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U.S., European consumers oppose move for more regulatory process burdens

Posted:  2/29/2008 TACD comments OMB-EC draft report, Review of the Application of EU and U.S. Regulatory Impact Assessment Guidelines on the Analysis of Impacts on International Trade and Investment

The U.S. and European Commission are moving in the direction of requiring more burdens on the regulatory process that will put consumers at risk, according to comments submitted today by a network of U.S. and European consumer groups, including Public Citizen.

The consumer groups filed comments collectively under the banner of the Transatlantic Consumers Dialogue (TACD), a gathering of U.S. and European consumer groups that address issues of common concern that arise in the context of U.S.-EU trade talks.

The OMB-EC proposals

TACD submitted comments on a draft paper by the White House Office of Management and Budget (OMB) and the European Commission addressing the degree to which impacts on international trade and investment are accounted for in regulatory impact assessments (“IAs”) that accompany proposed regulations.

The lead representative in the OMB-EC collaboration, which operates as the “High-Level Regulatory Forum” of U.S. and EU talks on “regulatory cooperation,” is Susan Dudley, the controversial recess-appointed head of OMB’s Office of Information and Regulatory Affairs.

The draft OMB-EC paper concludes with a series of recommendations for changing the governments’ respective regulatory processes:

• Developing processes for early identification of planned policy initiatives that “might have an impact on international trade or investment” or “might otherwise be of interest” to transatlantic trading partners or “third countries.”[i]   Although this conclusion does not further elaborate upon what such processes might be, the fourth recommendation further down the page suggests that, in furtherance of this recommendation, OMB and EC are contemplating requiring “preliminary analysis” of potential impacts on trade or investment whenever policy issues are added to government agendas.
• Furthering the objective of having “transparent rules or guidelines” for IA “accompanied by a rigorous system of quality control” by creating public consultation and comment mechanisms for both IA and agenda development.
• Making both policy agendas and IAs available to the public, along with underlying data and technical analysis, to allow for transatlantic trading partners and third countries to respond if they foresee significant trade or investment impacts.
• Expanding their respective IA guidelines with respect to impacts on international trade and investment.
  • Although the EC’s IA guidelines already call for rigorous assessment of potential impacts on international trade, the EC-specific section of the Draft Report hints at a possible expanded focus on international investment.[ii] 
  • OMB, meanwhile, presents Appendix B1, titled a “Draft Discussion on Incorporating Trade Impacts into Benefit-Cost Analysis,” which appears to presage a new government-wide pronouncement for U.S. agencies to follow when conducting their own IAs.
  • The joint conclusion of the report identifies three additional potential policy edicts to apply whenever “preliminary analysis suggests that a proposal might significantly affect international trade or investment”:[iv]
    • an analysis “demonstrating the need for any proposed regulation”;
    • an analysis of the distributive impacts of the proposal; and
    • a “recommendation” that the program consider adopting any “existing international standards or regulatory approaches.”

The consumer response

TACD objected to the regulatory process changes sketched out in the draft paper.

“TACD approaches this report with a core principle in mind: that it is the responsibility of government to protect consumers,” the TACD comments began.  “[Impact assessment] methodology has a significant effect on the assessments themselves, which in turn have a significant effect on policies to protect consumers.  Consumers therefore have a keen interest in any dialogue about IA methodologies.”

TACD objected that the draft report fails to identify any problem warranting the kind of dramatic proposals in the report’s conclusion.  Among other shortcomings:

• The report misleadingly suggests that regulatory deforms are justified by World Bank research about regulation and economic vitality.  The World Bank research misused by the report address only very specific kinds of regulation –-regulations governing business creation, contracts, and access to ports –- and is utterly inapposite to the regulations that protect consumers, the environment, public health, civil rights, and safety.
• The report fails to acknowledge the growing empirical evidence that stringent regulatory protections are associated with economic benefits, such as early-mover advantage in developing green technology and the discovery by regulated industry of more efficient and profitable ways of doing business.
• More fundamentally, the draft report considers regulatory protections as more of a threat to the public than the threats that regulations are supposed to reduce.  The authors of the report propose sweeping process changes that are unaccompanied by the kinds of procedural constraints, such as cost-benefit analysis, that are demanded of regulations themselves.

Additionally, TACD took the OMB-EC recommendations head-on:

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