1. According to a U.S. EPA engineer, among all U.S. environmental programs, the Clean Water Act achieves “the most compliance with the least amount of rancor, the least amount of lawsuits, the least amount of haggling over how to comply.”

2. ISO 14000 is a new series of private standards, promulgated by the International Standards Organization, that call for active corporate environmental management structures, procedures, and audits. Its principal compliance-forcing mechanism is the specification by customers that the selling company's products be made in ISO 14000–certified facilities. Some businesspeople anticipate that ISO 14000 certification will become a virtual requirement for exporting products to Western Europe and for selling to some governments.

3. Pollution prevention measures, Q Corp officials have told us, are seen as financially beneficial for the company, reducing chemical use and lowering purchasing costs. The company may be able to make money by licensing its new treatment technologies or providing know-how to other firms.

4. The Japanese Sewer Law provides that all industrial effluent must be discharged to a sewer/treatment plant system, if connections are possible. See Gesui dōhō (Sewer Law), Law No. 79, 1958, § 10 (1).

5. David Wallace, Environmental Policy and Industrial Innovation: Strategies in Europe, the U.S. and Japan (London: Royal Institute of International Affairs, 1995), 107.

6. See Kankyō kihon hō (Basic Environmental Law), Law No. 91, 1993, §§ 4 and 8 (advocating more corporate voluntarism).

7. On MITI's Corporate Voluntary Plan initiatives and corresponding reactions from the industry, see Mitsutsune Yamaguchi, “Planning and Implementing Environmental Policy and the Role of Industry: The Relationship between Government and Industry—The Situation in Japan”(paper prepared for the U.S.-Japan Conference on Environmental Policy in the United States and Japan for Industrialized and Developing Countries, Center for Global Change, University of Maryland, December 1, 1994).

8. Wallace, Environmental Policy and Industrial Innovation, 104. See also MITI, ed., Kigyō ni okeru kankyō kōdō keikaku (Action plans for corporate environmental activities),(Tokyo: Nihonkōgyōshimbunsha,1994); and MITI, Kankyō ni kansuru borantarī puran no sakutei jyōkyō ni tsuite (On the development of corporate voluntary environmental plans), December 8, 1993 (unpublished MITI document). For detailed arguments concerning MITI's administrative guidance and its influence, see Kosuke Oyama, Gyōsei shidō no seiji keizai gaku (The political economy of administrative guidance) (Tokyo: Yūhikaku, 1996); and Gregory W. Noble, “The Japanese Industrial Policy Debate,” in Pacific Dynamics: The International Politics of Industrial Change, edited by Stephan Haggard and Chung-in Moon (Boulder, Colo.: Westview Press, 1989), 53–95.

9. Partly this is due to the particularly influential role MITI plays in the preregulation consultation that takes place between government and industry for environmental matters. According to a Q Corp official, when consultative committees (shingikai) recommend new environment-related policies, the relevant ministry and agency (usually the Ministry of Health and Welfare or the Environmental Agency) come to Keidanren to explain their content. MITI also comes to Keidanren to listen to manufacturing industries' reactions to the new proposals. Generally, the Environmental Agency needs MITI's support for particular proposals. According to company officials, when both the Keidanren and MITI say yes to a policy proposal relevant to manufacturers, it means the measure will become law.

10. See David Vogel, National Styles of Regulation (Ithaca, N.Y.: Cornell University Press, 1986).

11. See Martin Shapiro, Who Guards the Guardians? Judicial Control of Administration (Athens: University of Georgia Press, 1988); Joseph L. Badaracco Jr., Loading the Dice: Five-Country Study of Vinyl Chloride Regulation (Boston: Harvard Business School Press, 1985).

12. The scope of local regulatory power is defined and constrained by Nihon

13. Suishitsu odaku bōshi hō (Water Pollution Prevention Law), Law No. 138, 1970, as amended by Law No. 34, 1989, and Law No. 58, 1996. For a comprehensive annotation, see Kankyōchō (Environmental Agency), editorial supervision, Chikujyō kaisetsu: Suisitsu odaku bōshi hō (Annotations; Water Pollution Prevention Law) (Tokyo: Chūōhōkishuppan, 1996).

