While operating as de facto transnational rules for several decades, these private quality standards were ultimately challenged. The British liberal market project had both destructive and creative effects on the cotton trade, which generated new patterns of social conflict. This conflict destabilized the private authority of Liverpool merchants as US cotton producers, US merchants, and ultimately the USDA proposed competing visions of how cotton quality should be governed and what that would mean for the distribution of benefits in the cotton trade.

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t a b l e 2 . 1 . Actors Controlling Key Governance Tasks from 1870–1922 vs. 1923 –2004. Key Governance Tasks

Private, Transnational Standards for Economic Liberalism 1870–1922

Public, Transnational Standards for Embedded Liberalism 1923 –2004

Definition of Quality

Liverpool merchants’ private trade association (LCA)

US state (with voting rights for US industry and foreign merchants and textile manufacturers)

Benchmark Standards

Liverpool merchants’ private trade association (LCA)

US state (with voting rights for US industry and foreign merchants and textile manufacturers)

Dispute Settlement

Liverpool merchants’ private trade association (LCA)

Private trade associations in the United States and Europe

The struggle over the Liverpool standards was a struggle over who would control the key governance tasks for quality standards: defining quality, creating benchmark standards, and settling disputes. The control by Liverpool merchants was ultimately replaced by a new, hybrid institutional arrangement in which the US state took control of most, though not all, of these governance tasks (see Table 2.1). It is in the analysis of how this new institutional arrangement emerged that the payoff of embedding institutionalism within the historical development of the global capitalist system is revealed. The path dependencies of existing institutions critically shaped the trajectory of change. Given the established trading relations, expertise, and discourses embodied in the Liverpool standards, it was difficult to simply impose a new system of quality classification. Instead, challenging the Liverpool private standards required rivals to overcome the problems of institutional dependence. In order to get in the standard-setting game, challengers needed to master the existing standards before trying to redirect them to serve different interests. In this process, strategic action was critical. Diverse players experimented with a range of different proposals for how these institutions might be retooled such that they would be accepted by key stakeholders in the cotton trade. However, the strategies that different actors adopted—and their discursive claims to the legitimacy of their proposals—were shaped by broader shifts in the balance of power in the world economy and by broader ideological frames and intellectual currents that emerged as part of the debate over economic liberalism and alternative ways to organize the economy. In-

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deed, institutional change must be understood through an analysis of path dependencies, the strategic efforts on the part of actors, and their embeddedness in broader, historically specific processes of capital accumulation on a world scale.

t h e r i s e of f or m a l p r i va t e s t a n da r d s w i t h i n t h e br i t ish proj ect of econom ic l i ber a l ism Cotton has been traded locally and regionally for thousands of years. However, the transnational and intra-empire trade became significant only in the late 1700s. At this time, Britain began to import significant quantities of cotton to fuel industrial textile production and the industrial revolution. British spinners and weavers introduced major organizational and technological innovations (factory-based production, the water frame, the spinning mule, and the jenny and their link to steam power). These innovations radically increased yarn and textile production and thus the demand for cotton (O’Hearn 2001; Quark 2008). Through protectionist policies that restricted the flow of information, technology, and skilled workers out of Great Britain, as well as the use of colonialism to undermine key competitors in India, the British state politically constructed the comparative advantage of its textile industry. These efforts helped the British state to enforce a global division of labor in which its existing and former colonies were its raw material suppliers. British firms established networks to import cotton from many regions, including the West Indies, the East Indies, the United States, and Brazil. However, with the introduction of Eli Whitney’s saw gin in 1794, the United States became by far Britain’s most significant cotton supplier (Baker and Griffin 1984:398) (see Figure 2.1). Multicommodity merchants and merchant bankers in London and Liverpool forged the trans-Atlantic and intra-empire trade in cotton and other commodities (Killick 1974a:501, 1974b). These merchants made long-distance trade possible, and shaped it to serve their interests, through their access to credit and their reliance on friendship and family relationships to manage the risks of trade. There were significant risks involved in the long-distance trade. The quality of a bale of cotton, for example, could deteriorate during its Atlantic journey due to water or other damage. Moreover, the price of cotton could differ dramatically from the time it departed a plantation in Virginia to the time it arrived in Liverpool. Given these risks, British merchants facilitated the long-distance trade by extending credit to their trade partners and integrating them into a consignment system of trade (see Figure 2.2). In the consignment system, the cotton planter in the US South maintained

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f igu r e 2 . 1 . Imports to Britain by Origin, 1811–84. Adapted from Ellison 1968 [1886].

f igu r e 2 . 2 . Liverpool Merchant–Dominated Trade Route, 1800–1915.

ownership of the cotton but consigned it to a local or regional merchant who charged a commission for selling it on his/her behalf. In exchange, the cotton planter received credit to buy agricultural supplies, food, and other necessities while the cotton was on its journey to Britain for sale. The local or regional merchant in turn consigned the cotton to the larger merchants in New York in return for credit to conduct their business. Finally, the New York merchant consigned the cotton to the British merchant in exchange for credit. Indeed, the consignment system was made possible by “a long chain of credit stretching from the manufacturers, brokers and merchants in England, through merchants in New York, down to cotton buyers, factors and planters in the southern states” (Killick 1974a:510–11; McMichael 1991). The relationships along this US-British trade route were largely close, personal relationships among elites. It was often brothers and sons who were sent to start US subsidiaries. Merchants stressed the importance of family and commercial honor as they trusted each other with their investments abroad (Killick 1974a:505). Planters, too, were often sons of promi-

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nent families “seeking a fortune and adventure” (Cox 1926:531). Not only were they well resourced and able to purchase slaves to work their land, but also they maintained intimate relationships with merchants and even manufacturers. In short, these elites managed these risks by entering into consignment relationships with people embedded within their overlapping economic, political, social, and even familial networks (Killick 1974a; Simpson 1989; Stone 1915). It was within these elite networks that the first quality standards for cotton emerged. With the increasing speed of mechanized textile production, the quality of cotton was considered critical to processing efficiency and the quality of the finished textile product (Dumbell 1926). Indeed, as early as 1835, microscopes were being used by cloth manufacturers to distinguish qualities of cotton (Ure 1835). While no formal system of quality classification existed, trade partners developed informal definitions of quality, which distinguished cotton by national origin and/or region (e.g., West Indies, East Indies, United States), as well as through terms such as middling, ordinary, choice, or fair (Cox 1926:531; Dumbell 1926). Due to the close relationships among elites, business was conducted “on the basis of a verbal understanding” (Cox 1926:531). Written contracts were rare as “mutual trust between gentlemen rather than the law and written contracts dominated the relationship” (Woodman 1990 [1968]:xiii). Moreover, while distinct players might evaluate cotton quality differently, the ultimate determination of the cotton quality and the resolution of any disputes occurred through face-toface negotiations upon its sale to spinners in Britain, and the resulting price was passed back along the chain of consignment relationships. It was a system “based on confidence and self-regulation” that largely operated outside of state regulation and state courts (Ellison 1968 [1886]:274). As these were large, multicommodity merchants and trading houses, this practice of selling commodities based on informal quality designations and self-regulation was common across many primary commodities, from cotton and coffee to sugar, spices, and other tropical products (Daviron and Ponte 2005). These arrangements governed the transnational and intra-empire trade in cotton for the first half of the nineteenth century. By 1850, however, Britain adopted a liberal economic project that significantly expanded global trade and created the impetus to replace this informal system with formal quality standards and dispute settlement arrangements. The industrial textile revolution, and the cotton trade that supported it, had propelled Great Britain’s rise to industrial supremacy. As Eric Hobsbawm puts it, for the British, free trade meant that British firms “were allowed freely to undersell everybody

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in all markets of the world and secondly that they encouraged underdeveloped countries to sell them their own products— chiefly food stuffs and raw materials— cheaply and in large quantities, thus earning the income with which to buy British manufactures” (1975:38; McMichael 1987). In this period, Britain abandoned protectionism, negotiated “free trade treaties” to reduce tariff barriers among leading industrial nations, and reduced restrictions on international waterways (Hobsbawm 1975:36–37). Ideologically, this move to a free trade regime was justified by classical economists such as Adam Smith and David Ricardo, whose theories advocated competition based on “natural” comparative advantage and an end to state intervention into markets, despite the political construction of Britain’s textile prowess (Silver and Arrighi 2003). The period from 1850 to 1870 was thus one of rapid expansion that significantly shifted the contours of the cotton trade. Between 1820 and 1850, Britain’s cotton piece-good exports grew by about 1.1 billion yards. Between 1850 and 1860 alone, such exports grew by more than 1.3 billion yards (Hobsbawm 1975:30). In turn, demand for cotton expanded to feed this growth. World cotton consumption was about 60 percent higher in the 1850s than it was in the 1840s (Hobsbawm 1975:41). At this time, an influx of new merchants entered the cotton game. The larger, multicommodity trading houses began to diversify into banking while more-specialized cotton merchants began to handle the cotton trade (Cox 1926:531). With these changes, the thick personal relations that had been used to manage risk under the consignment system began to break down (Lipartito 1983:52). The cotton trade increasingly became a world of arm’s length transactions among trading partners no longer embedded in dense and overlapping networks. The uncertainty that these developments brought to the cotton trade was only exacerbated by the US Civil War from 1861 to 1865. The Civil War largely halted cotton production in the US South and severed the South’s trade relations to the northern United States and to Britain (see Figure 2.1; Woodman 1990 [1968]:202). In what came to be known as the “Cotton Famine” or the “Cotton Panic,” cotton prices began to fluctuate significantly given the uncertainty of the US supply and the difficulties merchants faced in their efforts to secure alternative cotton supplies from other regions such as the East Indies (Harnetty 1970; Hazareesingh 2012). As Simpson describes the situation in Liverpool, “The cotton market became very excited . . . even wild” (1989:310). The influx of new actors and increasing price volatility left merchants searching for new ways to take advantage of these expanding market op-

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portunities while minimizing the associated risks. Aided by the laying of the trans-Atlantic cable and the introduction of the steamship, merchants began to experiment with forward delivery and futures contracts. With better communication technologies, merchants in Liverpool could learn in advance when cotton was being shipped to them, and they began to sell cotton “to arrive,” or for forward delivery (Garside 1935:234). Signing a contract for cotton “to arrive” meant that sellers were agreeing to deliver—and buyers were agreeing to purchase—a certain quality and quantity of cotton at a specified date in the future. Since forward delivery contracts did not allow buyers to select cotton bales for purchase by inspecting the cotton in a warehouse, merchants began to sell “by sample.” Samples could be sent in advance of the bales, and buyers would decide whether or not to purchase it. Buying cotton for forward delivery was advantageous for both merchants and spinners. Spinners could purchase cotton at a known price without holding extensive inventories (Woodman 1990 [1968]:290). For merchants, forward delivery contracts reduced the risks associated with long-distance trade as they guaranteed the merchant a specified future price for specific quantities and qualities of cotton (Lipartito 1983:51). Forward delivery contracts thus reduced the price risk of overseas trade, or the risk that the price would change from the time the cotton left the United States to the time it arrived in Liverpool. Forward delivery contracts did not, however, address what might be thought of as relative price risk. That is, sellers and buyers still risked that they would agree to a particular price for the future delivery of cotton and the price would move against them by the time the cotton actually arrived in Liverpool. In this way, buyers risked paying a higher price for cotton than their competitors if the price declined from the time they signed a forward delivery contract to the time of delivery. Similarly, sellers risked selling cotton at a lower price than their competitors if the price of cotton increased between the signing and fulfillment of the forward delivery contract. In periods of significant price fluctuations, such risks created incentives for buyers and sellers to default on contracts, or to break the contract if the price moved against them. To address the problem of relative price risk, merchants, brokers, spinners, and speculators began to experiment with futures contracts— essentially forward delivery contracts that were not based on the purchase or sale of actual physical cotton. With futures contracts, they could hedge— or offset—their relative price risks. To hedge, when an actor entered into a transaction in physical cotton, he/she would offset the price risk of that

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transaction by entering into an opposite transaction in futures contracts. For example, if a merchant purchased cotton, he/she would balance it by selling a futures contract; if he/she sold cotton, he/she would buy a futures contract. If prices changed, the gain in one transaction would be balanced or cancelled out by a loss in the other, thus obviating the risk inherent in a fluctuating market (Garside 1935:chapter 13; Woodman 1990 [1968]: 290–94).1 Forward delivery and futures contracts thus increased the calculability of risks in a liberalized market. Yet, these new types of contracts could reduce the risks of trade only if market players could overcome the greater uncertainty they created for determining the quality and value of the cotton. Forward delivery contracts required sales “by sample,” which created the risk that the quality of the actual cotton delivered might not match the sample sent in advance (Bouilly 1975). In this context, who would have the authority to verify the quality of the cotton and settle disputes? Futures contracts posed a graver risk because they represented agreements to deliver cotton that were not even based on samples (Ferguson 1980:150; Rothstein 1966). How could buyers know the quality of cotton that would be delivered? It was in this context that the extension of markets was forged through the construction of formal private authority in the late 1860s and early 1870s. To address these market coordination issues, merchants in Liverpool claimed the authority to conduct three key governance tasks (see Table 2.1 at beginning of chapter). First, they claimed authority over the formal definition of cotton quality within their trade association, the Liverpool Cotton Association (LCA).2 They translated what had been a loose and informal system of classification into a system of formal grades (e.g., Middling, Middling Fair, and Fair) that distinguished cotton based on its color and trash content (leaves and other plant parts or foreign materials). These became known as the Liverpool Standards (USDA 1922:20). Second, Liverpool merchants created benchmark standards, or official physical representations of the different grades. This came to be seen as a key coordinating function as these benchmark standards were the authoritative reference to be used to settle disputes over quality. If cotton was delivered on a futures contract, its quality could be determined by comparing it against these physical representations. Finally, they claimed formal authority over dispute settlement through the establishment of a private arbitral body and board of appeals to settle disputes outside of state courts (Arthurs 1985:66). The arbitral body was responsible for setting rules for dispute settlement for cotton sold on official Liverpool Standards or by sample, as well as for a range of technical

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contract terms (e.g., payment terms, storage, insurance, and transportation) (Ellison 1968 [1886]; Lipartito 1983:84). Soon after the establishment of the LCA, cotton merchants established trade associations to address similar issues in the major US markets, first in New York (1871) and New Orleans (1874) and later in regional markets across the South (Lipartito 1983; Rothstein 1983:397). With the laying of telegraph cables, these markets, emerging supply markets in Brazil, Egypt, and India, and increasingly important buyers in continental Europe could be linked. This effectively established a world market in cotton (Farnie 1979:175). Market information from around the globe was suddenly at one’s fingertips, and cotton producers, merchants, and spinners around the world became increasingly subject to the disciplines of worldwide supply and demand conditions.3 But this market information was useful only if it was commensurable— that is, if quality standards across different trade associations were uniform such that price quotations for different qualities could be compared across different markets. How was this commensurability achieved? Given the powerful position of Liverpool merchants as suppliers of credit, the Liverpool standards effectively operated as the de facto trans-Atlantic standards. All contracts for sale from the United States to Liverpool were made on Liverpool’s terms and according the Liverpool Standards and arbitration. Other standards could be used to buy and sell cotton in the United States, but ultimately any US merchant had to buy and sell cotton in relation to the Liverpool Standards to ensure they would not face losses upon export. As a merchant from the US South would explain years later, “These conditions were forced on the southern cotton interests by the financial necessities existing forty years ago, and it has not been possible thus far to bring about a concerted effort to throw off these shackles” (cited in House of Representatives 1908: Part II, 135). US merchants thus had no influence over the content of the Liverpool Standards. “Foreign buyers dominated the American markets,” Bouilly (1975:95) explains, “and over a long period they thoroughly established the principle that in custom and law the purchaser has the right of determining the grade of the cotton that he bought.” While they could purchase copies as references, these benchmark standards were expensive and often unavailable. Moreover, US merchants did not have representation within Liverpool arbitration and found its results to be “exceedingly unfair” (House of Representatives 1908: Part II, 127). As a US government official would later describe the situation, “When American cotton reaches the other side,

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it is arbitrated against an unknown standard before a board of men who represent the buyer and on which no American shipper has any American representative” (cited in International Cotton Bulletin 1923:421). As Liverpool merchants operated a vigorous re-export trade to continental Europe, the Liverpool Standards and arbitration generally applied to US cotton headed not only to British spinners but also to spinners in France, Belgium, Holland, Germany, Spain, and Italy (Tenny 1947:1021). The LCA’s de facto status as rule-maker did not go unchallenged. In 1874 and 1875, the representatives of the US regional trade associations held a series of meetings to discuss harmonization of quality standards both nationally and transnationally. The overall vision of the meetings’ architects was to establish the transnational authority of a permanent cotton trade association to oversee quality standards for all cotton traded from the United States to Europe and operate an arbitral body to settle disputes in the transnational trade (Bouilly 1975:267–69). However, with their powerful position in the market, Liverpool merchants rebuffed this proposal for the creation of a new institution of shared governance and instead simply refined their own quality standards for US cotton, elaborating distinct grades for Upland, New Orleans, and Texas growths (DeLoach 1912:1802–3).4 One might say that the US merchants’ challenge yielded incremental but not transformational change given that Liverpool merchants maintained their ability to define quality, create benchmark standards, and settle disputes and thus direct the benefits of trade in their interests.

t h e c on s t ru c t ion of p r i va t e au t hor i t y i n com pa r at i v e con t e x t Merchants’ efforts to construct private authority were not limited to the cotton trade. With the rise of futures trading in a wide range of commodities, private trade associations sprang up across Western Europe and the United States to set quality standards and establish arbitral bodies to settle disputes (see Table 2.2) (Ferguson 1980; Jones 1958). Moreover, these projects to establish private authority within individual sectors were embedded in a broader struggle between private firms and emerging national states over who should have the authority to govern commercial transactions. The key obstacle to private authority was enforceability. The competitive dynamics among private firms within trade associations made it difficult to rely on private enforcement of the rules. If a trade dispute arose and was settled in a private arbitral body, how could one ensure that the com-

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t a b l e 2 . 2 . The Proliferation of Private Trade Associations (nonexhaustive list). Adapted from Cronon (1991); Cutler (2003); Daviron and Vagneron (2011); Jones (1958); Schmitthoff (1968). 1841 Liverpool Cotton Brokers’ Association (United Kingdom) 1954 Philadelphia Commercial Exchange (United States) 1856

Chicago Board of Trade (wheat) (United States)

1858

Milwaukee Grain Exchange (United States)

1861

The New York Produce Exchange (United States)

1865

Kansas City Board of Exchange (United States)

1871

New York Cotton Exchange (United States)

1872 Bremen Cotton Exchange (Germany) 1873 The Silk Association of America (United States) 1877

London Corn Trade Association (United Kingdom)

1881

New York Coffee Exchange (United States)

1881

Le Havre Coffee Exchange (France)

1882

New York Mercantile Exchange (United States)

1883 American Seed Trade Association (United States) 1885

New York Coffee & Sugar Exchange (United States)

1888 Hamburg Coffee Exchange (Germany) 1888

London Coffee Exchange (United Kingdom)

1895

National Hay Association (United States)

1896

Grain and Feed Dealers National Association (United States)

1896

National Cotton Seed Products Association (United States)

1925

New York Futures Market (cocoa) (United States)

petitive parties to the dispute would abide by the arbitral body’s decision? If the party at fault refused to pay the arbitral award due, the rest of the association’s membership would have to blacklist the offending member, refusing to trade with him/her until the award was paid. While this basis for the enforcement of private rules worked in theory, in practice, competition among members meant that there were incentives to “free ride” by trading with blacklisted firms. Moreover, if a party to the dispute was not happy with the arbitral decision, he/she would turn to state courts in hopes of finding a more preferable outcome. Emerging national state court systems were willing to solve this enforcement problem for private firms by bringing the governance of commercial

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transactions under their jurisdiction. Indeed, as trade associations forged private authority to set standards and settle disputes, a conflict emerged between firms and states over who could claim this authority. Lawyers and judges had developed hostility toward private arbitration and in some cases saw arbitration as at odds with public policy because they competed with state courts for jurisdiction (Arthurs 1985:71; Cutler 2003:175). State courts considered contractual agreements to arbitrate revocable—that is, even if one signed a contract binding oneself to arbitrate disputes, one could simply take the dispute to court instead and the other party would have no recourse (Stone 2005:4). These judicial systems had made efforts to incorporate many aspects of commercial custom into common law in order to make it acceptable to the commercial community (Arthurs 1985:55). In this view, disputes over cotton contracts should be settled in state courts, which would provide the enforcement capacities private firms desired, while subjecting commercial contracts to public laws. For private firms in the cotton trade, and in the broader business communities in Britain and the United States, settling disputes in state courts was less than desirable. This reflected both the practicalities of trade and prevailing ideologies of contract governance. Litigating commercial disputes in court tended to involve costly and lengthy court proceedings that were governed by judges and juries that knew little of the intricacies of trade (Arthurs 1985; Ferguson 1980). Beyond the delay and cost of litigation, disputes in the cotton trade were largely disputes over quality, not points of law. As a result, a decision by a jury in the state courts would necessarily be based on testimony from “experts” knowledgeable of the material characteristics of cotton and of the trade. The same “experts” would thus have decided the dispute through arbitration but in a more timely and less costly manner (Simpson 1989:322). To avoid state intervention, private trade associations in the cotton trade took further steps to bolster their private dispute settlement mechanisms in order to insulate themselves from state courts. The Liverpool Cotton Association obligated members to settle all disputes through their private arbitral body. The Association further established the right of appeal to the president and committee of the Association in order to further insulate arbitral awards from state courts (Ellison 1968 [1886]:275; Simpson 1989). In 1872, the organization reported that the appeals committee had heard 882 appeals that year alone, suggesting that the number of disputes arbitrated was much higher (Arthurs 1985:66). Many associations also passed rules allowing them to impose fines on members, blacklist members who had not paid settlements based on their arbitral decisions, and suspend or expel recalci-

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trant members from the organization (Ellison 1968 [1886]:278; Lipartito 1983:55; Woodman 1990 [1968]:67). Trade associations and exchanges became new forums through which negative gossip circulated, thus recreating the threats to business reputation that operated in the consignment system. In associations that could establish strong commercial communities, private sanctions could be “every bit as coercive as the sanctions of the civil law” but rooted in private rather than state authority (Ferguson 1980:155). Firms also preferred private arbitration due to a liberal economic commitment to keeping states out of the market and privileging private over collective rights. Using their own trade associations, firms could set their own rules and shield themselves from public policy concerns. If disputes were settled in state courts or if arbitral decisions were taken to court for enforcement, courts could invoke their own laws, legal doctrines, and judicial attitudes and have a considerable impact on the outcome (Arthurs 1985:69; Benson 1995:490). Liberal economic ideologies not only privileged private rules over public rules but also shifted the logic of private contract governance itself compared with earlier historical periods of private rule-making. In the medieval period, for example, merchants travelling across Europe had developed a robust set of customary rules for exchange and dispute settlement. Private contracts in the medieval period were based on the idea that parties to a contract held obligations to fulfill the contract based on its inherent justice or fairness (Cutler 2003:157). That is, merchant autonomy to exchange and to govern their own transactions was based on a shared understanding of just bargaining, and merchant tribunals could overturn a contract if they felt its terms were unfair. It was not until the elaboration of the AngloAmerican law of contract in the nineteenth century that this principle of justice or fairness in exchange gave way to the notion that contractual obligations are consensual and derive from the voluntary agreement of the parties to a contract (Cutler 2003:157; Simpson 1989:327). In this new conceptualization, contracts were to be viewed as expressing the wills and desires of individuals, and “the law was not to police the equity of the bargain” (Cutler 2003:157). In this view, state authority was attractive for solving the free-rider problem, but only if it could be limited to enforcement of private rule-making and dispute settlement authority. These ideas became formulated in the principles of freedom of contract and contract sanctity, which also signaled a division of labor between the private and public spheres. Freedom of contract should allow private individuals and firms to agree to terms

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of exchange, while contract sanctity should be guarded by states through the enforcement of contracts within state courts (Cutler 2003). As such, these changing ideas would maximize the autonomous authority of firms, and particularly the most powerful firms, strengthen the enforceability of private authority, and narrow the scope for legitimate state intervention in commercial transactions. These ideas were largely reflected in the British Arbitration Act of 1889, which gave arbitral awards enforceability; an arbitral award “could be enforced, with the court’s leave, as though it were a court order or judgment” (Ferguson 1980:156). Moreover, contracts binding parties to arbitration would be considered irrevocable. Indeed, by the end of the nineteenth century, judicial hostility toward private arbitration had largely disappeared. Here we can see that the emergence of private authority over standards and dispute settlement in the cotton trade reflected a broader effort to establish the legitimacy of private authority vis-à-vis emerging national states in this period. By the end of the nineteenth century in Britain, it was estimated that “almost all mercantile cases, even those that eventually came to the courts, went to arbitration” ( Jones 1958:462). In the United States, over 1,000 trade associations had systems of arbitration by 1927 (Stone 2005:4). In this way, private actors made a competing claim for authority—that is, they attempted to institutionalize their private relations of authority in order to challenge or displace the role of common law in determining private “rights.” As we will see in the following section, however, the legitimation of private vs. state authority over standards and dispute settlement would not mean that the authority of Liverpool merchants in particular would go uncontested in the cross-border trade of cotton.

n e w pat t e r ns of soc i a l con f l ict Liverpool merchants had established themselves as trans-Atlantic standardsetters in the expanding world market for cotton. In the three decades before the turn of the century, however, these standards, and the broader British liberal market project they facilitated, generated new patterns of social conflict that came to destabilize the Liverpool standards. Liverpool merchants’ de facto status as rule-makers was slowly destabilized by three institutional strategies. First, US merchants, who gained growing power to rival Liverpool merchants through the creative dynamics of the liberal market project, pursued a redirection strategy to reconstitute the rules to better reflect their preferences. Second, US cotton producers, who were impov-

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erished through the liberal market project, adopted a protection strategy to limit the disadvantages they faced. Finally, the US state adopted a redirection strategy as part of a broader state-building project aimed at addressing the disruptions of market discipline while also redirecting the benefits of market liberalism to its territory. Rivaling Firms and the Seeds of a Redirection Strategy Britain’s unilateral free trade policy intensified interfirm competition among merchants from the 1870s to the 1900s, which ultimately generated greater consolidation on both sides of the Atlantic. The rise of London as the center of world finance provided Liverpool merchants with cheap and easy access to credit (Fleming 1966:3). Privileged access to credit, paired with the spread of futures trading, allowed Liverpool merchants to strengthen their strategic position as market-makers that could absorb the risks of trade to facilitate liquidity (see Carruthers and Stinchcombe 1999). Futures trading provided a tool to manage the risks of long-distance trade, but it also commodified risk. Rather than managing risk through close, interpersonal networks as in the earlier period, actors were compelled to purchase price insurance on the market. Thus, those actors who could afford to buy futures could sharpen their competitiveness, which largely meant merchants over spinners and farmers, as well as larger merchants over smaller ones (Bouilly 1975:28). It was merchants who were ideally situated to benefit not just from hedging but also from speculating on the futures market. Given their position as middlemen between buyers and sellers, merchants had access to information on both supply and demand that was critical for predicting price movements and taking competitive positions on the futures market. Indeed, as Eric Hobsbawm notes, it was during this period that “[Britain’s] finance triumphed, her services as shipper, trader, insurance broker, and intermediary in the world’s system of payments, became more indispensable” (1968:125). In many ways, competition among merchants revolved around the ability to secure and provide credit. By providing an alternative risk management strategy, futures trading allowed merchants to do away with the consignment system of trade. Rather than compete to maintain thick and extensive networks, merchants instead competed to secure credit in order to purchase large inventories of cotton outright in the fall when the US crop was harvested (Killick 1981:154). By accumulating large stocks, merchants could mix bales to create the even-running lots that spinners desired, and then retail it throughout the year (Fleming 1966:3). These inventories were then

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hedged on the futures market, eliminating much of the price risk associated with holding large stocks. Hedged cotton itself became another source of collateral for credit (Cox 1926:534; Lipartito 1983:52). This further allowed Liverpool merchants to offer credit to suppliers in the United States, as well as to spinners “on almost a permanent revolving-loan basis, as a means of securing their business” (Fleming 1966:6). This competition among merchants was replicated, if in a slightly different form, within the United States. As futures trading brought an end to the consignment system, intensified competition emerged among US merchants. These merchants competed along three key axes: (1) exploiting the competitive advantages of futures trading, (2) expanding their sourcing networks, and (3) gaining the capital and expertise to reduce their dependence on, and even compete with, Liverpool merchants (Killick 1981:165). As competition drove consolidation, a handful of the largest US merchants came to dominate the market, a position signaled by their “branches all over the cotton belt, a seat on the New York Cotton Exchange and branches in Europe” (Killick 1981:165). Indeed, by the early 1900s, three of the largest US cotton merchants—Geo. H. McFadden & Bros., Alexander Sprunt and Son, and Stephen M. Weld—set up selling agencies in European and Asian markets to cut out Liverpool merchants entirely. This further allowed them to access credit and warehouse facilities in Europe (Fleming 1966:4; Killick 1981:165). Intensified competition among merchants within the United States and abroad destabilized the Liverpool Standards as the de facto trans-Atlantic standards in two ways. First, quality standards were implicated in the competition among US merchants for control of the US market. Merchants in regional trade associations began to differentiate their quality standards and arbitration rules as a strategy to draw spot and futures trading to one exchange over another (Bouilly 1975:231). Private rule-making became part of competitive regional development strategies. In the process, the different trade associations adopted nearly identical grade names in the classification systems, largely borrowed from the Liverpool Standards, but they defined the grades differently (USDA 1922:18). A former president of the New York Cotton Exchange explained the situation: What is called “middling” in Augusta, Ga., is very different from and much higher than the “middling” of Savannah and Charleston. The “middling” of Texas is nearly one-half grade better than the “middling” of New York and fully one-half grade better than the “middling” of Liverpool. The grades of New

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York do not correspond with those of Liverpool or Bremen or Havre, nor with those of many of the spinning centers in New England. (Marsh 1911:267)

These multiple standards began to destabilize the status of the Liverpool standards as the de facto trans-Atlantic standards. The ability to compare the grades across different cotton exchanges declined, making price quotations “confusing and often misleading” (USDA 1922:18). Moreover, as more of the US cotton crop was consumed domestically, differences emerged in markets oriented toward the domestic vs. the export trade (House of Representatives 1908: Part II, 127). Greater consolidation among US merchants also spurred a more coherent redirection strategy to reconstitute the Liverpool standards in ways that would better serve US merchants’ interests. With their growing power in the export trade, the larger US merchants organized in the New York Cotton Exchange again contacted the Liverpool Cotton Association in 1900. Echoing the strategy pursued in 1875, they called for negotiations among US and Liverpool merchants to harmonize their definitions of quality standards and their benchmark standards, as well as to create an International Appeals Board to settle disputes, on which US merchants would have representation. In response, however, the President of the Liverpool association explained that difficulties present themselves which offer considerable obstacles to joint procedures in the adoption of new standards, and that much time would be lost before any practical result could be arrived at. This association, therefore, without giving up hope that international standards will sooner or later be agreed to, has decided to proceed to make up for itself revised standards of American cotton . . . it is hoped [the US associations] may agree with the general views as to what such standards should be, so as to commend themselves as the basis of standards for general adoption by the exchanges. (letter cited in House of Representatives 1908: Part II, 134)

Liverpool merchants were not prepared to share their position as standardsetters for the trans-Atlantic trade, although their ability to enforce this dominant position was diminishing. Indeed, the enforceability of Liverpool arbitral awards within the US was becoming a problem. While private enforceability mechanisms existed, the enforceability of the Liverpool Cotton Association’s arbitral decisions ultimately ended at national borders where the authority of British state courts ended. As such, if a US merchant decided not to honor an arbitral award,

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it was difficult to force them to pay. At the International Cotton Congress in 1907, a representative of the International Federation of Master Cotton Spinners’ and Manufacturers’ Association in Europe complained that the “impossibility of enforcing the judgments delivered in a court of arbitration constitutes an intolerable situation” (cited in IFMCSMA 1907b:175). The limits of the state authority that undergirded the LCA’s private authority thus exacerbated the problems associated with the growing discontent with LCA standards and arbitration. US Cotton Producers and the Emergence of a Protection Strategy The second shift in the pattern of social conflict in this period was the relative impoverishment of US cotton producers. The destructive dynamics of the British liberal market project took historically specific form in the cotton trade. During the Cotton Famine of the US Civil War, cotton prices inflated more than the prices of most primary commodities, and, between 1873 and 1896, the price of raw cotton declined 50 percent more than wholesale prices in general (Farnie 1979:174). The slump in prices was in part due to the creation of a worldwide market for cotton through the linking of futures exchanges, as well as to rising cotton production in China, India, Egypt, and the Turkestan region. Most importantly, however, was the tripling of cotton production within the United States during this period (Farnie 1979:174–75; see also Wright 1974). Cotton farmers “remained deprived of any protective hedge against a slump in prices” (Farnie 2004:20). Yet, rather than turning to other crops, farmers continued to increase cotton production. The dramatic increase in cotton production despite declining prices was rooted in the tenancy system of production. After the Civil War, cotton production by enslaved Africans in service of white plantation owners ended. Plantation owners replaced enslavement with tenant farming relationships, which left black and white tenants free but nonetheless dependent on and subordinate to plantation owners and merchants (Ransom and Sutch 1972; Schwartz 1976).5 As cotton buying increasingly became concentrated in the hands of relatively few large European and American firms, tenant farmers became integrated into this network through local merchants, plantation owners, storekeepers, and regional merchants. Given the underdeveloped banking system in the US South at this time, tenant farmers were compelled to seek credit from local merchants and storekeepers, who in turn received credit from and purchased cotton on behalf of the larger merchants, often

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at set prices (Woodman 1990 [1968]:289; Saloutos 1960:10–13). In essence, tenant farmers were compelled to mortgage their crop to plantation owners or local merchants at high interest rates to finance their seed, equipment, and food requirements during the crop’s growing cycle (Schwartz 1976:34– 35). It was out of this system that skyrocketing cotton production emerged. When farmers were unable to repay, merchants and plantation owners took a highly interventionist approach, stipulating the crop to be planted and the time and conditions of sale. Both merchants and plantation owners were committed to continued cotton production despite falling prices. Saloutos explains, for example, that New Orleans merchants would provide credit to farmers in Mississippi where capital was scarce as a way to control the cotton crop. The merchant needed to ensure repayment as he/she was in turn “‘squeezed’ by creditors in Boston and New York” (1960:24). In effect, it was a system of debt peonage that locked farmers into the production of cotton during a period of falling prices (Ransom and Sutch 1972). As such, it was “incredibly disruptive” and “marked from the outset by widespread discontent and protest” (Schwartz 1976:11). In this highly unequal relationship with landlords and merchants, tenant farmers had little influence over the terms of the sale, most importantly the evaluation of the crop’s quality and price. Farmers had become increasingly aware of the importance of quality classifications during this period as local papers emerged, carrying numerous cotton quotations and multiple listings of grades (Bouilly 1975:98). But, in general, the farmer was obliged to accept the buyer’s classification. This was in large part due to relationships of power and dependency, but also stemmed from the social relations of expertise embodied in the existing standards. Cotton producers’ knowledge of cotton quality was largely limited to crops in their locality. Merchants, in contrast, were able to develop a keener expertise given their position as middlemen who purchased cotton from across the cotton belt and sorted it into similar quality, or even-running, lots for sale to spinners. It was widely acknowledged that the evaluation of cotton quality was a highly skilled task. When merchants settled disputes, trade associations chose arbitrators from among only the most experienced merchants. Indeed, a cotton quality “classer” was becoming an occupation in and of itself. Some trade associations had begun hiring professional classers (LCA 1913:517–25) and relied on a “committee of experts” to determine the physical definition of their standards (DeLoach 1912:1802). These inequalities in expertise made it difficult for producers to negotiate over quality and price, particularly when standards varied across mar-

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kets. A US government inquiry into the problems faced by cotton farmers explained the situation in this way: Such lack of uniformity in grading, and the consequent absence of correspondence between quotations for the different markets, have, in the opinion of some cotton growers, caused extremely heavy loss to the cotton producer. The cotton planter, and particularly the small cotton grower, have only rough ideas of the grading of cotton in the leading markets, whereas the larger cotton buyers, who are familiar with the types of the different markets, are able to translate the standards of one market into those of another and thus have an advantage in dealing with the producer. (House of Representatives 1908: Part II, 124–25)

This situation led to many accusations of false or under-classification. However, “there was virtually no way a person could pin down the validity of the charges . . . [which] threw one more uncertainty into the already uncertain and financially hazardous process of valuing cotton” (Bouilly 1975:99). Facing these problems, tenant farmers in the South began to develop a protection strategy to minimize the disadvantages they faced. In doing so, they saw the problems they encountered in negotiating the quality of their crops as part of a larger set of problems associated with the tenancy system and the growing power of merchants. In the 1880s and 1890s, the central goal of major farmer organizations, from the Farmers’ Alliance to the Farmers’ Union and the National Cotton Planters’ Association, was to increase their bargaining power vis-à-vis merchants and even to bypass merchants altogether, in order to “to abolish the credit system that hung around the neck of the farmer like a millstone” (Saloutos 1960:92).6 This goal was largely pursued through attempts to establish marketing cooperatives, which also tried to teach both farmers and the cooperatives themselves about cotton classification (Saloutos 1960:90; Yang 1937). The Texas Farmers’ Alliance Exchange (founded 1887) and later the Farmers’ Educational and Cooperative Union (known as the Farmers’ Union) began to class samples from farmers’ cotton bales to help them attain quality premiums when they sold to local buyers (Yang 1937:18). By 1906, the Farmers’ Union began to establish Schools of Cotton Classing across the cotton-growing states, designed to teach farmers how to evaluate quality (Yang 1937:20–21). These efforts to arm farmers with greater bargaining power, however, were intended mostly for white farmers and only incidentally for African-American farmers (Saloutos 1960:212). These efforts, however, did not overcome the problems caused by the

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multiplication of quality standards among different merchants and cotton exchanges. A representative of the Farmers’ Union explained the problems he faced when chairing a committee to establish cotton classing schools: I found there were a half-dozen or more classifications of cotton in America, and when “middling cotton” was wanted one could not tell whether New York, New Orleans, Liverpool, Howell’s, Inman’s, or Mr. Somebody else’s classification was wanted. Before we could begin teaching, it was necessary to determine what we would teach, it being absolutely essential that a standard of grades be fixed. (cited in IFMCSMA 1907b:99, original emphasis)

Thus, by the early 1900s, a range of farmers’ organizations, from the Southern Cotton Association to the Farmers’ Union, began to call for government intervention into quality classification (Bouilly 1975:248–49; Yang 1937). Farmers’ organizations took this struggle not only to their government representatives but also to their foreign buyers. As a representative of the Farmers’ Union explained to a meeting of the Master Cotton Spinners’ Association, representing spinners across Europe: We are opposed to the man who stands between the producer and the spinner and manufacturer. That man toils not in the field, nor does he spin. He manipulates the world’s market to his own advantage, and to the detriment alike of producer, manufacturer, and spinner. . . . We are trying in America to bring about a standardization of grades. . . . We want to know when we purchase cotton what we get and what we can expect. We want to know what we are selling, and what we shall be forced to deliver. (cited in IFMCSMA 1907b:34)

Some analysts suggested that “the same grade name was applied to two qualities differing in market value by as much as $2.50 a bale. Under this condition of affairs it was difficult for the grower to know the value of his product on markets other than his own” (Hoffman 1915:470). Farmers’ organizations claimed that southern farmers lost millions of dollars every year due to their lack of knowledge of the cotton grades and that the government must step in (Yang 1937:30). A Redirection Strategy within a State-Building Project The final development in this period was the emergence of a state-building project on the part of the US government that would ultimately challenge the dominance of Liverpool merchants in the cotton trade. This response to the British liberal market project had two key elements of import. The

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first part of the state-building project took the form of national industrial protectionism, which was linked with the emergence of a powerful, more nationally oriented coalition of US textile industrialists. This shift was a direct response to the British unilateral free trade regime that sought to undercut textile manufacturers around the world. In the United States, the defeat of the southern planters in the Civil War accorded northern textile industrialists considerable political power. This allowed them to successfully press the US state for protectionist policies that sheltered them from the British free trade regime. The United States erected tariff barriers during and after the Civil War (Arrighi 1994:293). The protected US cotton textile industry grew rapidly after 1961, replacing “spinning mules with ring spinners, [and] thus heavily unionized male labor with nonunion female labor” and enjoying privileged access to the growing domestic consumer market (Hugill 2009:406) (see Figure 2.3). US textile industrialists successfully shaped the national agenda to prioritize industrial development. This also meant a subordination of the interests of US merchants and southern planters in greater integration into Britain’s free trade regime to ensure growing markets for their cotton exports. Yet, cotton and other agricultural exports remained significant

f igu r e 2 . 3 . US Cotton Production, Exports, and Consumption, 1790–1930. Adapted from Mitchell (1992).

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as “industries producing for the highly protected and rapidly expanding domestic market became the main loci of capital accumulation in the U.S.” (Arrighi 1994:291). Cotton remained a commodity of critical national importance given the dependence of the US economy on the valuable foreign exchange that it earned. As LaFeber explains: By 1870 the American economy depended so much upon foreign markets for the agricultural surplus that the ups and downs for the next thirty years can be traced to the success or failure of marketing each year’s wheat and cotton crop. (1953:9–10, cited in Arrighi 1994:292)

However, in the broader power struggle over the direction of the US economy, export agriculture became a “‘hand-maiden’ of growth”—a sector that should support the broader national development project (Rothstein 1983:395). The second element of this state-building project emerged in response to growing social unrest generated by the destructive elements of market discipline. In rural areas in particular, farmers were organizing in the Farmers’ Alliance and the Populist Party, challenging the tenancy system and the broader constellation of interests that they saw as profiting from their work (Schwartz 1976). In response, the US government, as well as intellectuals and professionals, were grasping for both the capacities and the vision to address growing social unrest. In this view, the US Department of Agriculture (USDA) became a central element of the US government’s state-building project. The USDA was one of the fastest growing parts of the federal government from the 1880s to the 1930s (Hamilton 1990:211). As Hamilton suggests, the USDA can be understood as part of the government’s search for “new ordering mechanisms in place of the self-regulating market and the community-based political system of the nineteenth century” (1990:208–10). A key guiding ideology that would ultimately shape this state-building project, and the work of the USDA in particular, was that of Progressivism. Progressivism as a movement was inspired by and emerged in response to the Populist surge of the 1870s and 1880s (Noble 1977:60). But rather than a movement tied to the grassroots of rural America, Progressivism was a movement of intellectuals and professionals (Shenhav 1999:34). Key intellectual founders of Progressivism included a group of scholars trained in the tradition of the German historical school of economics (Cochoy 1998:196). In the latter decades of the nineteenth century, a steady stream of American students traveled to Germany and were trained in a scientific model of

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historicism that had come to dominate the German social sciences ( Jones and Monieson 1990). In its approach to economics, the German historical school represented a reaction to and a critique of British classical economic liberalism (Alchon 1985:32). These scholars were dissatisfied with the inability of classical economic liberalism to resolve the problems associated with rapid marketization, commoditization, and industrial development. As a result, the German historical school oriented itself toward the empirical study of real markets as they were historically constituted with the goal of offering practical solutions to economic matters ( Jones and Monieson 1990:103). Upon returning to the United States, these German-trained economists found positions in US universities, and particularly at land-grant institutions where the practical and reform-minded approach of the German historical school intersected with the study of agriculture and rural life. In this context, these economists turned their focus to agricultural marketing. They undertook in-depth studies of the physical movement of agricultural commodities through marketing channels in order to understand marketing institutions, procedures, and practices (Cochoy 1998:197).7 Through their research, the scholars of the German school pointed to waste and inefficiencies in the functioning of agricultural marketing systems due to issues such as the lack of uniform standards ( Jones and Monieson 1990:105). Moreover, as they followed commodities from field to final consumer product, they witnessed firsthand the problems farmers faced getting a good price for their products (Bartels 1951). In short, these scholars saw the ills of the system but believed that science and expertise could solve these ills by infusing order and efficiency into the entire agricultural system, from production to marketing. By the turn of the century, these ideas began to coalesce with the broader emerging ideology of Progressivism. Progressive leaders sought to address the ills of industrial capitalism. “To them, poverty, disease, unemployment and social discontent were not the result of an inexorably unjust social order. Rather, they were the effects of an unstable, ill-managed, but improvable corporate capitalism” (Alchon 1985:8). The prescription, therefore, was technocratic state-building. A new set of institutions was needed that could “stand above class conflict and exercise authority in the social interest” (Alchon 1985:8). These institutions would be based on the collection and analysis of objective data. Science, wielded by experts and professionals, could become the key tool to construct “neutral” and “efficient” state intervention for “the good of society as a whole” (Shenhav 1999:5). Both the national

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orientation and emerging technocratic vision of this state-building project would come to shape the emerging conflict over quality standards and the USDA’s redirection strategy.

de l e g i t i m i z i n g p r i va t e au t hor i t y a nd the institu tiona l dependence of a technocr atic state Pressures were mounting to challenge the mismatch of standards that had emerged in the wake of discontent with the de facto trans-Atlantic Liverpool Standards. What was less clear, however, was how the problem should be fixed. A decisive move to effect institutional change was finally stimulated when a hurricane hit the US cotton fields in 1906. Hurricane damage meant that low-grade cotton flooded the market. The New York Cotton Exchange (NYCE) had already set price differences between quality grades and refused to change them, artificially supporting the price of low-grade cotton (see Bouilly 1975:275–312). This left spinners paying too much for lowquality cotton and producers watching high prices for the low-grade cotton they had already sold. It was largely New York merchants who reaped the profits of selling poor-quality cotton at high prices. The futures and spot prices became so misaligned that merchants found it profitable to ship cotton from Liverpool for delivery on New York contracts (Bouilly 1975:311). These events raised new inquiries into the functioning of futures markets and also turned the spotlight onto the question of quality standards. In the wake of broad discontent over actions of the NYCE in this crisis, the US government authorized the Secretary of Commerce and Labor to investigate the problems of price volatility and cotton classification (see House of Representatives 1908). Through this process, cotton farmers gained powerful allies in their call for government intervention: textile manufacturers and smaller merchants. Textile manufacturers in the United States wanted a stable domestic trading environment and recent events had demonstrated that the mismatch of private standards could not deliver this. They saw at least part of the problem as rooted in the lack of uniform standards, which was seen as creating the opportunity for manipulation (Yang 1937:50). Smaller and medium-sized merchants also supported government intervention as they were less equipped than their larger counterparts to handle significant price shifts. Finally, the disruptions were felt abroad, and an international meeting was held in Atlanta, Georgia, in 1907, during which merchants, producers, and most importantly, European spinners

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and textile manufacturers called for a uniform cotton classification system for US cotton to be created either by the US government or by an association composed of representatives of cotton exchanges, growers, and spinners (IFMCSMA 1907a:66). Some merchants continued to lobby against state action (House of Representatives 1908: Part II, 128). As one merchant expressed to a government inquiry: If there were any crying need of it, there might be some reason for it . . . but the present system that we have of grading cotton and selling cotton to spinners has not been the result of the experience of a few months or a few years, but of fifty years. It is a world-wide trade, and it has accustomed itself to the present development; and for the Government to-day to come along and make a change would be like changing the standard of measurement in this country from inches into millimeters. (cited in House of Representatives 1908: Part II, 128)

Despite this resistance, those merchants who had long advocated for harmonized private standards—the larger merchants in the New York Cotton Exchange—had been identified as a key source of the problem during the hurricane scandal (Yang 1937:43). The continued criticisms of the NYCE by both cotton producer and textile manufacturer organizations thus effectively delegitimated the idea of private governance of standards in general and of the role of the NYCE in particular. Thus, support for government intervention won out on the domestic stage. Through the Agricultural Appropriations Act of 1909, the United States Department of Agriculture (USDA) was charged with the authority to establish an official definition of standards for US cotton and to create benchmark standards to represent them—two of the three critical tasks in the governance of quality standards (USDA 1935:7). The ideals of Progressivism shaped the USDA’s approach to standards making. Indeed, the branches of the USDA charged to address quality standards (the Office of Markets, the Bureau of Markets and Crop Estimates, and finally the Bureau of Agricultural Economics, successively) were influenced, and ultimately staffed, by some of the intellectual founders of Progressivism in the United States.8 Hamilton argues that the staff of the Bureau of Agricultural Economics came to envision themselves as “‘highly trained specialists’ using ‘elaborate scientific technique’ to infuse a new sense of order and rationality into agriculture in place of the ‘blind competition’ and the ‘silent forces of individual initiative’” (1990:216). Establishing uniform

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quality standards offered an opportunity to stand above the give-and-take of political conflict to benefit the cotton trade as a whole. However, this technocratic vision of Progressivism would not simply translate into enforceable state intervention. The government’s ability to establish a legitimate and enforceable set of standards was neither automatic nor preexisting. On one hand, the ideas of Progressivism still faced resistance from the business community, and particularly from large cotton merchants, who were reluctant to accept government intervention. As Alchon notes, “The only place where English ideas [on neoclassical economics] were taken more seriously than in England was in the United States” where an antistatist political culture merged with an individualist moral philosophy derived from Smith and Ricardo (1985:30). On the other hand, their ability to set standards was immediately hampered by their lack of expertise. Although government scientists began to study cotton quality standardization in 1907 (Yang 1937:118), expertise in cotton classification was largely embedded within a particular position within the cotton trade, that of merchants. This left the USDA facing a gap between its technocratic vision of the project and its existing capacities for such intervention, a gap which Alchon (1985:10) suggests was common in the Progressive program. In effect, the USDA faced the problem of institutional dependence. In order to redirect quality standards to serve different interests, the USDA would first have to master the expertise underlying the existing private standards. Only with this expertise could they produce new standards that would gain the approval of members of the trade who would use them. To this end, the USDA worked with an advisory committee of cotton classification experts from merchants’ associations, as well as representatives from various segments of the cotton trade, as it created its official standards. Moreover, it drew on the standards of domestic exchanges as comparisons (Bouilly 1975:314; DeLoach 1912:1803). The key problem was that, by importing the basis for its standards from the private sector, the USDA was highly dependent on merchants for input and for approval of the standards as legitimate. Without independent expertise in fiber quality, it was merchants who could claim the authority to evaluate the validity of the new standards. This became an immediate problem. Upon release of the new standards, the most ardent rivals of government intervention, the merchants in the New York Cotton Exchange, rejected them on technical grounds and questioned the accuracy of the official standards. They conducted their own tests and argued that the official standards

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were biased toward Texas and Gulf-Orleans cotton. The lower grades were too “bright” (too high in classification), which disadvantaged the Upland cottons grown in the eastern portions of the cotton belt, much of which was sold in the New York market (Bouilly 1975:316; Hoffman 1915:482; Marsh 1911:260). The NYCE continued to use its own standards. The New Orleans Cotton Exchange, long a competitor of the NYCE and an advocate of government intervention, led the southern cotton associations in the adoption of the government standards. Given the problems with these standards, however, the adoption was in name only as their members continued to use local standards or private types (Bouilly 1975:317). These government standards were never widely used in the commercial trade (Hoffman 1915:483; USDA 1935:7).

ov ercoming insti t u tiona l depen dence The large merchants in the NYCE had successfully rejected the USDA standards but in the following years saw the writing on the wall: new government standards would be made and legislation to make their use mandatory would likely be in the offing (Yang 1937:43–44). The NYCE continued its resistance, as one analyst reported: “The New York Cotton Exchange authorities vigorously combated all efforts to coerce it into making changes” (Hoffman 1915: 479). At the same time, however, the merchants in the NYCE decided to make another run to come to a private agreement over transnational standards with merchants and spinners in Europe, which they hoped could trump the government standards. Rallying the support of cotton exchanges across the United States, the merchants of the New York Cotton Exchange called for a meeting of trade associations on both sides of the Atlantic. Thus, at the request of the NYCE, the Liverpool Cotton Association held a conference in June 1913 to address the issue. Joining representatives of 20 US merchant associations were merchants from the Liverpool (England), Manchester (England), Bremen (Germany), and Havre (France) cotton exchanges, as well as representatives from the International Federation of Master Cotton Spinners’ and Manufacturers’ Associations, which represented 75 percent of the world’s cotton textile manufacturers (IFMCSMA 1913; LCA 1913; Ousley 1913:5). At the conference, the US cotton exchanges proposed what were essentially reforms to the Liverpool standards and again called for an International Board of Appeals for quality disputes (LCA 1913:542). The discussion over the US merchants’ proposal for an International Board of Appeals,

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which would transnationalize private authority to settle disputes, ended in a stalemate. Liverpool merchants refused to loosen their control over arbitration. As one observer remarked, Liverpool “will not share this very agreeable occupation with anybody else” (IFMCSMA 1913:49). The proposal for uniform standards, in contrast, was uncontroversial; there was broad agreement that harmonized standards would reduce the number of disputes and arbitrations in the trade. The question continued to revolve around who would be the standard setter. The other major European exchange, located in Bremen, Germany, had already adopted the Liverpool standards, and thus the European associations argued that they would be “very satisfied” if the US associations would adopt them as well (LCA 1913:542). The US trade associations, however, wanted a revision to the Liverpool standards that would differentiate between lower-grade cotton growths. This not only would benefit sellers by offering better prices for some growths in the lower-end grades but also would bring the Liverpool standards more closely in line with the US government’s official standards (LCA 1913:542–43; Bouilly 1975:318). In response, Liverpool did make overtures toward two concessions, hinting at a preservation strategy that would appease their challengers while maintaining some of their institutional privileges. First, they suggested they could move toward a model of greater shared governance in the future, as one representative from Liverpool explained: Liverpool could say that it had taken the first step in making standards and keeping standards. In future [sic] Liverpool would not do this off its own bat, but would invite Bremen, Havre, New Orleans and New York to meet our Exchange, to check and observe these standards, and if there was any occasion to make an alteration it would be the joint voice of those exchanges. (LCA 1913:543)

Second, they agreed to negotiate new standards based on the US proposals. A committee of representatives from the US and European associations met immediately to harmonize the definition of quality and to create new benchmark standards to represent them. These were deemed the International Standards for US cotton, which were to replace the Liverpool Standards (Stephens and Neville 1913:580). Ultimately, however, Liverpool’s preservation strategy can be summed up as one of no strategic action. In subsequent negotiations it would become clear that these were empty promises. The Liverpool merchants made no efforts to integrate other associations into a shared governance arrange-

