Government Operations Committee on June 12th, 2024

[The Chair, Conservative, Kelly McCauley]

Good afternoon, everyone.

I call this meeting to order.

Welcome to meeting number 129 of the House of Commons Standing Committee on Government Operations and Estimates.

We have two witnesses with us today. We'll start with Laura Jones. She has slides up on our TV. We'll start with her, and then we'll go to Mr. Greco.

Very briefly, I'm going to save about five minutes at the end to go over the next few days and to update everyone on our shipbuilding tour.

Ms. Jones, welcome to OGGO.

The floor is yours for five minutes, please.

[Laura Jones, Chair, External Advisory Committee on Regulatory Competitiveness, Business Council of British Columbia]

Thank you for inviting me to address the committee.

By way of background, I am currently the president and CEO of the Business Council of British Columbia. Prior to that, I spent two decades with the Canadian Federation of Independent Business, representing small businesses across Canada.

Regulation has been a career-long interest of mine. I've published numerous studies on it, including one recently for a Harvard journal. I chair the External Advisory Committee on Regulatory Competitiveness, which has a two-year mandate to give external advice to the Treasury Board.

During our work, we heard the consistent theme that there was an urgent need to modernize and improve our regulatory system. I will touch specifically on three ideas that the committee spent time on.

First and most generally, Canada's regulatory system needs a vision or a North Star, and we propose that the North Star be regulatory excellence. The diagram on the slide that I provided shows that it has “protection” on the vertical axis and “burden” on the horizontal axis. The quadrant that we should be shooting for in Canada is the northwest quadrant, which represents high levels of protection while minimizing unnecessary burden. Of course, sometimes people refer to unnecessary burden as red tape.

High protection is important to Canadians. We want to trust that the milk in our fridge is safe to drink. It also gives us an advantage, of course, with foreign buyers. We know that Canadian products, whether we're talking about blueberries or lumber, are valued for their quality, and that includes the high environmental and safety standards that govern their production. That makes them very marketable.

Regulatory excellence serves the public interest by promoting strong protections while minimizing unnecessary burdens that can limit economic opportunities. Reducing unnecessary burden can be hugely beneficial.

We heard one very relevant and compelling example from the Province of Nova Scotia. The province is working to eliminate some of the unnecessary burdens facing doctors. One change they made was to eliminate some of the unneeded requirements around doctors writing sick notes. This one change alone freed up 67,000 hours of time for doctors in the province. That's the equivalent of over 200,000 patient visits. Imagine what a powerhouse Canada could be if we were to get serious about eliminating unnecessary burdens across all of the interactions that governments have with citizens and businesses.

The second idea that the committee spent time on is regulatory measurement. Measurement is foundational to accountability and trust. Canada's regulatory system is in critical need of better measures across the board.

We think that an early focus of this should be a digitized inventory of regulatory requirements, and the good news is that Transport Canada is developing something that could do this job across government. They're developing a searchable database that can do things such as identify regulatory requirements throughout the supply chain. You might want to know, for EV batteries, from mining to manufacturing, how many requirements there are, or maybe you want to know how many different definitions there are for “child” in Canadian legislation and regulation. The answer is that there are 103 definitions for “child” in 107 Canadian acts and regulation. An easy-to-search database would save time and allow for better targeting of areas where burden can be reduced and for understanding areas where more regulation may be needed. Of course, we could also track what's happening to the inventory over time.

The final idea that I want to highlight is consultation and engagement. We believe that we need a culture change from one-and-done consultation to ongoing engagement and continuous improvement throughout the life cycle of regulation. General themes that we heard in our work include the importance of plain language; outreach that starts early; making compliance as simple as possible and creating easier ways for users to provide feedback to the system; and creating and maintaining strong avenues for external advice and feedback, and this could, of course, include a third external advisory committee. We think that outside advice supports momentum and accountability around regulatory excellence.

In conclusion, there are three ideas.

First, regulatory excellence can make Canada more competitive and help with the affordability challenges that are top of mind for households and the productivity emergency that is top of mind for the Bank of Canada. It's an idea that should be championed across government and beyond.

Second, we need better measurement to hold ourselves accountable to the idea of regulatory excellence.

Finally, regulators need to seek outside advice and stay in conversation with those they regulate. The external advisory committee is a good example of that.

Thank you very much.

[The Chair, Conservative, Kelly McCauley]

Thank you very much, Ms. Jones.

