Recommendation Letter (January 2021)

Impact of COVID-19 on regulatory modernization

Since reconvening in September, the committee has had an opportunity to discuss the impact of COVID-19 on regulatory modernization with you and with other senior officials from the Treasury Board of Canada Secretariat. Key insights from these discussions include the following:

• The pandemic has had a disproportionate impact on sectors such as tourism, transportation and energy, as well as on small businesses and vulnerable populations.
• The government can respond with agility in times of crisis, but in some cases unnecessary regulatory hurdles have persisted.
• A key element of the government’s new-found agility was a shift in regulatory focus from process to outcomes and toward a culture of risk management rather than risk aversion.
• Digitalization was critical to the pandemic response; however, there is still room for improvement. For example, some Canadians and businesses without high-speed Internet struggled to access financial supports from the government.
• Government information was sometimes confusing or conflicting. While this problem existed pre-pandemic, it is worth emphasizing that the lines of communication between regulators and citizens need to be improved. Information should be clear and accessible with easy ways to get questions answered quickly.

COVID-19 was a shock to the regulatory system. Examples of a shift in mindset by all levels of government are not hard to find: approving vaccines rapidly, approving restaurant patios quickly, allowing doctors to bill for virtual appointments, and allowing meat to be sold across provincial borders temporarily to help prevent food shortages.

The committee believes it is worth bringing a small group together within government to capture the best of the regulatory changes from the COVID-19 experience and to focus on institutionalizing changes that will contribute to Canada’s regulatory excellence. The changes may include continuing to put greater emphasis on outcomes, continuing to be flexible and formalizing some of the temporary regulatory measures and adjustments made to the administration of regulations.

Reflections on the committee’s previous advice letters

The themes and recommendations from our first two advice letters remain relevant and form a good foundation for modernizing Canada’s regulatory system.

We noted that regulatory competitiveness should have two focuses: reducing unnecessary burdens and accelerating innovation. These focuses include “dialing down” the negatives of regulation (removing irritants) and “dialing up” the positives that drive innovation (stringency, flexibility, predictability) without compromising the health, safety, environment and economic prosperity of Canadians.

The committee was pleased to hear about actions taken to implement some of our advice. The targeted regulatory reviews are in progress for digitalization, clean technology and international standards. We look forward to receiving an update on the development of roadmaps at a future meeting.

Based on our previous advice, the committee continues to recommend that the government:

• make measuring the cumulative burden of regulation a priority, including developing broad-based federal metrics
• focus on enhanced engagement with relevant parties early and often to understand operational realities and to determine how best to achieve desired outcomes
• consider a more general web-based consultation on regulatory irritants to engage all interested Canadians as a means of identifying issues that may be relatively easy to fix. Regulatory flexibility created during the COVID-19 crisis that should be made permanent would be a logical early focus. A virtual “suggestion box” for government could be permanent and would be a good way for government to establish a pathway for ongoing feedback from citizens on a range of regulatory issues. Such a suggestion box should not, of course, be the only pathway for collecting feedback; real-time engagement is also important and, as noted earlier, some citizens lack access to the Internet.
• identify opportunities to take a meaningful leadership role in influencing international standards, particularly in areas of competitive advantage, and explore strategies to enable Canada to accept evaluations from trusted international partners

New advice to the Treasury Board of Canada Secretariat

In accordance with the committee’s mandate, it was asked to provide advice on the new Centre for Regulatory Innovation, a proposed approach for integrating competitiveness considerations into departmental regulatory development processes, and the 2020 review of the Red Tape Reduction Act.

Regulatory innovation and experimentation

The committee recognizes that the new Centre for Regulatory Innovation has the potential to encourage experimentation, empower the exploration of non-traditional solutions, and encourage a culture of innovation among regulators. The Centre for Regulatory Innovation’s success will depend on its ability to be an active partner in the innovation ecosystem by helping to bridge the gap between the companies, investors, and academics who are innovating, and the government officials whose job it is to protect the public with appropriate regulations. Doing so requires an understanding of both worlds so that regulatory obstacles to promising developments in areas such as biomedical research and clean technology can be identified early, and so that solutions can be found, particularly for products or new technologies that do not fit into existing regulatory pathways. One can imagine any number of scenarios where a new approach or technology must engage multiple regulators in new ways, such as drones delivering medical samples, genomics improving the resiliency of Canada’s food supply to pathogens, rules for self-driven vehicles, to name a few. It will also be important to ensure that consumers and other interested parties have a voice in how regulatory innovation proceeds.

The Centre for Regulatory Innovation may also have a role to play in helping regulators better understand how artificial intelligence (AI) could improve its approach to regulating by identifying and categorizing risks more rapidly to improve the efficiency of regulatory resources. Technical Safety BC, for example, employs AI in virtual inspections that use cameras to scan the facility. AI helps identify where there might be an issue that warrants an in-person visit. This approach saves time and resources, while maintaining safety.

Often, departments regulate specific sectors with little regard for how new regulations might impact other regions or sectors. Digitalization and AI could provide timely analysis of this interconnectivity to reduce unintended challenges, such as conflicting regulations.

