U.S. WTO Submission - 'Determining the Need to Regulate' - A Document Even the 110th Congress Can Learn From

http://www.wtocenter.org.tw/SmartKMS/fileviewer?id=93847


World Trade Organization


Committee on Technical Barriers to Trade


G/TBT/W/285 (March 19, 2008)


DETERMINING THE NEED TO REGULATE

Communication from the United States


I. INTRODUCTION


1. In its successive reviews of the World Trade Organization Agreement on Technical Barriers to Trade (TBT Agreement), the TBT Committee has highlighted the importance and relevance of “good regulatory practice” as a tool for preventing the creation of unnecessary obstacles to international trade. From the U.S. perspective, an important component of good regulatory practice is the effective use of processes and analytic tools for determining the need to regulate. These processes and tools rely significantly on the commonly accepted principles for good regulatory practice originally set forth in the 1995 OECD Recommendation on Improving the Quality of Government Regulation and discussed in an earlier communication from the United States to the TBT Committee on “Good Regulatory Practice.”[1]


2. Discussions of good regulatory practice address issues that go beyond the scope of the TBT Agreement; nevertheless, the principles are relevant to the development and application of standards, technical regulations, and conformity assessment procedures. The successful application of good regulatory practices should reinforce, in a domestic context, the goal of preventing unnecessary obstacles to international trade.


3. This U.S. submission responds to the Committee’s invitation for the submission of papers and provides an overview and summary of the key elements that are part of the U.S. federal regulatory approach for determining when it is necessary to regulate.
[1] G/TBT/W/258, 26 October 2005.


A. Background

B. Identification of the Need for a Regulation

C. Consideration of Legal Requirements

D. Consideration of Alternatives

E. Risk Assessments[11]

F. Cost-Benefit Analyses[14]

G. Continual Reassessment of Need During the Regulatory Process


H. The Logic of the Decision


1. During the preparation or review of a draft regulation, there are a number of questions that should be asked to ensure that the regulatory decision is justified. This process can be somewhat like a peer review, with questions being asked about the basis for assumptions or the source of data, about legal authority or policy judgments, etc. Many of these questions reflect the disciplines and principles of the WTO agreements, particularly the TBT Agreement.


The basic, general questions that should be addressed, with some possible follow-up questions, include:


(a) Is the problem or policy goal clear? For example, for a safety regulation, why do private markets provide less than the optimal amount of safety? Have the agency officials made the objective clear enough to ensure that it will be met by the regulatory action? Are they sure that a regulation is being issued to address a problem that really exists?


(b) Will the regulatory action address the problem? If the objective is to make bathrooms in a building accessible to disabled persons, for example, will the regulation require that the bathroom be accessible, but not that the building itself be accessible? If you require that drug or food labels include information for the consumer to ensure they do not use drugs or food that may be harmful, would tests show that the average person would not understand the label? If you require seats on aircraft that will withstand greater crash forces, will the aircraft floor be strong enough to hold the seat in place when subject to those forces?


(c) Do the data and the analyses support the decision? Are the costs and market distortions minimized while the benefits are maximized? Are data sources reliable? Are the ranges of possibilities so broad that the basis of the decision is questionable?


(d) Is the action sensible? Is it possible that a mistaken decision could cause serious harm to the marketplace or adversely affect health, safety, or the environment?


(e) Are the assumptions reasonably explained and supported? Are appropriate sensitivity analyses conducted to respond to challenges to assumptions?


(f) Does the regulation comply with legal requirements, including international agreements (including the WTO agreements, bilateral and regional free trade agreements, and mutual recognition agreements) to which the United States is a party, statutes (including implementing legislation for such agreements), executive orders, and regulations?


(g) Are conflicts or other effects on achieving other objectives and requirements explained and justified? Assuming, for example, that a regulation is necessary, in assessing alternatives has there been any consideration of how other governments have chosen to regulate in this particular area? Have there been any consultations with foreign governments?


(h) Could the regulatory action have unintended consequences? Could the increase in costs for a product or service as a result of a required safety improvement cause consumers to choose alternatives even less safe than the product or service before it was improved? Because of costs, would a company have to forego one safety protection in order to provide another required protection? For example, would consumers choose a less safe way to travel, if regulations raised the cost of another mode of transportation? Would patients refuse to take a necessary drug, because a required warning about a very minor risk associated with the medication scared them?