Before we start with Mr. Greco, I just want to remind everyone to keep your earpieces away from your microphones at all times.

Mr. Greco, welcome back. The floor is yours.

[Alex Greco, Senior Director, Manufacturing and Value Chains, Canadian Chamber of Commerce]

Thank you, Mr. Chair. It's nice to see you again, along with members of this committee.

It's my pleasure, once again, to appear before you on behalf of 400 chambers of commerce and boards of trade and more than 200,000 businesses of all sizes, of all sectors of the economy, from every part of the country.

Now, I've already had a chance to share an opening statement with this committee, so I'm really looking forward to the discussion and questions. Therefore, I'll keep my opening remarks fairly brief.

Having said that, as I mentioned in my last appearance, the regulatory burden is an ongoing issue for Canadian businesses. It stifles business growth and investment in Canada. According to the Organization for Economic Co-operation and Development, or the OECD, Canada ranks second to last among a group of 31 countries in terms of business investment growth. The relatively poor investment performance of Canada compared to other countries suggests that businesses see less opportunity in Canada, spelling trouble for the country's future economic growth prospects.

While our members frequently bring forward specific regulatory challenges, they all lead to a broader general theme. The government is moving too slowly on regulatory modernization, while taking a piecemeal approach. As a result, the complexity of our regulatory system continues to stifle economic growth.

Canada also has a complex network of overlapping regulations from all levels of government that make a lot of things more expensive and more difficult than they need to be for businesses. Every hour and every dollar businesses spend dealing with redundant paperwork and confusing compliance issues is an hour or a dollar not spent running and growing a business. This is especially true for small businesses, which often lack the specialized staff and the financial resources of larger companies to deal with regulation and compliance.

Moreover, while some steps have been taken to strengthen interprovincial trade with the launch of the Canadian internal trade data and information hub, we have missed opportunities to reduce interprovincial trade barriers. Interprovincial trade barriers cost Canada's economy more than $14 billion each year. Progress on strengthening internal trade is necessary to reduce barriers and to ensure an open market and the free flow of people and goods across Canada.

Regulatory modernization does not mean deregulation or a lessening of environmental, labour, safety or any other important societal standards. Rather, it means writing regulations smarter, more efficiently and in a manner that focuses on economic growth and business investment.

Now is the time for the government to move boldly and urgently on a collaborative, transparent, whole-of-government approach to regulatory reform. The three recommendations I put forward in my last appearance were as follows. First, the government must move to implement an economic and competitiveness mandate to federal regulators. Second is regulatory alignment across domestic and international jurisdictions. Finally, the government should pledge to provide regulatory certainty to businesses.

The Canadian chamber, though, also recently submitted recommendations to the President of the Treasury Board regarding the reignition of the Canada–United States Regulatory Cooperation Council, or RCC. Our relationship with our most important trading partner is of the utmost priority, and it was good to see yesterday that Canada and the United States reaffirmed their shared commitment to regulatory co-operation.

In such a competitive business environment, we need to streamline and align regulatory processes, promote trade, pursue mutual recognition and enhance the efficiency of cross-border operations between our two countries. A reinvigorated regulatory co-operation council will do just that, while promoting Canadian prosperity, sustainability and safety. With nearly $3.5 billion of trade crossing our border every day, we must do everything we can to ensure that regulatory alignment will support further growth in trade and market access.

That said, I cannot stress enough that for Canada to be a competitive trading partner globally, we must have our own house in order. This will require not only regulatory harmonization with the United States but also addressing the web of overlapping regulations between Canadian jurisdictions. As I said previously, when regulations are more consistent between jurisdictions, businesses are better able to trade within Canada and beyond.

I thank you for the opportunity to bring further testimony to the honourable members of this committee today. I look forward to the questions and the discussion.

[The Chair, Conservative, Kelly McCauley]

Thank you, Mr. Greco.

We'll start with Mr. Morantz.

Mr. Morantz, welcome to OGGO.

[Marty Morantz, Conservative, Charleswood—St. James—Assiniboia—Headingley, MB]

Thank you, Mr. Chair. I'm happy to be here.

Mr. Greco, perhaps I'll start with you. I have in front of me a letter that was written on May 9, signed by Mr. Beatty, the head of the Canadian Chamber of Commerce. In the letter he comments at length about the budget that was delivered, and particularly the increases in the capital gains inclusion rate, which aren't self-regulatory in nature as the Income Tax Act is.

