International regulatory cooperation in a supply chain world

Is version of EUI RSCAS; 2015/04; Global Governance Programme-154The economic gains from better international regulatory cooperation are substantial, but realizing them will require new policy approaches. In today’s trade environment of globalized production processes and low tariffs, regulatory policies are increasingly restricting the international flows of goods, services, knowledge and professionals. Examples include product regulations to achieve health, safety or security objectives; licencing requirements for services providers; and certification procedures for production processes. These regulations are being developed in “policy silos” by those with little incentive or capacity to take into account the cross-border economic effects of their decisions. The result is a plethora of minor differences across jurisdictions in regulations that have similar policy objectives but that impose redundant or inconsistent requirements. This raises the cost of doing business and hinders global trade. Indeed, regulatory compliance has become a major concern for companies with production processes that cross borders as part of global value chains. In this chapter, Bernard Hoekman, Director of Global Economics at the European University Institute, proposes ways to improve regulatory co-operation by breaking down the “policy silos” that separate regulatory and economic policy-making. What is missing from current approaches, he argues, is a cross-cutting, deliberative mechanism that focuses on the forest rather than the trees, encourages learning, and builds trust through regular interactions among stakeholders. Hoekman advocates a new policy approach centred on supply chains, the conceptual framework that international businesses use to organize their production. He proposes “supply chain councils” that would function as advisory bodies, and would consist of senior representatives from business, labour, government departments and regulatory agencies. Their goal would be to identify areas with the most to gain from regulatory cooperation and establish performance indicators to monitor the implementation of much-needed policy reforms. According to Hoekman, Canada’s most urgent regulatory policy challenge is to achieve better convergence of North American and European standards through continued efforts in the Canada-US Regulatory Cooperation Council and the Canada-EU regulatory cooperation forum. Over the longer term, he says, Canada should take a leadership role on these issues at the World Trade Organization, because the global nature of production ultimately means that regulatory cooperation should be open to all countries. Such multilateral cooperation is particularly important for countries like Canada that lack the political or economic weight to drive regulatory convergence on their own. Finally, he recommends that Canada support regulatory cooperation in forums with broader membership that could build momentum to tackle these issues, such as the Organisation for Economic Co-operation and Development and Asia-Pacific Economic Cooperation