Industry Committee on Feb. 19th, 2019

[Michael Chong]

Yes, but you don't have numbers for provincial and municipal governments.

[Frances McRae]

No.

[Michael Chong]

Okay. If you had those, they might be useful for the committee. If we're going to help Canadian competitiveness, it would be useful to have an analysis of how many regulations there are, obviously at the federal level, but also at the provincial and municipal levels.

I've been on and off this committee for 15 years. This is the third time the government has undertaken a broad sweeping initiative to undertake regulatory reform. I remember in 2004 we had the smart regulation initiative, and then in 2010-11 we had the Beyond the Border and regulatory reform initiatives with the establishment of the Regulatory Cooperation Council for a number of areas of regulatory reform. Now we have the latest cabinet directive on this.

If you look at the data, we continue to slip in the rankings when it comes to regulatory burden. According to the World Economic Forum, Canada now ranks 38th out of a list of countries in terms of regulatory burden for business investment. That's despite all these initiatives that we've been taking. Why is that? Why are we slipping? Is it a lack of political leadership? Is it some other reason? Why are we slipping despite all these initiatives to reduce the regulatory burden?

[Frances McRae]

Maybe I'll start and then Stephen can talk a little bit more about the overall environment.

I think the reality is it's a shifting environment. Regulations change all the time, and countries change their regulatory regimes all the time. The technology has made things quite different, whether it's compliance kinds of technologies, regulatory technology.... It's not a static environment, and I would say that each of the initiatives that has been undertaken has gone some way to address the issues, and then the environment keeps shifting. I think it goes back to the point about agility that the economic strategy tables made. It's really important that we have an agile system that is able to keep up. I think it is a shifting environment and that agility is the only thing that's going to keep us ahead.

Stephen.

[Stephen Fertuck]

You raise a good point that looking back over the scope of 15 years there have been a number of initiatives put in place that have attempted to tackle this issue. I think if we look back over that period of time there have been a number of improvements and advancements that have been made. Certainly some of the frameworks in place have been improved upon and updated, whether it's the cabinet directive or a number of the other initiatives you identify. Certainly as part of the previous Red Tape Reduction Act there was a systematic attempt to look at all the requirements for companies to file paper copies of certain documents and so on and a wholesale attempt to replace those with requirements for digital documents to facilitate, as Frances mentioned, with the advent of new technologies, the streamlining of some of those processes.

Over time we've actually seen some landmark pieces of legislation, including, for example, the Safe Food for Canadians Act. In the context of Agriculture and Agri-Food Canada and the Canadian Food Inspection Agency, their regime was subject to a complete overhaul. It's now an outcomes-based act that focuses really on achieving the outcomes of safe food but not in a prescriptive way; whereas its predecessor very much was saying that the only acceptable way to do inspection of certain products and so on was if it could conform to certain parameters that were very explicit and consequently very narrow. Over the scope of time there have been some significant changes that have brought greater flexibility to businesses to comply with government requirements in more flexible ways, but there's certainly more work to be done.

Darcy, did you want to—

[Michael Chong]

No, I....

Mr. Chair, do I still have some time left?

[The Chair, Liberal, Dan Ruimy]

You have two minutes.

[Michael Chong]

If you look at the data, Canada has chronically low levels of business investment. I don't think it's entirely due to regulation, but obviously, that's one critical element of it. If we're going to increase prosperity for Canadians, I think one critical component of doing that is streamlining regulation. One of the things I would suggest the department needs to look at is doing an analysis of provincial and municipal regulations. I don't see how we can achieve a lighter regulatory burden while still achieving health and safety outcomes unless we know what the provinces and the municipalities are doing; otherwise, you have a situation where the left and right hands don't know what they're doing.

When you look at the levels of business investment we have in this country, we're somewhere around 10% of GDP on a non-residential basis. That's much lower than our major economic competitors south of the border and across the Atlantic. I think this is critically important for us to improve our competitiveness.

