by Nina Hart
On February 27 and
28, 2014, New York University School of Law hosted a symposium on “New Approaches to
International Regulatory Cooperation,” featuring a mix of academics, government
officials, and practitioners. Co-sponsors
were the Atlantic Council, the U.S. Chamber of Commerce, and the ABA Section of
Administrative Law & Regulatory Practice.
Following up on the theme of the Symposium with some of its participants,
this post aims to introduce readers to the concept of international regulatory
cooperation (IRC), and some of the challenges facing the relevant actors.
Since the development
of the General Agreement on Trade and Tariffs in 1947, and its successor, the World
Trade Organization, the international community has been systematically engaged
in negotiations to reduce trade barriers.
While a main target of these negotiations has been tariffs, nations have
also acknowledged that non-tariff barriers (NTBs) pose similar impediments to efficient
markets and optimal conditions of competition.
As symposium organizer Neysun Mahboubi, a Research
Scholar at the Center for the Study of Contemporary China at the University of
Pennsylvania, notes, “Many seem to agree
that the first generation of trade issues, which focused primarily on tariff
levels, has largely been resolved. What
remains to be addressed in present and future trade agreements are non-tariff
barriers.”
In recent years, the
focus on non-tariff barriers (NTBs) has expanded to include nations’ divergent
regulatory regimes. Michael Fitzpatrick,
currently Senior Counsel for General Electric, worked in the White House Office
of Information and Regulatory Affairs (OIRA) during both the Clinton and Obama
Administrations, and led the IRC efforts during much of Obama’s first term. He notes that during the Clinton
Administration, IRC was not discussed very much, but it now has become a focus
for the Obama Administration. “This is
the future,” he suggests. “We live in a
global economy, and are increasingly linked economically by trade, as well as
socially and culturally via social media and the arts. This more global environment forces us all to
think about how our own regulations impact others around the world, especially
with respect to trade and economic growth.”
Executive
Order 13609
On May 1, 2012,
President Obama signed EO 13609, which signaled the
Administration’s commitment to promoting international regulatory cooperation. In particular, the EO charges executive
agencies with considering the international effects of their regulations and considering
regulatory approaches already adopted by the international community when drafting
new regulations.
Significance of the EO
The history of the
EO itself lends support to Fitzpatrick’s comment that IRC is increasingly relevant
in an age of increased globalization. In
1991, the Administrative Conference of the United States (ACUS) issued a report, recommending that agencies
develop systematic ways of interacting with their foreign counterparts. Twenty years later, ACUS revisited the issue
and studied whether agencies had implemented any of the 1991 recommendations. The 2011 study determined that agencies had
increased their coordination with foreign agencies, including through mutual
recognition of domestic standards, cooperation during the rulemaking stage, and
information sharing for enforcement purposes.
The study also indicated that the need for such coordination had
dramatically increased, and that, based on this level of need, the extent of agency
cooperation was insufficient. After
considering these 2011 findings, the Obama Administration decided to draft and
release EO 13609.
EO 13609 emphasizes
several things. First, although the
Executive Order does not impose new requirements on agencies, the EO “clarifies
and highlights the importance of IRC,” according to Adam Schlosser, Director of
the Center for Global Regulatory Cooperation at the U.S. Chamber of Commerce. The issuance of the EO also signals an
increased awareness by political actors of the need for IRC. Further, it is a step toward
institutionalizing IRC as a norm for agencies and the public, although, as
discussed below, democratic legitimacy concerns remain.
Challenges to Implementation
As discussed above,
the 2011 ACUS Recommendation noted that while executive agencies have increased
their efforts towards IRC since 1991, the extent of cooperation and methods of
doing so could be improved. One reason for the uneven attempts by agencies
to communicate and interact systematically with their foreign counterparts is
related to what might be termed “agency culture.” Because domestic issues are typically the
focus of regulations, agencies’ concerns have traditionally been on domestic
effects. Without additional pressure
from OIRA or the White House, the needed “paradigm shift” in agency thinking is
unlikely. As Schlosser indicates, “Regulators
are cautious by nature, and do not make rapid changes, so they need
encouragement from a higher level.” The
EO is an example of political pressure that can impress on agencies the
importance of IRC, but a more sustained effort to encourage international
coordination is required to transform the idea of IRC into an institutional
norm.