14. JWPPL § 3 and Sōrihurei (Order of the Prime Minister's Office) § 1, Tables 1 and 2.

15. JWPPL § 28(1) and Shikōrei (Cabinet Order) § 10.

16. See note 4, JSL § 3(1).

17. JWPPL § 3(3) and Cabinet Order § 4; JSL §§ 8 and 12–2(3) and Shikōrei (Cabinet Order) §§ 6(2), 9–4(3), and 9–5.

18. Water Pollution Control Act Amendments of 1972, 33 U.S.C. §§ 1251, et seq. These amendments are collectively referred to as the Clean Water Act.

19. Thus if a federal EPA official disagrees with a state water quality board's handling of a particular discharger's permit application or regulatory violation, the EPA may take action under federal law against both the state agency and the discharger. The same overlapping of authority occurs at the state and local levels of government. If a discharger into a local sewer system (such as Q USA) violates its “indirect discharge permit,” and the local water treatment authority (POTW) treats the discharger leniently, state environmental officials could charge the POTW and the discharger with violating state law. And if the state fails to do so, the EPA could take legal action against the discharger, the POTW, and the state for violating the federal Clean Water Act.

20. 33 U.S.C. § 1365.

21. See Robert A. Kagan, “Adversarial Legalism and American Government,” in The New Politics of Public Policy, edited by Marc Landy and Martin Levin (Baltimore: Johns Hopkins University Press, 1996).

22. For example, in 1991 California responded to a federal mandate by issuing water quality standards under the California Inland Surface Waters Plan. Those standards were challenged in court and in 1994 were rescinded by the state agency that promulgated them. State Water Resources Control Board, State of California, California Inland Surface Waters Plan, 91–12 WQ (April 11, 1991); Water Quality Control Cases, Judicial Counsel Proc. No. JC2160, California Superior Court, Sacramento County, March 25, 1994; State Water Resources Control Board, Resolution 94–87.

23. See Frank Upham, “After Minamata: Current Prospects and Problems in Japanese Environmental Litigation,” Ecology Law Quarterly 8 (1979): 225–48. For more general perspectives on the courts' decisions on environmental litigation, see Naohiko Harada, Kankyōhō (Environmental law) (Tokyo: Kōbundō, 1994), chap. 5.

24. Margaret A. McKean, “Pollution and Policymaking,” in Policymaking in Contemporary Japan, edited by T. J. Pempel (Ithaca, N.Y.: Cornell University Press, 1977), 201–38.

25. The JWPPL does authorize regulation of contamination of surface water and groundwater in terms of color and temperature. See JWPPL §§ 1, 2(2), and 3. But

26. First triggered in 1964 by local concerns about unregulated pollution, over 37,000 agreements have now been negotiated between companies and municipalities, including (as of 1994) 220 by firms in Q Corp's industry. For general reviews of municipal agreements; societal background, and function, see Naoto Asano, “Kyōtei” (Agreements), published as chap. 2, sec. 3, in “Kōgai bōshi kyōtei oyobi kankyō hozen ni kakawaru kisoku, yōkō, kyōtei tō no hogaku teki kenkyū” (Legal studies on regulations, guidelines, and agreements concerning pollution control and environmental protection), Kankyōhōkenkyū 14 (1981): 32–42.

27. In the case of Q Japan, the municipal agreement was entered into after Q Japan's plant had already started production. Usually, however, such agreements are made in advance of construction; companies are compelled to enter into the agreements in exchange for approval of construction and other permits. Thus, in Japan, municipal agreements actually function like legally mandated permit systems in the United States. In the process, local governments often make substantial and intrusive demands.

28. The municipal regulators' initial “toughness” may have occurred because the municipality is almost 100 percent dependent on groundwater for its potable water supply; or because officials believe that the residents worry about how the plant handles its chemical-intensive operations; or because this particular locality has had a troublesome history of industrial water pollution; or because, due to the prominence of Q Japan, municipal officials perceived that in this agreement they would be setting a precedent for interactions with other firms. Company officials report feeling as if, at the beginning, the attitude of municipal officials was, “If you do not make an agreement with us, you can just get out of our town.” Ultimately the agreement between the firm and municipality helped municipal regulators signal residents that they were effectively controlling Q Corp, while enabling Q Corp to develop a favorable image in a community that harbored deep ambivalence about the risks of industrial pollution.

