Improving Regulatory Relations in Multi-Level Governance: Principles and Mechanisms
IMPROVING REGULATORY RELATIONS IN MULTI-LEVEL GOVERNANCE: PRINCIPLES AND MECHANISMS
G. Bruce Doern
Chancellor’s Professor of Public Policy
School of Public Policy and Administration
Carleton University, Ottawa
and
Politics Department
University of Exeter
A Paper for Presentation to the Organization for Economic Cooperation
and Development (OECD) Expert Meeting on Regulatory Cooperation Between Levels of Governments, Paris, June 30-July 1, 2003.
1
CONTENTS
Page
INTRODUCTION 3
DEFINING REGULATION 4
THE SOURCES OF NEW AND EVOLVING LEVELS
OF REGULATORY GOVERNANCE 7
$Unitary states;
$Federations;
$Regional multi-country governance;
$International relations and globalization
$Interactions among core regulatory regimes
- Regime I, the sectoral regulatory regime;
- Regime II, the horizontal framework regulatory regime;
- Regime III, the overall governmental executive regime
for making and managing regulation across
the government; and
- Regime IV, the international regime.
REFORM IN MULTI-LEVEL REGULATION:
PRINCIPLES AND MECHANISMS 15
Principles:
$harmonization;
$mutual recognition,
$uniformity or tacit cooperation; and
$competitive regulation and best practice bench-marking.
Mechanisms:
$integration and capacity-building incentives to conform;
$memoranda of understanding;
$joint formal agreements or contracts;
$voluntary codes;
$private action by citizens to trigger enforcement or compliance
CONCLUSIONS 26
References 29
INTRODUCTION
As a part of the broader overall OECD work on Governance Issues in Multi-Level Governments, the purpose of this paper is to provide a framework of principles and mechanisms regarding improved regulatory relations in multi-level countries and jurisdictions (OECD, 1994; 1997; 2002). It develops and examines such a framework by drawing on the comparative experience of multi-level countries/jurisdictions and on relevant academic literature on regulation and governance. Where appropriate, it also very briefly provides illustrative examples from several countries of regulatory developments of these kinds.
While the framework of issues and concepts set out in the paper is a considered one, there are invariably some key limitations to the analysis. The brevity of the paper means that only basic themes can be developed in a basic stock-taking manner. The range of OECD country experiences is vast and complex and only some of these can be sampled in a very illustrative rather than definitive way. The author’s research focus on Canada, the U.K. and U.S. regulatory systems will undoubtedly be evident in some ways. And, it must also be noted that regulation in the different illustrative policy fields also have unique features which do not always translate to regulatory challenges in other policy fields.
The title of the paper refers to ways of improving multi-level regulatory governance. In many ways, the principles and mechanisms canvassed in this paper can help improve such relations. However, it must be stressed that what constitutes improved (or harmed) multi-level regulatory governance is itself highly contested. Some of the contested aspects of these principles and mechanisms for improvement also emerge in the analysis.
The paper is organized into three sections. The first section deals briefly with definitional issues about regulation as a policy instrument and governance activity. As this section shows, definitional issues alone contribute to the problem of “levels” of regulatory governance. The second section briefly traces the macro ways in which new or evolving levels of regulatory governance are emerging in the context of: unitary states; federations; complex regional systems of governance such as the EU; international relations and globalization; and complex regimes of regulation or sets of regulators within countries. The third section examines reform principles and mechanisms for the improvement of multi-level regulatory governance, and links these briefly to examples drawn from several different regulatory policy fields. Conclusions then follow.
DEFINING REGULATION:
While the overall focus of the paper is on regulatory relations in multi-level governance contexts we need to deal from the outset with the challenges of: a) defining regulation (itself a part of the “levels” problem); and b) setting out the key elements of regulation. From these definitions some major informational problems arise which also affect the ability of governments to assess regulatory relations and impacts of any kind, including impacts on multi-level governance.