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ment. Moreover, although Liverpool merchants had agreed to adopt the International Standards, whether due to miscommunication or manipulation, they officially adopted them only to class US Upland cottons, maintaining separate standards for the US Gulf and Texas growths. The US exchanges had understood the International Standards to uniformly apply to all cotton grown in the United States (USDA 1922:21). This situation, in the minds of the USDA and the US associations, was “fraught with temptation to deception” as cotton would be shipped from one region to another in attempts to be classed under a more favorable set of standards (USDA 1922:22). Fresh from their negotiations abroad, representatives of twenty US cotton associations arrived in Washington to lobby for the adoption of the International Standards as the official US standards (USDA 1922:23). Despite claims that these International Standards had the entire transnational segment of the trade behind them, the Secretary of Agriculture refused to simply adopt them. While the USDA had been embarrassed and delegitimated in its first efforts to claim authority as the new standard-setter, in the intervening years it had launched a concerted effort to close the gap between its technocratic vision and the expertise required to establish cotton standards and overcome its institutional dependence on cotton merchants. Drawing on the example of the land-grant economists and their empirical approach to a science of agricultural marketing, the USDA began to construct a science of classification. In 1912, 1913, and 1918, the USDA conducted studies of marketing conditions, first in Oklahoma and then across the entire southern cotton belt, focusing particularly on the correlation between market prices and qualities of cotton. Through these studies, they found a range of difficulties facing farmers selling in their local markets, including (1) wide variations in prices paid for middling cotton in the same market on the same date; (2) penalizing of lower grades; (3) insufficient premiums for better grades, staples, and qualities; (4) unfair differentials in price between the eastern and western section of the cotton belt; and (5) bargaining advantages gained by the farmer knowing the exact grade, staple, and quality of his/her cotton (Montgomery 1929:12–13). Indeed, one USDA report estimated that cotton producers in Texas alone had already increased their profits by $1,000,000 through their efforts to grade cotton in cooperatives and teach farmers about classing (Yang 1937:87). Perceiving clear evidence of the benefits government intervention could bring to the plight of farmers, the USDA also developed scientific research on cotton quality standards. This work was influenced by Frederick Taylor’s (1911) ideas of scientific management that were becoming popular at

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the time. The notion that scientific study could reveal the one most efficient way to conduct any task was increasingly seen as applicable not just to industrial production but also to marketing (Cochoy 1998). For example, if one could identify the most efficient way to match fiber properties with spinning machine settings, one could determine the best standards to differentiate between their processing values. To this end, the USDA began to conduct spinning tests to determine the “intrinsic value” of different fiber characteristics for processing efficiency in order to provide a scientific basis for grade differentiations (e.g., Meadows 1921; Meadows and Blair 1921; Willis 1927). This would ultimately become the USDA’s central strategy vis-à-vis quality standards for cotton (and other agricultural products), and in the 1920s a division of fiber science research would be established (see Palmer 1961; Harding 1947:185, 235–37). The work of the USDA thus gave birth both to a new field of applied science—fiber science—and to a new group of specialists.9 This represented a critical shift from a system in which the legitimacy of standards was evaluated by those most experienced in strategic positions within the trade (merchants) to a system in which the legitimacy of standards would become increasingly external to the trade and in the domain of scientific experts. It was thus armed with this technocratic vision and an emerging program of scientific research that the Secretary of Agriculture and the USDA received the request to adopt the International Standards negotiated by private players within the trans-Atlantic trade. Seeing their goal as one to protect the farmer by putting the trade “on a higher plane for everybody,” the Secretary of Agriculture refused to simply adopt standards that had been set largely by merchants (USDA 1923:3). They did agree to work with classing experts from the New Orleans and New York merchant associations to establish a new definition of quality and associated benchmark standards (Hoffman 1915:484). In short, the USDA had overcome, to a significant degree, its institutional dependence on merchants in standard setting. These new standards, which ultimately represented a combination of the 1909 official standards and the International Standards, were made mandatory for use in futures exchanges within the United States through the United States Cotton Futures Act of 1914 (USDA 1922:26; USDA 1935:7). While these standards were mandatory for use only in futures contracts, they were adopted by cotton exchanges across the United States, as well as textile manufacturer associations in New England and the southern states (USDA 1922:26). In the course of a few years, most domestic trade came to be conducted on the basis of the official standards or private types (Tenny

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1925:186). Thus, by developing necessary expertise and giving concessions to US merchants to get their support, the USDA successfully set uniform standards for the domestic trade in cotton. The standards promulgated under the Cotton Futures Act, however, had little effect on the trans-Atlantic trade. Thus, while national harmonization of standards had been achieved, the different standards used abroad still created difficulties in comparing price quotations across markets. Moreover, Liverpool merchants maintained their control of standard-setting and dispute arbitration for the trans-Atlantic trade. To address these issues, additional efforts were made between 1913 and 1916 to pass the United States Cotton Standards Act. This Act would make the use of the official USDA standards mandatory not just for futures markets but for all interstate and foreign trade in cotton (USDA 1924:1). However, as some of the largest US merchants continued to lobby against the Act on the grounds that it would disrupt the transnational trade in cotton (Saloutos 1960), it became clear that the Act would have better luck in the House and Senate if the USDA could secure the support of cotton buyers abroad and particularly Liverpool merchants. Thus in 1914, the USDA sent “expert cotton men” to the cotton exchanges in Liverpool, Bremen, and Havre to persuade them to adopt the USDA standards (USDA 1922:27). The cotton exchanges at Bremen and Havre suggested that they would follow Liverpool’s lead (Yang 1937:72–74). Thus, securing European adoption for the USDA’s official standards meant winning over the Liverpool Cotton Association. Despite the month spent by USDA’s experts meeting with its members and Board of Managers, the LCA rejected the USDA standards. Instead, the LCA pursued a preservation strategy, proposing that they could work together on the creation of standards for US cotton, periodically sending each other copies to come to mutual agreement on points of conflict. However, Liverpool insisted that the LCA would have the exclusive rights to the sale of standards in Europe, and the United States would not be allowed to certify or arbitrate shipments of cotton sold to Europe (Yang 1937:71). The USDA was not satisfied with these conditions, but ultimately World War I made it necessary to postpone further consideration of the matter (Bouilly 1975:322).

shifting bases of pow er a nd legitim acy World War I tilted the terrain of struggle in the United States’ favor. WWI and its aftermath shifted the geography of credit and thus the balance of

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power in the cotton trade. As Britain struggled to pay for the war, the United States’ balance of trade with Europe shifted in its favor. At the end of the war, the United States not only had purchased at bargain prices many investments Britain had made in the United States during the nineteenth century, but also had accumulated huge war credits and built up stocks of gold (Arrighi 1994:270–71). New York did not displace London as the financial center of the world after WWI, but it did put them on more equal footing and put US and European cotton merchants on more equal footing in their access to credit. As one of the largest US merchants at the time explained, WWI was a critical turning point: US firms “would no longer be dependent on Europe for financing, storing and carrying surplus cotton from the time of its availability until the mills needed it” (Fleming 1966:7; see also Cox 1926:535). The period from 1915 to 1930 was thus one of rapid growth for US merchants. The experience of Anderson-Clayton, the US merchant that emerged as the largest in the world in this period, demonstrates how better access to credit allowed a handful of the most competitive US merchants to forge geographically expansive distribution networks. Anderson-Clayton established joint ventures or subsidiary agencies in Britain, France, Belgium, Switzerland, Spain, and Portugal, as well as a selling agency in Germany that established branches in Czechoslovakia, Austria, Holland, Hungary, Yugoslavia, Poland, and the Scandinavian and Baltic countries. Further selling agencies were established in Italy, Japan, China, Mexico, and India (Fleming 1966:10). The demand for US cotton in Japan and China in particular spurred efforts to establish storage facilities and direct marketing relationships that would be financed and controlled by firms in the United States, bypassing Europe completely (Fleming 1966:8). Anderson-Clayton was regularly purchasing, storing, and delivering 2 million bales a year, or about 13 percent of the US crop, by the end of the 1920s (Killick 1981:168). Killick argues that the shape of the market shifted significantly from the first decade of the 1900s to the late 1920s: Instead of thousands of small firms, about 300 firms marketed the crop. . . . Out of these, three or four very large firms sold nearly a third of the crop. The market therefore, while still competitive, was far more concentrated than before the war. . . . American rather than European firms now dominated the international cotton market. (1981:165–66)

In short, the largest US merchants had become competitors rather than suppliers of European merchants (see Figure 2.4; compare with Figure 2.2).

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f igu r e 2 . 4 . Emergence of an Alternative US Merchant–led Trade Route, 1915 –23. Adapted from Farnie (2004); Killick (1981); Garside (1935).

This would have significant implications for the struggle over standards. Despite growing challenges, Liverpool merchants’ preservation strategy had failed to give strategic concessions to incorporate rival actors into their governance arrangement and after WWI they found themselves in a significantly weakened bargaining position. WWI also legitimated standardization as a key tool for competitive statebuilding. Standardization came to be seen as central to war efforts in order to eliminate the duplication of tasks and bring efficiency to war-related production (Noble 1977:81). After the war, “the value of research and standardization garnered prestige and authority” (Krislov 1997:87). Herbert Hoover, in his positions as Secretary of State and Secretary of Commerce, aggressively pursued standardization, emphasizing the importance of standardization and simplification for industrial efficiency (Krislov 1997:90–92; Noble 1977:81). Indeed, the 1920s would become the “heyday of efficiency experts” (Strasser 1989:157). After WWI, standardization became central to a mantra linking efficiency to US national competitiveness. USDA officials called on US merchants “as Americans and good business men” to support their efforts to transform the official US standards into trans-Atlantic standards to ensure “our national prosperity” (cited in International Cotton Bulletin 1923:421). This effort was cast in explicitly Taylorist terms, as a USDA official explained the importance of standards in bringing efficiency to cotton marketing and distribution: In the organization of every manufacturing plant in the civilized world the necessity for economy and efficiency in its processes of operation is so thoroughly

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understood that it has long been a fundamental consideration. . . . Not only must new economies be devised and applied in the sphere of manufacturing but the same principles must be followed with equal steadfastness in the field of merchandising. (USDA 1922:1–2)

However, as the USDA again pursued the transnational adoption of its standards, a discourse linking its standards not just to efficiency but to objectivity and neutrality was required to legitimate its standards abroad—that is, to legitimate not just state intervention but intervention by a foreign state to supplant private authority. To merchants in Liverpool and other European markets, the USDA argued that the efficiency gains to be made through the adoption of their standards were clear. If American sellers and European buyers used the same standards, quality expectations within contracts would be clearer, disputes over quality would be less frequent, and the expenses associated with arbitration would be diminished. Thus, common standards “would not only simplify methods of handling cotton, but would tend to higher standards of ethics in the cotton business” (USDA official, cited in New York Times 1921). Indeed, the lack of harmonized standards could be seen as an “extravagance and needless expense” that operated “as a tax upon the economic well-being of the world in general and upon the prosperity of those directly interested” (USDA 1922:1–2). If the USDA standards were adopted by the European associations, they would merely be following “the general tendency of international business procedures” toward standardization, such as the efforts of the International Chamber of Commerce to harmonize bills of lading, customs methods, and arbitration clauses (Brand 1923b:576). Moreover, they drew on the idea of science as neutral and objective to depoliticize the issue and dispel concerns that standards set by the USDA would privilege their side of the Atlantic. They emphasized the scientific basis of the standards, explaining “the care and methods taken in their preparation and the safeguards taken, such as vacuum storage, to maintain the character of the standards against variation” (USDA 1922:27). These were not arbitrary standards set to achieve competitive advantages but rather objective standards “based on a fixed scientific system” (Tenny 1925:186). Their objectivity and neutrality was demonstrated by the fact that “American producers, merchants and spinners alike have found them a dependable and satisfactory basis on which to conduct their business” within the United States (USDA 1922:7–8). The USDA had “spared no expense to provide for and safeguard their accuracy” (USDA 1922:7). Despite these efforts of persuasion on the part of the USDA, Liverpool merchants continued to

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defend their own standards that had “stood the test of time” (cited in New York Times 1921).

the us cot ton sta nda r ds act As the European exchanges remained recalcitrant, the US government was finally able to garner enough support to pursue a different strategy: they would simply impose their standards. To this end, the US government passed the US Cotton Standards Act in March of 1923, which would take effect in August of that year (USDA 1924:1). The Act prohibited US citizens from entering into transactions for the shipment of cotton on the basis of foreign standards. That is, if a US citizen bought or sold US cotton by description (or by referring to standards rather than sending a physical sample), they were required to describe the cotton using the official US standards.10 Moreover, all publications of prices or quotations had to be based on the official standards. Finally, the Act gave US citizens the right, but not the obligation, to appeal to the US Department of Agriculture to have cotton samples arbitrated by the government if subject to arbitration in a foreign country. The final certificate of classification issued by the USDA would be accepted by US courts as prima facie evidence of the true classification of the cotton (Brand 1923a:368). In essence, the US Cotton Standards Act claimed the authority of the USDA over all three governance tasks for the transnational trade in US cotton: the definition of quality, the creation of benchmark standards, and the settlement of disputes. This move by the US government to effectively impose its standards on the trans-Atlantic trade set off a new round of antagonisms, as the anecdote at the beginning of the chapter suggested. For Liverpool merchants, the concerns were two-fold. The US Cotton Standards Act was an explicit challenge to Liverpool control over standards and quality arbitration. It shifted the geographic site of institutional power over standards from Liverpool to the United States. Second, the Act sought to shift from a system of private authority over standards to one of public authority. As one European cotton buyer explained: The Act prescribes that the final appeal must rest with the Washington authorities. The Americans were dissatisfied with the arbitration of Liverpool, and now they expect that the whole world must be satisfied with the final word of the Washington officials; in other words the alleged defective system of Liverpool is grafted on to Washington, without first consulting the buyers. (International Cotton Bulletin 1923:422, original emphasis)

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Liverpool merchants had historically carved out their private authority to arbitrate disputes amidst the encroachment of state courts and were not willing to relinquish a key dimension of this authority—the arbitration of quality disputes—to the United States government (Tenny 1925:187; USDA 1924:8). The particular terrain of (un)enforceability of the Cotton Standards Act would shape the ultimate form this governance arrangement would take. European buyers, and Liverpool merchants in particular, were not pleased with the Act. However, despite the fact that the US government had no jurisdiction over their actions, simply disregarding the law could backfire. This was due to the competitive dynamics among merchants. The smaller and medium-sized merchants in the United States who were their suppliers would have no choice but to use the USDA standards or face fines and/or imprisonment (Brand 1923a:369; USDA 1923:9). In contrast, the largest US merchants, who had become their direct competitors (see Figure 2.4), were in a position to circumvent the law completely. The largest US merchants were establishing foreign subsidiaries in all the major European markets. As such, they could export cotton on US standards to their foreign subsidiaries and then sell to spinners using, as one small exporter explained, “whatever standards they wish” (USDA 1923:9). Thus, the Liverpool merchants, and their allies in other European associations, pledged to negotiate with “the highest authorities in Washington” to address the issue (cited in International Cotton Bulletin 1923:418). These competitive dynamics among merchants were also a concern for smaller exporters and producer marketing cooperatives in the United States (USDA 1924:5). As one smaller merchant insisted, “the teeth of the bill, so to speak, are gnawing upon the trade” such that “the larger exporters will immediately take the business . . . out of the hands of these small independent exporters” (cited in USDA 1923:9). For these less powerful actors, trans-Atlantic standards set by the USDA could serve their interests but only if the law was effective in achieving its aims. These less powerful exporters, lacking selling agencies abroad, not only needed the government to impose these standards on European buyers but also needed to have them accepted as legitimate by the European trade associations such that their use was enforceable. Thus, to get both US and Liverpool merchants on board, the USDA engaged in a process of bricolage, grafting the elements of most concern to Liverpool merchants onto the USDA standards. In the end, the USDA would assume authority over two of the three critical functions that Liverpool merchants had previously controlled. The USDA would formally define

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the quality standards and it would play the key coordinating function of preparing the benchmark standards. In exchange for accepting the USDA as rule-maker and adopting the Official Standards of the United States for all contracts and arbitral proceedings involving US cotton, Liverpool merchants and the other European associations gained two concessions. Foreign trade associations would be given an advisory role in the creation and revision of the standards into the future. This role began immediately as representatives came to the United States to work with the USDA on the preparation of the physical grade representations before they would accept the agreement (USDA 1924:10). In addition, the USDA would not be authorized to change the standards in any way without holding a meeting that the foreign trade associations could attend and at which they could cast 50 percent of the votes (USDA 1924:20). The signatories would meet biennially or triennially to review and revise the standards and to examine the sample standards. In short, Liverpool merchants agreed to concede control over standards for transparency and oversight. The second concession reinforced private authority in arbitrating quality disputes, despite their basis in public standards. The USDA agreed that the foreign trade associations could have classification experts licensed by the USDA who would then have the authority to determine the “true classification” of US cotton, which would be upheld in US courts (Tenny 1925:188; USDA 1924:9). This would allow European merchants to maintain control over this third critical governance task within their private trade associations (see Table 2.1 at beginning of chapter). With these concessions, the Universal Cotton Standards Agreement was officially signed by the trade associations in Liverpool and Manchester in the United Kingdom, as well as by the trade associations in France, Germany, Italy, Belgium, Spain, and the Netherlands and the spinners’ association, the International Federation of Master Cotton Spinners and Textile Manufacturers Associations (USDA 1935:9) (see Table 2.3). The USDA heralded the agreement as almost a revolution in the basis of trading in cotton, growing from a period when standardization was little known and was in the hands of a relatively small group of trade people, largely situated abroad, to a period when the rank and file of producers and merchants in this country thoroughly understood the basis of grading and were able to handle their operations on a parity with the buyer. (Tenny 1925:186)

This claim to victory on behalf of the “rank and file” farmers and merchants was perhaps overstated. In fact, surveys in the years following the Universal

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chapter two t a b l e 2 . 3 . Trade Associations Signatory to the Universal Standards Agreement in 1923. Adapted from Ramey (n.d.). Trade Association

Country

Liverpool Cotton Association

United Kingdom

Manchester Cotton Association

United Kingdom

Syndicat du Commerce des Cotons du Havre

France

Bremer Baumwollborse

Germany

Association Cotoniera Italiana

Italy

Centro Algodonero de Barcelona

Spain

Vereeniging voor den Katoenhandel te Rotterdam

Netherlands

Marche de Coton Belge a Gand

Belgium

Federation of Master Cotton Spinners Associations

United Kingdom

Standards Agreement suggest that only about a quarter to a half of US cotton was sold on the basis of the official standards (Yang 1937:153–57). While the government began to place government supervisors at many of the major markets, farmers who sold at local markets remained at a disadvantage. Moreover, in the decade immediately following the Act, only about 4 percent of farmers took advantage of the opportunity to pay licensed government classers to grade their cotton (Yang 1937:163). The official standards had the greatest impact where they were accompanied by cooperative marketing (Yang 1937:163). When organized in marketing cooperatives, farmers could collectively hire a trained classer to grade their cotton on the official standards and their collective bargaining power helped translate that information into a better price. Ultimately, this problem was addressed as the government became concerned that US producers’ loss of export market share was in part due to an erosion of US cotton quality. Through the Smith-Doxey Amendment to the Cotton Statistics and Estimates Act in 1937, the USDA was authorized to offer free classing to members of organized cotton improvement groups, which made cotton classing the Cotton Division’s “largest and most important function” (USDA 1984:29). With this service, participation in government classification steadily increased to cover 55 percent of the crop by 1949 and 95 percent of the crop by 1960 (USDA 1984:8–12, 33).11 The victory was perhaps better understood as a state-led redirection strategy that effectively rolled together the protection strategy of cotton

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farmers and the redirection strategy of US merchants into a broader bid to control a governance institution central to the competitiveness of the cotton sector both domestically and transnationally. In effect, the USDA shifted quality governance in the cotton trade from private, transnational standards centered in Britain that facilitated its liberal market project to public, transnational standards centered in the United States that would ultimately prefigure the goals of embedded liberalism, which the United States would consolidate in the postwar period. This was not a simple nationalization of control over quality standards but rather a renegotiation of the transnational relationships among the state, the private sector, and civil society amid global competitive pressures.

consolidating state in terv en tion, t r a n s n a t ion a l i z i n g p r i va t e a r b i t r a l au t hor i t y Given the importance of cotton as a foreign exchange earner, the Universal Standards Agreement for the cotton trade represented the most far-reaching agreement struck by the USDA for the governance of an agricultural commodity. At the same time, the negotiations over cotton quality standards forged what would become the broader program of state intervention in agricultural standard-setting. From 1914 to 1935, the USDA established official standards to be used in the national markets for over 65 fresh fruits and vegetables, 14 canned fruits and vegetables, 12 grains, 14 types of hay and related products, 7 types of livestock, 5 meats, and a range of different types of tobacco (USDA 1935). Similar to the approach taken for cotton standards, the Bureau of Agricultural Economics adopted a scientific approach that would allow them to establish the facts that could mediate among divergent interests in these sectors. As a USDA report explained: The Bureau of Agricultural Economics has served in the capacity of a factfinding and coordinating agency, furnishing, as a result of painstaking research, pictures of varied conditions and practices throughout the producing areas and in both foreign and domestic trade, and assisting wherever possible in harmonizing the divergent views of competing areas and interests. (USDA 1935:3)

The USDA heralded the standardization of agricultural crops as “one of the outstanding features” of their work during this period (Tenny 1925:185). More broadly, state intervention in the governance of quality standards reflected growing tensions in agriculture and the economy generally, which would ultimately lead to greater state intervention not just to establish stan-

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dards but to provide farmers with a degree of protection from market discipline through New Deal agricultural policies (see chapter 3). Beyond cotton, transnational standards were established for only one other agricultural commodity at this time: wheat (1916), the United States’ other major export crop. Efforts toward transnational harmonization, however, were not unique to agriculture. Both interstate and private conferences flourished in this period to standardize a broad range of scientific, technological, and measurement norms and practices that would facilitate transnational commerce in a range of sectors (Baldwin 1907; Crawford et al. 1993). World Fairs served as important places where industrialists and scientists met to discuss the standardization of technologies and measurements and the interchangeability of components. While the Universal Standards Agreement brought the state into standardsetting, it also reinforced private authority over dispute settlement. It did not, however, successfully transnationalize private arbitration. The rise of transnational US merchants, particularly after WWI, did bring a degree of de facto transnationalization in private arbitration. With selling agencies in major European markets, US merchants were able to join the European trade associations, bringing transnationalization through membership. This did not, however, solve the problem of jurisdiction. The enforceability of arbitral decisions made in a trade association in one country was still limited to some degree by the territorial authority of state courts. The reinforcement of private dispute settlement authority in the Universal Standards Agreement reflected broader efforts in the transnational business community to build the private agreement and interstate infrastructure that would allow the enforceability of private arbitral awards. The broader transnationally-oriented business community began to bring private interests together to discuss commercial arbitration through the International Congresses of Chambers of Commerce, and later the newly formed International Chamber of Commerce. These bodies ultimately lobbied the League of Nations to take up the issue. Through the League of Nations, states signed protocols recognizing the irrevocable nature of arbitration agreements in 1923 and 1927 (Nussbaum 1942). In the postwar period, the need to deepen and extend support of transnational commercial arbitration and the private authority undergirding it became even more pressing for Western firms. With decolonization, a vast new world of trade was opening that would not automatically function on the basis of Western ideas of private contract governance. In this context, firms successfully pressed states through the United Nations to establish

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the 1958 United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, also known as the 1958 New York Convention. On the basis of this Convention, firms could contractually bind themselves to settle disputes in any state court of their choice or through a particular private arbitral body (Cremades and Plehn 1983; Cutler 2003). By ratifying the Convention, states agreed to enforce the decisions of both other state courts and private arbitral bodies without subjecting them to domestic rules and procedures, unless they contradicted public policy, which was vaguely defined. With the New York Convention, trade associations aimed to overcome the limitations to their private authority that had been tied to the territoriality of state sovereignty. This Convention is often seen as an effort to spread “rule of law” to the newly independent countries of the global South. However, it was an effort to spread a particular kind of “rule of law” that privileged certain interests. Through the 1958 New York Convention, Western private contract governance became a globalized localism (see Santos 1995). Its aim was to facilitate increased transnational trade by strengthening the role of private actors as rule makers and rule enforcers and destabilizing the governance role of states. This represented a key step in what Sassen (2006) calls the “denationalization” of state agendas, as states began to shift from a nationally focused organizing logic to a transnationally focused one in which they increasingly serve the needs of transnationally oriented capital. Importantly, the 1958 New York Convention also institutionalized and globalized a particular discourse about what made contract governance fair that had emerged in relation to economic liberalism in the nineteenth century. This is the notion that contractual obligations are consensual and derive from the voluntary agreement of the parties to a contract (Cutler 2003:157). In this way it further inscribed the interests not just of private actors but of the most powerful private actors in the postwar period: Western, and particularly US-based, transnationally oriented firms.

cot ton qua lit y sta nda r ds in the globa l sou th While heralded as the “universal” standards, the Universal Standards Agreement applied only to the trade in US cotton. It is not that struggles over quality did not exist in the many colonies that supplied the European powers with cotton. However, as Karl Polanyi (1957 [1944]) notes, a necessary condition for the success of movements challenging market liberalism in this period was sovereign state power. The kind of protection that US cotton

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producers established for themselves, as inadequate as it may have been, was “out of reach” for colonial subjects as long as they lacked “the political status necessary to shelter themselves from the social dislocations caused by European trade policies” (Polanyi 1957 [1944]:183). Indeed, contestation over cotton quality often fed directly into struggles to end colonialism and establish sovereign independence, demonstrating the way in which struggles over particular governance arrangements such as quality standards both constitute and are constituted by broader globalscale developments. Perhaps the most striking example of this is the case of the khadi (hand-spun, hand-woven cloth) movement during India’s struggle for independence. As Shambu Prasad, an Indian scholar, explains in his (1999) study of the movement, the struggle over cotton quality in India reflected resistance to the broader transformations of the Indian cottontextile sector under British colonialism. Local (desi) cotton varieties had been used to produce the high-quality Indian textiles that had outcompeted British textiles in their own market in the eighteenth century. Yet, during British colonization, Indian cotton gained the reputation of being of inferior quality compared with that in the United States. This was because the definition of cotton quality had been transformed by industrial production. That is, the short-staple cotton that could produce high-quality fibers in the Indian handcraft manufacturing sector did not have long enough fibers to be used in industrial production in Britain.12 Quality came to be defined in terms of the limitations of industrial spinning machines. For those involved in the khadi movement, this definition of Indian cotton as of inferior quality was part and parcel of the transformation of the Indian textile industry and society more broadly in service of the British Empire. Concerned about their dependence on US cotton, British merchants turned to India during the nineteenth and early twentieth centuries, and in earnest during the US Civil War, in hopes of establishing a reliable alternative to US cotton (Harnetty 1970; Hazareesingh 2012). This involved imposing taxes on Indian textile manufacturers in attempts to eliminate domestic competition for cotton supplies and introducing US seed varieties and production practices in efforts to secure greater volumes of cotton with the qualities British textile manufacturers demanded. The khadi movement contested this definition of Indian cotton as inferior as an integral part of Mahatma Gandhi’s nonviolent, civil disobedience movement. Gandhi advocated self-reliance by spinning one’s own yarn on the charkha (spinning wheel) and weaving one’s own cloth in order to achieve self-sufficiency and boycott foreign cloth (Thapar 1993). The charkha was seen as “an alternative technological response to universalis-

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tic modern western science” and an effort to reconstruct the traditional, decentralized cottage mode of manufacture that had been undermined by British colonialism (Prasad 1999:PE17). Scientists within the movement, Maganlal Gandhi and Dadabhai Naik, undertook research to demonstrate how cotton quality should be redefined to better suit the specificities of small-scale Indian textile manufacturing rather than the demands of European industrial production. This formed the beginnings of an alternative, although never fully realized, science, as well as a vision of a science that would be in part constructed in a decentralized manner by common people working in the fields and involved in spinning. Through this movement, the charkha became a national symbol and was later incorporated into the flag of India. Such struggles contributed to the broader fight for political independence, as well as to alternative ideas regarding who should govern economic exchange. Many people in newly independent countries saw their freedom from the shackles of colonialism as a chance to regain the power to direct their own destinies and set their own rules. However, the destinies of these new states were fraught with tensions at conception. Political independence was qualified by many countries’ continuing economic dependence on Western markets and Western ideas of “development.” Upon gaining independence, they found themselves already caged within the Western model of “development” in which states were to adopt the science, technology, and expertise of the West to industrialize and “catch up” while still trapped in a web of neocolonial relationships. This had implications for the governance of quality standards and cotton sectors more broadly. Many newly independent countries forged an interventionist role for the state in managing the economy, reflecting dominant “development” ideologies at the time. For cotton and agricultural commodities more generally, this meant the construction of state trading enterprises (STEs) that would buy and sell cotton and other commodities on behalf of producers in order to bargain more powerfully vis-à-vis Western buyers, as well as to use export earnings to pursue broader national development projects, such as infrastructure construction. These STEs also nationalized quality standards, claiming the authority to define quality and create benchmark standards for their domestically produced cotton. While national standards prevailed, the definition of quality was still largely defined in terms of the needs of textile manufacturers abroad, and, as in India, US cotton varieties were introduced around the globe to ensure the compatibility of the cotton with Western industrial demand (see Quark 2008). Indeed, many countries used the US standards as a reference in drafting their own

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t a b l e 2 . 4 . Quality Classifications in Cotton-Producing Countries. These are only examples and do not represent an exhaustive list of national classification systems. Adapted from Earlam 2003. African Franc Zone: Standards 0, 1, 2, 3 Argentina: Use the alphabet, B down to F and quarter grades Brazil: Use numbers 4 to 9 and half grades West African countries: Use established types Manbo/s, Manbo, Kaba/s, Kaba China: Use numbers that indicate the grade (1–7) and staple length (e.g., 129 is Grade 1, 29 mm) India: Use variety names (e.g., Bengal Deshi, Shankar 6) and standards (e.g., Superfine, Fine, Fully Good)

standards in part because the US standards had gained approval from European merchants and textile manufacturers through the Universal Standards Agreement. These national standards were referenced to one another to facilitate price comparisons (Daviron 2002) (see Table 2.4).

conclusion Out of the struggle over quality standards from the 1870s to the 1920s, a new standards regime was born that would structure the governance of cotton quality around the globe into the postwar period. This new standards regime emerged at once through the shifting positions of diverse actors in the global capitalist system and through actors’ strategic efforts to retool institutions to serve their perceived interests. The impetus to construct new standards emerged out of the particular patterns of social conflict generated by the British project of economic liberalism and the rise of private authority in the cotton trade centered in Liverpool. As Liverpool merchants sought to create institutions that would increase the calculability of, and thus their ability to benefit from, liberalizing markets and expanding trade, they claimed status as de facto standard-setters and dispute arbitrators in the cotton trade. However, as the broader project of economic liberalism both threatened the livelihood of cotton farmers and gave rise to new competitors in the US merchant sector, Liverpool merchants faced both protection and redirection strategies challenging their institutional power. In the end, through its redirection strategy, the USDA was able to wrest control over standards from Liverpool merchants. This success, and the ultimate form that the new standards regime took, was critically structured by a trial-and-error process of institutional innovation. The USDA effectively

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rolled together the demands of the protection strategy of cotton farmers and the redirection strategy of US cotton merchants in order to maximize the benefits of this critical sector to national revenues. Shaping this strategy were the broader ideas of technocratic state-building that emerged in the Progressive Era. These were not abstract world cultural frames but rather specific discourses developed through social conflict in relation to competing visions of how markets should be organized and for what ends. These ideas shaped the USDA’s strategy to draw on scientific rationality in an effort to depoliticize the struggle over standards and thus legitimate state intervention in a realm previously governed by private actors. By establishing science as a new basis for the legitimacy of standards and making strategic concessions to more powerful players, the USDA was able to craft an institutional arrangement to govern quality standards that would ultimately be accepted by key stakeholders in the trade. While strategy matters, the ability to innovate, experiment, and organize other actors is nonetheless shaped by the shifting balance of power in the broader economy. The USDA’s successful bid for institutional power was in part a result of broader shifts in the geopolitical and geoeconomic balance of power as the center of finance began to shift toward the United States after WWI. Powerful actors such as the Liverpool merchants might have maintained greater control had they more concertedly pursued a preservation strategy to retool their institutional arrangements earlier on when the relative balance of power in the cotton trade was still weighted in their favor. Finally, even a relatively successful call for government intervention still left cotton producers on the margins of standard-setting. This protection strategy did, however, shape the trajectory of institutional change, particularly by delegitimizing the private authority of merchants in the NYCE. Thus, it is the dynamic interplay between strategic action and broader structural dynamics that shapes how institutional change unfolds and who prevails in the struggle to control the rules of the game. The ultimate form that the new standards regime took—public, transnational standards for embedded liberalism—was thus structured by the complex patterns of conflict and institutional strategies that emerged in relation to the British project of market liberalism. While the competitive rivalries that grew during the 1870s to 1920s period would continue into WWII and create a contraction of transnational trade, these governance institutions that embodied the tension between transnational trade and national competition would serve as the template for nationally focused governance institutions in the postwar period—that is, after 1945.

chapter three

A Project of Uneven Liberalization

When I visited Banikoara, a small village in the northern part of Benin, in 2006, the cotton harvest was almost over. The long journey from the country’s capital, Cotonou, to Banikoara had involved a motorcycle taxi, a longdistance bus, and finally for the last few hours a taxi packed with people and supplies. With the windows rolled down, my face became caked with dust from the red soil as I observed the countryside. Farmworkers were gleaning the last bits of cotton lint from fields that had already been picked over. As trucks carried the season’s yield toward the local cotton gins, tufts of cotton spilled out, lining the road in their wake. With simple buildings and dirt roads, Banikoara seemed far away from other stops on my research circuit, which included plush office buildings and five-star conference hotels. But as I began to talk with farmers and local leaders, it became clear that the issues debated at international conferences and in corporate boardrooms were just as salient to the people of Banikoara as to those working for transnational cotton merchants or the USDA. Indeed, as the small tenant farmers in the post–Civil War US South and the cotton growers who marched alongside Gandhi in the khadi movement were concerned about their ability to get a fair price for the cotton they grew, so too were the residents of Banikoara. A local farmer demonstrated this to me through the meticulous records he had been keeping since the 1970s. He had tracked his yields and the prices he had received each year. Things were tough in 2006. As the farmer explained, prices were low and the cost of inputs kept increasing. It did not help that the state-owned cotton company, SONAPRA, had been undergoing a process of privatization at the behest of the World Bank and International

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Monetary Fund. Due to the disruptions caused by this restructuring process, many farmers had not yet been paid for their previous year’s crop. I later visited the local market where farmers were delivering their cotton. I watched as the cotton was weighed and graded before it was sent off to the gin where the cotton fibers would be separated from the seeds, pressed into bales, and prepared for export. Other cotton farmers at the market expressed similar concerns. One farmer joked that the market was where they brought their cotton not to get paid, but to avoid getting paid! Leaving the market, a local official steered me toward his office. He wanted to ensure that I understood the bigger picture that the farmers of Banikoara were facing, particularly given my position as a researcher from a US university. He dug in his desk drawer and pulled out a stack of papers. It was a petition signed by many in the community, calling for the elimination of US cotton subsidies. From the cotton fields of Banikoara to the highest-level trade negotiations at the WTO, the issue of cotton subsidies framed cooperation on all other issues. Not only did cotton farmers in Banikoara see many of the challenges they faced as related to the subsidy issue, so too did many in the international community. Tensions over what was seen as a highly uneven US project of market liberalization spilled over into sector-specific negotiations over the harmonization of quality standards and dispute settlement arrangements. A representative from the ICAC explained that collective action on quality standards and other issues was difficult given resentment toward the United States, especially with the failure of the Doha round of WTO negotiations. “The psychological effect of the failure of Doha has been enormous,” he noted, “People are angry and are less likely to cooperate.” In 2003, the Cancun WTO meetings had collapsed. Further cooperation on trade liberalization was stalled, and, as the Organisation for Economic Cooperation and Development reported, “The failure to reach agreement on cotton was a key reason for this impasse” (as cited in Heinisch 2006:262).

*

*

*

In this chapter, I explore the origins of these contemporary axes of conflict by tracing how strategic actors pieced together new rules of the game for the cotton trade from the 1970s to the 1990s. In doing so, I demonstrate the utility of institutional analyses that characterize institution-building as a trialand-error, often ad hoc, process, but insist that institution-building must also be understood as driven by competitive efforts to shape the terrain of

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market competition. Actors craft new institutions to address the problems they face given their historically and spatially specific position within patterns of capital accumulation. Moreover, the efficacy of these institutions is limited by the patterns of conflict that they generate. This chapter explores how US actors reconstituted the institutional arrangement created out of the struggle with Liverpool merchants (see chapter 2) as part of a broader US project of market liberalism. Much as Liverpool merchants forged their private authority over quality standards in an effort to navigate the uncertainties of a liberalizing economy in the 1870s, a century later US textile manufacturers, cotton producers, merchants, and the US government retooled the existing quality classification system and dispute settlement arrangement as they sought to address both the new opportunities and the new competitive pressures presented by the broader, US-led liberal market project. In doing so, they created a new de facto global quality classification system and dispute settlement arrangement during this period. Moreover, just as Liverpool merchants’ position as de facto transnational rule-makers generated particular patterns of social conflict and resistance, US producers, the USDA, and transnational merchants faced growing resistance to their new governance arrangements as they came to be seen as de facto global arrangements. I will demonstrate how tensions began to build as the new governance arrangements were interpreted as part of the United States’ uneven liberalization project that served to stack the deck in favor of US players. These tensions would ultimately boil over into more coherent redirection and protection strategies on the part of emerging rivals and marginalized actors, respectively. The contemporary axes of conflict are not simply carbon copies of the earlier struggle between actors in the United States and Britain. While the patterns of conflict generated by projects of market liberalism share similarities, they also take historically specific forms. The US neoliberal project, for example, was not an entirely coherent liberalization project. Rather, it unfolded in a highly uneven manner as it was influenced by domestic conflict within the United States over the trajectory of liberalization. The unevenness of this project shaped the nature of quality governance as well as the institutional strategies that challengers developed in response to it.

t h e u n ev en proj ect of us m a r k et l i ber a l ism At the turn of the twentieth century, the USDA had wrested control over two key quality governance functions—the definition of quality and the

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creation of benchmark standards—from Liverpool merchants and maintained authority over these functions into the postwar period. From the 1970s to the 1990s, the USDA cast these functions in new form as part of a broader project of market liberalism. During this period, the US state, in cooperation with private firms and cotton producers, constructed an automated system of cotton classification that would replace the existing manual system of classification. This new system emerged out of and was shaped by the particular contours of the US liberal market project. By the 1970s, US firms were facing a crisis of profitability. The 1950s and 1960s had brought prodigious expansion in world production and trade. Through this expansion, Japan and the Western European countries, especially Germany, successfully recovered from WWII and began to compete and even forge ahead of US firms in one sector after another, from textiles to steel (Silver and Arrighi 2003:342). The US state responded to these competitive pressures through a “revival of the liberal creed” (Silver and Arrighi 2003:341). The form that this project of market liberalism would take, however, was shaped by domestic conflict. Distinct segments of the US economy experienced this crisis of profitability differently. Importing firms and transnationally competitive exporters saw the solution in transnational expansion and began to push the US government to more aggressively pursue a trade liberalization agenda. However, US sectors such as textiles, apparel, and agriculture, which would not be competitive in a liberalized environment, sought protectionist measures (Chorev 2007). Given trenchant domestic conflict, the US government carved out a liberal market project that was highly uneven across different economic sectors. Nowhere was this more apparent than in the textile, apparel, and agricultural sectors, which would become the crux of what some claimed to be the hypocritical nature of the US liberal market project. While pushing other countries to enact trade liberalizing policies, the United States would establish its powerful position in the cotton textile sector through protectionist policies. First, the US state maintained its long-standing agricultural support programs during this period, which allowed the US producers to establish a dominant position, claiming over one-third of all exports during the 1970s and 1980s (ICAC 2010a) (see Figure 3.1). The US agricultural subsidy regime was designed to combat declining agricultural incomes resulting from overproduction and declining commodity prices. Although the problem of overproduction dated back at least as far as the Civil War (Wright 1978), the problem was not directly addressed until the New Deal when the federal

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f igu r e 3 . 1 . Major Cotton Exporters, 1980–2009. Adapted from ICAC (2010a). Each year refers to a marketing year—that is, 2000 refers to the marketing year from August 2000 to July 2001.

government began to face growing unrest in the wake of the Great Depression. The Agricultural Adjustment Act (AAA) of 1932 (revised in 1938) offered price supports, or subsidies, to wheat, corn, and cotton producers as an incentive to cooperate with acreage controls (Friedmann and McMichael 1989; Winders 2009).1 This supply management policy did reduce cotton production and export market share temporarily in the 1930s. At the same time, however, it had unintended effects. As conflicts with sharecroppers and wage laborers, as well as competition on the export market, intensified, large cotton producers began to use government subsidies to finance the mechanization of cotton picking, rapidly displacing sharecroppers in the 1940s and 1950s. When combined with the introduction of synthetic fertilizers, insecticides, and herbicides following World War II, the transition to mechanized cotton production effectively undermined prevailing attempts to restrict the supply of cotton and allowed the United States to regain its competitive position on the export market (Mann 1987). The subsidy regime would remain in place into the twenty-first century, albeit with some changes.2 While supporting farm incomes in the United States, these policies indirectly served to artificially lower the international price of cotton, thus discouraging international production and competition. Rather than addressing the problem of overproduction, domestic cotton producers and merchants sought to offset declining prices with demand-side strategies intended to create new markets for US exports (Brown 2000).

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The United States also ensured the continued competitiveness of its textile and apparel industry through protectionism, despite a broader policy of trade liberalization. Asian textile and apparel manufacturers had grown quickly in the immediate postwar period through a combination of state management, US support, and Western market access. In hopes of containing Soviet expansion in the 1950s and 1960s, the US government had provided funds to help modernize textile industries in places such as Japan and Hong Kong, South Korea, Singapore, and Taiwan, the so-called Four Asian Tigers, and provided access to US markets (Rosen 2002). While US textile manufacturers balked at the practice, cotton producers and merchants directly benefited and lobbied in support of efforts to create new markets abroad. For example, cotton merchants lobbied in support of the Marshall Plan, which helped finance the sale of cotton throughout Europe, and Public Law 480, which allowed over 25 countries to import agricultural commodities including cotton with local currency (Brown 2000; Dunn 1992). With this support, Asian textile manufacturers had begun to outcompete Western manufacturers in their own markets. Thus, while the US government began to use the General Agreement on Tariffs and Trade (GATT), bilateral negotiations, and structural adjustment programs through the IMF to evoke liberalization policies from its trade partners, the powerful textile and apparel lobby successfully persuaded the US government to negotiate the Multi-Fibre Arrangement (MFA) in 1974 —and renew it in 1977, 1981, and 1986—to ensure protection from foreign imports. Through the MFA, textile and apparel exporters, and particularly the major exporters in Japan, Korea, Taiwan, and Hong Kong, agreed to a system of “voluntary” quantitative restrictions on textile and apparel exports to the United States (Rosen 2002).3 The stated goal of the MFA was to facilitate the “orderly” expansion of trade in textiles and apparel, such that it could benefit both countries in the global North and those in the global South. Through the MFA, states established individual quotas specifying the precise quantities of different textile and apparel products that could be exported from one country to another. In practice, MFA import quotas limited the expansion of textile production and exports from “developing” countries, and particularly the most competitive countries in East Asia (Rosen 2002). Western countries were to gradually open their markets to exports from the South, while maintaining safeguards to minimize “disruptions” in their domestic markets. In practice, however, quotas became more rather than less restrictive as the United

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States and European Union sought to protect their domestic manufacturers and “play politics” with textile and apparel quotas (Dicken 2007). Though not a party to the original MFA, China also signed bilateral agreements establishing MFA-style quotas. The Chinese government took full advantage of possibilities to expand their textile and apparel exports, manipulating the quota regime where possible (Rosen 2002). However, China’s continued expansion, like that of MFA countries, was ultimately limited by its access to Western markets. Together, the MFA and the bilateral agreements between the United States and China had critical implications for the logic of trade in the textile and apparel sector and thus for the geography of the global cotton trade. As the size of countries’ textile and apparel sectors was limited by the size of their allotted quota, the quantity of cotton they imported and their import market share was also limited by the size of their quota, effectively decentralizing cotton imports. For example, from 1974 to 1992, US cotton producers claimed, on average, around a 35-percent market share of cotton exports while the largest cotton importer in this period, Japan, had only a 16-percent share of cotton imports. No other single importer accounted for more than 9 percent of total world imports (ICAC 2010a). The MFA thus indirectly reinforced the power of US producers vis-à-vis cotton importers by minimizing their dependence on any one importer. Protection through the MFA allowed textile manufacturers to stave off their own decline within the United States’ broader project of market liberalism. However, given that the ultimate goal of the MFA was to eventually liberalize the apparel and textile trade, another critical component of this strategy was cost cutting and technological upgrading to enhance their competitiveness vis-à-vis competitors in East Asia. In the 1960s and 1970s, textile and apparel manufacturers successfully lobbied the government for tax write-offs and other assistance to invest in new technologies that would increase economies of speed and deskill the labor process (Rosen 2002:90–91). To this end, US textile manufacturers adopted a new spinning technology: open-end (rotor) spinning. Open end spinning was attractive to US manufacturers for several reasons (Perkins et al. 1984:484–85). Openend spinning brought textile manufacturers one step closer to completely automated yarn manufacturing, allowing them to reduce their labor force. Moreover, it reduced the number of processes in yarn spinning, streamlining production. Finally, open-end spinning brought significant economies of speed; its production rate was three to five times faster than the ring spinning technology that had conventionally been used. Through these

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technological upgrades, the textile industry became more consolidated as the competition to gain financing for new capital investments pushed out smaller firms and brought a wave of buyouts and mergers, as well as greater vertical and horizontal integration (Rosen 2002:92). The push to establish a mechanized system for cotton classification emerged out of the intersection of textile industry efforts to sharpen their competitiveness and the growing threat of a new rival for cotton producers: synthetic fibers (USDA 1984:48). Open-end spinning brought significant economies of speed, but it created other problems for US textile manufacturers. Open-end spinning produced yarn and thus fabrics that were not as strong as those spun using the traditional ring spinning technology, which was still used by the United States’ competitors in East Asia. As Jacobson and Smith explain: Open-end yarn—however efficiently it might be spun—was lower in strength, and its performance in weaving was in fact less efficient than that of the ringspun alternative. The fabric made from open-end yarns tended to lower tensile and tear properties, and this caused problems with garment manufacturers farther down the line. (2001:212)

As such, some of the main users of cotton fabrics—blue jeans–makers like Levi Strauss and Company—began to complain that their fabrics were ripping and wearing out more quickly. One Levi’s representative expressed to its textile manufacturer suppliers, “We don’t care which one you use [open-end or ring spinning], but you better turn out the same product” (as cited in Jacobson and Smith 2001:213). Levi’s and other companies began to introduce new strength standards, creating greater pressure on US textile manufacturers to balance the economies of speed they could gain with open-end spinning with the quality demands of its buyers. One way to overcome this problem was to pay greater attention to fiber quality ( Jacobson and Smith 2001:209). Manufacturers using open-end spinning required a particular quality of cotton— cotton with stronger, finer fibers—in order to withstand faster spinning speeds and maintain yarn and fabric quality (Perkins et al. 1984). As textile manufacturers had to buy cotton of higher quality along these characteristics, the accurate measurement of cotton fibers became more important. For textile manufacturers looking to more carefully manage fiber quality, synthetic fibers like polyester and rayon had certain advantages over cotton. Synthetic fibers could be produced with constant quality characteristics, which made them ideal as processing inputs. Cotton, in contrast, varied significantly with environmental conditions and production and gin-

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ning practices (Mann 1987; USDA 1984). With these advantages, industrial producers of synthetic fibers both at home and abroad began to eat away at cotton’s fiber market share within the United States. In the 1920s, cotton held an 88-percent share of the US domestic apparel market. As petroleumbased synthetics such as acrylics, polyesters, and spandex were introduced in the 1930s and gained widespread use after WWII, cotton’s market share eroded to 66 percent and continued to decline to its all-time low of 33 percent in the US domestic market in 1973 ( Jacobson and Smith 2001). Cotton researchers and industry players recognized that textile manufacturers could use cotton fibers as efficiently as synthetic fibers only if instruments could be developed to more precisely measure cotton fiber characteristics ( Jacobson and Smith 2001:206). Thus given their particular position with the competitive dynamics of the United States’ uneven liberalization project, in the 1960s and 1970s, the USDA, with the support of US cotton producers’ organizations, began researching the possibilities of mechanized classification— of making quality standards that gave more precise processing-relevant information (see Table 3.1). Mechanized classification could sharpen the competitiveness t a b l e 3 . 1 . Key Cotton Fiber Characteristics and Their Relationship to Processing Efficiency and End-Product Quality. Adapted from Cotton Incorporated (2010); Perkins et al. (1984); USDA (2001). Characteristic

Effect

Fiber length

Affects yarn strength, yarn evenness, yarn fineness, and the efficiency of the spinning process.

Length uniformity

Affects yarn evenness and strength, as well as spinning efficiency. Related to short fiber content.

Fiber strength

Affects yarn strength, allows faster processing speeds.

Micronaire (fineness/maturity)

Finer fibers (with low micronaire) may require slower processing speeds. Finer fibers can produce stronger yarns (more fibers per cross-section). The more mature the fibers, the better the absorbency and retention of dyes.

Color

Affects the ability of fibers to absorb and hold dyes and finishes and can reduce processing efficiency.

Trash/Leaf Content

Must be removed at a cost.

Short Fiber Content

Ratio of short to long fibers, which affects yarn strength and fineness.

Neps

Tangled knots of fibers that cause undyed spots during dyeing and finishing of yarn and fabrics.

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both of US cotton producers vis-à-vis corporate synthetic producers and of US textile manufacturers vis-à-vis competitors in East Asia. The USDA had begun scientific research on fiber quality measurement in the 1910s and 1920s (see chapter 2). From those early years, the application of scientific principles to improving the efficiency of textile manufacturing was understood as part of a strategy of national competitiveness. As an early USDA scientist commented after hearing a presentation on new developments in US fiber science: “I feel like shouting from the housetops that work like this will determine national security and supremacy” (letter from Dr. R. Y. Winter, director of the North Carolina Experiment Station, 1935, cited in Palmer 1961). Through this earlier research, a number of measurement instruments had been developed to more accurately measure some quality characteristics of cotton. While these measurement instruments did come to be used in some commercial contracts, they were mostly used by individual merchants and textile manufacturers to manage their inventories (Palmer 1961). Cotton breeders also began to use these measurement instruments in their efforts to breed cotton to meet spinners’ demands (USDA 1984). These instruments did not, however, come into widespread use for the commercial trade as they were manually operated and rather time-consuming to use, making it impractical to employ them in the classification of the entire US crop. The exception to this was the micronaire instrument, which measured the fineness of cotton fibers, for which a rapid and reproducible measurement instrument was developed and included in the USDA’s Official Classification procedure in 1966 (Perkins et al. 1984:447). The goal in the 1960s and 1970s was thus to make these measurement instruments faster through automation and to integrate them into a single system that could be used to classify cotton for the commercial trade. The USDA worked with several private instrument manufacturers to achieve this aim. A Swiss company, Uster Technologies, eventually came to hold the patent for this new measurement system known as the High Volume Instrument or HVI system. The first US classification office was equipped with mechanized classification technology in 1980. By 1991, the United States had switched entirely to mechanized classification, and merchant and textile manufacturer associations around the world approved the HVI system for inclusion in the Universal Standards Agreement in 1995 (Knowlton 2005). This new classification system represented a significant shift from the traditional quality standards based on manual classification, by shifting the definition of, as well as the “ways of knowing” about, cotton quality.

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In the traditional manual system, US cotton was differentiated on international markets according to national origin (e.g., United States), staple length (the length of fibers), and grade (based on color, trash content, and gin preparation). Traditional manual classification was considered more of an art than a science. Some compared the expertise required to manually grade cotton to the evaluation of wine (DAGRIS 2002, as cited in Bingen 2006:229). An expert classer drew on all of her senses to evaluate a cotton sample. A classer judged the “touch” or feel of the cotton by pressing it into the palm of her hand to observe how quickly it resumed its form afterwards. Next the classer held a small sample of cotton between the thumb and forefinger of each hand and, through “a process of lapping, pulling, and discarding,” made the fibers parallel to judge the length, as well as the uniformity of fiber length in the sample (Perkins et al. 1984:446). These processes also revealed to the classer any leaves or seed fragments, which were considered trash, and allowed the classer to identify tangled knots of fibers (neps). The most experienced classers even ran the fibers across their tongue to assess “stickiness,” which results from inadequate pest management, and pulled the cotton next to their ears to detect the brittleness of the sound when the fibers separated and broke (Bingen 2006:229–30). Through this process and through comparison with the official benchmark standards prepared by the USDA, a classer would determine the cotton’s length, as well as its grade (e.g., Middling or Strict Low Middling). The grade represented a composite evaluation, based on a classer’s “overall impression” of the sample’s color, leaf/trash content, and gin preparation, which included factors such as neps and overall smoothness or roughness (Perkins et al. 1984:441). With the introduction of mechanized classification, classers’ “sensory science” was replaced by machine testing. Rather than offering more general evaluations of staple length and the various factors contributing to grade, the HVI system drew on advances in electronics, lasers, and spectral analyses to provide more accurate and detailed measurements of individual fiber characteristics (Perkins et al. 1984:449). The mechanized system integrated three measurement instruments, each feeding data into a central computer. The first instrument measured a fiber’s resistance to a puff of air to evaluate its fineness. The second employed a colorimeter, a device that detects subtle variations in cotton color, ranging from gray to yellow to white. A video camera was also used to detect leaves, stems, and other trash. Finally, the third instrument used air to draw fibers out to measure their full length and then pulled the fibers apart to test their strength (Lee 1996).

