Why governments must work together

Globalisation, increasing international co-operation, economic and monetary unions, social conventions and a variety of other formal and informal relations have meant growing interdependence between countries, and particularly between members of the OECD. That has a substantial impact on how governments exercise regulatory powers, with less freedom of action -- and new responsibilities (1).

A vast array of agreements and treaties influence the regulatory systems of national governments. They range from the supranational (the European Community, for example, has adopted no fewer than 22,000 regulations), through international multilateral agreements (the North American Free Trade Agreement, the GATT (not least its Technical Barriers to Trade agreement), Decisions of the OECD Council), bilateral treaties and co-operative agreements (such as the Australia-New Zealand Closer Economic Relations Agreement), national-local arrangements to share responsibility for making and implementing rules (in most OECD countries, both federal and unitary), to regulatory agreements between sub-national governments (negotiations among Canadian provinces to reduce provincial trade barriers).

The rapidity and scope of the move toward regulatory interdependence is opening new opportunities for government action and closing others, reshaping institutional roles and relationships, and transferring power from national political institutions and traditional bureaucracies to emerging intergovernmental networks. Effects on the roles of government, the legislatures and the judiciary in setting and overseeing laws and policy are only beginning to be perceived.

Intergovernmental co-operation though often described as reducing discrepancies through the harmonising of regulation -- has usually amplified regulatory complexity by introducing new forms of decision-making and involving a range of individuals, institutions and processes that are outside the traditional scope of government, yet whose actions must nonetheless be dependable, consistent and co-ordinated.

Interdependence affects governments not only at all levels of national government, but also locally, regionally, and supra-nationally. An accurate view of regulatory interdependence has to see it as an intricate web of vertical and horizontal links between all these levels, often stretching from the lowest to the highest. Tasks are scattered throughout this web. Implementation of regulations, for instance, may be carried out by parts of government far removed from where decisions were made, as when environmental-health inspectors employed by local authorities in the United Kingdom advise refrigerator repairmen how to handle ozone-depleting chemicals under the terms of the Montreal Protocol. 'Regulatory diversification' is a better term for these developments than such popular terms as 'internationalisation' or 'decentralisation'.

Regulatory co-operation, too, tends substantially to increase the amount and detail of regulation. As member states of the EC often note with dismay, issues that seem simple at home expand to pages of text as negotiators strive to eliminate ambiguities and ensure consistency. At times, the effect of governmental co-operation seems to be multiplication of regulation rather than solving of problems.

This complexity is made even less manageable by relentless pressure for change as economic, environmental and social issues become increasingly intertwined. Markets have led interdependence with the growth of global trade and capital movements; unless governments resort to protectionist measures, they have no choice but to follow. There is also a growing recognition of environmental and social externalities, exemplified recently by charges of 'social dumping'. Linkages among policies means that governments are not controlling change; rather, they are attempting to cope with it.

Making this sprawling, multigovernmental regulatory system work is a management challenge of the first magnitude. As in any interdependent system, the likelihood of failure increases with complexity: policy success will be constrained by the weakest link in this web of relationships.

But is this new regulatory environment, as some public-sector managers believe, so uncertain, involving so many different individuals and institutions, and changing so rapidly that it defies any kind of strategic planning? Indeed, are governments losing control of regulation? This perception would be quite dangerous politically if it triggered a retreat from the economic necessity of interdependence and led to a reduced capacity to deal with the urgent common issues in the OECD area.

Governments do not have to lose control, but deep-seated reform is necessary if they are to use these intergovernmental processes profitably and within the constraints of their political legitimacy and public acceptance. The old style of government in OECD countries -- hierarchical, vertical, standardised, lodged firmly in the structure of the national state -- is suited for stable conditions and well-defined problems, but it is not appropriate for a multi-layered regulatory system characterised by complexity, diversity and innovation.

NETWORKS AND PARTNERSHIPS

One of the most profound changes in the making of regulation is the emergence of decentralised networks among bodies that formulate and implement regulation. One example is the group of national regulators from 144 countries who gather in Rome to make recommendations on food standards under the auspices of the FAO-WHO Codex Alimentarius Commission. Similarly, in areas ranging from capital movements and training of pilots to chemical testing and workplace standards, thousands of intergovernmental networks of organisations, administrators and experts analyse, discuss, negotiate, or even make regulatory policies.

Such intergovernmental networks provide flexible and specialised frameworks within which multiple governments can interact as partners (2). But national administrators find them very difficult to manage, since they are often informal, responsibilities are diffuse and shared among governments, issues can be technical, and information on what they are doing is not consistent or easily available. Frequently, it is not even clear who is involved in a network. Networks can thus escape existing national mechanisms for policy oversight and co-ordination, quality control, and consultation.

Yet government effectiveness in OECD countries today depends less on how well single organisations function, and more on how well these networks of people and organisations function. Styles of government are changing -- slowly in response. Networks are being institutionalised, as in the EC Standing Committee for Administrative Co-operation which has created co-operative bodies between national authorities in areas such as abolition of tax frontiers in the European internal market. Partnerships between governments -- such as an agreement between Sweden, Canada, and Australia to share the burdens of testing of new drugs are supplementing decision-making in national administrations.