29. For example, for arsenic, national law calls for a limit of 0.1 mg/l, the prefectural ordinance calls for a limit of 0.05 mg/l, the municipal agreement sets an arsenic limit of 0.03 mg/l, and the company's internal standards call for a limit of 0.02 mg/l.

30. Q Corp's corporate policy instructs all its factories to construct and operate effluent treatment facilities that exceed government standards by a margin of error, and their environmental managers and engineers take pride in their successes. Hence, Q Corp officials conceivably might consider it embarrassing to reveal information suggesting that Q USA and Q Japan effluent levels did not reach an equivalent level of stringency. On the other hand, Q Corp does have the financial resources and expertise to implement its corporate policy, and its commitment to successful company-wide environmental management seems quite genuine. Hence, we came to regard as quite credible Q Corp environmental managers' statements that the two factories' posttreatment effluents are basically equivalent with respect to average level of contaminants.

31. Whereas Q USA's permit for discharge to the sewer plant requires treatment of fluoride, ammonia, pH, and solids, Q Japan is required to treat phenol, nitrogen, and phosphorus as well. According to a Q Japan official, the U.S. standard for fluoride is more lenient than the standard that Q Japan must meet. Whereas Q Japan does not face a specific standard for ammonia, Q USA does, and Q Japan officials regard that standard as very stringent. On the other hand, Q Japan faces a specific standard for nitrogen.

32. Robert A. Kagan, “Regulatory Enforcement,” in Handbook of Regulation and Administrative Law, edited by David Rosenbloom and Richard Schwartz (New York: Marcel Dekker, 1994).

33. See JWPPL §§ 5, 7, and 8; JSL §§ 12–3 (1), 12–4, and 12–5.

34. Although the local regulators sometimes called for explanations of parts of the applications, in Q Japan's experience, the regulators would never step into complex technological issues that might be posed by the changes in the specified facilities in question.

35. In the past, criminal prosecution and civil penalty practices of the EPA provided no incentive for self-auditing. Effective January 22, 1996, a new EPA policy entitled “Incentives for Self-Policing: Discovery, Disclosure, Correction and Prevention of Violations” (60 FR 66706 [December 22, 1995]) provides, in essence, that the EPA will not seek criminal prosecution or gravity-based civil penalties for a violation of environmental requirements if that violation was detected through a voluntary environmental audit, was promptly disclosed to the EPA independent of action by government or third-party plaintiffs (e.g., citizen suit), was corrected within sixty days, was not a repeat violation, and resulted in no harm to human health or the environment.

36. In the United States, Section 308 of Clean Water Act expressly provides that “[a] ny records, reports, or information obtained under [the act] shall be available to the public” except for company “trade secrets.” Section 308 also expressly states that “effluent data” is never a trade secret. Under Section 505 of the Clean Water Act, any citizen with standing may commence a civil action on his own behalf against any person violating an effluent standard or order issued under the act, or against the government for failing to perform a nondiscretionary duty. Also, Section 505 allows the courts to award “costs of litigation” to any “substantially prevailing party.” On the frequency of such suits by organized environmental advocacy organizations, see Jeffrey G. Miller and Environmental Law Institute, Citizen Suits: Private Enforcement of Federal Pollution Control Laws (New York: Wiley Law Publications, 1987); Michael Greve, “Environmentalism and Bounty Hunting,” The Public Interest, fall 1989, 15–29. Even if a regulatory agency and a regulated company reach a settlement regarding a remedy for a particular violation, citizens are free to sue for penalties. Unocal, for example, agreed with regulators in 1993 to pay $780,000 for discharging selenium into San Francisco Bay in excess of applicable standards. In 1997 the federal courts agreed with citizen groups that the citizens could nevertheless sue Unocal for those same violations, resulting in penalties against the company that possibly will exceed $50 million.