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These mechanized measurements were more precise than manual evaluations. With the mechanized system, fiber length came to be measured not in 32nds of an inch but in 100ths of an inch. They were also much faster. Instead of being able to test about forty samples in an eight-hour day, the mechanized system could measure 800 (Lee 1996). And in place of an overall evaluation of color, trash content, and gin preparation, the mechanized system provided individual measurements of length uniformity, fineness/ maturity (micronaire), strength, and color (see Table 3.2).4 Moreover, in the manual system, the legitimacy of the standards was ultimately rooted in the benchmark standards, or the physical representations of the length and grade standards that the USDA prepared. These physical representations were based on fiber science and prepared by classing experts but were ultimately subject to inspection and approval by the US domestic industry and signatories to the Universal Standards Agreement. The mechanized classification system was also based on the preparation of benchmark standards, or physical samples of cotton considered to have “known” values that were used as reference material to calibrate the classification instruments. These benchmark standards were prepared through a tedious and exacting process by highly specialized experts. While they were accepted through the Universal Standards Agreement in 1995 as the International Calibration Cotton Standards (ICCS), the US industry and most foreign signatories to the Universal Standards Agreement lacked the specialized expertise required to evaluate them. The automated classification system thus significantly deepened the basis for the legitimacy of standards in a highly specialized Western science. The data offered by the new mechanized classification system allowed

t a b l e 3 . 2 . Manual Classification versus High Volume Instrument (HVI) Classification. With Manual Classification, cotton is sold based on…

With HVI Classification cotton is sold based on…

National Origin

Length

Length

Strength

Grade (overall assessment)

Length Uniformity

Micronaire (fineness/maturity measured by instrument since 1963)

Micronaire (fineness/maturity) Color (evaluated manually until 2000) Trash (evaluated manually)

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textile manufacturers to use a scientific approach to managing its raw material inputs. In 1982, Cotton Incorporated, a US cotton producer–funded research organization, introduced a computer software system, the Engineered Fiber Selection (EFS) system, to help textile manufacturers make use of the measurements from the United States’ new mechanized classification system to increase their competitiveness ( Jacobson and Smith 2001). The EFS software linked detailed fiber measurements to the precise characteristics of the yarn that textile manufacturers wanted to produce. It used regression equations to estimate the specific quality of cotton to purchase, the precise way to mix these cotton bales, and the spinning machine settings to use in order to produce a desired quality of yarn. This allowed textile manufacturers to match machine speeds and settings to fiber properties in order to increase processing efficiency, to better control end product quality, and to better manage raw material purchasing (Smith and Zhu 1999). Moreover, the EFS software controlled for variance not only within a lot of bales but also over long periods of time. This feature was critical to overcoming a key advantage of synthetic over natural fibers: the variation created by fluctuating weather conditions from year to year and by geographically dispersed producers with different climates, soil qualities, etc. “The EFS program, when fed HVI data, could assure that the mix of cotton a mill laid down today would be just like (have the same specifications as) the one it had laid down a month ago and would lay down a month from now” ( Jacobson and Smith 2001:215). It would later be estimated that the EFS system could save textile manufacturers between two and six cents per pound of cotton they used (Cotton Gin and Oil Mill Press 2005). The system quickly gained wide adoption among US textile manufacturers in the 1980s and early 1990s. In sum, the USDA constructed a new automated classification system to replace manual classification as the basis for the Universal Standards Agreement. The USDA retooled this institutional arrangement in response to the changing competitive positions of both US cotton producers and textile manufacturers within the broader US project of market liberalism. Both US cotton producers and textile manufacturers stood to lose to competitors in the global South under the broader trade liberalization agenda and successfully lobbied for protectionist measures to shield them from this outcome, ultimately generating a highly uneven liberal market project. The retooled classification system represented part of this effort to navigate a liberalizing environment as it presented a way to enhance the global competitiveness of both US cotton producers and textile manufacturers.

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t h e us s yst e m a s t h e de fact o tr a nsnationa l system As competitive pressures intensified within the United States’ uneven project of market-led development, the United States’ mechanized classification system became the de facto global system. The pressure for the globalization of this classification system was rooted in the unexpected outcomes of protectionism within the broader trade-liberalizing agenda. While the textile industry had successfully maintained protectionism, liberalization in other sectors—such as finance—allowed apparel manufacturers and later retailers to operate within the loopholes and inconsistencies of the MFA rules. Apparel manufacturers realized they could effectively outsource their apparel and textile manufacturing to countries in the global South with access to quota and dramatically reduce production costs. The MFA thus gave Western apparel firms and retailers incentives to build complex subcontracting networks by piecing together import quotas allotted to a broad range of countries (Collins 2003; Rosen 2002). Indeed, as Dicken notes (2007:261), “the entire clothing industry of some developing countries was, in effect, created by MFA quotas.” By the 1990s, if apparel firms and retailers had not shifted production overseas, they increasingly could not compete (Collins 2003). This intensifying competition also spilled over into quality demands. In the contest for consumer dollars, retailers and the new “branded marketers” (apparel firms that handle design and marketing but outsource production) began to shift toward product differentiation as a basis for competition (Larsen 2003:11). As Jonathan Zeitlin and Peter Totterdill explain, the “struggle for competitive advantage has come to center increasingly on retailers’ and manufacturers’ efforts to target specific groups of customers defined in new ways, to seduce customers with attractive, fashionable garments; to respond rapidly to short-term trends in the sales of individual product lines” (1989:162). To this end, fashion cycles intensified as retailers began to switch out their inventory six or eight times a year rather than twice, while products and styles proliferated in a “dizzying diversity in fabric, design, and style” (Abernathy et al. 1999:9; Collins 2003). The competition among retailers and branded marketers generated growing consolidation among firms through mergers and acquisitions and thus growing power to pass on these competitive pressures to weaker actors upstream. Indeed, Richard Appelbaum and Gary Gereffi reported that “the large merchandising firms can afford to squeeze hard . . . [turning]

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up the pressure on their contractors to make clothes with more fashion seasons, faster turnaround times, lower profit margins, greater uncertainty about future orders and frequently worse conditions for workers” (1994:52, 60). These pressures were in turn passed on from apparel manufacturers to textile manufacturers in the form of more exacting quality specifications, demand for more sophisticated textiles, and, of course, lower price points (Gibbon and Ponte 2005:179; Larsen 2003:11). For textile manufacturers around the globe, these demands turned their attention toward the quality of their raw materials for the production of both high- and low-quality yarns and textiles. Careful attention to cotton quality was critical in order to meet higher quality specifications and to create new types of yarn and fabrics. As Colwick, Lalor, and Wilkes explain: The increasing consumer demand for quality and performance translates into new demands on cotton as a fiber. Fine yarns are needed for sheer fabrics. Strong yarn is needed for easy-care fabrics because easy-care finishes weaken fabrics (like wrinkle-free). Mature, nep-free fiber is needed to manufacture velours, corduroys, and knitted fabrics that are to be dyed in shades where fabric quality depends on uniform dye uptake. (1984:392)

However, cotton quality was also important for products such as blue jeans, which could be made of fairly low quality cotton. Raw materials— cotton and other fibers—were the most important factor influencing yarn quality and represented about 50 percent of the cost of yarn (Estur 2004b). With narrowing margins, textile manufacturers sought to purchase the lowest quality of cotton possible to make a given end-product. Under these conditions, textile manufacturers around the world became more interested in the savings that could be gained by scientific management of processing based on mechanized cotton fiber measurements. This became a concern not only for textile manufacturers but also for major cotton exporters wanting to ensure their competitive position vis-à-vis US exporters. As demand for mechanized classification grew, the US classification system and benchmark standards gained status as the de facto global standards by the 1990s. Most other cotton-producing countries still used manual classification, and no other comprehensive mechanized classification system existed. US cotton producers thus enjoyed a first-movers advantage. Some textile manufacturers in Europe and East Asia began to adopt mechanized systems and to license the EFS software by the late 1980s. To facilitate this adoption as a way to create markets for US cotton, the US producer-funded Cotton Incorporated began to license their EFS software to textile manu-

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facturers abroad, focusing particularly on Asian textile manufacturers. In 1989, Cotton Incorporated opened an office in Singapore to offer technical support to textile manufacturers in Thailand, Indonesia, the Philippines, and Malaysia who adopted the HVI system and licensed the EFS software ( Jacobson and Smith 2001:296). With an EFS license, textile manufacturers received two service visits a year from Cotton Incorporated and could attend seminars on how to use the EFS system to achieve “lean” manufacturing. In return, the textile manufacturer had to commit to increasing the percentage of US cotton that they used (Robinson 2006). Indeed, Cotton Incorporated saw the EFS system as a way to encourage foreign textile manufacturers to choose US cotton over both synthetics and cotton from other producing countries. In short, as major retailers began imposing new quality demands on their suppliers around the globe, demand for more precise measurements of cotton fibers gave the United States’ mechanized classification system status as the de facto global standard. As such, the new mechanized classification system helped to reinforce the position of US cotton producers as dominant exporters vis-à-vis their competitors both in synthetic fibers and in other cotton-producing countries—a position that was ultimately undergirded by the United States’ ongoing agricultural subsidy regime. As we will see in the following chapter, this would become a source of international rancor and would spark both a protection strategy and a redirection strategy against the de facto global status of the US classification system and standards and the broader liberal market project in which they were embedded.

shif ting qua lit y cl assifications i n com pa r at i v e con t e x t The growing demand for more exacting quality differentiations in the cotton industry reflects two broader dynamics common to a range of other commodities in this period. The first is the dynamic interplay between the competition among capitalist firms to achieve ever-greater economies of scale and/or speed and the material characteristics of raw materials for production. Building on Bunker’s earlier work (1984, 1985), Bunker and Ciccantell (2005) identify this interplay in relation to extractive industries. They argue that, under the competitive demands of capitalism, firms and states create technological innovations to achieve greater economies of scale and speed. However, as economies of scale and speed increase, so do the quantities and precise qualities of natural resources required by the system.

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For example, at the end of the twentieth century, Japanese engineers designed and built supertankers and enormous dry-bulk carriers that ultimately gave them a significant advantage over the United States in the competition to dominate world trade. To realize these technological innovations, however, they created new raw material quality demands; that is, they required steel of much higher tensile strength and flexion than currently existed and thus had to secure access to huge deposits of iron and coal of precisely specified purity, grade, carbon and sulfur content, hardness, and moisture content (Bunker and Ciccantell 2005:10–11). In short, technological change emerging out of the competitive dynamics of capitalism generates increasing demands on raw material quality and the information available about it. Busch et al. (2006) note parallel dynamics in the soybean industry, as the adoption of more capital-intensive technology to extract oil from soybeans created demand for new information about soybean quality. In a similar way, the competition to reduce labor costs and achieve greater economies of speed in the textile industry created new demands for stronger fibers that could withstand faster processing speeds, thus generating demand for new ways to evaluate fiber quality. In addition to the interplay between competitive dynamics and material constraints, the greater importance of quality in the cotton trade in recent decades reflects a broader “turn to quality” in the economy more generally. In recent decades we have witnessed a shift from an economy of quantities, or an economy in which price competition is the major axis of struggle, to an economy of qualities, or an economy in which competition unfolds increasingly in relation to nonprice considerations (Callon et al. 2002). Just as the apparel industry shifted to product differentiation and intensified fashion cycles in the 1980s and 1990s, with implications for the cotton trade, so too have a range of other sectors come to place greater attention on quality differentiation as consumer demands shift and/or firms differentiate products to generate greater consumer demand. This shift has been well documented in food and agricultural commodities as competition in products as diverse as fresh fruit and vegetables, coffee, soybeans, and wheat have increasingly come to turn on quality attributes (see Daviron and Ponte 2005; Dolan and Humphrey 2000; Friedberg 2004; Magnan 2011). Hatanaka, Bain, and Busch argue that “quality is becoming a central component of economic competition in the global agrifood system. . . . Retailers are competing on other factors besides price, such as quality, convenience, and production practices” (2006:42).

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t r a nsnat iona l m erch a n ts: e x pa n de d n e t wor k s , de fac t o dispu t e set t l emen t au t hor i t y While the USDA claimed de facto global authority over the definition of quality and the creation of benchmark standards from the 1970s to the 1990s, Western transnational merchants began to extend onto a global scale their private authority over the third critical quality governance task: dispute settlement. In the 1970s and 1980s, Western merchants began to expand their sourcing and distribution networks abroad, particularly as textile manufacturing shifted increasingly toward Asia. Many smaller and mid-sized merchants and producer cooperatives, operating around the world with domestic or regional foci, continued to prosper by trading domestically. However, at the same time, a handful of large merchants, some who had moved in and out of the cotton trade for over 100 years and some new to the cotton trade, began to again expand operations globally. Taking advantage of the shifting geography of textile production, these merchants competed through mergers and acquisitions to create broad-based sourcing and distribution networks worldwide. These included European and US merchants with a history of transnational trade, US-based merchants looking to expand outside their domestic market, and highly capitalized grain merchants diversifying into new commodities. It was the merging of the strengths of these three types of firms that resulted in significant consolidation in cotton trading. For example, Cargill, a US-based grain merchant, acquired the Memphis-based cotton merchant Hohenberg Brothers in 1975. Cargill was attempting to diversify into other commodities within the US market, and Hohenberg Bros. was one of the largest domestic cotton merchants. In 1981, Cargill further acquired the Liverpool-based Ralli Brothers and Coney. This British cotton merchant had a long history of transnational cotton trading, allowing Cargill to transnationalize their newly acquired cotton business (Cargill 2005b). Giant multicommodity merchants like Cargill gained critical advantages over the older firms concentrated on cotton alone. They could shift funds from one commodity to another in response to price changes and profit opportunities, and it was generally only these firms that had the capital and expertise to speculate in the commodity futures markets (see also Talbot 2004). By the late 1990s, trading cotton came to be characterized by increasingly high barriers to entry. Building global sourcing and distribution networks

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required very high levels of working capital and access to credit, accumulated market knowledge (in all countries involved as well as in trade-related services like transport, insurance, and financial services), the ability to manage risk through diversification and/or price risk management, and intangibles such as reputation (Gibbon 2001; Larsen 2003). This went hand in hand with the increasing role of financial capital in the economy in this period. Merchants assumed a critical coordinating role, procuring specific volumes and quality mixes from cotton-producing countries around the world in order to offer a wide selection of alternative cottons to geographically dispersed textile manufacturers. With the growing adoption of mechanized classification of cotton, the largest merchants began offering cotton to meet more exacting specifications within narrow tolerances (Ruh 2005:11). To be competitive, merchants thus had to minimize inventories while maintaining a high level of responsiveness to the precise demands of manufacturers (Gibbon 2001). As well, reliable delivery times became increasingly important. Merchants began to offer delivery in regular monthly, weekly, or even daily shipments as textile manufacturers began to operate on a just-in-time delivery basis (Çalis¸kan 2010:67; Ruh 2005:11). Finally, merchants increasingly offered brokerage services for buyers, including futures and options. Although some regional merchants and large-scale producer cooperatives (such as those in the United States) forged their own marketing relationships, most cotton was sold through the large transnational firms given the costs of performing these functions (Gibbon 2001). Some scholars have seen this as the emergence of a “trader-driven” commodity chain in the cotton trade, given the “huge disparities in resources (financial and informational)” that emerged between merchants and both their suppliers and clients (Gibbon 2001:352). During this period, traderdriven chains began to emerge for a range of commodities, such as coffee, cocoa, and cashews. Many of these commodities were characterized not only by the growing power of transnational merchants but also by growing consolidation among downstream buyers (e.g., coffee roasters, chocolate manufacturers, and apparel retailers) (Gibbon 2001). In this respect, many trader-driven chains fed into buyer-driven commodity chains, which were becoming increasingly common in this period (Gereffi 1994). As a new cadre of transnational merchants gained dominance in this period, they attempted to extend their rules for private dispute settlement on an increasingly global scale. Since its beginnings in the nineteenth century, the Liverpool Cotton Association (LCA) had continued to operate as a pri-

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mary trade association for European-based merchants, albeit with disruptions during the World Wars. For their part, US merchants had established their own national association, the American Cotton Shippers Association (ACSA), in 1924 (ACSA 2011). By the 1970s, however, as the transnational trade in cotton began to expand significantly, these two trade associations, which counted in their membership most transnational merchants and whose memberships were increasingly linked due to mergers and acquisitions, decided to join forces and harmonize their rules for cross-border trade. Given that ACSA’s rules had become more domestically focused in the postwar period, members of ACSA agreed to use the LCA’s rules and arbitral body for dispute settlement in the transnational trade. Transnational merchants’ ability to extend the private authority of the LCA to settle disputes was facilitated by, and took particular form in relation to, the United States’ uneven market-led development project. In their relations with textile manufacturers, transnational merchants were empowered to largely impose their private authority over dispute settlement through the combined effects of the MFA and the structural adjustment programs of the IMF and World Bank. The MFA had the indirect effect of creating a geographically diffuse cotton trade. This created a new opening for transnational merchants who could supply cotton to these geographically diffuse and relatively small-scale buyers. Structural adjustment programs (SAPs), pushed by the IMF and World Bank, further reduced the bargaining power of textile manufacturers. SAPs were developed as a policy discourse by World Bank President Robert McNamara and cultivated by Western elites, “in keeping with the ascendant Reagan revolution” (Babb 2005:200). First introduced as a response to the debt crisis facing many countries in the 1980s, SAPs cast policies of liberalization and privatization as the path to “development” for countries in the global South, undergirded by the coercion of conditional lending (Babb 2005; McMichael 2004). A key target of these policies was state trading enterprises (STEs) that had bargained collectively on behalf of textile manufacturers (and/or cotton producers) to secure a better price vis-à-vis transnational merchants. Privatization thus gave transnational merchants greater leverage to impose their private authority as arbiters of quality disputes, as well as contract disputes more broadly. The Indian case is illustrative here. In the nationally focused development model adopted by India in the post-independence period, an STE, the Cotton Corporation of India, held a monopoly over cotton imports and exports. In 1991, however, the Indian government ended this monopoly as

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part of a broader adoption of liberalization and deregulation policies, and private merchants and spinners were allowed to import and export cotton (Landes et al. 2005). Given the historical development of the sector, Indian spinners, compared with those in other major textile-producing countries, were relatively small and not vertically integrated—that is, spinning, weaving, finishing, and apparel manufacturing processes were often done by separate firms (Landes et al. 2005; Tewari 2008). Without the STE to purchase cotton on their behalf, these small Indian yarn manufacturers and import firms, inexperienced in transnational transactions, purchased cotton directly from transnational merchants. A representative of the Indian Cotton Mills Federation explained the implications: In cotton, it is often the seller who decides the conditions of contracts and in most transactions his writ ultimately runs. The fact that cotton exporters are few in number and huge in size, whereas importers are often thousands of small spinners only further compounds this position. ( Jaipuria 2005)

Many of the firms importing cotton were small and had little bargaining power vis-à-vis merchants who insisted on using LCA contract rules and arbitration to settle disputes (Business Line 2004; Gurumurthy 2001). Indeed, it was reported that LCA contract and arbitration rules were used for all cotton imported to India by the early 2000s (Economic Times 2003). As these small players had difficulty challenging transnational merchants’ position as de facto transnational rule-makers, these simmering tensions would eventually develop into a protection strategy. In the 1980s and 1990s, transnational merchants’ position as powerful middlemen was further strengthened by the implementation of structural adjustment programs (SAPs) in cotton-producing countries. First, SAPs encouraged countries to adopt an export-oriented model of agriculture. The West African bloc of cotton-producing countries, for example, claimed a position as a significant exporter from the 1980s to the 2000s by focusing on developing their export-oriented cotton sectors. Indeed, some analysts consider cotton “a rare economic success story in sub-Saharan Africa” (Tshirley et al. 2008:123). While sub-Saharan Africa’s share of world agricultural trade fell by half from 1980 to 2000, cotton exports from the West African bloc increased from about 4 percent to 15 percent of total world exports over the same period (Larsen 2003:17; Tshirley et al. 2008:123). Their success, however, is largely attributed not to the export-oriented development model per se but rather to the comprehensive and efficient provision of inputs, credit, support services, infrastructure, and region-specific research estab-

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lished by the French state trading company that maintained a monopoly over cotton marketing in most of Francophone Africa until the late 1990s (Larsen 2003:13). Beyond the promotion of export-oriented agriculture, in many countries structural adjustment meant the liberalization of the cotton market and the privatization of STEs that had organized, marketed, and governed national cotton sectors and their links to the global market. For example, throughout the 1990s and early 2000s, countries in Eastern and Southern Anglophone Africa—Tanzania, Uganda, Zambia, and Zimbabwe—privatized STEs and cooperatives, leaving private companies to dominate input supply, ginning, and marketing (Baffes 2004; Tshirley et al. 2008). In the Francophone West African countries, privatization and liberalization moved more slowly as both the STEs themselves and the French state’s cotton trading company, the CFDT (La Compagnie Française pour le Développement des Fibres Textiles, or the French Company for the Development of Textile Fibers), resisted these policies. The roots of this resistance lie in the nature of the West African cotton sectors after independence (see Box 3.1). While colonial ties ended upon independence, neocolonial economic ties were forged as the CFDT negotiated with new state trading enterprises (STEs) in West African countries to establish a trade monopsony in the region. As the IMF and World Bank pressured West African states to privatize their STEs as part of structural adjustment programs, both the STEs and the CFDT opposed these policies. For the CFDT, privatization would eliminate their monopsony in the region (Bingen 1998, 2006). Given France’s important role as a bilateral donor to the region, the CFDT’s resistance did successfully delay privatization for a time (Baffes 2007; Bingen 1998). Cotton producers had a different view of the situation. As Bassett (2001) demonstrates in Côte d’Ivoire, cotton growers’ incomes declined from the 1970s to the 1990s as profits were accruing not to them but to input suppliers, cotton merchants (CFDT), and the state marketing board. Cotton producers saw the CFDT system as unaccountable. They worked to build up their producer organizations. This allowed them to stage strikes and protests to call for greater decision-making power and a greater share of the export price of cotton (Bassett 2001; Bingen 1998). For their part, West African states saw the privatization agenda reflecting the broader hypocritical nature of the US-led project of market liberalism. The World Bank argued that the “managed monopoly” system in place in West African countries was vulnerable in a highly competitive global market, claiming it limited incentives to minimize costs and stifled entrepre-

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box 3. 1. Cotton Marketing in West African Countries after Independence. In the postwar period, French textile firms were intent on keeping their former French African colonies closely integrated into French industrial sectors as they claimed independence. Eager to rebuild their war-torn industry, French textile companies and cotton merchants lobbied the French government to restructure the cotton sectors in West African colonies to ensure their access to ample volumes of high-quality cotton. This resulted in the unprecedented investment of French government funds into two companies whose mission was to promote cotton development in its overseas territories: the IRCT (L’Institut de Recherche de Cotton et Fibres Textiles or the Cotton and Textile Fibre Research Institute) and the CFDT. The IRCT’s mission was to conduct agricultural research and, in particular to develop a high-quality cotton seed variety that would thrive in the West African colonies. The CFDT was a joint venture between the French state and private textile interests that would intensify and extend cotton production using the IRCT’s research (Bassett 2001). As part of the “Green Revolution,” the CFDT pushed cotton producers in the Francophone colonies to adopt a high-input/high-output “cotton package,” consisting of high-yielding seed varieties and heavy use of inputs, such as newly available pesticides like DDT. CFDT achieved this through its relationships with the governments of the newly independent West African countries. The CFDT offered to operate an extension program to promote the use of the new “cotton package,” and to train producers and extension agents. In exchange, they received the privilege of controlling all aspects of cotton ginning and marketing, establishing a monopsony in West African countries (Bassett 2001; Bingen 1998). This system increased production and gave CFDT exclusive access to cotton supplies in Francophone West African countries, which they purchased from state trading enterprises (STEs).

neurial decision-making. From this view, the managed monopoly model was stymieing economic growth and depressing cotton producers’ incomes (Bingen 2006:223). From the perspective of the African STEs, however, it was US cotton subsidies, not their managed monopolies, which were depressing cotton producers’ incomes. Moreover, West African states argued that the key to their global competitiveness was not firm structure—public vs. private—but rather the maintenance of an integrated model to ensure cotton quality, which yielded price premiums on the international market. In West African states, the cotton sectors were organized in a so-called filière intégrée, in which a single STE managed all of the steps in the production process, from the provision of seeds and other inputs to the purchase of the crop at the end of the growing season, the separation of the cotton lint from the seeds at ginneries, and the marketing of exports (Bassett 2001; Siaens and Wodon 2008). For West African states, privatization risked the deterioration of this quality control

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system and thus of the reputation for high quality that their cotton producers enjoyed on the global market. Indeed, the experience of Southern and East African countries in the wake of privatization reinforced these concerns. Liberalization in many countries did provide farmers with prompter payment for their cotton and a higher share of the final market price for lint than they had previously received (Baffes 2004; Tschirley et al. 2008). However, in a number of countries, evaluations of the privatization and liberalization of cotton sectors suggest that quality control systems broke down and cotton quality deteriorated. Farmers no longer had the infrastructural support or incentives to produce high-quality cotton (Gibbon and Ponte 2005:182). In Uganda, Tanzania, and Zimbabwe, for example, privatization and liberalization brought an influx of relatively small, private ginner-merchants attempting to gain a slice of this new market. As a result, intense competition emerged among newly privatized gins to purchase seed cotton, which destabilized input provision and quality (Tschirley et al. 2008:134–5). In Tanzania and Zimbabwe, market liberalization brought intensified competition among small-scale ginner-merchants and the elimination of grading at the first point of sale, thus eliminating quality premiums for farmers (Gibbon and Ponte 2005:147; Tshirley et al. 2008:140). In Tanzania, private ginners purchased cotton across the country, mixing local seed stocks. Few private firms provided inputs. Those who did offered them on a cash-only basis (Gibbon and Ponte 2005:147). These disruptions to quality control and input distribution mirrored the consequences of privatization and liberalization in other sectors such as the coffee industry (Gibbon and Ponte 2005:136). Quality control was best maintained in countries like Zambia, which reproduced a single-channel system that mirrored the operation of the state trading enterprises but in private form. In these systems, privatization took the form of geographical monopsonies. Private firms were given the sole right to purchase cotton from farmers within a given region and were obligated to provide inputs and technical assistance on credit to farmers. With their monopsony control, private firms have had an interest in increasing production, as well as in defending national reputations for quality by maintaining grades as incentives for farmers (Gibbon and Ponte 2005:146–7). These systems, however, amounted largely to handing over public companies to private, and often transnational, firms (Larsen 2002, 2003; Poulton et al. 2004). In Zambia, the state trading enterprise, LINTCO, was sold in two parts, one to the private firm, Lonrho Cotton, and the other to Clark Cotton, a South African firm (Tschirley et al. 2008). The Zambian sector

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soon became a staging ground for two of the largest transnational merchants’ competition in acquisitions. Dunavant purchased Lonrho Cotton while Cargill purchased Clark Cotton (Larsen 2003). In cases like this, quality control remained, but the responsibilities for grading cotton and determining the distribution of profits were turned entirely over to private firms with little public oversight. Small cotton producers effectively sold directly to a vertically integrated transnational conglomerate that had a monopoly over ginning in their geographical zone. Despite the concerns West African states held regarding the experiences of East and Southern African countries, reforms in West Africa proceeded under continued pressure from the IMF and World Bank. Mali was the only country in which ginning and export marketing continued to be managed by a single STE. In Côte d’Ivoire, Benin, and Burkina Faso, STEs still existed, but their monopsonistic positions were broken up by privatizing some gins and/or allowing private companies to enter the market. The initial years of these reforms brought instability to input provision and quality control systems (e.g., in Benin, see Siaens and Wodon 2008:161). Quality control fared best where public regulatory structures were left in place (Gibbon and Ponte 2005:182). For transnational merchants, privatization of STEs thus opened up access to new cotton supplies through the different ways of “[substituting] private for government trading organizations” (Bassett 2008:53). Between 1994 and 2009, the number of state trading enterprises involved in selling significant quantities of cotton (between 50,000 and 200,000 tons annually) fell from fifteen to just three, due mostly to privatization in African countries (ICAC 2010b:2). This allowed the largest transnational merchants to expand their operations significantly during the 1990s in terms of the number of countries from which they purchased cotton (Larsen 2003:9). In some cases, as we have seen, this has meant vertical integration into ginning. Cargill, for example, came to own cotton gins in five countries in southern Africa: Malawi, Tanzania, South Africa, Zambia, and Zimbabwe. Moreover, firms have also attempted to develop long-term relationships with reliable local merchants/ginners, which involves prefinancing seasonal purchases (Larsen 2003:9). While about 17 merchants were active in the West African cotton trade by the mid-2000s, just five handled 70 percent of production (Estur 2004a:11; see also Fok 2005). Privatization thus enhanced transnational merchants’ power in the cotton trade and ability to impose contract terms and rules for dispute settlement. As a range of small, private ginner-merchants took the place of

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state-level collective bargaining, transnational merchants purchasing cotton from these smaller firms enjoyed formidable bargaining power to impose contract terms and dispute settlement mechanisms. As one analyst suggests, in their relations with private ginners in African countries, transnational merchants were often capable of “taking advantage of the poor know-how of ginning companies regarding contractual disputes” (Estur 2004a:22). In short, the 1980s to the 2000s was a period in which transnational merchants were gaining increasing power vis-à-vis both their clients and suppliers and began to use this powerful position to impose their private authority to govern contracts and settle disputes. Yet, it was also a period in which tensions were building in opposition to their position as de facto transnational rule-makers within the US-led neoliberal project.

t h e l i m i t s of p r i va t e au t hor i t y The private authority of transnational merchants over dispute settlement could not be achieved simply through growing economic dominance and coercion. Rather, while transnational merchants were increasingly able to impose their authority, they also faced limits to this strategy. These limits were rooted in part in intensifying price volatility from the 1970s to the 2000s and in the privatization and commoditization of risk that accompanied the privatization of state trading enterprises. While declining prices and price volatility had long been a concern of countries in the global South, the end of US buffer stocks and the oil shocks of the 1970s significantly increased price volatility in cotton and other primary commodity markets. Cotton prices were relatively stable in the 1950s and 1960s. Through its support programs for domestic producers, the US government effectively operated a world buffer stock that kept the international price of cotton high and stable (Finlayson and Zacher 1988). In the late 1960s, however, the United States sold off its cotton reserves, destabilizing the cotton market and making the price of cotton more volatile. This, paired with the successful oil cartel of OPEC (Organization of Petroleum Exporting Countries), led to significant fluctuations in commodity prices for much of the decade. Cotton prices reached significant highs in 1973, 1976, 1980, and 1983, from which producers benefited (Finlayson and Zacher 1988). But these price highs were preceded and followed by significant lows. For example, international cotton prices jumped from 30 cents a pound in the spring of 1973 to 90 cents that November (Busch 1982:425). Numerous efforts were made to establish an interstate agreement to stabilize cotton prices but to no avail (see Box 3.2).

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box 3.2. Price Stabilization Efforts in the Cotton Trade. Cotton-producing countries held numerous discussions of possible stabilization schemes through an international commodity organization, the International Cotton Advisory Committee (ICAC), between 1966 and 1972, and again through the United Nations Conference on Trade and Development (UNCTAD) between 1977 and 1982 (Finlayson and Zacher 1988). These negotiations paralleled similar efforts to negotiate price stabilization agreements for eighteen primary commodities, only five of which were successful. Indeed, with many commodity sectors facing similar problems, addressing price volatility had become a central plank in the Group of 77’s (G-77, a caucus of countries from the global South) 1974 proposal to the United Nations (UN) General Assembly for a New International Economic Order (NIEO) (McMichael 2004). However, in the cotton sector, producing countries were unable to come to an agreement, given conflicting interests, the heterogeneity of cotton, and the competition from synthetic fibers. While some cotton-producing countries in the global South wanted to stabilize the market, others were anxious to increase their share of world exports, not restrict it by limiting production or exports through quotas (Finlayson and Zacher 1988). Moreover, the United States, as the largest cotton exporter, was leading a concurrent effort to organize cotton-producing countries to fund cotton promotion activities in order to spur demand in the face of growing competition from corporations producing synthetic fibers (Brown 2000; Dunn 1992). As an UNCTAD report noted in 1972, the ICAC could not agree to production or export controls because “the general view of interested Governments has been that any agreement would be restrictive in nature and would not favor cotton in its competition with man-made fibers” (cited in Finlayson and Zacher 1988:239).

The trend toward falling prices and price volatility persisted into the 1980s and 1990s. The real price of cotton continued to decline, from more than $3 per pound of lint in the early 1950s to $1–$2/lb. in the 1970s to just $0.50–$0.60/lb. in 2004 (all in 2004 dollars) (Townsend 2004). At the same time, price volatility continued in the 1980s and 1990s. Baffes (2004) argues that, if volatility is measured as variability from one year to another, price volatility was the highest from 1973 to 1984 during the oil crises and commodity price boom. However, volatility was 2.5 times higher during the period from 1985 to 2002 compared with the period from 1960 to 1972 (Baffes 2004). Part of this volatility came from changes in supply and demand due to weather, producers shifting to other crops, the price of synthetics, and shifting government policies (Estur 2004a; Finlayson and Zacher 1988). However, two additional factors were of critical importance. In the 1980s and 1990s, China increasingly opened up to the international market. Information on China’s cotton production, consumption, stocks, and policy agenda was difficult to obtain. As a result, China’s net trade

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with the rest of the world was a key factor in year-to-year price fluctuations (Estur 2004a). Price volatility also increased alongside the growth in speculation in cotton markets. Until the 1980s, the major participants in cotton futures trading were merchants. Merchants used futures to hedge or protect themselves against sudden price changes. In the 1980s, however, there was a general proliferation of financial instruments and derivatives. For cotton, this meant the introduction of options trading on cotton futures contracts on the New York Cotton Exchange in 1984. Options contracts are cheaper than futures contracts and thus available to smaller merchants and spinners in the cotton trade. In addition, options contracts were available to smaller speculators, who were investing in financial markets but could not afford a diversified portfolio of commodity futures. By the early 2000s, about 40 percent of the average daily trading on the New York cotton futures exchange was speculative activity—that is, not connected in any way to sales of physical cotton (Estur 2004a). As more speculators entered the market, this also brought a shift in the type of speculative activities. Traditionally, speculators chose to buy or sell cotton futures on the basis of fundamental analysis, or the actual projections of future supply and demand for cotton. Some cotton merchants participated in this type of speculation. In the 1980s and 1990s, financial speculation based on technical analysis became more common. Using technical analysis, speculators chose to buy or sell cotton futures and options not on the basis of actual supply and demand forecasts but rather on the basis of past market movements. This meant that money was being shifted in and out of cotton futures markets with little relation to the actual changing conditions “on the ground” in cotton-producing and -consuming countries (see also Talbot 2004:chapter 5). Intensifying price volatility did not pose a problem to transnational merchants’ operations per se. To the contrary, it was the management of price volatility that gave transnational merchants their position as marketmakers—that is, those actors willing to absorb risks to allow exchange to occur. Transnational merchants managed price risk through tools like futures markets. However, price volatility did affect their relationships with their clients. Spinners and cotton producers in the global South, as well as cotton producers in the North and even many smaller and medium-sized merchants, were much less able to manage price risk. Hedging instruments did not (and still do not in many cases) exist for many cottons outside the United States (Baffes 2001). Moreover, the lines of credit necessary to suc-

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cessfully and competitively hedge were increasingly beyond the scope of all but the largest transnational merchants, as the executive director of the ICAC explained: For traders and those who have the financial resources to weather price fluctuations, meet margin calls and take advantage of volatility, there is opportunity for profit. But there are very few firms that are large enough, savvy enough, and have the expertise and financial resources to take advantage of the profit possibilities that come from volatility. There are some who can, but for the vast majority of market participants, it’s a negative. . . . For those without a virtually unlimited line of credit behind their hedge position, they simply can’t do it. (cited in Cotton International 2010c)

If actors could not hedge or otherwise manage their price risks, they would be much more likely to default on contracts in the case of significant price fluctuations. This was particularly the case given the growing privatization and commodification of risk through structural adjustment programs. A key role that state trading enterprises had played was the socialization of price risk. Through their monopolies on cotton buying and selling, STEs could average out the highs and lows of price fluctuations to help cotton producers secure a stable income and to help textile manufacturers avoid radical shifts in the prices of their raw materials. With privatization, the management of price risk was privatized and individualized. Moreover, price risk management was commodified in the sense that it was no longer a public service but a form of private insurance that should be bought on the futures market. As many textile manufacturers in particular lacked the access, expertise, and credit availability to manage their risk on future markets, the decision to simply default on a contract when the price moved against them was an alternative risk management strategy.5 One transnational merchant explained to me the rule of thumb that their firm used: if the international price moved more than 10 percent below the contract price, they expected the chance of default to increase by 50 percent. By the early 2000s, Estur (2004a) noted that it was no longer unusual for monthly prices to vary from the annual average price by a margin of 15 percent. If textile manufacturers in the United States defaulted on their contracts as a way to manage price risk, this would not pose a significant problem for merchants as they could arbitrate the dispute in their private arbitral body, which would be upheld in US state courts, forcing the defaulting party to pay damages. On the global stage, however, and particularly in countries

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in the global South, the growing risk of contract defaults posed by rising price volatility posed more complicated problems. Even if transnational merchants had the economic power to impose their contract terms and dispute settlement authority on, for example, textile manufacturers in India, they could still face significant losses if the textile manufacturer defaulted on the contract. This was due to the fact that merchants’ private authority was contingent on the support of states and a transformation in states’ organizing logics to serve transnational firms rather than domestic producers or spinners. Private arbitral authority was supported by Western governments through the 1958 New York Convention (see chapter 2). Many countries in the global South, however, had resisted adoption of this Convention as they felt that private transnational arbitration prioritized the interests and customs of transnational firms and overrode national laws, such as those designed to protect domestic sectors and facilitate national economic development (Sempasa 1992; Sornarajah 1989). Latin American countries, for example, adhered for many years to the Calvo Doctrine, named after an Argentine jurist, which held that disputes arising from international contracts, especially foreign investment contracts, should be settled only by domestic courts and tribunals applying domestic law. Developing countries further upheld this doctrine through resolutions in the New International Economic Order (NIEO) (Sempasa 1992; Sornarajah 1989). Many countries were finally compelled to sign on to the 1958 Convention as a condition for IMF and World Bank loans and/or as part of a regulatory competition for mobile capital (Robé 1997). Yet, this still did not ensure the enforceability of private arbitral authority. Despite being signatories to the Convention, some state courts would reopen cases to apply domestic laws and procedures when an arbitral decision was brought to them to be enforced. Facing this context, merchants were forced to litigate disputes in state courts to get contracts enforced, which was a lengthy and costly process. The costs of litigating a contract default could be as high as 60 percent or 70 percent of the value of the contract one was trying to recover (Busch 1982:42). Thus, it was not feasible to take every textile manufacturer who defaulted on his/her contract to court in his/her respective country. Moreover, problems emerged even among merchants and spinners who accepted private arbitration and had well-developed private contract rules. One US firm reported losing arbitration, and subsequently litigation in court, to a German firm, due to the differences between their respective trade associations’ rules (Busch 1982:435). That is, problems emerged due to the fact that

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merchants, textile manufacturers, and other actors in the cotton trade were organized in separate and largely nationally-focused trade associations with nationally focused rules. As one commentator remarked, “There was soon no predominant culture in the cotton trade, and as trade became internationalized and variegated, so did the standards of doing business” (Busch 1982:437). In this context, transnational merchants explored new possibilities for addressing the contract enforceability problems that ensued from price instability. In 1976, ACSA and the LCA established a new transnational organization: the Committee for International Cooperation between Cotton Associations (CICCA). This organization brought together private trade associations around the world with the express purpose of promoting contract sanctity in the transnational cotton trade (CICCA 2009; ICAC 1996). In addition, merchants tried to construct a new culture for the transnational trade. They aimed to reconstruct the kinds of thick personal relationships that allowed gossip networks and threats to reputation to serve as powerful disincentives to contract defaults (Bernstein 2001:31). To this end, the LCA began to supplement their yearly convention with social events to help build new relationships and invited their new clients to these events. In the United States, ACSA began to hold events such as the Sourcing Summit, in which they invited spinners from around the world to make connections with US merchants and tour US cotton production and ginning facilities. Such events worked not only to sell more cotton but also to create a “community” in the cotton trade. Merchants considered other possibilities for minimizing contract default problems, but as competition to expand transnationally at this time was intense, they were unable to forge cooperation around proposed strategies. A member of one merchant association recalled that they had considered rating countries on risk factors and hiring credit investigators and asset trackers to help enforce arbitral awards. However, some of the largest firms were reluctant to put up the money to protect firms that took on too much risk. As one merchant representative stated to me: “Why should I pay for an army of lawyers so someone can go and do high-risk business and then I’d have to pay to bail him out?” In general, deeper cooperation to stabilize transnational contract governance was overshadowed by new opportunities to maneuver in a transnational market without clearly defined rules. Expanding one’s operations into new markets while avoiding significant losses due to contract defaults became a new axis of competition for merchants. One transnational mer-

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chant explained to me that one of his competitors had been selling into the Indian market when prices fluctuated dramatically. This competitor had not practiced due diligence to ensure the credit-worthiness of his buyers. As a result, when prices fluctuated significantly, the competitor faced a rash of contract defaults and spent years trying to settle them in Indian courts. “Knowing Your Buyer” represented a key risk management strategy, and merchants competed to establish relationships with reputable buyers. In these ways, merchants chose to compete over who could manage this risk in the plays of the game, rather than to negotiate new transnational rules of the game. As one observer commented, it threatened to be “a situation akin to anarchy—a game whose participants must be as adept at changing rules as at classing cotton” (Busch 1982:437).

p r i va t e au t hor i t y ov e r di s p u t e s e t t l e m e n t i n com pa r at i v e con t e x t The growing power of transnational cotton merchants and their efforts to extend their dispute settlement authority globally from the 1970s to the 1990s is part and parcel of the broader rise of private authority in the world economy. Indeed, for many, the rise of private authority is seen as a defining feature of the current era (Cutler et al. 1999; Gereffi 1994; Hall and Biersteker 2002; Haufler 2001; Kahler and Lake 2003; Büthe and Mattli 2011). The rise of private arbitral authority to settle disputes for transnational commercial transactions in particular is a trend that extends far beyond cotton and other agricultural commodities. Over 90 percent of cross-border contracts for the trade of goods as diverse as electronics, oil, or solar panels contain a private arbitration clause (Berger 2010). While bulk commodity sectors like cotton have long been the mainstay of private arbitration, since the 1970s the number of more general arbitration forums has grown from around a dozen to more than one hundred in the 1990s, and the caseload of major arbitral institutions, such as the International Chamber of Commerce, have more than doubled in the same period (Mattli 2001a:920).

conclusion Contrary to macrolevel approaches that tend to overstate the coherence of projects of market liberalism led by powerful coalitions of states and firms, the transformation of quality governance in the cotton trade from the 1970s to the 2000s reflects a more contested and piecemeal process (see

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also Krippner 2011). As their competitive positions in the capitalist world economy shifted, US textile manufacturers, cotton producers, the USDA, and transnational merchants strategized to reconstitute the rules governing the cotton trade. This was a highly contested and uneven process, given divergent interests within the United States itself regarding the trajectory of market liberalization. It was out of both the new opportunities and the new competitive pressures created by the United States’ trade liberalization project that a new system of quality classification and dispute settlement was forged. Responding to growing competition from East Asia, US textile manufacturers pushed for protectionism through the MFA and for technological upgrading support. The new open-end spinning technology they adopted, however, sacrificed quality for economies of speed. This, paired with cotton producers’ competition with synthetic fibers, stimulated cotton producers, textile manufacturers, and the USDA to retool their quality classification system to increase the competitiveness of the cotton-textile sector as a whole. As the rise of giant retailers in the 1990s heightened competitive pressures across the industry, the USDA’s mechanized quality classification system increasingly came to be seen as the de facto system for global adoption. In short, as institutionalists suggest, it was a process of strategizing and problemsolving that generated a new quality classification system. At the same time, however, we can better understand why the retooled classification system took the form that it did by situating actors within broader contests over the organization of the global capitalist system. Actors sought to solve the particular competitive problems they faced given their historically and spatially specific position within the shifting world economy. For transnational merchants, this was a period of expansion as both the protectionist compromise of the MFA and the privatization agenda pursued through IMF and World Bank structural adjustment programs created opportunities to extend the global reach of their sourcing and distribution networks. As their bargaining power vis-à-vis relatively small and geographically dispersed trading partners strengthened, transnational merchants were more able to impose their preferred contract and arbitration terms. This rise of private authority, however, was not as unproblematic as much of the literature suggests. The authority of transnational merchants over dispute settlement did not depend simply on states retreating to allow private firms and associations to take over their responsibilities, such as through the privatization of state trading enterprises. State authority continued to underpin private authority. Particularly in a volatile market, private dispute

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settlement continued to depend on state courts to enforce arbitral awards as if they were decisions of the courts themselves. We see that a key limit to transnational merchants’ authority was the degree to which state courts around the world accepted this denationalized function as legitimate. To allow private authority over contract governance to function, there must be at once privatization of state functions and the denationalization of the organizing logic of state institutions. In the cotton sector at the end of the twentieth century, this involved shaping the role of state courts such that they no longer guarded public policy and public welfare concerns and instead facilitated transnational trade (see also Sassen 2006). Yet, many states resisted such transformations. Ultimately, the status of the USDA and transnational merchants as de facto transnational rule-makers would not go unchallenged. Rather, from the 1970s to the 1990s, tensions began to build in opposition to these dominant actors, their rules for quality governance, and the United States’ uneven neoliberal project as a whole. Much as in the conflict over standards at the turn of the twentieth century, the contemporary transnational rulemakers would face both a redirection strategy on the part of emerging rivals and a protection strategy waged by marginalized actors by the turn of the twenty-first century.

chapter four

The World Trade Organization and the New Competing Kings of Cotton

In 2002, shortly after its accession to the WTO, the Chinese government carried out a seemingly innocuous bureaucratic procedure: it notified the WTO that it was introducing new mandatory quality standards for cotton imported into China. On the surface, this specification of technical standards appeared painfully mundane and technocratic. All cotton imported to China would have to be tested for short fiber content according to the GB/ T6098.1-1985 Test Method of Cotton Fiber Length using Roller Analyzer and for neps according to GB/ T6103-1985 Test Method for Raw Cotton Trash (WTO 2002). But this simple act would set off intense contestation over who had the authority to set cotton quality standards and what the basis of this authority should be. Joining the WTO in December 2001, China was poised to become an apparel and textile powerhouse. The MFA quotas were being phased out, and retailers were rushing to China where suppliers could offer some of the cheapest apparel in the world. For the Chinese government, this was a golden opportunity to ramp up production. Exports of designer jeans, blouses, and underwear would provide valuable foreign exchange earnings and serve as an engine for economic growth. But they would also provide a promise of “development”—that the wrenching changes accompanying the country’s rapid economic growth would provide jobs and opportunities for regular people. Quality standards were critical to these goals. The quality of textile exports and thus the raw cotton imported or domestically produced was of key importance to the competitiveness of China’s cotton-textile industry

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and thus its ability to keep jobs in the country. Improving their quality classification system thus represented a strategy both to facilitate textile manufacturers’ scientific management of production and to shift quality incentives for cotton producers both in China and abroad. It was in this context that the Chinese government introduced new quality standards for imported cotton. In their notification to the WTO, Chinese officials reported that “the national standard for cotton is revised in order to improve the quality of cotton, to satisfy the needs of textile enterprises for high-quality cotton, to prevent fake and bad quality cotton from flowing into the market and to fight deceptive practices in trade” (WTO 2002). These new standards would be governed and implemented by China Inspection and Quarantine (CIQ), the state agency that oversaw cotton imports. Receiving notification of the Chinese quality standards through the WTO, the US industry was alarmed. The new Chinese standards required that all cotton imported to China had to be measured for two fiber characteristics that had never before been included in official commercial quality standards anywhere in the world. Moreover, the US industry was concerned that US cotton would suffer price discounts if it was imported on the basis of these measurements (FAS 2004). This threatened the profit margins of both US cotton producers and transnational cotton merchants, particularly those who sourced most or all of their cotton volumes in the United States. In response, the USDA, its fiber scientists, and the US cotton industry sprang into action. The USDA’s Agricultural Research Service (ARS) obtained the measurement instruments used for the Chinese standards, had the test methods translated into English, and within three weeks produced results to discredit the Chinese standards. A fiber scientist from the ARS organized a briefing for Chinese fiber experts, and the CIQ agreed to postpone the implementation of the new standards (Kaplan 2004). In the United States, the ARS scientists were likened to “firefighters” who could “respond when foreign agricultural fires flare up” (Kaplan 2006). This skirmish over quality standards ultimately sparked a broader struggle over what institutional arrangements would govern quality standards in the global cotton trade. Moreover, it points to a defining moment in the struggle over standards: the creation of the WTO. The formal establishment of the WTO represented a critical turning point for the governance of quality standards as it at once consolidated certain dimensions of the United States’ neoliberal project and galvanized the resistance to it that had been brewing over the previous two decades. The WTO was the product of more than seven years of negotiation during the Uruguay Round of the General

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Agreement on Tariffs and Trade (GATT), which lasted from 1986 to 1994. The WTO was the culmination of efforts to harmonize global trade through the use of binding rules designed to promote the dual principles of free trade and freedom of investment. In this chapter, I explore three key implications that the WTO had for quality standards and dispute settlement in the cotton trade. First, the WTO would dramatically shift power relations as the creative dynamics of its liberal market agenda spurred the ascendance of China as a dominant player in the sector capable of challenging the power of the West. The cotton trade came to be dominated by three competing kings of cotton: China, the United States, and transnational merchants. Second, these shifting competitive positions in the trade crystallized conflicts over the US neoliberal project and spurred the consolidation of both a redirection strategy and a protection strategy against the USDA standards and transnational merchants’ dispute settlement. The Chinese state and more marginalized actors interpreted both the quality classification system and dispute settlement arrangements as globalized localisms, or rules developed in the context of the United States to benefit US players over others in the global trade. Third, the WTO reshaped the logic of decision making over standards and dispute settlement. The battle over rules for the global cotton trade would not be settled simply by economic might. Through the WTO, the United States pushed for a new supranational infrastructure for harmonizing and addressing disputes over technical standards. This new institutional infrastructure, established through the Agreement on Technical Barriers to Trade, created a vague legal environment, which framed standard-setting as a struggle over who could define what made a standard “international” and science-based. Moreover, by limiting the role of states in the economy—and the Chinese state in particular—the WTO created new challenges for both the Chinese state and transnational merchants in the governance of dispute settlement.

the n ew competing k ings of cot ton Enter China The most dramatic effect of the WTO on the cotton trade was the rise of China as a powerful new actor intent on shifting the rules governing the cotton trade to its benefit. China’s rapid rise as a major economic player in the cotton trade resulted from the phase-out of the Multi-Fibre Arrange-

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ment through the WTO from 1995 to 2005 and China’s accession to the WTO in 2001. The creative dynamics unleashed by liberalization generated a powerful new rival to the United States’ liberal market project. However, despite its rapid ascendance to a dominant position in the cotton trade, the Chinese state also experienced growing domestic tensions within the cotton textile and apparel sector, largely due to the shifting role of the state under WTO reforms. The United States initiated the Uruguay Round of the GATT, which would ultimately establish the WTO, in order to improve the position of its transnationally competitive firms. Specifically, the goal was to include trade in services, foreign investment, and intellectual property rights—the so-called new issues—under the regulatory umbrella of the GATT (Chorev 2007). In order to gain commitment on these issues, the United States promised to liberalize trade in sectors where countries in the global South were most competitive, including textiles/apparel and agriculture. In the apparel and textile trade, key apparel importers including the United States, the European Union, and Japan agreed to replace the MFA quota system with the new Agreement on Textiles and Clothing (ATC), which would phase out quantitative restrictions on apparel imports over the course of ten years, ending completely on January 1, 2005 (Rosen 2002).1 For China, however, the promise of market access with the end of quotas in 2005 could be realized only with their accession to the WTO. The Chinese state had been negotiating the terms of their accession for fifteen years. During this time, there was considerable domestic unease over the wisdom of pursuing membership. Some complained about the emergence of a “new capitalist class” in China that was pursuing market liberalization while exploiting workers and farmers. Others opposed the US domination of the international system and the vulnerabilities to economic and political pressures that WTO membership would bring (Breslin 2003:215). Moreover, many were concerned that the Chinese state would lose its much-exercised ability to provide palliatives to those who faced the consequences of the shift to a more market-oriented system. The Chinese state, for example, had provided subsidies and loans to agricultural producers (Breslin 2003:215). In the cotton, textile, and apparel industries, these tensions were sharp given their position as strategic commodities for the Chinese state. Cotton and textiles were historically important as sectors that clothed a large population and army, earned foreign exchange, created jobs, and provided a source of tax revenues (Fang and Babcock 2003:1). Indeed, the Chinese state’s revenue from textile exports expanded more than 17 times from 1978

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to 2000 and accounted for around 25 percent of total export revenue during the same period (Fang and Babcock 2003:1). By the early 2000s, approximately 20 million Chinese people were directly involved in the textile sector, while over 100 million farmers in China produced cotton (Alpermann 2010; Fang and Babcock 2003). The cotton and textile/apparel industries were also strategic as they straddled China’s increasingly precarious rural-urban divide. In the decades after Communist Party leader Deng Xiaoping initiated his program of economic reforms in 1978, the disparity between rural and urban incomes markedly increased. From 1985 to 2004, urban incomes soared from $80 a year to over $1,000 a year, on average. Rural incomes, in contrast, grew at a much slower rate, increasing from around $50 per year in 1985 to $300 in 2004 (Harvey 2005:126). Moreover, as the commune agricultural system was dismantled along with the (weak) collective social rights they had provided, peasants faced burdensome user charges for schools, medical care, and the like (Breslin 2003:217; Harvey 2005:127). In the cotton sector in particular, the state attempted, with mixed success, to “marketize” cotton production and distribution in the 1980s and 1990s in order to reduce the financial burden on the state by shifting it to farmers (Alpermann 2010: chapter 3). As China became one of the world’s fastest growing economies, it also became one of the world’s most unequal societies. Finally, the domestic cotton sector was also considered vital to national unity concerns. A large proportion of Chinese cotton was grown in the Xinjiang autonomous region, populated by non–ethnically Han minorities.2 By the early 1990s, Xinjiang emerged as the largest producer of cotton at the provincial level, and, by the 2000–2008 period, it accounted for 30 percent to 40 percent of national production (Alpermann 2010:170). Given that Xinjiang was a remote, largely Muslim region with a low standard of living compared with the rest of the country and a history of unrest, the Chinese state was sensitive to any changes that could generate instability in the region, such as a fall in the price of cotton, the region’s main cash crop (Fang and Babcock 2003:7; Min 2012). Increasing cotton production was seen as critical, not only addressing “economic development, but also lead[ing] to ethnic harmony and social stability in the country’s border areas” (Min 2012:82). Xinjiang had a weak industrial base, and approximately 60 percent of rural residents’ incomes in the Xinjiang cotton-growing areas were derived from this crop. Cotton was also an important source of local government revenues in the region (Alpermann 2010:170–71).3 The combined effect of China’s accession to the WTO and the ATC was

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thus mixed. This regulatory shift made China the largest producer of textiles and apparel in the world. The ATC changed the logic of global sourcing and production in the apparel and textile sectors (Bair 2008). As import quotas were progressively phased out, apparel retailers could source product from those countries offering an optimal mix of technology, labor costs, infrastructure, and market proximity (Rosen 2002). With a vast labor force and the capacity to ensure stability and competitiveness through its authoritarian political structure, China was uniquely positioned to capitalize on liberalization. In anticipation of the end of the quota system in 2005, China ramped up production, tripling its total industrial output value in textiles between 2000 and 2007 (Alpermann 2010:163). As David Harvey suggests, “The spectacular emergence of China as a global economic power after 1980 was in part an unintended consequence of the neoliberal turn in the advanced capitalist world” (2005:121). The creative dynamics of market liberalism gave rise to a new rival. As China became the largest producer of apparel and textiles in the world, it also became the largest cotton importer. Despite the fact that China was the world’s largest cotton producer, its cotton consumption quickly outstripped demand (see Figure 4.1).4 China’s cotton imports skyrocketed from approximately 98,000 metric tons when it joined the WTO in 2001 to nearly 4,200,000 metric tons in 2005, and its share of world cotton imports

f igu r e 4 . 1 . Cotton Production and Consumption in China, 1990–2009. Adapted from ICAC (2010a). Each year refers to a marketing year—that is, 2000 refers to the marketing year from August 2000 to July 2001.

