Thank you, Mr. Chair, and good morning, members. Thank you very much for inviting the Treasury Board of Canada Secretariat to contribute to your review of the Red Tape Reduction Act. As the chair indicated, my name is James Van Raalte and I'm the executive director of the regulatory policy and co-operation directorate at the regulatory affairs sector with the Treasury Board of Canada Secretariat.
My remarks and testimony this morning are intended to explain what the act sets out to do and how it works, share some initial observations on its results reported to date, and describe the efforts that have been made so far to support its upcoming statutory review.
The one-for-one rule, instituted in Treasury Board policy in 2012-13 and then legislated in the Red Tape Reduction Act in 2015, aims to control the administrative burden that regulations impose on businesses. Administrative burden refers to the costs that relate to activities like submitting reports and preparing for inspections, whereas compliance burden refers to the costs related to complying with the actual requirements that protect health, safety, the environment and the economy—for example, things like batch testing.
There are two components to the one-for-one rule. When a new or amended regulation increases the administrative burden on business, the cost of this burden must be offset via other regulatory changes. Specifically, for every dollar of new administrative costs imposed, a dollar must be removed; and for every new regulation that introduces administrative burden, an existing regulation must be removed. In both instances, when new administrative costs are introduced, departments have two years to offset the costs with other changes and remove a regulation from across a minister's portfolio.
There are three categories of regulations exempted from the requirements to offset: first, regulations related to tax or tax administration; second, regulations where there is no discretion regarding what is to be included in the regulation, for example, treaty obligations or the implementation of a court decision; and third, regulations made in response to emergency, unique or exceptional circumstances, including where compliance with the rule would compromise the Canadian economy, public health or safety.
Only Governor in Council and ministerial regulations that impose administrative burden on businesses are subject to this one-for-one rule. It does not apply to regulations developed under independent regulation-making authorities such as those typically granted to organizations at arm's length from government, such as the Canadian Radio-television and Telecommunications Commission.
I would like to share with the committee some of the results of the one-for-one rule observed since its introduction as policy in 2012 and up to March 31, 2019. I will clarify for the committee that the policy was in place before the act was in place and we have performance results all the way through, so I will be speaking to those performance results all the way back to 2012.
For context, Canada currently has about 3,000 federal regulatory titles in its stock. Annually, approximately 150 to 250 regulatory changes are approved. This includes the additions of new regulations, amendments to regulations and repeals.
Since the policy was put in place in 2012, there have been approximately 2,070 regulatory changes, again, new amendments or repeals. Roughly 86% of these, or 1,772, were subject to ministerial or Governor in Council approval and were therefore within the scope of the rule. The remainder, as I indicated, were made through independent agencies, arm's length from the government.
Of the regulatory changes within the scope of the rule, about 15%, or 266, had implications under the rule, meaning that the changes that were made increased or decreased administrative costs for business, added new regulations with new administrative costs for business, repealed regulations or contained some combination of these elements.
Under the first element of the rule, regulators removed an estimated $44.9 million in annualized administrative costs while adding $20.6 million in annualized administrative costs, producing a $24.33-million net reduction in annualized administrative costs. Put another way, for every dollar of administrative costs that has increased, approximately $2.2 were decreased.
Under the second element of the rule, departments and agencies added a total of 41 new regulations that introduced new administrative burden on business. They also repealed a total of 185 regulations from their stock. This has resulted in a total of 144 net regulations removed under the rule.
With regard to the application of exemptions, a total of 88 regulations met the criteria that were approved for exemption by the Treasury Board. The breakdown is as follows.
Fifteen of the 88, or approximately 17%, were exempted because they were related to tax or tax administration, for example the United States Surtax Remission Order, which reimbursed importers for Canadian surtaxes on imported steel that responded to U.S. tariffs on Canadian steel, or the elements of the Softwood Lumber Products Export Charge Act, 2006 regulations, which eliminated export charges on softwood lumber products exported from Canada to the United States.
Forty-nine out of 88, or approximately 56%, were exempted on the basis that there was no discretion regarding what is to be included in the regulation. This included the access to cannabis for medical purposes regulations, which responded to Federal Court and Supreme Court decisions concerning the access to cannabis for medical purposes, or the regulations implementing the United Nations resolutions on Mali, which implemented a UN Security Council resolution to freeze the assets of designated individuals and entities whose assets were derailing the peace process in Mali.
