2. Best Practice Principles on International Regulatory Co-operation

Develop a whole of government IRC policy/strategy

An IRC policy can be defined as a systematic, national-level, whole-of-government policy/strategy promoting international regulatory co-operation whether reflected in a broad strategic document or other instrument. It may incorporate but goes beyond any specific agreement drawn with key partners or regional approach adopted to promote regulatory co-operation. This policy is an opportunity to convey political leadership and build a holistic IRC vision and strategy with clearly defined roles and responsibilities. It can also help set a definition on IRC, to support a common understanding across the government. Ultimately, the IRC policy is also important to ensure IRC practices of policymakers and regulators feed into the broader strategic priorities of the government. IRC being a core component of regulatory quality, an IRC policy needs not stand alone and can be fully integrated into a broader regulatory policy. Examples of such policies are still rare. Box 2.2 presents selected country examples.

While trade is a strong driver for IRC, an effective IRC narrative should go beyond the expected trade benefits. IRC has important broader benefits for policy makers, regulators and society across policy areas, for example via learning from foreign peers, or aligning approaches on common and cross-border policy challenges to strengthen the effectiveness of domestic regulation in achieving its policy objectives. Co-operation is also a cornerstone of effective market surveillance and regulatory enforcement. With the growing dematerialisation of flows transcending borders, regulatory co-operation across different jurisdictions is becoming critical to the identification of non-compliant behaviours, the detection of dangerous products and conducts and their remedies. From this perspective, IRC may help achieve other broader objectives such as safety, social and environmental.

The IRC policy/strategy should be evidence-based and acknowledge the key drivers, benefits, costs and challenges of co-operation. It should give priority to key partners for collaboration, taking into account the country’s “dependence” on other countries (subject to sectors and / or policy areas) and account for IRC drivers and political economy. Typical IRC drivers include geographical proximity, economic interdependence, political and economic properties of potential partners (including relative size) and their like-mindedness, the maturity and proximity of the regulatory system, and the nature of regulation.

The IRC policy/strategy should account for the variety of IRC approaches. Different IRC approaches have different benefits and costs and may be more or less relevant depending on the sector/area under consideration. As their experience with IRC matures, policy makers should undertake more systematic ex ante and ex post assessment of their regulatory co-operation initiatives. They should develop a base of evidence on uses and impacts, relying on information collected via regulatory impacts assessment, ex post evaluation and data provided by international fora. This would help governments in updating the IRC policy/strategy over time based on evidence.

The IRC policy/strategy should also recognise that a level of unilateral adoption of international or of other jurisdictions’ instruments may be warranted in sectors or policy areas where a country has accumulated less knowledge and expertise or where the country’s limited activity may not warrant the necessary resources to develop its own approach. Opting to unilaterally recognise or uphold regulatory requirements issued by competent authorities in other jurisdictions can also be a flexible and rapid option for countries that can prove particularly useful during a crisis to quickly increase the supply and availability of goods and services. This has proved an important mechanism in the midst of the COVID-19 crisis to facilitate the trade of critical medical products and protective equipment.

Establish a co-ordination mechanism in government on IRC activities to build a consensus and common understanding on IRC and capitalise on relevant information on IRC practices and activities

IRC is part and parcel of the regulatory policy agenda and an important building block of regulatory quality. Nevertheless, it entails an ambitious rethinking of traditional domestic rulemaking processes. To ensure IRC is interwoven within the regulatory process and helps contribute best to domestic strategic objectives, the design and establishment of an IRC strategy requires the commitment of the regulatory oversight bodies. Yet its successful implementation is a whole-of-government endeavour involving different actors. It also requires a significant change in the administrative culture. As such, there should be dedicated staff strongly connected to the regulatory policy agenda with sufficient resources and influence to ensure maximum mainstreaming in the rulemaking practices of departments and regulators (Box 2.2).

There should be an IRC policy overseen, at least in its regulatory quality dimension, by the regulatory oversight bodies and capacities established in line with the 2012 Recommendation. These bodies have a key role to play to ensure the mainstreaming of IRC considerations in rulemaking practices, in the development of relevant guidance and in their systematic check during scrutiny work.

