Canadian companies are dying a death by 130,000 cuts — or 134,754 to be more specific. That is the total number of federal requirements as reported by the federal Treasury Board that impose an administrative burden on businesses.
These requirements are part of Canada’s complicated network of overlapping regulations from all levels of government that have created a costly and uncertain environment in which to invest and operate a business.
The Canadian Chamber of Commerce has released a new report, Death by 130,000 Cuts: Improving Canada’s Regulatory Competitiveness, which recommends that the government immediately convene a business-government working group to support the development and implementation of improvements to the federal regulatory environment.
Canada needs improved collaboration among elected officials, regulators and stakeholders to identify more efficient ways to achieve policy objectives while maximizing economic growth.
High compliance costs and inefficient and unpredictable regulatory processes have significant negative impacts on productivity and innovation.
This can be especially tough for small businesses that lack the specialized and dedicated compliance resources of larger companies, creating significant competitive risks for Canada, especially with the U.S, our largest competitor and trading partner having recently enacted significant corporate tax and regulatory reforms.
Obviously, regulations can be good and necessary to make business more predictable, protect citizens from health and safety hazards and generally make our society run more smoothly.
However, when regulations are not well-thought out with input from knowledgeable stakeholders and all levels of government are not working together, the result will often be a tangle of overly burdensome, conflicting and inefficient regulations that stifle growth while not providing the benefits that were originally intended.
Some of the most common ways for regulation to move from beneficial to burdensome include:
- Regulatory overlap between the federal and provincial/territorial governments. For example, recent changes to the National Energy Board’s mandate by the federal government to assess the upstream GHG emissions of pipeline projects have intruded into provincial/territorial jurisdiction.
- Interprovincial regulatory differences. Despite bold commitments from governments to eliminate internal barriers to trade within Canada, little progress has been made aligning regulations between provinces and territories.
- More rules. More paperwork. Less business. Canadian businesses face a growing cumulative regulatory burden. As all levels of government continue to layer on new regulations, businesses must contend with more and more compliance and reporting requirements instead of focusing on growing their business.
- Business input and best practices are often not considered. Often, regulatory guidelines and best practices are not followed by regulators. This can result in inadequate consideration of business issues, flawed cost-benefit analysis of proposed regulations and an underestimation of the actual costs to business.
- Inconsistent regulatory consultations. Project-based consultations for major energy projects have become politically-influenced, open-ended processes incapable of evidence-based decisions within a reasonable amount of time.
- Regulatory regimes not keeping pace with rapidly changing technology. Many regulatory frameworks are overly prescriptive, outdated and not equipped to deal with or incentivize innovative business activity.
Of course, the business community understands that the current patchwork of regulations in Canada are the result of decades decisions by different political parties. There are no overnight fixes – what is required is a sustainable commitment to addressing the competitiveness of Canadian businesses generally, with a particular focus on regulatory regimes. The business community is proposing the following as a starting point:
- Immediately convene a government-business regulatory competitiveness working group. The working group would develop recommendations for the federal government to measure and reduce cumulative regulatory burden. It would also develop recommendations for governments to ensure a consistent application of regulatory guidelines across jurisdictions and ensure the adoption of best practices by regulators.
- Give regulators economic growth and competitiveness mandates to ensure economic impacts receive appropriate consideration in decision-making while preserving necessary protections.
- Increase federal leadership in eliminating internal trade barriers to trade through clear goals, timelines and accountability as part of the Canadian Free Trade Agreement.
- Improve regulatory consultations through earlier engagement with stakeholders while ensuring processes are transparent and evidence-based. Project-based public consultations should be time-limited and focused on projects, not other policy issues.
- Make overly prescriptive regulatory frameworks more flexible to better accommodate rapidly changing business environments by moving to risk- or outcome-based regulations where appropriate.
- Increase regulatory alignment with Canada’s trading partners by integrating regulatory cooperation into free trade agreements and design new regulations with alignment by default where it is in Canada’s economic interest to do so.
The most important thing is to get moving on reforms – the global economy gets more competitive daily while Canada seems to be going backwards.
The economics of regulation does not get enough attention, and losing sight of the need to balance regulation with growth has resulted in Canadian businesses becoming less competitive. Without a healthy business environment, we will have a harder and harder time paying for social programs, infrastructure, health care and education. It’s one of the reasons our chamber’s vision is Stronger Community Through Business Prosperity.
Krista Ross is CEO of the Fredericton Chamber of Commerce, a nationally accredited organization with nearly 1,000 members, is an active business organization engaged in policy development and advocacy that affects the competitiveness of our members and the Canadian business environment.