(i) Will the action promote or hinder innovation, competition, trade, and investment? If the regulation does not reference or incorporate performance standards, specifically internationally-developed standards, if available, why not? Does the regulation require the use of U.S. certification agencies or laboratories and, if so, why? Will foreign businesses have a hard time complying because the regulation is based on U.S. industry manufacturing processes?


(j) Are there reasonable alternatives and explanations for their rejection?


(k) Is the regulation clear, practical, and easily enforced? Would a regulatory alternative that is more acceptable to the regulated community but establishes a slightly lower level of protection end up providing more protection if regulated entities were more likely to comply with it? Or if it were easier for the industry to comply?


III. CONCLUSION


33. A thoughtful, open, and transparent process for examining the need for regulation leads to better decisions. Well-done analyses are exceptionally valuable tools in this decision-making process. They have convinced advocates of one position or another to change their minds about a particular action.


34. If the process is used correctly, there will be better participation in the process by the public and other governments, and regulations are much less likely to create trade barriers or other problems.


FOOTNOTES


[1] G/TBT/W/258, 26 October 2005.


[11] See f.n. 3, supra. See also, Treasury and General Government Appropriations Act for FY 2000, Pub. L No. 106-554; § 515 (“Quality, Objectivity, Utility, and Integrity of Information” and OMB “Guidelines for Ensuring and Maximizing the Quality, Objectivity, Utility, and Integrity of Information Disseminated by Federal Agencies” (2002). {[3] See “Updated Principles for Risk Analysis” (December 19, 2007 memorandum from the Administrator, Office of Information and Regulatory Affairs (OIRA), Office of Management and Budget (OMB), and the Associate Director and Deputy Director for Science, Office of Science and Technology Policy; OMB regulatory documents are generally available at http://www.whitehouse.gov/ omb/inforeg/regpol.html).}


[14] See f.n. 4, supra. {[4] See OMB Circular No. A-4, “Regulatory Analysis” (2003).}

Congressman Rangel and Other House Ways & Means Committee Majority Members Provide Political Cover for Clinton & Obama to Promote Trade Protectionism

http://waysandmeans.house.gov/


U.S. Must Enforce Laws to Break Down Trade Barriers


March 28, 2008


Committee on Ways and Means, U.S. House of Representatives


WASHINGTON, DC – Senior House Democrats today sent a letter to President Bush, renewing their call for stricter enforcement of U.S. rights under trade agreements. The letter was sent in anticipation of the Administration’s annual "National Trade Estimate" (NTE) report listing barriers to U.S. exports.

[The 2008 National Trade Estimate (NTE) Report is accessible here:
http://www.ustr.gov/assets/Document_Library/Reports_Publications/2008/2008_NTE_Report/asset_upload_file365_14652.pdf ].

In their letter, the Democrats expressed hope that the Administration would move past merely inventorying the systemic, recurring trade barriers that U.S. companies face, and, and to take a positive step forward and begin enforcing U.S. rights more vigorously."


In the Democrats’ view, stricter enforcement of trade laws would avoid further growth of the U.S. trade deficit and unsustainable levels of foreign-owned U.S. debt.


In 2007, the U.S. trade deficit was $711.6 billion – the third highest in history and a shocking five percent of the U.S. economy. Over the past six years alone, foreign-owned debt has more than doubled, currently standing at $2.4 trillion or 17 percent of U.S. gross domestic product (GDP). As noted in the letter, the Bush Administration has accumulated more debt to foreign governments and individuals than all previous administrations combined.


The Democrats' letter is accessible here: http://waysandmeans.house.gov/media/pdf/110/cbr%20potus.pdf .


[A REVIEW OF THE POINTS MADE IN THIS LETTER WILL REVEAL CERTAIN TRUTHS, THEY BEING: 1) THE ADMINISTRATION ARGUABLY HAS FAILED TO PROTECT U.S. PROPERTY RIGHTS BY NOT VIGOROUSLY ENFORCING WORLD TRADE ORGANIZATION (WTO) RULES AGAINST VIOLATING WTO MEMBER NATIONS; 2) THE U.S. TRADE DEFICIT NO LONGER REFLECTS STRICTLY LOW-COST, VALUE-ADDED IMPORTS - RATHER IT NOW INCLUDES ALSO HIGH TECHNOLOGY IMPORTS DUE TO CORPORATE OUTSOURCING/ OFFSHORING; AND 3) THE RESULTING TRADE DEFICITS FROM NONENFORCEMENT OF WTO LAWS AND THE GROWING HI-TECHNOLOGY IMPORTS ARGUABLY CREATES MORE FOREIGN-OWNED U.S. DEBT AS U.S. CITIZENS BUY MORE & MORE OF PRODUCTS DESIGNED, DEVELOPED & MANUFACTURED FROM OVERSEAS SOURCES ON CREDIT. ]


