New challenges for better regulation (OECD Forum)

Your blogger attended the first day of the 2015 OECD Forum, where "leaders and influencers ...  gather to debate the most pressing social and economic challenges confronting society." This year's instalment was not directly connected to regulation, but this was not a reason to stay away: we smart regulators do not work in a vacuum, we try to apply or skills to assist governments and regulators in achieving all regulatory outcomes, so it is necessary now and again to take a look at the bigger picture. And the general theme "Investing for the future: people, planet, prosperity" promised to cover all the major challenges confronting policy makers. Please refer to the OECD Forum website for excellent introductory statements and access to resources, my comments are limited to what may interests regulators.

1. The session on "Unlocking investment" naturally examined the role of regulation for fostering the right investment climate . But 80% of participants (polled instantly) thought a return to pre-crisis levels would not come from regulation. Though compliance costs were mentioned as a hindrance to investment, it seemed to me that better regulation policies and tools were not sufficiently well-known. The panel and audience seemed to put more faith in bringing about  a public-private dialogue ensuring a co-ordinated approach between the private and public sectors to develop a new investment culture, where social goals would be on a par with profit. Innovative business models, and Social impact investment approaches were a prime example of that trend. See also blog by Eric Solheim, chairman of the OECD Development Assistance Committee.

2. The Trade & Investment for development session examined how countries could unlock the full growth-inducing potential of trade, which has not retrieved its pre-crisis levels. Speakers agreed that FTA were no longer focused on tariffs, but increasingly addressed NTBs, mainly of regulatory origin. Prime examples of the trend were the  TTIP (Transatlantic Trade and Investment Partnership) and TTP (Trans-Pacific Partnership). Much attention was given to the fragmentation of markets resulting from NTBs, with the ensuing increase in compliance costs (such as mutiple national certification procedures for the same product) and loss of trading possibilities, with corresponding reduced growth estimated at 2% of GDP. Removal of these obstacles could greatly benefit SMEs, as was shown from NZ and CZ examples, who could participate much more in Global Value Chains. More than ever, regulatory coherence was necessary. A new challenge for governments, especially in developing countries, was also to preserve the quality of investment, i.e. that it contribute to sustainable and inclusive growth, and not seek immediate profit.

3. The session on Sustainable Development Goals (SDGs) only rarely touched on regulatory issues but provided a prime example of an integrated policy inspired by international consensus and facing all the challenges of implementation that better regulators are familiar with. The discussion therefore covered very familiar territory: the main challenge, said one of the speakers, was political will  (the audience voted - by 38% - the lack of measurability as the top obstacle), lack of accountability and transparency of governments in pursuing non-binding commitments, need for more evidence-based decisions with data-collection strategies. It was quite surprising, even touching, to note the extent to which the private sector (including multinationals) vowed to support these mainly social goals, apparently to build a good reputation.

Reg. ref. to boost bilateral trade (Australia/Korea)

(Yonhap press release) "The Australian Embassy in Seoul on Friday (13 March) hosted a forum on regulatory reform and deregulation with the South Korean government in a bid to explore ways for cooperation in these areas, officials said.
The one-day forum titled the "Best Practice Regulation Workshop" came as Seoul and Canberra seek to boost cooperation in the field of regulatory reforms with a free trade agreement between South Korea and Australia (KAFTA) going into effect late last year.
"Services and investment are important parts of KAFTA, but they cannot reach their full potential unless the regulatory environment improves," Bill Paterson PSM, the Australian ambassador to Seoul, said at the opening of the forum.
"Predictability, transparency, consultation, consistent application, and cutting red-tape are essential and both our governments are committed to achieving a more business friendly regulatory environment," he added.
Kang Young-chul, deputy minister for regulatory reform, also said that "drastic reform is necessary for the success of regulatory reforms," adding that South Korea and Australia will continue to carry out cooperation in this sector.
South Korea said that it will scrap more than 100 administrative rules cited by local companies for hindering businesses as it seeks to prod more companies into increasing investment to jump-start the local economy.
Australia is in the process of reducing tape worth $1 billion every year in its drive for deregulation, the embassy said."

Swedish report on regulatory cooperation

H. Lund, senior adviser in the Swedish Board of Trade, draws our attention to an interesting new report which contributes to one of the most challenging dimensions of regulatory cooperation. The following is a quote from a Board's news report:

Free movement of goods and services are increasingly dependent on preventing and eliminating technical barriers. Therefore, technical barriers to trade between the EU and the U.S. are a key issue in the ongoing free trade agreement negotiations, the Transatlantic Trade and Investment Partnership (TTIP). This is also established in the National Board of Trade's new report "Regulatory Co-operation and Technical Barriers to Trade within Transatlantic Trade and Investment Partnership (TTIP)".

The report has been produced as a contribution to the negotiations and highlights the regulatory aspects of TTIP. It outlines how the regulatory systems for trade in goods is structured in the EU and the U.S. and provides an analysis how TTIP relates to the WTO legal framework and existing free trade agreements. The report also includes an analysis of how TTIP can affect five selected sectors: automotive, information- and communication technology (ICT), chemicals, pharmaceuticals and medical devices.

