Can De-Regulation Fix Canada?
Post 72 | Low hanging fruit with big impact
We hear a lot lately about de-regulation.
Argentina’s dramatic economic improvement is considerably owed to nearly 700 regulatory reforms since Javier Milei took office. The degree of that country’s turnaround and de-regulation’s contribution can’t be ignored.
The new Department of Government Efficiency (DOGE) in the US is making news as it targets $2 trillion in savings while proposing to create efficiencies and eliminate waste. We won’t know outcomes for some time, but it will minimally cause a long overdue rethink of entrenched structures and processes.
In Canada, Pierre Poilievre and the Conservatives are banking on regulatory reforms as a key tool in shrinking government, unshackling the free-market economy and improving cost of living. This will help battle inflation, impact housing affordability, balance budgets, encourage growth of the private sector and incentivize businesses to start, stay and grow here.
So what exactly are these regulations we keep hearing about? Can taming them make a difference? And should we care?
For many it’s little more than the droning of Charlie Brown’s teacher – something useful only to economists and politicians. Some fear any de-regulation means return of unchecked effluent runoff into waterways, choking smog and uncontrolled financial markets.
But neither is the case.
REGULATION
~ A principle, rule, or law designed to control or govern conduct
~A governmental order having the force of law
Regulations can be proactive or restrictive. They usually mandate, ban, compel or control. There are ramifications for non-compliance including blocked access, non-participation, monetary fines or even imprisonment.
Most days we abide or are confronted by dozens of them. Many derive from government, but not all; and usually in the form of a law, but not always. Obey a traffic signal, buy anything with physical or digital currency, pay tax on your groceries, wear your seatbelt, purchase alcohol, open a package, read a label, complete a form, renew a license, sign consent, show your ID, buy a stock, accept browsing cookies…or just don’t kill someone – and you’ve been touched by a regulation.
Except perhaps for anarchists, everyone agrees that humanity can’t exist without regulations. They have created a stable monetary system, cleaner environment, given us homes with sound building codes, provided safe streets and enabled much of the modern benefits we enjoy daily - too many to count, as they keep life from being an 1800s wild west show.
The more independent minded among us tend to chafe against their excesses, with liberally minded often more eager to embrace increasing controls. Though when moving into the world of business, such distinctions grow weaker. But I guarantee every Canadian has experienced irritation at some regulation that feels unnecessary, restrictive, nonsensical, duplicative or downright infuriating. And some experience it regularly – with business owners at the top of the list.
Regulations we find excessive are colloquially referred to as red tape, waste or often just bureaucracy - those processes that impede productivity, force duplication or demand form filling, box checking, and report completion with no discernible benefit.
We also encounter more insidious regulations that restrict our personal freedoms or impose censorship – the Covid era with enforced vaccines, lockdowns and government quelling of dissent providing stark examples with effects still echoing.
In recent years we’ve seen regulations sometimes motivated by ideology more than whatever consumer, health or environmental attributes they are purported to protect – often stepping on personal choice and free markets along the way.
Admittedly, assessing what is necessary versus extraneous or overly restrictive is often subjective, but the infamous line, “I know it when I see it”, often applies.
Many regulations are like Romulan vessels in Star Trek with their cloaking devices. Bump up against their force field and you’ll quickly know about it – yet you can’t see what’s behind to know how big it is, why it’s there, whether it’s aggressive or friendly, and how to navigate it. The cloaking device is dropped only when it suits and even then, the inhabits speak a language you can’t understand.
To wit - ponder some personal or business regulation you’ve encountered recently that struck you as unnecessary, inexplicable, repetitive or seemingly wasteful. Share an example in the comments section if you wish.
Here’s a brief personal example…
My brother agreed to swap me a long gun inherited from our father who’d owned it since at least the 1960s and never registered under the now-scrapped gun registry (costing $2B versus the 1995 estimate of $2M). After re-taking a two-day Canadian Firearm Safety Course, completing forms, paying my fee, agreeing to a criminal check and finally receiving my Possession and Acquisition License (PAL), I was set to get my gun legally rather than just have my brother hand it to me. So, I completed RCMP Form 5592e including references from two friends, each required to sign in through their bank then navigate a digital process to certify I wasn’t a nutbar (by the way, fellas, thanks for that). My brother then signed in similarly to confirm he'd seen my PAL and was going to transfer a gun to me. Nowhere did it ask for details of the gun – make, model or serial number (reference aforementioned gun registry boondoggle). To ensure compliance I called the help line and after many attempts was candidly told the only reason for this entire process was to confirm I was getting a gun, though they already knew I intended to do so based on issuing my PAL.
The total process required about five hours of my time to research, complete the forms and coordinate the process. Then probably thirty minutes from each of my references, plus similar time from my brother to conduct the digital transfer. We can only speculate the direct and indirect hours on the other end to process this one application. All for the government to be told something they already knew.