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f igu r e 4 . 2 . China’s Share of Total World Cotton Imports, 1990–2009. Adapted from ICAC (2010a). Each year refers to a marketing year—that is, 2000 refers to the marketing year from August 2000 to July 2001.

jumped from approximately 2 percent to 43 percent across the same period (ICAC 2006, 2010a) (see Figure 4.2). China thus burst onto the scene as a major player in the global cotton trade. However, it also faced heightened domestic tensions over who would benefit from this newfound power. In order to secure its accession to the WTO, the Chinese state was compelled to give other concessions that made balancing the tensions in the cotton sector more difficult. Increased market access for textiles and clothing came at the cost of increasing market access for foreign agricultural products, including cotton (Alpermann 2010; Fang and Babcock 2003). Through its accession agreement, the Chinese state committed to ambitious liberalization targets for cotton and other agricultural commodities, as suggested most clearly by the resulting Tariff Rate Quota (TRQ) structure. Designed to encourage international trade, TRQs are based on a bifurcated tariff system in which imported goods up to a given quota are imported at a lower rate than goods above the quota. In effect, TRQs minimize the degree of protectionism within a predefined segment of a given domestic market. WTO members are required to establish TRQs at a tariff rate of 1 percent only for 3 percent to 5 percent of national consumption, calculated from a negotiated base period or starting year. China, however, agreed to TRQs of 1 percent for almost 20 percent of

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national consumption for some commodities including cotton (Alpermann 2010:50). Similarly, while WTO members are generally allowed to impose tariffs of up to 76 percent on goods outside the TRQ (i.e., above the specified quota), China agreed to a maximum tariff rate of 40 percent for nonTRQ goods (Colby 2002). Given skyrocketing demand for imported cotton, however, the Chinese state charged only a maximum of 1 percent on all imported cotton between 2001 and 2004 (Alpermann 2010:177). The Chinese state faced internal criticism on the grounds that it had traded the livelihoods of domestic cotton producers—who now had to compete with cheap, subsidized US cotton—for access to foreign textile and apparel markets (Alpermann 2010:177). Indeed, in the reforms associated with WTO accession, the government allowed a 40-percent drop in domestic procurement prices for cotton in order to align domestic prices with international price levels, despite calls among Chinese academics for farmer support (Alpermann 2010:55–56). For the Chinese state, its WTO accession agreement was in part an opportunity to push forward unpopular reforms by placing the blame for them on the external economic and political environment. This strategy would not, however, avoid resistance. Facing growing concerns about rural-urban inequalities, in 2005, China’s National Development and Reform Commission (NDRC), which sets trade policy, retooled the TRQ system, introducing a sliding tariff (ranging from 5 percent to 40 percent) designed to shield the domestic cotton market from cheap imports (Alpermann 2010:177). The NRDC also established the China National Cotton Reserves Company (CNCRC) in March 2003 to buy and maintain cotton reserves in order to manipulate supply and demand in a way favorable to both domestic cotton producers and the textile industry (Alpermann 2010:174). In short, China’s accession to the WTO and the ATC at once brought the dramatic ascendance of China to a dominant position in the cotton trade. However, this rapid growth in the apparel and textile sector would not erase the long-standing tensions within the historically strategic cotton-textileapparel sector. Continuing Power of US Producers, Growing Social Conflict Another implication of the WTO for the balance of power in the cotton trade was the consolidation of the US producers’ position as dominant cotton exporters and increasing resistance from those actors marginalized by the United States’ uneven project of market liberalism. The liberaliza-

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f igu r e 4 . 3 . Total World Cotton Exports, 1970–2009. Adapted from ICAC (2010a). Each year refers to a marketing year—that is, 2000 refers to the marketing year from August 2000 to July 2001.

tion of the textile and apparel sectors shifted demand for cotton even more decidedly to Asia and to China, significantly increasing the quantity of cotton traded transnationally (see Figure 4.3). The competition among exporters in this growing market was supposed to unfold in a liberalized environment. Through the 1995 Agreement on Agriculture (AoA) under the WTO, states had agreed to universal reductions in trade protection, farm subsidies, and government intervention in agriculture as part of the trade-off for inclusion of trade in services, foreign investment, and intellectual property rights (McMichael 2004). The AoA threatened to significantly undermine US cotton producers’ positions as major exporters (McMichael 2004). However, rather than forfeit their position in the global cotton trade, powerful farm groups, and particularly the National Cotton Council, successfully lobbied to keep the US government from implementing their AoA commitments.5 The United States retained cotton subsidies at the expense of the much larger farm populations in the global South who continued to face an artificially depressed international price for cotton. Thus, while US cotton consumption decreased with the phase-out of quotas, US cotton production and exports increased as US producers more squarely reoriented toward the export market (see Figure 4.4). The United States maintained about a 39-percent share of world cotton exports from 2001 to 2005 (ICAC 2006, 2010a; see Figure 4.5). In short, the end of the MFA and the United States’ failure to make good on its promises to liberalize agricultural trade under the WTO

f igu r e 4 . 4 . US Cotton Production, Consumption, and Exports, 1980–2009. Adapted from ICAC (2010a). Each year refers to a marketing year—that is, 2000 refers to the marketing year from August 2000 to July 2001.

f igu r e 4 .5 . US Share of Total World Cotton Exports, 1997–2009. Adapted from ICAC (2010a). Each year refers to a marketing year—that is, 2000 refers to the marketing year from August 2000 to July 2001.

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allowed US producers to maintain and even strengthen their export market share. However, US producers also faced growing challenges. While supporting farm incomes in the United States, these policies indirectly served to artificially lower the international price of cotton, thus discouraging international production and competition. As cotton production (and agricultural production more generally) was seen as a sector through which countries in the global South could actually benefit from the trade liberalization agenda, the US state’s continued subsidization of their farmers became a source of international rancor. While debate exists regarding the extent of their effect, the International Cotton Advisory Committee, an international commodity organization, concluded that in the absence of US subsidies, world cotton prices would have been 6 cents/pound higher in the marketing year 2000–2001 and 11 cents higher in 2001–2002, or approximately 10 percent and 26 percent higher than the actual averages of 57.2 cents and 41.8 cents/ pound (Baffes 2004).6 Moreover, some analysts estimate that the removal of US production and export subsidies would reduce US cotton production by 20 percent and US exports by 50 percent, which would have short-term implications for price and long-term implications for the geography of cotton production (Baffes 2004).7 Thus, in 2002, Brazil filed a complaint against the United States through the WTO’s Dispute Settlement Body, the same year that the US Congress passed the Farm Security and Rural Investment Act, known as the 2002 Farm Bill, which promised to increase subsidies for cotton and other agricultural commodities (Heinisch 2006). Brazil charged that US cotton subsidies violated WTO agreements and caused “significant price depression and price suppression” in the cotton market (WTO 2003a:N-14). Benin and Chad also signed on to the Brazil dispute as third parties, which entitled them to submit written communication supporting the complaint, including a study on the effect of falling prices on rural poverty (Heinisch 2006). This represented the first case at the WTO against domestic subsidies in a Western country, as well as the first time an African country had been involved in WTO litigation (Becker and Benson 2004). The following year, Benin, Burkina Faso, Chad, and Mali launched a widely publicized challenge to US cotton subsidies with the support of 13 other African countries, as well as transnational advocacy organizations such as Oxfam. They introduced the “Poverty Reduction: Sectoral Initiative in Favor of Cotton” to the WTO Trade Negotiations Committee (WTO 2003b). This initiative called for the phase-out of support measures for cotton pro-

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duction and export, as well as financial compensation for Least Developed Countries and West African cotton producers until this was achieved. Cotton came to be seen as a test of the legitimacy of the WTO system as a whole. Indeed, the dispute over cotton stalled WTO negotiations more generally, contributing to the collapse of negotiations at Cancun in 2003. In an unprecedented move in response to these growing tensions, cotton was pulled out of the broader agriculture negotiations to be treated in a special subcommittee (Heinisch 2006). The WTO General Council pledged in 2004 that the cotton subsidy issue would be addressed “ambitiously, expeditiously and specifically, within the agriculture negotiations” (WTO 2004: A-1). In March of the following year, the WTO ruled in favor of Brazil, calling for the United States to either remove its subsidies by July 2005 or face trade sanctions by Brazil. In response, the United States did remove its Step 2 program, which compensated exporters and domestic mill users for the higher price of US cotton, and made changes to its export credit guarantee programs, which took effect in 2006 (Schnepf 2009). The position of US producers was also threatened by a deepening fracture within the cotton-textile lobby in the United States. The National Cotton Council had long spoken as a unified voice for cotton producers, merchants, textile manufacturers, and other players in the cotton trade on national policy issues. However, as US-based merchants had built global sourcing and distribution networks in recent decades and European merchants had become major players in the US market, these now-transnational merchants saw their interests as less and less aligned with the other segments of the US cotton-textile industry. And nowhere were these tensions clearer than in the debate around cotton subsidies. Transnational merchants had become vocal opponents of the US subsidy programs (see also Winders 2009:157, 171). For example, the president of Dunavant, one of the three largest transnational merchants, had broadcast his concerns with the US farm programs on numerous occasions (see Brandon 2002; Cotton International 2007; Latzke 2005). As he expressed: I am also disappointed that a cotton producer potentially makes more money when prices are low, than when prices are high. There is nothing about that situation that makes any economic sense to me. I do not blame the West Africans, the Brazilians, and the Australians for raising hell about our farm program. (as cited in Latzke 2005)

As a conflict over the USDA warehouse program sparked further tensions in 2005, these fractures deepened (Laws 2006b; Roberts 2006; Robinson

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2007).8 In 2006, Dunavant formally submitted its resignation from the NCC. With this move, of the “Big 3” merchants—Cargill, Dunavant, and Louis Dreyfus/Allenberg— only Cargill remained a member of the NCC (Roberts 2006). The NCC faced the loss of powerful allies in their efforts to maintain domestic support for the cotton subsidy regime. Consolidation of Merchant Power Finally, the expansion of production and trade following the end of the MFA further solidified the role of transnational cotton merchants in the global market. Large merchants who were extending the transnational scope of their operations in the 1980s and 1990s were well positioned to take advantage of this boom in transnationally traded cotton. Small and midsized merchants were unable to survive in an environment populated by firms that were larger, had global supply and distribution networks, were diversified across a range of commodities, and had the credit and expertise to hedge on the futures market. An executive of one of the largest trading firms described the credit lines needed to survive in the cotton business as “frightening,” leading to considerable consolidation among merchants. Indeed, by 2007, sixteen trading enterprises came to dominate the transnational trade in cotton, each trading at least 200,000 metric tons of cotton per year. Of these, three were state-owned enterprises, one from China and two from Uzbekistan. Twelve were private and cooperative merchants, seven of which were based in the United States (Guitchounts 2008:15). While the cotton trade was not as concentrated as other commodity sectors, such as the grain trade, consolidation was increasing with the liberalization of trade and the privatization of STEs. While precise data on firm market share is difficult to obtain, some estimate that the ten largest companies handled more than two-thirds of the annual transnational cotton trade (Çalis¸kan 2010:61). Within this group of transnational merchants, or merchants operating across national borders, three tiers of merchants could be identified, on the basis of the relative global scope of their transnational operations. The first tier represented those firms that could be considered global merchants. These were the first-movers who had captured a competitive advantage in the 1980s and, by the early 2000s, had evolved into what the industry referred to as “the Big 3” cotton merchants: Louis Dreyfus/Allenberg, Cargill, and Dunavant. These firms’ operations were not only transnational but global. They operated across the entire global cotton trade, buying and selling cotton in most if not all cotton-producing and -consuming countries

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in the world. Each of these firms handled over 1 million metric tons of cotton a year, and together the Big 3 likely controlled around 45 percent of all transnationally traded cotton.9 The second tier of merchants were private firms that had been slower to expand their operations globally (Ecom; Paul Reinhart; Toyo Cotton; COPACO/DAGRIS/Geocoton; Weil Brothers Cotton) or firms that had entered the cotton business relatively recently (Olam International; Plexus Cotton). The third tier of merchants included state-owned enterprises and cooperatives, specifically the Uzbekistan STEs (Uzinterimpex; Uzmarkazimpex; Uzprommashimpeks), the Chinese STE (Chinatex), and the major US cotton cooperatives (Staple Cotton Cooperative Association; Calcot). These enterprises operated transnationally, but either the buying or selling end of their operations focused on one country. The US cooperatives traded US cotton to buyers around the world; Chinatex imported cotton from a range of countries into China (and sometimes exported Chinese cotton); and Uzbekistan exported Uzbek cotton to foreign buyers. Given their ownership structures, these enterprises were more constrained in their ability to expand their reach globally.10 While the Big 3 stood apart given the volumes of cotton they traded, their second and third tier competitors were attempting to catch up through mergers, acquisitions, and joint ventures. This competition proved significant both in the potential for other large firms to challenge the Big 3 and in the shift in the geography of merchant power that this could bring. While the biggest merchants have historically been based in the United States and Western Europe, new, increasingly key players were multicommodity merchants based in Asia, such as Olam International and Noble Cotton (part of the Noble Group).11 For example, Olam International, a Singaporean-based company, was established relatively late in 1989. Olam began with a regional focus, linking cotton producers in Central Asia and Africa with textile manufacturers in Asia and particularly China. In attempts to become global in scope, in 2007, Olam acquired Queensland Cotton (Australia) after a bidding war with Louis Dreyfus (Pearson 2007).12 The acquisition of Queensland Cotton, which itself had acquired Anderson-Clayton (United States) in 1997, expanded Olam’s operations to include major cotton-producing regions in Australia, the United States, and Brazil (Olam 2007:21). In 2007, Olam’s expansionary strategy intersected with the efforts of the state trading enterprise in China, Chinatex, to transform itself into a more diversified company involved in a range of activities, including textile and apparel manufacturing and brand development, in order to survive in a

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privatized and liberalized environment. Since 1996, reports suggested that Chinatex was investing in cotton farms in Australia to secure control over cotton supplies and was pursuing investments in fashion design firms in Europe, the United States, and Japan in order to capture the more profitable activities in the apparel and textile industry (Chinatex 2010; Chong 2003). Industry players report that, to expand its control over cotton sourcing, Chinatex approached at least one of the Big 3 merchants proposing a joint venture ( JV) but was unable to strike a deal as the firm was not willing to enter an agreement that would involve sharing decision-making power and profits with Chinatex. As one merchant explained: “A JV is a nightmare. Especially with someone as established as Chinatex.” Chinatex instead established a JV with Olam. For Olam, this was a strategic move to increase its competitiveness vis-à-vis the Big 3. Despite having to share decision-making with Chinatex, Olam increased its access to the Chinese import market. Chinatex guaranteed them a contract to supply 30 percent of its import volume (Olam 2007:21). Moreover, it provided Olam with a cotton supply and trading network in the domestic market, which transnational merchants were trying to access. As the example of Olam and Chinatex demonstrate, second and third tier firms were attempting to catch up to the Big 3 by expanding their operations to have a truly global scope. The New Competing Kings of Cotton Thus, with the ATC and China’s accession to the WTO, the competitive terrain in the cotton trade shaped up to be a battle of giants. The Chinese state and Chinese textile manufacturers became powerful players, wielding a 35-percent to 40-percent market share in cotton imports. At the same time, with its new export focus in the wake of the MFA, the US state and US cotton producers came to command nearly a 40-percent market share in cotton exports. Linking these powerful producers and consumers were a handful of increasingly consolidated cotton merchants, the largest of which together likely claimed a 45-percent market share in transnationally traded cotton (see Figure 4.6). The establishment of the WTO thus shifted the focus of contestation decidedly onto the rules of the game— onto struggles over institutional power in the cotton trade. Previously the US state, US cotton producers, and transnational merchants wielded enough power to largely extend their domestically negotiated rules for the cotton trade onto the transnational stage, albeit in a piecemeal way. However, as the anecdote at the beginning of

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f igu r e 4 . 6 . Approximate Structure of the Most Significant Cotton Trade Route, 2000– 2010. Adapted from Alpermann (2010); Çalis¸kan (2010); Guitchounts (2003, 2008); ICAC (2010a).

this chapter suggests, the Chinese state and Chinese textile manufacturers increasingly commanded enough market share to challenge these dominant actors and to roll out new rules of the game to reflect their preferences. In this context, a key question emerged: who would be able to claim the authority to make global rules for the cotton trade?

n e w pat t e r ns of con f l ic t ov er qua lit y cl assification The TBT Agreement and Emergence of a Redirection Strategy in China The struggle over institutional power would be shaped not only by the shifting balance of power in the cotton trade but also by a new supranational institutional infrastructure for standard-setting put in place through the Agreement on Technical Barriers to Trade (TBT) within the WTO. The GATT and the coercive pressures of structural adjustment programs had been integral in removing formal tariffs that served as barriers to trade. With these achievements, the United States and other Western states turned to tackle other potential obstacles to trade, including the mismatch of nationally focused technical standards that had developed in the postwar period. The goal was “to ensure that standards are genuinely useful, and not arbitrary or an excuse for protectionism,” as well as to create a mechanism to enforce the use of trade-facilitating standards and technical regulations (WTO 2010). This issue was first addressed through the 1979 Tokyo Round Standards Code, which was a side agreement to the Tokyo Round of GATT negotiations.13 During the Tokyo Round, the United States pushed not only to address nontariff barriers but also to establish dispute settlement mechanisms, which would allow states to resolve disputes under the auspices of the GATT (Chorev 2007:157). The Tokyo Round Standards Code, however, brought little progress in harmonizing disparate technical standards in part

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due to the limited number of GATT members (“contracting parties”) who subscribed to it and to weaknesses in the dispute resolution mechanism (Atik 1996–97:741). Thus, it was through the Uruguay Round negotiations to establish the WTO that technical standards would be squarely addressed. Unlike the Tokyo Round Standards code, the TBT Agreement was an integral part of the Agreement Establishing the World Trade Organization and, as such, was binding on all WTO member states (Wirth 1994:828). With its mandatory status, the TBT Agreement committed member states to three main objectives: (1) to avoid unnecessary obstacles to trade, (2) to harmonize standards, and (3) to make regulations transparent (Wilson 2003:710). The most clear-cut and well-defined of these objectives was the idea that standards must facilitate rather than hamper trade. Standards were not to be based on narrow national interests or policy objectives and were not to be “more trade-restrictive than necessary to fulfill a legitimate objective” (WTO 2011: Article 2.2). The process through which standards should be harmonized to achieve these trade-facilitating goals was left vaguer. The TBT Agreement stipulated, “Where technical regulations are required and relevant international standards exist or their completion is imminent, Members shall use them . . . as a basis for their technical regulations” (WTO 2011: Article 2.4). When issuing a new standard or regulation, member states were required to notify the WTO Secretariat in advance and allow a notice-and-comment period before the standard took effect (Wilson 2003). If a country adopted “international” standards, it was considered WTO compliant, whereas if their standards differed from pertinent “international” standards, they could be challenged through the WTO dispute settlement mechanism as upholding an unnecessary nontariff trade barrier and thus a violation of international trade law (Büthe and Mattli 2011:6). But, as political scientist Walter Mattli (2001b:330) asks, “what are international standards and who decides them?” The TBT Agreement provided a rather vague legal definition of “international.” In this context, the commitment to base national standards on “international” standards did not diminish political contestation over standards; rather, the TBT Agreement effectively redirected political contestation from a struggle over what standards should prevail to a struggle over who could define their standards as “international.” Indeed, it was precisely the struggle over what counted as an “international” standard that shaped the contestation between the Chinese state

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and the USDA in 2002 mentioned in the anecdote at the beginning of the chapter. The Chinese state introduced new standards for imported cotton as a part of a redirection strategy to challenge to the USDA’s instrument classification system and benchmark standards that were increasingly becoming the de facto global standards. This bid to set new cotton quality standards was not an isolated incident but rather part of the Chinese state’s broader and ambitious standards strategy. With its accession to the WTO, the Chinese state had become bound by the stipulations of the TBT Agreement to base national standards on “international” standards. Yet the Chinese state was not interested in simply “localizing international standards” but rather had its sights set on “the internationalization of national standards” (Suttmeier et al. 2006:15). This effort was motivated by a sense that the “‘relative gains’ from becoming the ‘workshop of the world’ are not to China’s liking” (Suttmeier et al. 2006:30), and that the state intended to use “the country’s increasing geopolitical influence to promote new sets of rules for international standardization,” particularly as the more traditional measures of protection for its economy would have to be sacrificed with WTO accession (Fomin et al. 2011:753). To this end, the Chinese state launched a long-term science and technology plan that emphasized zizhu chuangxin, or indigenous innovation, aimed in part at developing a more effective role in global standard-setting (Suttmeier et al. 2006). Through its challenge to cotton quality standards in particular, the Chinese state was questioning the “international” character of the US system given the institutional incongruities Chinese firms faced in using it. That is, for the Chinese state and Chinese firms, use of the US system assumed a particular set of social, material, and technological conditions that existed in the West. This is because, as science and technology scholars might put it, the US system was rooted in context-specific science and technology (see Hess 2007; Prasad 1999). The idea of context-specific science draws attention to the fact that scientific agendas are chosen, funded, and pursued in relation to potential applications in particular contexts (Kloppenburg 1988; see also Kleinman 2003). Scientific and technical knowledge is context-specific as it is developed in relation to particular mixes of labor, technology, and raw materials. As such, it is not universal knowledge but knowledge created in and for a particular context (Frickel and Moore 2006; Kloppenburg 1988). For example, the mechanized classification system was developed in the United States to enhance the competitiveness of the US textile industry in the global market. It was thus tailored to the needs and specificities of a largely integrated US cotton textile sector, which differed

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significantly from the specificities of their competitors in Asia. Since the 1970s, Western textile manufacturers and those in Asian countries had adopted different spinning technologies on the basis of their relative access to capital versus labor. Designing a quality measurement instrument to enhance the competitiveness of open-ended spinners in the United States was not the same as designing one with the preferences of ring-spinners in Asia in mind. Through the distinct ways that fibers were spun using these different technologies, they interacted differently with the material characteristics of cotton fibers. In the ring-spinning process, fibers were drawn together in parallel to be spun. This brought the full surface areas of the fibers’ lengths against each other, creating greater friction between the fibers, which resulted in greater yarn strength. Thus, for ring spinning, fiber length was critical to the yarn’s strength, as was its fineness, as fewer fibers could be used to make yarn of the same strength. By contrast, in open-end spinning, fibers were not drawn together in parallel and became highly tangled during the spinning process. The tangling effectively made the fibers shorter than they really were. As the benefits of fiber length to yarn strength were not maximized by open-end spinning, Western textile manufacturers tended to privilege fiber strength as the most important fiber characteristic contributing to the strength and weaving performance of their yarn (interview with fiber specialist; Jacobson and Smith 2001). As a result, textile manufacturers using different spinning technologies privileged different fiber characteristics, primarily fiber strength vs. fiber length, and thus had different interests in what fiber characteristics should be measured and included in the definition of quality (Estur 2004b; Perkins et al. 1984) (see Figure 4.7). The US instrument classification system was largely designed around the specificities of the US manufacturers’ open-end spinning. Surveys conducted with US textile manufacturers in the 1960s and the 1980s resulted in the inclusion of five key fiber characteristics in the HVI system: strength, length, length uniformity, micronaire, and color (USDA 1984:48–49). As the US instrument classification system demonstrates, the contextspecific nature of research matters because it creates an uneven terrain of science and technology from which to make decisions over standards. Context-specific research had not been conducted to reflect the specific constellations of labor, technology, and raw materials drawn on by textile manufacturers using ring-spinning technology in Asia. For example, while the US instrument classification system did measure length, US textile manufacturers had not demanded more detailed information about fiber length,

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f igu r e 4 .7. Spinning Technology, Interest in Quality Standards, and Relationship to HVI System and Universal Standards.

such as a measurement of a sample’s short fiber content, or how many fibers in a sample are shorter than a given threshold. For manufacturers using ring spinning, this additional information about the variability in fiber length within a bale was useful for predicting yarn strength and fineness. Moreover, the US instrument classification system had been designed before consolidation in the retailing sector created increasingly stringent quality specifications for apparel and textile products. As a result, it did not measure other fiber characteristics that affected yarn and textile quality, such as neps and maturity. Textile manufacturers using ring spinning were increasingly interested in measuring these additional fiber characteristics not included in the US instrument classification system in order to meet retailers’ quality demands. Moreover, even faster ring-spinning technology, air vortex spinning, was under development, which would heighten quality demands further. Air vortex spinning was capable of very high production speeds but was also very sensitive to variations in fiber length, as well as trash content (Perkins et al. 1984; Robinson 2001; Walfar 2012). For textile manufacturers such as those in China, this legacy of contextspecific fiber science had critical implications for their competitiveness. The US instrument classification system was a globalized Western localism. It was a system developed in the United States that was simply being extended across the globe despite the fact that it was not necessarily universally applicable. As such, it created institutional incongruities with the social, mate-

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rial, and technological conditions in China. Through the introduction of its new national standards, the Chinese state launched a redirection strategy to make a competing claim to the authority to set “international” standards in order to gain control over a key governance task: the definition of quality. Despite the emergence of the Chinese state as an influential player in the trade, the USDA was able to draw on the, albeit vague, stipulations established through the TBT Agreement to challenge the Chinese standards in two ways. First, the USDA argued that the Chinese standards were not “international” in character as they had not been discussed in and approved by appropriate international standardizing bodies, such as the International Textile Manufacturers Federation’s (ITMF) Committee on Cotton Testing Methods (Bel 2005; Laws 2002). The TBT Agreement did not explicitly delegate authority to any given body to set international standards. However, it did encourage member states to participate in international standardizing bodies and thus implicitly delegated regulatory authority to such bodies. These bodies included most prominently the International Organization for Standardization (ISO) and the International Electrochemical Commission (IEC), but also more specialized bodies. The standards created in such organizations were not legally binding, but they gained their legal status as “international” standards as they were increasingly referenced in, or incorporated into, government regulations (Büthe and Mattli 2011:137; see also Busch and Bain 2004). As the Chinese standards had not been reviewed in any such forum, the USDA argued that the standards could not be imposed on the rest of the cotton trade. The US industry argued that the Chinese standards could be used as protectionist trade barriers that would allow the Chinese state to control the flow of cotton imports into the country and thus balance growth in the textile industry with rural development (Laws 2002). Second, after testing the Chinese measurement instruments for accuracy and reliability, the USDA charged that the measurement instrument and test methods did not provide reliable results. That is, they challenged the scientific legitimacy of the standards. In this challenge, the USDA was drawing on the discourse of scientism that had effectively gained disciplinary teeth through the Dispute Settlement Understanding at the WTO. Scientism is “the belief that policy is best dictated by scientific reasoning, since science is presumed to transcend human values and interests and to provide answers upon which all can agree” (Kinchy et al. 2008:156). The TBT Agreement itself did not require that “international” standards be based on scientific and technical expertise.14 However, within this vague

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legal environment, the scientization of decision-making— or the recourse to scientific rationality as the basis for decisions—was “virtually inescapable” given the nature of standardizing organizations and the dispute settlement process within the TBT (Wirth 1994:829). Major standardizing organizations like the ISO depended on “technical committees” to review competing standards. Thus, it was largely scientific and technical experts that played the key role in evaluating relevant standards in the process of determining “international” standards. Moreover, under the TBT Agreement, if a member state adopted stricter regulations than other members, another member state could demand that they provide proof of risks that would arise from less strict regulation. Such a risk assessment must consider “inter alia: available scientific and technical information, related processing technology or intended end-uses of products” (WTO 2011:Article 2.2). Ultimately, disputes considered under the Dispute Settlement Body would be reviewed by a panel of technical experts drawing on scientific and technical knowledge (Wirth 1994). Thus, by demonstrating their ability to scientifically discredit the Chinese standards, the USDA was able to signal that if the Chinese state continued to pursue these standards, the USDA would be likely to prevail if it came to a formal dispute at the WTO. As a result of these challenges, the Chinese state agreed to postpone the implementation of its standards. This dispute over the US instrument classification system was not just a struggle over the definition of quality. It was also a struggle over who would play the critical coordinating function of creating benchmark standards for new and existing classification instruments. In its mechanized classification system that had become the de facto global standard, the USDA played this coordinating role of making the benchmark standards, which served as the authoritative representation of the standards. Many in the cotton trade, however, were skeptical of the United States’ International Calibration Cotton Standards as the benchmark standards for a global mechanized classification system. The actor with the most bargaining power to challenge the USDA’s control over benchmark standards, however, was the Chinese state. This fact was not lost on officials at the USDA, who recognized that, as the largest producer and consumer of cotton, the Chinese state would desire control of this coordinating function. As a USDA official explained: They [the Chinese state] don’t want to trust our standards. I don’t blame them, I don’t know if I would trust China sending us [benchmark standards]. . . . They would want to be independent. . . . In the US, we’d feel the same.

The Chinese state had the potential to make a bid to control this key coordinating function, given its position as the world’s largest importer and the

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United States’ dependence on the Chinese market. In short, this was also a struggle over the geographical site of institutional power in the global economy. Just as the United States came to challenge British control of this coordinating function at the turn of the twentieth century, so too would China come to challenge US control. Related to who would conduct these critical coordinating functions for global quality standards was the question of who would oversee the making of benchmark standards. That is, what would be the grounds on which an actor could claim the legitimacy to play this coordinating role? The USDA had constructed the transnational legitimacy of its coordinating authority in the past through the Universal Standards Agreement (see chapter 2). Trade associations that represented foreign buyers of US cotton were given an advisory role in the creation and oversight of the standards in return for using them for the purchase and sale of all US cotton. The Universal Standards Agreement, however, was limited in its utility for addressing the current concerns. Neither the Chinese textile industry nor other cotton-producing countries were signatories to the Universal Standards Agreement. The most obvious limitation derived from the fact that the Universal Standards Agreement was inaptly named; it was not actually universal in that it applied to cotton grown anywhere in the world. It was an agreement regarding standards for US cotton. Its legitimacy derived from representation of all buyers and sellers of US cotton and from the US state’s control over cotton grown within its territory. In its current state, the Universal Standards Agreement had not been developed to apply to cotton grown elsewhere in the world, nor did it give representation to other cotton-producing countries. For cotton-producing countries, then, adopting the Universal Standards meant submitting to the power of an institution in which it had no representation or decision-making power. Moreover, given the much more complex scientific and technological basis of the new instrument classification, oversight through the Universal Standards Agreement would be meaningful only for those participants with significant knowledge of fiber science and technology. For their part, Chinese textile manufacturers would be welcomed as a new signatory to the Universal Standards Agreement. For the Chinese state, however, this was not necessarily an effective way to achieve their interests. While foreign signatories played a role, the creation and oversight of the USDA’s Universal Standards was largely dominated by US interests, given the more domestic focus of the US cotton sector since the 1930s. For example, the voting structure for the Universal Standards had become, in the words of a USDA official, “heavily biased towards the U.S.” Of 36 total votes, 24

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were allocated to producers, ginners, merchants, and textile manufacturers in the United States, 6 were allocated to foreign merchant associations (of which many US merchants were members), and 6 were allocated to foreign textile manufacturer associations (Knowlton n.d.). In short, the Universal Standards were governed by a transnational institutional structure, but the representation mechanisms within that institutional structure were biased toward a national membership. It seemed unlikely that the current membership of the Agreement would change the voting structure sufficiently to give the Chinese state the power it wanted over quality standards. For the Chinese state and Chinese textile manufacturers, if they signed on to the Universal Standards Agreement, they would be submitting themselves to the authority of the USDA and the US industry. A Protection Strategy Challenging the US Classification System The Chinese state’s redirection strategy was not the only challenge to the international system of quality standards governance. As textile manufacturers around the world became increasingly interested in instrument classification of cotton to facilitate scientific management of spinning processes, a range of cotton-producing countries also became interested in shifting to instrument measurements of cotton. In the short run, instrument measurements were seen as potentially giving US producers yet another advantage in the global market, in addition to their government subsidies. In the long run, many saw a single, global instrument classification system as important in the struggle against synthetics for fiber market share. While cotton enjoyed a world fiber market share of about 68 percent to synthetic fibers’ 22 percent in 1960, its world fiber market share had fallen to about 40 percent to synthetic fibers’ 58 percent by 2003 (ICAC 2010a). The broader adoption of instrument classification had been discussed on and off since the late 1980s within the International Cotton Advisory Committee (ICAC), an international commodity organization bringing together state and private actors in the cotton trade. In the late 1990s and early 2000s, a textile manufacturer based in Brazil, who was later referred to as a “visionary,” pushed to get others on board with the idea of a single, global instrument classification system. In response, the ICAC staff began to consult fiber measurement experts around the world to initiate discussions regarding the feasibility of a global classification system. These efforts would form the seeds of a broader protection strategy among more marginalized actors.

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Similar to their concern regarding the new Chinese standards, the US industry was wary of these discussions. One USDA representative explained: When the ICAC started talking about this, we were worried, because they wanted to start a new international standard, start from scratch. . . . We had always thought of [our] standards as the international standards.

In this context, the US industry and the USDA again drew on the discourse of scientism underlying the TBT Agreement to support the idea that a global classification system should be based on the US system. As Drori et al. note, actors who accept and/or promote the discourse of scientism see “scientific knowledge and laws as universal (that is, without boundaries), not affected by particularistic interests (for example, national security), and therefore inherently shared (that is, transferable from one context to another)” (2003:79). From the perspective of scientism under the TBT Agreement, adoption of the USDA classification system as the global system made sense. If scientific and technical knowledge was universal and could be applied anywhere, it did not matter if the instruments for measuring cotton had been developed in the United States or Uzbekistan. The point was to determine the precise characteristics of all cotton, so the same measurement instrument could be used in the United States, China, or Burkina Faso. If science is separate from particularistic interests, the US instrument classification system itself could be understood as value-neutral and apolitical. This system did not provide value judgments regarding whether cotton from one place was better than another. It simply provided descriptions of cotton that could be compared. If there was demand for more precise measurements of cotton fibers, then the best available measurement technology should be standardized globally to quickly and efficiently facilitate trade. In this case, the USDA had the best developed instrument measurement system and standards with proven reliability that had the potential to be transferred to other countries. Demonstrating this view, a US cotton producer and former chairman of the National Cotton Council insisted that “as we move to adopt instrumentation classing systems, it would be wise if other countries learn from the U.S. experience” (as cited in Laws 2005a). As discussions proceeded, however, it became clear that, while many cotton-producing countries at the ICAC were interested in adopting instrument measurement, they understood the US classification system and benchmark standards as representing not “neutral” and “universal” science but rather context-specific science, much as the Chinese state did. That is,

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they saw the system as reflecting the specific mix of labor, technology, and raw materials in the US cotton production sector, which, if adopted, would create institutional incongruities in their sectors that were characterized by much different social, material, and technological conditions. Cotton-producing countries’ first concern mirrored that of the Chinese state regarding the narrow range of fiber characteristics included in the US instrument classification system. Cotton-producing countries, and particularly representatives from the Indian and African industries, argued that, if additional quality characteristics were added, cotton from a range of countries in the global South would receive price premiums relative to US cotton. They argued that cotton produced in many countries where cotton was picked by hand had superior quality characteristics compared with US cotton that was machine-picked. Yet, the US system and standards did not measure additional fiber characteristics, such as trash, neps, and short fiber content, that proved the superiority of hand-picked cotton (CSITC Task Force 2007b:4).15 Cotton producers that harvested with machine pickers picked up more trash along with their cotton compared with producers that picked their cotton by hand (Baker and Griffin 1984:401). Trash affected processing and yarn and fabric quality. Because machine-picked cotton had more trash, it needed to be cleaned more, which created more neps, or tangled knots of fibers.16 Neps were a problem because they affected spinning performance, yarn appearance, and uniformity of dyeing (Baker and Griffin 1984:434–35). Knots of fibers did not absorb dye well and, as a result, neps appeared as white flecks in the fabric of textile and apparel products (Perkins et al. 1984; interview with fiber specialist). Machine-picking, more cleaning, and faster ginning also tended to break cotton fibers, which decreased fiber length and created a higher short fiber content, which led to weaker yarn in ring spinning (Baker and Griffin 1984:434).17 There was a particular difference in short fiber content between cotton that was processed with the faster sawgin, as in the United States, versus that processed with the slower roller-gin, as in much of India. As a result, cotton producers had significantly different interests in quality standards, depending on how they picked and ginned their cotton (see Figure 4.8). Which characteristics of cotton were included in the definition of quality had implications for whose cotton would be valued more highly on the market. As a representative of the Indian cotton industry commented: “It is also a question of what are we agreeing to standardize.” If trash, neps, and short fiber content were included in the definition of quality, producers that

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f igu r e 4 . 8 . Cotton Picking Technology, Quality Characteristics, and Relationship to HVI System and Universal Standards.

hand-picked their cotton would receive a price premium on the market visà-vis those who used machine pickers. Indeed, under the manual classification system, hand-picked cotton from Francophone West African countries commanded about a 9-percent quality premium above the average price of other cottons in the same quality category (the Cotlook A index), in part for a reputation for low nep counts and low short fiber content (Larsen 2003:28). A representative from the ICAC noted that many countries in the global South had the perception that the instruments had been developed by the United States for US cotton and were thus biased to the characteristics of US cotton: “There is suspicion, a perception that, because the United States has developed all the tests, if they had an interest in developing a nep-o-meter, they would have.” As a result, many countries interested in adopting instrument classification were hoping to use the ICAC as a forum to develop a truly “international” system that would be more representative of the interests of diverse actors in the global cotton industry. In addition to the narrow range of measurements that were used to

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define quality, cotton-producing countries raised a second concern: even those fiber characteristics that were measured by the US instrument classification system were defined in a way that was biased toward US cotton. This was again due to the context-specific nature of US fiber science and technology. For example, the African industries expressed concerns regarding the legitimacy of USDA color grades. The US color grades were developed to distinguish color differences among US cotton growths. However, different environmental conditions, such as climate and soils, affected the color of cotton. The USDA color standards classify creamy or yellow cotton as lower quality than whiter cottons. For US cotton, this creaminess indicates microbial deterioration of the fibers that could affect dyeing or finishing processes. However, West African cotton is creamier in color than the whiter US cottons based on environmental conditions of production, not microbial deterioration. The creamier color of West African cotton does not affect dyeing and finishing (interview with fiber specialist). Yet, on the basis of the US color standards, West African cotton would be classified as lower quality and discounted on the market. Finally, a range of state and private representatives, particularly from countries in Africa, were reluctant to adopt the US instrument classification system given the institutional incongruities created by its capital intensity (CSITC Task Force 2006a:10). This reflected a long-held concern of development economists and dependency theorists. Because much research and development had been done in the West, the resulting technology reflected the specific mix of labor, technology, and raw materials, or the relative factor endowments, of Western countries, which generally meant an increasingly capital-intensive environment. Development economists and dependency theorists considered this to be inappropriate technology for countries in the global South that were capital scarce and labor rich (see Cooper 1972). Indeed, from the perspective of many in the African cotton industries, the US instrument classification system had been developed in conjunction with the US cotton industry—that is, in an industrialized country where the cost of labor was high and the volume of cotton grown was enormous. Given these circumstances, it was appropriate for the United States to adopt a highly mechanized, capital-intensive measurement system that could rapidly measure large volumes of cotton. The cost of measurement in the United States was $1.85 per sample of cotton, and US cotton producers could afford to pay for these costs as they competed on the basis of economies of scale and government subsidies. However, for capital-scarce countries in Africa that produced much smaller volumes of cotton, industry analysts suggested

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that the “costs would be relatively high” to implement the instrument classification system (Townsend 2005:2). While countries producing smaller volumes of cotton would not need the same number of measurement instruments as the United States (around 300), the cost of a single machine was about $215,000USD, and the yearly costs of operating and maintaining each instrument were estimated at $113,000USD for developing countries (CSITC Task Force 2008). A representative of the African Cotton Association (ACA) insisted in an interview that the cost of purchasing the measurement instruments, maintaining constant temperature and humidity in labs, and training people to both operate and repair the instruments would put the system out of reach for most African countries. Others raised concerns regarding the technological treadmill induced by mechanizing fiber measurement and classification. A representative from Zimbabwe, for example, complained during an ICAC conference that the HVI 900 model they purchased was considered outdated and needed to be replaced by a 1000 model: “we can’t just keep chasing Uster’s development cycle, the cost is prohibitive.” (Uster was the most prominent instrument manufacturer selling HVI machines.) This reinforces dependency scholars’ concerns that, because Western firms maintained control over the production of knowledge and technology, countries in the global South developed technological dependence on the West (Cardoso and Faletto 1979; Smith 1993). In this context, representatives from African countries saw the proposed imposition of the HVI system as illegitimate, unless efforts were made to reduce the costs of the system. In sum, both textile manufacturers in Asia and cotton-producing countries around the world raised concerns about seeing the US instrument classification system through the discourse of scientism. From this view, the US system would be the obvious choice for a global instrument classification system. However, this view ignored the implications of the legacy of contextspecific science and thus masked and, indeed, naturalized an unequal playing field. For cotton producers in West African countries, this legacy laid bare “why science works better or more often for some groups than for others” despite its supposed universality (Frickel and Moore 2006:8). These concerns led cotton-producing countries to pursue a protection strategy through the ICAC. In 2003, member states of the ICAC voted to establish an “Expert Panel on Instrument Testing of Cotton” to explore the possibility of an international agreement on instrument-based classification that would better represent the interests of cotton-producing countries around the globe (ICAC 2003c).

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n e w pat t e r ns of con f l ic t ov e r dispute set tlement The WTO and China’s Redirection Strategy for Private Arbitral Authority The WTO also recast the struggle over dispute settlement in the cotton trade. China’s accession agreement to the WTO created the conditions for its rapid ascendance into a position of power, creating a powerful new client with whom transnational merchants would have to bargain over dispute settlement. At the same time, however, the accession agreement put new limits on the legitimate role of the state in the economy, particularly by weakening one of the Chinese state’s key levers of influence in the cotton sector: state ownership and control of cotton marketing. This would not eliminate the role of the Chinese state in shaping the terms of dispute settlement, but it would create new institutional incongruities. The Chinese state would need to develop new capacities to steer and guide the sector at a distance. Historically, the Chinese state had strictly controlled cotton production, marketing, and trade, and particularly cotton imports and exports. The China National Textiles Import and Export Corporation (Chinatex) was the sole agency with the authority to import and export cotton.18 Established in 1951, Chinatex, like other state trading enterprises in China, served as a channel to the outside world in an otherwise closed economy. Reflecting the broader goals of their centrally planned economy, Chinatex’s role was to import and export cotton and wool to meet the needs of state-owned textile factories and/or to dispose of domestically produced surpluses (Alpermann 2010). As such, control of imports and exports served as one tool through which the Chinese state could manage competing demands within its cotton and textile sectors. For example, the Chinese state used this authority, as well as other policy tools like price floors and export subsidies, to market uncompetitive cotton from Xinjiang (Fang and Babcock 2003). The ability to control imports and exports represented “a major lever to macro-manage the whole domestic cotton and textile sector” (Alpermann 2010:174). However, through its accession agreement to the WTO, the Chinese state was compelled to open up cotton import and export trading to private firms. With this commitment, the Chinese state significantly weakened this lever of influence over the cotton-textile sector. Chinatex remained a state trading enterprise but had to make room for private firms, and particularly a growing group of private and foreign-invested textile manufacturers, to import cotton.19 The textile sector itself was undergoing a transformation

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in ownership patterns in this period. In 2000, twenty percent of textile firms were state-owned or state-controlled (i.e., partially privatized); by 2005, this fell to just 4 percent. With a shift from state to private ownership came an influx of new textile manufacturers. The number of cotton textile manufacturers tripled, from 2,692 firms in 2000 to 7,632 firms in 2005 and 10,098 in 2007 (Alpermann 2010:164).20 Thus, rather than a single state trading enterprise buying on behalf of both state-owned and private textile industries, a vast array of private textile manufacturers and private trading agencies were now in the importing game.21 Some of these spinning firms were large, indeed, the largest in the world with vertically integrated textile manufacturing operations that increasingly had transnational reach (Appelbaum 2008). Many others, however, were small firms with no experience importing cotton or using transnational contracts, and no experience with or access to price risk management tools, which were underdeveloped in China at this time. This shift in what was considered the legitimate role of the state in managing the cotton textile sector created new obstacles for both transnational merchants and the Chinese state in the contest to influence transnational dispute settlement. For transnational merchants, dealing with an array of smaller textile manufacturers maximized their bargaining power, but it also created the same problems that merchants had faced in other new markets abroad. That is, their relatively small-scale clients had difficulty managing price volatility (see chapter 3). As a result, they were more likely to default on contracts, and state courts in China would not necessarily uphold private arbitral decisions made in the LCA, the transnational merchant–dominated trade association and arbitral body. Industry players reported that sanctity of contract had not presented a problem when merchants were dealing directly with the STE, Chinatex. However, the increasing number of small players in the rapidly growing Chinese market meant that merchants had a lot to lose if price volatility brought widespread contract defaults. For example, when prices dropped from 84 cents in October 2003 to just 42 cents in August 2004 (Laws 2006a), many Chinese spinning firms defaulted on their contracts as they could not absorb the high prices and remain competitive (Latzke 2005). This resulted in significant losses, as one transnational merchant described: We had a really bad experience in China. . . . We had sold a lot of cotton on pretty good terms, high prices. But then the market dropped and prices fell. . . . And the Chinese mills started defaulting. . . . This was a huge hit.

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The problems associated with contract defaults in the Chinese market were intensified given the different legal norms that operated in China. While Western ideas of contract law privileged freedom of contract, in China, state courts and legal norms remained highly embedded in guanxi, or networks of personal relations. For example, one transnational merchant reported that he took an arbitral award to a Chinese court to have it enforced when the spinning firm refused to pay. The judge decided not to enforce the award so as not to bankrupt the offending spinning firm and leave hundreds of community members jobless as a result. One Big 3 merchant explains: If you go to a court in China, forget it. We’ll take people to court to set a precedent, to show people what happens when you walk out of a contract. But we have no chance of winning.

