US Senate calls for smart regulation

On June 23, several senators outlined proposals for revamping the regulatory system, a system they blame for the nation's economic problems. Cass Sunstein, administrator of the White House Office of Information and Regulatory Affairs (OIRA), told the senators that the proposals were largely unnecessary and could have harmful unintended consequences, as reported yesterday on the official OMB website. The Obama administration is engaged in a large scale anti red tape exercise and departmental plans are now online for comment. The discussion in the Senate is rich and all documents are available online from the links just quoted for interested experts. That the country that initiated modern regulatory reform in the 1980's should still be seeking ways to consolidate results and make further progress shows that the search for regulatory quality is never ending and that it needs to rediscover itself at regular intervals.

Australian State breaks new ground (red tape)

Earlier this month, our Australian friends have enriched our toolbox of anti red-tape measures with two additional ferocious implements. In my birth state, New South Wales, the Business Chamber has made a "ground breaking proposal to cut red tape" which includes at least two items that we have not yet seen elsewhere:

• " Introduce a one-in, two-out policy for new regulations and red tape – any new regulation has to replace two other regulations;"
• "Release a yearly ‘name and shame’ list for government agencies – undertake yearly benchmarking of customers and users of every government agency."

The other measures of the plan are also worth reading. The "one-in two out" is also envisaged in the UK (on a tip from Manos).

OECD report measures pace of regulatory reform in 40 countries

This week, OECD published the second edition of one of its flagship reports « Government at a Glance », a mine of comparative information about the many facets of government performance in member and partner countries. Our interest lies principally in chapter X “Regulatory Governance” where we are presented with quantitative data carefully defined and collected to answer the question: how are better regulation policies doing across the world.
The comparative analysis of regulatory policies is supported by regulatory governance indicators defined for that purpose. The indicators compare the focus and scope of regulatory management systems across countries and identify trends over time, monitoring the spread of good practices. Data was collected via country responses to the OECD Survey on Regulatory Management Systems and refer to institutional practices as reflected in administrative arrangements and procedures. More specific country assessments can be found in in-depth country reviews of the OECD which analyse how governments implement these procedures in practice.
The indicators draw upon country responses to the OECD Regulatory Management Systems’ Indicators Survey conducted in 2005 and 2008 for the (then) 30 OECD member countries. Data were subsequently collected for the four countries that joined the OECD in 2010 (Chile, Estonia, Israel and Slovenia) as well as three other major economies (Brazil, the Russian Federation and South Africa). Country-specific data are available on line at: http://dx.doi.org/10.1787/888932392248.

UK: is the "deregulation mania" going too far?

An interesting discussion is going on within the UK government between the different components of the coalition. It is for us the opportunity to take stock again of the pros and cons of regulation (a well rehearsed discussion). The discussion seems liveliest in the environment sector, where the LibDem energy secretary has taken the "deregulation zealots" to task over their "Thatcherite" approach to regulation. A source said: "We are taking issue with this ideology that less regulation is inherently better. Regulation can be incredibly important. When the process comes to a head in the autumn, we are certainly not going to be letting regulations go. We will be fighting and we have quite a lot of ministers on our side."

The UK current approach to regulatory reform (see previous post for the "statement of new legislation") is interesting in that it appears to be perhaps the most energetic drive against red tape on record. Two main features give new life to old techniques:

• The consultation of the public via the Red Tape Challenge, a site which raises the standards for interactivity in consultation, and isworth the visit; currently targeted for feedback from the public: the "Equalities" legislation (preventing discrimination and ensuring equal opportunities);
• The reduction of advisory bodies, also called "bonfire of quangos" which is raising a stormy debate (see Guardian blog), after the introduction of a Public Bodies Bill, and has been labelled contrary to the (unwritten) constitution of the realm by a select committee report of the House of Lords, because it proposes to bypass parliament, giving the power to change, transfer or abolish these public bodies straight to ministers.

Re-regulation back on the agenda for trade contracts

We BR experts have been working largely on the assumption that there was too much regulation around, especially on business. We always remember however that BR does not mean deregulation, but more relevant and efficient norms. The economic crisis has highlighted the vulnerabillity of our economies to unchecked speculation, which may be promoted in the absence of appropriate regulation. Recents events in Greece, though more structural, also call for prompt action. The current trend towards more regulation on financial activities was illustrated with the European Commission making proposals at the March Council. Now the French president, current head of the G20, in a speech in Brussels on 14 June, argued that the "financialisation" of commodity markets and trades that are not backed up by real money could lead to a repeat of the recent economic crisis. He calls for developing and enforcing better regulations of trades in the commodities market, and the extension of the use of cash deposits to all derivative deals. The issue had been under scrutiny since last summer. The European Commission, by the voice of Commissioner Michel Barnier, backed Mr. Sarkozy's proposals of capping individual trade sizes. So did Farm Groups around the world, according to Associated Press.
Meanwhile, the European Parliament, reacting to the March European Council conclusions quoted above, has stated that "finance ministers have not done enough to improve economic governance." The EC has already formulated a compromise version of its 6 proposal package (21 June).
For the theoretical background, see "Regulation and Markets" by D. Struber (1989), and for updates in thinking, a conference will be organised in London on 6 July by City and Financial.

