Private Regulation and Foreign Conduct01 Jan 2010
Current U.S. policy on safety regulation for imported food is based largely on ex post measures. Several reform proposals seek to strengthen the ex ante component of this regulatory program. These proposals rely on one or more of three basic strategies: direct extraterritorial regulation; delegation of regulatory authority to private entities; and delegation of regulatory authority to foreign government agencies. This paper explores the ability of each strategy to respond to several principal-agent problems relevant to imported-food safety: the regulatory license problem; interest group capture; and the reality of bribery and threats in many food-exporting countries. Through the lens of these principal-agent problems, delegation to a foreign government agency is the least attractive of the three strategies. The choice between the remaining two strategies is an empirical question on which little data is currently available. To the extent governments wish to experiment with delegation to private entities, they should do so in a limited manner, focusing on specific product categories or regions. The success or failure of these programs could then inform decisions on whether to rely more broadly on delegation to private entities as a regulatory strategy.