On Regulatory Cooperation Rules In International Trade Agreements

International Regulatory Cooperation(IRC)is a broad and flexible concept which refers to promoting cross-border trade and investment,reducing the regulatory divergence though formal or informal arrangements of international cooperation by governments of the world.Regulatory Cooperation is actually not a new concept in the context of Global Governance.Earlier-stage cooperation was mostly initiated by regulators aiming to tackle regulatory problems arising from cross-border regulatory issues.As the decrease of tariff and increase of Global Value Chains(GVCs)has brought to the attention on the downsides of regulatory barriers during international trade,countries are beginning to consider regulatory issues from perspective of promoting trade.Currently,OECD divides the International Regulatory Cooperation Mechanism related to trade and investment into 11 types,and regulatory cooperation rules in international trade agreements is only one of them.The Chapters of “Regulatory Cooperation”,“Regulatory Coherence” and “Good Regulatory Practices” are incorporated into free trade agreements,such as EU-Canada Comprehensive Economic and Trade Agreement,Comprehensive and Progressive Trans-pacific Partnership Agreement,Transatlantic Trade and Investment Partnership Agreement,EU-Japan Economic Partnership Agreement and the United States-Mexico-Canada Trade Agreement.The trends of international regulatory cooperation are calling for attentions on how to break through the restrictions of a country’s sovereignty and regulatory autonomy,how to promote deep and substantive cooperation on regulatory issue related to trade and investment,and how to effectively reduce the impact and loss of international trade due to behind the border” measures or "non-tariff” measures.Regulatory cooperation rules in international trade agreements have been becoming a new topic of International economic law and International Governance,as well as an important part of the optimization and upgrading of international economic and trade rules.This dissertation strives to research the regulatory cooperation rules scattered among international trade agreements,and to systematically study on the status quo and development trend of international regulatory cooperation rules.In addition to the Introduction and Conclusion,the main contents of the remaining six chapters is trying to answer the following four questions.Firstly,what are the regulatory cooperation rules in International Trade Agreements? Secondly,what are the core elements of Regulatory Cooperation rules in international trade agreements? Thirdly,what might be the trend and negotiation approach of regulatory cooperation rules in international trade agreements? Fourthly,how to response to the regulatory cooperation rules in international trade agreements from China’s perspective?By discussing the basic theoretical issues of regulatory cooperation rules in international trade agreements,Chapter Ⅰ is aiming to answer "what are the regulatory cooperation rules in international trade agreements".Firstly,this Chapter aims to give a clear definition of regulatory cooperation in international trade agreements,so that this dissertation’s research object is determined.Regulations refer to the government and the regulatory agencies making administrative regulation within the discretionary space prescribed by law,which are supplemented by a mechanism to supervise and promote the enforcement of these regulations.The origin of the international trade agreements’ regulatory cooperation rules stems from the limitations of a country ’s regulatory capacity and the externality of domestic regulatory policies.It is also due to the expansion of trade barriers from tariff barriers to non-tariff barriers.Regulatory divergence brings unnecessary costs to international trade and investment,which makes the establishment of a coordinated,transparent and efficient global regulatory environment an inevitable requirement for the promoting of international trade.The regulatory cooperation rules in the context of international trade agreements refer to the rules requiring the domestic regulators follow the procedural requirements when making rules or decisions.It also requires parties to enter into institutional arrangements with mutual recognition or coordination of regulations.The rules should be horizontally applied to any regulatory barriers,and the instrumental value of them is to achieve coherence among domestic regulators in order to promote cross-border trade and investment.Secondly,this Chapter also discusses the development and evolution of regulatory cooperation rules in international trade agreements.From the provisions of equivalence,mutual recognition and coordination standards in the WTO/TBT agreement and WTO/SPS agreement focusing on “behind-the-border” barriers,to the provisions that horizontally applied to any trade area in the preferential trade agreements,the rule system has earned its first pattern.Thirdly,the regulatory cooperation rules written in current international trade agreements can be classified,by their characteristics,into three categories as substantial rules,procedural rules,and enforcement rules,which constitute the logical basis of the dissertation.Finally,in order to meet the purposes of domestic regulation and trade liberalization,the regulatory cooperation rules in international trade agreements are designed to achieve more complex target level,which contains not only to reduce,or even eliminating divergencies of regulatory requirements,but also to improve regulatory quality through greater transparency,objective analysis,accountability,as well as its predictability,eventually facilitate international trade and investment.The dissertation responds to the query “what are the core elements of regulatory cooperation rules in international trade agreements” through its chapter Ⅱ,Chapter Ⅲ and chapter Ⅳ.Chapter Ⅱ classified the existing substantive rules of regulatory cooperation in international trade agreements as three types of rules,containing harmonization of standards,mutual recognition and equivalence,which,according to some previous researches,were considered as alternative methods to trade facilitation.However,this dissertation believes trade facilitation is also one of the objectives of