Finally, 28 of the 88 exemptions were there because they were made in response to emergency or unique circumstances, including where compliance with the rule would compromise the Canadian economy, public health or safety—for example, a 2017 amendment to the regulations amending the wild animal and plant trade regulations that temporarily prohibited the importation of salamanders to prevent the introduction of a specific fungal disease into Canadian ecosystems.
The Government of Canada, as a whole, has maintained positive balances—that is, it has complied with the act—for both elements of the rule: administrative burden and regulatory titles.
Allowing portfolios to bank reductions in administrative burden and numbers of regulations provides added incentive for regulators to remove burden as soon as possible. This results in immediate benefit to Canadian businesses.
One significant gain from the implementation of the rule is the system-wide heightened awareness of the cost impacts of administrative requirements on business. As a direct result of the rule's application, we now have the ability to measure, record, and report on changes in regulatory administrative burden on business and to inform meaningful conversations with stakeholders about its reduction.
The one-for-one rule is one part of a larger scheme of policies and measures that make up Canada's regulatory framework. Cost benefit analysis, the application of the small business lens, regulatory co-operation and regulatory stock review all aim, among other objectives, to minimize burden on business and maximize efficiencies.
Following the implementation of the Cabinet Directive on Regulation in September 2018, the government committed to a regulatory reform agenda and announced the review of this act alongside a number of modernization initiatives that aim to strengthen transparency, co-operation across jurisdictions, innovation, and competitiveness within the regulatory system.
These initiatives include targeted regulatory reviews, the development of an online consultation platform, the establishment of a Centre for Regulatory Innovation, an annual regulatory modernization bill, and an external advisory committee on regulatory competitiveness and ongoing support for international and interprovincial regulatory co-operation.
As you know, the Red Tape Reduction Act includes a provision for the President of the Treasury Board to cause its review five years after coming into force. In preparation for this review, the Treasury Board of Canada Secretariat launched a consultation via Canada Gazette from June 28 until September 5, 2019.
Thank you, Mr. Chair. I'll try to move through this relatively quickly.
I am pleased to be here today as part of your review of the Red Tape Reduction Act.
My colleague from the Treasury Board Secretariat has given us a great overview of the RTRA. What I hope to do this morning is provide a brief perspective from a regulatory department.
The health portfolio regulates tens of thousands of products that we all use in everyday life. These cut across a number of different industry sectors. They range from children's sleepwear and toys to the medicines that we might take. They also include pesticides, vaping and tobacco products, cannabis and controlled substances. There's quite a wide range of products.
The health portfolio is responsible for the administration of 18 acts and 137 regulations. Health Canada is among a small number of departments that represent a significant portion of the regulations administered by the Government of Canada. The key drivers for our regulatory activity are to protect the health and safety of Canadians and to facilitate access to products that are vital to well-being.
As my colleague has just outlined, the purpose of the RTRA is to reduce the administrative burden that regulations impose on businesses.
That is something we take seriously at Health Canada when considering the development and amendment of regulations. Since the Red Tape Reduction Act and the one-for-one rule were enacted, the health portfolio has made notable progress in meeting the purpose of the act: 13 regulatory titles have been eliminated and $4.2 million in administrative burden has been reduced.
It's important to note that this reduction has been accomplished in a period when the department has seen the emergence of two entirely new industries. The vaping or electronic cigarettes industry and the cannabis industry did not exist at the time of the RTRA's passage. Both have required legislative and regulatory frameworks to be established, adding new titles to our stock.
Health Canada has implemented regular monitoring and reporting regimes to measure compliance with the act and reports annually to Canadians through the Treasury Board Secretariat. The Red Tape Reduction Act and the one-for-one rule are an important part of our efforts to control administrative burden, but there are a number of other measures that contribute to this work as well.
The Government of Canada has a robust regulatory management and modernization agenda. My colleague from the Treasury Board Secretariat would be able to provide detail on this if you wish, as it is led by his department.
Health Canada is an active participant in the Government of Canada's regulatory co-operation efforts. We work with partners in the United States and the European Union to reduce unnecessary differences and eliminate duplicative requirements and barriers among jurisdictions. One example of this is the 2019 approval of two oncology drugs through joint reviews with the United States and Australia. Further, Health Canada has worked with the United States Center for Veterinary Medicine and has simultaneously approved 11 veterinary drugs.
Regulatory alignment with international partners not only reduces burden on industry, it also makes Canada a more attractive market for business development and expansion.