The thing that sticks in my mind about how ridiculous some of these regulations are is an incident with the National Capital Commission. Several years ago, two young children wanted to set up a lemonade stand and got slapped with a massive bureaucracy that wanted them to pay $1,500 for a permit. It created a huge outcry. What was so ridiculous about the whole situation was that, after the controversy, the NCC came forward with a new rule that, yes, allowed them to set up a lemonade stand, but it was subject to a plethora of conditions. It had to have bilingual signage. They had to report the revenues to the NCC. There was an indemnification clause. There were size restrictions and adherence to provincial health and safety regulations.

My kids live in Wellington County. They set up a lemonade stand and we didn't have to go through any of that. Nobody died because they drank my kids' lemonade. This happened in recent years; this wasn't 15 years ago.

We've been through a lot of this stuff in the last 15 years, yet we continue to slip in the rankings. We don't have the sense of where provincial and federal regulations are. One of the results is low levels of business investment and a sense that Canada can't attract business investment and can't get the economy moving.

[The Chair, Liberal, Dan Ruimy]

I hate to cut you off, but you're over the time.

[Frances McRae]

I'll add one comment. First of all, I agree with everything that you're saying. Really what we hear from small businesses is about the cumulative impact of compliance. What you're saying is important, that businesses don't really focus on whether it's a federal, provincial or municipal requirement. They have to deal with all of it.

Minister LeBlanc is working hard on interprovincial barriers to trade. The one I mentioned earlier about corporate registries is one of those that we are working on to try to reduce that burden across the system with the provinces and territories. There are a number of other examples like that.

You're absolutely right that the cumulative effect is definitely something we are concerned about.

[The Chair, Liberal, Dan Ruimy]

Thank you.

We will move to Mr. Masse.

[Brian Masse, NDP, Windsor West, ON]

Thank you, Mr. Chair.

Some of the businesses that we've heard from and the representatives.... Is there a kind of working group that could be created? Are there thoughts of a different approach to what has been done in the past? The term they continue to use is “red tape”. Could you elaborate on whether or not there could be a different approach? They've offered suggestions of what's been done in British Columbia and a few other places.

Could I have your thoughts on that and how your department would respond to that suggestion?

[Frances McRae]

I would point back to the fall economic statement, where we did talk about the establishment of a centre for regulatory innovation. We see that kind of an organization looking at best practices, whether they come from international jurisdictions, Canadian jurisdictions or different federal departments. The idea is that we build on best practices.

Some of the efforts in some of the Canadian jurisdictions are starting to show some results, as you would have heard. Those would be things the federal government would want to be looking at. Treasury Board Secretariat, in its work with the provinces and territories more broadly, is well placed to be able to pull that in.

[Brian Masse, NDP, Windsor West, ON]

I know Ontario is now talking about another one. It seems to be ideologically driven as opposed to anything else. They haven't really outlined a plan. It still is something that they want to go after. It's not a negative criticism in terms of the ideology of where it comes from. It's like, if you want to create a regulation you have to get rid of two, or something like that. It's just kind of an equation. British Columbia has moved on that, too.

Do I understand there will be a review that would include those best practices from other jurisdictions? They are looking for something concrete to come back. They are not ruled out, but they are going to be evaluated, I suppose.

[Frances McRae]

My sense is that the regulatory centre for innovation will look at any good practice from anywhere. Some of the things we hear from businesses around the one-for-one rule, for example, is that you have to be a little bit careful because sometimes you can take out a very easy rule and add a very burdensome rule. The numbers don't necessarily equate; the one-for-one is sort of apples and oranges sometimes. We would want to avoid a situation where we're strictly working on a numbers basis. The measure of the burden is something that we would want to be looking at a little bit better than just the numbers.

[Brian Masse, NDP, Windsor West, ON]

That's why I characterize it as ideological. I'm not trying to be negative about the sense of it, but it seems to be driven by a political position versus that of real results and success.