Sub-Saharan Africa attracts FDI

According to a report by Kenyan paper Business Daily, a reduction in red tape and an improvement in political conditions means that sub-Saharan Africa is becoming a more attractive destination for foreign direct investment, especially from India. This theme was highlighted at a conference organised by the South African Institute of International Affairs where experts from India and Africa examined ways of deepening engagement between South-South economies.The South African Institute of International Affairs (SAIIA) is highly attuned to Regulatory Reform issues and publishes reports focusing on ways to improve the business climate, with detailed studies on NTBs. Its site also promotes the African Peer Review Mechanism, an interesting tool for the 21 members (2006 figure) to work together to implement reforms to achieve better governance and consolidate democracy. A conference will be held on 28 June by SAIIA to monitor progress of APRM in Southern Africa.
For background on RR in Africa, see paper by IFC coordinator P. Ladegaard and the proceeds of the Mombasa meeting of the Network of Reformers (already summarized on this blog).

Great expectations (US)

Cutting red tape and simplification are often seen as fertile ground for political promises, but delivery can be tricky, as it can be quite complex to simplify regulation. This seems to be borne out by recent experience in the US following President Obama's executive order (already reported on this blog, see "US" category). The President’s Jobs and Competitiveness Council has recently released its initial recommendations after three months of work (in an article by its chairman for the Wall Street Journal, not on the official website). Commentators seem unimpressed:

• Acccording to a Bostom Globe columnist: "The ideas ranged from woefully uninspiring to unhelpfully vague."
• Another comment, under the title "the Council's fairy tale" is equally critical: "Part of this council’s problem is the inherent limit on the effectiveness of all government commissions and blue-ribbon panels. To start with, they are heavily staff-driven. Immelt and Chenault are busy people with limited experience in government. They rely heavily on a staff, assembled mostly from inside the White House. The staff puts a few ideas on the table, the council approves, and the staff fleshes out the details."

From our own experience, we BR experts know how difficult it can be to implement, in measures taking effect on the ground, such attractive ideas as "make it easier to visit the US through improved visa processes,” “put construction workers back to work.” or “streamline permitting.” In general, it is advisable to wait, before announcing them, till details of the legal changes have been finalised, and if possible checked for realism and applicability in field enquires.

Desperate remedies: Russia imposes fines on red tape

A more forceful way for public authorities to enforce compliance with due process within administrations: whereas most governments rely on training officials and rewarding good behaviour (incentives for officials to promote compliance) Russia is looking into increasing citizens' way of redress, according to new legislation under discussion. "Fines will be imposed on unhelpful state officials in line with a new bill that Russia's Economic Development Ministry will soon bring before parliament. The bill will amend the Administrative Code, placing a priority on complaints from victims of red tape and other mala fide actions by municipal or federal officials. An official's failure to follow required procedure in public duties will be qualified as an offense and punished with a 3,000-5,000 ruble ($110-$180) fine unless lawmakers in parliament's lower house decide on a higher one. To bring an official to justice, the wronged individual will have to lodge an administrative complaint, which will be considered separately from the vast flow of other kinds of complaints." For more, see Nezavisimaya Gazeta article dated 16 June.
For a recent official statement of regulatory policy in Russia, see speech by Dmitry Medvedev at the St Petersburg International Legal Forum in May. The president also signed an Executive Order on monitoring enforcement of laws in practice in Russia.

Regulatory principles under scrutiny

As previously reported on this blog, the OECD is actively seeking the views of officials from regulatory agencies and ministries, the private sector, social partners and civil society at large on the possible update of the 2005 Recommendation on Regulatory Policy and Governance (closing date 1 July).  Though unconnected with this consultation, an in-depth review of the current OECD principles has just been published by Frank Vibert, senior visiting fellow at the LSE under the title “Regulating in an age of austerity: reframing international regulatory principles.” Reading this paper is highly recommended in the context of the current revision.

