REGULATORY COMPETITION IN THE SINGLE MARKET

Although regulatory competition has been hailed in some quarters as a superior alternative to Council-driven harmonization, little empirical investigation has been carried out to demonstrate how regulatory comp etition might work in actual EC practice, and therefore whether its ex pected benefits will, in fact, materialize. We construct a framework s tylizing the iterative process of regulatory competition, and illumina te its emergence from five elements of the regulatory strategy of the EC-1992 internal market programme. The framework presented shows that the process of regulatory competition is a complex and unpredictable o ne. Two case studies are provided to exemplify the difficulties. These practical limitations severely weaken the case for regulatory competi tion based on theoretical economic arguments. Moreover, a comparative cost-benefit analysis of regulatory competition and harmonization sugg ests that, where relevant, regulatory competition and harmonization sh ould be seen as complements, rather than substitutes. The demarcation between the two is best determined on a case-by-case basis according t o the principle of subsidiarity.