Co-ordination among decision-makers has emerged as a major issue for managers: 'top-down' central coordinators and lengthy co-ordination processes may have to be replaced by 'bottom-up' networks that are more tightly knit. The current efforts of pharmaceutical regulators and industries from the United States, Japan and the EC to arrive at consensus on requirements for drug testing and registration is a case in point. This informal and open process has made more progress toward improving drug standards and reducing testing costs than has been achieved by the unwieldy national negotiating forum in the WHO.

Perhaps the biggest obstacle to co-operation is lack of trust. In spite of increasing interdependence, governments find it difficult to trust one another to carry out their respective duties in regulatory agreements. To some extent, this suspicion is realistic: many international agreements have simply not been respected. But it is also inherent in the intergovernmental process. Differences in administrative cultures, legal traditions (such as treatment of liability), capacities, values and policy priorities undermine co-operative relationships.

Trust is required not only in administrations, but also among politicians and the general public. Public acceptance of regulatory interdependence rests ultimately on perceptions of the reliability and compatibility of the 'other' governments involved.

Trust between governments must be built horizontally and vertically, using tools such as common professional norms, clear agreements on duties and roles, communication and growing familiarity. Improved transparency is essential. Governments and intergovernmental organisations must actively generate and disseminate information. Information technologies have not, in general, been used very effectively in informing governments about one another, but they do show considerable promise. Trust can also be buttressed by more effective procedures for resolving disputes. Much can be done to help governments gain experience in making such procedures work better.

Governments may therefore have to devote more time to familiarising themselves with one another's administrative styles, to better communication and public openness, and processes that control the quality of administration. A step-by-step approach, in the coordination of rule-making, may be preferable to immediate harmonisation. The OECD itself offers many examples -- such as its 'Guidelines for the Testing of Chemicals' Programme -- of how trust can be built and sustained between countries as a foundation for regulatory co-operation.

ACCOUNTABILITY AND SOVEREIGNTY

Concerns about accountability and national sovereignty lie behind many criticisms of the multi-layered regulatory system. How can governments work effectively together while maintaining the controls on law-making necessary for a democratic system? How can agreements between governments be held accountable to citizens? This is made more difficult by such traditions of intergovernmental processes as closed negotiations, limited participation and lack of public information on consequences and options.

Public concerns about sovereignty tend to out-pace government response, and will continue to heighten. Even so, there may not be complete realisation of the extent to which governments have already effectively surrendered legal authority to intergovernmental regulatory processes -- that is, they have become 'regulation-takers' rather than 'regulation-makers'(3).

Information can be used to strengthen accountability. Pertinent analysis, for example, can be used to open up intergovernmental decisions and improve the quality of public debate on important issues. The EC and the GATT are using benefit-cost analysis to clarify to interested groups the consequences of regulatory decisions. But communication is complicated because perceptions of the problem to be solved by regulation can vary widely between tiers of government. This is particularly true when the benefits and costs of regulatory actions are distributed asymmetrically, as is often the case in trade agreements on specific products. In these cases, the benefits of sustaining the broader co-operative system must also be presented to the public.

Public consultation and participation are not well-developed in processes of regulatory co-operation, but demands from non-governmental parties for access are intensifying. Environmental, labour and consumer groups are making appearances in fora such as the GATT, NAFTA, FAO-WHO, and the OECD.

National governments can do much to strengthen and diversify the participation of interested groups; regional and local governments, for example, may be under-represented in international regulatory fora, given the importance of their roles in implementation. Yet care must be taken to ensure that a multitude of new voices do not lead to chaos and, equally, to ensure that participation is not captured by narrow interests who may be tempted to use intergovernmental fora to suppress competition and injure wider public interests.

Careful thinking is required on the relationship between intergovernmental co-operation and the sovereignty of citizens in a democracy. A loss of democratic control in a national context may be inevitable as the monopoly on law-making held by national legislatures and administrations weakens, but compensating increases in accountability may be achieved through the design of networks, markets and international institutions. As the GATT process shows, international agreements can, in fact, stimulate useful national debates on fundamental issues of public policy. Moreover, regulatory competition allows consumers to choose between alternative regulatory regimes, and hence can supplement 'national sovereignty' with 'consumer sovereignty'.

An interdependent world requires new forms of governance. Indeed, the transition to co-operative government is already well-advanced. Sharing regulatory authority with other governments does not have to be a threat to national authorities or to the democratic values they preserve. On the contrary, the current search by national governments for new and more effective forms of regulatory co-operation to solve urgent common problems is fuelled by a reliable propellant -- self-interest.

l. Regulatory Co-operation for an Interdependent World. OECD Publications, Paris, forthcoming 1994.

2. Les Metcalfe, The Weakest Links: Building Organisational Networks for Multilevel Regulation, Paris, 1993, available free of charge from the OECD Public Management Service.

3. John Braithwaite, Prospects for Win-Win International Rapprochement of Regulation, 1993, available free of charge from the OECD Public Management Service.

Scott H. Jacobs is responsible for regulatory management and reform in the Public Management Service of the OECD.

Copyright Organisation for Economic Cooperation and Development Feb/Mar 1994
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