For discussion: new Regulatory Quality principles (OECD)

OFFICIAL ANNOUNCEMENT: "Call for comments on the Draft OECD Recommendation on Regulatory Policy and Governance."
"The Draft OECD Recommendation on Regulatory Policy and Governance updates existing OECD instruments on regulatory reform and management adopted since 1995. The OECD intends to produce a Recommendation that covers regulatory policy, management and governance as a whole-of-government instrument that can and should be applied by sectoral ministries and regulatory agencies. In undertaking this work, the OECD will hold meetings with BIAC and TUAC and is actively seeking the views of officials from regulatory agencies and ministries, the private sector, social partners and civil society at large. The OECD currently invites public comments both on the draft recommendations and the explanatory text and questions to guide the consultation process. The deadline for comments is 1 July 2011. For all the relevant information, please visit this webpage."
Please note that the email address for sending the comments is mailto:reg.reco@oecd.org .

Egypt confirms regulatory reform policy commitment

On 5 June, Egyptian Regulatory Reform and Development Activity ERRADA announced a conference on managing the stock of legislation, in collaboration with SIGMA, to take place on 8 June in Cairo with international experts. ERRADA, a government initiative, has justs re-vamped their website, which is very informative on what is happening for reform in Egypt. ERRADA was launched in 2008 to build a regulatory management system for business related regulations. See Wikipedia page for a brief history of the agency. ERRADA developed the necessary institutions, tools and processes to enable it to inventory and review existing business related regulations. It also aims to provide accessibility to these regulations to the public and enhance decision making in Egypt through introduction of evidence-based tools (through RIA) into the policy making cycle. The ERRADA site contains the latest government statements on regulatory reform, among which we can notice the strong action in favour of simplifying legislation.

International partners supporting RR in Egypt  include:

Better Regulation in France

The editor of this blog is uploading today a draft of a chapter on France of a book to soon be published in Italy about Better Regulation in selected European countries. Written with a colleague and co-actor in the development of regulatory quality in France (Michel Hainque), the chapter builds on last year's OECD review of Better Regulation in France, with additional research and updates, including some 50 links to official documents, sites or editorials. More than a exhaustive description of all regulatory quality concepts and mechanisms, the chapter focuses on what is specific about the French approach to BR policies, institutions and tools and examines their merits by reference to international best practice. The main conclusion is that the French model, though it places great emphasis on the formal quality of norms, at the expense of their economic relevance, offers some excellent practices, deriving from its administative tradition, that can inspire other national schemes. This text represents of course only the completely personal views of the authors, and is open for discussion and edits that can still be considered for the final edition.

EU-wide standards: more controls on the economy?

Standards are in a complex relation with regulation in that they appear less unilateral, less legal binding form of constraint on economic operators, while achieving very similar policy goals. An earlier post pointed at the link, with stakeholders showing that they remain vigilant on the use of this tool to improve the performance of markets without creating undue new burdens.

The recent Single Market Act places new emphasis on this policy tool: "Boosting the free movement of services by facilitating the definition of services standards at European level" is one of the 12 "key actions."

On 1 June, the Commission approved a Communication on a strategic vision for European standards - COM(2011)311 and a related draft regulation. The EC webpage on standardisation policy gives a brief history since a 2004 communication, and sums up the news as follows:  "More Standards for Europe and faster: this is the main objective of a series of measures that the European Commission proposed on 1 June 2011. Standards are sets of voluntary technical and quality criteria for products, services and production processes. Nobody is obliged to use or apply them but they help businesses in working together which ultimately saves money for the consumer.

See also the official press release and a guide published by the EC In its communications, the EC stresses the link between standardisation and  better regulation policies.

An Euractiv article gives an overview of the topic in the light of this announcement, including the industry's concerns that  the expanded powers of the Commission may lead to a wave of new regulatory constraints.

There is no doubt that standards can be viewed as softer substitutes or "alternatives" to regulation, provided that their adoption process fully achieves the goals of smoother markets and geater economic competitiveness. (see also previous post on standardisation.)

The most important steps proposed by the Commission to strengthen the system of standard-setting in Europe are:

• The enhancement of its cooperation with the leading standardisation organisations in Europe (i.e. CEN, CENELEC and ETSI);
• The drafting of European standards with the help of organisations representing those most affected, or most concerned – consumers, small businesses (SMEs), environmental and social organisations;
• The recognition of Global ICT standards that will play a more prominent role in the EU;
• The increase of the number of European standards for services if there is a demand from business."

Armenia adopts "guillotine"...