As the vice-president of the National Cotton Council expressed at a government hearing on US-China economic relations: We currently do not have a lot of faith in the Chinese dispute settlement system. We believe that in order to quickly improve these issues, China should look to internationally recognized bodies that have developed terms of trade over an extended period of time and use their experience. These organizations, such as the [Liverpool] Cotton Association, could help China revise its outdated and one sided purchase contracts and help reform rules governing the settlement of contractual disputes. (Weil 2006)

Transnational merchants saw the adoption of the LCA rules for dispute settlement as the way forward. At the same time, the LCA’s private enforcement mechanisms had limited efficacy in the Chinese market. As one transnational merchant explained, blacklists served as a sufficient deterrent for larger, vertically integrated textile manufacturers supplying major Western retailers who were careful to avoid blacklists. However, in the diverse Chinese market, the LCA blacklist also had significant limitations as a range of smaller merchants who operated in China did not respect their blacklists or boycotts. Thus, when the LCA put smaller Chinese textile manufacturers on their blacklist, those firms could still buy cotton from merchants who were not members of the LCA, undermining the blacklist’s efficacy. As a merchant in the LCA explained: “You can put mills on a blacklist, but this just creates a niche market for Hong Kong and domestic merchants who buy from us and make a profit. They are happy to see us blacklist someone.” Thus, transnational merchants’ private enforcement mechanisms were limited because many merchants in the cotton trade did not accept the authority of the LCA as legitimate. The difficulties they were facing in the Chinese market thus in-

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tensified merchants’ interest in harmonizing rules for dispute settlement such that they would be enforceable in China. Undermining Chinatex’s control over imports and exports also created new obstacles for the Chinese state. Global competitiveness was the name of the game in the textile sector. Historically, Chinatex had played a key role in ensuring competitiveness, in part through its centralized bargaining power. As a single-desk buyer/seller, Chinatex could wield considerable influence over contract terms and dispute settlement arrangements in their dealings with transnational merchants and could ensure a reputation for contract sanctity. With its accession to the WTO, however, “one of the crucial old levers of state control over the economy, namely ownership, had been lost in the course of economic transformation” (Alpermann 2010:165). As the Chinese state lost its direct control over ensuring contract sanctity and competitive contract terms, it would need to develop new capacities to safeguard this competitive edge. Contract sanctity was critical to the competitiveness of private textile manufacturers due to the nature of cotton sales transactions. Much cotton is sold “on call,” meaning all of the contract specifications are set except for the price (ITC 2009–10). The price of the cotton is based on premiums and discounts (“on” or “off”) in relation to the futures price in a specified month. In an “on call” transaction, the base price of cotton is not fixed until the buyer advises the seller to fix the price.22 In other words, buyers can watch price fluctuations and “call” the best price. Without price risk management tools, textile manufacturers needed a good reputation for reliable payment and contract sanctity so that merchants would offer them on-call pricing. If spinning firms could not use on-call pricing, they risked paying more for cotton if prices increased. A service provider to merchants explained to me that the consequences Chinese manufacturers faced for contract defaults became clear in the early 2000s when the price of cotton spiked. Merchants were wary of many Chinese textile manufacturers and of Chinese arbitration and court enforcement. As such, they were concerned that if the price fell again, Chinese textile manufacturers would default on their contracts. As a result, many merchants refused to offer Chinese textile manufacturers on-call pricing, and, as a result, Chinese yarn became more expensive than yarns in competitor countries like Indonesia as Chinese textile manufacturers were forced to buy their cotton at higher prices. Chinese textile manufacturers’ global competitiveness was thus reliant on a reputation for contract sanctity. The Chinese state’s interest in ensuring a national reputation for contract sanctity, however, did not mean that it would simply accept transnational merchants’ contract rules and arbitral body, the LCA. Far from unrivaled

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in their claim to dispute settlement authority for the global cotton trade, transnational merchants faced a formidable bargaining foe. The Chinese state wanted contract rules that would sharpen the competitiveness of these sectors, and this meant challenging rather than accepting the rules of the transnational merchants’ association. Like many industry players around the world, the Chinese state considered the LCA rules for dispute settlement to be merchant biased as they were developed by, and in the interests of, transnational merchants. As a major cotton news outlet explained, “While [LCA] never was intended to be a ‘merchants’ organization,’ that’s the perception that has grown over the years” (Cotton International 2010a). Indeed, when I questioned one of the LCA’s arbitrators about this perception, he responded, “It’s because they are trader biased!” In short, the merchants’ association and arbitral body were viewed as a globalized Western localism, or as a set of rules for dispute settlement that were developed to benefit Western firms, yet were being cast onto the global stage. Thus, while the Chinese state and transnational merchants saw the benefits of cooperation for enforceable contract rules, each side aimed to claim their own authority over dispute settlement. As in the conflict between Liverpool merchants, US merchants, and the US state in the early 1900s, whose rules mattered not only for who would settle disputes on the basis of what rules but also for who would oversee these rules in the future and would make decisions regarding how rules should change and be interpreted. Protection Strategies against Transnational Merchants’ Dispute Settlement Authority Protection strategies against transnational merchants’ dispute settlement authority also emerged from some national and regional trade associations representing textile manufacturers and local/regional merchants in other parts of the world at this time (see Table 4.1). These players also considered the LCA dispute settlement mechanisms to be a globalized Western localism, developed by, and in the interests of, transnational merchants. And these rules, if adopted, would create disadvantageous institutional incongruities given the different social, cultural, and legal histories in their countries. Indeed, textile manufacturers and domestic merchants in many other countries faced a similar issue as in China: the adoption of the LCA rules was being proposed in the wake of the privatization of state trading enterprises. In the newly privatized environment, textile manufacturers, domes-

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t a b l e 4 . 1 . Cotton Trade Associations 2009. Rules of these associations are estimated to govern contracts for at least 90% of transnational traded cotton. These associations are members of the Committee for International Cooperation between Cotton Associations (CICCA). Adapted from ICAC (1996); CICCA (2009). Association

Country

Alexandria Cotton Exporters Association (1932)

Egypt

American Cotton Shippers Association (1924)

United States

Association Cotonnière Africaine (2002)

Regional

Association Cotonnière de Belgique (1899)

Belgium

Association Française Cotonnière (1895-estimate)

France

Associazione Cotoniera Italiana (1883)

Italy

Australian Cotton Shippers Association (1981)

Australia

Bolsa de Mercadorias & Futuros (1917)

Brazil

Bremer Baumwollbörse (1872)

Germany

Centro Algodonero Nacional (1887)

Spain

China Cotton Association (2003)

China

Cotton Association of India (1922)

India

Gdynia Cotton Association (1938)

Poland

Izmir Mercantile Exchange (1891)

Turkey

Japan Cotton Traders Association (1947)

Japan

The Karachi Cotton Association (1933)

Pakistan

The Liverpool Cotton Association (1882)

United Kingdom

tic merchants, and cotton producers in these countries were inexperienced and faced a cadre of powerful transnational merchants who wanted to impose their rules and arbitral procedures (see chapter 3). Moreover, many textile manufacturers also considered LCA procedures for arbitrating contract disputes to be biased. For example, the LCA rules, like the rules of European cotton associations, specified a practice called invoicing back that tried to resolve disputes by returning transacting parties to the same situation they would be in if the contract had been fulfilled normally. In both the LCA rules and those of the continental European trade associations, if a merchant did not deliver cotton to a textile manufacturer as specified in a contract, the merchant would have to repay any money that the textile manufacturer had already

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paid for the shipment, plus the difference between the price stated in the contract and the spot market price at the time of default, which would allow the textile manufacturer to purchase cotton to replace that which was not delivered (ICA 2009a; ECC 2008). The LCA rules on invoicing back, however, diverged from the rules of the European trade associations in key respects. First, the LCA rules did not allow aggrieved parties to claim additional damages related to a contract default. An LCA official described: “LCA rules don’t address consequential costs or losses. Like if the cotton doesn’t arrive, what additional costs this creates for spinners.” Losses or costs incurred as a result of the contract nonperformance could not be claimed, unless the parties added specific additional contract terms that deemed specific consequential costs recoverable (ICA 2009a: rule 226; see by contrast ECC 2008: rule 098). This narrower approach taken in the LCA rules was related to its procedures for settling disputes. The LCA arbitral body did not attribute blame for breach of contract, in contrast to the continental European trade associations that linked fault and responsibility for damages with breach of contract (ICA 2009a: rule 226). As a result, under LCA rules, merchants could at times be the beneficiary of damages even if they were the party that had not followed through with the contract. For example, in an extreme case, if no consequential costs could be claimed and the spot market price was lower than the contract price at the time of default, textile manufacturers could be forced to pay merchants the price difference, even if it was the merchant who had not delivered on the contract. An LCA official explained to me that the high court in England had pointed to the biased nature of these rules. The judge in the case encouraged them to shift to a system of attributing blame, but the LCA was reluctant to do so. Ultimately, the judge conceded that, as a private trade association, they could have any rules they wanted, but that people should know the risks of these rules when they enter into them. The LCA’s network of arbitrators was also perceived as unrepresentative of the global cotton trade. The majority of arbitrators officially recognized by the LCA were US and British merchants and specialized arbitration firms. Indian textile manufacturers, for example, argued that their interests would be better met if arbitral proceedings occurred in India and if domestic arbitrators were used (Economic Times 2003). Not only was there a concern about the Western bias that these arbitrators would bring to the process, but also it was almost prohibitively expensive for actors in some countries in the global South to hire a Western arbitrator. The LCA had what was considered an adversarial arbitration system, or a “hired gun” system. Each party in the dispute would appoint and pay for an arbi-

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trator to serve on the arbitration panel. Thus the dispute would be settled by a panel of two arbitrators, and, like American-style litigation, the end result was significantly influenced by who could appoint and compensate the best arbitrator. According to the LCA bylaws, arbitrators could charge between 75 and 150 GBP per hour (approx. $150–$300USD) (ICA 2009a). As well, LCA arbitration fees were higher for nonmembers, and some small importers could not afford to be a member. For example, many smaller Indian textile manufacturers, who might import only 10 percent of the cotton they consumed, did not consider LCA membership cost-effective. However, if they did have a dispute with a transnational merchant, they would have to pay the high nonmember arbitration fees (Business Line 2004; Economic Times 2003; Gurumurthy 2001). Industry players in countries in the global South felt this system put them at a considerable disadvantage in disputes with Western transnational merchants. In addition to seeing the LCA as biased toward transnational merchants, textile manufacturers and regional merchants in other countries had their own institutions for dispute settlement. The continental European trade associations and cotton exchanges, for example, had developed their own contract rules and arbitral bodies in the late 1800s and early 1900s to govern cotton imports.23 The European textile manufacturers and merchants were adept at using their own rules and procedures to secure advantages in contracts and arbitration. They recognized that if the LCA rules increasingly became the de facto transnational rules for the trade and they were compelled to use them, they would be at a disadvantage given the learning curve involved in learning to use and maneuver within new rules. The Anglo-American style of private arbitration was considerably different than that used in continental Europe (see Dezalay and Garth 1996). Moreover, it was based in a different legal system that textile manufacturers and regional merchants outside the Anglo-American system would need to learn. As LCA officials explain: “Arbitrators also need to be trained to a level where they have enough knowledge of English contract law and arbitration law to debate the issues and make decisions fairly, impartially, and in line with the law” (Butler and Hughes 2011). In short, as transnational merchants’ dispute settlement institution increasingly became de facto transnational, textile manufacturers and regional merchants raised skepticism regarding the particularistic nature of this institution. That is, they saw transnational merchants’ dispute settlement arrangement as a globalized localism that would disadvantage them given the institutional incongruities they would face in adopting the rules. Resistance among more marginalized actors in the trade was apparent,

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f igu r e 4 . 9. ECC Country Imports as Share of Total World Imports, 1990–2008. Adapted from ICAC (2010a).

although this generalized skepticism took a more organized form only in two rather disparate protection strategies. The first came from the trade associations of continental Europe that mostly represented textile manufacturers. The European textile industries had declined precipitously in recent decades, and their trade associations were attempting to stave off their decline in both market share and influence within the transnational cotton trade (see Figure 4.9). In 1999, the seven European cotton trade associations, including the LCA, had formed the European Cotton Confederation (ECC) to promote greater cooperation in the European industry (Roskwitalski 2006). When the LCA proposed the adoption of its rules, the remaining members of the ECC decided instead to negotiate standard European rules for cotton contracts and arbitration, in part because of the commonalities between the contract rules and arbitration procedures based in the continental European civil law tradition versus the Anglo-American common law tradition. The ECC thus launched a protection strategy to standardize their contract rules regionally to defend against the imposition of the LCA rules. A different protection strategy was forged by textile manufacturers in the Indian cotton industry. Since cotton importing and exporting was opened to private firms in the early 1990s in India, small textile manufacturers were at a considerable bargaining disadvantage vis-à-vis transnational merchants and raised concerns that they were unable to secure their preferred contract terms during negotiations (see chapter 3). The LCA attempted to quell their concerns about these power imbalances, suggesting that they would not experience problems if they were very specific in stipulating contract terms

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(Economic Times 2003). However, as a representative of the Indian Cotton Mills Federation insisted: LCA is primarily a body of cotton traders and their arbitration is heavily biased towards cotton suppliers. The small individual mills of India are unable to either get detailed specification included or get any arbitration body other than the LCA stipulated at the time of negotiating the contract. (quoted in Business Line 2004)

Cotton buyers in India argued that the vast difference in the economic power wielded by transnational merchants compared with Indian buyers meant that they were unable to specify different or more specific contract terms. This is also what drove Indian firms to contest LCA arbitral decisions in state courts, which was a practice that transnational merchants were hoping to eliminate. Like firms in other countries in the global South, Indian firms saw state courts as places to turn when they were forced into an unfair deal by more powerful transnational merchants. Unwilling to adopt what they saw as biased LCA rules and arbitration procedures, Indian buyers and textile manufacturers adopted a different strategy. They began discussions regarding a standard contract specific to the Indian market (Gurumurthy 2001). These would be nationally focused rules that Indian firms wanted to use for imports and exports from India to offset what they saw as their significant bargaining disadvantage in the global market. The cotton and textile trade associations in India further lobbied the government (although unsuccessfully) to incorporate a provision in the National Foreign Trade Policy stipulating that all disputes over cotton imported into India must be arbitrated by an Indian arbitral body such as the Indian Council of Arbitration (Business Line 2004). Indian buyers argued that they were initiating this action only “after years of futile efforts to convince major cotton suppliers and arbitration bodies that the trading conditions should take into account the genuine concerns of buyers” ( Jaipuria 2005). The LCA was not pleased with this development. An LCA official explained that, from their view, Indian manufacturers were a “threat” as they thought LCA rules “represented Western companies and Western power trying to impose on them” and thus “wanted to use Indian law and Indian arbitration.” Ultimately, however, the LCA largely dismissed the Indian associations’ protests. An LCA member explained that the LCA simply “refused to negotiate with them.” At this time, India was still a relatively small player in the transnational trade. While transnational merchants had suffered losses due to contract defaults in the Indian market, they were not

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about to use the Indian standard contract or negotiate on the Indian industry’s terms. In sum, the protection strategies launched against the LCA rules challenged the LCA’s claim to global authority over dispute settlement.

conclusion The creation of the WTO was a critical turning point in the struggle over standards and dispute settlement in the cotton trade. The WTO was in many ways the culmination of the United States’ uneven project of market liberalization as the United States pushed for inclusion of the “new issues” such as services, foreign investment, and intellectual property rights, while maintaining their agricultural subsidy programs despite an agreement to eliminate them. This uneven application of the WTO rules crystallized a protection strategy targeting US cotton subsidies, making cotton the poster child of the WTO’s failure to address “development” issues. This deep rancor over subsidies spilled over into other issues, intensifying the conflict over the harmonization of quality standards and dispute settlement mechanisms. At the same time, the liberalization of the apparel and textile trade propelled China into a powerful position in the cotton trade and armed the Chinese state with the economic power to pursue a redirection strategy to challenge Western control over key governance institutions. However, the WTO not only transformed power relations and strengthened the “pushbacks” against the US liberal market project, it also recast the logic of decision making over standards and dispute settlement. Both the Chinese state and more marginalized actors saw the United States’ quality classification system and transnational merchants’ dispute settlement arrangements as globalized localisms that generated disadvantageous institutional incongruities if imposed on their countries. Yet, their options for challenging these governance institutions were circumscribed by the new institutional infrastructure at the WTO. The Chinese state’s initial efforts to challenge the US classification system were stymied by the United States’ ability to maneuver within the new and somewhat vague legal environment created by the Agreement on Technical Barriers to Trade. Moreover, the Chinese state’s ability to negotiate directly with transnational merchants over dispute settlement was complicated by its commitment to end its monopoly over cotton imports and exports in its WTO accession agreement. In short, the WTO consolidated a struggle among three competing kings of cotton but also stipulated new terms on which this battle would be fought.

chapter five

Imitate and Overtake?

As I interviewed executives from the most powerful cotton merchant firms in the world, the story was consistent: constructing rules for contracts and dispute arbitration to govern the transnational cotton trade was a priority. As an executive from one of the Big 3 cotton merchants explained, the lack of enforceable contract rules was costing merchants money, and “we’re talking millions and millions of dollars.” In this context, transnational merchants were trying to convince their most important clients, the Chinese state and Chinese textile manufacturers, to adopt the rules for contracts and dispute arbitration of their trade association, the Liverpool Cotton Association (LCA). As one representative of a merchants’ trade association bluntly put it: “If [Chinese textile manufacturers] have 40 percent of the market, we better have some goddamn rules.” For their part, the Chinese state and Chinese textile manufacturers also had identified dispute settlement as a critical issue. Smooth dispute settlement procedures and a reputation for contract sanctity were critical for ensuring the competitiveness of their textile and apparel sectors into the future. However, given the requirement to relinquish its state monopoly over cotton importing and exporting under its WTO accession agreement, the Chinese state remained dependent on the private governance of dispute settlement by transnational merchants unless it could master this form of governance and redirect it to serve Chinese interests. For the Chinese state, the ability to influence these governance institutions would require new strategies to steer and guide the sector from an arm’s length given that the Chinese state would need to foster organization and cooperation among private firms to negotiate with transnational merchants.

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The Chinese state and Chinese firms have long attempted to leapfrog forward in the race to economic competitiveness by gaining access to sophisticated Western technologies. Here what was needed was a competitive institutional model, and the Chinese state took a similar tack. There were few agricultural lobby groups as successful as the National Cotton Council (NCC) in the United States. This trade association integrated diverse groups in the cotton-textile sector—producers, ginners, warehousers, merchants, textile manufacturers, cooperatives, and cottonseed crushers—into a unified lobby that successfully maintained government support for the sector despite declining support in the broader electorate and challenges at the WTO. It was this model that the Chinese state sought to replicate through the establishment of a parallel trade association, the China Cotton Association (CCA)(Sansom 2007/8). The goal was to create a strong and unified bargaining unit that could advise the state and negotiate with private trade associations abroad. A few years after it was established, I met with a representative from the China Cotton Association in his small office in a Beijing skyscraper. Rules for dispute settlement were “an important challenge,” he explained. Negotiations with transnational merchants had not been conflict-free: “Quality is the biggest issue for [contract] rules.” Halfway around the world in the US office of a transnational merchant representative, I listened to another version of the negotiations over rules for cotton contracts and dispute arbitration. This time the description was more animated: a face-off between trade associations over whose rules would govern the transnational trade in cotton. Things really heated up between February and July 2005, the transnational merchant representative recalled. Merchants sent three delegations to Beijing with hopes to convince the CCA to adopt their rules for contracts and dispute arbitration. The stakes were high, and the CEOs of some of the largest transnational cotton merchants in the world went to negotiate. But the CCA rebuffed this proposal, suggesting instead that negotiations could proceed on their terms. That is, transnational merchants could comment on the contract rules that the CCA was developing. Relieved to at least have opened a dialogue, the merchants consented. They sent us a draft of their contract rules for comment in September 2005, the transnational merchant representative recounted: “It was so far off the mark we didn’t even want to work on it and possibly make it worse.” Instead, they invited the Chinese negotiators to a three-day meeting in Memphis. Some common ground was staked out, and the back-and-forth continued. The Chinese delegation sent a new draft, incorporating compro-

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mises from the Memphis meeting. The transnational merchants sent more changes. Leaning forward, anticipating the climax of his story, the transnational merchant representative explained that it all came down to another threeday negotiation in Beijing in March 2006. The merchants and the CCA could not agree on key issues. The merchant delegation decided to play hardball. In the last half hour before the negotiations were to end, the merchant negotiators told the CCA, “You can leave if you want, but we are not leaving this room until we get these changes.” The CCA conceded, but played hardball back. Two weeks later, the contract came back to the LCA with 22 changes. The CCA claimed it was their lawyers who did it, but it took two and a half months for the transnational merchants to get it back to the original agreement. The Chinese state had clearly created a tough new negotiating body. But would it be an institution that could enforce the use of its rules?

*

*

*

This chapter demonstrates a critical dimension of institutional change in the global capitalist system: because emerging rivals face the problem of institutional dependence, institutional change is inevitably incremental in nature. Rivals emerge out of the existing institutional structure that facilitated dominant actors’ liberal market projects and cannot simply sweep away these institutions to impose new ones. Rather, rivals need to master existing arrangements in order to redirect them to serve new interests. Moreover, these rival firms and states may be constrained in terms of how existing rules can be changed given the path dependencies of existing institutions. In this chapter, we will see that the Chinese state encountered just these issues as it pursued its redirection strategy. Dependence on existing institutional arrangements made it difficult for the Chinese state to simply impose new rules. As we saw in chapter 4, the WTO—the very institutional structure that fueled China’s rise—also created new dependencies as it made scientific knowledge a prerequisite for participating in decision making over standards and limited the legitimate role of states in the economy. The Chinese state thus crafted a redirection strategy, which aimed to overcome the problem of institutional dependence by importing the institutional expertise it needed to master and then redirect existing arrangements along a new trajectory. This strategy, if successful, would lead to institutional change that was inevitably incremental in nature as the Chinese state was

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compelled to build from and reconstitute the institutions that the US-led coalition of transnational firms and the US state had established.

scientized politics a nd institutiona l dependence The Chinese state’s redirection strategy to set new standards for imported cotton had been stymied by the USDA and US industry (see chapter 4). The commitment through the TBT Agreement to base standards on scientific and technical knowledge had created the problem of institutional dependence for the Chinese state. That is, when the Chinese state tried to set new standards to better serve their interests, they found themselves dependent on the USDA and US scientists to legitimate their standards, given the USDA’s long legacy of fiber science research. Thus, in order to overcome this problem, the Chinese state pursued a different strategy in this scientized environment, or in a decision-making arena dominated by scientific rationale. If it did not have the scientific and technological capabilities to significantly influence standard-setting processes, the Chinese state would compete to create new legitimating knowledge that would allow it to set standards free from dependence on US institutions and science. Just as the USDA had to first master Liverpool private standards and develop their own independent fiber science in order to redirect them to serve their preferences in the early 1900s, so too would the Chinese state need to master the USDA’s standards before it could reconstitute them in their favor. This, however, would not be an easy process. The United States had almost a century of fiber science research under its belt, as evidenced by the legacy of context-specific science. To be successful in the competition to control standards, the Chinese state would have to rapidly catch up in the fiber science and measurement game. To this end, the Chinese state contacted the USDA in 2003 and asked if they would help the Chinese cotton standards agency, the China Fiber Inspection Bureau (CFIB), replicate the US system for the classification of its entire domestic crop (Laws 2005b). Essentially, the Chinese state was seeking a crash course in the United States’ instrument classification system. This not only would allow them to leapfrog some of the technological barriers to standard setting but also would create incentives for domestic cotton producers to increase cotton quality1—a concern that had been continually emphasized by both the central state and provincial governments in a string of policy documents since liberalization (Alpermann 2010:52).

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The Chinese state’s request, however, was not primarily about technology adoption. The USDA did not control the measurement instrument itself; the HVI could be purchased from private companies, Uster or Premier. And the USDA had made available basic guidelines for how to use the HVI machine for cotton measurement. What the Chinese state wanted to import and replicate were the USDA’s broader institutional arrangements that ensured the precision and accuracy necessary for use in the commercial trade. To actually use instrument classifications to buy and sell cotton, the measurement instruments must be embedded within institutions that coordinate and ensure continuous harmonization of the instruments across space and time. These institutions must establish a system of procedures to ensure that every measurement instrument is accurate and thus would provide the “true value” of the fiber property measured and that all machines are precise and thus capable of producing repeatable measurements. The USDA and the US industry had spent decades of time and money developing this broader system of reliability procedures that allowed it to be accepted and used by actors in the commercial cotton trade. This involved developing detailed procedures for a range of issues, including ensuring the measurement instruments purchased met exacting tolerances in machining and construction to avoid machine error, taking samples from cotton bales, ensuring target moisture content of both the laboratory and cotton sample, establishing a centralized quality control facility to oversee calibration and check test procedures, creating benchmark standards representative of the full variation in cottons grown, and so forth (USDA 2001). Many players across the US cotton and textile industry were initially wary of the Chinese state’s request. A USDA official explained their reaction: “Many people from all seven domestic sectors were against it. Don’t give away our secrets, tell them to develop their own system that took us so long to develop.” A representative of the National Cotton Council (NCC) further explained: “We have a tremendous investment in the [classification] system, including an investment in engineering.” The industry as a whole was reluctant to just give away their system and procedures. In short, it was one thing to encourage the adoption of the HVI machine. It was quite another to tutor the Chinese state on how to create from the ground up the complex institutional arrangements necessary to operate it accurately, precisely, and efficiently. After tense discussions, the US industry and the USDA decided to help the Chinese state replicate their instrument measurement system for several reasons. First, as this new measurement system would encourage Chinese

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textile manufacturers to adopt scientific blending, it would increase the first-mover advantages enjoyed by US cotton producers until other cottonproducing countries were able to catch up and establish their own instrument measurement systems. A USDA official explained: “That would be good for us—if we can associate performance to fiber qualities and other countries don’t have that.” US cotton producers, and the transnational merchants that traded their cotton, were positioned to capture the lion’s share of these first-mover advantages. Second, the USDA and the US industry were concerned that, if they did not facilitate China’s adoption of the system, the Chinese state would be more likely to develop a system that was incompatible with the US system, creating a fight over whose standards would prevail. The Chinese state’s potential to develop its own measurement instruments and to require their use was perceived as a significant threat. As a USDA official described, the Chinese cotton standards agency could decide to require new instrumentation to measure, for example, short fiber content, that is not included in the US system: “This would require more investment, changing our system. We want to be giving the system.” A US cotton producer and former chairman of the NCC concurred, insisting that “it’s clearly in our best interest that China’s classing is consistent with ours since China spins more cotton than any other country in the world” (cited in Laws 2005a). The US industry decided that, if they helped the Chinese standards agency adopt their system, it would reduce the likelihood that they would establish new measurement instruments that were incompatible with the US system. Finally, the USDA and the US cotton industry wanted the Chinese state to adopt not only the measurement instruments but also the USDA’s benchmark standards, the International Calibration Cotton Standards. With China’s growing power in the transnational cotton trade, the USDA recognized that there were powerful incentives for the Chinese state to make another bid for authority over quality standards. Maintaining their control over quality standards meant maintaining their ability to use standards to ensure the competitive position of US cotton. A USDA official explained to me that if the Chinese state changed the standards to make, for example, certain West African quality parameters the new standards, it could introduce higher standards than the United States currently achieves. For US cotton producers, using standards to maintain the competitive position of US cotton on the export market was particularly important given their declining overall competitiveness. Despite the fact that the United States remained one of the three largest producers of cotton in the world, along with China and India, their cost competitiveness was increasingly maintained

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through government subsidies that had been intensely targeted as unfair trade practices within WTO negotiations. With this agreement within the US industry, the USDA struck a deal with the Chinese state: they would facilitate the Chinese standards agency’s adoption and implementation of the system on the condition that they adopt the USDA benchmark standards. The Chinese state agreed to the deal and in late 2003 announced the launch of the five-year Chinese Cotton Quality Classification Reform Plan, aimed to overhaul its entire classification system and to shift from a manual- to an instrument-based measurement system modeled on that of the United States (FAS 2004; Southwest Farm Press 2004). To this end, officials from the Chinese standards agency, as well as Chinese marketing and agriculture ministry officials, traveled to Memphis in February 2004 to study the US instrument measurement system (Keyes et al. 2005; Laws 2005b). This initial exchange was followed by a number of visits that involved “intense, detailed information exchanges” (USDA official, as cited in Laws 2005b). The officials from the Chinese standards agency, a USDA official explained, came to study their system thoroughly, asking questions about every detail of how the system operated: “They wanted everything from us—floor plans, lighting requirements, every bit.” The USDA provided the Chinese agency with their standard operating procedures, which were considered in-house procedures that they had never before shared with a foreign laboratory. Moreover, the Chinese agency sought information on the history of the broader institutional environment in which the USDA was embedded: “They’ve asked a lot of questions about where we came from and what authorizes us to do what we do—the legislation and the regulations we operate under. . . . This is not only from the classification part of it but for the establishment and maintenance of the standards” (USDA official, as cited in Laws 2005b). Ultimately, the USDA and its partners in the National Cotton Council and the producer-funded Cotton Incorporated hoped “to ensure China [sic] grading standards, protocols and parameters are based on sound engineering, scientific and statistical principles consistent with U.S. [sic]” (Weil 2006). With the USDA’s help, the Chinese standards agency aimed to have a fully functioning HVI system to measure and class their entire domestic cotton crop by 2010 (Laws 2005b).

t h e probl em of i nst i t u t iona l i ncongru i t y The Chinese standards agency had long-term interests in taking over the production of benchmark standards. In the short term, however, simply

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constructing an instrument classification system that would class the entire Chinese domestic crop and generate measurements that textile manufacturers would trust presented a significant challenge. This was due to the problem of institutional incongruity. That is, importing an institutional arrangement was not a question of simple mimicry. Rather, the import of an institutional arrangement creates incongruities with existing social relations, which must be replaced or reoriented to support the new institution. In its efforts to imitate the US classification system, the first, although perhaps least consequential, obstacle for the Chinese standards agency was the significant start-up costs involved. The US cotton industry was producing only about 20 million bales of cotton to China’s 30 million bales (Laws 2005b). The Chinese standards agency had been using manual fiber evaluation and some individual manual instruments in their classification system (Keyes et al. 2005). To switch over to automated instrument classification, the Chinese standards agency needed to purchase enough measurement instruments to classify these large quantities of cotton. A USDA official reported that the USDA owned around 300 measurement instruments at the price of approximately $215,000 each and upgraded their machines every 5–7 years, with an annual cost of about $4 million–$5 million. The Chinese standards agency initially purchased 150 machines with plans to more than double that number. Once purchased, the measurement instruments had to be run in air-conditioned laboratories in which the temperature was maintained at 21 degrees Celsius plus or minus 0.6 degrees, and humidity levels were kept at 65 percent plus or minus 2 percent (ICAC 2003a:2). The cotton samples themselves had to be conditioned to reach a humidity level between 6.75 percent and 8.25 percent (USDA 2001). According to USDA officials, in the USDA’s main classification laboratory in Memphis, this required an initial investment of $3 million in the air-conditioning system, and the utility bill was $40,000 per month during the summer to keep the instruments going and maintain the laboratory conditions. The USDA’s 300 machines were spread across 12 such laboratories (USDA 2001). The Chinese standards agency spread its 150 machines across 50 laboratories and had plans to put around 330 machines in as many as 110 laboratories that would need to be kept at these conditions (Laws 2005b). A USDA official who helped the Chinese standards agency with the implementation expressed concerns about some of these decisions. For example, China’s HVI machines were very geographically dispersed, which posed problems given the need to move cotton samples quickly to centralized labs to conduct quality control and the lack of transportation infrastructure in some parts of the country.

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He expressed that the Chinese state may have misread the difficulty of these problems. The USDA used FedEx to ensure quick and efficient delivery of samples, which enabled daily verifications that every classification laboratory was producing accurate and reliable results. Beyond investments in the machines and laboratories, however, implementation of the instrument measurement system posed deeper problems of institutional incongruity. The Chinese standards agency would need to facilitate significant infrastructural and social changes in their cotton sector, from gin to spinning mill, for the classification system to function. First, the Chinese agency would be responsible for classing the cotton of 30 million farmers with an average farm size of less than one-half acre, compared to the USDA’s task of classing bales for about 18,600 farmers with an average farm size of around 1,000 acres (Laws 2005b). To do this, the Chinese state needed to compel ginners and textile manufacturers to update their equipment and production layout to be compatible with the classification system. For example, the measurement instruments operated on the basis of standard sampling procedures for international standard size bales (approximately 227-kg bales). Chinese ginners, however, made smaller bales, weighing about 80 kg. Industry players explained that shifting to the larger bales would require technological changes for both ginners and textile manufacturers. Ginners needed to invest in new equipment, such as bale presses. While one person could carry the 80 kg bales, ginners and textile manufacturers needed to purchase equipment to move the 227-kg bales. Furthermore, textile manufacturers needed a larger space to “lay down” the bigger bales to be blended. The big bales would also potentially increase transportation costs; there were concerns that rail cars would not be able to hold as much cotton per car given the shape and size of the big bales. Not only would these infrastructural changes cost private firms money, but also Chinese textile manufacturers were skeptical of the emerging government classification system (FAS 2006). The Chinese standards agency would have to demonstrate the reliability of its system to industry players before they would actually trust the resulting measurements and use them to scientifically manage cotton purchasing and processing (Laws 2005b). To induce these changes, the Chinese state introduced a range of incentives for ginners and textile manufacturers. In addition to subsidized lowinterest loans, the Chinese state set a higher domestic price for cotton sold in 227-kg bales and tested at the new instrument measurement laboratories to create a price incentive for farmers and ginners to adopt these changes. Large bale cotton also received first priority in rail car allocation (FAS 2006,

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2009). While the Chinese state purchased the big bale cotton at these higher prices for the state reserves, the ultimate goal was to create demand among textile manufacturers. To this end, industry players report that the government began allotting much-coveted quotas for cheaper imported cotton to textile manufacturers that purchased big bale domestic cotton. For every ton of big bale domestic cotton purchased, textile manufacturers received one ton of import quota. The Chinese state also began to directly and indirectly facilitate consolidation in the sector that would better enable more costly reforms. For example, the Chinese Cotton Quality Classification Reform Plan mandated a reduction in the number of gins. At this time, the sector was characterized not only by a ginning overcapacity but also by a large number of small gins, some cooperatively owned. A Chinese representative explained that part of the classification reform program was to realize a system like that in the United States, which included creating a much more consolidated ginning sector. There were 8,000 gins in China, which, according to the reform program, needed to be reduced to just 2,400 over the course of just five years. This would be a difficult challenge, he noted, as the United States took 100 years to make the change from 22,000 gins to just 890. The highly competitive ginning market also appeared to be contributing to this dynamic. Reports suggested that some gin owners were taking an aggressive approach to big bale reform to avoid being outcompeted during the transition (FAS 2009). The reform plan also seemed likely to push out smaller textile manufacturers. Bigger textile manufacturers were better positioned to adjust to the reforms and invest in new technology. Moreover, bigger textile manufacturers were already accustomed to using imported cotton and thus some already had the newer equipment and infrastructure designed for big bales. Indeed, this was part of the Chinese state’s broader strategy of “grasping the large and letting go of the small” (zhuada fangxiao) (Wang 2009:166). As in other sectors, the goal was to generate a small number of vertically integrated ginning and textile conglomerates that would establish the core of the sector and would preferably grow out of the remnants of the old state-owned enterprises, whose new private owners tended to have close connections to the government (Alpermann 2010:136).

m a r k etized politics a nd institutiona l dependence The Chinese state also faced the problem of institutional dependence in its redirection strategy to take control of dispute settlement. Just as the TBT

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Agreement had scientized politics, the Chinese state’s commitment to dismantle public ownership and control over the STE, Chinatex, served to marketize politics, or shift political struggle over dispute settlement into the private sphere. Without a monopoly over cotton importing and exporting, the Chinese state could no longer use this as a lever to bargain favorable contract terms, ensure contract sanctity, and manage the cotton sector more broadly. Instead, private textile manufacturers were left to bargain independently over contract terms and manage the price volatility that threatened contract sanctity. The Chinese state was concerned that these firms would end up dependent on the contract terms and dispute settlement institutions imposed by transnational merchants. While coordination had historically occurred through the state in China, transnational merchants had a long history of private coordination over dispute settlement. Moreover, the Chinese state had used its monopoly over imports and exports as a way to balance the competing demands of textile manufacturers and domestic cotton producers. It did not want to simply forfeit this goal in a marketized environment. Avoiding this institutional dependence, however, would require the development of new state capacities to steer and guide the economy at an arm’s length or at least ensure strong sectoral organization such that the private sector maintained bargaining power vis-à-vis transnational merchants. As it could no longer claim authority over contracts directly, the Chinese state instead developed a new strategy to ensure the continued power of collective bargaining and at least indirect state authority. As mentioned above, in 2003, the state established a trade association, the China Cotton Association (CCA), under the supervision of the Ministry of Civil Affairs. This trade association was ostensibly a private body that could legitimately play a role in negotiating dispute settlement arrangements in an environment that saw the state’s role as illegitimate. As in the case of quality measurement, the Chinese state pursued a strategy to import institutional models in an effort to sharpen its ability to play in this marketized game. As the anecdote at the beginning of the chapter suggested, this time it turned to the private sector in the United States to study the institutional structure of the National Cotton Council (NCC). The NCC was the key organization that represented the US cotton lobby. The NCC had a record of highly effective lobbying since its establishment in 1938. This record has been due in part to the successful integration of seven elements of the cotton-textile sector—producers, ginners, warehousers, merchants, textile manufacturers, cooperatives, and cottonseed crushers— into a unified body. The NCC served as a site for these competing factions

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to mete out their policy differences and lobby for state policies with a single voice. Interested in replicating this example of achieving sector-wide agreement, the Chinese state sent a delegation to the United States to study the NCC and ultimately modeled its new trade association, the CCA, in its likeness (Sansom 2007/8). The National Cotton Council subsequently hosted an intern from the China Cotton Association “to assist their understanding of our business systems and our terms of trade” and had plans to send its own intern to China “to work with the China Cotton Association in an effort to continue this exchange of information” (Weil 2006). The CCA, however, was not a carbon copy of the NCC. Like the NCC, the CCA claimed to be a voluntary organization that brought together a wide range of interest groups in the cotton sector, including cotton farmers, farmers’ cooperatives, merchants, cotton textile industries, cotton research institutes, and other enterprises engaged in cotton production, purchasing, processing, and operation (China Cotton Association 2011; Fang 2009). However, industry players suggested that the CCA—unlike the US association but like other “private” business associations in China—was actually better characterized as a “quasi-public” association with limited autonomy from the state or as a “state corporatist” relationship (see Dickson 2003; Kennedy 2005; Unger 1996; Unger and Chan 1995). The CCA was supervised by the Ministry of Civil Affairs and reported directly to the All China Federation of Supply and Marketing Cooperatives (ACFSMC) (China Cotton Association 2011). Thus, while the Chinese state could no longer directly negotiate with transnational merchants over dispute settlement, it created a trade association that it hoped would still wield bargaining leverage.

pl ay ing the marketized game One of the first goals of this new private association was to address the conflict with transnational merchants over dispute settlement authority. While they could not mandate contract terms or use of their arbitral body, the CCA decided to develop a standard contract that would serve as an “industry best practices” model that Chinese textile manufacturers could use. Given their significant dependence on transnational merchants, the CCA decided that they would allow transnational merchants to negotiate with them over the standard contract. Merchants had generally considered this type of collective action highly contrary to their interests. The CCA was suggesting that merchants negotiate over Chinese rules. Merchants preferred to negotiate from the starting

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point of the LCA rules. What rules were negotiated, and thus under the auspices of whose trade association negotiations would unfold, could have implications for who would have authority over rules in the future. At the same time, however, transnational merchants were becoming increasingly concerned with the problem of contract defaults. Cotton industry analysts estimated that contract defaults related to the lack of enforceable contract rules were adding $300 million to transnational cotton merchants’ costs of doing business each year (Gillen 2006). In this context, transnational merchants saw at least the opportunity to negotiate as a step in the right direction. Any rules were better than no rules, at least in the short term. Despite their common interest in stabilizing contract rules for trade into China, infighting emerged among transnational merchants over how negotiations with the Chinese sector should be conducted and who should conduct them. A second-tier merchant based in Europe was the president of the LCA at the time and started negotiating with an organization in China. But the Big 3 merchants, all headquartered in the United States, the largest exporting country, were not going to forfeit their lead in the negotiations. A US-based LCA representative recounted the tense meetings held among merchants at this time as the US-based Big 3 told the European merchant firm that they had “no right” to lead the negotiations, and that “because American firms are the biggest, we have the most leverage, so we would do the negotiating.” A joint negotiating body was established consisting of the American Cotton Shippers Association (ACSA) and the American Cotton Marketing Cooperatives (AMCOT) with the ultimate goal of molding the CCA rules to reflect those of the LCA (May 2011). With an agreement to negotiate collectively over the CCA standard contract, industry players reported that intense competition ensued over the terms of the contract. Two issues were particularly contentious. First, as the 1958 New York Convention allowed transacting parties to settle disputes through private arbitral bodies instead of state courts, a central point of contention was whose arbitral body would settle contract disputes. The merchants wanted to name the LCA as the arbitral authority, while the CCA wanted all disputes to be arbitrated by the Chinese arbitral body, the China International Economic and Trade Arbitration Commission (CIETAC). As sociolegal scholars argue, which private arbitral body settles disputes matters. Werner explains that “international arbitration has become a field of intense competition: competition between arbitral sites; between the arbitral institutions; between counsel; between arbitrators; and even between the periodicals of international arbitration” (1985:5).

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One of the reasons for this competition is that different private arbitral bodies can vary significantly on the basis of their historical development in relation to the legal professions, practices, and legal systems of particular countries and/or sectors (Dezalay and Garth 1995). The LCA, for example, was steeped in the private rules, norms, and culture of the transnational cotton merchant community, which emerged from the Anglo-American arbitration tradition and legal systems, and was developed to address the technical specificities of the cotton trade. CIETAC, in contrast, was developed in relation to the legal rules and cultural norms in China. CIETAC was also a broader body that conducted arbitration for commercial disputes across a range of sectors. Different arbitral bodies and arbitrators have different conceptions of what arbitration should look like and how it should operate, based on different national legal and arbitral traditions. Therefore, which arbitral body is used determines who is “able to play by their own terms” (Dezalay and Garth 1995:52; see also Sempasa 1992).2 Santos (1995) suggests, for example, that, through the growing role of its arbitral body in settling transnational commercial disputes, the Chinese state and Chinese firms are attempting to impose some of the particularistic qualities of “Chinese capitalism” and “Chinese modernization” on private arbitration practices.3 Private arbitral bodies may also have different enforcement mechanisms. The LCA had private enforcement mechanisms, such as a blacklist, which it used to discipline parties without resorting to state courts. Although the LCA’s blacklist had limited effectiveness in the Chinese market (see chapter 4), in the eyes of transnational merchants it was still preferable to CIETAC enforcement mechanisms. At this time, CIETAC did not have a blacklist for the cotton trade. As a result, if the offending party refused to pay the arbitral award, the only recourse would be to take the dispute to Chinese courts. This was a highly disagreeable route from the perspective of transnational merchants. Thus, the conflict over which private arbitral body would settle disputes was a conflict over who would enjoy institutional power and thus have the ability to shape contract governance in their interests in two respects. On the one hand, it was a struggle over who would have the advantage of playing by their own rules for arbitration. On the other, it was a struggle over the geographical site of institutional power into the future. The second contentious issue was the quality terms of the contract. In cotton contracts, a quality penalty is commonly included that dictates the penalty to be paid per bale if the quality of the shipment is found to be

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below the quality range stated in the contract. Merchants aim to keep this penalty low as they have historically made money by agreeing to a certain quality range but then shipping in the bottom end of the range or including a few subquality bales. Also, merchants assume the risk that the quality of bales could change during transport due to improper storage or water damage, for example. Such circumstances put merchants at risk of quality penalties when the quality is verified upon delivery. Textile manufacturers, on the other hand, desire high quality penalties as the quality of their end product is dependent on receiving the quality of raw materials that they purchased, and they are generally producing yarn to meet the quality specifications of a particular sales contract. With these divergent interests, there was much contention over whose preferences for quality penalties would prevail. By late 2005/early 2006, the CCA and transnational merchants had come to a compromise on some issues. But, as these were ultimately the CCA’s rules, it was the CCA that would release the final, official version of their choosing. In May 2006, the new Chinese trade association, the China Cotton Association (CCA), released its new standard contract for use in the trade. Some of the concessions won by transnational merchants were evident. The CCA agreed to allow parties to choose either CIETAC arbitration or LCA arbitration, which was considered a major victory by the LCA. In addition, the CCA agreed that Mandarin and English interpretations of the contract would be given equal weight in case of disputes. Finally, the CCA recognized that the contract would be a voluntary, model standard contract, not a mandatory contract. This meant that parties were not required to use the CCA contract and, if they did, they could amend or delete terms (China Cotton Association 2006a). In the dispute over key quality terms, however, the CCA refused to compromise. To protect textile manufacturers’ interests, the CCA maintained the requirement that the quality of all cotton entering China must be certified by the state agency, China Inspection and Quarantine (CIQ), and that CIQ certifications were final in contract quality disputes (China Cotton Association 2006a). That is, despite the move to private authority over contract rules and dispute settlement, the Chinese state would maintain its authority to verify import quality. As well, the CCA reserved textile manufacturers’ right of rejection—that is, the right to reject cotton if it is three or more grades inferior to the contract grade or if it contains false-packed or mixed packed bales (China Cotton Association 2006a).4 Most controversially, the CCA contract had higher quality penalties than

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were in the original Chinatex contract. In the CCA contract, merchants would have to pay 3.75 percent of the contract unit price for bales found to be one grade below the contract grade and 9 percent for bales two grades below. Further, if more than 5 percent of the bales in the shipment were two grades inferior to the contract grade in terms of quality and staple, an additional 20 percent of the contract value of the total defective bales would be paid in damages (China Cotton Association 2006a). From the perspective of the transnational merchants who trade millions of bales a year, one vice president explained: “There are huge penalty differences [between the CCA contract and contracts we are used to using]. $30 per bale vs. $3 per bale!” Merchants viewed this as a highly unacceptable contract term. Through the construction of the CCA, the Chinese state had successfully produced an association capable of strongly negotiating with transnational merchants. With this new institutional structure, however, came new institutional incongruities. Most critically, although they officially released the contract, the CCA and the Chinese state could not enforce its use. The Secretary-General of the CCA explained that, with the new standard contract, they were providing “a new option for the contracting parties in import and export trade” (Fang 2009:8). However, this was not state legislation but a private agreement to which transacting parties must agree. The question was, could the Chinese state’s new arm’s length strategy for steering and guiding the sector ensure the use of the contract? To this end, the CCA launched an effort to educate textile manufacturers and importers about the CCA rules and promote their use. For example, a few months after the CCA rules were officially released, the CCA publicized the first formal contract for imported cotton that was conducted under the CCA rules. Weiqiao Textile Company, one of the largest cotton textile manufacturers in the world and one of the top 500 enterprises of any kind in China, contracted with a foreign merchant using the CCA terms (China Cotton Association 2006b). Moreover, the CCA established a series of training programs to educate Chinese industry leaders about the new rules. Finally, a blacklist system was established to encourage self-regulation and strengthen the principle of contract sanctity (FAS 2006). These efforts on the part of the CCA to encourage private textile manufacturers to use the new standard contract were further complicated by transnational merchants’ efforts to foil its implementation. From the perspective of transnational merchants, by refusing to compromise on quality terms in the official version of the contract, the CCA essentially declared a stalemate in efforts to develop harmonized contract rules. Transnational merchants

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thus began to pursue an informal collective strategy to undermine the CCA contract. This involved two tactics. First, merchants attempted to water down what they viewed as the harsher terms in the CCA contract. The manager of a merchant office in Shanghai explained: “CCA rules are not fixed, they are negotiable. You can add in things from [LCA] rules and delete things.” For example, merchants reported that they successfully convinced textile manufacturers to accept the quality penalties from the old Chinatex contract, which were about half the penalty amount in the CCA contract, as well as to accept LCA instead of CIETAC arbitration. In addition, transnational merchants tried to undermine the CCA contract as a whole by emphasizing its nonmandatory character to their clients. A merchant negotiator explained: “We understood throughout this process that textile mills could use whatever rules they wanted to, and we told our Chinese mill counterparts this too.” This strategy appeared to work. The CCA released the contract in May 2006; however, a CCA official reported that a year later few spinning firms had adopted the contract: “We have not received satisfactory results in terms of adoption.” Several merchants reported that they successfully compelled a number of textile manufacturers to accept LCA rules. Yet, while merchants were pursuing an informal collective strategy to boycott the CCA standard contract, or at least its strongest terms, this collective action among merchants began to give way to competitive tensions. The differentiation among merchants meant that smaller firms, trying to catch up to the Big 3, perceived the costs and benefits of boycotting the CCA contract differently. An executive from a second-tier firm explained that his firm had different interests and strategies compared with those of the Big 3. He compared the Big 3 firms to cruise ships that had trouble making quick turns, while his smaller firm was better positioned to take advantage of quicker market advantages. It was this responsiveness that he hoped would bring back more competition in the merchant sector. From this perspective, the competition to establish favorable trading relationships within the rapidly expanding Chinese market was fierce, and fiercer for second-tier firms. Given the breakdown of cooperation with the CCA, this second-tier merchant firm decided to use the CCA contract and CIETAC arbitration as a competitive strategy to establish relationships with buyers. The manager of their Shanghai office explained that most transnational merchants were using the LCA rules and arbitration in their contracts, but their firm was using CIETAC arbitration. He explained, “We want to be viewed [by our

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Chinese clients] as leaning more toward Chinese rules and toward keeping arbitration in China.” With second-tier firms viewing the costs of continued collective action with larger merchants as outweighing the benefits, the collective strategy to boycott the CCA contract began to collapse. As one of the Big 3 merchants explained, when one merchant broke with the cooperative strategy, everyone did: “For a while, people were refusing to use CCA rules, but then one guy traded on them and so it was either, you let your competitor get all the business, or you trade on them too.” He noted that there was “no discipline” in the market and that the margins were small enough that competition was “cut-throat.” Rather than cooperating to set the rules of the game, merchants again slipped into competition over the plays of the game to access the Chinese market.

conclusion This chapter demonstrates that emerging rivals face considerable challenges in their redirection strategies and must develop new tactics to overcome them. Perhaps most critical is the problem of institutional dependence. Rivals are unable to simply impose new rules as their own competitiveness is reliant to some degree on the existing arrangements, including the broader supranational institutional structure. Seeking to challenge the rules of Western incumbents, the Chinese state faced a scientized and marketized rule-making environment. In this context, it was compelled to develop new strategies to direct institutional change as its conventional levers of political control had been weakened. This demonstrates the way in which competitive efforts to shape the rules of the game drive not only institutional change but also the transformation of the structure of states themselves. As Saskia Sassen argues, national states “are producing the necessary instrumentalities that enable new forms of authority” (2006:233). Specifically, the Chinese state attempted to imitate US institutions in order to overcome the problem of institutional dependence. The goal was to master key institutional arrangements developed in the United States, such as the classification system and the private trade association, in order to then redirect them to privilege their preferences. Here we see that the types of strategies that institutional dependence engenders create processes of institutional change that are incremental in nature because rivals are compelled to work from and retool the existing arrangements. This chapter also challenges accounts that point to the Westernization of governance or the unstoppable power of transnational firms under neo-

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liberal globalization by focusing on interfirm and interstate competition. Western transnational firms wield considerable influence in negotiations over transnational governance in the cotton trade, yet the emergence of powerful rivals such as China presents significant challenges to the agendas of both powerful Western governments and transnational firms. The struggles among firms and states are not simply over the distribution of institutional power between public and private spheres but also over the geographical distribution of institutional power.

chapter six

Switching Tracks China’s huge market “is ours, but we’ve been passive, not proactive. To negotiate with the other side, we need our own cards to play. Standards are China’s cards.” fa n g x i n g d o n g , c h i n e s e b u s i n e s s c o n s u lt a n t , April 2, 2004 (as cited in Kennedy 2006:46)

Chatting in the lobby of a Liverpool hotel at the annual meetings of the International Cotton Advisory Committee (ICAC) in 2005, a USDA official told me about his upcoming meetings with the China Fiber Inspection Bureau (CFIB). It would be his first visit to China, and it was an important one. The CFIB was adopting the USDA’s cotton quality classification system. The USDA saw this as a transfer of institutional arrangements that they hoped would bolster US cotton producers’ competitiveness and help them maintain institutional control over cotton quality standards. A year later I spoke with USDA officials again and discovered that the USDA’s negotiations with the CFIB had not exactly gone according to plan. After another visit to China, it had become clear that the Chinese state did not simply aim to imitate the USDA’s classification system but to overtake it—that is, to redirect the classification system, and the benchmark standards underlying it, to better serve Chinese rather than US interests. “They took me to one of their state-of-the-art labs,” one USDA representative explained, “It was scary. . . . If that is their best lab, their worst lab could be as good as our best lab!” The CFIB had set their sights much higher than adoption of the USDA standards and technology. “They say our USDA system is a model. They make no bones about it, they hope to improve upon our model,” a USDA official recounted. In the course of a few months, I was headed to China myself. During an interview, a representative of the China Cotton Association confirmed that the ambitious plan to adopt the USDA classification system was making progress. Moreover, he explained that new Chinese standards were in the

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works, some of which would be different from the USDA standards. For the USDA, the potential for the Chinese state to introduce new standards for cotton imported into China appeared to be a tangible threat, and the stakes were high. If China made its own standards, a USDA official explained, the United States would either have to take China’s standards or fight with them about it. But “anybody else in the world that was selling to China would side with them.” Indeed, the possibility that the Chinese state could successfully take control of benchmark standards and make them switch tracks to privilege their preferences amplified the USDA and the US industry’s concern with discussions at the ICAC about creating a more representative global classification system and standards (see chapter 4). The US industry and the USDA thus launched a preservation strategy to co-opt the process to ensure that any globally adopted system would be based on the USDA’s classification system and benchmark standards. Yet, concerns that the US system and standards represented a globalized localism would not be easily swept under the rug. Rather, these concerns remained central at an ICAC meeting that I attended in Goiânia, Brazil, in 2006. Greeting acquaintances I had made at the same conference the previous year, I squeezed my way through tight rows of chairs to claim a seat at the back of a session on the harmonization of quality classification. The chair opened the meeting by reminding attendees of their overall goal: to create a global classification system that would serve the common good of “the entire cotton community.” But as the meeting progressed, clear disagreements emerged regarding just what would benefit the “cotton community” and who had the power and technical expertise to make such decisions. A fiber specialist explained that the ICAC would need to use mechanisms such as round trials to demonstrate the reliability of a global measurement system. Logistically, there would be a charge for participating in the round trials, just to cover costs, an ICAC staff member noted, but, given how costly the new system would be for developing countries, they may be able to provide funding to facilitate developing countries’ participation in the round trials. An executive from a transnational merchant firm commented dryly, “If a lab can’t afford $300/year for rounds testing, can they really upkeep a lab to the necessary standards anyway?” While some tensions emerged as the chair led the group through the agenda, other attendees interrupted, more concerned with the issues that had not made it onto the agenda. Why are we measuring only these few

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fiber characteristics, some questioned. An official from the African Cotton Association explained that hand-picked fibers performed better than machine-picked cotton on certain quality characteristics that were not measured by the US instrument classification system. A representative from the Indian industry agreed that many countries in the global South would benefit if quality was defined differently. Overall, it was clear that challenges from multiple fronts would not leave unscathed efforts by the US industry and the USDA to reconstitute their institutional power.

