The Future of International Regulatory Cooperation: TTIP as a Learning Process Toward a Global Policy Laboratory
Law & Contemporary Problems, Forthcoming
34 Pages Posted: 17 Dec 2015
Date Written: December 16, 2015
At the time of the negotiations of 'new generation' trade agreements, such as the Transatlantic Trade and Investment Partnership, this article focuses on an important consideration that may be neglected in current efforts to attain international regulatory convergence (IRC): The benefits of learning from regulatory variation, and the design of institutions.
Part I briefly surveys the range of mechanisms for IRC, with examples including U.S. – EU, U.S. – Canada, and Australia – New Zealand efforts, among others. These IRC efforts can be seen as moves along a spectrum from fully uncoordinated regulatory heterogeneity – variation – toward fully coordinated regulatory homogeneity – convergence. In part III, we highlight the pros and cons of IRC. The benefits of IRC include reducing trade barriers, which leads to more open markets and improved regulatory approaches. The costs of IRC include not only the time spent negotiating agreed standards but also the reduction in regulatory variation itself. Regulatory variation may be desirable to match heterogeneous local preferences. Further, we emphasize a distinct additional benefit of regulatory variation: The opportunity for learning about the impacts of differing policies. Such learning can come from observing policy variation in practice, from purposeful experimentation with policy alternatives, and from studying transitions over time as IRC pushes from variation toward convergence. Even if regulatory convergence is desirable, there can be many possible forms and levels of regulatory convergence, such as the choice among the array of regulatory instruments or among standards at different levels of stringency. Simply seeking convergence does not indicate which form or level of regulation would be ideal. Nor does it indicate which mechanism of IRC should be employed to move from variation to convergence. Hasty convergence to one current approach may reduce trade barriers but may also entrench a suboptimal or arbitrary selection. Learning about the impacts of regulatory variation – and about the impacts of different mechanisms for IRC – can thus be essential to making intelligent choices about any moves to convergence. In part IV, we discuss the institutional framework needed to promote these benefits from both regulatory variation and cooperation. In federal systems, a central government may oversee variation among its member states, study the impacts of these varying policies, and select the best policy approach for broader federal adoption. But at the international or global scale, there is no central government. Although IRC has so far put a priority on reducing regulatory variation to reduce trade barriers, we argue that learning from regulatory variation should also be an important feature of any IRC effort. Interestingly, part of TTIP being discussed so far may offer a new model of IRC capable of promoting the alignment of regulations while at the same time capitalizing on gains from studying regulatory variation. Its horizontal framework for regulatory coherence carries the potential to become a new mechanism of IRC, perhaps giving rise to what we propose: A transatlantic regulatory laboratory, in which regulators, experts and others can study and learn from both observed and experimental tests of differing regulatory approaches. As a model for other IRC efforts in other trade agreements and regions, this idea of a transatlantic regulatory laboratory may, in turn, represent a stepping-stone toward a global policy laboratory.
Keywords: TTIP, Regulatory Cooperation, Convergence, Divergence, Mutual Recognition, Equivalence, MRA, US-EU, race to the bottom, implementation
JEL Classification: F10, F13, F15, K23, K32
Suggested Citation: Suggested Citation