[AND, ARGUABLY, THE USTR SHOULD HAVE LONG AGO BEGUN CONSULTATIONS WITH VARIOUS U.S. KEY TRADING PARTNERS, AS A PRESAGE TO COMMENCING A POSSIBLE WTO ACTION AGAINST PARTICULAR WTO MEMBER GOVERNMENTS IF U.S. CONCERNS ABOUT MARKET ACCESS TRADE BARRIERS ARE NOT ADEQUATELY ADDRESSED.


THE QUESTION, HOWEVER, IS WHICH KEY TRADING PARTNERS HAVE IMPOSED THE MOST EXTENSIVE, SYSTEMIC AND DAMAGING TRADE BARRIERS AGAINST CRITICAL U.S. PRODUCTS AND PROCESSES, OR HAVE DIMINISHED THE VALUE OF OR OTHERWISE EXPROPRIATED KEY U.S. ASSETS UNDERLYING HI-TECHNOLOGIES WHICH SERVE AS THE CORE OF AMERICA'S 21ST CENTURY ECONOMY?? HERE IS WHERE THE RANGEL REPORT GOES ASTRAY AND IS ARGUABLY DISINGENUOUS. THE RANGEL LETTER FOCUSES ON THE FOLLOWING U.S. TRADING PARTNERS: CANADA, CHINA, THE EUROPEAN UNION, JAPAN, KOREA, MEXICO RUSSIA AND THE UNITED KINGDOM].


[IT IS INTERESTING TO SEE IN THE RANGEL LETTER THAT WHILE THE EUROPEAN UNION (EU) IS INCLUDED AS A KEY U.S. TRADING PARTNER WITH WHICH THE USTR SHOULD ENGAGE IN CONSULTATIONS TO PROTECT U.S. RIGHTS, NOT MUCH IS MENTIONED ABOUT THE MANY VERY EXPENSIVE AND COMPLEX NON-TARIFF ENVIRONMENTAL AND HEALTH (SUSTAINABLE DEVELOPMENT)-RELATED SANITARY AND PHYTOSANITARY, LABELING & TRACEABILITY, PRE-MARKET REGISTRATION, CONFORMITY ASSESSMENT REGULATORY-BASED TECHNICAL BARRIERS TO TRADE WHICH THE EU HAS ADMITTEDLY ERECTED AGAINST THE U.S. SINCE AT LEAST 2002. THESE REGULATORY RESTRICTIONS WHICH DOUBLE AS DISGUISED TRADE BARRIERS, HAVE AFFECTED BILLIONS OF DOLLARS $$$$ OF U.S. EXPORTS, AS WELL AS, DIMINISHED THE EXERCISE AND VALUE OF U.S. PROPERTY RIGHTS. CONSEQUENTLY, THEY HAVE RESULTED IN A SIGNIFICANT TRADE DEFICIT WITH EUROPE, WHICH THE RANGEL REPORT FAILS TO MENTION.


APPARENTLY, THERE IS A 'GOOD' REASON FOR THIS. MR. RANGEL AND HIS COLLEAGUES ARE UNLIKELY TO ADMIT IT, BUT THEY WISH TO ADOPT THESE VERY SAME EXPENSIVE AND COMPLEX REGULATORY REQUIREMENTS HERE IN AMERICA SO THAT AMERICAN BUSINESS ARE PLACED ON THE SAME COSTLY FOOTING AS THEIR EUROPEAN COUNTERPARTS. THIS IS WHAT THE DEMOCRATS AND THE EUROPEANS REFER TO AS 'LEVELING THE PLAYING FIELD' OR TRANSATLANTIC 'REGULATORY HARMONIZATION'. PERHAPS, THIS IS LARGELY WHY CONGRESSMAN RANGEL AND HIS COLLEAGUES HAVE EFFECTIVELY GIVEN EUROPE A 'PASS'.


