The case for regulatory modernization

Economists and politicians keep repeating the word competitiveness – and for good reason. For a small, open economy like Canada, competitiveness is vital to facilitate economic growth and maintain our quality of life. But what does competitiveness really mean in the economic context, and how can Canada best improve it?

One potential avenue is enhanced trade, and indeed, previous governments have worked hard to secure and enhance market access for Canadian industry via multilateral trade deals. The North American Free Trade Agreement (NAFTA), the Canada-European Union Comprehensive and Economic Trade Agreement (CETA), and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) are all excellent examples of multilateral trade agreements that provide tremendous opportunity for Canada, particularly for our agriculture and agri-food sector. Canada now enjoys an annual trade surplus of more than $10 billion in agriculture and agri-food, and across Canada, nine out of every 10 farms are dependent on exports. This represents 210,000 farms and includes a majority of farms in every province.

Canada does not, however, control the political climates of other nations, and at present the forces of economic nationalism are creating rough waters for trade around the globe. Both NAFTA and CETA are under threat from protectionist forces in the United States and Europe, with no immediate resolution in sight. Also, despite the tremendous promise it holds, the complexities of the talks mean that any potential free trade agreement with China is likely several years away. Despite the government’s best efforts, the expansion of global trade markets for Canada will proceed slowly for the foreseeable future.

Similarly, with persistent deficits plaguing both the federal government and most provincial governments, Canada has very little fiscal room to implement broad based tax cuts for the foreseeable future. Therefore that is out as a means to fuel economic growth. Interest rates are near historic lows, so an easing of monetary policy is also not going to serve as a means to stimulate growth.

So what tool does the Government of Canada have to spur growth and competitiveness, thus making Canada more attractive to global investors? The answer can be found in a strong and comprehensive, government-wide effort to reduce the use of regulations as the policy tool of choice and to expedite implementation of regulatory reforms for those that remain to unfetter Canada’s export-oriented value chains to allow them to contribute to the $75 billion export goal.

In its recent report, Death by 130,000 Cuts, the Canadian Chamber of Commerce reported there were 131,754 federal requirements imposing an administrative burden on business in 2015. (In fairness to the federal government, Ontario currently has an estimated 380,000 regulations on the books.) CropLife Canada and its member companies certainly understand and support the notion that well-designed and well-implemented regulations are an important tool for the protection of Canadians, and for enhancing public trust. With their growth left unattended, however, overlapping, duplicative and overly restrictive regulations can choke innovation and competitiveness, leaving Canadian business in a difficult position relative to our global competitors.

The Global Competitiveness Index, run by the World Economic Forum, tracks the performance of 137 countries on 12 pillars of competitiveness. In the most recent report, Canada ranked 14th overall. While this may appear to be a strong position, it is worth noting Canada ranked as high as ninth in 2009-2010. The area of clear weakness identified by the index for Canada was the sub-category of burden of government regulation, where Canada ranks 38th.

This drag may well be contributing to Canada’s weak business investment climate. Between 2015 and 2017, business investment as a share of GDP in Canada was 15th out of 17 Organisation for Economic Co-operation and Development (OECD) economies. In the plant science sector, where bringing a new product to market takes many years and investments that can surpass $150 million, the speed and predictability of the regulatory system is of paramount importance when it comes to investment decisions. This is why we believe that regulatory reform is the most efficient and sustainable way for the federal government to deliver results that will pay dividends for Canada’s competitiveness for many years to come.

For our sector, regulatory reform means one thing – having Health Canada understand and accept its role as an economic regulator as an important role, in addition to its first priority of protecting health, safety and the environmental. After all, nothing can happen in terms of innovation and helping farmers be more competitive without first working through either the Pest Management Regulatory Agency (PMRA) or the Canadian Food Inspection Agency (CFIA).

It goes without saying that the health and safety of Canadians and protection of our environment always come first, and our industry takes great pride in our record on safety and stewardship. We have worked closely with regulators on these issues, and will continue to do so. We also believe it is possible to keep these goals first, while at the same time acknowledging the crucial economic role that both agencies play in the competitiveness of Canadian agriculture and agri-food. Without the active and positive acceptance of Health Canada as a critical component of the government’s ambitious agricultural growth agenda, we believe that the economic targets for agriculture will go unrealized.

In CropLife Canada’s 2019 pre-budget submission to the House of Commons finance committee, we recommended the federal government convene a government-business working group tasked with reducing the cumulative regulatory burden facing Canadian companies and combat the inconsistent application of directives and best practices by regulators. This should be a three-year plan, with the minister of finance reporting on progress towards improved competitiveness via regulatory reform yearly upon the presentation of the federal budget. This effort must include the full and active participation of all federal departments, including Health Canada.

Specific to our sector, we also recommended the mandates of PMRA and CFIA be amended to include the facilitation of competitiveness and innovation as core parts of their mandate.

Canada’s economic performance within the difficult global environment continues to be remarkably resilient, but storm clouds are forming on the horizon. The trade environment is a difficult one, global competition is sharp, and business investment in Canada is lagging. Regulatory improvement presents a tremendous opportunity for the Government of Canada to take an organized, comprehensive, whole-of-government approach to enhancing competitiveness, while ensuring the health and safety of Canadians and the protection of our environment remain top priorities. CropLife Canada and its member companies, and indeed all of Canadian agriculture, stand ready to play a constructive role in the process, one that will help the government of Canada reach its policy goal of $75 billion in agriculture and agri-food exports by 2025.

Dennis Prouse, vice-president of government affairs, CropLife Canada

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Source: CropLife Canada