Health Canada participates in the sectoral regulatory reviews led by the TBS. A review of regulations in the health and biosciences sector was conducted in 2018 to identify and address regulatory barriers to economic growth and innovation. The results were published in the health and biosciences sectoral regulatory review road map. The road map sets out a variety of initiatives that aim to reduce burden and foster innovation that the department will pursue over the coming years.
One example of this, as noted in the 2018 fall economic statement, is Health Canada's proposal to reduce clinical trials record retention requirements from 25 years down to 15. This will not only reduce burden on industry, but it will align with international standards in other jurisdictions like the U.K., the U.S., the EU and Australia. Potential savings of up to $40,000 are estimated per clinical trial from this change.
Finished product testing is another good example, where the department is pursuing regulatory change intended to create an exemption to retesting requirements for some lower-level products imported from certain countries with comparable safety standards to Canada. This will reduce the burden on industry, much of which would be small and medium-sized enterprises. During our consultation on this, one of the industry associations estimated that the reduction of this duplicative testing requirement could result in approximately $32 million in savings to industry annually.
Instrument choice is another important mechanism to reduce burden. One of the trappings of regulators is that they regulate. Regulation by default is something that has to be guarded against. When it is determined that some level of intervention is required to respond to an identified need or risk, considering non-regulatory instruments is important. Solutions through policy, guidance and in some cases voluntary measures can be a way of achieving policy objectives with a view to minimizing the amount of regulatory burden imposed. Even in cases where it is determined that a regulation is required, regulatory design is important. Where possible, outcome or performance-based regulations should be considered, where regulations specify the desired result of the regulation, rather than just a prescriptive manner in which to comply with the regulation.
As you can see, with the RTRA as a backdrop, there are a number of measures being employed at Health Canada that also seek to reduce burden.
Just before I close my remarks, I would like to briefly reflect on one of the important challenges the department faces in its quest to reduce administrative burden. Health Canada is the department responsible for helping Canadians maintain and improve their health. In short, our regulations are rooted in health protection. When regulating in the interest of the health of Canadians, there's always a need to balance this policy objective with the burden imposed on the industries that we regulate. Where regulatory intervention is required, the health of Canadians will be the determining factor in the approach we take.
Mr. Chair, I think I'll leave it there in the interest of time. I'm happy to take any questions you may have.
I'll offer a quick perspective.
We've obviously been watching what has been happening in other jurisdictions and some of the conversations that are taking place there. When you look at the early implementation of a one-for-one, or more, there's probably more inventory in the regulatory stock in terms of outdated or antiquated regulations.
You go through your first couple of rounds and remove those, and your regulatory stock gets a bit leaner. Then, when you have a lean regulatory stock and you want to bring forward a new title, and you have to get rid of three, what do you do, particularly for a regulator that regulates in the interest of health? Which risks are less important, or which dangers? Maybe we have to get rid of these precautions because we want these other precautions. It's something that has to be given consideration when looking at that.
Other arguments have been raised in other jurisdictions. What's happening is that regulations are becoming more complex. Regulators are having to save titles: one in, three out. They're taking like regulations and combining them into mega regulations. This makes compliance more difficult for industry. Where you have clear and distinct regulation that's easily understood and easily applied, that works. When you start to combine these things for the sake of saving titles, you could actually increase compliance burden, which is different from administrative burden, but they're in the same vein.
Those are some of the arguments that have been raised when looking at what's going on in some of the other jurisdictions and would be a concern if you were to go to that type of approach.
The members of the committee were selected by the President of the Treasury Board of the day. I'll quickly go through the list of members, if I may, Mr. Chair. The work of the president's external advisory committee on regulatory competitiveness is transparently published on the Treasury Board of Canada's website, so I'm not revealing any brand new information.
The chair is Ms. Laura Jones, who is the executive vice-president and chief strategic officer of the Canadian Federation of Independent Business.
Dr. Catherine Beaudry is a professor and Canada research chair in the creation, development and the commercialization of innovation, at Polytechnique Montréal.
Stewart Elgie is a professor of law and economics and executive chair of the Smart Prosperity Institute, University of Ottawa.
Ginny Flood is vice-president of government relations at Suncor Energy.
Anne Fowlie is the CEO of AgWise Strategic Solutions, Fruit and Vegetable Dispute Resolution Corporation.
Don Mercer is the president of the Consumers Council of Canada.
Keith Mussar is the vice-president of regulatory affairs, I.E.Canada, Canadian Association of Importers and Exporters.
Finally, Nancy Olewiler is the director of the School of Public Policy at Simon Fraser University.
Consumer representation, academic representation and industry representation balance out the membership of that advisory committee.