...of course, only for excessive regulation ! Following Scott Jacobs's trip to Yerevan earlier this year, reform is under way in Armenia, as already noted here. See latest news on yesterday's Arka press item. Extracts:  "Prime Minister Tigran Sargsyan presented prospects for introduction of the Regulatory Guillotine, a rapidly spreading regulatory reform tool, in Armenia (...) Introduction of this instrument that lessens bureaucracy and enhances state administration in Armenia has been initiated by the Armenian government and okayed by the OSCE Yerevan Office.
“You know what the Regulatory Guillotine concept is,” the premier said. “I met with Mr. Scott Jacobs, one of its main authors, and I want to thank the OSCE for giving me such a chance. After we got familiar with the broad concept, we approved it. The economy ministry’s team has worked with Jacobs, and this is five months our team is carrying out necessary preparations for introduction of this concept. The concept has been upheld also by the Armenian president. We have decided to set up an interdepartmental council for coordinating this work.”  Sargsyan stressed the importance of reformation in regulatory area saying it would lessen corruption risks and improve business environment in the country. He said the concept also implies improvement of tax and customs administration.

Why"green tape" is good for business

At last year's OECD conference, one of the ideas new to some of participants was that environmental protection should not be viewed only a source of administrative costs, it actually boosted economic performance. This is confirmed by recent research: a new working paper from the National Bureau of Economic Research found that reducing ground-level ozone (a main component of smog) significantly improved worker productivity.

EU- USA regulatory dialogue

The EU - USA regulatory dialogue is a topic not yet covered by this blog, but well worth checking out for its technical content. A DG Enterprise webpage traces the history and goals of the dialogue (since 1998), launched on the basis that "Regulatory barriers have long been recognised as the most significant impediment to trade and investment between the EU and the USA... a more integrated and streamlined transatlantic regulatory environment would significantly reduce costs for producers and consumers on both sides of the Atlantic and improve the competitive potential of EU and US companies in the global economy." Both the European Union and the United States run a number of regulatory dialogues.
The EU-USA dialogue takes a practical turn at the meetings of the High Level Regulatory Cooperation Forum, which is convened at irregular intervals, and where partners discuss burning trade issues but also exchange best practice concerning regulatory reform methodologies or compare notes on current issues (example reponses to the financial crisis.) For an example of proceedings, see report of the 2008 meeting in Washington).
The framework agreement has spawned more specialised streams, such as the the financial markets regulatory dialogue (for EC point of view see 2004 paper) which aims to foster a better mutual understanding of EU and US regulatory approaches; to identify potential conflicts in approach as early in the regulatory process as possible; and to discuss regulatory issues of mutual interest. Other sectoral dialogues (15) include Automotive industries, Chemicals, RTT and Insurance.
Recent news: owing to the interests at stake, the dialogue is lively: yesterday, Commissioner for internal markets and services Michel Barnier was putting pressure on his US counterparts, according to a Financial Times news item. Mr. Barnier stated that even though the pair had jointly declared their commitment to introduce a number of regulatory initiatives, the EU has overtaken its counterpart in areas such as capital requirements and putting curbs on banker bonuses. "The level playing field must be a reality, not an empty slogan," he is reported to have written in the letter, sent on 27 May. Mr. Barnier's concerns rest with the US's reluctance to fully adopt banking standard Basel II, fearing that the country could take a similar stance with its successor, Basel III.

Common commencement dates (France)

As already reported here, common commencement dates were due to be implemented in France. Now a circular dated 23 May has applied the concept. The move aims to deliver on the goal to lower administrative burdens, by delaying the entry into force of new rules concerning business for at least two months, with enforcement starting on either 1 Jan or 1 July. Exceptions are provided for compliance with new EU rules, and for immediate effect of beneficial simplification measures. Changes in regulations will also be better publicized online (Legifrance). This reform complements measures announced in circular dated 17 February. This text had re-introduced the obligation to do a screening of all new business related legislation in a "prior evaluation" (évaluation préalable), which is very similar to an impact assessment. Experts may look at the annexes that give a detailed template of the prior evaluation, which is also called "detailed impact analysis." These reports are to be quality checked by the Commissioner for Simplification. With minor changes, the scheme applies also to draft legislation concerning local government, where a special regime aims to avoid new, unfunded regulatory costs.
You may note, en passant, the new site where all non-legally binding internal administrative instructions (circulaires) are now published.
Earlier in April, and in the wake of the Simplification Sittings, the Governement issued a communication on its simplification policy.

Some good stories about American red tape

For some informative but also entertaining news about regulators' excessive zeal across the Pond, in spite of Mr Obama's efforts, you should visit the Heritage Blog, which has published 12 stories on particularly aggravating cases. The last (published yesterday) is "Regulatory Grapes of Wrath", on a bill in Congres that would allow states to prohibit consumers from making interstate purchases of wine. I must say that as a European, I find this idea completely alien to my view of the US, and the other 11 are just as good.