Regulations are rules of behaviour backed-up by the sanctions of the state (Doern, Hill, Prince and Schultz, 1999). But such rules can take many forms including:
-constitutional or quasi-constitutional rules;
-statutes and laws;
-delegated legislation or "the regs"
-guidelines;
-standards and codes;
As one moves across these modes and levels of rulemaking, the extent and nature of the sanctions by the state (from strong to virtually non-existent) is wide and of course the range is itself fought over by stakeholder interests, NGOs, governments and citizens (Baldwin and Cave, 1999). In this paper, it is necessary to err on the side of breadth in defining regulation largely because political and legal reality across countries requires such a multi-level approach.
Though the paper must err on the side of breadth, it is important to realize that a logical and eventually empirical conundrum arises. The wider regulation is defined to be, the more it becomes equated with government and governance as a whole. But at some point governance is not just regulation and the state is more than just a regulatory state. It also involves taxation, spending, persuasion and other ways of trying to ensure that diverse policy goals and values are implemented in democratic life (Palast, Oppenheim and MacGregor, 2003; Doern, 1999).
The two main elements of regulation also need to be kept in mind: regulation making; and compliance and enforcement. To be credible, regulations and rules must be made in a legitimate fashion and enforced or carried out in an effective, efficient and fair manner.
Regulation making processes are the processes through which regulations are promulgated in the first place and also amended. Firms and other stakeholders have concerns about how speedy and effective such processes are. But such processes immediately raise concerns and values about: who the regulators are (e.g. arms-length commissions; ministers, a “statutory person”); which interests are represented in a regulatory body; and the accountability and transparency of such regulatory agencies and their processes (Heritier and Thatcher, 2002).
The second element of any regulatory system is the compliance and enforcement process. This also involves issues regarding how stringent such enforcement is and how one assembles national and international data on stringency. The compliance and enforcement process includes: effective and fair actions regarding the education of persons affected by the rules in question; the provision of incentives to comply; and the actual application of penalties and sanctions, based on some system of inspection by regulators or self-policing and auditing (Sparrow, 2000). Compliance also includes the processes for handling license applications and renewals (or equivalent activity) and the approval of products subject to regulation. It also covers the handling of consumer and citizen complaints and appeals and the development of regulatory service standards. (Grabosky, 1995).
Regulation making and regulatory compliance and enforcement have both been greatly influenced in the last decade or more by efforts to "reinvent" government, which, in regulatory realms, has often meant the greater use of softer compliance activities and approaches and economic or incentive-based regulation (such as tradeable pollution permits, pollution taxes, and the greater use of voluntary codes (Hood, Scott, James and Jones, 1999; Webb, 2003). Both elements of regulation have also been influenced by debates about the role of science-based regulation and “sound science”, the basic norm in international trade agreements, compared to principles such as the precautionary principle emanating from international and national environmental agreements and protocols (Doern and Reed, 2000; Hood, Rothstein and Baldwin, 2001; United Nations Environmental Program, 2000).
Because of the need for breadth in defining regulation and because of the need to deal with both the elements of regulation sketched above, there are difficult empirical problems in assessing regulation and in comparing regulatory outputs and effects among countries and among levels of government within countries. Thus a central starting point is to stress that the more that rule making has expanded and takes ever wider forms such as in statutes, delegated legislation, guidelines, codes and standards, the harder it is to assess because the information is less and less available and/or reliable. What is clear, however, is that there are more and more levels of regulatory governance and very dense and often entangled webs of accountability (Duane, 2002; Francis, 1998; Doern and Gattinger, 2003).