Now multiply that by tens of thousands of gun owners going through the same process. And this example is but a wee speck in an ocean of onerous, unnecessary regulations we run across daily.
And most of them fall on our businesses.
One of the few organizations in Canada focused on regulatory reforms is the Canadian Federation of Independent Business (CFIB). In 2021, they published the sixth edition of their Canada Red Tape Report with information on the cost of regulations.
“The cost of regulation from all three levels of government to Canadian businesses totalled $38.8 billion in 2020*. The total number of hours spent on regulatory compliance by businesses of all sizes in Canada was 731 million hours - the equivalent of nearly 375,000 full-time jobs.”
[*Adjusted to exclude Covid’s one-time impacts]
Necessary regulations were defined as delivering valuable health, safety, and environmental outcomes, among others. Red tape was deemed to deliver little or no benefit. Admittedly these distinctions were subjective but anyone who’s run a business knows what adds value, what is questionable and what is excessive.
According to the report 83% of businesses claim red tape is costing them, with that group believing regulations could be reduced by 28% without sacrificing the public interest.
This equates to $11 billion a year or ~0.5% of GDP. And translates into saving or repurposing 205 million hours or 105,000 full time jobs.
Average Canadian businesses consume the equivalent of 85 days annually on compliance matters, with 24 of those allocated to red tape.
And this just from our 1.2 million Small Medium Enterprises (SME), representing about one-third of total GDP. Replicate that straight line across all industry and we’ve potentially found a 1.5% GDP increase or $33 billion in savings.
A summary report by Fraser Institute quotes research on Canada’s federal regulations between 2006-2018, where what are considered “restrictive regulations” increased 8.3% from 66,000 to 72,000. They go on to list some of the major new regulations introduced since 2018 including:
Bill C-69 Impact Assessment Act (environmental assessment for any major infrastructure projects)
Bill C-48 (restricting oil tankers off Canada’s west coast)
EV mandates (requiring all new cars be electric vehicles by 2035)
Appliance standards (reducing energy consumption from household appliances)
Home efficiency standards (reducing household energy consumption)
Net-Zero Plastic Waste (banning use of single-use plastic products)
Net-Zero Nitrous Oxide emissions regulations
Net-Zero Building emissions regulations
Clean Electricity standards (to drive net emissions of GHG in electricity production to net-zero by 2035)
Since that report was published, we have also seen:
35% carbon emissions cap below 2019 levels on Canadian oil and gas production
Bill C-59 Federal Competition Act amendments to fine and jail industries (targeted at oil & gas) for the subjective sin of greenwashing their environmental credentials
What do you notice about all of these regulations?
None of them promote growth or drive productivity. They all restrict, ban or penalize, while driving the 43% increase (110,000 positions) in our federal bureaucracy since 2015 to manage it all.
You’ll never understand bureaucracies until you understand that for bureaucrats procedure is everything and outcomes are nothing.
~Thomas Sowell~
Let’s examine some examples to make this real-world.
MEDICAL. Building on a 2020 Patients Before Paperwork study by the Nova Scotia government looking for efficiencies in their medical system, the Canadian Taxpayers Federation published an extrapolated 2023 Report. “Our analysis finds that across Canada, physicians are spending 18.5 million hours each year on unnecessary administrative work - the equivalent of 55.6 million patient visits. By setting a target to reduce physician red tape by 10%, governments across Canada could reduce physician fatigue and burnout, improve the quality of patient care, and save the equivalent of 5.5 million patient visits a year.” That would make a helluva dent in our medical access problem where ~20% (8 million) of us have no primary care physician.
AIR TRAVEL. Complaining about the cost of airfare in Canada ranks up with kvetching about government and weather. A recent article in The Hub called out for regulatory reforms to the Canada Transportation Act. The three primary areas were to loosen cabotage restrictions (allow foreign airlines to carry passengers on domestic legs), ease foreign ownership restrictions to encourage competition, and privatize airports to reduce excessive fees to passengers. How many Canadians would complain about having more options and lower fees?
PLASTICS. December 2022 saw the ban of plastic straws in Canada (subsequently reversed by a Federal Court ruling a year later). This regulation had deeper reverberations than consumer irritation at sucking milkshakes through soggy paper. It placed further burden on an $80 billion food service industry with already tight margins - driving up costs, forcing them to source new suppliers, adapt to different products and deal with customer dissatisfaction. Any infinitesimal environmental impact of this ideologically driven ban, pales in comparison to the damper it put on businesses. Small pebbles make big waves.
NET ZERO. Net zero pursuit is costing us tens of billions in direct money and opportunity cost, including a $57B bet (Stellantis, Volkswagen, Honda, Northvolt) on EV battery technology that is already going pear-shaped - for vehicles that are showing lagging uptake when not subsidized and where Canada’s ICE-to-EV net zero global impact is maximally 0.15%. This was driven by a single mandate – to force the end of manufacturing combustion engines on passenger vehicles after 2035. And it used the twin hammers of government regulation and taxpayer money rather than letting the market determine demand level.