*

*

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These struggles over the governance of quality standards draw into sharp relief the multifaceted competitive dynamics that shape institution building and institutional change. In this chapter, I trace these overlapping axes of contestation in order to understand how redirection strategies and protection strategies stimulate dominant actors to develop preservation strategies that aim to reconstitute institutions in ways that appease challengers and protect their institutional privileges. The new arrangements that conflictdriven processes of institutional change evoke are hybrid in nature precisely because dominant actors themselves are compelled to reconstitute the rules. In particular, I explore the preservation strategies pursued by the USDA and transnational merchants to reconstitute their institutional power in the midst of both protection strategies from more marginalized cottonproducing countries and redirection strategies from China. These efforts were funneled through the scientized and marketized legal framework created at the WTO. Strategizing within the framework of the TBT Agreement, the USDA launched an effort to amass evidence of the “international” character of their system and standards, while at the same time trading a degree of control over standards for transparency given the perceived threat of a Chinese bid for institutional power. For their part, transnational merchants pursued a similar strategy to cast their particularistic rules as universal and to position themselves as seemingly neutral “global” actors that could maintain control over dispute settlement, regardless of whether the geographic seat of institutional power over benchmark standards remained in the United States or shifted to China. These efforts ultimately contributed to a new, hybrid institutional arrangement as the institutions established by the US state and transnational merchants began to switch tracks to serve new interests (see Table 6.1). Indeed, what emerged from these competi-

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t a b l e 6 . 1 . Actors Controlling Key Governance Tasks, 1923 –2004 vs. 2005 –? Key Governance Tasks

Public, Transnational Standards for Embedded Liberalism

Standards with Chinese Characteristics and Private, Transnational Dispute Settlement

Definition of Quality

US state (with oversight from US industry and foreign merchants and textile manufacturers)

Interstate body (ICAC) adopting US state’s definition of quality, but revising it in response to Chinese demands

Benchmark Standards

US state (with oversight from US industry and foreign merchants and textile manufacturers)

Interstate body (ICAC) adopting US state’s benchmark standards, but with potential challenge from the Chinese state

Dispute Settlement

Private trade associations in the United States and Europe

Transnational merchants’ private trade association (ICA), positioning itself as geographically neutral amid geopolitical competition

tive strategies were US standards with Chinese characteristics and private, transnational dispute settlement arrangements that were positioned as geographically neutral although not scale neutral as they continued to privilege the most powerful global actors. What is critical is how multiple axes of conflict drive processes of institutional change. Pressured by both redirection and protection strategies, dominant actors perceived their bargaining power as eroding and revised their preferences and strategies in these institutional struggles, choosing to reconstitute their institutional arrangements to appease challengers. In this way, we see how not only redirection and protection strategies but also the preservation strategies of incumbent rule-makers contribute to the construction of institutional arrangements that are, by virtue of these competitive strategies, inevitably hybrid.

e m e r g e n c e of u s da’ s p r e s e rva t ion s t r a t e g y As negotiations with the Chinese state unfolded, the protection strategy on the part of cotton-producing countries at the ICAC was also intensifying. In 2003, the member states of the ICAC had established an “Expert Panel on Instrument Testing of Cotton” with the goal of creating an international

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instrument-based classification system that would represent the interests of industry players around the globe (ICAC 2003c). While the Expert Panel was established through the ICAC’s formal one-state, one-vote procedures, decision making within the Expert Panel was more informal. Industry players report that tense negotiations unfolded over how harmonization should proceed. Many in the industry thought this would be an opportunity to forge a classification system and benchmark standards that accounted for the diversity in fiber quality across different regions of the world and different methods of harvesting and processing. To achieve this end, many felt that a relatively neutral body, such as the Bremen Fibre Institute in Germany, should take the leadership role in organizing the harmonization process. Indeed, the executive director of the ICAC asked the Bremen Institute to submit a proposal for how the accuracy and reliability of a globally integrated classification system could be achieved such that it would be accepted by the commercial trade. The Bremen Fibre Institute had a strong reputation in fiber science. Moreover, as the German textile industry had declined into near nonexistence, the Bremen Fibre Institute could claim to be a largely disinterested and thus legitimate actor to play this leadership role. Seeing this as a challenge to the US system and standards, the US industry and USDA responded to these growing pressures by launching a preservation strategy designed to co-opt the ICAC process and ultimately reconstitute its institutional arrangement to at once diffuse the marginalized actors’ protection strategy and protect the United States’ institutional privileges. To this end, the USDA and the US industry would need to establish their own leadership role and to establish the principle that the US instrument classification system and benchmark standards should be the basis of global harmonization. Their arguments in these closed-door negotiations likely reflected their public rhetoric. As a cotton producer and a former chairman of the NCC insisted, “As a cotton producer, I think I am free to say that we are supportive of the ICAC expert panel of judges as long as the actions of the panel are in line with the USDA classification standardization objectives and procedures. . . . Only USDA is qualified to lead an international effort to standardize instrument classification” (as cited in Laws 2005a). A USDA official echoed these sentiments that global harmonization should mean adoption of the US classification system and benchmark standards: As instrument-based classing spreads throughout the world—and I think it’s going to spread more quickly as we go along— our system is getting more and

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more attention and focus as the example to be followed. . . . From the USDA standpoint, we support the concept of getting more countries on board with adopting and emulating the U.S. system to perpetuate global accuracy, consistency in procedures, and utilization of standards and standard practices. (Earnest 2005:2)

Moreover, the US industry and the USDA came to see the negotiations in the ICAC as important not only in and of themselves but also in their strategic relations with the Chinese state. As the vice-president of the National Cotton Council and CEO of a major cotton merchant firm explained in a government hearing on China-US economic relations: It is in the best interest of the U.S. if China adopts standards and testing protocols consistent with those we currently use. China’s classification reforms coincide with activities by several other non-U.S. cotton producing and consuming countries to consider adoption of new standards that could be significantly different than the longstanding U.S. system. Though we don’t believe such a shift is likely, it would complicate our export efforts significantly should it occur. (Weil 2006)

If the US system and standards were adopted by the ICAC, this at once would avoid the potential for another set of competing standards and ultimately could help the USDA gain bargaining leverage vis-à-vis the Chinese state. A USDA official explained to me that their efforts to influence the harmonization discussions at the ICAC were ultimately about China. If the US industry could get the rest of the world on the US system, it would be harder for China to make a bid to take over. That is, the USDA and the US industry wanted to construct the legitimacy of its system and benchmark standards through the ICAC before it came down to a competition between Chinese and US benchmark standards. The US industry and the USDA were ultimately able to push their agenda through the ICAC Expert Panel by securing the support of some of the most powerful actors in the cotton trade, transnational cotton merchants, who would be primary users of the standards in the commercial trade. Transnational merchants were adamant that a global classification system and standards could be adopted for the commercial cotton trade only if its reliability could be demonstrated. Industry players report that these US and European-based merchants, as well as private cotton fiber inspection firms, threw their support behind the global adoption of the US system and standards. Publicly, a representative of the transnational merchants’ trade association, the Liverpool Cotton Association (LCA), expressed that “an in-

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ternational agreement . . . is needed and ICAC could help to achieve it in order to continue good trading practices” (ICAC 2003b:1). Despite their ability to gain powerful allies, the United States’ leadership role would be highly contested, particularly given the growing dispute over their cotton subsidies that was brewing at this time. As such, the USDA agreed to work together with the Bremen Fibre Institute to establish a framework for harmonization. The Bremen Institute could bring a broader sense of legitimacy to the endeavor. Indeed, the Bremen Fibre Institute in many ways became the public face of the harmonization effort, as the USDA stepped back from activities such as chairing meetings. Most importantly for the US industry, the Expert Panel agreed that their goal was “to facilitate the adoption of instrument testing standards and procedures utilized by the United States Department of Agriculture (USDA) by all testing centers around the world” (CSITC Task Force 2005:2). The Expert Panel would encourage and facilitate the adoption of the US instrument classification system that measured five fiber characteristics (strength, length, length uniformity, micronaire, and color) and use the USDA’s International Calibration Cotton Standards as the basis for calibrating the instruments and thus assessing their accuracy and reliability. With this plan of action in place by 2005, the Expert Panel agreed to change its name to the Task Force on the Commercial Standardization of Instrument Testing for Cotton (CSITC) in order to reflect the “new phase of work facilitating the implementation of proposals” (CSITC Task Force 2005:2). The ability of the US industry to push its own demands through the Expert Panel and onto the agenda of the Task Force, however, would not eliminate resistance to their system and standards. In discussions at Task Force meetings in 2005, representatives from the Indian industry in particular were insistent that the adoption of the US instrument classification system did not require adoption of the USDA’s benchmark standards. CIRCOT, the Central Institute for Research on Cotton Technology, which was part of the Ministry of Agriculture in India, also created benchmark standards for HVI machines and other measurement instruments for users in India, Pakistan, and Nepal, and thus claimed they could also perform this function. The Indian industry argued that other benchmark standards, such as those produced by CIRCOT, could be used, or a new set of global benchmark standards could be created that would be more representative of cotton quality around the world. Either way, the Indian industry expressed that “the supply of calibration cottons should not be monopolized” (CSITC Task Force 2006a:10). Moreover, representatives from the African Cotton Association,

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representing regional ginners and merchants, repeatedly raised concerns that the fiber characteristics that best demonstrated the superiority of handpicked cotton were not included in the harmonization proposal (CSITC Task Force 2005, 2006a, 2007a, 2007b, 2008). With continued resistance, the USDA, the US industry, and the key players from the Expert Panel that directed the meetings of the Task Force employed the discourse of scientism in an attempt to depoliticize the issue and convince other cotton-producing countries that the US system and benchmark standards were legitimate as the basis for global standards. To this end, they admitted that the US system and standards did not represent “neutral” science that was universally applicable across all cotton-producing countries. The Task Force, for example, formally acknowledged the “frustrations of African producers about the need for additional tests” (CSITC Task Force 2006b:2). At the same time, however, the USDA used scientized politics to argue that there was currently no alternative to the US system and standards. A USDA official explained that the West African bloc, for example, had a legitimate case for their demands but insisted that there had been no research breakthroughs on the parameters they were interested in and that existing instruments just were not fast enough to be used for the commercial trade. The USDA and the US industry argued that their hands were tied. Additional fiber characteristics could not be added to the instrument classification system just to make it more representative. By drawing on scientism, the USDA’s strategy eroded the need for stakeholders’ consent to governance outcomes (see Krippner 2011). While a wide range of actors in the cotton trade might support the inclusion of new measurements, international agreement was not enough. Science must undergird the measurements, as a former chairman of the NCC argued: “We support instrument classing only through methods that have been proven feasible as well as reliable. We have resisted the temptation to compromise accuracy just to expedite adoption of instrument testing” (cited in Laws 2005a). Instruments to measure additional characteristics first had to be developed and then had to be proven as reliable for the commercial trade. Moreover, instruments had to measure cotton fast enough to make them practical and feasible for the volumes of cotton traded. It was only on the basis of these criteria that new measurements and standards would gain the support of transnational merchants and textile manufacturers that would use the instruments for commercial trade and ultimately gain acceptance as “international” standards as recommended under the TBT Agreement. As fiber science experts flashed charts full of numbers about inter- and intralab

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variability and confidence intervals at the 2006 meeting that I attended, it was clear that, if one was versed in both fiber science and statistics, one would have more influence over how cotton quality would be defined and measured. In this way, the discourse of scientism allowed the USDA, as Krippner (2011:146, original emphasis) puts it, to impose “social distance as the exclusive authority of the scientist over a problem is established” (see also Offe 1984). The discourse of scientism, as institutionalized through the TBT Agreement, also helped the USDA to depoliticize decision making over standards by establishing temporal distance or temporal uncertainty regarding when the problem of new fiber measurements would be solved. In the scientific realm, “facts are gathered, ordered and acted on in a methodical process that is foreign to the rhythms of political life” (Krippner 2011:146; see also Offe 1984). From this view, everyone could agree that new fiber characteristics should be added, but the timing of their inclusion would be driven by the uncertain pace of scientific discovery. Indeed, the USDA and US industry successfully gained enough agreement to elicit an official statement by the Task Force, as was reported from the 2007 meetings: There was general agreement that CSITC should expand its focus to these and other relevant fiber quality measurements, once the current system is adopted universally, and once rapid/repeatable measuring equipment becomes available. (CSITC Task Force 2008:3, original emphasis)

Moreover, the USDA and US industry were able to push the Task Force to emphasize “the need to ensure that calibration standards are based on USDA reference material to ensure uniformity” in order to stall Indian demands for the use of different benchmark standards (CSITC Task Force 2006a:11). In effect, by drawing on the discourse of scientism, the USDA and US industry attempted to scientize politics, or channel politics through science (see Weingart 1999). By emphasizing science as the basis for decisionmaking, they were able to bracket concerns with fairness in favor of technical concerns (see Kinchy 2010). Indeed, proponents of the US system were able to effectively define the goal of the Task Force in technical terms. As the Task Force’s report from the 2005 meeting explained: There was also concern expressed during the 4th Meeting about the need to recognize differences between handpicked and machine picked cotton. However, there was agreement that the concern of the CSITC was to ensure uniformity between instrument results in different locations, and not to try and differenti-

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ate between cottons of different origins. While the importance of harvesting method is recognized in cotton marketing, it was agreed that the harvesting method is not a factor in instrument testing. (CSITC Task Force 2005:3)

In this way, the Task Force effectively defined its task as one of ensuring uniformity across measurement instruments, obscuring the fact that testing uniformity across instruments presupposed an agreement on the definition of quality and what common benchmark standards would be used to calibrate the instruments. That is, while the Task Force professed that it did not “differentiate between cottons of different origins,” its adoption of the USDA definition of quality and benchmark standards already did. The US industry also attempted to address these concerns through venue shifting. They argued that the Task Force was not the right venue for “research” on new fiber measurements. The USDA, the Bremen Fibre Institute, and the International Textile Manufacturers’ Federation, they suggested, all had different programs that would be “more appropriate vehicles for the investigation of methods to develop tests for these parameters” (CSITC Task Force 2007a:4). In this way, they attempted to exclude new fiber measurements from the official classification system the Task Force was developing for the commercial trade by diverting the issue to a different forum. While drawing on discourses of scientism to deflect calls to include additional measurements, the USDA, with the help of the Bremen Fibre Institute, moved forward to actively reconstruct the institutional arrangements surrounding the United States’ system and standards in order to verify the reliability of the system on a global scale so it could be adopted for the commercial trade. In order for a global instrument classification system to be accepted and used by textile manufacturers and merchants around the world, it had to be demonstrated that there was minimal variation in classification results (CSITC Task Force 2005:9). That is, whether a classification lab evaluating the quality of a cotton sample was in Benin, the United States, or China, it had to provide the same results. To this end, the instrument classification system could not just be adopted by laboratories around the globe. Rather, these far-flung classification laboratories had to be linked into a common, permanent institutional structure that would ensure the quality and thus the value of the cotton was reliably measured no matter where that cotton travelled. The Task Force’s main aim was to establish this institutional infrastructure on the basis of the US system and benchmark standards. The heart of this arrangement would be a quarterly system of Round Trials involving

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private and state-run classification labs around the world. For each Round Trial, the USDA made copies of five cotton samples with known values and sent them to all participating laboratories, which measured each sample six times each day for five days using their instrument systems (CSITC Task Force 2007a:3). The USDA collected the data, and the Bremen Fibre Institute analyzed it to verify the accuracy and precision of the labs’ results in relation to one another and provided feedback to labs to help them improve. The Task Force Round Trials would provide quarterly checks of the system on a global scale. In some respects, the Task Force was attempting to cast on a global scale the institutional structure that the USDA had developed to ensure the reliability of its domestic labs. The goal was to provide verification of the reliability of classification results on a regular basis. In other respects, however, this global institutional structure took a significantly different form. In the governance of its domestic, public system, the USDA had assumed the responsibility (1) to ensure that all labs in their territory provided reliable results and (2) to ensure that all industry players in their territory had access to instrument classification. Moreover, the USDA operated a quality assurance program in which a random sample of 1 percent of all cotton classification samples tested by the USDA’s twelve classing office labs was sent to their Quality Assurance Branch in Memphis, where the samples were retested, and feedback on the data was provided to the labs on a daily basis (Gibson 2003:674). This system also created public accountability. Industry players, and particularly the weakest actors such as cotton producers, could hold the state accountable if they felt their cotton was not classed reliably or if they did not have access to classification. Through the Round Trials, however, the Task Force did not assume responsibility to ensure access to labs for all industry players. Either individual states or private actors would set up labs, or cotton producers would be penalized for not providing instrument classification. Given the high cost of the system, this appeared likely to stratify cotton producers and cottonproducing states on the basis of their ability to pay.1 Indeed, as a range of countries including Australia, Israel, Uzbekistan, Greece, Spain, and South Africa began adopting instrument classification, many African states feared that, if they were the only countries that did not adopt instrument measurement, their cotton would receive price discounts on the global market. “We don’t have a choice,” a state official from the West African bloc explained, “We’ll need it to get our cotton on the market.” An ICAC representative concurred, commenting that, within a few years, 60 percent to 70 percent

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of the world would be using instrument classification: “If the major exporters go this way, the smaller exporters have to go this way too or they’re at a disadvantage.” In short, automated instrument classification would become the minimum standard necessary to trade cotton transnationally. This kind of investment was particularly difficult for African states that faced revenue losses given the privatization of state trading enterprises. Moreover, as states struggled to invest in this capital-intensive system, private transnational inspection firms and merchants began to establish global networks of classification labs. For transnational inspection firms in particular, the push toward instrument classification represented a potential market niche, and they were financially positioned to set up these labs much more quickly than states or domestic private actors. Privatization raised reliability issues, however, particularly in cases where the transnational merchants that were buying cotton from producers and ginners were also classing it or paying a private inspection firm to class it for them. It was these reliability issues that had compelled the USDA to intervene in cotton classification in the early 1900s. Moreover, this also meant that cotton producers would have access to instrument classification only when it was deemed necessary and profitable by private actors. The uneven access that this could create was evident in the case of Zimbabwe. The state trading enterprise in Zimbabwe was privatized, and new private players were allowed to enter the market in the late 1990s (Tschirley et al. 2008:138–39). Industry players report that one company decided to install instrument classification while others have not. As a result, it is estimated that only half of Zimbabwean farmers have access to instrument classification (ICAC 2011b). Furthermore, the Task Force did not assume the responsibility to ensure that all labs provided reliable results. Rather, the Task Force would verify whether or not labs were capable of producing reliable results. To this end, the Task Force agreed to release information about the Round Trials and the reliability of classification labs in three ways. First, they would publish an overview of the Round Trial results outlining the variability within and between classification labs and a statement about the accuracy and precision of the labs overall. This statement would keep the identity of individual labs and their results confidential while demonstrating to the public the reliability of instrument classification as a global system. Second, each classification lab would receive a summary of their performance in relation to other labs, which they could provide to their customers in order to demonstrate their classification proficiency. Finally, the Bremen Fibre Institute would

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provide each lab with more detailed data on their performance, as well as technical advice if requested, to help improve their reliability (CSITC Task Force 2006b). Thus, while some feedback and technical advice was available, it was ultimately the responsibility of national states and/or private actors in cotton-producing countries to ensure their labs could achieve certification and establish a reputation for reliable classing. In effect, countries no longer competed just to ensure a national reputation for consistent quality (see Larsen 2003) but also to ensure a national reputation for reliable classification laboratories. Some cotton-producing states were beginning to assume this role. The Brazilian government, for example, began requiring all private classification laboratories in their country to participate in the Task Force round trials and to provide their results to the government for evaluation in order to develop a national reputation for reliable instrument classification (CSITC Task Force 2010a:7, 2010b:9; McAlister 2011:44). As well, international organizations stepped in to support African countries in putting in place the institutional infrastructure that would help to establish and maintain reliable classification laboratories. The ICAC Task Force requested financial support from the Common Fund for Commodities (CFC) and the European Union (EU) to facilitate instrument classification in African countries. The EU and the CFC pledged $3 million and $2 million, respectively, to fund adoption on the basis of a proposal designed by fiber measurement specialists from the Bremen Fibre Institute in Germany and CIRAD (Centre de Coopération Internationale en Recherche Agronomique pour le Développement) in France. The project would provide funding to set up and train staff for two Regional Technical Centers— one in Mali to serve West Africa and one in Tanzania to serve East Africa—that would act as support centers for African classification labs (CSITC Task Force 2006a). The goal was to establish regional centers of excellence that could offer training for other labs, provide technical information, and run regional round trials on a quarterly basis to supplement the Task Force’s round trials. Moreover, the Regional Technical Centers were to offer retesting services similar to those conducted by the USDA for its domestic classification labs. Labs in the region could send a proportion of their samples to the Regional Technical Center to be retested such that the results and reliability of the lab could be verified (CSITC Task Force 2010b:10). The money, however, was slow to materialize, especially from the EU, and the start date of the project continued to be delayed. Once it did get underway, the project lasted only three years, at the end of which

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the new technical centers had established their own proficiency but, project managers reported, the broader services such as regional round trials and retesting were not in operation. Overall, the spread of instrument classification, and particularly the institutional infrastructure to support it, was uneven. By the 2007 meetings of the Task Force, fifty fiber measurement laboratories using over seventy measurement instruments around the world were participating in the Round Trials (CSITC Task Force 2007b). And participating laboratories were demonstrating acceptable levels of reliability. Moreover, key merchant trade associations signaled their growing confidence in the system. Drawing on the Round Trial results, the Liverpool Cotton Association (LCA) and the Gdynia Cotton Association began revising their contract rules to include provisions for how instrument classification would be used in the commercial trade and how disputes would be settled if two different machines located in different places gave different results (CSITC Task Force 2008). These efforts to cement these new institutions served a critical purpose for the US industry and the USDA’s preservation strategy. As the US classification system and benchmark standards became the basis for global and regional round trials, the USDA was able to amass evidence of the “international” character of its classification system and benchmark standards in operational terms, if not in representativeness. If the Chinese state were to make a competing bid to set standards, this would be critical evidence if a dispute were to be settled under the rubric of the TBT Agreement. The “international” character of the US system and standards, however, was not secured. There were around 1,300 classification instruments used for commercial classification worldwide that were the key candidates for the Round Trials (CSITC Task Force 2008; Ghorashi 2011:24). While 300 machines belonged to USDA and thus had already demonstrated their reliability and seventy more had joined the Round Trials, there were still a vast number of nonparticipants. In 2007, the Task Force called for a major effort to improve participation (CSITC Task Force 2007b:3).

hedging their bets Similar to the USDA’s efforts to reconstitute their institutional power over quality standards, transnational merchants developed a preservation strategy with the aim to retool their dispute settlement arrangements to assuage challengers and safeguard their institutional privileges. Not only were transnational merchants dissatisfied with the official rules that the Chinese asso-

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ciation, the CCA, released, but also they were concerned with the growing protection strategies from more marginalized actors in other trade associations (see chapter 4). In this context, the transnational merchant–dominated LCA decided to persuade private trade associations representing merchants and textile manufacturers around the world to adopt its contract rules and use its arbitral body to settle and enforce disputes for all transnationally traded cotton. The idea was that, if they could get other trade associations to adopt their rules, they could use that as added bargaining power vis-àvis the CCA. At this time, the CCA remained largely isolated from broader negotiations in the global cotton trade as it was not a member of any of the key international cotton organizations, such as the International Cotton Advisory Committee (ICAC) or the Committee for International Cooperation among Cotton Associations (CICCA), in part because Taiwan was a member. To this end, transnational merchants cast their proposal as representing the general interest of the “cotton community” as a whole. “The world needs one major trade body and one international set of rules,” insisted the president of the Liverpool Cotton Association (as cited in LCA 2003:3). From the perspective of Western, transnational merchants, it was also clear what those common rules should be: the rules of the LCA. Transnational merchants pursued their preservation strategy through three key tactics: (1) changing key rules to gain weaker actors’ consent, (2) discursively framing LCA rules as “ethical” business practices, and (3) making its authority structure more representative. The LCA hoped that these efforts would persuade other trade associations to join their organization, ultimately bolstering its bargaining power vis-à-vis the Chinese state and the CCA. The LCA’s first strategy was to evaluate and revise their rules in order to claim their impartiality. The LCA compared their rules and procedures with those of other private trade associations and arbitral bodies, such as the Sugar Association and the Grain and Feeds Trade Association (LCA 2003:4). Further, they invited the Chartered Institute of Arbitrators to provide an assessment of the strengths and weaknesses of their arbitration procedures in comparison with other UK-based trade associations. On the basis of these evaluations, one of the key changes made was to their arbitration practices. The LCA decided to replace their adversarial arbitration system with a tribunal system, more similar to that used in the continental European trade associations. In the new tribunal system, each party would still appoint and pay an arbitrator, but the LCA would also appoint a chairperson to each arbitration panel. This chairperson would manage the arbitration and would

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have the final vote on the arbitral award. In addition, any and all payments for arbitration would have to be made through the LCA Secretariat to ensure transparency (LCA 2003:26–27). These changes increased the LCA’s institutional capacity to construct more neutral arbitral panels but would not guarantee this outcome. Sociolegal scholars have argued that the process by which private arbitral bodies appoint “neutral” arbitrators tends to be biased against parties in the global South. Western and transnational actors are often viewed as “neutral” whereas arbitrators in the global South are viewed as more biased and representative of “local” concerns (Dezalay and Garth 1996:95–96). It would remain to be seen how representative these neutral appointees would be. While these efforts focused on constructing the LCA’s legitimacy in the eyes of other private industry players around the world, the LCA also saw these rule changes as important for establishing the legitimacy of their arbitral decisions in local courts (LCA 2003:4). With these changes, it would be more difficult for local courts around the world to undermine or nullify LCA arbitral awards by arguing that improper arbitration procedures were used. LCA officials also worked with CICCA and the ICAC to encourage states to uphold private contract governance. Transnational merchants used the ICAC meetings as an opportunity to implore state officials to uphold their commitments in the 1958 New York Convention. At several ICAC meetings, transnational merchants “urged governments to ensure that valid international arbitral awards are enforceable in their countries” (ICAC 2003c:3). They argued that enforcement of arbitral awards should be a matter of public policy for courts. State courts should uphold and enforce private arbitral agreements “in order to ensure that a nation’s export reputation is not tarnished by the disreputable exporter or importer” (CICCA 2009). The LCA was not willing, however, to change its controversial invoicing back rules. Instead, they made a strategic interim concession to other trade associations. The LCA agreed to allow trade associations to adopt the LCA contract rules without adopting LCA arbitration (Wellman 2005). This meant that industry players would write their contracts according to LCA rules but, in the case of a dispute, they would settle it using the procedures of their national trade association. This represented a significant concession but a strategic one. By letting cotton associations keep arbitration within their own associations, transnational merchants put aside for the time being their goal to establish the LCA as the authoritative arbitral body for the industry. This would keep continued conflict over LCA arbitration procedures, and their failure to link blame with breach of contract, from halting

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all standardization efforts. At the same time, it would achieve perhaps a more important goal: constructing broader support for private arbitration and enforcement outside of state courts. When transnational merchants had pushed clients to use LCA arbitration, they had responded by turning to state courts when disputes arose. Allowing members of other trade associations to use their own arbitral bodies meant that transnational merchants would have to loosen their control over arbitration but would increase the acceptance of private arbitration and enforcement. If actors were using their own arbitration bodies and procedures, they would be more likely to respond to private enforcement mechanisms like blacklists and less likely to challenge arbitral decisions in state courts. The LCA’s second strategy was to use these rule changes as the basis of a discursive campaign to claim their impartiality and thus their legitimate leadership in the transnational harmonization of dispute settlement mechanisms. To launch this effort, in 2004 the LCA rebranded itself as the ICA, the International Cotton Association. Liverpool was associated with a long history of powerful merchants dating back to the 1800s. By changing their name, transnational merchants hoped to cast off this image. The president of the new ICA declared: “By altering our name we are making a statement to the world. We are the internationally recognized arbitral body for cotton” (as cited in ICA 2004:20). To gain support for the ICA, transnational merchants portrayed the shifting geography of the cotton trade as presenting great uncertainties for market players—uncertainties that could be best minimized through adoption of the ICA’s contract rules and dispute settlement mechanisms. As the cotton industry as a whole was becoming increasingly dependent on the Chinese market, they argued, the economic interests of all actors were threatened. As the president of the ICA explained: Contract default is a normal occurrence with domestic China and our Chinese friends need to be informed of the importance of contract sanctity within the International Trade. A severe breakdown of this with China could have dramatic ramifications worldwide and the whole issue of sanctity of contract internationally. . . . I urge all of you not to underestimate this issue. (as cited in LCA 2003:3)

In this context, they argued, it was “in the interest of the entire world to make sure that this clear understanding [of contract sanctity] is in place” (LCA 2003:27). ICA officials urged others in the industry to “take up the call for further growth in trade through standardization” (ICA 2005:12).

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Common rules for contracts and dispute settlement were necessary to ensure all actors could effectively navigate an uncertain trading environment and benefit from trade growth. Indeed, transnational merchants cast transnational harmonization around their rules as the only way to ensure “ethical” trading practices in an uncertain and threatening new environment. From the ICA’s perspective, good business ethics were defined as whether or not a party defaulted on a contract. The transnational merchants in the ICA suggested that those who upheld contract sanctity were ethical businesspeople, while those who defaulted on contracts were not: “we have re-focused ‘sanctity of contract’ as the core tenet of this industry, by identifying and isolating those who do not share the overwhelming worldwide belief in this value” (LCA 2003:26). Merchants in the ICA argued that adopting their rules, as well as the blacklist as a private enforcement mechanism, was thus simply: for your own protection. It serves us nothing if our competitors do not obey the rules, and attempt to seek some advantage over the honest guys. The responsibility of enforcement is not the Association’s, it is yours, it must be the collective effort of all of us, to ensure that those who do not take our rules seriously, find themselves isolated. (ICA 2004:20)

If all players in the global cotton trade agreed to use the ICA rules, it would make it much easier to use private mechanisms to enforce contracts across borders. As a US-based transnational merchant put it: “The noose must continue to be tightened on defaulters worldwide” (cited in LCA 2003:19). What was not mentioned was how this construction of “ethical” business practices was biased toward larger players who had access to and the expertise and credit lines to use price risk management tools (such as hedging in futures markets), and thus could manage their risk without resorting to contract defaults. As Wallerstein puts it, as capital accumulation is rooted in unequal practices, it is a system that “must profess universalism while practicing anti-universalism” (2004:39). Through this “you’re with us or against us” mentality, the ICA argued that the adoption of the ICA rules represented the solution to the lack of common, ethical contract rules for the transnational cotton trade. Pointing to the significant changes to ICA rules and procedures, the president of the ICA argued: The [ICA’s] new rules for arbitration create an open transparency within our system and it will be extremely hard to argue against the impartiality of the [ICA] now that this has been created. . . . I also believe that the new rules . . .

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will help to address any misconceived perceptions that the [ICA] is not a completely fair and impartial body. (as cited in LCA 2003:3)

In this way, the ICA aimed to distinguish its own neutrality and impartiality from the unfairness of other potential solutions, such as using nationally focused rules representing the narrow interests of only some actors. This reflected broader neoliberal discourses about trade that differentiated between the impartiality of a “universal free trade model” and the “unfairness” of alternative trade practices, such as protectionism (see Sum 2000). To promote this message, the ICA launched an educational campaign to familiarize textile manufacturers and merchants, particularly in countries in the global South, with the newly revised ICA rules. The ICA posted the new rules, a guidebook, and a standard model contract on its website and translated the ICA rules into four languages in addition to English: French, Portuguese, Russian, and Mandarin (ICA 2005, 2006). Moreover, from 2006 to 2009, subsequent presidents, the director general, and other ICA members held interactive workshops and presentations in China, Turkey, India, Bangladesh, Uzbekistan, Australia, Ghana, Benin, Burkina Faso, Switzerland, Tanzania, Brazil, and the United States (ICA 2006, 2007a, 2009b). Finally, the ICA tackled concerns that their authority structure was unrepresentative by diversifying its directorships, its network of arbitrators, and its Rules Committee. In addition to its officers and ordinary directors, the ICA added a new category of “associate directors” who would be “especially appointed to represent the interests and concerns of international members of the ICA and the principal overseas cotton producing and consuming regions” (ICA 2007b). By 2007, the ICA had appointed associate directors to represent the African Cotton Association, the Indonesian Textile Industry, the Pakistan Cotton Textile Industry, the Turkish Cotton Industry, the Australian Cotton Industry, the Committee for International Cooperation among Cotton Associations (CICCA), and the International Textile Manufacturers Federation (ITMF) (ICA 2007b). The ICA president attempted to demonstrate their move toward increasingly diverse representation in his presidential address: We are trying very hard to create a Board which is balanced. For any Organisation to make decisions which are in the best interests of the International trade as a whole, you need an equal number of Buyers and Sellers. On the board of the [ICA] today we have spinners from Brazil, Italy, Turkey and Indonesia. In December we will add an additional spinner from Indonesia and hopefully

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India. These Spinners represent many diverse interests. In addition, we have producers, traders, controllers and arbitrators, all of whom contribute to the debate. (as cited in LCA 2003:26)

By incorporating a broader spectrum of actors within its authority structure, the ICA hoped to legitimate its claims to being a globally representative association both to industry players in trade associations around the world and to their Chinese counterparts. “We are convinced that it is in [China’s] interest to join the international cotton community,” the ICA president explained in his presidential address at the ICA annual meeting. As for their Chinese guests, “may they be so inspired by the unity of nearly 800 cotton men and women gathered here tonight, that they will want to become part of this international movement, being based on the principles of fair and equitable conditions to all parties involved” (cited in ICA 2004:20). The ICA further initiated a training program to globalize its network of arbitrators. While this meant decentralizing control over arbitration processes, an ICA representative explained that, as over half of their arbitrators were UK-based, they were encouraging more arbitrators from other countries. “We need arbitrators in China, in India,” he explained, “. . . we need the credibility. If we can certify arbitrators across the world, then people aren’t so against it just being some decision coming down from Liverpool.” Decentralizing their network of arbitrators, he suggested, would allow people to feel like “I’ve got my own guy here, my ICA arbitrator in my own country who speaks my language. And then my arbitration panel might have someone from Brazil on it and an independent person appointed by the ICA, so you’d really feel like you were getting an unbiased opinion.” In October 2006 at their annual meetings, the ICA held the first ever examination to become a certified ICA arbitrator. In the first seven months, 31 members, from the United Kingdom, the United States, Switzerland, Germany, China, Singapore, and Belgium, passed the Level 1 Arbitrator Training Course exam (ICA 2007a). Subsequent examinations were held in the United Kingdom, the United States, Burkina Faso, Switzerland, and Brazil (Adcroft 2009). Once certified, these individuals could accept appointments as arbitrators for contract disputes or sit as Technical Appeal Committee members within the ICA. In perhaps its most significant concession to establish greater representation, the ICA decided to strategically diversify their Rules Committee. At their annual meeting in 2006, they announced that every trade association that adopted the ICA rules would be given a seat on the ICA Rules Committee. The Rules Committee debated rule changes and drafted proposals to be

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approved by the membership. A representative of the ICA explained the rationale behind this decision: “So then they feel like they have a say in it, it is not just Liverpool telling them what to do.” By offering to incorporate other trade associations into the Rules Committee, the ICA was loosening control over this key agenda-setting function in order to gain broader support for its leadership in the sector. In sum, by changing rules, by framing them as representing “business ethics,” and by incorporating a broader spectrum of actors within its institutional structure, the ICA hoped its preservation strategy would legitimate its claims to be an impartial and globally representative association. Trade associations representing textile manufacturers and merchants in different regions responded differently to the ICA’s preservation strategy on the basis of their shifting competitive positions. The ECC had continued with its regional protection strategy and had harmonized the rules of the European trade associations in the form of ECC rules. Like the ICA, the ECC claimed that its rules were global in jurisdiction and could be used for trade anywhere in the world. The ECC’s claim to global authority, however, would prove ineffective. The ECC had done little to reach out to trade associations in other regions, and ECC textile industries continued to decline. Making matters worse, ECC faced divisions within its own ranks. In 2005, the Gdynia Cotton Association in Poland and the Belgian Cotton Association officially adopted the ECC rules. The following year, the Association Française Cotonnière (AFCOT) in France and the Centro Algodonero Nacional in Spain proposed adoption to their memberships. In contrast, the Associazione Tessile Italiana in Italy rejected the European Rules and instead continued to trade using their national rules (Roskwitalski 2006). Further dividing the ECC, the Bremen Cotton Exchange in Germany expressed its commitment to the goal of globally standardized rules but was unsure if aligning itself with the ECC standardization effort was the best strategy, given that many ECC industries could soon cease to exist (Wellmann 2005). Recognizing the significant divisions within the ECC, the ICA entered into close dialogue with the Bremen Cotton Exchange. Through these discussions, the executives of the Bremen Cotton Exchange agreed to compare their rules with the ICA rules. In June 2006, the membership of the Bremen Cotton Exchange voted to officially adopt them. The ICA president held up the Bremen Cotton Exchange as an example: Tonight I call upon all other associations to support us in this [standardization] task through closer cooperation. Bremen is a fine example of this cooperation:

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they support the idea of “one set of rules” and are currently working on replacing the Bremen Rules with the International Rules. This is a vital step towards harmonization. We appeal to the remaining associations to join this process. In Abraham Lincoln’s words: united we stand, divided we fall. (as cited in ICA 2005:25)

The ICA president equated Bremen’s support of the ICA rules with support for “one set of rules.” In this way, he suggested that uniting to reach the common goal of transnational contract rules meant adopting the ICA rules, or the “International Rules” as he termed them. The ICA’s executive director called for other trade associations to follow Bremen’s lead, insisting that a spot on the rules committee gives associations “a voice in the ongoing development of the ICA Rules. This is not just ‘window dressing’ as [the Bremen representative] has taken full part in committee discussions and has had a noticeable influence on the direction of the debate” (as cited in Harris 2008). Bremen harmonized its rules to match the ICA rules while maintaining the right to use their own arbitral body and procedures to settle disputes. The ICA used Bremen’s partial adoption to construct the ICA rules as the logical end on the linear road to contract rule standardization. From this view, they were able to frame the ECC rules as merely an interim step along this inevitable trajectory. An ICA /ACSA representative explained that the other European associations just needed to continue down the road to harmonization: The officials in Gdynia, Ghent and Le Havre understand that one set of rules is better than three. I view this as an interim or temporary step towards the adoption of the ICA Rules. . . . Having participated in the U.S. debate in the 1970s when ACSA decided to abandon its own rules and uniform contract in favor of the now ICA rules, I fully understand the desire to maintain national or regional identity. The next logical step for these countries is to follow the German model by revising their rules to comport with those of the ICA and by conducting their arbitrations in Gdynia, Ghent and Le Havre by applying these revised rules as Bremen is now doing.” (cited in Harris 2008)

This representative framed holding on to national rules as subjective, based on understandable, but ultimately irrational, concerns for national identity. Adopting the ICA rules, in contrast, was the objective and rational decision necessary to facilitate trade. In the two years after announcing these concessions, an ICA representative reported that the Belgian Cotton Association, the Gdynia Cotton As-

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sociation, and the Centro Algodonero Nacional had initiated discussions regarding the adoption of ICA rules. From a depressed market position, these European associations saw seats on the ICA’s rule committee as their best bet to maintain decision-making power over contract governance as their economic power dwindled. Indeed, the Gdynia association ultimately adopted the rules formally in 2010 (ICA 2010b). Thus, several of the European associations moved toward adopting the ICA rules. Their protection strategy fractured into consent by last resort. However, the French association, AFCOT, was reluctant to adopt ICA rules, given their distinct position within the global cotton trade. The French textile industry had declined, but French cotton merchants were attempting to compete in the increasingly consolidated merchant sector. The French merchant firm, Geocoton, in particular held a significant regional market share in Francophone West Africa, based on neocolonial economic ties. Geocoton was previously the French state-owned CFDT (see chapter 3). After former French colonies in West Africa received their independence, the CFDT secured export monopolies through joint ventures with these new governments and their cotton STEs. The West African STEs thus bargained on behalf of cotton producers, but they were compelled to sell most if not all of their cotton to CFDT. Part of a long history of linking cotton producers in former colonies to textile manufacturers, Geocoton wanted to maintain its regional advantage in Francophone Africa. This regional advantage, however, had become increasingly difficult to retain. The privatization of the West African STEs under structural adjustment programs had further meant the loss of CFDT’s export monopolies in these countries and competition with an increasingly consolidated group of transnational merchants that wanted to access this newly open market. As a result, CFDT/Geocoton lost substantial volumes of its African business from 1994 to 2001 (Guitchounts 2003:11). Its trade volume remained stable from 2001 to 2006, however, given efforts to expand their sourcing operations in other regions (Guitchounts 2008:13). In this context, Geocoton saw the use of their trade association’s rules as one way to maintain their regional advantage in Francophone Africa. The vice president of AFCOT expressed their intent this way: An objective is to strengthen this special link that binds us with the West African countries by elaborating common schemes such as contract sanctity, arbitration and standardization. . . . We hope to keep on transmitting a “Frenchspeaking cotton culture” combining both tradition and modernity. (cited in Cotton International 2005)

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By maintaining the French AFCOT rules, the merchants in AFCOT hoped to solidify relationships with these domestic merchants. In this way, AFCOT’s protection strategy was thus also a competitive strategy. While AFCOT was reluctant to adopt ICA rules, the leadership of the African Cotton Association (ACA) at the time took a role in promoting their adoption. From the perspective of some West African domestic merchants, adopting the ICA rules could be strategic. As the French now had to compete with other merchants to source African cotton, African merchants and producers could play several companies against each other to escape to some degree the price-fixing that came with the French export monopoly. Becoming fluent in the ICA rules could help African merchants better exercise their new bargaining power. Leaders of the ACA thus began to work with the ICA to facilitate workshops in African countries on how to use ICA rules in a protection strategy laden with neocolonial resistance. Finally, the Indian trade associations, who had expressed resistance to the ICA rules in the past, had begun internal discussions around their adoption.2 Since the ICA launched its initial efforts to lead the standardization of contract rules, the Indian textile sector had grown significantly. After China, India was one of the biggest winners from the phase-out of the MFA. Indian textile manufacturers had become the second largest consumer of raw cotton in the world behind China (ICAC 2010a). Much like the CCA, Indian textile manufacturers saw the benefits of adopting the ICA rules: improving their reputation for contract sanctity to access on-call pricing. As such, representatives of the Indian industry decided to at least consider the ICA rules, as one Indian representative commented: “We want to study them. We’ve formed a committee. . . . Over the next year we are going to compare [the ICA rules] to our rules and see what we would be agreeing to, if we were to adopt them.” But actors in the Indian sector still had misgivings regarding what they saw as a largely top-down imposition of the ICA rules. For example, as a panel of ICA representatives gave updates on the standardization process at the 2006 ICAC meetings, an Indian industry representative reminded participants that what was needed was not just updates but a “consultative and consensus process.” While entering the dialogue around global standardization, actors in the Indian sector would not blindly adopt the ICA rules. Despite this plan to consider the ICA rules, another opportunity was emerging for Indian merchants. In the course of a few years, India’s cotton production had dramatically increased due to rising yields (Gruere 2007).3 The Indian sector surpassed the United States to become the second largest

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f igu r e 6 . 1 . India’s Cotton Imports and Exports, 1974 –2008. Adapted from ICAC (2010a). Each year refers to a marketing year—that is, 2000 refers to the marketing year from August 2000 to July 2001.

cotton producer in the world behind China. As production significantly outstripped consumption, India radically increased its exports (see Figure 6.1), and its share of world cotton exports increased from 8 percent to 12 percent from 2005 to 2007 (Gruere 2007). Moreover, Indian merchants enjoyed a competitive advantage as the cotton trade became focused on China. Indian cotton was selling for three to five cents lower per pound than US cotton given lower transport costs (Horton 2008). With its increasingly significant position on the export market, resistance to the ICA rules made sense as part of Indian merchants’ broader expansionary strategy. As an Indian merchant commented, “We were working on moving to the ICA rules . . . but [now] there is not as much interest in moving it forward.” With growing exports, Indian merchants had the potential to “hook on” to China’s rapid growth by establishing direct trading relationships with Chinese textile manufacturers, allowing them to bypass transnational merchants and the ICA rules. As such, it joined AFCOT in a protection strategy that was at once a competitive strategy. A few years before, the ICA had largely dismissed the Indian sector’s resistance to ICA rules. As its competitive position as a major textile and cotton producer strengthened, however, the Indian trade associations became a critical target of the ICA’s efforts to legitimate its authority, as an ICA official commented: “To get India on board as probably the second largest player in the industry behind China would be a real coup.” This

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meant addressing Indian actors’ concerns with the ICA rules. As representatives of the Indian industry had proposed determining which of its own rules were superior to those of the ICA, the ICA took a more active role in channeling how such points of dissent should be handled. For example, the ICA agreed to allow some deviations to account for what it termed countryspecific conditions. The ICA president explained: “Let us not forget that there may be special circumstances that require a specific trade rule for a specific purpose in a specific country. So why not a country annex to cover such circumstances?” (ICA 2006:27). In this way, the ICA tried to construct these country-specific deviations not as a challenge but as a supplement to the global authority of the ICA rules. The ICA thus attempted to address the Indian sector’s problems with the ICA rules while channeling this dissent in a way that supported the overall adoption of ICA rules. At the same time, the biggest transnational merchants knew that some of these competitors in India were very small and would eventually shake out of the market. Many smaller merchants and even gin-owners in India were attempting to get a slice of the Chinese pie, selling small amounts of cotton to Chinese textile manufacturers. Rather than compete in terms of price with these small Indian merchants, transnational merchants preferred to “just wait and let it play out,” as an executive of one of the largest transnational merchants explained to me. That is, they chose to compete not on price but on price risk management. In the long run, prices would fluctuate, and these smaller Indian merchants would not be able to absorb this price risk and would default on their contracts: “The [Chinese] mills will get shafted and will turn back to us” (large transnational merchant). In sum, the ICA had made inroads in its attempts to construct its leadership and control over cotton contract rules. Some trade associations had indeed begun adoption of the ICA rules. However, the ICA’s preservation strategy, launched due to the challenge posed by the CCA, also created new strategic opportunities for weaker actors to demand greater representation in contract governance and, in the case of French and Indian merchants, to try to undermine the ICA’s claim to sectoral leadership. In terms of its broader goal to increase bargaining leverage vis-à-vis China, the ICA’s success was mixed. In a demonstration of its growing willingness to negotiate with the global cotton community, the CCA joined CICCA in 2007—an important step given CICCA’s close cooperation with the ICA and the China’s general refusal as yet to participate in other international cotton bodies (China Cotton Association 2008a). Transnational merchants also convinced the CCA to work with them to offer educational workshops on rules for

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contracts and dispute arbitration for Chinese spinners (ICA 2011d; 2012a; 2012e). Despite these signs of cooperation, the CCA remained dedicated to the promotion of the CCA contract and CIETAC arbitration.

sw itching tr acks? It was the specter of another threat from the Chinese state that disrupted the preservation strategies of the USDA and transnational merchants to reconstitute their power by retooling their institutional arrangements and strategically incorporating more marginalized actors. The perception that the Chinese state was gaining the scientific, technological, and organizational expertise to create new benchmark standards brought new and more far-reaching preservation tactics on the part of the USDA and transnational merchants. Paradoxically, however, these efforts to reconstruct their institutional power in fact contributed to track-switching, or the reorientation of these institutions to privilege new interests. Standards with Chinese Characteristics The USDA had been attempting to deflect demands for additional fiber measurements and to integrate cotton-producing countries around the world into the Task Force’s Round Trials on the basis of their classification system and standards. At the same time, however, the USDA was intensely monitoring the development of the Chinese classification system and overall reform plan. A USDA official explained to me that they were “constantly trying to get information from China” to make sure that “what we’re doing reflects what they are doing.” Evidence was growing that the Chinese state was preparing for another bid to control standards. The Chinese standards agency was moving quickly with the implementation of the instrument measurement system. By the end of 2008, reports from the National Development and Reform Commission (NRDC) and industry players suggested that 1,257 gins had completed the renovation of their equipment, with 86 more in the process. As well, 85 classification labs had been built, housing 278 HVI instruments. In 2008, 1,216 gins participated in HVI classification, up 57 percent from 2007. The total domestic cotton classed by the HVI system reached 2.8 million metric tons in 2008. According to China’s cotton classification plan, the new classification system would be fully operational in September 2010 (FAS 2009). Moreover, the Chinese state notified the WTO of the introduction

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of new cotton standards for domestic use in 2007. These standards were relatively similar to those of the USDA and the controversial neps and short fiber measurements were not included (FAS 2007). Nonetheless, they suggested that the Chinese state’s expertise in fiber science and technology was growing. More critically, at the 2007 Task Force meetings, it was reported that the Chinese state was considering developing their own benchmark standards for a Short Fiber Index (SFI) (CSITC Task Force 2007b:4). Not only would this be changing the definition of quality by introducing a previously excluded measurement, but also the Chinese state was planning on using a more stringent definition of short fibers than had previously been considered in the trade. Any fiber 16.5 mm or less would be considered short; in their research, the USDA had been using a cutoff of 12.7 mm (CSITC Task Force 2007b:4). The 16.5 mm definition would likely result in harsher quality penalties for machine-picked cotton from the United States. Moreover, if the Chinese state introduced these new standards, it would shift the key coordinating function, the production of benchmark standards, to China, at least for this measurement. This possibility for a broader challenge from the Chinese state was further reinforced for USDA officials in a tour of the emerging Chinese classification system. “Their goal is to have a better system than we do,” a USDA official recounted, “. . . Someday you’ll be buying your standards from us—that’s pretty much what they told us.” The perceived threat of a challenge from the Chinese state also stood to destabilize the already fractured alliance between cotton producers and transnational merchants within the US industry. US producers would face price discounts on the market if new fiber measurements, such as a Short Fiber Index, were added to the classification system. However, much like their opposition to the US subsidy regime, US-based transnational merchants were less interested in preserving advantages for US producers and more interested in ensuring that overall control of the classification system and benchmark standards did not shift to the Chinese state, which could weaken merchants’ overall influence over the system. Thus, at the 2007 Task Force meetings, transnational merchants publicly supported an effort to include an SFI. A representative of the transnational merchants’ trade association, the ICA, offered to petition the USDA to develop benchmark standards for a Short Fiber Index at the next Universal Cotton Standards Conference in June 2008 in Memphis (CSITC Task Force 2007b). In response to these pressures, the USDA and the US industry pursued two tactics to further its preservation strategy. The first tactic was to pla-

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cate. The perceived threat of new Chinese standards made it increasingly difficult to simply deflect calls to include additional fiber measurements. As a result, the USDA and the US industry decided to address some of the concerns posed by the Chinese state’s redirection strategy and the cottonproducing countries’ protection strategy in order to maintain their overall control over the classification system and standards. To this end, the USDA agreed to move forward with efforts to shift the definition of quality to include a Short Fiber Index in the classification system. The USDA would provide “unofficial and developmental” benchmark standards for SFI and organize a small group of about ten labs to evaluate the SFI calibration through a “subtrial” within the broader Round Trial system (CSITC Task Force 2010a:7; 2007b). As the results from these “subtrials” for the SFI trickled in, the USDA argued that the variation in results across labs was too high, demonstrating that the SFI was still too unreliable for inclusion in the official Round Trials (CSITC Task Force 2009b:7). The SFI, as well as measurements of maturity and trash, could be included as optional measurements. While this information would be collected for research purposes, it would not be considered part of the official Round Trials (CSITC Task Force 2010b:9). Other fiber scientists lent support to this argument, agreeing that neither the SFI nor the other optional measurements demonstrated sufficient reliability. Outside of the Task Force meetings, however, a fiber scientist expressed to me that the reliability of measurements that were included in the official Round Trials could also be questioned. Variations in color measurements, for example, had increased for all participating laboratories over the course of the 2007–10 Round Trials (CSITC Task Force 2010b; ITMF 2010).4 In his view, the decision to exclude the optional measurements was at least in part a political decision on the part of the USDA. One of the problems contributing to the unreliability of the SFI was the lack of agreement over the reference method underlying the production of benchmark standards. That is, in order to create benchmark standards that could be used to calibrate measurement instruments such that they provided reliable results, there had to be agreement on how to establish the “known” or “true” measurement of the SFI in a sample of cotton on which the benchmark standards could be based. This had become an increasing concern in 2005 as the International Organization for Standardization (ISO) had revised and released a procedural standard, ISO 17025, for laboratories carrying out tests and/or calibrations (originally published in 1999). The aim of the standard was to outline procedures to ensure testing and calibra-

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tion laboratories continually improved their ability to consistently provide valid results. One of the key aspects of the standard was the need to trace and prove the validity of the underlying calculation on which a measurement instrument was based (ITMF 2006). While states had not officially delegated standard-setting authority to the ISO under the TBT Agreement, the ISO had effectively become the most powerful of a handful of standardsetting organizations (see Büthe and Mattli 2011). As such, identifying and verifying a solid method for ensuring the validity of benchmark standards for SFI would be a critical dimension of any SFI standard that would hold water in the transnational arena. Not only was a valid reference method key to ensuring the legitimacy of any benchmark standard to be adopted as “international” standards; it could also increase the reliability of the Short Fiber Index, potentially facilitating its inclusion in the official Round Trials (ITMF 2008:7). The Task Force estimated that reliable benchmark standards could potentially reduce the coefficient of variation for interlab short fiber measurements by half (CSITC Task Force 2010a:7). Several methods did exist to identify a reference value, or “true” value, of cotton’s short fiber content for use in creating benchmark standards. However, there was neither scientific nor political agreement regarding which method was best, or whether any of the available methods were sufficiently reliable for use (ITMF 2006, 2008; CSITC Task Force 2009a, 2009b). The USDA was conducting its short fiber research using reference values from one measurement instrument, the AFIS, which itself was based on reference values from the Suter-Webb instrument. The Chinese state, in contrast, based its short fiber research on reference values from a different measurement instrument, the Roller Analyser (ITMF 2008). For the USDA and many in the international cotton community, the debate was two-fold. What was the best method (and not just the method that best fit the USDA’s existing research investments and market interests)? And, what would China do? The perceived threat that the Chinese state’s course of action could ultimately trump whatever agreement was made among others in the trade was evident at a meeting of the International Committee on Cotton Testing Methods at the International Textile Manufacturers Federation in 2008. This meeting brought together fiber scientists and instrument manufacturers from around the world—indeed, many of the usual suspects that organized and operated the ICAC Task Force—to discuss cotton measurement and classification in relation to textile manufacturers’ needs. A representative from Uster, the most prominent instrument manufacturer

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selling HVI machines, gave a presentation demonstrating that both the Chinese Roller Analyser and the Suter-Webb showed good results when used to calibrate the HVI machines for SFI. A USDA official followed with a presentation on his work on the development of benchmark standards for SFI, raising a number of provocative questions, as the meeting’s minutes reported: “is AFIS a good reference, what will China do, should 16mm be considered as basis length?” (ITMF 2008:7). For all involved, the importance of the decisions to be made was clear, given the uncertainty posed by the Chinese state into the future, as the meeting’s minutes demonstrate: in the controversial and intense discussion it became clear, that any decision now will be an important decision, and will have an impact e.g. to avoid different/separate levels of SFI in different regions of the world. The definite aim of the Task Force is to avoid different levels. (ITMF 2008:7)

The key concern that emerged for the USDA and US industry, as well as others in the cotton trade, was this: how could they protect their own interests but at the same time avoid investing time and resources into research and technology that the Chinese state could later deem irrelevant? It was here that the perceived threat from the Chinese state helped to shift US priorities to better reflect Chinese interests. While reluctant to include and focus research attention on the SFI, in 2009 the USDA announced that they had begun a collaborative study with the Chinese standards agency, the China Fiber Inspection Bureau (CFIB), to determine how to assign reference values to SFI benchmark standards (CSITC Task Force 2009a:6). Moreover, the USDA agreed to develop benchmark standards for both the 16.5 mm and 12.7 mm definitions of short fibers as no agreement on this had yet been made (CSITC Task Force 2009a:6). In short, while the USDA remained reluctant to add fiber measurements that would harm the competitiveness of US cotton producers, the growing pressure from the Chinese state had begun to shift the focus of research on the inclusion of those measurements of most importance to Chinese textile manufacturers and, coincidentally, to producers who picked their cotton by hand. Perhaps more importantly, the USDA had begun to work cooperatively—indeed, conduct cooperative research—with the Chinese state not just on fiber measurement but in relation to the critical coordination function of producing benchmark standards. In essence, the USDA sought to trade a degree of institutional power by giving up some of the advantages enjoyed by US producers with the aim to maintain overall control over quality standards. The USDA’s second tactic was to regulate. That is, the perception that

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the Chinese state was preparing to set its own benchmark standards compelled the USDA to trade a degree of institutional power over standards for transparency. Here again, the USDA sought to maneuver within the vague legal environment established by the TBT Agreement, which offered firstmover advantages to those who had the existing scientific and technological knowledge and international connections to establish the “international” character of their preferred standards. To this end, the USDA created two sets of procedural standards through the ASTM International to serve as a form of meta-governance. Much like the ISO, the ASTM International was a standard-setting organization that served as a site for scientists and industry players to come together to evaluate standards. The ASTM International (formerly known as the American Society for Testing and Materials) was based in the United States and had historically been a forum for domestic standard-setting. It was now trying to position itself as an international center for standard-setting (hence the name change), given the stipulations in the TBT Agreement to base national standards on “international” standards.5 The first set of procedural standards established the “technical requirements to validate the consistency of data reported by a cotton classification instrument” (ASTM International 2007:1). The USDA successfully had this standard adopted as by ASTM International in 2007 as ASTM D7410–07 Standard Practice for Qualification of Cotton Classification Instruments for Cotton Marketing. If a new cotton classification instrument was installed in a laboratory6 or existing instruments were undergoing annual verification, this standard established a series of tests that should be performed to ensure the instrument met “established criteria for instrument qualification” and could provide test results “within acceptable tolerances . . . for the marketing of cotton bales” (ASTM International 2007:2). These tests were to be performed on evaluation cottons, defined as cottons that have established standard values “as established by United States Department of Agriculture (USDA)” (ASTM International 2007:1, original emphasis). Moreover, the measurement instrument itself “shall be calibrated using USDA calibration materials” (ASTM International 2007:2). Through these procedural standards, the USDA thus aimed to establish its own procedures and benchmark standards as the ultimate arbiter of the validity of a measurement instrument. While voluntary, by securing their adoption at ASTM International, they gained stature as “international” standards, which could ultimately help to build the USDA’s case against a challenge from China. If the Chinese state, for example, introduced a new measurement instrument, the USDA

