May 02, 2012

Executive Order Embraces International Regulatory Race to the Bottom as Official Administration Policy

On one level, President Obama’s Executive Order issued Tuesday, “Promoting International Regulatory Cooperation,” seems benign enough.  After all, who would be against international cooperation and a desire to “reduce, eliminate or prevent unnecessary differences in regulatory requirements”?  Moreover, the Order on its face does little more than set out priorities and procedures for enhancing international regulatory cooperation.

Unfortunately, this Order is a one-way regulatory ratchet that leads only to deregulatory changes in the United States that at best will provide no new protection to U.S. citizens or the environment.  The Order is motivated solely to eliminate “unnecessary” differences in regulatory requirements that “might impair the ability of American businesses to export and compete internationally.” 

The priority for regulators is clear. Scour our regulations and compare them to those of our trading partners—or better yet simply let the U.S. Chamber of Commerce lead you—to identify those areas of “unnecessary” differences.  What then?  Eliminate the differences by rewriting U.S. regulations to those of our trading partners, so many of whom have terrible worker safety and environmental policies (hint: China).   Nothing in the Order asks the agencies to conduct the hard negotiations or cooperation to change, let alone increase, the protections of our trading partners.  The clear expectation is that “unnecessary” differences will lead to the United States conforming our standards to those of the foreign regulators.   If “unnecessary” is read narrowly enough, the order could do little damage to our environmental and public health protections—but the pressures and signals in this Order all point toward an expansive witch hunt for “unnecessary” regulatory differences.   The Chamber of Commerce’s unusually zealous approval of this Order is not to be overlooked.

As with other Executive Orders on regulation, this continues the disturbing trend of advancing an anti-regulatory agenda by stripping decision-making authority from the agencies charged with implementing environmental, health, and safety statutes.  For example, the Executive Orders 12866 and 13563 each establish mechanisms for ceding significant authorities to the Office of Information and Regulatory Affairs (OIRA) within the White House Office of Management and Budget (OMB).    These Orders enable the few dozen economists at OIRA to team with regulated industries and demand that agencies weaken the safeguards they are developing in order to reduce costs for those regulated industries, leaving people and the environment inadequately protected.  Those agencies that resist risk having their rules blocked.  All of this takes place behind closed doors.

The new Executive Order on International Regulatory Cooperation reinforces OIRA and industry’s privileged position on regulatory decision-making, but it adds a truly distressing new twist:  It risks letting foreign governments have an undue deregulatory pressure on U.S. agencies.  Section 3(d) of the Order says:

To the extent permitted by law, and consistent with the principles and requirements of Executive Order 13563 and Executive Order 12866, each agency shall:


(d) for significant regulations that the agency identifies as having significant international impacts, consider, to the extent feasible, appropriate, and consistent with law, any regulatory approaches by a foreign government that the United States has agreed to consider under a regulatory cooperation council work plan.

So, not only are agencies obliged to consider proposals to weaken their rules from the notoriously anti-regulatory OIRA and affected industries, they must now also consider some such proposals from foreign governments as well (that the regulatory cooperation council will presumably weed out some of the more extreme ideas provides only so much comfort).  Because many U.S. trading partners have considerably weaker safeguards than the United States, invariably these alternative “regulatory approaches” would weaken proposed rules, making it easier for the companies in these foreign countries to introduce their dangerous products into U.S. markets.  In the future, the Consumer Product Safety Commission might have to entertain proposals from China on how best to regulate toxic lead contamination in toys, and perhaps the Environmental Protection Agency would have to entertain proposals from Canada on how to regulate products containing asbestos.  Even assuming the agencies rejected such ideas, the time and resources required to consider the plans would take away from actual work to protect the public, and it would provide industry with a new way to harass the agencies. These scenarios are not a win for democracy, and they’re certainly not a win for protecting public health, safety, or the environment.

In short, implementing the Order only allows the United States to race to the regulatory bottom.   

 A balanced Executive Order on international regulatory cooperation could have been positive both for improving regulatory efficiency and for strengthening protections for public health and the environment in a globalized economy.  It could, for example, highlight the need to work with our trade partners to lift their standards to protect our health and environment.   It could prioritize identifying and importing more protective standards into the United States or promoting the export of our higher standards. It could have asked agencies to identify areas where our trading partners’ failure to regulate threatens our public health and environment—and to work to change those differences.     In other words, such an Executive Order could have been a vehicle for the upward harmonization of environmental and public health standards around the world.  Unfortunately, this is an election year and that type of Executive Order is apparently “unnecessary”.

David Hunter, CPR Member Scholar; Associate Professor of Law, American University Washington College of Law. Bio.

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