THE SOURCES OF NEW AND EVOLVING LEVELS
OF REGULATORY GOVERNANCE
There is no denying the fact that new and evolving levels of regulatory governance have occurred and that they make regulatory and other governing relations more complex for governments and confusing and even bewildering for citizens and voters (OECD, 1997; Heritier and Thatcher, 2002). These changes can be seen in the obvious key political-institutional contexts of comparative government and international relations: unitary states; federations; regional multi-country governance; and globalization and international relations (Hague, Harrop and Breslin, 2001; Peters, 1998). They can also be seen through an understanding of the existence and key characteristics of regulatory regimes. Each of these are highlighted briefly below (see Table 1) in part to show the different starting points and lines of trajectory for the existence of levels of regulatory governance and for their current shape. Not all countries see levels in the same way because the inherent sources of them vary across countries. Because of this, countries will also have different views about the nature of, and priority to be given to, such principles as harmonization, mutual recognition as well as the mechanisms explored in the next section of the paper.
Unitary states typically imply one dominant level of governing and regulatory authority but such states have always had to deal with other levels in a regional-spatial context (where extensive delegation occurs) or at the local government level where democratic demands lead to localized mandates for rule making. Most unitary states have also had other kinds of levels of regulation in that they ceded important self-regulatory roles to dominant professions such as law and medicine where issues regarding the regulation of
Table 1: A Summary View of Sources of Multiple “Levels”
in Regulatory Governance
Unitary States
- The National Government
- Regional Entities
- Local Government
- Self-Regulating Entities (e.g. the Professions)
- Independent Regulatory Agencies and Commissions
Federations
- The Federal/National Government
- State/Provincial/Lander Governments
- Regional Entities
- Local Government
- Self- Regulating Entities
- Independent Regulatory Agencies and Commissions
Regional Multi-Country Governance (e.g. EU; NAFTA)
- Central or “Community” Competences/Authorities (e.g. Majority Voting)
- National Competences
a) Unitary (see above)
b) Federation (see above)
- Special Cross - National Regions and Bodies
- Rules about Rules and Dispute-Settlement
International Relations and Globalization
- Levels of regulation due to need to coordinate a given
nation’s regulators with those of its immediate bordering neighbours
(e.g. U.S versus Canadian energy regulators)
- Levels of regulation due to need to coordinate with International bodies
(e.g. international labour standards and ILO)
Regimes of Regulation Which Interact and Collide Within Countries
- Regime I: The Sectoral Regulatory Regime
- Regime II: The Horizontal Framework Regulatory Regime
- Regime III: The Overall Governmental executive regime for managing
Regulation Across and Within the Government
- Regime IV: The International Regulatory Regime
quality of service were and are central (Dewees, 1983). Independent or arms-length regulatory agencies and commissions are also a key source of multi-level regulation (Gilardi; 2002; Thatcher, 2002, Doern, Hill, Prince and Schultz, 1999).
Formal federations are a system of governance where levels are quite literally
“constitutionialized” in some fundamental way (Burgess and Gagnon, 1993; Deighton-Smith, 2001; Doern and MacDonald, 1999). Sovereignty is divided and lists of powers are assigned between the two levels of government. Some areas of governing and regulation may be listed as concurrent powers with some kind of doctrine of paramountcy applying when conflicts cannot be resolved. New problems regarding levels of regulation can occur when new areas of policy emerge (e.g. the environment or the Internet) which were not envisaged by the initial designers of federations and federal constitutions. The notion of levels of regulation in federations can also be a function of the inherent number of constituent units (e.g. 50 U.S. states versus 10 Canadian provinces). In addition of course, federations, like unitary states, have further regulatory levels which emerge from other sub-regional and local and city governments and democratic and economic pressures.
Regional multi-country governance is both an old and a new form of governance but the most compelling forms of regulatory levels emerge from complex experiments such as the
European Union and regional free trade areas such as the North American Free Trade Agreement (NAFTA). While aspirations to form a federal state may be a part of these systems, they are by definition systems having to fashion their own sense of levels, competences, and forms of rule-making and regulation (Heritier and Thather, 2002; Burgess, 2000; Kanishka, 2001). Here again, the inherent number of constituent countries is a further generator of levels of regulation as are different traditions and systems of law such as between common law traditions versus more codified legal traditions (Baldwin, 1995; Ogus, 1994).
