State Regulatory Capacity and Administrative Law and Governance Under Globalization
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This essay addresses global regulatory cooperation, its governance, its power dynamics, and the role of administrative law in the context of two important new initiatives: the Trans Pacific Partnership (TPP) between the United States, Japan, and eight other developed and developing Pacific Rim countries; and the proposed Transatlantic Trade and Investment Partnership (TTIP) between the United States and the European Union. While Congress has granted Trade Promotion Authority (TPA) to President Obama for both agreements, their ultimate political viability is far from assured. These two “megaregional” regimes seek to achieve trade, investment, and commercial regulatory and related objectives through a single regional institution covering a major proportion of global economic activity. The TPP agreement has been signed by representatives of the parties but requires domestic approvals. Negotiations on TTIP are ongoing. While their ultimate fate is uncertain, they represent major innovations in an era of major changes in the global economic and geopolitical landscape and weakening multilateralism. These megaregional initiatives represent the latest chapter in the globalization of regulation, a topic neglected in American administrative law courses, casebooks, and texts. Jerry Mashaw has written a book on another hidden world of American administration and law—that of the nineteenth century. This essay seeks to help correct a similar neglect by examining the global character of the administrative constitution in the twenty-first. Much of Jerry’s work has addressed state capacity to deliver regulatory protections and economic security to citizens, as well as the contributions of managerial and decision-analytic approaches that constitute part of the internal law of administrative governance, as contrasted with exogenous requirements such as trial-type hearings, notice and comment rulemaking, and judicial review. Internally generated norms and methods of governance are especially important in the global administrative space, where regulatory bodies operate outside the system of domestic legislatures and courts and global equivalents to those institutions are lacking. As Mashaw observes, “[g]lobal administrative law almost necessarily imagines that there is a normative core of responsible and responsive administrative practice that can be identified and implemented without necessarily making administrative institutions accountable either to elected representatives or to courts having broad jurisdiction to review their decisions,” since, at “the global level, these political and legal constraints hardly exist.” This essay discusses how the developing body of global administrative law responds to the challenges of regulatory globalization in the specific context of TTIP and TPP, including the contributions of US innovations in internal administrative governance, such as regulatory impact analysis (RIA) and quantitative risk assessment. States seek continually to renew and strengthen their regulatory capacities in order to secure economic prosperity and protect their citizens against harm and insecurity. Under conditions of global integration, they cannot achieve these goals unilaterally. They must engage with other jurisdictions in order to promote global trade and investment and address transnational market failures. In order to enhance their ability to secure prosperity and protection for their citizens, states must surrender greater or lesser control over regulatory programs to other states through international trade and regulatory organizations, intergovernmental regulatory networks, or various bilateral arrangements. These global regulatory arrangements manifest in new form the iron law of regulatory agency: political principals can enhance their power and performance only by devolving more and more authority, regulatory technology, and discretion to agents. The history of administrative law represents a series of innovations to manage the progressively more serious agency costs that result. Global regulatory programs escalate agency costs and multiply the challenges for administrative law in keeping pace in ensuring accountable and responsive regulatory decisions. This challenge is complicated by the circumstance that regulatory authority is a species of power not only vis-`a-vis the regulated but also against competing regulatory jurisdictions. The globalization of regulation accordingly generates geopolitical rivalry. States that dominate regulatory governance of the global economy can use it to advance their economic, ideological, and strategic interests. International regulatory cooperation inevitably inherently involves rivalry and potential conflict. The current arrangements for global regulatory governance also pose serious equity issues. By and large, less powerful states must dance to the tunes of the more powerful. The kaleidoscopic array of global regulatory programs exhibits a systemic imbalance between prosperity and protection, serving the interests of well-organized economic actors and disregarding environmental, health, and social harms, as well as adverse distributional consequences generated by economic globalization. TTIP and TPP must be analyzed and evaluated through these positive and normative frameworks. Their primary aim is to liberalize trade and promote investment through a broad suite of measures: decreasing tariffs (to zero in the case of TPP); reducing very significant nontariff barriers created by domestic regulatory differences and impediments to trade in goods and services; liberalizing domestic regulation and administration, including by promoting transparency and anti-corruption; addressing structural barriers, including those created by government procurement policies, state-owned enterprises, and, potentially, state industrial policies; promoting development of global supply chains and e-commerce; coordinating competition law programs; and enhancing protection for investment and intellectual property. TTIP and TPP also contain measures to prevent erosion of environmental and labor standards as a result of enhanced economic integration. Equally important, TTIP and TPP provide innovative institutional arrangements for ongoing regulatory cooperation among the parties with a hub-and-spoke design comprising a central supervisory and coordinating body and task forces composed of domestic regulators in specific sectors. In their scope, ambition, and design, TTIP and TPP go significantly beyond previous regional trade-regulatory cooperation models such as NAFTA, Mercosur, and recent bilateral Free Trade Agreements (FTAs) initiated by the United States or the European Union; they accordingly justify the label “megaregional.” TTIP represents an effort by the European Union and the United States to compensate for their loss of preeminence in the World Trade Organization (WTO) and other multilateral trade and regulatory bodies by leveraging their combined market power to promote neoliberal economic regulatory policies against the challenge of China and other emerging economies. The aim is not only to stimulate transatlantic economic growth but also to generate regulatory standards and methods that achieve global currency, potentially marginalizing existing multilateral regulatory bodies in the process. Through TPP, the United States, in partnership with Japan and a group of OECD countries and fast-growing developing countries, seeks to stimulate the participants’ economic growth, promote its international economic policy agenda in the Asia-Pacific region, and counter the growing regional power of China, with the potential for using TPP as the foundation for an encompassing Pacific Free Trade Agreement that could include China. Both TTP and TTIP have attracted significant criticism and opposition in the European Union, the United States, and some other TPP countries as industry-dominated ventures that will afford unjustified protections to intellectual property rights in foreign investment; harm labor, consumers, health, and the environment; and undermine the authority of domestic political and legal institutions. This essay first addresses the economic, geopolitical, and regulatory protective drivers of regulatory globalization. It then examines the various institutional forms that international regulatory cooperation has taken, including the new generation of megaregional regimes, represented by TTIP and TPP. Next, it considers some of the structural consequences of regulatory globalization, including the imbalance between the promotional and protective functions of regulation, increases in agency costs, and the resulting challenges for administrative governance and law. It then considers these challenges in the specific context of TTIP and TPP, including their internal governance, their relation with domestic administrations and administrative law, and their consequences for nonparty countries. It discusses how megaregional regimes pose novel challenges for domestic systems of administrative law by further shifting regulatory decision making to global institutions and creating potentially significant agency costs. It examines how familiar, as well as new, administrative law techniques can be deployed to promote greater accountability and responsiveness by global regulatory decision makers in TTIP, TPP, and other global regulatory regimes. The discussion considers the importance of the internal law of administration, including US innovations, such as regulatory impact analysis and quantitative risk assessment, and how they can play an important and constructive role in the mega regionals. A conclusion follows.
Source Publication
Administrative Law from the Inside Out: Essays on Themes in the Work of Jerry L. Mashaw
Source Editors/Authors
Nicholas R. Parrillo
Publication Date
2017
Recommended Citation
Stewart, Richard B., "State Regulatory Capacity and Administrative Law and Governance Under Globalization" (2017). Faculty Chapters. 1686.
https://gretchen.law.nyu.edu/fac-chapt/1686
