Trans-Pacific Partnership to expand ‘regulatory coherence’

Occupying only six of the 6000 pages of the Trans-Pacific Partnership agreement, chapter 25 is a good place to start if you’re a regulator planning to read the text of the TPP.

While you probably won’t be reading any outraged opinion pieces about this section, covering what is called “regulatory coherence”, any time soon, it sits behind an important push by the United States to facilitate what might be called “new globalisation” — a world in which goods are not merely made in one country and exported to another, but come together through complex supply chains spanning several different countries, each with its own legal and regulatory systems.

This is the first time Australia has signed an agreement featuring regulatory coherence provisions. But what is regulatory coherence?

“It’s targeting services regulation … by seeing harmonisation of measures across jurisdictions, but also just improving domestic decision making.”

The idea is that all government regulatory processes are improved by the application of this concept, explained Elizabeth Sheargold, a research fellow at Melbourne Law School, at a seminar on the TPP on Friday.

“It’s designed to promote open, fair and predictable regulatory environments for business to operate in,” she said. “It’s targeting non-tariff barriers to trade, it’s targeting services regulation, it’s meant to be making it easier for global value chains to operate by seeing harmonisation of measures across jurisdictions, but also just improving domestic decision making.”

Like much of the rest of the TPP, regulatory coherence goes beyond the traditional concerns of free trade agreements — tariffs are already fairly low — and into the realms of ensuring similar business environments for globalising corporations across jurisdictions.

While maintaining the right of states to determine their own regulatory priorities, the chapter talks about the importance of transparency, impartiality, due process and coordination in regulation, while suggesting governments take “into account input from interested persons in the development of regulatory measures”.

New regulatory measures should be written in clear, understandable language that is made publicly available, says the document, and governments should also regularly review the ongoing appropriateness of current regulations and “provide annual public notice of any covered regulatory measure that it reasonably expects its regulatory agencies to issue within the following 12-month period.”

“It’s a long process. This document of just six pages is not going to do it [all], but it is just a start.”

Donald Robertson of law firm Herbert Smith Freehills said that the move to codifying — albeit unenforceable — regulatory coherence measures in the agreement was “making sure that people are living by some sort of rational philosophy of why you intervene in markets and how”.

“So concepts of proportionality, justification of regulations, what are the alternatives to those regulations, least constrictive alternatives and then reviews and focusing on how that is actually rational are central to a global value chain and globalising world. It’s a long process. This document of just six pages is not going to do it, but it is just a start.”

The TPP also recommends that to achieve good outcomes governments should make sure they are in the habit of using regulatory impact assessments (also known as regulatory impact statements or RIS), but leaving open the door on what kind of formal approach is best. Overly quantitative RISs have led to litigation in the United States, though in some situations they are more appropriate.

“What you don’t want though is the sort of regulatory impact statement you often see which is they start at the other end and they work backwards,” Robertson argued.

One possible way of improving regulation is giving someone oversight of regulatory system reform. Australia and the US are already making progress on this. In the United States the job of coordinating efforts to improve regulation lies with the Office of Information and Regulatory Affairs; in Australia the Office of Best Practice Regulation sits within the Department of Prime Minister and Cabinet.

The agreement also facilitates the opportunity for Australia to learn from its neighbours. It establishes a commitee on regulatory coherence that will help implement parts of the chapter and identify future priorities, including potential sectoral initiatives and cooperative activities.

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