INDEED, REGULATORY RESTRICTIONS NOW LOOK POLITICALLY PALATABLE TO THE DEMOCRATIC PARTY PRESIDENTIAL CANDIDATES AS A 'QUICK FIX' FOR THE CURRENT TRADE DEFICITS, EVEN THOUGH THEY KNOW FULL WELL THAT EARLY 20TH CENTURY HISTORY HAS SHOWN HOW TRADE PROTECTIONISM BY ONE COUNTRY CAN DEVOLVE INTO A SERIES OF SIMILAR PRACTICES EMPLOYED BY OTHER NATIONS THAT RESULT IN MORE & MORE TRADE PROTECTIONIST DEVICES BEING ERECTED. IN FACT, THE TRADE PROTECTIONISM OF THAT ERA WAS PARTLY RESPONSIBLE FOR THE EVENTS THAT LED TO WORLD WAR II!!! THE INTERNATIONAL TRADING SYSTEM WAS CREATED TO PREVENT THAT FROM EVER OCCURRING AGAIN.


[IN ADDITION, THE RANGEL LETTER FAILS TO MENTION EITHER BRAZIL OR THAILAND, TWO OF THE LEADING NATIONS RESPONSIBLE FOR TRYING TO CHANGE THE INTERNATIONAL LEGAL PARADIGM FOR INTELLECTUAL PROPERTY - PATENTS, COPYRIGHTS & TRADE SECRETS, SO THAT THEY MAY ACQUIRE U.S. SCIENCE & TECHNOLOGICAL KNOW-HOW AT CONCESSION-RATE PRICES!!! DOCUMENTARY EVIDENCE DEMONSTRATES HOW THESE TWO NATIONS HAVE, FOR AT LEAST 8 YEARS, LED AN INTERNATIONAL GROUP OF DEVELOPING COUNTRIES, WITH THE ASSISTANCE OF WELL-FUNDED HEALTH & INFORMATION ACTIVIST GROUPS, TO CHANGE INTERNATIONAL TRADE, INTELLECTUAL PROPERTY AND HEALTH LAW. THEY HAVE UTILIZED A NUMBER OF DIFFERENT UNITED NATIONS AGENCIES & ORGANIZATIONS TO CONVERT PRIVATE INTELLECTUAL PROPERTY RIGHTS INTO THE PUBLIC INTERNATIONAL GOODS OF FREE HEALTHCARE AND FREE DIGITAL KNOWLEDGE. BRAZIL AND THAILAND HAVE WORKED TOGETHER IN THE WTO, WORLD HEALTH ORGANIZATION (WHO), WORLD INTELLECTUAL PROPERTY ORGANIZATION (WIPO), THE UN COMMISSION ON HUMAN RIGHTS (UNCHR), THE UN DEVELOPMENT PROGRAM (UNDP) AND UN EDUCATION, SCIENCE & CULTURAL ORGANIZATION (UNESCO). IN FACT, BOTH BRAZIL AND THAILAND HAVE, WITHOUT LEGAL JUSTIFICATION, ISSUED COMPULSORY LICENSES AGAINST U.S.-OWNED DRUG PATENTS, WHICH IS ESSENTIALLY THE SAME THING AS A GOVERNMENT DECLARING EMINENT DOMAIN ON ONE'S PRIVATELY OWNED HOME. INTERESTINGLY, U.S. SENATOR PATRICK LEAHY AND OTHER CONGRESSIONAL DEMOCRATS HAVE PROPOSED LEGISLATION WHICH WOULD ALLOW THE U.S. GOVERNMENT TO DECLARE COMPULSORY LICENSES ON THE PATENTS AND COPYRIGHTS OF U.S. TAXPAYER-OWNED HI-TECHNOLOGIES!!! PERHAPS, THIS IS LARGELY WHY CONGRESSMAN RANGEL AND HIS COLLEAGUES HAVE GIVEN BRAZIL AND THAILAND A 'PASS'.


[INSTEAD, MR. RANGEL AND HIS COLLEAGUES DEVOTE CONSIDERABLE INK TO 'BASHING CHINA' WHICH, FOR SOME UNEXPLAINABLE REASON, DEMOCRATIC POLITICIANS ARE OBSSESSED WITH, AS ARE THEIR EUROPEAN COMMISSION COUNTERPARTS.]


