Tuesday 31 March 2015

Podcast interview with Simon Deakin: Law and Finance in Rising Powers

In a podcast interview, Simon Deakin, Director of the Centre for Business Research (CBR), and Professor of Law at the University of Cambridge, has said that he is optimistic that the developing economies in the BRICS will find new ways to facilitate how business is conducted and will over time reduce the role of corruption in their economies.

Following a CBR, University of Cambridge, Workshop on Law and Finance in Rising Powers, Professor Deakin said:

“I am trying to be both optimistic and realistic. It is of tremendous importance not just for the BRICS but for the West that we do not see a race to the bottom. In the West we have a social norm that we don’t bribe officials, but in countries where there is a social norm to bribe an official to get somewhere, that is a very different world. We take for granted that by and large there is a very low level of corruption in our society and when we see corruption in the west we try and stop it. We must continue to take that line and we must encourage campaigns against corruption in all relevant contexts. However, we have to realise that corruption arises where there isn’t a functioning rule of law, so we can’t afford to preach to the BRICS; we need to help them to establish the appropriate laws and processes.”

“We have to take the view that transitioning from a clan based system and an authoritarian based system, such as China and Russia had, to one based on democracy and the rule of law, is a very difficult process and admit that we don’t fully understand how that process works. We have great models which explain how the free market works but this is where it is already established, where there is already a rule of law. We don’t yet have a convincing model of moving from one system to another. We need social science to help inform us in our policy making.” 

Listen to the full interview with Simon Deakin

More podcasts from the workshop on Law and Finance in Rising Powers,
Centre for Business Research, University of Cambridge, December 9th 2014

Tuesday 24 March 2015

Consumer choice, governance and the global stem cell therapy market

Image by dream designs, FreeDigitalPhotos.net
By Brian Salter, Yinyua Zhou and Saheli Datta

Existing modes of regulation in stem cell therapy innovation offer little recognition of the role of health consumer choice in the governance of this emerging global market. Instead, there is a strong, and familiar, emphasis on the roles of scientists, clinicians and bioethicists in determining what regulation should be provided, when and by whom. For the most part it is assumed that health consumers (patients) should be protected from themselves through regulation that renders consumer choice redundant because the apparatus of the state or professions has ensured on their behalf that available treatments are safe and efficacious. Their best interests are served, it is maintained, by their continuing faith in their regulatory guardians. This article argues that such an approach to regulation is outmoded and inefficient because it fails to address the governance needs of motivated, mobile consumers in the global stem cell therapy market. Such consumers require a balance between information that facilitates their ability to make rational choices and the confidence that provider regulation is fit for their purpose.

The dominant orthodox approach to governance works so long as the authority of science, medicine and, to a lesser extent, bioethics is able to control the operation of the health care market by convincing consumers that their choices of treatments should be what science, medicine and bioethics say they should be. The logic of this interpretation of the market is that consumer demand for stem cell therapies should adjust to the available supply generated by the orthodox scientific model of stem cell innovation characterised by the sequence of basic research, clinical experimentation, product development, clinical trials, product approval and clinical application, regardless of the timescale involved. In the case of stem cell therapies, this approach to market governance has clearly failed. The rapid and continuing expansion of a global market of innovative treatments measured in terms of hundreds of clinics treating thousands of patients has occurred independently of the very small stem cell therapy market supplied by the outputs of the orthodox model. Alternative, practice based models of stem cell innovation have developed that respond to consumer demand much more readily than the orthodox model. This poses demand side governance challenges which need to be recognised and addressed.

Much of the expansion in the supply of stem cell therapies has taken place in non-Western countries such as China and India where the assumptions of the orthodox model of stem cell innovation are less comprehensively embodied in regulatory arrangements and there is a greater tolerance of clinician led medical innovation. Whereas in Europe medical innovation supplies therapies for single or small groups of patients in what is presented, in the case of the Hospital Exemption at least, as a non-routine exercise, in non-Western countries this model routinely provides therapies for large populations of patients (see e.g. NutechMediworld, Zhongyuan Union Stem Cell, Celltex and Unique Cell Treatment Clinic). In other words, medical innovation and consumer demand responsiveness are regarded as normal rather than exceptional. In an interesting variant, some companies have combined elements of medical innovation and scientific innovation into a single business model. Here, profits from the stem cell medical innovation treatments for one set of diseases are re-invested in the funding of registered clinical trials for stem cell scientific innovation (orthodox model) with regard to a different set of diseases (e.g. Beike Biotechnology, Chaitanya Stem Cell Therapy Centre).

Health consumer demand for stem cell therapies is not easily diverted by the advice of leading authorities. It is not, as is frequently implied, merely a matter of toning down the hype and consumer demand ‘pull’ generated by the competing optimistic visions of the factions of stem cell science and stem cell clinics; there is also the very considerable demand ‘push’ created by the engagement between a consumer’s health status and the domestically available health care supply. The constraints imposed by a particular disease condition, the proximity of pain and/or death, and the limits of local treatment serve to structure a calculation of risks and benefits with its own internalist rationality. Where patient organisations are well organised, this economic demand for treatment may translate into political demand for changes in the orthodox model and its governance: for example, in the cases of AIDS and neuromuscular disorders. Most recently, in Italy protests from patient groups led the Italian Parliament to introduce legislation in May 2013 to allow experimental stem cell therapies on 32 terminally ill patients to proceed.