Transatlantic
Trade & Investment Partnership (TTIP) Negotiations
In June 2013, the
United States and European Union announced that they would begin negotiating
the terms of the TTIP Agreement. The mutual
goal is to increase market access and eliminate trade barriers in numerous
economic sectors. Topics for negotiation
include services; market access; competition; trade
facilitation; sectoral regulatory issues; regulatory cooperation and coherence;
investment; textiles; labor and environment; intellectual property rights, and
technical barriers to trade. Of particular relevance here is the overall
goal of removing unnecessary or duplicative regulatory burdens from market
actors. Fitzpatrick argues that the TTIP
negotiations are looking for ways to promote better coordination between the
U.S. and EU “where the regulatory objectives on both sides are functionally the
same and where the regulations have achieved essentially the same protective
outcomes, but where the regulatory paths taken are different.” The theory, he adds, “is that these regulatory
differences are highly inefficient, adding cost and burden. These added costs and burdens are passed
through the economic system from the regulated entities to consumers, with no
added benefit in terms of protecting health, safety, or the environment, for
example.” More information on TTIP is
available at http://www.ustr.gov/ttip and http://ec.europa.eu/trade/policy/in-focus/ttip/about-ttip/.
Significance of TTIP
TTIP is one of the
most recent multilateral efforts to recognize that important issues related to
trade remain unresolved, and that these issues may have a better chance of
being resolved through free trade agreements (FTAs) rather than through the
WTO. Specifically, the WTO negotiations,
which are called “rounds,” may be unable to reach any meaningful resolution on
these issues due to the nature of the institution and the complexity of the
issues. The number of countries involved
in rounds is much higher, and their trade needs and willingness to compromise
varies. Thus, reducing the number of
actors involved – in this case, including only the United States and the EU – reduces
the number of divergent preferences. In
the context of TTIP negotiations, the two parties have fewer preferences to
accommodate, and therefore may be able to address these NTBs in a meaningful
way. As noted above, the nature of NTBs is
such that their elimination requires deeper commitments from governments, and working
through the WTO, which is large and requires unanimous consent for the
imposition of new obligations, is not always conducive to extracting such
commitments.
TTIP is also
significant in the attention it draws to the idea that unnecessary regulatory
divergence is often inefficient for companies and for governments. As noted above with respect to EO 13609, the
inefficiencies may appear self-evident, but in order to eliminate these NTBs, there
must be political and public pressure to do so. As Fitzpatrick notes, “high level political
leadership is key.” Thus, the ongoing
negotiations themselves help publicize the existing inefficiencies and need for
resolution.
Challenges to Negotiations
& Implementation
TTIP faces
criticism on a variety of points. Some critiques
are more readily addressed and rebutted than others. For instance, some critics have argued that TTIP
will lead to a regulatory “race to the bottom.”
However, as Mahboubi notes, “this is a counter-intuitive objection for interested
parties in the US to make, considering that the EU generally has the more
stringent labor, safety, and environmental standards, for instance.” Fitzpatrick adds that this concern is
overstated because the “EU regulators, or U.S. regulators for that matter,
would never agree” to water down their own regulations. “The focus should, and will, be on removing
or preventing unnecessary and costly differences in regulatory approaches when
both sides are seeking to achieve, or achieving, the same outcomes.”
Another criticism
is that IRC requires too great a relinquishment of sovereignty. While there is always a question of
sovereignty with respect to international cooperation, Fitzpatrick points out,
“there is a nonnegotiable floor for each party”; in other words, each party will
decide how deeply to bind itself and opening the door will not create a domino
effect such that sovereignty will be continuously eroded.