[A CLOSE REVIEW OF THE NATIONAL TRADE ESTIMATE REPORT WILL REVEAL THAT EUROPE IS SECOND ONLY TO CHINA IN THE NUMBER OF 'TRADE BARRIERS' LISTED AND DESCRIBED. THE REPORT DEVOTES 45 PAGES TO EUROPE, AND 67 PAGES TO CHINA, BUT EUROPE IS NOT REALLY BEING FOCUSED ON BY MR. RANGEL!!].


FURTHERMORE, THE NATIONAL TRADE ESTIMATE REPORT SHOWS THAT THE FOLLOWING COUNTRIES HAVE BETWEEN 10 and 20 PAGES OF DESCRIBED TRADE BARRIERS, BUT ONLY JAPAN & RUSSIA ARE MENTIONED, NOT TAIWAN, SOUTH AFRICAN CUSTOMS UNION OR INDIA. HAVE MR. RANGEL AND HIS COLLEAGUES GIVEN THESE COUNTRIES A 'PASS' AS WELL???


[THE FOLLOWING COUNTRIES HAVE FEWER THAN 10 PAGES ALLOCATED TO THEM, BUT THEY ARE ALSO INCLUDED ON MR. RANGEL'S 'BAD BOY' LIST:

- KOREA – 5 PAGES;
- CANADA – 10 PAGES;
- UNITED KINGDOM – ¼ PAGE.

WHAT IS INTERESTING HERE IS HOW THE U.K. IS CITED FOR PHARMACEUTICAL MARKET ACCESS BARRIERS BASED ON OVERLY CONTROLLED PRICING SCHEMES: THIS PROVIDES ONE MAJOR EXAMPLE OF WHY U.S. DRUG PRICES ARE SO HIGH – NAMELY, B/C U.S. PHARMA COMPANIES FIRST SUBSIDIZE THE COST OF DRUG DEVELOPMENT IN OTHER COUNTRIES WHICH DO NOT PAY HIGH ENOUGH PRICES FOR APPROVED DRUGS THAT WOULD PROVIDE THESE SAME U.S. COMPANIES WITH ADEQUATE RETURN ON INVESTMENT (ROI) TO REINVEST INTO NEW INNOVATIVE PRODUCTS.


ARGUABLY, IF MR. RANGEL AND HIS COLLEAGUES ON THE COMMITTEE ON WAYS AND MEANS FOCUSED INSTEAD ON ASKING THE ADMINISTRATION TO NEGOTIATE WITH OTHER COUNTRIES, INCLUDING THOSE IN EUROPE, TO RAISE THE ACCEPTABLE LEVEL OF DRUG PRICES PER THEIR GOVERNMENT-RUN MEDICINE REIMBURSEMENT PROGRAMS, SAY 10-15%, THIS WOULD EASE PRICE PRESSURES IN THE U.S. SOMEWHAT, AND MOST LIKELY RESULT IN MORE AFFORDABLE, CUTTING-EDGE MEDICINES].


[The OECD nations, including the United States, have effectively been subsidizing the health care costs of developing country governments and citizens. Unfortunately, this subsidization has not occurred with all OECD members paying their fair share. Considering the extent of pharmaceutical price controls currently being imposed in countries such as Australia, Canada, Japan, and the Member States of the EU, some of which are extremely proud of their social welfare systems, it is arguable that Americans are likely to bear most of these costs, especially in the near term.


In fact, this concern was duly noted within a recent 2004 United States Commerce Department study evaluating pharmaceutical pricing in high income countries. It called for higher patented drug prices in Canada, Europe, Japan, Australia and other OECD countries in order to reduce the degree to which American consumers subsidize global drug development costs.


The report concludes that these countries have been free-riding off American patent rent extraction by setting government reimbursement prices too low. . . A recent speculative estimate, based on industry data and calculations . . . suggests that eliminating OECD price controls on patented drugs would increase revenues by $17.6 to $26.7 billion per
year, with additional R&D of $5.3 to $8 billion per year. Implicit in this estimate is the assumption that about a third of incremental revenues would be spent on R&D. . . ."

See Kevin Outterson, Nonrival Access to Pharmaceutical Knowledge, Submitted to the CIPIH (Jan. 3, 2005), at note 190, ¶ 7.2., available at: http://www.who.int/intellectualproperty/submissions/KevinOutterson3january.pdf. ]