May 13, 2014 - 8:15am

Regulatory Cooperation: Not Just Singing Kumbaya

Former Senior Director, Center for Global Regulatory Cooperation International

barriers by Jerome Favre.JPG

Photo: Jerome Favre/Bloomberg
Photo: Jerome Favre/Bloomberg

It’s “Emerging Issues in Trade Week” at the U.S. Chamber, and we’re digging into some of the meatier trade challenges facing American business today. Regulatory cooperation is high on this list.

As advances in transportation and technology overcome distance — bringing markets closer to producers — goods and services are reaching customers more quickly, inexpensively, and easily than ever before. As trade agreements have brought down tariffs and other border measures, divergent regulatory frameworks loom as perhaps the biggest challenge to traders today.

These divergences often serve no real purpose, and in some cases they are the result of a simple lack of communication between regulators. However, regulatory barriers can add significant costs without generating any benefit or protection for consumers.

Some of these barriers are easily overcome by multinational corporations, which have the scale and sophistication to navigate diverse requirements from a host of governments. However, small businesses are often stymied by the challenge of complying with an endless parade of regulatory requirements that vary — often only a bit — from market to market.

Regulatory cooperation provides the tools needed to overcome these non-tariff barriers to trade. The beneficiaries aren’t just companies: Regulatory cooperation can safely lower costs for consumers while helping regulators to more easily reach the health, safety and environmental goals they are assigned.

Aviation provides examples of current how ongoing cooperation provides tangible benefits. In the United States, passengers are not permitted to bring more than 3 ounces of liquids onto planes, while the EU limit is 100 milliliters. However, U.S. and EU security authorities have recognized that both amounts meet common safety goals, allowing passengers to travel across the Atlantic without additional hurdles.

In another longstanding example of cooperation, the Federal Aviation Administration and the European Aviation Safety Agency have had a longstanding agreement to recognize the safety approval processes for planes built on the other side of the Atlantic. Aircraft safety has increased over the life of U.S.-EU aviation cooperation.

As these examples show, regulatory cooperation is the opposite of a “race to the bottom.” It’s really only feasible where counterpart regulations provide similar levels of protection for health, safety, and the environment.

Regulatory cooperation imposes no limits on sovereignty. The responsibilities of domestic regulatory agencies are not altered or delegated. Rather, cooperation with overseas counterparts helps regulators examine the way other systems address similar issues in order to reach the most effective solution.

It isn’t about harmonization, either. In general, it does not involve creating an identical regulation, which may make sense only in select cases and for certain sectors.

Regulatory cooperation is happening both inside and outside of trade agreements. Last week, for instance, Canada and the United States issued an update on their bilateral cooperation in this area. The Chamber has worked hard to provide practical input into this process.

In the Transatlantic Trade and Investment Partnership (TTIP) negotiations, the United States and the EU aim to make ground breaking commitments on regulatory cooperation. The Chamber and BusinessEurope, the federation of national business organizations in Europe, last week released a paper on regulatory cooperation as part of the TTIP.

Regulatory cooperation can make regulation more effective and less costly. It’s a winning formula with a bright future.

About the Author

About the Author

Former Senior Director, Center for Global Regulatory Cooperation International