The challenge in the negotiations consists of finding the level of regulatory cooperation that offers clear benefits in terms of enhanced trade opportunities between the U.S. and the EU. This, while legitimate interests such as health and safety are maintained and while observing that trade conditions with third countries are not impaired. An important part of the analysis is to clarify the Swedish interests and estimate the extent to which they coincide with the interests put forward by various stakeholders in the EU.

"Better regulation can facilitate trade" (OECD)

OECD (Regulatory Policy Committee) work on International Regulatory Cooperation (IRC) has taken a big step forward with the organisation of a one-day joint workshop with the Trade Committee to investigate how sound regulatory policy could enhance the quality and effectiveness of trade agreements. It was also the first time that the newish community of regulatory experts formally joined forces with the Trade pundits to tap the potential of a synergy between the two bodies of expertise.

In the morning delegates heard a series of presentations (including one from A. Alemanno who recently wrote on the TTIP negotiations) researching how trade barriers related to regulatory heterogeneity could weigh down the desirable development of international commerce and thus impede growth. The afternoon session (chaired by your blogger) featured six national cases of successful experience with IRC mechanisms in support of trade policies and FTA negotiations. The closing session, chaired by the UK delegation, outlined a future programme of work that would substantiate the conclusion (formulated by F.van Tongeren from OECD) that "Better Regulation can facilitate trade." No doubt official proceedings will soon be made available on the IRC and Trade pages of the OECD site.

Background. Recent OECD work on Global Value Chains has provided a strong reminder of the importance of reducing protectionist measures, improving inefficient and unnecessary customs and other border procedures, and reducing the cost of ‘behind the border’ measures that constrain trade in goods and services. In particular, regulatory misalignment, both in policy formulation and application, increases the costs facing firms operating internationally and holds back growth and job-creation. The OECD publication "IRC: addressing global challenges" makes the point that IRC is intensifying but there are also concerns that multilateral and regional trade deals could lead to a weakening of legitimate domestic regulations. Achieving regulatory and policy objectives in an increasingly globalised world while respecting the need for openness internationally can be a challenge for governments.

Red tape slows trade on Indian subcontinent

According to the Times of India, "Commerce ministers from Saarc countries who met recently spoke of increasing trade within the region but a study shows how the subregion in South Asia comprising India, Nepal, Bangladesh and Bhutan remains one of the toughest places to move goods due to archaic procedures. Sample this: it may take up to a month for pulses, juices and carpets to move within three countries, when the actual driving time is much less. 

The study done by Delhi-based thinktank Research and Information System for Developing Countries (RIS) for Asian Development Bank and UN Economic and Social Commission for Asia and the Pacific has detailed how trade through three key corridors in the four countries faces major delay because of tardy procedural clearances. For example, procedural approvals for both importers and exporters to transport pulses from Nepal to Bhutan via India takes at least 23 days."

Pacific Alliance (trade block) rapidly expanding

Regional economic and trade integration can be a long and arduous path, but four countries of Central and South America have been progressing rapidly, as evidenced by the 7th Summit of the Alianza del Pacifico in Cali (Colombia), which bringue together Mexico, Colombia, Peru and Chile (210 million inhabitants). A total of nine heads of state and government attended, as Canada, Costa Rica, Spain, Guatemala and Panama joined the members, with observer status, while Australia, New Zealand and Japan attended at a ministerial level.

WTO: "cutting red tape" could save $1tn

According to an item from The Guardian (UK) widely reported by other media, the WTO chief says that "cutting red tape could boost global economy by $1tn" if Doha talks can remove barriers by end of 2013. By red tape, P. Lamy is referring to technical barriers to trade, beyond information obligations on business, but this is the highest figure ever given for a regulatory cost exercise. He predicts that by the end of this year, "What will happen is that a number of bits of the (Doha) agenda will be concluded selectively, one by one, starting with trade facilitation. Removing barriers to trade will deliver half to two thirds of the benefits of the round. World trade is worth $22tn and the cost of moving trade is $2tn. Cutting red tape in half could stimulate the world economy by $1tn." For those interested in the economic impact of Smart Regulation.

Template for regulatory reforms (ASEAN)

According to an ASEAN Korea Centre news item, "ASEAN is moving towards creating a template that would institutionalize regulatory reforms that would guide the region in its trade negotiations with other regional trade partners as the ten-member states fully integrate their economies by 2015."
This template would serve as ASEAN's guiding principles when they negotiate for other regional trade deals or the so-called ASEAN + 3.
So far, ASEAN has entered into regional FTA deals including China, EU, Japan, US, Australia-New Zealand, India, among others. On top of that, individual ASEAN members also conduct their own bilateral FTAs with other trading partners. These FTAs are no longer governed by ASEAN rules.
But this guiding principle will not supplant existing ASEAN agreements but rather broaden the economic reach of ASEAN as it seeks to expand trade and investments through regional FTAs.
In July this year, the Philippines hosted the first ASEAN Regulatory Reform Symposium for ASEAN (ARRS) integration in preparation for the ASEAN full economic integration or the ASEAN Economic Community (AEC) by 2015.