Regulatory Coherence

As tariffs have declined and quantitative restrictions have been removed, the policies that inhibit international trade and investment flows are increasingly of a regulatory nature. Regulatory regimes differ across countries in terms of objectives, implementation and enforcement. These differences imply additional costs for foreign firms desiring to enter global markets as they will need to satisfy regulatory norms in each country they operate in.

In many cases regulatory objectives in different countries are very similar, such as ensuring health and safety or minimising risk. In such cases, regulatory cooperation may be an instrument to lower trade costs by reducing market segmenting effects, without undercutting the attainment of regulatory objectives. In other cases where regulatory institutions have very different capacities, regulatory cooperation may also be a way of reducing trade barriers by supporting a process of convergence and upgrading through technical assistance and capacity-building programs.

The WTO includes some disciplines regarding regulatory policies, most notably in the area of mandatory product standards (SPS/TBT), and has made agreements on subjects where regulation plays a major role – including the agreements on services (GATS) and IPRs (TRIPS). A challenge confronting WTO members is to determine whether and how the WTO could support processes aimed at reducing the negative impacts on trade and investment flows that result from differences in regulation and duplication of regulatory regimes.

The E15 Task Force on Regulatory Systems Coherence has examined the challenges arising from differing regulatory regimes, and the resulting impact on trade and investment flows; assessed the adequacy of the trade system to facilitate regulatory convergence and upgrading; and proposed options in terms of mechanisms and enforcement strategies for the trade system to support regulatory cooperation and reduce trade costs.

Towards this end, the Task Force has assessed how countries pursue regulatory cooperation in the context of bilateral, regional, and multilateral initiatives; evaluated the potential benefits of regulatory cooperation for key stakeholders in terms of compliance and enforcement costs and increased social value; examined the need for key international institutions to do more on coherence consultation and cooperation in the area of regulation; evaluated whether the WTO could play a role in leveraging bilateral and regional integration efforts, as well as global cooperation among regulatory bodies that are not necessarily tied to trade; and proposed enforcement strategies for the various cooperation initiatives put forth.