Achieving Regulatory Policy Objectives: An Overview and Comparison of U.S. and EU Procedures

Susan Dudley with Kai Wegrich
by Susan E. Dudley, Director, & Kai Wegrich, Professor of Public Administration and Public Policy at the Hertie School of Governance
March 10, 2015

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The quality and extent of government regulation is “a major determinant of prosperity.”[1] As the World Bank observes, “a thriving private sector—with new firms entering the market, creating jobs and developing innovative products—contributes to a more prosperous society,” [2] “promotes growth and expands opportunities for poor people.”[3]

The United States and the European Union, along with other “OECD high-income economies continue to have the strongest legal institutions and the least complex and costly regulatory processes on average”[4] according to the World Bank’s annual Doing Business survey.

All the top countries [in the Bank's survey] regulate, but they do so in less costly and burdensome ways. And they focus their efforts more on protecting property rights than governments in other countries.[5]

As the U.S. Office of Management and Budget has noted, these “results are also consistent with economic theory, which predicts that economic growth is enhanced by regulatory policies that promote competitive markets, secure property rights, and intervene to correct market failures rather than to increase state influence.”[6]

Well-reasoned regulatory policies and practices that are not excessively burdensome can not only facilitate economic growth and public welfare within countries, but they can support international trade and investment, which raises standards of living across jurisdictions. Recognizing this, the Transatlantic Trade and Investment Partnership (T-TIP) between the EU and the U.S. aims to be “an ambitious and comprehensive trade agreement that significantly expands trade and investment between the United States and the EU, increases economic growth, jobs, and international competitiveness, and addresses global issues of common concern.”[7] While recognizing that Europe and the U.S. have an “immensely successful economic relationship,” officials on both sides of the Atlantic hope to “do more to strengthen the contribution of trade and investment to fostering jobs, growth, and competitiveness in both economies.”[8]

The success of T-TIP depends on strengthening EU-U.S. regulatory coherence, and reducing regulatory barriers to transatlantic trade and investment. As our economies become more global, and the EU and U.S. work to reduce tariffs and explicit trade barriers, regulations are emerging as more important and significant barriers to trade.[9] Not only can poorly designed or conflicting regulations inhibit transatlantic trade and investment, but differences in regulatory policy and procedural approaches may continue to challenge economic partnerships between the EU and U.S.[10] While forward-looking (horizontal) regulatory cooperation efforts have been relatively successful, and may offer more opportunities than efforts to change existing regulations, they also face significant challenges.[11] In particular, procedural differences in how regulations are analyzed, developed, and enforced must be understood if regulatory cooperation is to be achieved.

Thus, one of the goals of the T-TIP negotiations is to agree upon:

Cross-cutting disciplines on regulatory coherence and transparency for the development and implementation of efficient, cost-effective, and more compatible regulations for goods and services, including early consultations on significant regulations, use of impact assessments, periodic review of existing regulatory measures, and application of good regulatory practices.[12]

Achieving this goal requires both policy research to identify and analyze key challenges, and public debate to develop politically-feasible solutions. This paper aims to provide a descriptive analysis of procedural differences in regulatory development to serve as a factual basis for understanding the regulatory challenges and opportunities for transatlantic trade.

The sections below summarize regulatory procedures in each jurisdiction, dividing the process for establishing regulations into four stages: 1) agenda setting, 2) regulatory development, 3) final determination and opportunities for challenge, and 4) implementation and enforcement. After presenting the procedures in the U.S. and EU, we compare how the shared goals for achieving a regulatory system that is evidence based, transparent, and accountable are achieved in the two jurisdictions.

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This project is funded in part by the European Union

 

[1]     World Bank 2003. Doing Business in 2004: Understanding Regulation. Washington, DC: World Bank Group.

[2]     World Bank. 2013. Doing Business 2014: Understanding Regulations for Small and Medium-Size Enterprises. Washington, DC: World Bank Group. The Bank notes that the 8 economies that joined the European Union in 2004 have “largely continued on a path of comprehensive and ambitious economic and institutional reforms.”

[3]     World Bank 2003.

[4]     World Bank 2013.

[5]     World Bank 2004. Doing Business in 2005: Removing Obstacles to Growth. Washington, DC: World Bank Group.

[6]     U.S. Office of Management and Budget. 2006 Report to Congress on the Costs and Benefits of Federal Regulations and Unfunded Mandates on State, Local, and Tribal Entities.

[7]     Office of the U.S. Trade Representative, “U.S. Objectives, U.S. Benefits In the Transatlantic Trade and Investment Partnership: A Detailed View” March 2014. http://www.ustr.gov/about-us/press-office/press-releases/2014/March/US-Objectives-US-Benefits-In-the-TTIP-a-Detailed-View

[8]     Final Report of the EU-US High Level Working Group on Jobs and Growth, February 11, 2013. Available at http://trade.ec.europa.eu/doclib/docs/2013/february/tradoc_150519.pdf .

[9]     Thomas J. Bollyky, “Better Regulation for Freer Trade,” Center on Foreign Relations, Policy Innovation Memorandum No. 22, June 2012. http://www.cfr.org/trade/better-regulation-freer-trade/p28508

[10]   Céline Kauffmann, “The OECD Perspective on Good Regulatory Practices and International Regulatory Cooperation.” November 2014. http://regulatorystudies.columbian.gwu.edu/oecd-perspective-good-regulatory-practices-and-international-regulatory-cooperation. Anne Meuwese, “EU–US horizontal regulatory cooperation: Mutual recognition of impact assessment?” In D. Vogel, & J. Swinnen (Eds.), Transatlantic Regulatory Cooperation: The Shifting Roles of the EU, the US and California. (pp. 249-264). Cheltenham: Edward Elgar Publishing. 2011.

[11]   The EU-US High-Level Regulatory Cooperation Forum has been successful in advancing cooperation and discussion among EU and U.S. regulators. http://www.whitehouse.gov/omb/oira_irc_europe

[12]   Final Report of the EU-US High Level Working Group on Jobs and Growth, February 11, 2013. This objective is reiterated in the Initial EU Position Paper “Trade Cross-cutting disciplines and Institutional Provisions,” July 2013. Available at http://trade.ec.europa.eu/doclib/html/151622.htm