In the letter, he says:

As national industry associations representing Canadian companies committed to growing our economy, investing in this country and creating more opportunities for Canadians, we are alarmed to see these goals threatened by Budget 2024's proposed increase to the capital gains inclusion rate.

Further down, he says:

...the increase in the inclusion rate to 67% is deeply concerning to Canada's business community writ large.

He goes on with this line of argument, and then he says:

The assertion that the increase of the inclusion rate to 67% will only affect a small percentage of the wealthiest Canadians is misleading.

I point out that he signed it, and along with him, signatories are Dan Kelly from the CFIB, Mr. Darby from Canadian Manufacturers and Exporters, Kim Furlong from Canadian Venture Capital, Sherry McNeil from the Canadian Franchise Association, and Dave Carey from the Canola Growers Association.

Do you stand by those comments made by Mr. Beatty?

[Alex Greco]

Yes, we do.

There are a few things. On the tax increase, I think, there are a series of new taxes that build a lot of uncertainty in investment. I can tell you of one example. One of the small manufacturers I deal with is now caught in the middle of the capital gains tax. He was looking at doing an expansion, and he was dealing with a succession. As a result, because of the capital gains tax increase and how he's caught in that threshold, now he has to relook at his succession plan, and he has to look at new investments in machinery, equipment and technology.

At the end of the day, we want a competitive business environment, but we can't have a web of carve-outs and different caveats. We need to look at any of our “tax and spend” politics, and really look at broad-based tax reform to ensure innovation with that investment—

[Marty Morantz, Conservative, Charleswood—St. James—Assiniboia—Headingley, MB]

I appreciate that. I hate to cut you off, but I have a few more questions that I want to make sure we get in.

One of the things that are of great concern is this point about the small percentage of people. I think it's important for politicians of all political stripes to understand that most small businesses are not sole proprietorships. In other words, people don't own the assets directly. They're owned through companies.

This change is inherently unfair, because you can have two businesses that are exactly the same. You can have a hair salon that's owned as a sole proprietorship right next to one that's owned in a small business corporation. One gets the $250,000 exemption, and the other doesn't. If you count those people, who are no different from the sole proprietors, it's way higher, is it not?

[Alex Greco]

Yes, absolutely it is, but I think that's why we have to look at simplifying the tax system as a whole. It's why we've called for comprehensive tax reform for the interests of Canadians. We have to look not only at fairness. We have to look at it for all sizes of businesses; we have to look at generational fairness, and we have to look at what actions we want to take today so we're not sacrificing economic opportunity and prosperity.

[Marty Morantz, Conservative, Charleswood—St. James—Assiniboia—Headingley, MB]

I think it's important to understand that this change was made by way of a motion, not by a law. There will be implementing legislation that will come, probably in the fall. Is it the intention of the Canadian Chamber of Commerce to stridently argue that the government should withdraw these changes and not make an increase to the capital gains inclusion rate? Is that the position of the Canadian Chamber of Commerce? Will they do that?

[Alex Greco]

Yes, it is.

[Marty Morantz, Conservative, Charleswood—St. James—Assiniboia—Headingley, MB]

Thank you very much.

Now, perhaps I might switch, in the time I have left, Mr. Chair, to Ms. Jones. It's the same questions to you. Your organization issued a fairly damning press release about the budget. What is the Business Council's position on the increase in the capital gains inclusion rate? Do you plan to stridently argue against it before the implementation legislation is brought by the government?

[Laura Jones]

We're still looking at the capital gains inclusion rate. We certainly have heard some concerns from some members, particularly in the biotech sector, so we'll be looking carefully at that.

Our broader concern, in terms of what's going on in our budget, is that the numbers for GDP per capita are looking very bleak in Canada. We've lost a decade.

[Marty Morantz, Conservative, Charleswood—St. James—Assiniboia—Headingley, MB]

That's a great point.

Let me ask you this question. Do you think, given the weak productivity that we have in terms of per capita GDP, that increasing the capital gains tax at a time when we have such weak productivity is a good idea?

[Laura Jones]

We would be concerned about raising any taxes at a time when we are concerned about attracting investment to the country.

[Marty Morantz, Conservative, Charleswood—St. James—Assiniboia—Headingley, MB]

Thank you very much.

Those are my questions, Mr. Chair.

