GTIPA Perspectives: How Smart Deregulation Can Unleash Powerful Innovations Worldwide

The Global Trade and Innovation Policy Alliance (GTIPA) represents a global network of over 50 independent, like-minded think tanks from over 40 economies across the world who believe that trade, globalization, and innovation—conducted on private enterprise-led, market-based, rules-governed terms—can maximize welfare for the world’s citizens. The Alliance exists to collectively amplify members’ voices and enhance their impact on trade, globalization, and innovation policy issues while introducing new scholarship into the world on these subjects. Among their shared principles, GTIPA members are committed to approaching globalization and trade through an innovation-based perspective. This perspective recognizes the immense potential of innovation in improving existing processes, products, services, and business models, and its role in expanding economies and promoting sustainable development.

This report highlights the mounting economic costs of burdensome regulations that exact far more costs than benefits on societies—and which in many countries have led to unchecked regulatory accumulation—and the adverse impact on innovation, productivity, and long-term growth they cause. Across advanced and developing economies alike, layers of outdated, duplicative, and often conflicting regulations have accumulated over decades, with little systematic reevaluation. This regulatory burden is particularly harmful to startups and small firms, which face disproportionate compliance costs and reduced flexibility. Evidence shows that excessive regulation slows investment, distorts the Schumpeterian process of creative destruction, and incentivizes informality, especially in emerging markets where a significant portion of the labor force operates outside the formal economy. According to the International Monetary Fund (IMF), in sectors such as textiles and construction informality can exceed over 60 percent of the world’s adult labor force, stunting sustainable growth. Meanwhile, studies find that streamlining regulation, particularly by liberalizing market entry, can unlock substantial economic gains. For instance, moving from median- to least-regulated among Organization for Economic Cooperation and Development (OECD) countries could boost employment growth by 1 percent annually. As such, effective reform efforts must go beyond rule-counting and focus instead on reducing compliance costs, fostering innovation, and ensuring that regulation supports rather than stifles dynamic economic activity.

When it comes to regulation—just as for innovation—the choice isn’t between all government or no government, it’s about what’s the optimal level of government engagement in fostering sensible regulations that effectively enable innovation.

To be sure, effective regulations are critically important to the success of countries’ advanced technology industries. For instance, if countries wish to lead in biopharmaceutical innovation, governments need to implement effective drug regulatory agencies to ensure that the drugs industry develops are indeed safe and efficacious. A good example of regulatory innovation comes from the United States. In the mid-1980s, it took on average three years for the U.S. Food and Drug Administration (FDA) to complete drug evaluations. In 1992, the United States introduced the Prescription Drug User Fee Act (PDUFA), which permitted the FDA to collect user fees from industry, helping ensure the agency could be adequately staffed with high-quality personnel and appropriate workflow and project-management frameworks to support making accurate and timely determinations regarding the safety and efficacy of new human drug applications for approval.[i] Today, the FDA makes drug safety and efficacy determinations in about 10 months, with no decrease in the accuracy of those determinations. Similarly, if countries want to manufacture innovative commercial airplanes or autonomous vehicles, regulatory systems need to validate the safety of these systems, while eschewing overly burdensome regulations. When it comes to regulation—just as for innovation—the choice isn’t between all government or no government, it’s about what’s the optimal level of government engagement in fostering sensible regulations that effectively enable innovation.

This volume compiles vignettes from thirteen countries: Argentina, Australia, Bangladesh, Brazil, Bulgaria, Chile, Colombia, Costa Rica, Ecuador, Germany, India, Indonesia, Italy, Korea, Pakistan, Philippines, Poland, and the United States.