. "2 Sanitary and Phytosanitary Risk Management in the Post-Uruguay Round Era: An Economic Perspective." Incorporating Science, Economics, and Sociology in Developing Sanitary and Phytosanitary Standards in International Trade: Proceedings of a Conference. Washington, DC: The National Academies Press, 2000.
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Incorporating Science, Economics, and Sociology in Developing Sanitary and Phytosanitary Standards in International Trade: Proceedings of a Conference
basing decisions about major regulations on assessments of their benefits and costs. Taken together, these developments have substantially changed the parameters for regulating imports of agricultural products from the time when "when in doubt, keep it out" was viewed as an appropriate decision rule.
It is clear that the domestic regulatory reform initiatives share many goals with the SPS Agreement. For example, both advocate transparency of regulatory rule making in order to promote symmetry of information among stakeholders, which include agricultural producers, processors, and consumers on one hand and trading partners on the other. Both also require that a regulation be based on a careful assessment of the risks that the measure is designed to mitigate and make provision for the inclusion of the costs of control programs as a factor in regulatory decisions.
However, in other respects, it is unclear whether the legal obligations found in the SPS Agreement are wholly congruent with U.S. Executive Branch guidelines for consideration of economic efficiency and distributional effects of measures as decision criteria. The SPS Agreement is primarily intended to aid WTO members in the decentralized policing of regulatory protectionism in foreign markets. Regulatory protectionism or capture occurs when domestic groups with a vested interest in a particular regulatory outcome successfully lobby for overly restrictive SPS measures that, by limiting or preventing safe imports, lower net social welfare. Two requirements in the SPS Agreement—to base SPS decisions on a risk assessment and to notify trading partners of changes in SPS measures—underpin the multilateral monitoring system. The risk assessment paradigm of the SPS Agreement, centered on the concept of "acceptable level of risk" (or "appropriate level of protection" in the language of the agreement), endorses risk-related costs as a normative basis for SPS regulatory decision making. This concept implicitly excludes consideration of benefits to other economic agents and generally fuses risk assessment with risk management by embedding value judgments about which risks are "acceptable" into scientific assessments. This approach stands in contrast to the economic paradigm of the Executive Branch directives in which normative rules for designing SPS measures rest on cost-benefit analysis tools to infer appropriate levels of protection from individual preferences.2
The simultaneous emergence of new multilateral and domestic rules for SPS regulatory decision making highlights the need for a comprehensive examination of this new regulatory environment. In this chapter I review the SPS Agreement with a view to examining how the agreement does or does not constrain the use of economic analysis in the design of regulations for imports
EO 12866 (1993) requires agencies to perform a cost-benefit analysis of all major regulations (those with an expected economic impact larger than $100 million). Directives published by the Office of Management and Budget (OMB) and the U.S. Department of Agriculture (USDA) clarify the general guidelines found in EO 12866. OMB's specific guidelines are found in Circular A-94 "Guidelines and Discount Rates for Benefit-Cost Analysis of Federal Programs." USDA guidelines are found in Appendix C of the Departmental Regulation on Regulatory Decisionmaking, DR 1512-1, "Guidelines for Preparing Risk Assessments and Preparing Cost-Benefit Analyses."