[The Chair, Conservative, Kelly McCauley]

Thank you.

Mr. Bains, please, you have six minutes.

[Parm Bains, Liberal, Steveston—Richmond East, BC]

Thank you, Mr. Chair.

Thank you to Mr. Greco and Ms. Jones for joining us today.

I represent a region that is integral to the movement of goods in the supply chain corridor in Richmond, British Columbia, which is a part of the port of metro Vancouver network, the largest port in Canada. We know there is an expansion coming. I want to talk a little about improving the efficiencies there through regulatory reform. If you can speak to that, I'll go to Mr. Greco first.

Maybe even talk a little about the introduction of artificial intelligence in developing the sustainment of growth for Canadian businesses in general.

[Alex Greco]

Yes, when you look at regulatory efficiency, I think you have to look at redundant regulations that don't make any sense anymore.

One of the things I know that's been talked about in the past has been the one-for-one rule. In looking at expanding and modernizing that, I think it is important to ensure that there are efficiencies. Also, you could look at eliminating two regulations when you're introducing one for the sole purpose. I think that's one thing.

Secondly, as I mentioned in my remarks, is removing internal trade barriers, and looking at a national corridors fund especially. We need to do investments in that because, for our transportation lines and our transmission lines, we need to deliver products, machinery, equipment and technology, whether it's through British Columbia or elsewhere, to ensure that you're having that efficiency.

I think, as well, if you want to increase more the transparency and predictability for all regulations, you could look at something like a regulatory bill of rights that has guiding principles and focuses on outcomes-based measures, proper consultation and alignment with Canada and the United States. Really, consider all impacts, including doing a full, robust economic analysis to ensure that regulations are done efficiently.

[Parm Bains, Liberal, Steveston—Richmond East, BC]

I want to pick up on what you mentioned earlier about the interprovincial trade barriers. I know that in the past there has been agreement between B.C. and Alberta, with the TILMA and things like that. How far have we come in combatting or overcoming those barriers?

You talked about consultation. What have you done, as an organization, to look at interprovincial trade barriers and consultation across the country?

[Alex Greco]

We consult with not only our member companies but also our chambers of commerce and our boards of trade through our policy committees and through one-on-one conversations. As for how far we've gotten, as I mentioned in my remarks, I think there have been steps with the internal trade hub to start to move that forward and to look at strengthening internal trade.

However, I think we still have a long way to go in terms of building that. In our 2024 pre-budget submission, we talked about establishing a national registry that goes beyond that in terms of identifying proper internal trade barriers. That's one aspect that we could do. Secondly, looking at the Canada-U.S.-Mexico free trade agreement in terms of being able to modernize the different mechanisms around internal trade barriers to reduce those barriers would be another thing.

The third thing is looking at mutual recognition in terms of whether you're dealing with trucking regulations or health and safety regulations and being able to harmonize them between different provinces in order to ensure that you have consistency. You have one requirement for B.C., and then you have another for Ontario and another for Quebec. The more harmonization you have, the easier it would be to do things, but it would also ensure that you're protecting the health and safety of Canadians.

[Parm Bains, Liberal, Steveston—Richmond East, BC]

Do your consultations, if you've done any, include the governing bodies of the respective industries?

[Alex Greco]

Yes, we work closely with governing bodies as well, but then we also work with other trade associations and with different regulatory bodies. We try to take a whole-of-government approach federally, but then also with our provincial chambers of commerce and our members, of course, who work closely with provincial associations as well.

Also, on the theme of consultation, I think it's important, as we go forward, if we're improving consultations at the government level, to look at establishing different road maps with different divisions within the Treasury Board—whether you're dealing with life sciences, manufacturing, etc.—in order to see how you are progressing on these different measures and what your timelines are, and to ensure it aligns with not only business objectives but also Canadian objectives.

[Parm Bains, Liberal, Steveston—Richmond East, BC]

Have you witnessed protectionism through these governing bodies from province to province, an unwillingness to remove barriers?

[Alex Greco]

I can speak from my experience in Ontario, when I was with them many years ago. I think there's been a challenge in terms of a culture change. Sometimes regulatory bodies are well intended, I think, but then they put in a lot of hoops in terms of different sandboxes that are supposed to streamline regulations. The end result is that it's not done officially.

The Ontario Energy Board was an example of that many years ago, but subsequently they took steps through reforms and consultation to improve it. It's a work in progress.