MOEA Training Course 2011 Competitiveness and regulation

1. MOEA Training Course 2011Competitiveness and regulation Charles-Henri MONTIN Senior Regulatory expert Ministry of economy and finance France French representative to OECD/RPC montin@smartregulation.net

2. Starting point Price variations across countries for the same goods How important a factor is regulation in a country’s competitiveness What is the economic basis of regulatory quality

3. National Competitiveness “policy clusters” Dangers: ideological bias (“liberalisation”) lack of economic analysis Source: Weymouth and Feinberg

4. How to nurture competitiveness

5. The economic basis • Economic studies (Nicoletti and Scarpetta 2003) show that product market reform are positively correlated to total factor productivity growth, with the strongest cause is reducing admin burden; • Gelauff (2006): a 25% cut of administrative burdens would lead to +0.9% GDP by 2005 • Distinguish between: • Other factor market regulations (labour, H&S) • Product market regulation

6. How regulation can support competitiveness • Reduce regulation that raises the cost of doing business • Assure basic legal guarantees (land law, contracts, dispute resolution, etc) and corporate governance FW • Preserve level playing field for markets: competition policy and law, financial markets supervision, • remove impediments to entry to markets and discriminations (regs or taxes) or protecting incumbents against competitors • Seek out anticompetitive behavior, to avoid rents, for lower prices • Enforce standards to disseminate major technologies

7. Use regulation to support competitiveness

8. Quality of the business environment Regulatory policy • Rules and incentives to foster investment and innovation • Rules that do not unduly skew allocation of corporate resources • Quality sectoral legislation (land law, contracts, etc) Competition policy • Rules and policies that favour efficient functioning of markets • No undue barrier to entry • Anti-trust legislation • Openness to foreign competition

9. How regulation can hamper competitiveness • Costs • direct /indirect; compliance /admin costs • SMEs and the economies of scale • Unintended microeconomic choices: interfering with optimal allocation of resources within the company to different business processes. Regulatory uncertainty causes risk of deferral of investment • Barriers to efficient market functioning

10. Qualities of regulation supporting competitiveness • Necessary • Clear/ accepted • Light (costs) • Well targeted • Stable • Proportional • Well applied • Professional assessment on the basis of international best practice

11. Regulatory quality (RQ) supports NC Not to be confused with regulatory competition Does not equate with deregulation RQ aims at making the best use of regulation in support of the full range of public policies RQ pursues several objectives (growth, social cohesion, risk management, protection), NC is one of the aims, not the only objective. RQ can be more, or less, geared towards NC

12. Dimensions of regulatory quality

13. Competitiveness a main concern in RIA The best tool is RIA: regulatory impact assessment: “competition” and “competitiveness” are the 2 first listed economic impacts to be studied European Commission has made this even clearer by introducing the “competitiveness test” for all new EU law (Oct 2010) with public announcement