regulatory cooperation,and they complement one another.Recognition that the three types of rules achieving better consistency or coordination of regulation,OECD includes the three types of rules in the scope of regulatory cooperation.Accordingly,this chapter classify them as the substantive rules of regulatory cooperation.Firstly,the harmonization of standards refers to the coordination of multiple different standards among various countries when applying international standards.In general circumstances,the harmonization of standards often applied to the matters related to SPS and TBT,and highly dependent on the standardization between international organizations.Secondly,Mutual recognition means that two or more countries agree to recognize each other ’s rules or / and conformity assessment procedures under the consensus.The concept of mutual recognition originates from the European Union legislation,which is also considered a good example for applying the mutual recognition rule among different countries.Nonetheless,the rule of mutual recognition between EU members is narrowly applied,and mainly used in technical regulations or conformity assessment procedures.Thirdly,the rule of equivalence requires regulators to acknowledge the effects of standards and regulations from foreign legislative system equals to the standards and regulations from which jurisdiction the regulators are located,or at least the regulator should consider the foreign standards and regulations legally “adequate” to be recognized.From that point of view,mutual recognition is essentially equaling to equivalence,for the regulatory policy objectives of both rules are the same or similar,so that some regulation in different regulatory jurisdiction are regarded as equivalent.Unlike the consensus underlying the mutual recognition,the equivalence is a unilateral decision.The equivalent requirements in international trade agreements are mainly applicable to areas such as TBT,SPS and service trade.Lastly,the harmonization of standards depends on the development of international standards,and the application of equivalence and mutual recognition depends on the trust between different regulatory systems.which means harmonization of standards,equivalence and mutual recognition are linked to each other despite differences and work together to bridge regulatory divergence and promote regulatory cooperation.Chapter Ⅲ discusses the existing procedural rules of regulatory cooperation in international trade agreements.The procedural rules of international regulatory cooperation are horizontally applicable to all trade sectors,and are embodied in the aforementioned preferential trade agreements led by the European Union and the United States.First of all,the source of procedural rules is considered as "Good Regulatory Practices",which derived primarily from the domestic administrative law of developed countries such as the United States,as well as promoted by APEC and OECD on the topic of Regulatory Reform.Eventually,it was introduced into international trade agreements to form four procedural elements.Firstly,requirements of transparency and public consultation.In addition to covering more detailed transparency requirements than previous trade agreement rules,the procedural rules also provide the opportunity for any interested person to submit to any regulatory authority of the Party written suggestions for the issuance,modification,or repeal of a regulation.It is similar to the “notice and comment” requirement from the administration procedural law of the United States.Secondly,regulatory impact analysis in the rule-making process.Regulatory Regulators are required to evaluate the costs and benefits of proposed measures taking the risky factors into account on the basis of science and evidence,then make sure the regulation being scientific and rational.Thirdly,retrospective reviews.During the enforcement process of the regulatory rules and measures,the ex post procedures will adopt or maintain mechanisms to conduct retrospective reviews of its regulations in order to determine whether modification or repeal is appropriate.Fourthly,Internal Consultation,Coordination,and Review.The rule requires coordination among domestic regulators to avoid the regulatory cost caused by regulatory divergence.Finally,the procedural rules of regulatory cooperation are also requiring coordination among domestic regulators.Although the procedural rules cannot directly achieve the coherence or consistency of regulation like the substantive rules,the governments can improve their regulatory quality by sharing the "good regulatory practices",and taking the international trade interests into account during decision making procedures,in order to achieve regulatory coherence or convergence to a certain extent.Chapter Ⅳ discusses the existing enforcement rules in international trade agreements.By combing the model clauses among international trade treaties,it clarifies the key elements that enables the regulatory cooperation rules of international trade agreements implement effectively.For the avoidance of confusion,the enforcement rules that being discussed in this chapter are not uniquely stipulated by international regulatory cooperation rules,but also commonly applied in varies of context relating to other trade rules.First of all,the application of regulatory cooperation rules is based on the determination of the scope of effectiveness.Generally,the horizontally applicable regulatory cooperation chapters in international trade agreements are set up as filter clauses to defining the scope of the covered regulatory measures,the areas where the rules apply.Then,the establishment of regulatory cooperation committee is an important part of the regulatory cooperation rules in international trade agreements.Starting from the TBT agreement and SPS agreement,the TBT committee and the SPS committee have made great achievements in promoting regulatory cooperation in their own domains.The regulatory cooperation bodies of US-EU,Australia-New Zealand,ASEAN and Mercosur have provided an empirical basis for the draft of rule.Naturally,the soft cooperation mechanism embedded in international trade agreements has also become an important auxiliary factor for the effective implementation of rules.Thirdly,the dispute settlement mechanism guarantees not only the binding