Adopting a Critical Approach to Regulatory Uniformity Harmonisation

Adopting a Critical Approach to Regulatory Uniformity & Harmonisation Rex Deighton-Smith Centre for Regulatory Studies Monash University

Harmonisation means a range of different things � Strict uniformity � (template legislation – e. g. National health practitioners registration) � Close harmonisation � Template legislation plus state specific elements (e. g. Building Code of Australia) � Looser harmonisation � Model � legislation (e. g. Model Rail Safety Act) Loose harmonisation � Common essential requirements (former OHS “national standards” agreements) � Mutual Recognition – an alternative approach 2

Some (recent) history � � � No state-wide uniformity in Victorian building regs until 1970 s (RRU 1990) But close national harmonisation in building regs achieved by the early 1990 s Close harmonisation in food regulations by the same time, and looser harmonisation in OHS & environmental regs Rapid expansion of the range of harmonisation schemes in subsequent years. Current Co. AG “seamless national economy agenda” a significant driver of this trend 3

Benefits of harmonisation � Harmonisation is a means and not an end � What benefits do regulators say are available? � Reduced � Greater manufacturing costs labour mobility � Reduced complexity, hence lower administrative burdens Greater compliance � Regulatory � Equity? “modernisation” (thus, better quality) (Means vs ends? ) 4

Costs of harmonisation � An intensive user of often scarce regulatory resources � Regulatory inflation (due to “race to the top”): � � Increasing the stringency of regulation � Expanding the scope of regulation Reductions in regulatory quality? � (e. g. OHS – onus of proof issue) � Reduced scope to accommodate efficient differences � Loss of regulatory competition & its benefits 5

Benefits of harmonisation - in practice � Many of the “theoretical” benefits identified are difficult to observe in practice, eg: � Limited number of regulatory inconsistency issues identified in rail regulation consultations � OHS Act RIS – “the model Act will confer an overall marginal to small net benefit” - & net costs for small business � Similarly small benefits (c. $8 m) identified in Marine Safety RIS, plus benefit/cost ratios near to 1: 1 � Context of usual “optimism bias” of RIS 6

Costs of harmonisation – in practice � Some experience suggests costs/difficulties are frequently under-estimated or overlooked � E. g. National health practitioner registration: � Administrative issues in processing registrations � Unanticipated increases in registration costs/fees � Concerns re: accessibility/effectiveness of disciplinary structure � Implications of this experience for the national trades registration proposal? 7

Governance issues � Even where harmonisation has potential benefits, institutional rules can cause concerns. Eg: � Ministerial Council voting rules � Often a qualified majority (two thirds) requirement � Takes little account of difference in jurisdiction size � E. g: Vic + NSW + Qld = 77% of the population – but can still be outvoted. � Contrast the EU “dual majority” requirement: Minimum number of countries in favour; Must represent 65% of the total EU population 8

Governance issues (2) � � Lack of political control in some areas – eg: Food Standards IGA states : � The Council must approve a draft standard unless one of seven specified criteria (i. e. faults) are met; � In this event, any member of the Council may require FSANZ to review the standard; � If FSANZ resubmits the standard (with or without amendment), the Council can only request a second review on a majority vote; � If FSANZ submits the standard a third time, the Council may amend or reject the draft standard. 9

The broader context � Incentive issues suggest harmonisation may be favoured where benefit/cost outcomes are negative: � Harmonisation favours an increased Federal role in state areas of regulation – thus likely to be favoured by fed govt � Has benefits to industry, but few (apparent) costs Hence, a strong incentive to lobby for it But societal benefit/cost balance can be very different � Has uniformity become an end in itself? � Is it a conventional wisdom that “uniformity is good”? 10

Mutual Recognition � � � Adopted in 1992 Drew from the EU precedent Concept was that MR could often � Achieve most of the benefits of uniformity � At substantially lower cost � � � Two PC inquiries conclude it has been only partly successful Attempts to implement it have often increased the focus on regulatory differences Uniformity schemes sometimes result - a perverse outcome 11

Implications for harmonisation processes? � Balance of benefits and costs will differ greatly across areas of regulation � The model used also affects this balance � We cannot assume a priori that benefits will exceed costs � There are strong incentives favouring harmonisation � Thus, we need a critical approach to harmonisation proposals � Regulators suggest this is increasingly lacking – EG: 12

National partnership agreement to deliver a seamless national economy � “. . . to implement a co-ordinated national approach. . ” in 18 areas, including: �A new National Construction Code � Food regulation � Product safety regulation � OHS laws � The health workforce � Licensing of tradespeople � Environmental assessment and approvals � Development assessment � Wine labelling 13

Addressing the problems How to ensure systematically that: � Harmonisation/uniformity is only pursued when net benefits are likely to result; � When it is pursued, the most appropriate model is used; � Specific regulatory choices are optimal; and � The dynamic quality of the resulting regulatory structure is safeguarded 14

Improved approaches to harmonisation � Improving understanding of the benefits and costs � Adopting a rigorous threshold test � Before the RIS process � Largely qualitative & “principles based” � Consideration � Comment � by OBPR? Improving Co. AG RIA processes �A � of the best model of harmonisation role for state regulatory reform offices? A “relaunch” of Mutual Recognition 15