Thank you for having me here today on behalf of Canadian Manufacturers and Exporters.
Manufacturing generates 10% of Canada's GDP and produces nearly two-thirds of Canada's value-added exports, employing 1.8 million people in high-paying jobs across the country.
It doesn't take more than a cursory look at Canada's key economic indicators to see that we are in a growth crisis. Just two weeks ago, the senior deputy governor of the Bank of Canada called Canada's lagging productivity “an emergency”.
CME is pleased to participate in your study and share our thoughts on part of what is contributing to our economic malaise—Canada's regulatory competitiveness. Canada is an increasingly challenging jurisdiction in which to start a manufacturing business, invest in it and grow it. Canadian manufacturers are caught up in an increasingly complex web of rules and requirements that prevent businesses and their employees from reaching their full potential.
When we survey our members, a large majority of whom are small and medium-sized manufacturers, the regulatory burden consistently polls as one of the biggest barriers to growing their business.
Over the last two decades, the federal government has undertaken a range of regulatory red tape reduction initiatives and reforms. They have all been useful to varying degrees, but fall well short of what is required to reduce the ongoing accumulation of red tape that is removing the dynamism from our economy.
This assessment applies to the Treasury Board's current federal regulatory modernization agenda. While there are some worthwhile tools in it, it is too modest in its scope and its ambition.
With that in mind, I'd like to share some of CME's recommendations on how the government should make Canada more competitive.
First, we recommend that the government legislate economic growth and competitiveness mandates for all regulators, alongside their current mandates. Presently many regulators do not sufficiently consider the economic consequences of their actions, because they are not required to. We can achieve both protection and prosperity, but only if the government sets an expectation that economic growth is an outcome that all regulators should be working towards.
In the 2018 fall economic statement, the government announced that it was considering implementing a change to add “regulatory efficiency and economic growth” to regulator mandates. However, after two rounds of consultations in 2019, this idea was quietly abandoned.
This change could be modelled after the U.K. growth duty, implemented there in 2017, which provides detailed guidance for U.K. regulators on how they can better support sustainable economic growth through the decisions they make and the ways in which they regulate.
We believe this is the most important policy change that this committee could recommend and that the government could undertake.
There are other steps the government should take to reduce the cumulative burden facing manufacturers and all businesses. We believe the government should expand the scope and ambition of the one-for-one rule. As committee members here will know, this rule requires that for every new regulation that increases the administrative burden on business, the cost of this burden must be offset through other regulatory changes.
Despite this rule being in place for over a decade, the number of overall administrative requirements on business have continued to increase, from 129,000 when the federal government first started tracking this figure in 2014 to 149,000 as of mid-2022. That's a net increase of nearly 20,000 new administrative requirements over eight years.
We also think there is an important leadership role for the federal government in working with the provinces to undertake a serious effort to reduce interprovincial trade barriers and promote regulatory harmonization among provinces through mutual recognition. Most of Canada's interprovincial trade barriers are the costs of complying with rules, regulations, standards and certifications that vary from one province to another. Mutual recognition would provide that any one province should allow any product, service, credential or other certification to be considered automatically compliant if it is already so in another jurisdiction.
The 2017 Canadian Free Trade Agreement did create a body, the regulatory reconciliation and co-operation table, to resolve interprovincial regulatory differences; however, it has proven to be not fit for purpose. While it has done some valuable work, it simply does far too little far too slowly.
Last, and while perhaps not as transformative, we do believe that there are small but meaningful steps the government can take to strengthen some of the regulatory modernization tools already at their disposal.
For instance, the External Advisory Committee on Regulatory Competitiveness, first established in 2018, provides advice to the President of the Treasury Board on how to improve Canada's regulatory competitiveness. It has made a series of excellent recommendations to the government, including in its most recent letter, stating that “What we heard from all that there is an urgent need to address the challenges that face the regulatory system.”
We recommend that Treasury Board adopt a “comply or explain” principle toward the committee's advice, which means that the government is obliged to either pursue the proposed initiatives from the committee or explain why they will not be pursued. This “comply or explain” principle would add a level of accountability to the work and to other government consultation panels.
To wrap up, the ability to navigate complex regulatory processes should not be a primary driver of business success in Canada. However, it has become so. In the face of the current growth crisis, it is essential that governments invest more of their time and energy to help make Canada a lower-friction economy. Doing so will help create a more efficient and competitive industrial economy while increasing the wealth and well-being of Canadians.
Thank you.