To ensure that countries develop an IRC policy and strategy in line with those impacted (country specific policy making community, regulators, businesses, affected communities, etc.), and in line with core regulatory policy principles, the oversight unit should highlight in any IRC guidance the importance of transparency, such as systematic publication of IRC documents, and promote wide consultation on the overall IRC strategy or its components. Public availability of the IRC policy/strategy can support governments in ensuring transparency and accountability about international co-operation efforts.

The successful implementation of an IRC policy/strategy is a shared endeavour across government. The entity responsible for the IRC strategy should pro-actively promote it across government and ensure appropriate linkages with other, related, policies and initiatives across government (i.e. trade and foreign policy). Typically, Foreign Ministries and overseas embassies have a role to facilitate IRC by providing access to networks, stakeholder and information, and often by co-ordinating participation in international organisations.

Enable an IRC conducive framework – i.e. raise awareness of IRC, build on existing platforms for co-operation, reduce anti-IRC biases and build in incentives for policy makers and regulators

Existing legal and policy documents and guidance on regulatory policy may generate obstacles for regulators to consider more systematically the international environment and engage in fruitful IRC. Updating these documents may help remove some of the unintended biases, embed stronger IRC incentive, and reduce legal and institutional impediments to co-operation. As an example, in 2018, Canada introduced amendments to the Red Tape Reduction Act to allow regulators to count reductions in administrative burden to businesses that occur in other jurisdictions as part of their one for one mechanism, should they result from a work plan under one of Canada’s three formal regulatory co-operation tables.

In addition, guidance to regulators should incorporate IRC elements and guide regulators on how to embed IRC in regulatory management tools (see below). For example, such guidance could clarify the standard of international evidence to be used in the RIA process and help regulators identify the applicable international instruments. While such a standard is still to be developed and could be the object of further OECD work, relevant information to be collected by regulators include data from other jurisdictions and international fora on the challenges they seek to address (i.e. patterns, evolution over time, impacts on various populations, among other), and on policies, their use and impacts in other jurisdictions. There is a wide range of information sources that can be tapped on, including official government data, international organisations, peer reviewed academic work.

Regulators at various levels of governance know best what co-operation mechanisms exist in their own area. Nevertheless, there is an opportunity for national levels to support and leverage existing regulators fora and build a community of IRC practices and other regulatory policy topics, raise awareness about IRC tools, and identify training needs when relevant (Box 2.3).

Gather and rely on international knowledge and expertise

At a minimum, Governments should act in accordance with their international treaty obligations, which infers appropriate co-ordination across government and a clear information base on such commitments.

In developing laws and regulation, policy makers and regulators should gather evidence and expertise that may go beyond their own jurisdiction. It is rare that a new issue arises without any other jurisdiction and international organisation having had to deal with it. Gathering the intelligence around the incidence of the issue at stake and the approaches adopted by others can help build the body of evidence on the area under consideration, identify a greater range of options for action, and develop the narrative around the chosen measure. This can be done as part of the routine practice of gathering information during ex ante RIAs and ex post evaluations. It can also be done by engaging with relevant experts and public and private sector representatives and practitioners from around the world, complementing traditional stakeholder engagement (see below). For example, Turkey’s 11th Development Plan (2019-2023) includes a section on National Capacity for International Cooperation that calls for exchanges with experts from other countries for the preparation of legislation dealing with regulating financial and technical issues (Presidency of the Republic of Turkey, 2019[3]).

Consider existing international instruments when developing regulation and document the rationale for departing from them

International normative instruments are usually the results of significant evidence gathering and consensus building (including scientific). Using them in domestic legislation provides a strong driver for regulatory consistency internationally therefore reducing the opportunities for arbitrage and the costs for the regulated entities of having to comply with multiple requirements. Binding instruments should be embodied in domestic law and regulations depending on the process set out to that effect. With regard to non-binding instruments, they should be taken into account and, when specific circumstances require departing from them, this should be justified based on evidence. For examples of domestic requirements to consider international instruments, see Box 2.4. Traditional regulatory management tools such as RIA or stakeholder engagement can help in the assessment of the benefits and costs of pursuing a unilateral approach versus relying on an existing international solution.

