The devil's in the details: Federal regulation in the 21st century

Posted on August 09, 2012

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by Peter Phillips

The increasingly heated parliamentary debate about the omnibus legislation to implement the 2012 federal budget has virtually ignored an important set of regulatory changes now underway. While the public debate has focused on changes proposed for environmental review of resource development projects (some, like the ‘one-project, one-assessment’ model, make eminent sense), there are equally (and perhaps more?) important elements of the budget and recent policy that could transform the operation of the Canadian regulation regime for both the agricultural biotechnology sector and all other sectors.

Some assert that in the 21st century the state has its greatest effect through its use of legislation and regulation. The actual scale and scope of activity is massive. The federal government has promulgated more than 4300 Acts and 2900 regulations, while each province, on average, has passed and are enforcing and implementing more than 500 acts each, which then generate something in the range of 900 to 3000 specific regulations per province. Virtually anything any firm, sector or household would consider doing probably has some rule that defines what can be done when, where and by whom.

Until now, the government and the civil service have held the upper hand in regulatory development, as they could impose almost any measure on anyone at any time. Over recent years, the regulatory regime has been somewhat controlled, as government has imposed internal rules that require new regulations to generate benefits that exceed their cost, that new measures be Gazetted for public comment and that new regulations be structured to realize the regulatory goal at the lowest relative cost and with the least ‘distortion.’ Even with those rules, regulatory reach and burden has been rising, especially as government fiscal capacity has been limited.

Now the federal government has proposed what may be a major shift in the balance of power in regulatory affairs and could substantively alter the long-term impact of the regulatory state.

While many of the changes are marketed as efforts to ‘reduce red tape,’ that underestimates their potential effect. In the past, under red-tape, regulatory reform programs, governments simply house-cleaned old regulations or targeted changes in specific regulatory areas. Now the government has committed to a principles-based change in how it will regulate, which by design will affect all existing and new federal and some provincial regulatory efforts.

In January 2011, the Government created a Red Tape Reduction Commission and after a year of Canada-wide consultations, the Commission recommended changing measures that generate little or no effect on public benefits, yet pose as irritants that impede business growth, competitiveness and innovation. Earlier this year the government implemented a “One-for-One” Rule. Under this rule, every time the Government adopts a new regulation, it must eliminate an existing one. In conjunction with this, the government has borrowed a regulatory burden calculator from Alberta which calculates the cost of compliance on small and medium sized firms. It is embedding this calculator as a means of testing the ‘effective’ burden of existing and new regulations. So unlike in the past, where governments could declare moral victories in the fight against red tape simply by writing rules more succinctly or by bundling multiple rules into one instrument, now regulators are going to need to develop a body of evidence to show what costs new measures will impose on business, and then to identify offsets to hold the burden at or below current levels. If new regulations add a new burden, then agencies will be forced to undertake a triage process, identifying lower impact measures that could be revised or eliminated to make room for the burden of new measures. In short, once this new system gets going, it could fundamentally alter the balance of power in the regulatory system.

Most importantly, firms and sectors will now have a fighting chance of engaging in a substantive debate with regulators about the commercial and economic effects of regulations. In many instances there are new, innovative and less costly ways of achieving greater public health, safety or equity. Governments that can identify and adopt ways to become more efficient and effective are likely to contribute to longer-term improvement in Canada’s socio-economic performance.

Peter Phillips
is an international political economist and Professor of Public Policy in the Johnson Shoyama Graduate School of Public Policy at the University of Saskatchewan.
  • Peter Phillips

    Posted on 15/08/2012

    Darcy My understanding is that this policy is rolling out across the federal government. My guess is that it will move at variable speeds in different areas, depending on what background work has been done. The biotech industry in Canada is already in dialogue with government, so it is possible (but not a certainty) that this model might be used earlier in this sector than in some others. As with all changes in complex system, the devil will be in the details--so it will take a lot of work to make this function as promoted. If it can be made to work, it should be good for the economy and good for those seeking to introduce innovative agri-food technologies. As to whether the policy will be sustained, generally good and effective policies outlast any single administration. So the challenge will be to make this work as proposed. p.

  • Darcy Pawlik

    Posted on 11/08/2012

    Dr. Phillips, I really need to know - will this actually happen? When can we expect to see the proposed changes take effect? Additionally, if the current administration is supplanted, can it be assumed this process will be scrapped completely? Overall, is this positive for Canada and the Ag-bio industry? All easy questions for you, thanks for taking the time to put this together. Darcy

  • MiketheScribe

    Posted on 10/08/2012

    Very promising, developments! I really like the idea of regulators having to pull a rule off the books for every one they add, and that they must prove the benefit of a regulation is more than the cost it imposes. It will be interesting to see how it plays out!