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Thursday, November 15, 2007

OMB and EU Discuss Regulation and International Trade

The European Commission and the White House Office of Management and Budget have released a joint draft report titled, "Review of the application of EU and US regulatory impact assessment guidelines on the analysis of impacts on international trade and investment."

The report describes the system by which the European Union (EU) and the U.S. examine proposed regulations for their potential impacts on foreign parties and/or international trade.

The report shows the EU's system for assessing the international impacts of regulation is more developed than that of the U.S. and recommends more thoughtful consideration of such impacts in future policy-making efforts.

In its discussion of the U.S. system for assessing international impact, the report almost exclusively examines Circular A-4, OMB's guidance for the preparation of cost-benefit analyses for proposed and final regulations. According to the report, "Circular A-4 does not offer clear guidance on how to consider the international trade and investment effects of US regulation." However, "In practice, US Regulatory Impact Analyses often acknowledge that many direct impacts on foreign entities are passed on to the U.S. economy."

The report also hints OMB may issue an executive directive on the subject or at least amend Circular A-4 to more explicitly include international impact assessment.

Reg•Watch has two initial concerns with requiring this type of assessment. First, the assessment would add an additional layer of study to a regulatory process already thick with analytical requirements. That could mean more delay in the issuance of regulations.

Second, couching an international impact assessment in terms of cost-benefit analysis may skew the quantified effects toward the cost side of the ledger, something OMB has been prone to do during the Bush administration. In an increasingly global society, assessing international impacts is useful; but the impacts are not solely economic. As we have seen with the seemingly endless stories of dangerous Chinese imports, a regulatory system can impact health, welfare and peace of mind.

Stay tuned to Reg•Watch for updates on this issue.