The general reticence to engage with the reality of the global market of stem cell therapies serves to perpetuate the present neglect of consumer demand led medical innovation and the forms of governance it requires. It is a reticence that has both supporters and opponents and is unlikely to remain politically unchallenged for long and bioethicists are beginning to acknowledge the issues posed by medical innovation in the stem cell field (5). It is important, also, that the present governance vacuum surrounding practice-based medical innovation is addressed by the medical profession itself through changes in its normal systems of self-regulation and professional guidance. Commenting on the ‘sclerotic’ qualities of the established drug innovation model traditionally sponsored by the US and European Union, Joyce Tait observes of China and India that ‘these increasingly powerful components of the bioeconomy may see a competitive advantage in leading regulatory reform so as to encourage more innovative health care sectors to develop, initially for their large and increasingly wealthy home markets, and perhaps also to encourage change in the United States and European regulatory systems’. Given the market benefits that may accrue from the association of these emerging economies with stem cell medical innovation as documented in this paper, it would be irrational of them to do otherwise.

For more details, please refer to:
Brian Salter, Yinhua Zhou, Saheli Datta (2015). Hegemony in the marketplace of biomedical innovation: Consumer demand and stem cell science. Social Science and Medicine. 131: 156-163.

Tuesday 17 March 2015

Improving labour conditions in the computer industry

Image by Victor Habbick,
By Khalid Nadvi and Gale Raj-Reichert

Many leading global brands, like Apple and Hewlett-Packard, source components from and have their products manufactured by a variety of independent suppliers. These suppliers undertake production in many locations across the world in vast global value chains. Ensuring that these suppliers meet international standards on labour, health and safety and environmental impacts is an increasing challenge for the global brands in the computer industry. These pressures are often accentuated by campaigning non-governmental organisations (NGOs), trade unions seeking to ensure better working conditions, and by governments keen to enforce public regulations. There has been substantial progress by the leading brands to engage with their first tier suppliers on such concerns. However, little is known about how labor standards and codes of conduct are addressed by second tier suppliers found at the lower tiers of global value chains, where the governance of labour conditions can be extremely challenging. Are private or public measures more successful in reaching suppliers down the global value chain? This question is addressed in a recent paper by Dr Khalid Nadvi and Dr Gale Raj-Reichert from the Institute for Development Policy and Management at the University of Manchester, “Governing health and safety at lower tiers of the computer industry global value chain” in the journal Regulation & Governance (the article is offered as open access and is free to everyone).

The paper investigates whether, and how, occupational health and safety standards permeate down the computer industry global value chain. It does so by comparing first and second tier suppliers located in Penang, Malaysia and their engagement with a private voluntary industry code - the Electronics Industry Code of Conduct (EICC), and the publicly regulated European Union Directive on the Restriction of Hazardous Substances (EU RoHs).

The EICC, which was developed in 2004, specifies guidelines for firm conduct and policies on labour, occupational health and safety, the environment, ethics, and management systems. The EICC is a voluntary standard and firms that comply with it are required to ensure their suppliers also implement it. The EU RoHS, which came into effect on 1 July 2006, limits the use of hazardous contents, such as lead and brominated flame retardants, in electronics goods of all electronic products sold in the European Union. The penalty for not complying with EU RoHS includes fines and the denial of market access to the EU. Both the EICC and the EU-RoHS directive have direct and potentially positive impacts on the occupational health and safety conditions of workers in factories that produce electronics goods.

The study reported in the paper investigated a group of second tier suppliers in Penang, Malaysia and found that while none of them complied with the EICC code, the majority of them did meet the EU RoHS requirements. The second tier suppliers managed to comply with EU RoHS largely using their own resources with little or no assistance from other firms or the Malaysian government. Through case studies of different second tier suppliers the paper sets out to explain why these suppliers prioritized the EU RoHS over all other governance measures.

The findings show that EU RoHS because of its mandatory legal stipulation made it a de facto market entry requirement for suppliers that were already plugged into global value chains linked to the European market. These findings raise important questions about the role of public regulation and public governance in improving labour conditions in global value chains. While there has been an emphasis over the past three decades on private standards and private measures for governing labour conditions in global industries, experience has shown these measures to have weak outcomes. When one travels further down to smaller suppliers in lower tiers of global value chains in developing countries, private labour standards can be altogether missing. This is often because small suppliers usually have weaker technical, managerial and financial resources. Moreover, many lower tier suppliers in the electronics industry are located in developing countries with weak government agencies and regulatory oversight over labour conditions. This was exactly the case of the second tier suppliers in Penang featured in the paper. For the majority of these suppliers, government agencies did not assist with the compliance of any type of private or public standards on labour conditions.

The paper highlights a critical and important finding which suggests that mandatory standards directly tied to market access may be better able than voluntary private standards to penetrate down the global value chain to reach second tier suppliers. This signals the efficacy and importance of market access regulation over private voluntary initiatives in the most difficult places of global value chains. While market access standards (especially pertaining to labor and the environment) have been difficult to implement at a global or multilateral level (given World Trade Organization restrictions) there are however many examples that prove it is possible at the regional, national/bilateral, and even local levels. For example, China, Japan, South Korea, Turkey and California have all implemented their own versions of a RoHS.

Moreover, market access standards can have harmonizing effects on an industry. Take the printed circuit board industry as an example. After the EU RoHS banned the use of lead, printed circuit board companies found it more expensive to operate two different types of manufacturing processes – one that uses lead for non-EU markets and one that is lead free, complying with EU RoHS, and destined for the EU market. Also, brands such as Apple and Dell now require all of their products globally to comply with EU RoHS.

The findings of the paper support arguments for complementary public-private governance arrangements. Our findings suggest the need for policy actors and researchers to further investigate how to better integrate private regulation with public regulation and public enforcement in order to improve working conditions at lower tiers of the global value chain. 

For more details, please refer to: Nadvi, K. and Raj-Reichert, G. (2015) 'Governing health and safety at lower tiers of the computer industry global value chain',  Regulation & Governance, doi: 10.1111/rego.12079 . The paper can be accessed free.