The Political Economy of Due Diligence Legislation

The policy challenge. Citizens and politicians in Western democracies have increasingly become aware of the importance of human rights, civil liberties, social rights, and sustainability issues as well as the different adherence to basic rights (such as equal treatment) all over the world. This trend has recently materialized in laws in the United States (US), Europe, Australia, and elsewhere. To varying extents, these oblige domestic businesses to comply with, and enforce, Western values and standards along their international supply chains. This values-based due diligence legislation has caused ongoing controversies over compliance costs, impacts on foreign relations – particularly with developing countries – and effectiveness in achieving legislative objectives. Clearly the economic and political judgement of due diligence legislation in principle and in detail is very complex. Aiming to structure key contours of the political discussion on values and trade, in this policy brief we develop a conceptual, descriptive overview of the fundamental political economy challenges inherent to designing due diligence legislation