The committee recommends that the Centre for Regulatory Innovation be transparent in its work and communicate well both inside and outside of government. Doing so includes clarity about how the centre will prioritize its work. Transparency will build trust in the centre and lead to a better understanding of how regulatory innovation can improve outcomes for the public and ensure Canada’s long-term prosperity for current and future generations.

Practical considerations for the implementation of a competitiveness lens

The government made a commitment in its 2018 Fall Economic Statement to look at opportunities for legislative changes that could further integrate regulatory efficiency and economic growth into regulators’ mandates. The committee was asked to provide advice on adding a regulatory competitiveness lens as a means of integrating these considerations into the regulatory development process.

The proposed lens included considerations related to economic growth and trade, competition, cumulative effect, and innovation. While there were no objections to any of these areas, the committee noted the concept of “investment attractiveness” as a key consideration of competitiveness. The committee also expressed concern that implementing such a broad-ranging lens could be complicated in practice. We recommend that the government take more time to consider this lens before enshrining it in the regulator’s mandate. Further, the committee recommends keeping the lens focused and relevant to the new challenges we face, including economic recovery from the COVID-19 pandemic and the development of regulatory approaches that support innovation. Piloting a simple checklist might suffice as a start. Doing so would allow some additional consultation time with Canadians and the business community to garner their perspectives.

Policy considerations from the review of the Red Tape Reduction Act

The Treasury Board of Canada Secretariat briefed the committee on the Red Tape Reduction Act and asked for advice on several policy considerations.

Canada was the first country in the world to enshrine a one-for-one rule in legislation, and it did so with all-party support in 2015. The rule was an important signal that the cumulative burden of regulation was on the government’s radar screen, and this rule attracted media attention outside of Canada.

However, while the act keeps some elements of the regulatory burden from growing, it falls short of its promise to reduce red tape broadly defined. Further, the act only applies to businesses. Keeping the administrative burden of regulation reasonable for all Canadians should be a priority, and the committee recommends extending the Red Tape Reduction Act to include the administrative burden facing citizens. Provinces that have one-for-one policies that apply more broadly to the administrative burden affecting citizens have streamlined processes, such as accessing social services and registering to become an organ donor, to save time, frustration and lives.

As most burden stems from existing regulations, stock reviews, which is a requirement of the 2018 Cabinet Directive on Regulation, remain an important part of a system-wide approach to improving regulatory competitiveness. The committee looks forward to being engaged on the development of guidance that would support departments in conducting these reviews.

Beyond the one-for-one rule, the review is also an opportunity to consider legislative changes to the act that could enable regulators to be more agile and responsive. Specifically, the Treasury Board of Canada Secretariat sought our views on the potential use of temporary regulatory exemptions and on the incorporation of internal documents by reference into regulations.

The committee is generally supportive of government efforts that can lead to a more agile and responsive regulatory system; however, the concepts under consideration by the Treasury Board of Canada Secretariat need some “guardrails.” For example, the committee sees the value in giving ministers the power to authorize temporary regulatory exemptions where opportunities for regulatory experimentation exist, but there is a clear need for criteria, oversight and transparent accountability. Incorporating internal documents by reference must also be done very transparently.

Next steps

As the committee works toward our final advice letter, we will focus on the remaining items in our mandate, including advice related to a potential third round of regulatory reviews and advice on opportunities for more effective consultations. As noted earlier, inclusiveness will be an important principle as we look at consultation. We are also interested in digitalization, innovation and progress toward better regulatory measurement.

We support the need to have a more permanent, independent external advisory committee that has enough in-house capacity to do research and to provide the level of in-depth advice needed to support regulatory competitiveness and innovation, as recommended by the Growth Council and the Economic Strategy Tables. We will provide further advice on this point in our next letter. In the meantime, the committee wholeheartedly agrees that government should continue making regulatory modernization a priority long after our work is done.

Success in positioning Canada as a leader in regulatory excellence requires strong leadership across governments. We want to thank you for being a strong leader, and we encourage you to continue working to make this a priority for your colleagues across government as the country turns its attention to recovery in 2021.

Regards,

Laura Jones
Chair, External Advisory Committee on Regulatory Competitiveness

On behalf of committee members:

Dr. Catherine Beaudry
Professor and Canada Research Chair in Creation, Development and the Commercialization of Innovation
Polytechnique Montréal

Stewart Elgie
Professor of Law and Economics and Executive Chair of the Smart Prosperity Institute University of Ottawa

Ginny Flood
Retired Suncor Energy Inc. executive
Current Chair, Board of Directors, Clean Resource Innovation Network

Anne Fowlie
Chief Executive Officer of AgWise Strategic Solutions
Fruit and Vegetable Dispute Resolution Corporation

Laura Jones
Executive Vice-President and Chief Strategic Officer Canadian Federation of Independent Business

Don Mercer
President
Consumers Council of Canada

Keith Mussar
Vice-President of Regulatory Affairs
I.E. Canada, the Canadian Association of Importers and Exporters

Nancy Olewiler
Director, School of Public Policy Simon Fraser University

The views expressed by committee members are their own and not the views of the organizations with which they are affiliated.