Advancing Blue Economy Start-up Opportunities through Enhanced Regulatory Accountability

July 7, 2021

Regulators in both developed and developing markets are responsible for protecting the public from certain risks to human health, safety, environment, and consumer fraud. Article XX of the General Agreement on Tariffs and Trade (GATT) of 1946[1] has served to guarantee a “right to regulate” to address such risks as long as regulations are neither discriminatory nor arbitrary. The World Trade Organization in 1995 incorporated the GATT and further elaborated consensus-based rules to ensure that regulations across a wide range of sectors are developed transparently and are no more trade restrictive than necessary to achieve legitimate objectives.  The United States Agency for International Development (USAID) can work with partner countries to ensure regulations protect the public without posing overly burdensome requirements. USAID recognizes that certain regulators recently have begun to actively promote small business innovation, trade, and investment, and have therefore significantly expanded the concept of regulatory accountability. 

The Expanding Concept of Regulatory Accountability

In the United States, Executive Order 13609 of 2012, at the federal level, specifies “[O]ur regulatory system must protect public health, welfare, safety, and our environment while promoting economic growth, innovation, competitiveness, and job creation” (emphasis added).[2]   As a result, at the federal-level, various agencies have begun developing “innovation offices” and “pilot programs” to help regulators develop and test new government services. For example, in the U.S. Federal Reserve’s FedNow Pilot Program[3] , participating private financial institutions are helping develop the new FedNow instant payment service, helping shape product features and functions, providing input into the overall user experience, and ensuring readiness for testing before its general availability.

At the state-level, California has begun developing a startup “incubator” to develop and test new private sector products and services, aligned with California’s environmental priorities. Akin to a “regulatory sandbox,” the state, in close collaboration with participating startups, is providing a controlled environment, for a specified period of time and defined use case, enabling eligible entrepreneurs to test new data uses, technologies, and applications while receiving regulatory guidance. This close public-private sector engagement enables regulators and governments to understand the implications of different policy choices while building trust in the development of supporting technologies.

 The Model of the Port of San Diego’s Blue Economy Incubator

The Port of San Diego, established in 1962 by the California State Legislature, represents one of America's top multi-use ports bringing in nearly 3 million metric tons of cargo per year and countless visitors to enjoy San Diego’s abundant recreational opportunities. In addition, the Port controls San Diego Bay and manages 34 miles of the Bay's immediate waterfront under the state's Tidelands Trust. As the state-legislated trustee of tidelands and submerged lands in and around San Diego Bay, the Port fulfills its public trust responsibility to promote fisheries, navigation, and commerce, as well enhances and protects the environment through developing sustainable aquaculture and other “blue technologies.”

The San Diego Unified Port District Act of 1962, as amended[4] , states that among powers of the Port’s board of commissioners are to: 1) regulate and control the anchoring, mooring, towing, and docking of all vessels; and 2) promote the maritime and commercial interests by proper advertisement of its advantages and by the solicitation of business within or outside the district.

Based on its dual mandate, the Port established in 2016 a brand-new Blue Economy Incubator (BEI) to assist in the creation, early development, and scaling of sustainable aquaculture and Port-related blue technology ventures.[5] Through its BEI, the Port seeks out innovative aquaculture and blue technology proposals to address Port environmental challenges and inform future Blue Economy opportunities. In essence, the BEI serves as an SME “launch pad” by removing barriers to early-stage blue tech entrepreneurs and providing key assets and support services focused on pilot project facilitation.

To date, the BEI has received over 150 inquiries and 45 proposals. Of these, the Port has approved the launch of nine pilot projects including: shellfish nursery operations; copper remediation technology; a marine debris removal vessel; and seaweed aquaculture.  The Port’s ninth pilot project aims to demonstrate ECOncrete’s new award-winning eco-friendly “blocks,” which unlike regular concrete, attract shellfish and corals to reinforce the strength of seawalls and enhance local fish populations. If successful, ECOncrete could help protect vulnerable coastline populations from super storms, as experienced in the Philippines and Indonesia.  In exchange for funding or in-kind support provided to launch pilot projects like ECOncrete, the Port - a self-supporting public benefit corporation - receives a royalty position from the business’ operations and/or technology. The Port’s BEI exemplifies what is possible by adopting the broader notion of regulatory trust. As such, the Port’s BEI has not merely balanced the needs of regulators and entrepreneurs but enhanced the mutual benefits to all its stakeholders.

Exchanging the Port of San Diego’s BEI ‘Best Practices’ in International Cooperation

USAID, in coordination with the United States Department of State, encouraged the Port of San Diego to begin sharing its BEI experiences and related “best practices” at Asia-Pacific Economic Cooperation (APEC) “Offline-to-Online Initiative” conferences and at the Global Cooperation Training Framework for India and Association of East Asian Nations (ASEAN) member countries, co-hosted by the United States, Japan, and Taiwan in Taipei. Through these discussions, it is increasingly apparent that cargo ports throughout the Indo-Pacific are seeking to upgrade their business models and diversify their sources of revenue amidst an intensively competitive regional environment.

The Port of San Diego’s visit to multiple ports around Taiwan showcased the potential for U.S. businesses to also play a role in helping Taiwan’s ports transform to serve business incubation purposes as well. This exchange with the Port of San Diego offered a glimpse into how partnerships with innovative local startups can serve to amplify a port’s resources, environment, and competitive advantages. The Port of San Diego is considering how it may internationalize its technical exchanges on ocean economy, science, and marine technology development across the Indo-Pacific.

Partner Country Advice for Launching Local Startup Incubators

Of course, the basis for establishing a local startup incubator or accelerator within a regulatory authority is not typically found in a regulator’s existing mandate. Some regulators may need to investigate their statutory authorities and discuss potential options with their own national or provincial legislatures. USAID trade experts, entrepreneurship experts, and implementing partners can offer assistance to our partner countries in their efforts to foster broader understandings of regulatory trust and accountability. USAID, in coordination with the U.S Department of State and the Port of San Diego, is investigating how the Port’s BEI model of transforming a cargo port into a job-creating blue economy incubator could be adapted in port cooperation pilot projects among our partner countries, especially in the Indo-Pacific.

  • [1] https://www.wto.org/english/res_e/booksp_e/gatt_ai_e/art20_e.pdf
  • [2]https://www.whitehouse.gov/sites/whitehouse.gov/files/omb/inforeg/inforeg/eo_13609/eo13609_05012012.pdf
  • [3] https://www.frbservices.org/financial-services/fednow/community/news/012521-announcing-pilot-program-participants.html
  • [4] https://www.slc.ca.gov/Programs/Granted_Lands/G10_San_Diego/G10-08_San_Diego_Unified_Port_District/S1962_Ch67.pdf
  • [5] https://www.portofsandiego.org/waterfront-development/blue-economy