Wednesday, November 07, 2007

European vs American regulation

An opinion piece in The Economist provides an elegant contrast between policy approaches on either side of the Atlantic. It notes that there's competition to set global regulatory standards, and that Europe seems to winning. For example, American multinationals that invest in meeting European standards may decide that lighter domestic regulation provides a competitive advantage to non-exporting rivals, and may push for stricted US policies. For global companies, it's simplest to be bound by the toughest regulations in your supply chain.

From Brussels rules OK: How the European Union is becoming the world's chief regulator, The Economist, Sep 20th 2007:

The American model turns on cost-benefit analysis, with regulators weighing the effects of new rules on jobs and growth, as well as testing the significance of any risks. Companies enjoy a presumption of innocence for their products: should this prove mistaken, punishment is provided by the market (and a barrage of lawsuits). The European model rests more on the “precautionary principle”, which underpins most environmental and health directives. This calls for pre-emptive action if scientists spot a credible hazard, even before the level of risk can be measured. Such a principle sparks many transatlantic disputes: over genetically modified organisms or climate change, for example.

In Europe corporate innocence is not assumed. Indeed, a vast slab of EU laws evaluating the safety of tens of thousands of chemicals, known as REACH, reverses the burden of proof, asking industry to demonstrate that substances are harmless. Some Eurocrats suggest that the philosophical gap reflects the American constitutional tradition that everything is allowed unless it is forbidden, against the Napoleonic tradition codifying what the state allows and banning everything else.

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