Adopting a Critical Approach to Regulatory Uniformity &

Harmonisation

Rex Deighton-SmithCentre for Regulatory Studies

Monash University

2

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

3

Some (recent) history

No state-wide uniformity in Victorian building regs until 1970s (RRU 1990)

But close national harmonisation in building regs achieved by the early 1990s

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 CoAG “seamless national economy agenda” a significant driver of this trend

4

Benefits of harmonisation

Harmonisation is a means and not an end What benefits do regulators say are

available? Reduced manufacturing costs Greater labour mobility Reduced complexity, hence

lower administrative burdens

Greater compliance

Regulatory “modernisation” (thus, better quality)

Equity? (Means vs ends?)

5

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

6

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. $8m) identified in Marine Safety RIS, plus benefit/cost ratios near to 1:1

Context of usual “optimism bias” of RIS

7

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?

8

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

9

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.

10

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”?

11

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

12

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:

13

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

14

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

15

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 of the best model of harmonisation

Comment by OBPR?

Improving CoAG RIA processes

A role for state regulatory reform offices? A “relaunch” of Mutual Recognition