International Regulatory Conflict

My colleague Peter Van Doren posted here yesterday about a new National Highway Traffic Safety Administration (NHTSA) rule which mandates that “all cars and light trucks sold in the United States in 2018 have rearview cameras installed.” I’m going to leave the analysis of the domestic regulatory aspects of this issue to experts like Peter. I just wanted to comment briefly on some of the international aspects.

In particular, what if other governments decide to regulate in this area as well and they all do it differently?  That would mean significant costs for car makers, as they would have to tailor their cars to meet the requirements of different governments. Note that the U.S. regulation doesn’t just say, “cars must have a rear-view camera.”  Rather, it gets very detailed:

The final rule amends a current standard by expanding the area behind a vehicle that must be visible to the driver when the vehicle is shifted into reverse. That field of view must include a 10-foot by 20-foot zone directly behind the vehicle. The system used must meet other requirements as well, including the size of the image displayed for the driver. 

In contrast to a market solution, which provides flexibility as to what will be offered, the regulatory approach has very specific requirements.

As far as I have been able to find out, the United States is the first to regulate here, but others are likely to follow. When the EU or Japan turn to the issue, for example, will they develop regulations that are incompatible with the U.S. approach? Will there be a proliferation of conflicting regulations?

In theory, it’s easy to avoid these problems. Smart regulators would recognize that their foreign counterparts’ regulations are equally effective. But in other areas of automobile regulation, we haven’t seen enough of this cooperation. The rear-view camera issue provides an opportunity for regulators from different countries to work together to avoid making regulation even more costly than it already is.