37. On Japanese regulators' paternalistic stance, see Yoshinobu Kitamura, Jichitai kankyō gyōsei hō (The local governments and environmental administrative laws) (Tokyo: Ryōshohukyūkai, 1997), chap. 4.

38. Government inspectors who visit Q Japan do not sample every pollutant or inspect all records each time they visit the company. Rather, they inspect for each particular pollutant at least once per year, on average. On the other hand, Q Japan never knows which pollutant will be examined at which visit, and regulators sometimes visit the plant at midnight.

39. For the effluent control regime, on-site regulatory inspections are not the principal vehicle for governmental compliance oversight, since dischargers must report their discharge data to the government; absent employee malfeasance or neglect, it would be unusual for a violation of numerical end-of-pipe effluent standards to first come to a U.S. company's attention by means of a governmental onsite inspection.

40. See Kagan, “Regulatory Enforcement”; and Eugene Bardach and Robert A. Kagan, Going by the Book: The Problem of Regulatory Unreasonableness (Philadelphia: Temple University Press, 1982).

41. Under both federal and California law, courts can impose civil penalties of up to $25,000 per day of violation; criminal fines of the same magnitude for negligent violations; and for violations that “knowingly endanger another person,” a criminal fine of up to $1 million for an organization and up to $250,000 for individuals, plus up to fifteen years in prison. 33 U.S.C. § 1319 (c) (d); Cal. Water Code, §§ 13385–86.

42. JWPPL § 19(1).

43. Yoshinobu Kitamura, Gyōsei shikkō katei to jichitai (Regulatory enforcement and local government) (Tokyo: Nihonhyōronsha, 1997), chap. 2.

44. If Q USA instead discharged treated process water to the surface and exceeded NPDES (National Pollutant Discharge Elimination System) permit limits for ammonia in the same way, a company official says, it would likely result in a formal cease and desist order and fine, partly because an exceedance in that situation would have a direct environmental impact.

45. Possible approaches being discussed include the company installing technology to move the pH level downward or the agency modifying the firm's permit limit for pH.

46. At Q Japan, since the company treats nonprocess water for pH as well as process water by neutralization, influent that is in violation of regulatory limit leaves the plant in compliance with it.

47. The penalty level imposed in this case is not atypical. In fiscal 1989, the EPA concluded 166 administrative penalty orders for NPDES and pretreatment violations. The average penalty imposed for pretreatment violations was $24,056; the average for effluent violations was $16,696; the average for reporting rule violations was $12,882. The amount of the fine in the case described supports the assertion by Q USA environmental officials that no environmental harm had resulted from the discharge. It is also notable, in assessing their credibility in this regard, that the same officials were quite willing to tell us about a violation that had indeed resulted in environmental harm.

48. The California State Water Board's guidance to regional boards, referring to administrative civil penalties (ACL), states, “If the Regional Water Board has already imposed ACL for past violations, then ACL for additional violations of the same type should be substantially higher.” State Water Resources Control Board,

49. Q Japan officials told us that Q USA got what it deserved from the regulators, that Japanese regulators should and would impose fines for causing such an incident, and that even the Japanese regulators probably would not be able to handle such a case only by giving administrative guidance.

50. See Tokutei kōjyō ni okeru kōgai bōshi soshiki no seibi ni kansuru hōritsu (Law for Establishment of Organization for Pollution Control in Specialized Factories), Law No. 107, 1971, §§ 3, 4, 10, and 16 (2).

51. In 1987, Congress directed the states to adopt by 1990 numerical ambient water quality objectives for priority toxic pollutants. As of April 1990, twenty-two states, including California, still had not fully adopted the required objectives. States were reluctant to embrace these objectives for fear that they would be subject to legal challenges. In 1991, California promulgated the Inland Surface Water Plan (ISWP), which partly complied with the federal mandate but omitted objectives for some bodies of water and for thirty-seven of the pollutants it was supposed to cover. Consequently, the EPA disapproved the ISWP. Around the same time, several cities and counties sued the state because the ISWP would compel them to build new or renovated POTWs. Faced with state inaction and partial action, the EPA was required by law to issue the required standards. When the EPA delayed doing so, it was sued by the Natural Resources Defense Council. The agency issued some of the required standards in 1992, in the so-called National Toxics Rule. In 1991 a California Superior Court invalidated the standards in the ISWP, based on purely procedural legal mistakes made by the state agency issuing the plan.