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could claim that the instrument’s validity had to be proven based on these “internationally” recognized procedures. In the second set of procedural standards, the USDA sought to achieve a similar goal, but this time for an even more critical issue: the production of benchmark standards. The Chinese state had its eye on benchmark standards, and the Indian state’s fiber agency, CIRCOT, claimed to be producing benchmark standards for HVI machines (CSITC Task Force 2009a:7). With these intensifying redirection strategies, the USDA sought to establish the procedures through which benchmark standards must be created and deemed valid such that “other bodies (like in China) have the option of developing their own quality infrastructure and calibration cottons without deviating from the USDA quality and result level” (ITMF 2008:5). These standards were officially adopted by the ASTM International in 2012 as ASTM D7642-12 Standard Practice for Establishment of Calibration Cottons for Cotton Classification Instruments (ASTM International 2012). The stated purpose of the standards was to provide “an instruction for other geographical regions to establish their own calibration cotton standards for cotton classification instruments” and to ensure that these standards met “the level of the internationally recognized US Department of Agriculture (USDA) Benchmark Reference Cotton Standards” (ASTM International 2012:1). The standards stipulated that new benchmark standards must meet several major requirements. Most critically, the new procedural standards required cotton fiber testing organizations to use the USDA’s benchmark standards, which would remain “tightly controlled by the USDA,” as the underlying reference value for new standards (ASTM International 2012:2). Moreover, in the production of the standards, a cotton testing laboratory would need to use a minimum of six cotton classification instruments from at least four laboratories, at least one of which must be a USDA cotton classification instrument within a USDA laboratory (ASTM International 2012:2). In effect, even if other countries like China created their own benchmark standards, the USDA sought to establish itself as the main arbiter of validity and thus the legitimacy of these standards. Through these two sets of procedural standards, the USDA acknowledged that it may lose control over the classification system and standards. These two standards did not preclude the Chinese state or anyone else from introducing new measurement instruments or creating their own benchmark standards—indeed, they facilitated such developments. These standards did, however, demand transparency, as defined by the USDA. If new instruments or standards were introduced, the USDA hoped to use such “inter-

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national” procedural standards to guard against manipulation in classification and to ensure that the USDA ultimately played a key role as arbiter of what would count as a legitimate standard. A USDA official explained that this would be critical if the Chinese state ever decided not to use the US system: “We don’t want countries to be able to inflate levels and create inaccurate testing that will throw off prices. So China will be using our system essentially, even if they change their calibration.” A NCC representative summed up their long-term view: “In the end, my opinion is that the system is more important than the standards, but we would like US standards to prevail.” Indeed, Cotton Incorporated, a US producer–funded research organization, explained this effort “to influence global industry standards” as “paramount to maintaining a competitive position for U. S. cotton” (Cotton Incorporated 2005). Through these strategies, the USDA and the US industry sought to protect US interests but ultimately contributed to a process of track-switching. That is, in safeguarding themselves from the possibility of a Chinese bid to control standards, the USDA and US industry began to shift the classification system and standards from institutions that instantiated the interests of US cotton producers to institutions that privileged Chinese interests and even facilitated efforts by China to take control of the benchmark standards. In short, while the Chinese state had not yet taken control of standards, this struggle created a new hybrid institution: standards with Chinese characteristics. Merchants of Hegemony Transnational merchants’ preservation strategy to reconstruct their institutional power was destabilized by both the financial crisis of 2008 and a response from China. As in many primary commodities, the financial crisis hit the cotton trade in the form of a commodity boom-and-bust cycle in 2008. The intensification of price volatility in this period was marked. Between August 2004 and May 2007, cotton prices had fluctuated within a band of 14 US cents per pound (from 47 cents to 61 cents). Between June 2007 and February 2009, that band widened to 38 cents (from 51 cents to 90 cents) (Plastina and Ding 2011). Not only did this price volatility put all market players at greater risk of contract default, but also high prices increased the stakes associated with quality penalties if shipped bales did not match the quality specified in the contract. The Chinese state reported complaints from textile manufacturers of quality problems that “affected normal spin-

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ning operations and caused economic loss,” as well as “difficulties pursuing compensation claims from certain suppliers” (Xiushun 2009:12). The Chinese state’s traditional levers of control to manage the industry in this volatile environment had been eroded under the marketized stipulations of the WTO. Nonetheless, the Chinese state used a new administrative body, the General Administration of Quality Supervision, Inspection, and Quarantine (AQSIQ), to intervene. AQSIQ was created through the reorganization of China’s standards systems in 2001 following its WTO accession (Suttmeier et al. 2006). In 2008, the Chinese state notified the WTO of AQSIQ’s Announcement No. 87 on Administration Measures for the Registration of Overseas Cotton Exporters (FAS 2008; WTO 2008). Under this announcement, all merchants selling cotton into China would need to register with AQSIQ. The registration process would involve supplying AQSIQ with a range of information, including the volume of cotton traded by the firm overall and specifically to China in the previous year (China Cotton Association 2008b). The Inspection and Quarantine Bureaus (CIQ) under the AQSIQ would then be responsible for inspecting imported cotton, in order to “analyze and compare that the contract details and invoice have matching specifications” and to look for “serious violations of the inspection and quarantine regulations or a breach of the contract” (unofficial translation in FAS 2009:3). With this information on merchants’ quality and contract performance record, the AQSIQ would further assign grades of A, B, or C to merchants. Merchants with a lower grade would be subject to different inspection and supervision measures (FAS 2009). A follow-up announcement further introduced a quality credit valuation system, which required the submission of information that would allow AQSIQ to conduct a credit evaluation (Xiushun 2009). According to an AQSIQ official, the goal was to “ensure the quality of imported cotton, further regularise cotton trade order, [and] create an open, impartial, honest and faithful trading environment” (Xiushun 2009:12). Transnational merchants were not pleased by this intervention of the Chinese state. The new registration system established a role for the Chinese state in what merchants felt should be a private matter: the determination of whether shipped cotton met contract specifications. This sparked a host of responses from across the cotton trade. In January 2009, the USDA’s Foreign Agricultural Service sent a letter requesting that AQSIQ postpone the implementation of the registration system due to a lack of understanding of the policy (FAS 2009). The American Cotton Shippers Association

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(ACSA) and the American Cotton Marketing Cooperatives (AMCOT) sent a joint letter to AQSIQ, arguing that merchants’ contracts with Chinese textile manufacturers included specifications for how quality disputes should be addressed: through a private, “impartial arbitration process” (Nicosia and May 2009:1). The Committee for International Cooperation between Cotton Associations (CICCA), representing sixteen cotton associations around the world, also submitted a letter to AQSIQ echoing similar concerns that “the AQSIQ Registrations System is unnecessary and additional to the existing arbitration systems already provided by CICCA Member Associations,” which “are able to resolve any disputes arising from the cotton import to China” (CICCA letter to AQSIQ as cited in Wakefield 2009:1–2). Transnational merchants were further concerned that the registration process required the submission of sensitive financial data that lacked regulatory precedent under the WTO (Nicosia and May 2009:1; Wakefield 2009). Concerned that this registration system could open the doors to similar systems for a wide array of US agricultural commodities (see United States Senate Committee on Agriculture, Nutrition, and Forestry 2009), the US government, joined by the Government of Australia and the European Union, took the concern to the regular meeting of the WTO on Technical Barriers to Trade in 2009. The governments “stressed, among other things, that this type of scheme is best addressed under market-based commercial contracts, without the interference of state authorities” (WTO 2009). The Chinese state rebuffed these complaints, insisting that “quality requirements on domestic cotton were stricter than those imposed on foreign sourced cotton and trade in cotton had not been affected” (WTO 2009). As the headlines read in the cotton press, “China flexes its muscle by moving forward with its contentious AQSIQ plans” (Barnes 2009). “After months of contentious posturing,” a major cotton news outlet reported, “it looks as if a delegation of reputable international merchants [have] relented” (Barnes 2009). With no signs that the Chinese state would budge on its registration system, transnational merchants rushed to meet the registration deadline of March 2009 so as not to risk exclusion from the Chinese market (Howell 2009). The implications of this stand-off for the perceived balance of power in the cotton trade were significant, as the cotton news reported: “These latest developments prove that the lure of the world’s largest consumer market—China—is the ultimate trump card in international cotton dealings” (Barnes 2009). Despite their acquiescence to the Chinese state’s registration system, transnational merchants would not relent on their broader efforts to es-

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tablish private authority, and particularly the authority of the ICA, over dispute settlement. An editorial in a major cotton industry news outlet explained their continued concerns: Because of the importance of the Chinese market, the biggest concern for larger, reputable merchants is the amount of sovereignty given to the Chinese government in this matter. Who can hold AQSIQ in check if the organization begins excluding reputable merchants on disputable grounds? How much transparency can merchants expect? Only time will give us the answers to these questions. But if things become contentious in the near future, perhaps international merchants will regret blinking as early as they did. (Barnes 2009)

In this context, the transnational merchants’ trade association, the ICA, redoubled its efforts to persuade cotton associations around the world to adopt the ICA rules and create a united front in the cotton trade. Dubbed by some analysts as “historic changes” (Cotton International 2010a), the ICA pursued four key tactics to build greater support for their preservation strategy and their leadership over private dispute settlement. First, the ICA announced significant changes to their membership structure. Textile manufacturers and cotton producers had long complained that membership to the ICA was too expensive to warrant joining as disputes could be infrequent. Yet, when a dispute did occur, the application fee for arbitration for nonmembers was prohibitively high: £10,000 (Hughes 2010). In the new membership structure, the membership fee for textile manufacturers and producers would be reduced. While merchants would pay between $5,000 and $40,000USD a year, depending on the volume of cotton they traded, textile manufacturers and cotton producers would pay just $2,000USD and would receive free arbitration services and voting rights in the Annual General Meeting. In addition, they introduced a new category of Affiliated Association for other trade associations to partner with the ICA. There would be no fee for an association to become an affiliated member, only a commitment to promote the message of contract sanctity and to expel from their association any member that appeared on the ICA default list (ICA 2012l). In return, members of the affiliated association could apply for ICA membership at a 50-percent fee reduction and would enjoy a reduced arbitration application fee (£2,500 instead of the £10,000 paid by nonmembers), although they would not have voting rights (Hughes 2010). In 2012, the ICA touted its diversifying membership, announcing that ICA members had elected a new president from an Egyptian merchant firm and a vice president from an Indian merchant firm. As the incoming president explained:

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ICA’s ultimate goal is to provide a safer trading environment. One way we can do this is through membership, making sure it encompasses everyone along the value chain. Membership cannot be viewed as an exclusive club or a group of cotton merchants—it isn’t, we now have membership categories for all firms. It cannot be viewed purely to serve the interests of the big merchants—it doesn’t, I represent a small trading house out of Egypt. It is not about being English or European—I am African, the Vice President is Indian and our board is truly international. I know that my role as ICA President is not going to be easy, but I promise to follow in the footsteps of previous presidents and preserve the values of the ICA. (ICA 2012i)

Second, the ICA announced that they would hold a number of events tailored to bring more diverse market players into their fold. The ICA would begin holding its annual dinner, its main networking event which was historically held in Liverpool, as well as other major events, in international locations in order to encourage more participation, especially among Asian market players. In March 2010, they held a 2-day meeting in Singapore, in the spring of 2011 they held another conference in Dubai, and their annual dinner later that year was held in Hong Kong—“the first time in the history of the association that it won’t take place in Liverpool” (Cotton International 2010a). Dubai in particular was chosen as “a neutral venue where everyone in the cotton community can come together on equal footing,” while Hong Kong was chosen to send a signal that “things have changed, and the time has come for us to go where the business is . . . that means Asia” (ICA president, as cited in Cotton International 2010a). The ICA further began to offer trainings for textile manufacturers with titles such as “Managing risk in a volatile world” (ICA 2012f ). The trainings aimed to promote “responsible contracting” in order to give textile manufacturers a deeper understanding of risk management tools (futures and options), the behavior of the cotton market, and the ICA Rules and Bylaws (ICA 2012j). Third, the ICA announced that it would begin holding its Annual General Meeting at the Annual Dinner (the more widely publicized and attended event) to allow more members the “opportunity to contribute to the direction of the ICA” (ICA president, as cited in Cotton International 2010a). “We want to increase the diversity of perspectives among our membership,” the ICA president insisted, “so we welcome debates and discussion. The more voices we have to help shape the future direction of the ICA, the better off we’ll all be” (as cited in Cotton International 2010a). Finally, given the expanding use of instrument classification around the globe and the Chinese state’s efforts to extend its control over both bench-

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mark standards and quality dispute settlement, the ICA established a new center of excellence, the ICA Bremen International Quality Testing and Research Center. This can perhaps best be understood as an effort to at once solidify the role of private actors, and especially the ICA, in quality dispute settlement and position private authority on neutral ground—that is, able to perform this role regardless of whether the production of benchmark standards remained in the United States or shifted to China. Known as ICA Bremen for short, the Center was a partnership between the ICA and the Bremen Cotton Exchange and Fibre Institute. Through this partnership with a well-established center of expertise on fiber science, the ICA sought to establish itself as a leader in quality testing, training, and research services for the “global cotton community” (ICA 2011h). In the first few months after its launch, ICA Bremen received an “unprecedented volume” of cotton samples for testing and invested in more staff and equipment (ICA 2012d). A central role that ICA Bremen would play would be the operation of an international laboratory certification scheme. The ICA would audit classification laboratories around the world using the USDA’s reliability standards. This audit program would ensure that classification laboratories met standard levels of quality assurance, and ICA Bremen would maintain a list of these qualifying labs that could be used to resolve quality disputes in line with the ICA Bylaws and Rules (ICA 2011a). If a quality classification was challenged, the ICA Bremen classification laboratory would make the final judgment (CSITC Task Force 2008; ICA 2011a). Five major firms soon applied to have their laboratories certified under the scheme to “become a ‘laboratory of choice’ to resolve quality disputes in line with ICA Bylaws & Rules” (ICA 2012b). If successful, even if control over benchmark standards did move to China, transnational merchants would establish themselves as the ultimate arbiter of quality disputes within the global network of public and private quality classification labs. That is, while the struggle between the US and Chinese states resulted in standards with Chinese characteristics, dispute settlement in relation to these standards, they hoped, would remain in the private sphere. These changes did increase support for the ICA’s preservation strategy. The ICA membership increased by 34 percent from 2010 when the membership structure was changed to early 2012 (ICA 2012j). “With the increased volatility and increased number of disputes, it is easy to see how the old ‘battle lines’ may be drawn between buyers and sellers,” the president and managing director of the ICA explained. Yet, “the ICA Board has worked very

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hard to ensure that the ICA is representative of all parties in the trade. . . . Moving forward, the challenge is to retain that membership and ensure that each member feels there is value in being a member, and that they truly believe that they have a voice in the future direction of the ICA” (Butler and Hughes 2011). In 2012, the ICA reported that three associations had joined under the new Affiliated Association membership category: the Bangladesh Cotton Association (BCA), the Brazilian Association of Cotton Producers (ABRAPA), and Supima (the US-based extra-long staple cotton association) (ICA 2012l). Perhaps most importantly, however, the ICA secured growing participation from Chinese firms. Not only did numerous Chinese firms join the ICA in 2011 and 2012 (ICA 2011b,c,e,f,g; 2012c,g,h,k), but a representative from a state-owned firm, the China National Cotton Group Corporation, was appointed as an associate director to represent the interests of the China cotton industry (ICA 2011i). This signaled the ICA’s growing success in diffusing the challenge from China and integrating Chinese firms into the existing institutional arrangement. It also signaled, however, the way in which transnational merchants’ preservation strategy had transformed the existing institutional arrangement into an increasingly hybrid form that situated private, transnational authority over dispute settlement as geographically neutral such that it was compatible with Chinese authority over other governance tasks, such as the production of benchmark standards.

conclusion Overall, what we see in this chapter is a process through which key governance institutions in the cotton trade are switching tracks. It remains uncertain what final, more stable form transnational quality standards and dispute settlement arrangements will take. We can, however, be assured that the new institutions will take hybrid form (see Table 6.1 at beginning of chapter). The redirection and protection strategies, as well as the preservation strategies of incumbent rule-makers to reconstitute their institutional power, have effectively redirected these governance institutions in transformational ways. This is evident in the strategic efforts of the USDA, which recast its institutional power through a transnational institutional infrastructure and a transnational network of fiber scientists and standardizing bodies. Moreover, as transnational merchants have retooled their own institutional infrastructure they poise themselves to stand above the geopolitical tensions in an attempt to establish an institutional power that transcends national states. These preservation strategies on the part of dominant actors

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demonstrate why conflict-driven processes of institutional change inevitably generate hybrid institutions. It is also through these processes of competitive institution-building that new global political constituencies are constructed in ways that reconfigure access to institutional power. Both the USDA and transnational merchants were compelled to incorporate more marginalized actors into their institutional arrangements in new ways. The threat posed by China thus amplified the power of marginalized actors’ protection strategies to a degree and allowed them to gain some expanded room to maneuver and make claims on dominant actors. Nonetheless, on a broader scale, these struggles over the rules of game have not significantly empowered marginalized actors. Greater participation in the ICA, for example, does not change the underlying structural inequalities between transnational merchants and their textile manufacturer and cotton producer clients that make these weaker actors more vulnerable to price volatility and thus more likely to default on contracts.

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Conclusion In 1931, John Maynard Keynes said, “The market can stay irrational longer than you can stay solvent.” Nearly 80 years later, thanks to the ghosts of 2008, many of us are once again pondering our own “Inner Keynesian.” j o r d a n l e a , President of the American Cotton Shippers Association (Lea 2011:16)

We are “on the verge of entering uncharted territory,” warned the president of the merchant trade association, the ICA, “the past few months have certainly proved more unpredictable, more volatile and more uncertain than even the most perceptive market observers could have foreseen” (Butler 2011:14). Volatility in cotton prices reached its highest level in decades during the 2010–11 marketing season (ICAC 2011a). Between March 2009 and February 2011, prices fluctuated within a band of 148 cents (from 50 cents to 198 cents), in comparison with fluctuations within a band of 38 cents during the commodity price boom and bust in 2008 (Plastina and Ding 2011). During 2010, cotton was the single most volatile commodity out of fifty-three commodities tracked by the IMF (ICAC 2011a). The factors cited as contributing to this volatility were numerous: speculation, floods in Pakistan, bad weather in China and India, farmers’ diversification into other crops due to weakened demand after the financial crisis, expansionary monetary policy with low interest rates, and a weakening US dollar. However, hoarding and panic buying were also seen as exacerbating the situation (Clifford 2010; McCue 2011; Mohammad 2011). The International Cotton Advisory Committee, one of the industry’s most trusted sources for global data and market predictions, offered little to calm jittery market players. “Economic uncertainty continues,” the ICAC noted, “but market participants now have an additional year of experience on which to draw in managing such uncertainty” (ICAC 2011a:1). This soaring price volatility followed on the heels of massive disruptions in the cotton trade stemming from the global financial crisis. The effects

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of the financial crisis and its aftermath were perhaps most spectacular in their consequences for the most powerful actors in the cotton trade: transnational merchants. The defining moment of the crisis for merchants was the severe volatility in the cotton futures market on March 3 and 4, 2008. As prices spiked dramatically, merchants and speculators faced margin calls estimated at more than $2 billion on the Intercontinental Exchange (ICE). The value of the world cotton trade in 2008–9 was about $9 billion, meaning that the margin calls during two days represented about one-fifth of the annual value of world trade (ICAC 2010b:1). For many merchants, these margin calls were too much to bear when paired with contracting demand during the recession and tightened lending due to the credit crisis. The capital reserves required to participate in the global cotton trade had approximately doubled while access to credit had contracted dramatically. A merchant had been able to borrow approximately $6 per $1 of business equity as revolving lines of credit before 2008. After 2008, this fell to just $3 per $1 of business equity (ICAC 2010b:3). Fewer companies would be able to compete on a global scale under these conditions. Access to credit and financial management skills became “the limiting resources that determine a company’s business prospects” (ICAC 2010b:4). The ranks of transnational merchants were thinned in the wake of the 2008 margin calls. Paul Reinhart, which had been the largest merchant firm not headquartered in the United States, was forced to close its US operations, reducing the volume it handled by half. Seeing the writing on the wall, Weil Brothers, a large US-based firm, exited the business (ICAC 2009). Perhaps most striking, however, was the fall of one of the Big 3: Dunavant. Weakened by the March 2008 margin calls, Dunavant was forced to sell its cotton operations in 2009 and shift into the logistics business (Meek 2010). In short, financial stress pushed a number of mostly single-commodity firms into bankruptcy, into mergers, or out of business and brought greater consolidation to trading overall.1 In 1994, the nineteen largest cotton companies—public, cooperative, and private—handled 6.8 million tons of cotton. By 2010, approximately half the number of firms handled the same volume.2 While the ICAC noted that it was not yet possible for one or two companies to extract monopoly rents in the cotton trade, it admitted that regional monopolies were feasible (ICAC 2010b:2–3). This thinning of the ranks opened new doors for multicommodity merchants who had broader access to credit and could use resources from other trading divisions to support them through the 2008 margin calls. Some multicommodity merchants already involved in the cotton trade were able

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to significantly expand their operations. Most notably, Louis Dreyfus purchased most of Dunavant’s business, consolidating the operations of two of the Big 3 under one roof (ICAC 2010b:2).3 Moreover, in an interesting twist, new multicommodity firms based in Asia were also able to enter the cotton business, including Noble Resources Group (Hong Kong) and the Dubai Cotton Centre (owned by the government of the United Arab Emirates). By 2009, the president of the International Cotton Association reported that four companies controlled more than half of the fiber traded transnationally. Two were Western firms with cotton headquarters in the United States—Louis Dreyfus/Allenberg and Cargill—and two were relatively new players in Asia—Olam International and Noble Resources Group (Carpenter 2009b). Not only did the financial crisis create significant consolidation into the hands of fewer multicommodity merchants, but also it began to shift the geographic center of control over cotton trading. But was this really a move into “uncharted territory”? Or an intensification of the pressures and fault lines that had been building in the cotton trade for several decades and had been brought into sharp relief with the ascendance of China as a dominant player? Indeed, the disruptions created by the financial crisis and growing price volatility only sharpened cotton players’ focus on mechanisms to regulate the sector and manage these uncertainties: quality standards and associated rules for dispute settlement. Extreme price volatility left many producers and textile manufacturers alike facing a stark choice: uphold contract sanctity and go out of business, or default and hope to find new trading partners. For many, the decision was to default, as the president of the American Cotton Shippers Association reported: “Sadly, the volatility has tested the merit and integrity of contracts with both buyers and sellers in every market in the world” (as cited in McCue 2011:11). An executive of Louis Dreyfus/Allenberg warned that the cotton trade had become “an extremely high risk business” given “threats of unscrupulous defaults” (Nicosia 2011:10). In the eyes of transnational merchants, continued market volatility only amplified the need for the harmonization of rules for contracts and dispute settlement. In 2011, the ICA received 242 requests for technical arbitration, over five times the typical yearly average and more than double the ICA’s previous record high in 2008 (ICA 2012j). Market volatility did not, however, simply refocus concerns on price. For textile manufacturers, the quality of cotton also became more important in this environment. “The current ultra-competitive business climate places increasing demands on spinnability requirements,” the president of the Ja-

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pan Cotton Traders’ Association insisted. “The quality of cotton yarn depends heavily on the performance of the raw cotton” (Ichikawa 2011:126). Narrowing margins renewed the importance of scientific processing management and increasing spinning speeds, which required higher-quality cotton to prevent yarns from breaking. In an article titled “An Appeal for the Future of Cotton,” the chair of the ICAC Task Force urged players in the cotton trade to “get in the game!” and join the official Round Trials (Macdonald 2011:30). The US cotton industry made renewed efforts to unify their ranks in the midst of this continued uncertainty and conflict in the global cotton trade. To mend the fractures between producers and merchants, the American Cotton Shippers Association (ACSA) negotiated an ACSA membership to the National Cotton Council to better provide “supportive input directly from the merchandising community” and, most critically, to enable them to speak as a powerful, unified voice in the 2012 Farm Bill negotiations, in which Brazil’s WTO case would play a prominent role (Lea 2011:16). But it remained unclear whether an intensification of the uncertainties around price and quality would spur others to follow the leadership of transnational merchants and the USDA out of this mess. Tensions over US cotton subsidies continued to simmer. The US government had made some changes to its cotton programs in 2006 but still had not addressed the bulk of subsidies of concern to Brazil and the West African cotton-producing countries (Schnepf 2009). In 2009, these tensions again boiled over. The WTO’s Dispute Settlement Body found that the United States had not complied with their ruling and authorized Brazil to retaliate with $830 million in sanctions, including $591 million in higher tariffs on a wide array of goods, including autos, pharmaceuticals, medical equipment, electronics, textiles, and wheat (Chan 2010). To address the issue until the new Farm Bill could be negotiated in Congress, in 2010 the United States struck a deal to put $147.3 million per year, or $12.275 million a month, into a technical assistance fund for the Brazilian cotton industry (Chan 2010; Tomson 2011). In effect, US taxpayers began subsidizing Brazilian cotton farmers in order to maintain their ability to subsidize their own cotton farmers and avoid retaliatory trade sanctions—an arrangement that faced increasing domestic opposition in the United States (Tomson 2011; Wisconsin State Journal 2011). It was clear that the subsidies that upheld US cotton producers’ export dominance were increasingly precarious. The US state would not be able to use its economic might to flout the decisions of multilateral institutions forever. All the major players at the WTO, including the United States, were on re-

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cord acknowledging that the Doha Round would not be completed without “more in cotton” (Eagleton-Pierce 2012:19). The geographic fault lines appeared to deepen in the wake of a financial crisis widely viewed as precipitated by the United States. Industry players around the globe were not eschewing cooperation per se. Few disagreed on the need for harmonized rules. But the redirection strategies challenging transnational merchants and the USDA did not disappear. The Chinese textile industry experienced a rather quick recovery in 2008 and 2009. Across the globe it was clear that the dynamism of the Chinese economy was the only bright spot in an otherwise dismal economic outlook. In this context, both the Chinese and Indian states continued their efforts to develop their capacities to create benchmark standards, and neither opted to participate in the ICAC Task Force Round Trials. Moreover, while continuing to hold workshops for textile manufacturers on the importance of contract sanctity, the China Cotton Association gave no signs of simply endorsing the ICA rules and arbitral body. One of the trade associations in India—the Indian Cotton Federation (formerly the South Indian Cotton Association)—announced that it was creating its own standard contract. Following a rash of contract defaults in the Indian market during the 2010–11 price volatility, the Indian Cotton Federation decided to establish a contract for use in both the domestic and the international trade, with arbitration handled by the Indian Council of Arbitration (Cotton International 2011). In the midst of this struggle, transnational merchants were perhaps most obviously hedging their bets regarding where the geographic seat of institutional power would lie in the future through their efforts to establish themselves as the ultimate arbiters of quality disputes no matter where the production of benchmark standards was conducted. The contested legitimacy of the US industry and the USDA as leaders in the cotton trade was clear.

h e g e mon ic r i va l r i e s a n d i n s t i t u t ion a l c h a n g e What can these struggles in the cotton trade tell us about broader dynamics in the global economy? That is, what can they tell us about how the rules of the game are made and remade in periods of conflict among rivals for hegemony? Perhaps most clearly, the case of the cotton trade demonstrates the need to carefully trace diverse axes of conflict in order to understand how institutions change in periods of (potential) hegemonic transition. Understanding institutional change thus requires a theory of conflict in the global capitalist system. The history of capitalist development has un-

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folded through successive political projects on the part of firms and states to extend market discipline in ways that serve their interests and through subsequent resistance to these projects. It is the particular axes of conflict that emerge out of the destructive and creative dynamics of liberal market projects that drive institutional change in the global capitalist system. Actors’ positions within broader conflicts over the organization of the global capitalist system shape their preferences, bargaining power, and thus strategies in institutional struggles. Rule-making in the global economy is often characterized as a landscape of powerful actors: transnational firms, states, and international organizations who increasingly structure how the economy functions. The story of negotiations over global quality standards and dispute settlement in the cotton trade reinforces this view in many ways. Even if they cannot yet claim success, the usual suspects have been leading the charge to construct their authority on the global stage and in ways that often marginalize weaker actors. Since the 1970s, a coalition of transnational firms and the US state have pushed a liberal market project and the institutions like quality standards to facilitate it. And these efforts have been challenged by weaker actors, such as firms and states in West African cotton-producing countries. The extension of rules that facilitate market integration have destructive effects that can not only threaten livelihoods but also threaten the capitalist system itself and the powerful actors that put such rules in place. In response to this liberal market project, marginalized actors have pursued protection strategies to minimize the detrimental effects on their livelihoods. But this is not simply a story about elites’ ability (or not) to restabilize trade amid market volatility and challenges from below. It is also a story about geopolitical and intra-elite struggles stemming from the creative moments of market liberalism. Giving attention to this axis of struggle allows us to paint a different picture. This is also a story of actors such as the Chinese state and Chinese textile manufacturers, who gained growing power through the creative dynamics of the US-led liberal market project. These new rivals posed a threat to Western authority as their redirection strategies sought to reconstitute existing institutions to privilege their own preferences over those of dominant actors. These intersecting stories draw into sharp relief the question of whose rules will stabilize the economy and who will play the leadership role in this new era. And these growing tensions are far from unique to the cotton trade. As liberal market rules of the game have pushed us into a financial crisis, an environmental crisis, and a social crisis given growing income

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inequalities, there is increasing anxiety not only over how these problems will be solved but also over who will solve them. The redirection strategies to lead the global economy are evident in the actions of the so-called emerging economies, most prominently, China, and standards have emerged as the center of many such struggles. The Chinese state has become increasingly concerned with its dependence on international standards. A case in point is the Electronic Product Code (EPC), a technical standard used as the basis for the supply-chain management and inventory control by major retailers like Walmart. While Walmart supports the EPC, the Chinese state has raised concern over the royalties firms must pay to EPCGlobal “on a technology that will have such a ubiquitous presence in China’s foreign trade” (Suttmeier et al. 2006:26). China’s efforts to generate an alternative standard using radio frequency identification (RFID) technology is raising concerns given “indications that the Chinese approach may diverge from what is becoming the international standard” (Suttmeier et al. 2006:27). These struggles over the rules of the game have played out most prominently at the highest seats of institutional power in the global economy. As the IMF had an inauspicious opening for its top position in 2011, intense debate ensued over who would be chosen to lead this key international financial institution through this period of great uncertainty. Historically, the unwritten rule has been that the IMF is headed by a European, the World Bank by a US citizen. However, the BRIC countries, Brazil, Russia, India, and China, have gone from being IMF borrowers to IMF funders in recent years and have repeatedly called for changes to both the leadership and voting structures in these multilateral institutions. As the Brazilian Finance Minister, Guido Mantega, argued, the IMF needs to change its voting structure so it could “cease to be regarded as mainly an American-European institution and become a truly multilateral institution” (as cited in Reuters 2009). “Emerging markets deserve to be more fairly and fully represented,” the Mexican central bank governor explained as the world watched the first BRIC summit in 2009, “If this doesn’t take place in the coming years, the legitimacy of the fund is at stake” (as cited in Benson and Colitt 2009). Christine Lagarde of France was ultimately chosen as the next IMF managing director. Yet calls to reform the IMF voting structure have only intensified as the Eurozone teeters on the brink of collapse and the BRIC countries stand as some of the few countries that could inject money into the IMF to help stabilize Europe. These interstate and inter-elite conflicts are further being challenged by protection strategies around the globe. The Arab Spring, the austerity

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protests across Europe, and the Occupy Wall Street movement powerfully demonstrate the deepening popular discontent with liberal market policies and unaccountable leaders, which began with the IMF structural adjustment protests in the 1980s and took true global form in the WTO protests in Seattle in 1999. As we have watched citizens depose military rulers and link their struggles to the Occupy Wall Street protests rippling across the globe to over 80 countries, the power of protection strategies cannot be ignored. The struggles in the cotton trade and in the global economy more broadly over whose rules will prevail are not over. However, tracing these struggles and particularly in historical comparison has allowed me to identify key dynamics that shape institutional change in the global capitalist system. It has allowed me to identify the opportunities and challenges that face diverse players in their redirection, protection, and preservation strategies as they attempt to rule in an era of hegemonic rivalries. It is to these that I will now turn.

boiling frogs As popular lore has it, if a frog is dropped into a pot of boiling water, it will frantically jump out. But if the frog is placed in cold water and the heat is turned up gradually, it will not recognize the impending danger and will be boiled to death. Contemporary biologists refute this claim, insisting that, if at all possible, the frog will clamber its way out of the pot as the temperature rises (Fast Company 1995). But the questions remain: will the frog respond in time, and will it still have a way out? The lesson from this frog lore is a lesson of strategic action. As temperatures rise, strategic action really does matter to keep one from being devoured as frog legs. And, indeed, it is the issue of strategic action to which much of the recent institutionalist literature has drawn our attention. In periods of uncertainty, “strategizing actors” and “institutional entrepreneurs” can play critical roles in precipitating and directing institutional change by crafting innovative recombinations of existing institutions and discourses. In essence, they find an escape route from the boiling waters. But just knowing that the frog has the capacity to act strategically does not tell us whether it will escape the boiling waters in time. That is, just recognizing actors’ strategic capacities does not tell us when or under what conditions strategic action will be successful. I have built on this institutionalist literature by placing it within a theory of conflict: a theory of institutional change within the global capitalist system. Strategic action to

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change and build institutions must be understood as part of a struggle over the organization of the global capitalist system. Liberal market institutions create conflictual relationships. This conflict stimulates strategic action on the part of rivals and actors marginalized by these rules to subvert or challenge them. And these challenges to the rules turn up the heat on the actors who put them in place. Embedding strategic action to retool institutions within the global capitalist system not only allows us to systematically trace the roots of struggles over liberal market institutions, but also allows us to consider the issue of timing. Does it make a difference if the frog plans its escape route at 70 degrees rather than 180 degrees F? Economies are not static, as some institutionalist scholarship tends to imply. Rather, liberal market institutions spur economic dynamism along a particular trajectory, which can ultimately undermine the very institutions that created it. Thus, the timing of strategic efforts to reconstitute institutions matters for how successful they will be. Here I am not referring to simply an analysis of institutions in time, as Wolfgang Streeck (2010) puts it, or the idea that the longer an institution is around, the more likely it is to have changed. Although this dimension is important, I am referring primarily to what Streeck calls institutions’ location in historical time.4 That is, institutions, and efforts to change them, are shaped by historically unique conditions and events as they are embedded in broader political struggles over the development of the global capitalist system. The importance of historical time is particularly relevant when thinking about the ability of dominant actors—those who have put in place liberal market policies that serve their particular and geographic interests—to hold onto institutional power as redirection and protection strategies intensify. This is perhaps clearest when we consider our historical comparison. In the negotiations over quality standards and dispute settlement in the early 1900s and again in the early 2000s, strategic action on the part of incumbent rulemakers—Liverpool merchants and the USDA /transnational merchants, respectively—was critical in order to reconstitute their institutional power in the midst of growing challenges. Yet, Liverpool merchants largely pursued a strategy of no strategic action. Rather than integrate US merchants into their institutional structure, making it more representative and potentially warding off state intervention, Liverpool merchants instead held fast to their privileged position in the existing institutional arrangement. By the time they did attempt strategic action to recast the institution to incorporate other actors, it was too late. Broader shifts in the historical development of

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the world economy, particularly World War I, had undermined their key source of power, control over credit, and they were ultimately left as mere watchdogs over rules now set in Washington. In the current period, a different situation has emerged. Rather than waiting until the water boils over, the USDA and transnational merchants have gone on the offensive to recast their rules in response to China’s redirection strategy and the protection strategies from other cotton-producing countries and textile manufacturers. In this case, strategic action may pay off in the long run. By integrating other actors into their existing institutional structure, they strengthen its durability. Moreover, even if key coordinating functions shift to China, they have built the institutional infrastructure that may ensure greater transparency in China’s rule. These efforts on the part of Western actors not just to challenge Chinese standards development but also to channel it in desirable directions appears to be an increasingly prominent feature of US and EU trade policy vis-à-vis China. In 2005, the US government posted a dedicated standards attaché in Beijing, making it only the fourth embassy with such an official (in addition to Mexico, Brazil, and the European Union). Some prominent US standards organizations, such as the American National Standards Institute, have deepened their interaction both with Chinese standards bodies and with the US Congress and the executive branch (Kennedy 2006). Moreover, similar to the strategy taken by the USDA, the European Union has strengthened efforts to offer training and advice to Chinese agencies in their standards development processes (Kennedy 2006; Suttmeier et al. 2006). Overall, foreign firms and states have increasingly pushed for greater transparency in Chinese standard-setting processes (Suttmeier et al. 2006). These preservation strategies appear efficacious when we compare this case with other examples of standards wars, particularly the highly contentious efforts of China to create national standards for mobile security (WAPI) in 2004 and of South Korea to implement a national standard for the mobile Internet platform (WIPI) in 2005. A number of scholars argue that the critical factor shaping South Korea’s success and China’s failure was the strength of competing interest coalitions (Kennedy 2006; Lee and Oh 2006, 2008). South Korea built a broader coalition, including foreign companies, in support of WIPI. In contrast, in part due to security interests, the coalition in support of WAPI was rather narrow and exclusively China based. And this narrow coalition faced a large and firmly unified group of US and EU multinationals, their Chinese partners, and a range of industry associations in the United States, the European Union, and Japan that mobilized to challenge it (Kennedy 2006).

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Moreover, the more established and internationally recognized a given standard becomes, the more difficult it is to challenge. For example, in 2002 the Chinese government launched an effort to foster a Chinese-made Audio Video Coding Standard (AVS) as an indigenous alternative to the internationally established Moving Picture Experts Group (MPEG)/H.26x codec standard. This effort did gain some ground; the AVS working group had 192 members, including a significant number of transnational firms, by 2007. However, Fomin, Su, and Gao argue that “a competing standard in the presence of a dominant one is a highly costly and risky endeavor” due to the “switching costs—the interests of consumers, manufacturers and service providers are vested in the installed base of the dominant standard” (2011:749). These cases suggest that the efforts of the USDA and particularly of transnational merchants to construct a broader global coalition in support of their rule-making authority could be a critical factor into the future.

the opportunities a nd ch a llenges of globalized localisms Embedding strategic action within the global capitalist system also has implications for our understanding of institutional path dependencies. Actors’ strategic capacities to make institutional change are shaped by the path dependencies of existing institutions. This is a critical insight from historical institutionalist scholarship. Yet we can get more analytical leverage from it by giving greater attention to the way in which institutions emerge to begin with. Institutions are constructed to solve the particular problems actors face given their distinct positions in the global capitalist system. From this view, political projects to extend these institutions onto a global scale must be understood as projects to globalize localisms, as Santos (1995) would say. That is, they are efforts to extend certain rules of the game that not only serve particular interests but also reflect the economic, technological, political, and cultural specificities of the context in which they were constructed. Perhaps nowhere is this clearer than in US cotton quality standards that reflect the spinning and harvesting technologies used in the United States or in arbitral bodies that reflect a style of arbitration and legal system of a given place. Not surprisingly, projects to globalize local rules and institutions face resistance from actors with different historically and culturally constructed positions in the global capitalist system. Much of the recent institutionalist literature has focused on understanding institutional change that is incremental in nature. I demonstrate that

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institutional change in the global capitalist system is inevitably incremental in nature due to institutional dependence. Rivals emerge out of the creative dynamics generated by dominant actors’ liberal market institutions. As such, they remain dependent on these institutions and cannot simply sweep them away to impose new ones that better privilege their preferences. For redirection strategies in particular, it can be strategic and even necessary to work from incumbents’ rules and redirect them to serve one’s own interests. Rivals pursuing redirection strategies thus often try to retool incumbents’ institutions to overcome their path dependencies and make them switch tracks to serve new aims. Institutional dependence can create opportunities for emerging rivals as adopting and redirecting existing institutions can be more efficient than starting from scratch. For both quality standards and dispute settlement in the cotton trade, the Chinese state pursued a redirection strategy that effectively aimed to imitate and overtake the institutions constructed by the US state and transnational merchants. In order to redirect these governance arrangements to serve their interests, the Chinese state first imported the institutional configuration at the basis of the prevailing arrangements—that is, the institutions that ensured reliable functioning of the instrument classification system and the organizational model of the US private trade association. This was a strategic effort to compel not just technology transfer but, perhaps more importantly, the transfer of institutional expertise. This in many ways can be understood as a successful strategy on the part of the Chinese state to draw on foreign institutional models to leapfrog forward in the standard-setting game. As Suttmeier, Yao, and Tan (2006) explain, overall, Western firms and states have viewed China’s standardsetting efforts with great concern and have been reluctant to aid them. Nonetheless, the Chinese state and Chinese firms have in some cases been able to leverage their economic power to compel cooperation from Western actors. For example, when the Chinese state and Chinese firms began to develop a home-grown third-generation (3G) wireless standard (TD-SCDMA), the German multinational Siemens provided technology that helped Chinese standards development. This standard was approved in 2000 by the International Telecommunication Union (ITU), the key international standardizing body for information and communications technology (see also Zhan 2010). Indeed, foreign technological and institutional know-how has been an important component in a number of more prominent Chinese standards initiatives. “The appeal to new standards,” Suttmeier and Yao (2004:42) argue, “is thus an attempt to change some of the rules of the game without changing the game itself.”

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However, attempts to redirect dominant actors’ existing rules are not without pitfalls. Globalized localisms can also create path dependencies that constrain both rivals’ redirection strategies and marginalized actors’ protection strategies to change these institutions. In these efforts, competitors face the problem of institutional incongruities. Institutional incongruities emerge precisely because already existing rules and institutions were created to serve particular interests and to reflect the specificities of distinct players’ and places’ position in the global capitalist system. For example, the Chinese state wanted to redirect the USDA’s classification system and standards to serve the interests of its textile manufacturers; however, cotton production and textile manufacturing on the ground did not reflect the technological, social, and infrastructural specificities that existed in the United States where the system was developed. As such, to adopt the system and retool it to serve their own interests, the Chinese state first had to reshape the reality on the ground in China such that the imported classification could work. Rivals pursuing redirection strategies can also face the constraints of institutional dependence. That is, because they remain dependent on incumbents’ rules even in their efforts to redirect them to serve new interests, rivals can also remain dependent on the incumbents to legitimate their new rules and rule-making expertise. In the early 1900s, the USDA faced just this problem in its efforts to redirect Liverpool merchants’ private rules to better serve the broader concerns of US tenant farmers. When the USDA promulgated new standards, private merchants were able to undermine them as they had successfully constructed themselves as the legitimate arbiter of quality classification. It was only by shifting the terms by which standards would be deemed legitimate—by constructing a new discipline of fiber science to undergird the standards—that the USDA was able to escape this dependence to some degree. In the contemporary period, institutional dependence is a more difficult obstacle for rival rule-makers to overcome, given the scale and scope of institutional interventions into the economy in the course of the postwar period. When attempting to set its own quality standards for the cotton trade in the early 2000s, the Chinese state found itself dependent on the USDA to legitimate these rules. The new supranational infrastructure at the WTO required that new national standards be evaluated by other member states to ensure they meet the criteria of the TBT Agreement: that is, that the standards be non–trade distorting, science-based, and “international” in character. This requirement, paired with the USDA’s historical legacy of fiber science research, allowed the USDA to discredit the Chinese standards

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and stymie this competitive standard-setting effort. Indeed, the USDA made a concerted effort to establish its standards and classification system as the benchmark against which all other standards would have to be compared. For the Chinese state, this has, if anything, deepened its dependence on the USDA to confirm the legitimacy of any future bid to set standards. These findings underline the critical importance of the struggle over institutions. As Edward Steinfeld (2010) has argued, the Chinese state and Chinese firms have proven themselves adept at technological upgrading: gaining cutting edge technology through various means and quickly putting it into action in their economy. But can they develop the operational and managerial capacities as quickly, which would allow them to seize greater institutional power in the global economy (see also Brown et al. 2005)? My findings suggest that, while this is an ongoing challenge for Chinese firms and the Chinese state, it is not just Western technology that they are adopting in order to leapfrog into first place. They are also finding innovative ways to import Western organizational models and turn the problem of institutional dependence into an advantage. This is most evident in the Chinese state’s redirection strategy to imitate and overtake the USDA in control over quality standards. With its economic power in the cotton trade, the Chinese state has essentially secured the USDA as an institutional consultant whose goal is to help the Chinese state develop the organizational and managerial capacities to operate a reliable instrument classification system. This could prove essential to a successful switch to Chinese institutional power. In their comparison of Chinese and South Korean standards strategies, Kwak et al. (2011) find that these governments were most successful when they were able to minimize conflicts with existing standards and generate favorable attitudes from foreign players.

ch a nneling politics through depoliticized institutions A common theme at the turn of the twentieth century and again at the turn of the twenty-first century has been the depoliticization of struggles over liberal market institutions. A range of scholars have pointed to depoliticization as a key factor contributing to the expansion of liberal market institutions since the 1970s. Adam Tickell and Jamie Peck argue that “one of the more far-reaching effects of . . . neoliberalisation has been the attempt to sequester key economic policy issues beyond the reach of explicit politicization” (2003:175). “Judicialization” and “bureaucratization” are similarly processes that have transferred policy questions from arenas of open de-

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liberation to arenas insulated from such debate by layers of legal protocols and bureaucratic procedures, according to Chorev (2007, 2009; see also Krippner 2011). Others have suggested that the discourse of scientism has served as a handmaiden to neoliberalism, casting questions about the distribution of benefits in the economy in “neutral,” scientific terms (Kinchy et al. 2008; Moore et al. 2011). Depoliticization must be understood at once as a response to the overt politicization of the Keynesian regime in the 1950s and 1960s (Chorev 2007; Krippner 2011), as well as a continued response to the new political conflicts generated by liberal economic policies. To say that rule-making has become depoliticized is not to say that politics no longer affects outcomes. As Polanyi (1957 [1944]) assures us, politics cannot be eliminated as all market activity rests on political foundations. Rather, Krippner argues that depoliticization should be understood “as the reorganization of the boundary between the political and the economic” that allows rule-makers to treat issues that are political, or subject to human manipulation or control, as apolitical, or beyond the control of human agency (2011:145). Depoliticization is not an unintended consequence of rule-making, but rather debates over liberal market institutions must be politically constructed as depoliticized through institutional innovation (see also Krippner 2011:145). The role of science in negotiations over quality standards in the early 1900s provides an illustration. Interestingly, in this period, standards were constructed as apolitical, scientific issues in an effort to wrest standards out of the private sphere and into the public sphere. Despite resistance from liberal market-oriented merchants both at home and abroad, the USDA was able to legitimate state intervention into standards by linking it to the ideology of Progressivism that cast political questions about the consequences of liberal market institutions as technocratic. In this example, the depoliticization of standards-setting represented a strategy to benefit tenant farmers as some of the most marginalized actors in the cotton trade and yet, by constructing the standard-setting arena in apolitical, scientific terms, the influence of these actors was limited. While this effort did create harmonized standards, it also tended to discount farmers’ broader concerns that did not fit within this technical frame. More attention was given to reforming quality standards than to addressing the tenancy arrangements that farmers saw as the heart of their problems. Indeed, this represents a fascinating example of how standards were constructed as political at the same time as the institution that would set the standards, the USDA, was reconstituted as neutral and apolitical through its new role as an arbiter of scientific truth. In recent decades, politics has also been driven into increasingly depo-

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liticized realms but in different ways. The construction of supranational institutions as depoliticized arenas is perhaps the most pervasive influence on rule making in the contemporary global economy. As others have noted, supranational institutions shape how political struggles unfold (Conti 2011). These institutional rules shape how different actors can exercise their power and through what means. As such, constructing these institutions in depoliticized terms can shape how power inequalities operate in practice. Economic power does not necessarily translate easily into institutional power. What I have found is that depoliticized institutions and discourses channel politics along new trajectories. Political struggle is enacted through depoliticized institutions. Actors develop different political strategies to shape decision making in depoliticized arenas. Perhaps the most obvious example of this is how marketized institutions at the WTO have obliged the Chinese state to adopt new strategies to govern through the market. Compelled to end the public monopoly over cotton imports and exports with its accession to the WTO, the Chinese state has been forced to develop new capacities to steer and guide the cotton-textile industry as its more direct levers for balancing competing demands within the sector are no longer viewed as legitimate. In this context, the Chinese state imported the institutional model of the powerful private cotton trade association in the United States, albeit with greater state involvement. This strategy to influence a depoliticized arena, however, has not come without its institutional incongruities. While the Chinese state successfully influenced the content of the standard contract it negotiated with transnational merchants, it has been less successful in ensuring its use among the thousands of textile manufacturers operating in the country. The Chinese state can no longer mandate use of particular contract terms or dispute settlement institutions. Moreover, coordination among private textile manufacturers in the sector is difficult given the narrowing margins and fierce competition that has emerged in recent years, as well as weak bottom-up organizing within new trade associations like the China Cotton Association. The weak sectoral organization compelled the Chinese state to use more direct state intervention in the wake of the financial crisis. This reflects findings in other sectors in China. In their study of the Chinese wool sector, for example, Brown, Waldron, and Longworth (2005:112) found that the privatization of state-owned enterprises and the dismantling of specialized economic departments such as the Ministry of Textiles Industry have drastically reduced the state’s coercive powers over industry participants and reduced the state’s institutional capacity to facilitate in-

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dustry coordination. This has generated what many Chinese commentators describe as luan, or “economic chaos.” The TBT Agreement is another telling example. The TBT recognizes the political nature of standards and claims to neutralize these political struggles by demanding that national standards be “international” in character. Implicit is the idea that international standards reflect a political agreement of sorts among states. Yet, by providing a vague legal definition of what makes a standard “international,” it incites struggles to amass evidence that one’s preferred standard has an “international” character. For example, out of concern about a Chinese bid to set quality standards, the USDA began to collect evidence of the “international” nature of their standards and classification system by integrating a wider diversity of actors into the system and creating procedural standards approved by international standardizing bodies. Moreover, the TBT Agreement channels these struggles through science as science-based decision making has become the de facto basis for dispute settlement over standards (see also Quark 2012). As such, the political nature of standards—the fact that they can benefit some actors over others— has been masked by the discourse of scientism—by the idea that scientific and technical experts are the “best possible arbiters of controversy, clearing away the tangle of politics and opinion to reveal the unbiased truth” (Kinchy et al. 2008:156). In this depoliticized arena, the Chinese state was compelled to adopt a scientized strategy, to develop the scientific and technological capacities necessary to set standards that could be deemed legitimate under the TBT Agreement. Given the uneven legacies of scientific research, this further meant adopting what was largely US fiber science and technology as a starting point for developing new knowledge that could undergird standards that would better suit the interests of Chinese textile manufacturers. These examples demonstrate how the Chinese state itself has been compelled to transform in order to influence the distribution of benefits within an increasingly globally integrated economy. In this context, Suttmeier and Yao (2004) argue that the Chinese state’s overall standards strategy has been driven by a neo-techno-nationalism, “in which technological development in support of national economic and security interests is pursued through leveraging the opportunities presented by globalization for national advantage. Unlike older forms of techno-nationalism, China’s standards strategy necessarily requires attention to international norms, cooperation with foreign partners, and a recognition of the need for new forms of public-private

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accommodation” (2004:3; see also Yamada 2000). This reflects what Rosalyn Hsueh (2011) calls China’s liberalization two-step, a bifurcated strategy to both comply with its WTO commitments and retain control over the economy. However, the kind of transformations this has entailed for the Chinese state must be understood as powerfully shaped by the depoliticized nature of the WTO. The Chinese state has developed new capacities aimed specifically to wield greater influence in a scientized and marketized arena of struggle.

t h e c o t t on c ol d wa r Amidst these power struggles among incumbent rule-makers and their rivals, we cannot count out the role of protection strategies by more marginalized actors in shaping outcomes. While perhaps not playing the decisive role in institution building in the global arena, more marginalized actors can significantly shape the trajectory of institutional change. In the early 1900s, for example, it was cotton farmers’ organizations that successfully pushed for government intervention and effectively delegitimated the private authority of merchants to govern quality standards. This was a critical stimulus for the creation of public standards for cotton, which subsequently formed the model for public standards in a wide range of other agricultural products. These protection strategies, however, are best understood by tracing how they intersect with broader interfirm and interstate struggles. The interfirm competition between Liverpool and US merchants in the early 1900s helped to bolster the case for state intervention over quality standards. The USDA claimed that its intervention was not simply a matter of protecting cotton farmers but also a matter of ensuring maximum revenues for US merchants and for one of the US state’s most lucrative exports. In the contemporary period, a cotton cold war has emerged. It was cotton-producing countries in the ICAC that pushed for an effort to create a common instrument classification system. While this effort in and of itself challenged the USDA classification system as the de facto transnational standard, it gained greater salience as it intersected with the Chinese state’s bid to impose new quality standards on the global trade. The possibility that cotton-producing states would ultimately side with China over the United States in a standoff over standards, compelled the USDA and the US industry to establish a global institutional infrastructure in which all other countries could participate. Here we see the complex dynamics that emerge as protection strategies and redirection strategies collide. On the one hand, the threat posed by the Chinese state opened up some new room for more

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marginalized actors to maneuver. Through the ICAC Task Force, more information and training became available to help other cotton-producing countries adopt instrument classification, a situation that in fact eroded the first movers’ advantages enjoyed by US producers. Moreover, it opened a forum for discussion about what a globally harmonized instrument classification system should look like and what fiber characteristics should be measured, even if all actors did not participate equally in such discussions. In this way, we can see how a credible redirection strategy can help to amplify the protection strategies of marginalized actors, even if only to a limited degree. This finding on the implications of regulatory competition has parallels to research on private certification initiatives. For example, in her study of forestry certification programs, Christine Overdevest (2010) demonstrates how creating competition among private and/or public certification programs can serve to “ratchet up” the environmental protections in such programs. The existence of supranational institutions also contributed to the leverage of marginalized actors’ protection strategies to a degree. As Stephen Krasner (1981) has argued, under the right conditions, politically weak countries in the global South can turn multilateral institutions against their more powerful creators. Some analysts have interpreted the struggle over cotton subsidies at the WTO in these terms. Heinisch, for example, deems the challenges from Brazil and especially the West African countries an example of how “the WTO regime creates opportunities for weak states to achieve outcomes virtually inconceivable in its absence” (2006:253).5 The TBT Agreement provides another example. The need to base national standards on “international” standards pushed the USDA to establish the “international” character of its classification system and benchmark standards. One way of doing so was to integrate cotton-producing countries around the world into an institutional infrastructure based on their system and standards. Despite some enhanced room to maneuver, the problems of institutional dependence and institutional incongruities also affect the protection strategies of more marginalized actors. New “standards and certification systems are not scale-neutral for farmers,” Bain, Deaton, and Busch (2005:72) argue. “Instead, standards and standard makers expand inevitably the capacity of some participants and limit the capacity of others to reshape social, political and economic relationships.” Both economic resources and technical capacities in countries in the global South are limited, making it difficult to adopt and implement new standards or other institutional rules (Bain et al. 2005; Dolan and Humphrey 2000). Moreover, countries in the global South often lack the economic resources and scientific, professional, and

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diplomatic expertise needed to influence the debate in international negotiations (Conti 2011; Roberts and Parks 2007). For more marginalized actors in cotton-producing countries, even when things went their way, it was often difficult to profit from the cotton cold war given the increasing capital requirements necessary to participate. For many cotton-producing countries, the USDA’s instrument classification system was fairly capital intensive, creating significant entry barriers. Moreover, the annual cost of participating in the Task Force Round Trials increased over time as grant money from the Common Fund for Commodities ran out. While just $300/year in 2007, the charge increased to $600 in 2010 and to $1,000 in 2012 (CSITC Task Force 2009b;2011). The number of classification laboratories in African countries that were participating in the Task Force Round Trials had risen from eight labs in six countries in 2007 to fourteen labs in ten countries in 2011. Nonetheless, fewer than 10 percent of cotton bales exported from African countries in 2011 were classified using instruments rather than manual classing (Drieling 2011). Similarly, in the early 1900s, while US tenant farmers successfully won government regulation of quality standards, their negligible bargaining power still made it difficult for them to use these standards effectively when negotiating with merchants. It was only by linking the government standards with the broader bargaining power and expertise developed through marketing cooperatives and ultimately creating free government classing services that farmers were able to profit from this institutional change. Moreover, in both periods, increasing uncertainty and volatility in the economy brought greater consolidation of power, particularly among transnational merchants. In the contemporary contestation over dispute settlement institutions, the result was similar. The perceived threat that China could impose its own contract rules and arbitral body on the rest of the trade compelled the transnational merchants’ trade association to change some of its rules and to diversify its membership and authority structure to integrate cotton players from around the world. While this offered more marginalized players some enhanced decision-making power, it did not alter the fact that smaller players still did not have the resources and expertise to manage price volatility in the same way that transnational merchants did. This situation only intensified in the wake of the financial crisis.

sw itching tr acks A key implication of these struggles is that they can contribute to trackswitching. Indeed, the goal of both redirection strategies and protection

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strategies is to induce track-switching such that rules and institutions come to serve different interests than they did in the past. In the early 1900s, the USDA effectively rolled together the protection strategy of cotton farmers with the redirection strategy of US merchants in order to challenge the institutional power of Liverpool merchants in the cotton trade. Through this effort, the governance of quality standards fundamentally switched tracks. The USDA shifted quality governance from private standards for economic liberalism to national standards for embedded liberalism and shifted the geographic seat of power from the United Kingdom to the United States (see Figure 7.1). However, even if the incumbent rule-maker prevails and successfully reconstitutes its institutional power, the struggle still brings transformational institutional change. The patterns of conflict created by liberal market projects compel dominant actors to reconstitute their own institutional arrangements in ways that contribute to track-switching. Contemporary negotiations over quality standards and dispute settlement are a case in point. These negotiations are not complete, and it is not decided who the victor will be. While the Chinese state appears to pose a significant threat to the USDA’s control over standards, the USDA and US industry may still be able to reconstitute and maintain their institutional power. Yet, regardless of the victor, the struggle over standards has brought a governance form significantly different from that used in the past. In its preservation strategies to ward off a challenge from China, the USDA has contributed to trackswitching by incorporating new fiber characteristics of importance to Chinese textile manufacturers and by conducting research in conjunction with the Chinese state. Moreover, the USDA and its colleagues in the Bremen Fibre Institute have constructed a new institutional infrastructure within the ICAC for verifying the reliability of the classification system across farflung locations. As more market players accept this global system, it lays a new global track for cotton classification in relation to which future bids to control standards would need to engage. Finally, by creating new reliability standards, the USDA has traded a degree of control over standards for transparency in the event that China makes a successful bid to control standards. These reliability standards make it easier for the United States’ rivals to create their own benchmark standards, undermining the USDA’s control but ensuring the transparency of future governance arrangements if institutional power changes hands. What had been de facto transnational standards set by the United States morphed into standards with Chinese characteristics. At the same time, transnational merchants have begun to position them-

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selves as the neutral arbiters of quality disputes regardless of whether control over benchmark standards remains in the United States or moves to China. Once they establish a global system of laboratory certification, it will be difficult for challengers to be successful without adhering to or establishing a competing certification system. These efforts of transnational merchants to claim private authority over dispute settlement reflect the broader rise of private authority in the global economy that many scholars have noted, but demonstrate the way in which this private authority is enmeshed in and constructed in relation to geopolitical tensions. While many scholars have made strong claims that transnational firms have become “placeless” and unanchored by any particular national origin, this case suggests that a more nuanced analysis is required. Transnational cotton merchants were strongly aligned with the US state and the rest of the US cotton industry not simply because a significant slice of the cotton market originated within the United States but also because they preferred to maintain the geographic seat of institutional power in the United States rather than in China. This is not to say, however, that historical origins are decisive. Rather, state-firm alliances can shift and take new forms. Indeed, as the threat from China became stronger, transnational merchants’ support of the USDA’s project weakened, and they took steps to establish their own private authority over dispute settlement on geographically neutral ground (see Figure 7.1). This demonstrates the leverage gained from an analysis that does not assume the triumph of transnational firms but rather traces the contingent processes through which their power is constructed in relation to the political foundations of global markets that states construct and in relation to geopolitical competition. Overall, this analysis allows us to conceptualize specific instances of institutional change as constituted by and constitutive of broader transformations in the organization of the global capitalist system. As Figure 7.1 demonstrates, Liverpool merchants’ private quality standards can be understood as part of a broader set of institutions designed to facilitate Britishled hegemonic coalition and its liberal economic project from the 1870s onward. The institutional struggles and redirection, protection, and preservation strategies this engendered brought the construction of new quality standards. These new institutional arrangements can again be understood as part of the broader struggle of the US-led coalition of firms and states for hegemonic control in the world economy. As the US coalition later reconstituted these institutions to facilitate their own liberal economic project in the 1970s, we again saw an institutional struggle emerge that reflected

f igu r e 7. 1 . Actors Controlling Key Governance Tasks in the Periods 1870–1922 vs. 1923 –2004 vs. 2005 –?, and ConflictDriven Strategies of Institutional Change.