force of rules,but also its effective implementation,which renders the dispute settlement mechanism the core element of the enforcement rules.Although most of the regulatory cooperation disputes in preferential trade agreements are not applicable to dispute settlement mechanisms,but soft mechanisms such as consultations and special trade concerns(STCs)could effectively prevent and resolve disputes.Last but not the least,some international trade agreements also cover provisions like “cooperation and information exchange”,“notification of implementation”,to ensure the effective implementation of regulatory cooperation rules.On the basis of the status quo of the regulatory cooperation rules in international trade agreements,chapter V makes a pre-analysis of the future trend and negotiation approach of them.For starters,this chapter discusses the necessity of negotiation systematic rules of regulatory cooperation in international trade agreements.With the characteristics of comprehensiveness and soft law,the regulatory cooperation rules may,to some extent,revitalizing multilateral governance of the World Trade Organization and becoming the optional path of new trade negotiations such as digital trade.This chapter then analyzes the development trend of regulatory cooperation rules in international trade agreements,and believes that the regulatory cooperation rules led by the Europe Union and the United States have experienced the conversion of the commitment model from “negative integration” to “positive integration”.Additionally,the existing regulatory cooperation rules are flexible and open,which not only improves the participants of regulatory cooperation to private stakeholders,but also reserves space for negotiation in the future regulatory issues.Although it is gradually forming a rule paradigm dominated by the Europe Union and the United States,the regulatory cooperation rules in international trade agreements still need to face the test of multiple variability,such as the balance between regulatory autonomy and regulatory cooperation,the restriction from foreign interests against regulatory capabilities,the concerns of regulatory agencies on regulatory cooperation,and the resistance of interest groups.Finally,this chapter discusses the feasible path for the negotiation of regulatory cooperation rules.One is the choice of negotiation path.Multilateral trade agreements can expand the effect of regulatory cooperation in preferential trade agreements and avoid the multiple parallel discussions between trade partners,which makes the negotiation on regulatory cooperation rules the optimal choice.However,in consideration of the unevenness of current regulatory capabilities among various countries and their concerns about regulatory cooperation,it may be wise to take plurilateral trade negotiations as a transitional method,and gradually incorporate regulatory cooperation into multilateral trade negotiations.The second is about the application of dispute settlement mechanisms.It is recommended to apply the dispute settlement mechanism to the specified requirements such as transparency,harmonization of standards,equivalence and mutual recognition.The “soft law” model should be adopted to meet domestic regulatory procedural requirements,mainly through technical assistance and consultation.The third is the choice of the focus of negotiations.For starters,the key point of negotiation should focus on substantive rules matters,preferably mutual recognition,harmonization of standards and equivalence,and gradually expand to the scope of application.However,since the substantive rules relate to horizontal form of delegation between regulatory bodies and is based on mutual trust among the participants,the procedural rules can serve as a basis for the realization of the substantive rules and promoting the domestic regulatory quality so that to help the negotiation on substantive rules matters.Chapter Ⅵ responds to the query of “how to response to the regulatory cooperation rules in international trade agreements from China’s perspective?” This chapter discusses three issues,namely,the necessity of China’s participation in the regulatory cooperation negotiations,the similarities and differences between China’s current practices and the regulatory cooperation rules dominated by the US and EU,and how China will respond to the challenges brought by the new paradigm of global governance.Firstly,China needs international regulatory cooperation from the two perspectives of optimizing the business environment internally and maintaining trade and investment interests externally.Secondly,this chapter makes a comparison between China’s free trade agreements and domestic legislation,in order to clarify the differences between the regulatory cooperation rules in international trade agreement and China’s practices.Although China has not included a specific chapter on regulatory cooperation in free trade agreements,it has actively participated in the discussion of SPS and TBT-related regulatory issues at the international level,and has gradually incorporated procedural requirements such as “good regulatory practices” in its domestic regulation.Thirdly,the differences between China’s current practices and regulatory cooperation rules in international trade agreements are mainly reflected in three aspects.For one is that the government departments or regulatory bodies are not required to Identifying and labelling the regulations significantly affecting international trade and investment.For another is the rules of regulatory impact assessments which introduced in major administrative decisions are not very strict in detail.The third aspect is that China currently rarely considers the interests of foreign traders or investors in public participation of rulemaking or decision-making.Fourthly,in order to cope with the challenge raised by the regulatory cooperation dominant by the US and EU,China should consider promoting domestic regulatory reforms,and on the basis of improving the above issues,actively participate in the legislative activities of international regulatory cooperation to avoid the lack of a voice and ultimately be subject to others.Last but not least,China should consider utilizing the regulatory cooperation rules as tools to participate in global governance and negotiations of new trade issues.