52. This attorney said, “I do a lot of environmental audits for companies. I promise that if I spend a day reviewing the company and don't find any [violations], it's free. So far, I have always been paid.”

53. In addition, Q USA, as noted earlier, has had to pay more than $50,000 in civil penalties.

54. Overall, one gets the sense from the Q USA environmental manager that she must be very cautious with U.S. regulators (1) because the regulations are so detailed and complex that a regulator can almost always find the company “out of compliance”; (2) because of the consequent ever-present possibility of a large fine, which is financially troublesome; and (3) because of the sense that U.S. regulators are compelled to (or believe they should) respond to violations legalistically. She agreed with the formulation that she is always “walking on eggs” in her relations with U.S. (i.e., California state) regulatory officials.

55. Pollutant levels coming off any piece of production equipment vary over time. Removal efficiencies for any piece of treatment technology also vary over time. Consequently, end-of-pipe effluent characteristics will always fluctuate, but this fluctuation is usually within a range that is predictable using historical performance data. The company officials face the task of engineering their technology so that (1) the worst performance of the plant under normal operating conditions will at least meet the regulatory limit; and (2) under unusual operating conditions (called breakdowns, upsets, or excursions), the plant either is prepared to shut down operations or has some sort of auxiliary or redundant treatment capacity to avoid exceeding the regulatory limit. This is an inherent feature of the technology and,

56. For more general analysis of the interaction of statutory deadlines, litigation, and rule-making delays, see R. Shep Melnick, “Pollution Deadlines and the Coalition for Failure,” in Environmental Politics: Public Costs, Private Rewards, edited by Michael S. Greve and Fred S. Smith (New York: Praeger, 1992); and John Dwyer, “The Pathology of Symbolic Legislation,” Ecology Law Quarterly 17 (1990): 233–316.

57. For a historical overview of Japanese industrial pollution, see Hideyuki Kawana, Dokyumento: Nihon no kōgai dai yon kan (Document: Pollution in Japan), vol. 4 (Tokyo: Ryokuhūshuppan, 1989), chaps. 2 and 3.

58. In 1996, Q USA installed a scrubber for treating air emissions, at a cost of around $1 million, that it was not required to install until 1999. The firm acted early because it made economic sense to do so. The firm obtained no regulatory relief or benefit for being early. On the contrary, even though the equipment was optional at the time it was installed, once it was installed, regulators required (1) that the equipment be fully permitted; (2) that the plant report any upset conditions; (3) that the plant operate the equipment as if it were regulated; and (4) that the plant have an outside party certify its efficiency. According to one of Q USA's environmental engineers, there is no provision in the law for the regulator to say, “For the time being, you're doing us a favor.” He adds, “I don't feel that there is any relief for taking an early step toward compliance.” Permitting, for example, would not occur faster in the United States as a result of early installation of this equipment.

59. Among other things, ISO 14001, at § 4.1, requires “[t] op management [to] define the organization's environmental policy and ensure that it … includes a commitment to continual improvement and prevention of pollution [and] is available to the public.” After a plant brings its operations into compliance with the ISO 14000 series, the plant has the option of self-declaring that it has complied or of obtaining a third-party audit and certification that it has complied. Once certified, a firm is “registered” under ISO 14000.

60. Firms are motivated to pursue certification under the ISO 14000 series chiefly if they anticipate that purchasers of their products are interested in the firm possessing this certification. Q Japan, like many Japanese manufacturing firms, is export-oriented. The Economist reported, “Half of the Japanese plants that have complied with the new ISO standard are in the electronics sector. Being top exporters, Japanese electronics firms have been understandably nervous about having their goods barred from countries that are signatories to the ISO 14000 agreement. To be awarded the ISO seal of approval means making fundamental changes in the way a plant is managed, with strict planning, implementing, checking and reporting systems put in place.” “Toxic Waste in Japan: The Burning Issue,” The Economist, July 25, 1998, 61. Q USA, on the other hand, is not export-oriented. Typically, Q USA's products do not cross borders.