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and contributed to the wider struggle for control over expanding markets. In this period, the institutional struggles and the redirection, protection, and preservation strategies again led to a new set of institutional arrangements in the cotton trade that point to the breakdown of US hegemony and the formation of a potential new hegemonic coalition both in the cotton trade and in the broader world economy. In sum, the struggles in the cotton trade can be understood as reflecting and instantiating the transition from a British-led hegemonic coalition to a US-led hegemonic coalition, as well as the possible transition from the US coalition to a new hegemonic coalition in which both China and transnational firms are likely to figure prominently.

conclusion Many scholars insist that transnational corporations and powerful states have allied to set the rules of the global game. It is true that powerful firms and states are strategizing and making new alliances in attempts to extend their power and authority onto the global stage. But emerging forms of global governance are also highly contested, not just from weaker actors but from different fractions of transnational capital and powerful states. Within this contested and fractured landscape in the cotton trade, powerful actors have not yet been able to create stable, accepted, and enforceable global rules. They are iteratively strategizing to reconstruct their power and authority on a global scale, drawing on past relationships and capacities and forging new ones. From this perspective, we must recognize the new and unique ways that powerful actors are responding to their shifting environments and attempting to recast their power and authority onto global space. If we do not think broadly and historically about the ways in which states and firms might reconstitute their roles in the current period, we may miss some of the critical transformations in how the global political economy is being restructured. At the same time, if we do not pay equal attention to the fractures, pressure points, and possibilities for contestation, we will miss opportunities to construct a more just global political economy.

Notes

ch apter one 1. Alford and Friedland (1985) use the term “structural power” instead of “institutional power” for the second level. Here, I follow Wright’s revision of this terminology given that, as Wright points out, all three levels of power are “structural” “in the sense of being systematically structured by and through social practices” (1994:93). The second level of power is distinct in that it refers to power embodied in the features of institutional design. 2. Changes to the rules of the game are the focus of my analysis. In talking about these rules, I will use the terms rules of the game, institutions, institutional arrangements, and governance interchangeably. While the rules of the game can take the form of informal norms and customs, my focus is on the formal legal-political institutions that play the key role in governing modern political economies. Quality standards are an example of formal rules of the game. Quality standards facilitate commodity exchange and structure how its benefits will be distributed. As such, they can become sites of conflict over institutional power. 3. Even historical institutionalists who see political action as a source of institutional change tend to see this as an unintentional outcome (e.g., Pierson 2000). 4. Somewhat ironically, this parallels the problem with many Foucaultian analyses. Foucault sees conflict as endemic to society. However, this power is cast in rather general terms and fails to specify how states and capitalist relations could privilege some disciplinary techniques over others. As Jessop and Sum note, Foucault thus “tells us about the how of power but far less about the why of power and its role in reproducing certain forms of social domination” (2006:164, original emphases). 5. While these scholars are, more strictly speaking, socio-legal scholars rather than institutionalists, their study of bankruptcy law takes an approach highly analogous to recent institutionalist literature on change (e.g., Djelic and Quack 2003; Mahoney and Thelen 2010; Streeck and Thelen 2005; Thelen 2009). 6. This terminology is taken from Philip McMichael’s (2001) critique of the transnational capitalist class thesis posed by William Robinson. This critique follows McMichael in this and other work, in addition to Michael Burawoy’s (1979) critique of the organizational literature on industrial relations, and Wolfgang Streeck’s (2009, 2010, 2011) critique of the institutionalist literature. 7. This parallels the insights of Bruno Latour (1988) in his studies of scientific diffusion. For Latour, in order for a scientific application to diffuse broadly—or to be widely accepted as legiti-

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mate—the world must be transformed into a laboratory of sorts. This does not mean that the entire world must become a completely controlled environment. But it does mean that transferring certain social practices from one context to another requires changing the receiving context in order to ensure the predictability and reproducibility of actors’ behavior in that setting. The same can be said for governance institutions. 8. These estimates do not include land rent or seed value.

ch apter t wo 1. By hedging their purchases and sales through futures contracts, private actors, and particularly merchants, shifted the principle behind making profits in the cotton trade. Profits were not made from the purchase and sale of cotton per se. Rather, merchants made money based on the differences between the spot and futures prices at the time of buying cotton and those at the time of selling it—that is, differences in the “basis” (see Garside 1935:chapters 16 –18). 2. While I refer here to the Liverpool Cotton Association for the sake of simplicity, the Liverpool Cotton Association actually began as two separate trade associations. Brokers had established the Liverpool Cotton Brokers Association in 1841 to collect statistics on cotton stocks in Liverpool. In 1879, a merchant-run rival, the Liverpool Cotton Exchange, was established. The two merged to become the Liverpool Cotton Association in 1882 (Cox 1926:533; Ellison 1968 [1886]:278). 3. The discipline of worldwide supply and demand was tempered, however, as “Old World” cotton, especially Indian cotton, had fibers too short to be substitutable for US cotton in mechanized ginning and spinning processes (Quark 2008:15; Russell 2011:119). 4. Bouilly (1975:269) suggests that divisions within Britain and Europe more broadly made the harmonization of standards difficult as well. Ellison (1968 [1886]:275 –78) notes that such divisions intensified competition between brokers and merchants in Liverpool, which resulted in competing trade associations for several years. 5. During this period, there were a significant number of owner-operated farms in the US South—up to half in 1900. But Schwartz (1976:6) argues that this does not take into account the “widespread debt peonage which transformed farmers who technically owned their land into economically exploitable tenants.” From this view, he estimates the number of tenants to be between 60 percent and 90 percent in the 1890s. 6. The Southern Cotton Planters’ Association even tried to sell to European spinners directly but did not have the creditworthiness demanded (Saloutos 1960:163). 7. These perhaps could be considered the first “commodity chain studies,” which have again become popular (e.g., Friedland 1984; Gereffi 1994). 8. Henry C. Taylor, one of the German-trained economists to pioneer the research and teaching on agricultural marketing at the University of Wisconsin, would become the chief of the agencies appointed to govern quality standards for cotton and agricultural commodities more generally: first, the Bureau of Markets and Crop Estimates in 1919 and later the Bureau of Agricultural Economics in 1922 (Gilbert 2000). He thus oversaw the negotiations to establish a transnational agreement on quality standards with the European cotton exchanges. 9. See Cochoy (1998) for a more general discussion of the birth of new academic disciplines and new experts out of the science of marketing. 10. The Act still allowed the sale of US cotton by private type or by physical sample, as long as the private type did not aim to evade the US Standards by, for example, simply representing a physical sample of a foreign standard or description (Tenny 1925). 11. User fees were reintroduced for classing services through the Omnibus Budget Reconciliation Act of 1981 (USDA 1984:12). 12. Prasad (1999) argues that the problem rested in the introduction of the saw gin, which mechanized the process of separating the cotton lint from the cotton seed and thus radically in-

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creased the speed of initial processing. The saw gin tended to break cotton fibers. As such, the longer fibers of US cotton could be broken during the saw ginning process and still be long enough to engage in the industrial spinning machines. Despite the fact that Indian cotton held other superior quality characteristics, including fineness, silkiness, softness, durability, and absorbency, the most important criteria of industrial production deemed it inferior. In contrast, the US seed varieties were not compatible with the Indian processing system. The seeds were too soft to withstand the hand gins.

chapter three 1. The AAA represented a policy of supply management that gave farmers guaranteed minimum prices for targeted commodities. If market prices dropped below the government’s minimum price support levels, the Commodity Credit Corporation purchased the commodities from farmers at the price support level. This raised farm income and served to manage supply by pulling the commodities off the market. Farmers also had to adhere to the acreage allotments set through production controls or they would not receive price supports (Winders 2009). 2. Winders (2004, 2009) notes that, as cotton and wheat producers became more exportoriented, they supported changes in agricultural policies that maintained subsidies but reoriented them toward market expansion rather than supply management through production controls. However, supply management did not end completely until 1996. A version of price supports remains in place. 3. The MFA was preceded by the Short-Term Arrangement of 1961 and the Long-Term Arrangement of 1962, which had similar aims. 4. Color and trash (leaf grade) continued to be evaluated manually until 2000 when HVI color measurements became the official basis for the color grade. Leaf grade continues to be manually evaluated by a classer. 5. The problem of contract defaults due to price volatility first became a major issue in the 1970s. During this period, many cotton producers and textile manufacturers were compelled to break their contracts to buy or sell cotton in order to keep afloat (Busch 1982). Throughout the decade, producers in the United States, Mexico, Nicaragua, and Guatemala, and importers and textile manufacturers in Thailand, the Philippines, Korea, and Taiwan, began to default on their contracts (Busch 1982:429 –35). Among merchants, this became known as the “contract crisis” of the 1970s. US textile manufacturers did not default in large numbers during the crisis in the 1970s. However, Bernstein (2001) reports that, even though much trading in the United States was based on nothing but a handshake for many years, merchants increasingly demanded that US textile manufacturers sign legally enforceable contracts in the 1980s and 1990s. With the decline of the US textile sector, many US manufacturers who were teetering on bankruptcy became more likely to default.

ch a pter four 1. Apparel import quotas were phased out in four stages from 1995 to 2005. After each stage, a certain percentage of products covered by the MFA would no longer be subject to quotas— 16 percent immediately in 1995, 17 percent after three years, 18 percent after four more years, and finally 49 percent by the end of 2004 (Chorev 2007). Although most quotas were lifted by 2005, the European Union and the United States negotiated new import quotas for certain products from China in the years immediately following the phase-out of quotas (Dicken 2007:261). 2. The vast majority of the Chinese population is ethnically Han. 3. About half of Xinjiang’s cotton is produced by the Production and Construction Corps, a

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military-style organization leftover from the Mao era that was and continues to be used as an instrument of political control (Alpermann 2010:171). 4. Cotton production in China did increase in this period, and the average national cotton output since 2000 has been over 20 percent higher than the average output in the 1990s (Alpermann 2010:170). Nonetheless, consumption has been almost double the production in some years since 2000. 5. The National Cotton Council is the main trade association representing the cotton textile industry in the United States. It brings together seven sectors in the industry: cotton producers, ginners, warehousers, merchants, textile manufacturers, cooperatives, and cottonseed firms. According to some analysts, the NCC is “arguably the most effective agricultural lobby in the industrialized world. . . . The NCC has welded different players in the cotton sector into a unified political force with immense clout at all levels of government” (Watkins 2003:4, as cited in Heinisch 2006:256 –57). 6. The ICAC estimated that, if all countries removed direct subsidies, average cotton prices would have been 17 cents and 31 cents/pound higher in 2000–2001 and 2001–2002, respectively (Baffes 2004). 7. Removal of EU cotton subsidies would reduce production and exports within the European Union to a much greater extent (Baffes 2004). 8. A conflict over the Commodity Credit Corporation (CCC) loan program was sparked by problems with the 2005 US cotton crop. Cotton in the CCC loan program must be stored in USDAapproved warehouses. In 2005, the west Texas cotton crop was so large that the USDA allowed part of the crop to be stored outside rather than in warehouses (Laws 2006b). For merchants, this was problematic as the quality of cotton stored outdoors often deteriorated. Controversy over this storage issue was further exacerbated by broader concerns with the loan program. Merchants saw the loan program as creating incentives for cotton producers to put their cotton in the loan rather than marketing it. This meant that cotton sat in the loan as producers waited for better prices, rather than becoming available to merchants to export to their clients abroad (Laws 2007; Robinson 2007). 9. This figure represents an estimate of the Big 3’s market share cited to me by industry players, including executives from the Big 3 themselves. It also reflects rough estimates of market share based on trade data cited on the Big 3’s websites and Guitchounts’ (2008) report on the structure of world trade. According to their websites, Cargill trades over 5 million bales per year, or over 1 million metric tons of cotton per year (Cargill 2005a). Dunavant trades over 6 million bales per year, or over 1.3 million metric tons of cotton per year (Dunavant 2009). Louis Dreyfus/Allenberg trades about 6.8 million bales per year, or 1.5 million metric tons per year (Louis Dreyfus 2009). One million metric tons of cotton equals 4.593 million bales. 10. In addition to these large third-tier merchants, Guitchounts (2008:12) estimates that there were 443 additional firms that were engaged, at least in part, in the transnational cotton trade. These additional merchants were transnational in that they traded cotton across national borders and were third-tier merchants in that the buying or selling end of their business was concentrated in one country. However, they also represented significantly smaller enterprises, trading less than 200,000 metric tons of cotton annually, a portion of which would be traded domestically, not transnationally. As well, some of these smaller, third-tier merchants traded cotton through other merchants—that is, they were suppliers. For example, a firm in India or Pakistan might import or export cotton to or from a tier 1 or tier 2 transnational merchant. 11. China Investment Corp., the country’s sovereign wealth fund, reportedly purchased a 15percent stake in Noble Group, which is one supplier of China’s coal, iron ore, soybeans, and cotton (Carpenter 2009a). 12. Queensland Cotton was a state-owned enterprise until it was privatized in 1989. 13. The 1947 General Agreement on Tariffs and Trade (GATT) contained only a general reference to technical regulations and standards in Articles III, XI, and XX. A GATT working group

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was established to consider the impact of nontariff barriers to trade and concluded that technical barriers were the largest category of nontariff measures that exporters faced (WTO 2010). 14. While the TBT’s sister agreement, the Agreement on the Application of Sanitary and Phytosanitary Measures (SPS Agreement), explicitly requires science-based decision-making, the TBT Agreement itself does not specifically include any scientifically based trade disciplines. 15. Cotton was traded commercially on the basis of a trash standard at this time. However, trash continued to be manually measured and thus was not as reliable as other fiber measurements. As a result, cotton producers in the global South that pick cotton by hand would benefit from the inclusion of a more precise trash measurement. 16. A representative from a US cotton producer–funded research institute, Cotton Incorporated, reported to me that hand-picked cotton had 150 neps per gram, whereas cotton harvested by the two machine harvesting technologies used in the United States—pickers and strippers—had about 250 and 350 neps per gram, respectively. 17. Machine-picked cotton generally requires two seed-cotton cleaners and two lint cleaners whereas hand-picked cotton often requires no cleaning or only one cleaning (Chaudhry and Guitchounts 2003:94). 18. In the 1990s, China did extend some import and export rights to certain local cotton bureaus, state farms, and state-owned and joint-venture textile firms, although the system was still highly state controlled (MacDonald 2000). 19. This situation was also to be replicated in the domestic trade in cotton. In their accession agreement, the Chinese state committed to opening up the domestic trade in cotton by 2005. While before accession, China did not allow foreign firms to distribute or market cotton within China, with this commitment, foreign trading firms would gain the right to purchase and sell domestically produced or imported cotton within China (Colby 2002). For transnational merchants, this would mean that the domestic trade in China, the largest cotton producer in the world, would become a key site for competitive expansion. 20. Alpermann (2010:163) notes that these figures underestimate the number of firms involved in textile production in China. These figures refer only to the “cotton textile industry,” or firms that use only cotton as a fiber input in processing. This thus excludes a vast number of textile manufacturers that blend cotton with other fibers such as synthetics, silk, or wool. In effect, the transition from a single state-owned importer/exporter to a vast number of private importers/ exporters is likely more significant than these numbers suggest. 21. According to China’s WTO accession agreement, one-third of the quotas in its tariff rate quota (TRQ) system could be allocated to state trading firms while the remaining two-thirds had to be allocated to private firms (Colby 2002:1). 22. When selling on a fixed price to a textile manufacturer, a merchant will immediately buy a similar amount of futures contracts to offset their risk that the price of cotton will fluctuate before the time of delivery. When selling on call, the merchant does not buy futures contracts until the textile manufacturer fixes the price (ITC 2009 –10). 23. The continental European cotton associations are: the Association Française Cotonnière (AFCOT, France), the Belgium Cotton Association (Belgium), the Bremen Cotton Exchange (Germany), the Centro Algodonero Nacional (Spain), the Gdynia Cotton Association (Poland), and the Associazione Tessile Italiana (Italy).

chapter five 1. The USDA and other US scientists had long used instrument classification data in plant breeding. Moreover, the Uzbekistan government classing organization, SIFAT, reported that the incentives provided by more accurate instrument classification had resulted in a one-grade improvement of their cotton between 1999 when they first implemented instrument classing and

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2006. One estimate suggested that this would translate into an approximately $112 million increase in annual crop value (McAlister 2010). 2. Countries in the global South have felt that international commercial arbitration instead of dispute settlement through national courts was averse to their interests, in part given their unfamiliarity with the technicalities of arbitration in Western arbitration centers and thus their increased likelihood of losing disputes (Sempasa 1992; Sornarajah 1989). 3. Moreover, controlling the arbitral institution itself gives other legal advantages to certain parties. It is often the arbitral institution that chooses the third person on a three-member arbitration panel, with implications for the overall bias of the panel toward certain perspectives and styles of arbitration (Eörsi 1977). 4. A false-packed bale contains a mix of good cotton with inferior or damaged cotton, packed so that customary examination would not detect it. A mixed packed bale contains different grades, staples, or colors of cotton.

chapter six 1. The Task Force encouraged Uster, the HVI manufacturer, to make a lower-cost machine that lower-income countries could adopt. Most critically, the Task Force called for a “stand-alone” instrument that could condition samples within the instrument itself, eliminating the need for costly air conditioning systems. Uster reported, however, that efforts to develop such a stand-alone system have proved unsuccessful, but that an Uster 700 model would be available that would operate at lower speeds and would be available at 60 percent of the cost of an Uster 1000, the best available model (CSITC Task Force 2007b). Others suggested that Uster was investing little into research and development given the minimal competition in the market for HVI machines and the skyrocketing demand. 2. There are a number of trade associations operating in the cotton sector in India, which participate in transnational forums such as the ICA to differing degrees. These include the Confederation of Indian Textile Industry, the Cotton Association of India, and the South India Cotton Association (ICA 2010a). 3. In India, yields increased from 302 kg per hectare in 2002 –3 to 520 kg per hectare in 2006 –7, a 72 percent increase over four seasons (Gruere 2007). 4. While this was in part due to broadening participation among more inexperienced laboratories, variation in the measurement of other fiber characteristics did not pose the same problems. 5. For the USDA, the ASTM International was a venue preferable to the ISO as it allowed more specific standards. Moreover, while ISO used a one-country, one-vote system, which gave European companies significant power as a voting bloc, ASTM International distributed votes by company or “interest” and allowed technical committees to establish by-laws defining their own voting regulations. 6. The standard applies specifically to fiber measurements of micronaire reading, upper half mean length, uniformity index, breaking tenacity (strength), Rd (color reflectance) , +b (color yellowness), percent area trash, and particle count trash (ASTM International 2007:1).

chapter seven 1. Many medium-sized merchants report they cannot afford the volatility in futures markets and can no longer access sufficient credit from banks. As a result, many have begun to define niche roles in marketing particular varieties, source exclusively for certain mills, or become suppliers for larger merchants (ICAC 2010b:3). 2. These numbers refer to the category of “largest” firms, or firms handling more than 200,000

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tons of cotton annually. However, this period also brought a thinning of the ranks of “large” firms, or those that handle between 50,000 and 200,000 tons of cotton annually. The ICAC (2010:2) reports that in 1994, there were 51 companies in the large category. By 2008 this number had dropped to 44 merchants and by 2009 to just 37. 3. In 2010, Olam and Louis Dreyfus also entered into merger talks, which ultimately fell apart (Cotton International 2010b; Yeap 2011). 4. Here I draw on Streeck’s (2010) comparison of the notions of institutions in time and their location in historical time. Unlike Streeck, however, I specify that historical time must be understood through the lens of the historical—and contingent—development of the global capitalist system. From this view, I more closely follow world-systems scholars such as Tomich (1990), McMichael (1990, 2000), and Wallerstein (1974). 5. In a different interpretation, Eagleton-Pierce (2012) demonstrates that the United States was able to reframe the debate by emphasizing the issue of “development” rather than fairness in the application of trade rules and by attempting to define its responsibility in terms of providing aid and technical assistance rather than actually bringing its subsidy policies into compliance with the 1995 Agreement on Agriculture (AoA).

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Index

Page numbers followed by the letter b indicate tables, the letter f figures, and the letter t tables. African Cotton Association, 147, 181, 185, 197, 202 Agreement on Agriculture (AoA), 127–31, 251n5 Agreement on Technical Barriers to Trade (TBT): and Chinese registration system, 214; and depoliticization, 186 –87, 237; description of, 134 –35, 233; and “international” standards, 135 – 47, 158, 181, 186, 192, 210, 239; and science, 35, 136 – 47, 162, 168, 186 –87, 208, 210, 237, 249n14 Agreement on Textiles and Clothing (ATC), 122 –26, 133 Agricultural Adjustment Act (AAA), 89, 247n1 Alford, Robert R., 8 –9, 245n1 American Cotton Marketing Cooperatives (AMCOT), 171, 214 American Cotton Shippers Association (ACSA), 104, 115, 171, 200, 215, 224 AoA. See Agreement on Agriculture appareland textile sector: in China, 26 –27, 91, 119, 121–26, 132 –33, 158; as commodity chain, 32f, 103; and cotton quality/ classification, 28, 34, 42, 63, 93 –100, 101, 138, 144; geography of production in, 26, 34, 40, 88, 90, 98; in India, 80–81, 105; regulation of, 26, 30, 40, 43, 88, 90–91, 98, 122, 247n1; and scientific processing management, 96 –100; technological

change in, 40, 59, 91–93, 138; US, 34, 88, 90–100 AQSIQ (General Administration of Quality Supervision, Inspection, and Quarantine, China), 213 –15 arbitration. See dispute settlement Arrighi, Giovanni, 7, 13, 16, 43, 59, 60, 70, 88 Association Française Cotonnière (AFCOT), 199, 201–3, 249n23 ASTM International, 210–11, 250nn5 –6 ATC. See Agreement on Textiles and Clothing Bangladesh, 197, 218 bargaining power: of dominant actors, 117, 149, 182, 193; of marginalized actors, 57, 76, 104 –5, 110, 202, 240; and patterns of conflict, 6, 15 –17, 20–22, 25, 33, 226; of rivals, 140, 151, 169 Beckert, Jens, 28 benchmark standards: description of, 29; Liverpool-US struggle over, 39, 45 – 47, 54, 63, 66, 68, 73, 75; for manual versus mechanized classification, 95 –96, 163; and transnational merchants, 217–18, 225, 242; US-China struggle over, 136, 140– 41, 164 –65, 179 –80, 182t, 205 –12, 225, 241; US-marginalized actors struggle over, 143, 183 –88, 192, 239; US transnational influence over, 81, 88, 99

276

index

Benin, xiii, 2, 85 –86, 109, 129, 197 Block, Fred, 7, 12, 13, 21, 22 Boli, John, 11 Brazil, 227, 230; cotton exports from, 40, 46, 132; and dispute settlement, 197–98; and quality standards, 82t, 142, 191; and US cotton subsidy dispute, 1–2, 129 –30, 224, 239 Bremen Cotton Exchange, 54, 65 –66, 69, 199 –200, 217, 249n23 Bremen Fiber Institute, 183, 185, 188 –91, 217, 241 bricolage, 11, 25, 74. See also strategic action Bunker, Stephen, xiii, 100–101 Burawoy, Michael, xiii, 11–12, 245n6 Burkina Faso, 1–2, 109, 197–98 Busch, Lawrence, 28, 101, 139, 239 Büthe, Tim, 30, 116, 135, 139, 208 Campbell, John L., 11 Cancun, 2, 86, 130 Carruthers, Bruce, 9, 10–11, 14, 52 Central Institute for Research on Cotton Technology (CIRCOT, India), 185, 211 CFDT (La Compagnie Française pour le Développement des Textiles), 106, 107b, 201 Chad, 2, 129 China: accession to WTO, 26, 121–26, 236; cotton consumption and production, 55, 124; cotton imports, 26, 70, 124 –25, 132 –33; domestic tensions in, 121–26; and struggles over dispute settlement, 148 –52, 159 –61, 168 –76, 182t, 192 –93, 195, 197–98, 204 –5, 212 –18; and struggles over institutional power (general), 4 –5, 8, 13, 19, 26 –27, 121, 136, 227, 230–32, 234, 236 –38; and struggles over quality standards, 3 – 4, 119 –20, 135 – 42, 162 –68, 179 –81, 182t, 184, 205 –12; textile and apparel sectors in, 26 –27, 91, 121–26, 225 China Cotton Association (CCA), 3, 160–61, 169 –76, 179, 193, 204 –5, 225, 236 China Fiber Inspection Bureau (CFIB), 162, 179, 209 China Inspection and Quarantine (CIQ), 120, 173, 213 Chinatex (China National Textiles Import and Export Corporation), 131–33, 148 – 49, 151, 169, 174 –75 Chorev, Nitsan, 9, 22, 88, 122, 134, 235, 247n1

Ciccantell, Paul, 100–101 CIETAC (China International Economic and Trade Arbitration Commission), 171–75, 205 CIRAD (Centre de Coopération Internationale en Recherche Agronomique pour le Développement), 191 class, 7, 8, 18, 24, 61, 122 classical economics, 43, 61 classification (of cotton): and benchmark standards, 29; Chinese bid to control, 119 –20, 162 –68, 179 –80; Chinese discontent with, 136 –39, 140– 42; compared to other commodities, 100; and dispute settlement, 216 –17; divergence among systems of, 53; expertise in, 56 –58, 64 –65, 94 –96, 183; government intervention in, 62 –65, 67– 69, 73 –77; informal, 42; manual versus mechanized, 92 –97; marginalized actors’ discontent with, 56 –58, 142 – 47, 180–81, 185 –86; in other countries, 82t; private sector disputes over, 67; private system of, 45; science of, 67–68, 96, 186 –88, 233; US bid to maintain control over, 182 –92, 209 –12; US transnational influence over, 81–82, 98 –100. See also benchmark standards; definition of quality; quality; quality standards Collins, Jane L., xiii, 30–31, 98 Common Fund for Commodities (CFC), 191 conflict: and institutional change, 6 –7, 15 –25, 33 –36, 38, 181–82, 218 –19, 225, 241, 243f; and institutionalism, 9 –11; and market liberalism, 6, 15 –16, 226, 228 –29; over quality governance, 28 –30; among states, 22 –24 consignment system of trade, 40– 43, 50, 52 –53 context-specific science, 136 –37, 143, 146, 147, 162 contracts: ability to set terms of, 46 – 47, 104 – 5, 109 –10, 156 –57; and arbitration, 46, 49, 75, 78 –79, 116, 153 –55, 194; disputes over rules governing, 105, 151–58, 159 –61, 169 –76, 192 –205, 212 –17; ideologies governing, 50–51, 114, 196 –97; lack of formal, 42; and mechanized quality classification, 192; quality versus technical terms of, 29, 45 – 46. See also contract sanctity; default; dispute settlement; forward delivery contracts; futures contracts

index contract sanctity: in China, 149 –51, 169, 195; and global competitiveness, 151, 159, 202, 223; ideologies governing, 50–51, 196 –97; trade associations promoting, 115, 174, 195 –97, 201, 215, 225. See also default Cotton Association of India (CAI), 153t, 250n2 cotton processing. See processing cotton production. See hand-picked cotton; machine-picked cotton cotton quality. See quality cotton quality standards. See quality standards cotton spinning. See processing cotton subsidies. See US cotton subsidies courts. See state courts creative dynamics of capitalism, 15 –17, 33, 35, 38, 51, 121–24, 226, 232 credit: as competitive advantage, 46, 52 –53, 69 –70, 103, 112 –13, 131, 196, 222, 246n6, 250n1; facilitating trade, 40– 41; for small cotton producers, 105, 108; in tenancy system, 55 –57 CSITC Task Force (Commercial Standardization of Instrument Testing for Cotton), 144, 146 – 47, 185 –92, 206 –9, 211, 217, 240, 250n1 DAGRIS, 95, 132 default (contract): and arbitration, 153 –54; competition to avoid, 115 –16; and ethics of trade, 196 –97; and global competitiveness, 151, 171, 195 –96, 219; and litigation, 114; and price volatility, 44, 113 –14, 116, 149 –50, 204, 212, 219, 223, 247n5; private deterrents to, 115, 215, 225 definition of quality: and competition among trade associations, 53; for industrial textile production, 80–83; informal, 42; as governance task, 28 –29; Liverpool-US struggle over, 39, 45 – 47, 53 –54, 63, 66, 68, 73 –75; for manual versus mechanized classification, 94 –96; US-China struggle over, 137–38, 182t, 206 –9; US-marginalized actors struggle over, 144 – 46, 181, 186 –88; US transnational influence over, 82 –83. See also quality; quality standards dependency theory, 146 – 47 depoliticization: and market liberalism, 234 –35; through science, 72, 83, 186 –88, 235, 237; of supranational institutions, 236 –37, 238

277

destructive dynamics of capitalism, 6, 15 –17, 20–21, 33, 35, 38, 55, 60, 226 Dezalay, Yves, 18, 155, 172, 194 dispute settlement, 29; in China, 151; control over, 39t, 182t; and geopolitics, 218, 242; growth of private, 45 – 46, 47–51, 78 –79, 116; ideologies governing, 50–51; in other sectors, 116; state-business struggles over, 47–51, 69, 72 –77, 110–16, 212 –18, 250n2; and state transformation, 117–18; struggles among private trade associations over, 18, 46 – 47, 53 –55, 65 –66, 103 –5, 109 –10, 148 –58, 159 –61, 168 –75, 192 –205, 223, 250n3. See also 1958 New York Convention; WTO Dispute Settlement Body Dispute Settlement Body. See WTO Dispute Settlement Body Djelic, Marie-Laure, 5 –7, 9, 11 dominant actors, 6 –7, 15 –25, 36, 161, 181–82, 218 –19, 226, 229, 232 –33, 241 Drezner, Daniel, 24 Drori, Gili S., 11, 143 Electronic Product Code (EPC), 227 enforcement: of liberal market rules, 15 –22; limits to private, 54 –55, 114 –16, 150–52, 171–72, 174 –76, 194 –96; limits to public, 64, 74, 78, 150; public versus private, 47–51, 78 –79; of rules generally, 5, 9; supranational mechanisms for, 134 –35 European Cotton Confederation (ECC), 154, 156, 199 –202 European Union (EU), 1–2, 91, 122, 191, 214, 230, 247n1, 248n7 experimentation, 5, 7, 14, 39, 44, 83 Expert Panel on Instrument Testing of Cotton, 147, 182 –86 forward delivery contracts, 44 – 45 Friedland, Roger, 8, 245n1 futures contracts: emergence of, 44 – 45, 246n1; and commodification of risk, 52, 113; as competitive advantage, 52 –53, 102 –3, 112 –13, 131, 151, 196; and privatization of risk, 113; and quality standards, 45, 68; and speculation, 112, 222. See also price risk management; price volatility Garth, Bryant, 18, 155, 172 GATT(General Agreement on Tariffs and Trade), 90, 121–22, 134 –35, 249n13

278

index

geopolitics, 7, 8, 22 –24, 25, 27, 83, 136, 182t, 218, 226, 242 German historical school of economics, 60–61, 246n8 global capitalist system: and institutionalism, 10, 12, 228 –29; shaping and shaped by institutional struggles, 6, 33, 36, 38 –39, 82, 117, 228, 229, 231–33, 242 – 44; struggles over rules governing, 4; theory of institutional change in, 7–8, 12 –25, 225 –26 global commodity chain (GCC), 30–33, 103, 246n7 globalized localism, 17–18, 35, 79, 121, 155, 158, 180, 231–34 grades: and contract fulfillment, 174 –75, 250n4; definition of, 28 –29, 95 –96, 247n4; in different countries, 82t; disputes over, 38, 45 – 47, 53 –58, 62, 64 –67, 75, 146; as incentives for producers, 108; scientific determination of, 67–68. See also quality standards guanxi, 150 Halliday, Terrence, 9 –11, 14 hand-picked cotton, 26, 144 – 45, 181, 186 –87, 209, 249n15, 249n16, 249n17 Harvey, David, 15, 21, 123, 124 hegemonic rivalries, 4 –6, 8, 13, 16, 19, 24, 24 –25, 36, 225 –28, 242 – 44 historicizing theory, 11–12 Hobsbawm, Eric, 42 – 43, 52 Hopkins, Terrence K., 31 HVI (High Volume Instrument), 94 –97, 100, 137–38, 145f, 147, 163, 166, 185, 205, 209, 211, 250n1. See also classification hybrid institutions, 5 –7, 22, 25, 33 –34, 36, 39, 181–82, 212, 218 –19 incorporating comparisons, 31–33 incremental change, 5 –6, 9 –10, 19, 34 –36, 47, 161, 176, 231–32 institutional change: and diverse axes of conflict, 7–8, 15 –25, 83, 181, 226; in global capitalist system, 7, 12 –25, 40, 225 –26, 228 –29, 231; and hybrid outcomes, 6 –7, 22, 181, 219, 240– 44; incremental, 5 –6, 9 –10, 19, 34 –36, 47, 161, 176, 231–32; and institutionalism, 7, 8 –12, 228, 231; and marginalized actors, 83, 238 – 40; and state transformation, 176; struggles over, 6 –7

institutional dependence, 18 –19, 34, 36, 39, 64, 67–68, 161–65, 168 –70, 176, 232 –34, 239 – 40 institutional entrepreneur, 11, 13, 20–21, 228. See also strategic action institutional incongruity, 18, 35 –36, 136, 138 – 39, 144 – 46, 148, 152 –55, 158, 166 –68, 174, 233, 236, 239 institutionalism, 7, 8 –12, 13, 14, 19, 20–21, 24 –25, 34, 117, 228 –29, 231 institutional power: geographic site of, 73, 141, 172, 177, 181, 225, 242; and global capitalist system, 83; and institutionalism, 9 –12; struggles over, 82, 133, 172, 181, 205, 209 –10, 218 –19, 227–29, 234, 241; as type of power, 8 –9, 12, 236, 245n1; and WTO, 134 institutional privileges, 6 –7, 15, 17t, 16 –24, 66, 181, 183, 192 institutional strategies, 16 –25, 17t, 27, 33, 51, 83, 87. See also preservation strategies; protection strategies; redirection strategies interests: competition to institutionalize, 8, 77; constructing institutions to serve one’s, 13, 40, 47, 82, 209, 226, 231; in dispute settlement, 54, 78 –79, 114, 152, 154, 170–73, 195, 197; and institutionalism, 9; in market liberalization, 117; and position in global capitalist system, 14, 17t, 17–25, 82, 233; in quality standards, 28 –29, 47, 74, 137, 141, 144 – 45, 147, 165; redirecting institutions to serve new, 5, 6, 7, 17–19, 39, 64, 159, 161–62, 179, 181, 182 –83, 205, 209, 212, 232 –33, 241; and strategies, 17t, 17–25; of transnational firms, 130–31, 175; and the WTO, 135, 139, 143. See also preferences International Calibration Cotton Standards (ICCS), 96, 140, 164, 185 International Cotton Advisory Committee (ICAC), 2 –3, 31–32, 86, 111b, 114, 142 – 47, 179 –80, 182t, 182 –92, 193 –94, 208, 221, 224 –25, 238 –39, 241 International Cotton Association (ICA), 3, 32, 195, 221, 223, 225; constructing legitimacy of, 195 –204, 215 –18; and geopolitics, 206, 217 International Monetary Fund (IMF), 19, 22, 90, 104, 106, 109, 114, 117, 227–28 International Textile Manufacturers Federation (ITMF), 139, 188, 197, 208 –9

index ISO (International Organization for Standardization), 139 – 40, 207–8 legitimacy: construction of, 11, 14, 25, 27, 72, 74, 83, 184, 186 –92, 192 –205, 211–12, 233, 235; as context-specific, 14, 39; of private authority, 51, 63, 118, 169; of public authority, 64, 67, 148 – 49, 169, 236; and science, 68, 71, 83, 96, 139, 141, 162, 208, 234, 237; of Western rules, 1, 4 –5, 27, 130, 141, 146 – 47, 150, 183 –86, 227 liberalization: conflict generated by, 6, 16, 122 –25, 238; and firm consolidation, 26, 131; projects to pursue, 13; through structural adjustment programs, 104, 106 –8; uneven, 2, 86 –87, 88 –91, 93, 98, 129 liberal market projects. See market liberalism Liverpool Cotton Association: constructing legitimacy of, 193 –95; and geopolitics, 184 –85, 192; role in quality governance, 39t, 45 – 46; tensions with other trade associations, 46 – 47, 54, 65 –67, 103 –5, 115, 159 –61, 170–76; tensions with states, 49, 54 –55, 69, 149 –52, 152 –58 machine-picked cotton, 144 – 45, 181, 187, 206, 249n16, 249n17 Mahoney, James, 9, 13 Mali, 1–2, 109, 129, 191 marginalized actors, 6 –8, 16, 17t, 20– 24, 87, 118, 121, 126, 142, 155, 158, 181, 183, 193, 205, 219, 226, 233, 235, 238 – 40 market liberalism: conflict generated by, 15 –25, 17t, 51–52, 55, 58, 79 –80, 83, 100, 106, 121, 122 –24, 126, 158, 161, 226 –29; and depoliticization, 234; and hybrid outcomes, 77, 229, 241– 44; projects pursuing, 13 –14, 38, 87, 88, 91, 97, 116 –17 Marx, Karl, 15 Mattli, Walter, v, 28, 30, 116, 135, 139, 208 McMichael, Philip, 18, 31, 41, 43, 89, 104, 111b, 127, 245n6, 251n4 methodological nationalism, 30–31 Meyer, John, 11, 14 MFA. See Multi-Fibre Arrangement Multi-Fibre Arrangement (MFA), 26, 90–91, 98, 104, 121–22, 127, 131, 133, 202, 247n3, 247n1 Munro, James, 20

279

National Cotton Council (NCC): as government lobby, 127, 163, 248n5; as institutional model, 160, 169 –70; tensions within, 130–31, 224; in transnational negotiations, 143, 150, 163 –65, 183 –84, 186, 212 neoliberalism, 1, 13, 14, 22, 87, 110, 118, 120–21, 124, 197, 234 –35. See also market liberalism New York Cotton Exchange (NYCE), 53 –54, 62 –65, 83, 112 NIEO (New International Economic Order), 111b, 114 1958 New York Convention, 79, 114, 171, 194 open-end (rotor) spinning, 91–92, 117, 137. See also processing; ring spinning options. See futures contracts path dependency, 9, 11, 19, 34, 36, 39, 40, 161, 231–33 Polanyi, Karl, 13, 16, 79 –80, 235 power: and institutional change, 7; and institutionalism, 8 –12; types of, 8 –9, 12. See also bargaining power; conflict; institutional power preferences: and institutionalism, 10, 13 –14; and position in global capitalist system, 6, 14 –15, 17t, 33, 226; for quality standards, 137, 173; redirecting institutions to serve, 51, 134, 162, 176, 180, 182, 226, 232; and strategies, 17t, 17–25; state, 22 –24. See also interests preservation strategies: in comparative context, 228 –31; description of, 17t, 21–24, 27, 181, 242 – 44; of Liverpool merchants, 34, 66 –67, 69, 71, 83; of transnational merchants, 36, 181–82, 192 –205, 212 –18, 241– 42; of US state, 180–82, 182 –92, 205 –12, 241 price risk. See under risks of trade price risk management: through contract default, 113 –14, 149 –50, 212, 223 (see also default); through forward delivery contracts, 44; through futures contracts, 44 – 45, 52 – 53, 112 –13, 151, 196, 216, 249n22 (see also futures contracts); lack of access to, 112 –13, 149, 196; through personal relationships, 40– 41, 43, 115 –16; and quality standards, 45 – 46. See also risks of trade

280

index

price volatility, 43, 62, 110–16, 117, 149, 169, 212, 217, 219, 221–23, 225, 240 private arbitration. See dispute settlement private authority: construction of, 38, 45, 87, 102, 104, 110, 214 –17; and geopolitics, 217, 242; growing importance of, 18, 116; limits of, 47–51, 110–18, 238; and state authority, 47–51, 55, 72, 73 –75, 78 –79, 117–18, 173 privatization: in China, 152 –53, 236; and firm consolidation, 109, 131; projects to pursue, 13; of quality governance, 190; of risk, 110, 113; of state functions, 118; through structural adjustment programs, 85, 104, 106 –8, 117, 201 processing (of cotton): effect of cotton harvest method on, 144 – 46; relation to fiber quality, 28, 42, 68, 92 –94, 93t, 99, 101. See also open-end (rotor) spinning; ring spinning; scientific processing management; synthetic fibers Progressivism, 60–62, 63 –64, 235 protectionism: British, 40, 43; Chinese, 139; and neoliberal discourse, 14, 197; US, 59, 88 –91, 97, 98, 117; and WTO, 125, 134 protection strategies: description of, 17t, 20–21, 22 –24, 27, 181–82, 218, 226 –28, 229 –30, 233, 238 – 44; of marginalized cotton-producing countries, 35, 87, 100, 121, 142 – 47, 158, 181, 182 –83, 207, 219; of marginalized textile manufacturers and regional merchants, 87, 105, 121, 152 –58, 193, 199 –203, 219; of US tenant farmers, 52, 55 –62, 76 –77, 82 –83 public authority. See state authority Quack, Sigrid, xiv, 5 –6, 9, 11, 14 quality (of cotton): compared to other commodities, 100–101; control in production, 107–8; from different countries, 26, 76, 80–81, 143 – 46, 246n12; economic importance of, 28, 119 –20, 173 –74; governance of, 28 –29; of hand-picked versus machinepicked cotton, 143 – 46 (see also hand-picked cotton; machine-picked cotton); increasing importance of, 42, 92 –94, 98 –101; material determinants of, 28; and processing, 42, 92 –94, 93t, 137–38 (see also processing; open-end [rotor] spinning; ring spinning); and risk in trade, 40, 45. See also benchmark standards; classification; definition of quality; quality standards

quality standards: and consumer demand, 99 –100; control over, 39t, 182t; in global capitalist system, 38, 51, 82 –83, 87–88, 120, 158, 226, 242 – 44; governance of, 28 –30, 38 –39; ideologies governing, 61, 63, 67–68, 71–72, 134 –36, 143 – 44, 186 –88, 235 –37 (see also scientism); and institutional dependence, 39, 64, 67–68, 162, 233 –34; and institutional incongruity, 136, 138, 144, 146, 165 –68, 233; interstate struggles over, 2 –3, 4, 119 –20, 136 – 42, 162 –65, 179 –80, 183 –92, 204 –12, 217; marginalized actors’ discontent with, 56 –58, 76, 79 –81, 142 – 47, 180–81, 183, 238 – 40; as market coordination, 13, 28, 46; in other sectors, 28, 47, 77–78, 136; private governance of, 38, 41– 42, 45 – 46, 62 –63; private trade association struggles over, 46 – 47, 53 –54, 65 –67; state-business struggles over, 37–39, 62 –65, 67–69, 71–75; and technological change, 93 –97; US transnational influence over, 81–82; and WTO, 121, 134 – 40, 143, 158, 181, 233, 237, 239. See also benchmark standards; classification; definition of quality redirection strategies: of Chinese state, 35 –36, 83, 100, 121, 134 – 42, 148 –52, 158, 161–77, 181, 207, 211, 225 –28; description of, 17t, 17–19, 22 –24, 27, 181–82, 218, 229 –30, 232 –34, 239, 240– 44; of US merchants, 51, 52 –55, 65 –67, 83; of US state, 34, 51, 58 –62, 62 –65, 67–69, 71–77, 82 –83 ring spinning, 59, 91–92, 137–38, 144 risks of trade: commodification of, 52, 113; competition to manage, 26, 52 –53, 103, 116, 204; contract default, 113 –14, 149 –50, 212, 223 (see also default); price risk, 43 – 44, 112 –16; privatization of, 113; quality risk, 45, 173. See also futures contracts; price risk management rival actors, 6 –8, 13, 15 –16, 17t, 17–19, 21–25, 39, 51, 52, 71, 87, 118, 122 –24, 161, 176 –77, 225 –26, 229, 232 –33, 241 Robinson, William, 8, 18, 231 Santos, Boaventura de Sousa, 17, 79, 172, 231 Schumpeter, Joseph, 15 Schurman, Rachel, 20 scientific processing management, 67–68, 96 –97, 99, 120, 142, 164, 167, 224

index scientism, 139 – 40, 143, 147, 186 –88, 235, 237 Short Fiber Index (SFI), 206 –9 Sklair, Leslie, 8, 18 Slaughter, Anne-Marie, 5, 23 slavery, 25 spinning. See processing standards (general), 4 –5, 28, 77–78, 227, 230–31, 232, 234, 237. See also quality standards standards. See quality standards standards with Chinese characteristics, 182, 205 –12, 241, 243f state authority: limits of, 55; and private authority, 50–51, 117; transformation of, 169. See also private authority state courts: as alternative to private dispute settlement, 48, 157, 195; business avoidance of, 18, 42, 45, 47–51, 74 –75, 78 –79, 172, 195; in China, 149 –51, 172; jurisdiction of, 54 –55, 73, 78; skepticism of private dispute settlement, 47–51, 113 –14, 118, 149, 154, 194, 250n2 state trading enterprise (STE), 2, 81, 104, 106 –10, 113, 117, 132, 148 – 49, 152, 190 Steinfeld, Edward, 19, 234 strategic action, 10, 11, 25, 39, 66, 83, 228 – 30, 231. See also bricolage; institutional entrepreneur; strategic/strategizing actor strategic/strategizing actor, 11, 20, 86, 228. See also strategic action strategies. See institutional strategies Streeck, Wolfgang, 7, 9, 10, 11–12, 229, 245n6, 251n4 Structural Adjustment Program (SAP), 90, 104 –6, 113, 117, 134, 201 subsidies. See US cotton subsidies switching tracks. See track-switching synthetic fibers, 92 –94, 97, 100, 111, 117, 142 tariff rate quota, 125 –26, 249n21 TBT. See Agreement on Technical Barriers to Trade technological dependence, 147 tenancy system, 55 –58, 60, 235 textiles. See apparel and textile sector Thelen, Kathleen, 9, 10, 12 theorizing history, 11 track-switching, 36, 205, 212, 218, 240– 44 trade associations. See individual association names transformational change, 6, 47, 218, 241

281

transnational firms: competition among, 132 –33, 171, 175 –76; consolidation of, 102 –3, 108 –9, 131–33, 222 –23; constructing legitimacy as rule-makers, 192 –205, 214 –18; and geopolitics, 8, 18, 24, 184, 217, 225, 241– 42; as middlemen, 26; and quality classification, 190; as rule-makers, 8, 18, 27, 78 –79, 102, 103 –10, 116, 226; tensions with China, 3 – 4, 148 –52, 159 –61, 168 –76, 212 –14; tensions with marginalized actors, 152 –58; tensions with states, 110–16; tensions with USDA and US cotton producers, 24, 130–31, 206 TRQ. See tariff rate quota uncertainty, 4 –6, 8, 43, 45, 187, 209, 221, 224, 227, 228, 240 UNCTAD (United Nations Conference on Trade and Development), 111b United Nations (UN), 78 –79, 111b United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards. See 1958 New York Convention United States Cotton Standards Act, 37, 69, 73 –77 United States Department of Agriculture (USDA): authority over standards, 64, 75– 76, 77–78, 88, 93–97; constructing domestic legitimacy of standards, 63–65 67–69; constructing transnational legitimacy of standards, 2, 69–70, 71–73, 181–92, 205–12, 217; establishment of, 60–61; tensions with business, 63–65, 67–73, 73–75; tensions with foreign states, 2 – 4, 120–21, 136 – 42, 142 – 48, 162 –67, 179–81, 205–12 US cotton subsidies: Brazil-US dispute over, 1–2, 129 –30, 224, 239; Chinese concern with, 126; changes to, 130, 224; domestic tensions over, 130, 224; history of, 89, 247n2, 238n6; West African challenge to, 1–2, 86, 107, 129 –30, 239, 251n5; and WTO Agreement on Agriculture, 127–29 USDA. See United States Department of Agriculture Wallerstein, Immanuel, 7, 16, 31, 196 West African cotton-producing countries, 25 –27, 30, 226; challenges to US cotton subsidies, 1–2, 129 –30, 224, 239; and dispute settlement, 201–2; and quality standards, 82, 145 – 47, 164, 181, 186, 189;

282

index

West African cotton-producing countries (continued) and structural adjustment, 105 –10. See also names of individual countries World Bank, 19, 22, 85, 104, 106, 109, 114, 117, 227 World Trade Organization (WTO): China’s accession to, 26, 30, 119, 121–26, 148 –51; coercive power of, 19; creation of, 122;

legitimacy of, 1–2, 4, 86, 127–30, 239; and shifting power relations, 121–34; and standards, 119 –21, 134 – 40, 143, 161, 205, 233; and state authority, 148 –51, 213 –14, 236, 238. See also names of individual agreements WTO. See World Trade Organization WTO Dispute Settlement Body, 1, 129, 135, 140, 224