Is there any measurement in terms of elimination of regulation and the potential harm or impact to businesses and public safety? One thing that isn't discussed is the flip side to this. Some of the regulatory practices are in place because some people didn't want to follow best practices or proper practices and required basically behaviour modification in the industry either to ensure their products were safety-related or to ensure that the competition they were doing was fair. This committee was part of that work to put pressure on the government almost a decade ago to end the corporate deductibility of fines and penalties. Some people abused regulations and used fines and penalties as expenses as part of their business model and would claim that back at tax time.

Is there anything done to measure when a regulatory regime is changed and what the potential impact is not only for consumers for health and safety standards, but also for other businesses?

[Darcy DeMarsico]

One thing that came up on that point very strongly at the economic strategy tables is the impact that our strong regulatory system has on our export brand. One of the clearest measures is the fact that Canadian companies get sales overseas for their products because they have a reputation that engenders consumer trust. I know our agri-food table talks about that in the context of its exports to Asia in particular, as well. There is a really tangible consumer brand sales measurement.

[Brian Masse, NDP, Windsor West, ON]

Can that be shared with our committee though? I think it would be important if there are measurements taking place with those. I would like to hear those. For example, I know that the pharmaceutical industry at times has complained about Health Canada and getting through the process. At the same time, you're right. I know that for the supplement industry and others, we have some of the better standards and regulatory practices that actually allow us to enter into markets that would otherwise have been closed. We do sometimes fast-track.

Is there any information about that or are there examples that you can actually provide to the committee?

[Frances McRae]

Darcy, correct me if I'm wrong here, but my sense is that this is exactly what the economic strategy tables are calling for: an assessment of these issues. These are not things that exist at the moment. They are calling for these areas to be looked at further. I think the advisory committee that has been committed to will help us really refine what it is we need as kind of first steps to assessing the balance of all these factors. Clearly, it's important. We all, as Canadians, value the attention that's paid to health, safety and environmental regulations.

It's really a question of what the right balance is. That's why the sandboxes are so important. You need to be able to experiment in a space where it's safe and contained, so you can understand what the potential impacts might be on the various factors that we need to balance.

[Brian Masse, NDP, Windsor West, ON]

Yes. I know I'm probably out of time, Mr. Chair.

In everything from energy drinks and so forth, these new emerging products have significant health consequences. It's a balance.

[The Chair, Liberal, Dan Ruimy]

Thank you very much.

We're going to move to Mr. Jowhari.

You have seven minutes.

[Majid Jowhari, Liberal, Richmond Hill, ON]

Thank you, Mr. Chair.

Thank you, witnesses, for your input.

I'm going to start with Ms. McRae.

In your opening statements, you talked about the number of acts and number of regulations within ISED. I was busy writing things down. Can you restate the number of acts and number of regulations that the department is dealing with?

I recall 50 acts, but I'm not sure how many regulations there were. They can be rough numbers.

[Frances McRae]

There are more than 100.

[Majid Jowhari, Liberal, Richmond Hill, ON]

Thank you.

You also mentioned that about 11% of the small businesses are focusing on exporting, and you threw a number out of about one million small businesses, the SMEs that we have. We know that companies that focus on exports grow faster. They pay higher and contribute to the GDP.

To what do you attribute the success of those 11%? I understand you talked about the cumulative impact of regulation on all of those, but what do you attribute to the success, and how do the regulations within ISED help or hinder?

[Frances McRae]

First of all, yes, the numbers we have really are from Statistics Canada, and that is just the percentage of our small and medium-sized enterprises that export.

We need to remember that the vast majority of small and medium-sized businesses that we have in this country are really, again, in local communities, whether they are restaurants, lodging or apparel shops. They really do cater much more to a local market.

We would never expect to see 100% of our companies exporting, for example. The goal of doubling exports is something that we think is an important goal—