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).}
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).}
