Cooperation on behind-the-border regulation in PTAs

The design of an institutional mechanism to create a comprehensive and up-todate baseline for applied subsidy programs and operation of SOEs is beyond the scope of this chapter. It will require deliberation among PTA signatories and consultation with international organizations that might be asked to contribute to the effort. Any such mechanism can build on initiatives already being pursued under recent PTAs aimed at improving regulatory practices and supporting regulatory cooperation.

The need for transparency and analysis (assessment) of policies extends beyond subsidies and SOEs. As tariffs have fallen, policy-induced market access frictions and trade costs are increasingly apparent in regulations—helping to explain why PTAs have become deeper. The associated cooperation agenda is driven by business community concerns regarding the trade-impeding and cost-raising effects of differences in domestic health, safety, privacy, and data security standards; prudential and licensing requirements; and certification and conformity assessment procedures for products and production processes.

Like nontariff measures, state support measures challenge international cooperative efforts to identify approaches to reducing competitive distortions without a political commitment to fully integrate markets and without supranational institutions tasked with reducing national policies’ market-segmenting effects. National regulators frequently have mechanisms for interacting internationally. Governments at different levels (central, subcentral, and municipal), regulators, and international businesses are all engaged in mechanisms for cooperating with counterparts across jurisdictions. In the private sector, leading firms that set standards for health, safety, and quality for both products and processes in their supply chains may cooperate in private standard-setting activities that pursue interoperability and minimum standards across supply chains. They may work in cooperation with nongovernmental organizations (NGOs) and governments to do so.

Reducing the trade cost effects of regulatory differences is hindered by concerns about compromising countries’ regulatory objectives and impeding the execution of regulatory agencies’ legal mandates and obligations. Regulation is technical and dynamic, involving many actors with different degrees of autonomy and decentralization. And regulators must consider differences in local circumstances and priorities.

PTAs have a role in ensuring that regulations’ trade effects are considered. National regulators and international standard-setting bodies often do not consider the international implications of their activities, the trade impacts of their requirements, or alternative approaches that might have fewer negative effects while still realizing regulatory objectives. Their authorizing environment does not require them to do so, and they may not recognize the economic costs to firms and consumers in other jurisdictions associated with implementing their regimes.

PTAs can have a similar role for state support measures. A simple yet powerful change that PTA partners could seek is to agree that regulatory processes include an