Lesson 5: Considerations During the Process
Topic 3: Economic Effects (Executive Order 12866 and Regulatory Flexibility Act)
In this topic, you’ll learn about the requirements for economic analysis of regulations.
Objectives:
- Identify the requirements for assessing the economic effects of regulations that are prescribed by Executive Order 12866 and the Regulatory Flexibility Act
- Describe how such an assessment can assist in the successful completion of the market access process
Apart from its procedural requirements, Executive Order 12866 also includes requirements for analyzing the economic effect of significant rules.
For all significant rules, an economic analysis must be prepared that assesses:
“. . .the potential costs and benefits of the regulatory action, including an explanation of the manner in which the regulatory action is consistent with a statutory mandate and, to the extent permitted by law, promotes the President’s priorities and avoids undue interference with State, local, and tribal governments in the exercise of their governmental functions.”
Executive Order 12866.
The Executive Order requires a more detailed and thorough cost-benefit analysis for rules that are determined to be “significant” because they will have an annual effect on the economy of $100 million or more. Whether or not a rule is designated “significant” for this specific reason, the Executive Order requires agencies to publish significant rules only when the benefits are shown to exceed the costs.
The Regulatory Flexibility Act (RFA) contains requirements for analyzing the effects of rules on small entities. Whether an entity is small is determined using standards set by the U.S. Small Business Administration. “Entity” typically refers to some kind of business; in this context, entities would typically be agricultural producers and handlers. The requirements in the RFA apply to all rules, not just those designated “significant”. RFA analyses describe the impact of rules on small entities. The RFA also requires agencies to consider alternatives that would minimize the impact of rules on small entities, if the rules could have a significant impact on a substantial number of small entities.
The analytical requirements in Executive Order 12866 and the Regulatory Flexibility Act are designed to ensure that rules benefit the economy overall and that they are flexible, where possible, so that both small and large entities can comply. Another benefit of conducting these analyses is that they can help an agency during the review process. Rules to allow the importation of commodities often raise concerns among domestic industry, which fears competition. However, as noted earlier, often the amount of imports likely to occur under a rule is very small compared to the size of the domestic industry, meaning impacts will be very small if they occur at all. If a large amount of imports are expected, a cost-benefit analysis can show that the benefits to consumers (typically in the form of lower prices) outweigh the costs to producers. Such information can help address political concerns that arise during review.
As noted earlier, notices are not subject to Executive Order 12866 requirements, including those requirements pertaining to cost-benefit analysis, nor are they subject to RFA requirements. Not having to complete this analysis is another reason notices typically take less time to publish than rules do.
In this topic, you learned about the requirements for economic analysis of regulations.
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