Finally, it is important to mention here the dynamics of the new regionalism and of the existence of so-called regional and local innovation systems (Storper, 1997). This refers to conceptions of innovation and a knowledge-based economy where innovation is seen as being a “bottom-up” and spatial dynamic of firms, communities and governments which function through clusters and networks. Such regions and spatial areas often cross traditional political borders and jurisdictions and require new kinds and levels of rule making or the need to get rid of old rules.
International Relations, globalization and related forms of international governance are a further generator of, and locus for, new levels of regulation making, deregulation, and regulatory compliance. At the global level, there is no world government as such. But there clearly are international institutions of both an overarching kind such as the UN and the WTO, and also numerous sectoral or policy field entities, attempting through their member states and through the global pressure of business, NGOs and civil society, to create new norms and rules, eliminate others, or secure compliance through greater mixtures of incentives and enforcement (Held, McGrew, Goldblatt and Perraton, 1999; Braithwaite and Drahos, 2000; Mattli, 2001). The need for speedier and more transparent systems of dispute settlement has also led to more “rules about rules”.
These brief paragraphs on the first four sources or realms of regulatory levels cannot possibly do justice to the complexity and diversity of each, or to the nature of their interactions (Teague, 2002). But they do indicate why political and economic actors are searching for new or revised principles and mechanisms to bring some kind of order and greater clarity to the resulting regulatory maize.
One ordering device has been simply to expand the notions (and hence levels) of what regulation is. Indeed, increasingly in this paper, one is forced to speak of rule-making in some more generic sense. As indicated in our discussion of definitions there are myriad forms or modes of rule-making through constitutions, statute law, delegated legislation (the “regs”),
guidelines; codes and standards.
Finally, a fifth source of levels of regulation is found in the existence of regimes of regulation interacting within countries and across borders. A regulatory regime is a complex interacting set of organizations, statutes, ideas, interests, and processes engaged in rule making and implementation. By definition a regime consists of sets of regulatory bodies. The first test of there being larger regimes of regulation is that there is some inner core of such features and characteristics that warrant such a designation for analytical and practical purposes. Building on and adapting earlier comparative work (Doern, 1998; Doern and Wilks, 1998; Doern, Hill, Prince and Schultz, 1999) the regulatory system of a given country or jurisdiction can be portrayed as an interplay among four regimes:
$Regime I Regime I, the sectoral regulatory regime;
$Regime II, the horizontal framework regulatory regime;
$Regime III, the overall governmental executive regime for making and managing regulation across the government; and
$Regime IV, the international regime.
The concept of regimes is a useful one (Wilson, 2000; Howlett, 2000; Harrison, 1996; Hancher and Moran, 1989). It helps us characterize more complex sets of regulators and their rules, rule making and compliance and enforcement processes. National government agencies have done this frequently such as through reports which focus on areas such as health and safety regulation or deregulation in areas of heretofore monopoly and economic regulation (Auditor General of Canada, 2000).
Regime I consists of sectoral regulators which historically have been characterized as monopoly or public utility sectors in which the regulator regulates a monopoly supplier or quasi-monopoly set of suppliers. The regime is seen as covering separate vertical sectors of the economy such as energy, broadcasting, and transportation. At its core, Regime I regulates entry to, and exit from, the industry and has preferred to regulate broadly through some form of profit and/or "rate of return" regulation. Regulation is often developed as a substitute for competition which normal markets would otherwise supply.
Regime II captures a cluster of regulators whose core inner logic is centred on the fact that the broad intent of rule-making is to fashion horizontal or framework-oriented regulations. In short, these rules are not intended to discriminate among sectors of the economy or society but rather, in principle, to treat all sectors equally. In other words the rules are not intended to create a whole host of sectorally specific rules precisely because, if such was the result, the economy would be pock-marked with regulation-induced internal barriers.