In the wake of President Trump’s antagonistic behavior at the Group of 7 Summit this past weekend and his Twitter tirade against Canadian Prime Minister Trudeau, you might not have noticed that just a week ago, the U.S. and Canada formally reaffirmed a commitment to work together to eliminate unnecessary differences between the two countries’ regulatory frameworks.
The Canada-United States Regulatory Cooperation Council (RCC) aims to reduce regulatory barriers to trade while maintaining the benefits of health, safety, and environmental policies; it remains a valuable, high-level forum for dialogue and a recognition of the importance of trade with one of our closest trading partners.
{mosads}The RCC is co-chaired by the administrator of the Office of Information and Regulatory Affairs (OIRA) in the U.S. and the secretary of the Treasury Board in Canada. It meets at least once a year and brings together senior officials from regulatory departments and agencies to identify challenges to regulatory cooperation at the federal level and present opportunities for overcoming them.
The new agreement also commits to holding stakeholder forums to solicit ideas from a broader audience for improving regulatory outcomes.
This is important, because unnecessary regulatory differences between countries can result in persistent barriers to trade that are less obvious than traditional barriers, like tariffs. While recognizing that countries may take different regulatory actions according to their national laws and sovereign policies, the agreement encourages the two countries to consider others’ policies when developing or modifying regulations, with a goal of fostering alignment when appropriate and feasible.
The RCC commits to prioritizing job creation, economic growth and innovation while maintaining high levels of public protections and continued development of good regulatory practices for effective cooperation. Regulatory cooperation can improve health and safety outcomes for the public — increasing benefits while reducing costs. For example, U.S. and Canadian transportation regulators worked together to develop uniform disability parking permit standards, thereby allowing citizens to travel more freely across borders.
There are real benefits to reducing barriers to trade, and regulatory cooperation is an important policy component. Ironically, this policy tool is usually turned to after the “low hanging fruit” has been plucked — in other words, after traditional barriers to trade, like tariffs, have been removed.
By cooperating on regulatory practices after they have addressed the more obvious hurdles to trade, governments have allowed markets to better drive economic gains in the form of lower production costs, lower prices for imported products, and increased investment flows between countries. Studies suggest that improved regulatory coherence between the U.S. and European Union, for example, could result in a 0.3 percent gain in U.S. GDP — no small figure considering that absence of cooperation left about $14 billion dollars on the table in 2017.
Trump’s decision earlier this month to impose new tariffs on steel and aluminum from our trading partners not only caused strife at the G-7 Summit, but threatens to harm the U.S. economy. Economists estimate the tariffs will cost 16 jobs for every one steel or aluminum manufacturing job gained. Over two-thirds of these losses are likely to affect low-skilled workers. The combination of tariffs, quotas, and retaliation by U.S. trade partners could reduce U.S. GDP by 0.2 percent annually. This amounts to roughly 400,000 jobs lost on net.
The Department of Commerce threatens to add to these burdens with a new investigation under Section 232 of the 1962 Trade Expansion Act into restricting automobile imports to the U.S. because they “threaten to impair the national security.”
Given these developments and the president’s Twitter outbursts after the G-7 Summit, the RCC agreement to cooperate on regulation may amount to one step forward, 10 steps backward. Nevertheless, highlighting the value of engaging in regulatory cooperation with trade partners can illustrate why U.S. citizens benefit from fewer barriers to trade.
Susan E. Dudley is director and Daniel R. Pérez is a policy analyst with the George Washington University Regulatory Studies Center.