Other concerns have
gained more traction, and generated more debate. For instance, there is an ongoing debate
about whether harmonization of standards (i.e. each nation adopts the same
standard) or mutual recognition (i.e. each nation retains independent standards,
but accepts the assessments done in the other nation) is the better approach to
IRC. Fitzpatrick notes that TTIP does
not require one method over another, but focuses exclusively on better
“coordination” and “coherence,” which may result from one or more of many
methods, including harmonization, mutual recognition, or use of common data
sets or testing methodologies. Despite
this, part of why the debate may persist is that much uncertainty exists as to
which regulations will be affected and how they will be affected.
A somewhat related
concern is that TTIP and other FTAs attempt to “Americanize” the standards and
procedures used to promulgate regulations.
As Francesca Bignami, Professor at the George Washington University Law
School, has argued, administrative procedures and regulatory frameworks are
designed in each nation to further the goal of public accountability. Public accountability requires that agencies
be responsive not just to regulated parties but also to the legislature and the
general public, and therefore it can be challenging to design administrative
law that ensures responsiveness to these multiple constituencies. For example, American administrative procedure
has been found in some academic studies to produce a “bias towards business.” See,
e.g., Jason Webb Yackee & Susan Webb Yackee, A Bias towards Business?
Assessing Interest Group Influence on the U.S. Bureaucracy, The
Journal of Politics, Vol. 68, No. 1, Feb. 2006, 128–39, available at http://journals.cambridge.org/action/displayAbstract?fromPage=online&aid=1962820; Wendy Wagner, Revisiting the Impact of Judicial Review on
Agency Rulemaking: An Empirical Investigation, 53 Wm. & Mary L. Rev.
1717 (2012).
This potential bias
is of concern because FTAs such as TTIP place significant emphasis on creating
administrative procedures that allow for extensive input from the private
sector actors who have a direct and immediate stake in regulatory outcomes. Furthermore, the specific type of administrative
procedure that has been advanced in the FTA context appears to reflect American
regulatory practice. Thus, Bignami
states, “the process risks being skewed towards one set of actors.” In particular, there is a risk that the framework
will be “open only to certain private actors with the extensive resources
necessary to take part in the many levels of regulation that are now emerging.”
Schlosser counters
that TTIP does not attempt to impose American procedures, but to develop a
better overall regulatory process. He
asserts that, the EU should actively offer methods to improve the U.S. system
as well. He further notes, “it is
important for other nations to criticize the United States, and, by doing so,
we can all take from each other and improve the final result.” Bignami argues that this is a far more difficult
issue to resolve than others may acknowledge, but there may be ways for FTAs to
address it. She suggests two things for
negotiators to consider as a first step toward resolving this issue. First, negotiators should consider providing “some
public funding for public interest groups so that they can conduct research in
the many technical areas covered by regulation and thus give meaningful
feedback.” Second, FTAs could include “a
duty to ensure representation and consideration of transatlantic consumer,
environmental, and other public interests in whatever process is eventually
hammered out.” Prof. Bignami explains
her arguments in greater detail here: http://www.iconnectblog.com/2012/10/designing-administrative-law-free-trade-vs-accountability-networks/.
Looking
to the Future
Negotiations on TTIP
are ongoing, and whether an agreement will be reached remains to be seen. On the issue of IRC more broadly, political
and economic forces seem to be aligning in its favor, and likely will continue
to do so regardless of how the TTIP talks end.
There is much to be gained through IRC; for instance, Prof. Bignami
notes that multilateral agreements can be a way for the parties “to develop
common standards and values that bind together the trading blocs.” However, the success of these agreements will
depend on the presence of political will, and the legitimacy will depend on the
precise procedures and mechanisms for representation put in place.
Further elaboration
on the ideas debated at the symposium will be available in late Spring 2015,
when the presented papers will be published in Volume 78 of Duke Law School’s Journal of Law & Contemporary Problems.
