This report responds to the request of the OECD Regulatory Policy Committee (RPC) to do a stocktaking exercise on International Regulatory Co-operation (IRC). It provides an overview of recent trends, the range of existing regulatory co-operation mechanisms (and actors involved) and preliminary lessons learnt from selected experiences. It builds on 10 case studies, a review of the literature and answers by RPC delegates to a questionnaire on IRC undertaken by the Secretariat in 2012.

In an increasingly globalised world, the way the rules of the game for business, investment and trade are designed and enforced is of critical importance for the performance and competitiveness of countries. Traditionally, rules and their application are a matter of domestic competence. However, dealing with climate change, human health and safety, migration and a range of other global policy issues requires that regulators look beyond their national borders to address interconnected and cross-jurisdictional challenges. The ongoing financial and economic crisis has provided ample illustration of the dramatic impact of poor articulation and inadequate enforcement of regulation across borders.

With the progressive emergence of an open, dynamic and globalised economy, the internationalisation of rules has become a critical issue. Governments increasingly seek to maximise the benefits of globalisation for national populations by eliminating unnecessary regulatory divergences and barriers, and ensuring greater co-ordination of regulatory objectives. At the same time, intensification of global challenges, such as those pertaining to systemic risks (financial markets), the environment (air or water pollution), and human health and safety, is leading to growing regulatory co-operation efforts as a key component of risk management strategies across borders. Regulatory co-operation is not a new topic (OECD, 1994). However, renewed attention has been paid to its importance since the economic crisis began in 2008. Perceived regulatory failures related to poor articulation of regulation across borders, limited enforcement of rules and regulatory capture have raised questions regarding the role of the state as a regulator and, specifically, how and where it should intervene to achieve key policy objectives in an increasingly globalised world????

This chapter is a unique attempt to synthesise the knowledge and evidence available to date on the various mechanisms used by governments to promote regulatory co-operation. It first identifies 11 IRC mechanisms and provides evidence on the frequency of their use by governments. It then reviews the trends in IRC over the past decades. The review of evidence confirms the increased internationalisation of regulation, which takes place through a wide variety of mechanisms and multiple actors. It highlights a shift in the nature of IRC from complete “harmonisation” of regulation to more flexible options – such as mutual recognition agreements.

Despite the growing trend in regulatory co-operation, decision making on IRC is not based on a clear understanding of benefits, costs and success factors of the various IRC options. This chapter is a preliminary attempt to define the range of benefits and costs/challenges of IRC. It identifies quantitative evidence of benefits and costs available to date and complements it with lessons learnt from the OECD IRC case studies. This chapter also builds on the case studies and the literature to identify some of the success factors of IRC and to initiate a checklist of critical considerations for government to ensure successful IRC.

As an initial step, this stocktaking report shows the multiplicity of IRC arrangements, the important benefits that can accrue from greater regulatory co-operation, but also the remaining analytical gaps and the complexity of implementing effective IRC. Clearly, more work is needed to guide governments in a number of areas. In that respect, the OECD presents unique advantages to advance the thinking and build a shared understanding on IRC. The OECD can build on its long-standing expertise in promoting regulatory co-operation among its members in various policy areas. It can tap into the experiences of its members in an area where countries and the EU have accumulated substantial experience from which important lessons and good practices can be drawn. The organisation also has the credibility and analytical strength to engage governments in fruitful discussions on a politically sensitive area, by anchoring the debate in evidence-based analysis. It has the convening power to reach out to different communities. Within the OECD, the Regulatory Policy Committee and its Recommendation on Regulatory Policy and Governance provide a relevant cross-sectoral framework for anchoring the discussions.