Fixing Canada’s regulatory regime would foster economic growth

Article content

Donald Trump’s tariffs have sparked a surge of patriotism in Canada, evident in the growing push to buy local and the wave of “Made in Canada” branding on store shelves.

Article content

Article content

The threats from the south have done more than rally national pride. They’ve also forced us to take a hard look at how we do business. There’s a renewed push to tackle the long-standing barriers that have hindered Canada’s competitiveness — including the arbitrary and unnecessary interprovincial trade restrictions that have made it harder to operate within our own borders.

Article content

But there is more we can — and must — do in this pivotal moment to encourage economic growth and put Canadian businesses in a better position to compete and win.

In particular, policy makers need to take direct aim at the dizzying array of regulatory barriers that are undermining our productivity, hindering investment and stifling growth. Doing so won’t cost Canadian taxpayers a dime (it would likely save them a few, in fact) and could kickstart greater job creation and stronger growth.

Canada has been a laggard in regulatory competitiveness. A World Economic Forum report described Canadian companies as facing an above average burden from government regulation compared to other countries. A key OECD indicator shows Canada ranking well below France, Spain, Ireland and dozens of other countries in reducing regulatory barriers. Meanwhile, the C.D. Howe Institute has identified regulatory uncertainty as a driver of weak business investment in Canada and a contributor to its productivity challenge.

Certain aspects of Canada’s regulatory system are praiseworthy. Notably, our financial framework shielded Canadians from the 2008 financial crisis, a period when more than 500 United States banks failed, while not a single Canadian bank did.

Article content

Article content

But in recent years the pendulum has swung too far, over-emphasizing market stability at the expense of market dynamism. The result? Higher barriers to entry and expansion, a cooling of foreign investment and a tangled web of overlapping regulations.

At a time of rapid global change, Canada can’t afford to be an unattractive place to do business. Yet, that’s exactly where we’re heading.

Consider this: Canada now has 44 distinct financial services regulators. Some are national, others provincial. The outcome is an onerous patchwork of regulations that hinder labour mobility, suppress growth, increase costs for businesses and delay or halt the exchange of goods and services across provincial borders. Resources that could be directed toward job creation or innovation are instead earmarked for managing the regulatory load.

Many of these 44 regulators are expanding in size and scope. We’ve seen regulatory bodies double and even triple their headcount over the past 20 years. With that growth has come a significant expansion of mandate. They are becoming increasingly active in addressing non-financial risks, expanding beyond their traditional remit of overseeing market strength and stability and into areas that impact competitive business activities, such as strategy and reputation management.

Article content

What can Canada do now to improve its regulatory competitiveness?

First, we can halt the regulatory creep and modernize our regulatory infrastructure to improve efficiency and lower compliance costs for businesses. This, in turn, will free up more capital for investment and innovation for the benefit of Canadians.

Right now, financial services firms must build comprehensive compliance frameworks to correspond with the demands of their 44 regulators across expanding scopes of regulation. This is a highly unproductive deployment of resources and leads to higher costs for consumers.

Second, we can clarify regulators’ mandates to include a secondary focus on improving competitiveness and growth to complement their core mandate for financial stability. The C.D. Howe Institute recently found that only 18 per cent of initiatives undertaken by regulators are aimed at enhancing efficiency or promoting growth. By comparison, the U.K. recently introduced a mandate for its regulators to regulate for growth, not just risk.

And third, we can reduce the burden on companies by harmonizing regulation across the country and removing duplicative or outdated guidelines. For example, the credentials of many financial services professionals (including insurance adjusters) are not always recognized beyond their home province, creating an unnecessary barrier to mobility.

Article content

The Trump tariffs will be harmful to our economy — but they could also serve as an unprecedented opportunity for Canadian policymakers to sweep away outdated and ineffective obstacles to growth.

In this volatile moment, we are all seeking ways to protect our economy and help it prosper. A predictable and balanced regulatory framework would help to enhance economic competitiveness, encourage foreign capital investment, boost productivity and drive job creation.

Celyeste Power is chief executive of Insurance Bureau of Canada.

Bookmark our website and support our journalism: Don’t miss the business news you need to know — add financialpost.com to your bookmarks and sign up for our newsletters here.

Article content