The principle of use of relevant international standards is already strongly embedded in the WTO SPS and TBT agreements from a trade impact perspective. Indeed, the use of international technical standards is particularly relevant in the development of domestic standards, technical regulations and conformity assessment procedures (sometimes referred to as STRACAP) to facilitate trade. Nevertheless, the use of relevant international instruments merits to be extended beyond the technical standard area and to apply more broadly. Indeed, in areas not directly related to trade, use of international instruments in decision making and the harmonisation of international approaches allow to avoid free riding behaviour and limit costs on businesses and citizens – this is typically the case in the tax area or corruption. Such a principle is valid for all jurisdictions but hold particularly true for those that have directly contributed to the development of such instruments.

For maximum interoperability gains, incorporation by reference of international instruments1 should be the preferred option when legally feasible. However, its limited use so far may well reflect a perceived lack of appropriateness of international instruments to specific country situations and the limited confidence of domestic regulators that these instruments may (without alteration) help them achieve their policy objectives. Hence this principle goes hand in hand with the need for policy makers and regulators to actively participate in international fora where such instruments are being developed (see below).

The 2018 Regulatory Policy Outlook highlights the importance of facilitating the access to applicable international instruments, whether legally binding or not, through centralised databases (by sector/policy areas or other) (OECD, 2018[4]).

Assess impacts beyond borders

At a minimum, governments should ensure that their rulemaking takes into account the potential impacts on parties outside of the national boundaries. The Regulatory Impact Assessment process provides an opportunity to do so, in particular through the assessment of trade impacts and of impacts on foreign jurisdictions. But while countries have started accounting for the trade impacts of their rulemaking (Box 2.5), the broader consideration of impacts of their regulatory action beyond their own borders (and potentially therefore of the second round effects) remains limited. To be effectively implemented, this principle goes hand in hand with the need to provide opportunities for consultation with external partners on the development of regulation (see below).

Engage actively with foreign stakeholders

Engagement of foreign stakeholders in regulatory processes – as an integral part of regular stakeholder engagement most commonly focused on domestic actors – can help raise awareness for regulatory approaches in other jurisdictions and provide information on enforcement consequences of selected regulatory options, including their impacts on trade and the practical effects of maintaining the same or different regulatory approaches. In practice, it is necessary but not sufficient to rely on open, non-discriminatory engagement processes domestically, for example via open-access internet platforms accessible to all. Countries should make an extra effort to involve foreign stakeholders. This can take the form of specific communication through business platforms or chambers of commerce.

Compulsory notification of draft regulations to international fora provides an important means by which to alert and draw inputs from foreign stakeholders. The WTO TBT and SPS Agreements provide such opportunity through the single central government authority responsible for notifications (OECD/WTO, 2019[5]) (Karttunen, 2020[6]). However, other notification processes exist in various sectors and regional platforms, such as for example notification obligations of environmental impact assessments under the UNECE’s Convention on Environmental Impact Assessment in a Transboundary Context (Espoo Convention) (Kauffmann and Saffirio, 2020[7]). Such notification processes can usefully complement the mechanisms established by regulatory oversight bodies and need to feed in and work in synch with those mechanisms.

Embed consistency with international instruments as a key principle driving the review process in ex post evaluation and stock reviews

The full extent of the impacts of a regulatory measure is only known after its implementation. Therefore, ex post evaluation provides a critical opportunity to identify regulatory divergences with international frameworks as well as their trade and other potential impacts. Evaluation and stock reviews can be used more systematically to map the state of international knowledge on the regulated area and take stock of new approaches adopted by other jurisdictions that may have proved successful. It should analyse the costs (and benefits) of diverging from international practice if such a choice was made ex ante and identify the unintended divergences (in design and enforcement) that may be source of frictions (Box 2.6).

Given the potential relevance of the findings of such ex post evaluation for other jurisdictions and the international community, the results of ex post evaluation should be made public and available to relevant partners and international fora to the extent possible.

Assess ex ante the co-operation needs to ensure appropriate enforcement and streamline “recognisable” procedures

Given the impacts of digitalisation and the fragmentation of value chains, it is likely that appropriate enforcement of any rule will require co-ordination with foreign jurisdictions, be it to gather relevant information on the market structure or to solve cases or find remediation when applicable enforcement authority or mechanism is located outside of the jurisdiction. Such enforcement co-operation needs are better estimated and foreseen early in the rule-making process in order to avoid gaps in the applicability of rules. More broadly, enforcement co-operation can be facilitated by ensuring that regulators have the appropriate tools/ legal authority to co-operate and take action provided by their domestic legislation (OECD, Forthcoming[8]).

