Recent directives from Europe and the United States suggest they are embarking on strikingly different regulatory pathways.

With the inauguration of President Joe Biden, America is committing to an aggressive use of regulation to address modern challenges while, in contrast, the European Commission is focusing on reducing unnecessary regulatory burdens, including through the use of regulatory budgeting. Director of the George Washington University Regulatory Studies Center and distinguished Professor of practice in the Trachtenberg School of Public Policy, Susan E. Dudley, in an OpEd article in Forbes Magazine assesses the two differing regulatory pathways.

In the US, Biden sees regulations as “vital for tackling national priorities,” emphasised Dudley.

According to her, Biden’s Modernizing Regulatory Review memorandum, issued on his first afternoon in office, promises “to mobilise the power of the Federal Government to rebuild our Nation and address… serious challenges, including a massive global pandemic; a major economic downturn; systemic racial inequality; and the undeniable reality and accelerating threat of climate change”.

This included directing agencies to take a wide range of regulatory actions with respect to the environment, workplace, education and immigration, among others. This is in addition to review regulatory practices “to ensure swift and effective Federal action”.

Need for strong analysis and reliable evidence

Dudley argued that the European Commission’s recent communication, Better Regulation: Taking Stock and Sustaining Our Commitment similarly highlights an “ambitious agenda,” and acknowledges “the unprecedented challenges we are facing”.

She concluded that “the need for strong analysis and reliable evidence is greater than ever”.

It focuses on streamlining regulation and “avoiding burdens that are not strictly necessary for the achievement of policy objectives”.

For example, the communication states that, “a cornerstone of [the EU’s] better regulation approach is to learn from the past by evaluating existing legislation”.

It views regulation as a “policy cycle” that “requires systematic collection of data” and evaluation of actual outcomes to ensure regulation effectively achieves goals. Both the US and EU directives emphasise the importance of time-tested good regulatory practices such as transparency and public engagement.

Similarities in both regulatory pathways

They also both reinforce the long-standing practice of examining regulatory benefits and costs before issuing new rules, but here the recent communiques diverge sharply in their emphasis. President Biden’s memo, she articulated calls for revisions to US regulatory impact analysis guidance to ensure it “fully accounts for regulatory benefits that are difficult or impossible to quantify, and does not have harmful anti-regulatory or deregulatory effects”.

It also directs agencies to consider the “distributional consequences of regulations…to ensure that regulatory initiatives appropriately benefit and do not inappropriately burden disadvantaged, vulnerable, or marginalised communities”. Nowhere does it express a concern for streamlining or keeping down the costs or burdens associated with regulation overall.

However, the Commission’s communication describes the purpose of its existing “regulatory fitness and performance (REFIT)” programme as maximising “benefits for people, businesses and society at large while removing red tape and reducing costs” as well as making “EU laws simpler and easier to understand”.

The Commission aims to “strengthen a policymaking culture that not only ensures that we achieve our policy objectives, but also pays closer attention to how we do so”. Thus, while acknowledging important regulatory benefits, it focuses on minimising the costs of achieving them.

To that end, it announces a new “one-in-one-out” approach to “strengthen the burden reduction effort further,” by “offsetting new burdens resulting from the Commission’s legislative proposals by equivalently reducing existing burdens in the same policy area”.

New approach needed

The new approach, Dudley contends, commits the Commission to “systematically and proactively seek to reduce burdens imposed by existing legislation”.

The one-in-one-out programme, which will be piloted later this year and commence in 2022, aims to “widen the focus from burdens stemming from specific legislative acts to the accumulation of burdens in each policy area and thus give a better overview of costs across policy areas every year”.

The Commission expects the new regulatory budget requirement to improve the quality of EU legislation so that it “better focus[es] on legislative efficiency, avoiding burdens that are not strictly necessary for the achievement of policy objectives”.

“There are things to be said for both approaches to modernising regulation. As I’ve written elsewhere, greater attention to the distributional impacts of regulation, as emphasised in the new US directives, ‘can help decision-makers set more compassionate, just, and equitable policies’,” the professor went on to say.

Both the US and EU currently guide agencies to understand distributional impacts, but “regulations would benefit from a more rigorous approach to understanding the potential benefits and burdens of alternative policies on different segments of the population”. However, the European Commission’s focus on evaluating actual regulatory impacts and reducing unnecessary burdens is also important, and may be the key to illuminating the distributional, as well as net, impacts of accumulated regulations.

These different approaches, she explained, may offer a natural experiment on how best to ensure regulations are producing the greatest net social benefits.