Regulatory Cooperation: A Wikihow
Implemented jointly by ICTSD and the World Economic Forum, the E15Initiative convenes world-class experts and institutions to generate strategic analysis and recommendations for government, business and civil society geared towards strengthening the global trade and investment system for sustainable development. The Task Force on Regulatory Systems Coherence is co-convened with the European University Institute (EUI).
This think-piece presents a roadmap for countries to enhance regulatory coherence across jurisdictions by engaging in regulatory cooperation, an area of increased priority for trade and regulatory authorities alike. As is well documented, regulatory fragmentation results in unnecessary barriers to international trade as exporters need to not only customise their products so that they comply with different and sometimes conflicting regulations, but also often test and certify them multiple times over to ensure that compliance is proved to the satisfaction of the local authorities. Multiple tests and multiple certification requirements do little to enhance safety for consumers and end users. On the other hand, in some sectors, they make a product or equipment so expensive that it may not be in the interest of a global firm to market the product to a specific country, especially if its market is small and heavily regulated. The overall impact on gross domestic product (GDP) from the deep regulatory reform that is necessary to ground a truly harmonized market is hard to estimate, and available estimates suggest that gains may be small. At the same time, gains from regulatory harmonization can be very significant for particular segments and markets—leading to substantial gains in a country’s overall economic performance. Following a review of the different options for increased regulatory coherence and cooperation among countries that wish to increase coherence between their respective regulatory systems, the paper looks at the national discipline that grounds bilateral, regional, or international regulatory cooperation. It then presents practical tools that are available to regulators to enhance regulatory coherence, including the United Nations Economic Commission for Europe’s (UNECE) “International Model for Regulatory Cooperation,” and presents the example of an initiative that was based on it.
The results on the ground of the current menu of options is deepening regulatory fragmentation in key economic sectors, and high rates of non-conformity of products on the market, while the basic problem of establishing mutual trust among regulators has still not been resolved. Additionally, the regulatory community at the global level is not now capable of the coherent regulatory framework that we need internationally to respond to new UN mandates. Most regulatory co-operation arrangements other than full harmonization have only resulted in a partial elimination of Technical Barriers to Trade (TBTs) covering specific aspects. On the other hand, full market access (free circulation) through full harmonization has normally to be carried out at huge costs.
What alternative approaches are possible? What contribution can come from the private sector and the financial community? As the paper exemplifies, there are a multitude of instruments to use in the complex work to eliminate or reduce the effect of TBTs. Which instrument to use depends on the situation at hand, for example, on the degree of regulatory difference between the parties or on whether appropriate international standards exist in a particular sector, and the amount of trade. Different types of arrangements and measures are thus required. With regard to the general relationship between trade in goods and services, the methods at hand to avoid obstacles to trade from technical regulations or standards do not differ in substance. Thus, a strategy to avoid TBTs may well be applied to trade in services as well as in goods. A fundament in the effort to avoid TBTs is to also apply good regulatory practice (GRP) from a trade perspective in the preparation, adoption, and implementation of technical regulations and standards. This is also important in the field of services. Active participation on information exchange and further developments of GRP within the TBT Committee, in combination with technical assistance in this area to developing countries, should continue to be a priority. International cooperation in the field of GRP between the OECD and other organizations such as the APEC should also be supported. One important aspect of regulatory cooperation is trade policy dialogue between countries (including all relevant stakeholders) and the UNECE WP on Regulatory Cooperation and Standardization Policies provides an ideal forum for this.
Solving existing TBTs is also important. A strategy should include a long-term plan of action to avoid TBTs in new legislation based on GRP and regulatory cooperation. Therefore, efforts to reduce TBTs in existing fora for regulatory trade dialogue, in the TBT Committee and through Mutual Recognition Arrangement- (MRA) based solutions, are needed.
MRAs on results of conformity assessment procedures have, however, shown disappointing results. Complex and costly negotiations have been followed by practical problems and slow implementation. The focus should instead be on an MRA of equivalent technical regulations (MRA+). Such agreements are possible only when such equality is codified, for example, in a specific agreement. Therefore, it should be worth aiming at effective participation in the work of the UNECE and other relevant international organizations to increase equivalence of technical regulations at the international level. In the area of standardization, the work should focus on promoting increased identity between regional and international standards. Emphasis should be made to use standards-receptive regulatory models such as the International Model in regulatory traderelated cooperation. When it comes to developing countries, technical assistance is needed both to governments developing and implementing quality infrastructures and to firms to ease the burden of complying to mandatory requirements and product specifications demanded by business partners.