Conformity assessment procedures allow companies to demonstrate compliance with regulatory requirements. When the foundations of mutual recognition and equivalence mechanisms, they are a key element to facilitate international trade and provide confidence that traded goods and services are fit for purpose. However, when different and not recognised across countries, they can add substantial costs to traders and limit the flow of quality products. Improving their quality domestically and facilitating recognition of trustworthy partners’ conformity assessment procedures can help regulators reduce their load domestically and limit compliance costs for regulated entities.

Co-operate with other countries to promote the development and diffusion of good practices and innovations in regulatory policy and governance

Good regulatory practices are the foundations of trustworthy regulatory institutions and frameworks. They are also the building blocks of stronger regulatory co-operation approaches and mechanisms. Countries should continue co-operating within the OECD and other relevant frameworks at a global scale to advance the knowledge and understanding of good regulatory practices, establish common language on key regulatory policy terms and concepts, and strengthen the confidence needed across jurisdictions for stronger forms of IRC. Co-operating internationally on good regulatory practices can be the opportunity for governments both to learn from others’ experiences and to build capacity of other countries with less developed good regulatory practice frameworks.

Contribute to international fora which support regulatory co-operation

Governments are encouraged to participate plainly in international organisations where science is discussed, practices shared, and common approaches and international instruments developed. They are usually consensus based and provide an opportunity to both collect evidence and gather expertise on issues of common interest and influence international rulemaking. In this perspective, it may be useful for countries to build a comprehensive mapping of all the international organisations that they contribute to. Where resources may be limited, sharing the burden of active participation among likeminded countries may help address the capacity challenges. At a minimum, continuous surveillance of the normative activity of international organisations will help identify when issues of relevance to a specific jurisdiction are being raised.

Beyond the active participation in the technical work of international organisations, countries could further support the use of good regulatory practices at the international level. Through their membership or participation in technical committees, national jurisdictions have a role to play in sending consistent messages and working towards the development of more transparent, evidence based, co-ordinated rules and no more burdensome than necessary to achieve legitimate policy objectives. They can, in particular, support greater engagement of a wide variety of stakeholders (both national and international) in the normative activity of international organisations, more ex ante and ex post evaluation of international instruments, stronger implementation and co-ordination of joint rules. The work of the Partnership of International Organisations for Effective International Rulemaking, spearheaded by the RPC, aims to provide a unique reference base on the practical steps that international organisations can take in this direction (OECD, 2021 forthcoming[9]).

The 2018 Regulatory Policy Outlook identifies a disconnect between the domestic and the international rulemaking processes, which generates inefficiencies. Better use of regulatory management tools across domestic and international levels may help bridge this disconnect. For example, greater monitoring and more regular evaluation of the application of international instruments at domestic level would help make the case for their use and inform domestic regulators of their expected and realised impacts. It would also help inform the revision of international instruments if evaluation results were shared more systematically across levels of government.

Use mutual recognition in combination with international instruments

In areas where regulatory harmonisation may not be needed and it is recognised that various regulatory approaches may achieve similar objectives, the mutual (or even unilateral) recognition of the other jurisdiction’s rules, conformity assessment procedures or enforcement results may avoid undue costs to business and enforcement clogging. Experience shows however that such recognition is most easily achieved among like-minded countries, and made less costly and facilitated by coherence and convergence in the underlying rules.

Align IRC expectations across various policy instruments, including trade agreements

Trade agreements are increasingly used as a mechanism to promote considerations on regulatory quality and co-operation. Most recently, a number of agreements incorporate standalone chapters focused on GRPs, IRC or both. These chapters can represent an important political commitment and serve to advance common understanding and use of regulatory co-operation and regulatory management tools across jurisdictions.

It is important though that consistency with the international commitments of countries in the same field is respected, in particular the 2012 Recommendation and the APEC-OECD Checklist. Where such standalone chapters create special standing bodies to oversee the implementation of these chapters and/or promote regulatory co-operation, countries should ensure that they effectively and efficiently deliver on their purpose avoiding overlaps with other bodies or the risk of co-operation fatigue. In particular, these bodies should provide an opportunity to bring together critical players working on improving regulatory effectiveness across policy communities in each country. An example is provided by the CETA (Box 2.7).