Reasons for optimism - regulation
Given the tendency for regulation to increase remorselessly, especially in protectionist blocs, there seems at first glance to be little cause for optimism concerning its future. Regulation is used by some countries and trading blocs to raise non-tariff barriers to foreign imports. Where tariff barriers are not allowed under international agreements such as the WTO, use is sometimes made of regulation as the alternative. Goods are kept out because it is alleged they do not met the ‘safety’ standards required, or are produced with insufficient ‘consideration’ of the workers, the environment, or any animals engaged in their production.
One ground for optimism is that there is a distinct trend for protectionist blocs to be superseded by genuine free trade areas, in which countries agree to accept each other’s regulatory regimes, instead of trying to impose their own on everyone else. The largest one, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), formerly the Trans-Pacific Partnership (TPP), was already the world’s largest free trade area, even before the UK applied to join it, and with the US looking increasingly likely to join.
Two more grounds for optimism stem from the UK’s departure from the EU and its reacquired ability to make regulations via a different approach. The first is that EU practices the so-called “precautionary principle” of not allowing anything until it has been shown to be safe.
A more sensible approach is that of cost-benefit, which balances the possible risks of something against the gains it might bring. The problem with the precautionary approach is that nothing can be shown to be completely safe, even taking a bath or climbing upstairs. It represents a cost-cost approach by not taking into account the potential benefits. The results of these two approaches were illustrated by the development of vaccines against Covid-19. The UK took the risk of ordering vaccines that showed promise but had not completed testing, and it ordered many million doses in advance. The EU accused the UK of risk-taking, and opted for a more cautious safety-first approach. The outcome was that the UK was able to vaccinate more people more rapidly once the tests were completed than the EU could manage.
A second advantage now available to the UK is that it can opt for result-driven, rather than process-driven regulation. The latter gives instructions in detail on what must be done and how it must be done, and it is very much the EU approach, whereas the former sets out the results that must be achieved, and leaves it to ingenuity to come up with different and efficient ways of achieving those results.
We can increasingly expect the UK to join expanding free trade areas rather than protectionist blocs that try to favour their own producers at the expense of outside producers and their own consumers. We can expect, too, that the UK will give attention to cost-benefit analysis when it regulates, rather than following the precautionary principle. It is also likely that the UK will take advantage of its new-found freedom to practice result-driven, rather than process-driven regulation, enabling it to achieve the desired outcomes in ways that are sympathetic to business and industry, and therefore to economic growth.