MINING. To make those EV batteries and other technologies driven by electrification, the world is demanding critical minerals. Canada’s mining industry is trying to move through feasibility and development stages for new zinc, copper, lithium and cobalt projects among others - to leverage the massive bounty beneath our feet. But we simply can’t get mines greenlit as lithium projects are taking 6 to 9 years and nickel mines 13 to 18 years, for example. They are held up by environmental consultations including from the Impact Assessment Act (IAA) (now in limbo given the Supreme Court’s 2023 ruling of its unconstitutionality). And seriously hamstrung by mandated indigenous consultation, including the 2021 Bill C-15.
ELECTRICITY. Consensus view of Canada’s electricity demand by 2050 is that we’ll need to triple our current capacity. Yet according to advocacy group Electricity Canada, new electrical projects require coordination with up to 80 regulatory bodies across federal/provincial jurisdictions, while facing increasing delays and costs from mandated indigenous consultations. And since 2019 IAA has further added mountains of paperwork, cost, time and complexity. It can take up to 10 years for a single new electrical generation project to wind its way through our regulatory gauntlet, and 4 years on average to gain federal approval for new transmission lines to even start being built.
LANGUAGE LABELING. Despite few French-only speaking Canadians outside of Quebec, our Consumer Packaging and Labelling Regulations require all prepackaged products sold everywhere in Canada to include minimum information in French - with food, pharmaceuticals and household products further encumbered. This places a disproportionate cost on small businesses (reliable studies are hard to source, though some suggest bilingual labeling adds 4% to total packaging costs), discourages foreign products entering the country and contributes to fewer consumer options with higher prices.
INTER-PROVINCIAL. Not all regulations are federal. A report by CFIB last year suggested that elimination of interprovincial trade barriers could result in $200 billion in savings worth $5100 per person. And a 2016 report suggested reduction of interprovincial trade barriers could reduce prices by 8-15%, adding anywhere from $50 to $130 billion to the Canadian economy.
I could go on…
Are there dangers of overdoing de-regulation? Unlikely. Given the massive body of regulations currently in place, excess de-regulation sits very low on my list of concerns. And if we do make an occasional oops we can readily fix it. But like the cloaked Romulans we can’t even see the thousands of regulations throttling our economy, businesses and lives, and costing us billions - though we all know what it feels like to bump into them.
We require a 180 degree change in commitment and action from our next government.
First, we need a publicly stated commitment to tackle de-regulation head on, with a concerted department-by-department effort to eliminate waste, duplication and spending. Declare it loudly and set target outcomes - otherwise it won’t happen. If done even half right, we will see positive impacts over the coming years.
Secondly, it must be done quickly. This is a rip-off-the-bandage job and not one for incrementalism. Let’s follow Argentina’s example, where Milei issued a mega-decree in his first thirty days in office that enacted 366 regulatory reforms which rose to 672 within the first year.
This key tool will help increase productivity, encourage competition, reduce time consuming paperwork, raise GDP, encourage investment, unencumber business growth and shrink the size and invasiveness of our government. Nothing is a magic bullet to fix what ails Canada, but this is some of the lowest hanging fruit we can pick to set us on the path.
Still think de-regulation is just geeky political talk?
Stay tuned and stay pragmatic.
I worked with government during my career and can attest that Sowell was correct that procedure is everything. With respect to your article another of his observations is that “People with time on their hands will invariably waste the time of people who have work to do.”, ergo regulation upon regulation.
Ronald Regan was also correct in his assessment that "Government's view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.". We have seen that too much over the past decade.
I think in the case of the potential “green” economy the subsidize part has been needed because of the lack of market interest, in order to promote the ideology. Sowell will likely again be proven correct in “It’s hard to imagine a more stupid or dangerous way of making decisions than by putting those decisions in the hands of people who pay no price for being wrong.”, when most of the green “investments” are written off.
In closing, I think the Canadian regulations that restrict the development and operations for mining the very minerals required for the green economy will likely negate Canada’s participation in that economy and hand it over to others, especially China. The government seems to have gotten our strengths backwards. They are subsidizing potential manufacturing, that others have well established, and strangling our natural resources, which have been our strength, that would have contributed to our success in the green economy.
Referring to Sowell, process in business is to achieve an outcome and if that outcome is not being achieved then change the process. In government, outcomes are seldom monitored and processes are seldom changed because the process for change is burdensome and frustrating.
Every regulation in government should be accompanied by stating the desired outcome and who is dealing with that. It also should be accompanied by a regulation that can be repealed or abandoned as it is out of date or has proven of little value.