Regulatory Cooperation Council

The first initiative seeking to reduce regulatory burden began with the meeting of Prime Minister Stephen Harper and President Obama in February of 2011, when they announced the creation of the Canada/United States Regulatory Cooperation Council (RCC). The RCC’s goal is to increase regulatory transparency and coordination between the two countries. The announcement noted that, “Regulation plays an important role in both our countries. Effective regulations protect our health, safety and the environment while supporting growth, investment, innovation and market openness.” The RCC went on to note that, “While our regulatory systems are very similar in the objectives they seek to achieve, there is value in enhancing the mechanisms in place to foster cooperation in designing regulations or to ensure alignment in their implementation or enforcement.

Unnecessary regulatory differences and duplicative actions hinder cross-border trade and investment, and ultimately impose a cost on our citizens, businesses and economies.”

Since the utterance of those very important statements, officials in both Canada and the United States have been diligently working to create a concrete ‘joint action plan’ to breathe life into this new policy framework. The working groups on the Joint Action Plan continue to meet in Ottawa and Washington, fleshing out practical approaches to enhance harmonization. In the coming months CPCA will work closely with our counterpart in Washington, the American Coatings Association, to ensure that every effort is made to facilitate more effective collaboration and provide input where appropriate and necessary to the relevant working groups.

This ongoing initiative will lead to important gains for the coatings sector, which is a highly regulated segment of the economy. It is also an area that has long argued for stronger harmonization of regulations on both sides of the border given the highly integrated nature of the products produced and sold by member companies. In fact, recent VOC coatings regulations for key product categories revealed that the industry fully accepts the need for harmonization to ensure a level playing field for companies doing business in both countries. This initiative will provide new opportunities to work more closely on future regulations and other risk management approaches.

Red Tape Reduction Commission

On the heels of this important bilateral initiative came the Red Tape Reduction Commission’s report in January 2012, chaired by the Hon. Maxime Bernier. The Commission’s first task was to “Identify irritants to business that stem from federal regulatory requirements and review how those requirements are administered in order to reduce the compliance burden on businesses, especially small business.”  The Commission identified 2,300 irritants created by federal regulations and has recommended 90 specific solutions to eliminate or alleviate them. The second part of the Commission’s mandate was to “recommend options that … will control and reduce compliance burden on a long-term basis.” The Commission is seeking ways to reduce the regulatory burden by reducing regulation. This is the first time in Canada a government has stated that it has a plan to ‘reduce’ regulations. Since Confederation, regulations have increased year after year after year.

The federal government has now responded favourably to the Commission’s recommendations with a specific Red Tape Reduction Action Plan. In announcing the Action Plan, the Minister responsible said, “The Government of Canada’s ambitious plan to cut red tape will further free up business to invest in jobs and growth, and cement Canada’s reputation as one of the best places in the world to do business.” The Government’s Red Tape Reduction Action Plan is one of the most ambitious red tape-cutting exercises in the world today, and it strengthens Canada’s leading global position as a transparent and predictable place to invest. The Conservative Government believes that this is part of its business-friendly agenda. The Action Plan will now place the onus on federal regulators to consider new approaches to achieving its objectives other than just regulation.

The Action Plan introduces six systemic changes that will reduce administrative burden on business, make it easier to do business with regulators and improve service and predictability. These government-wide changes are supported by 90 department-specific reforms that are common-sense solutions to business irritants in areas ranging from tax and payroll, to labour, licences and permits, transport and cross-border trade. It is important to note that “the vast majority of these reforms will be implemented over the next three years.”

The most substantive change is the ‘one-for-one’ rule. The requirement under this new rule stipulates that when a new or amended regulation increases administrative burden on business, regulators will be required to offset – from their existing regulations – an equal amount of administrative burden on business. This has to be done within two years of the regulatory change. It also requires regulators to remove a regulation each time they introduce a new regulation that imposes new administrative burdens on business. In both cases the value of the administrative burden cost savings or cost increases to business will be made public in the Regulatory Impact Analysis Statement and published in the Canada Gazette. It should be noted that Canada would be the first country to give such a rule the weight of legislation.

Federal officials already fully understand the intent of the government’s new policy push to reduce regulatory burden. CPCA has witnessed this firsthand in recent weeks with respect to consultations on a number of products that were scheduled for regulation. However, we are now proceeding down the path of a risk management approach instead of regulation.

It is incumbent upon industry and industry associations like the Canadian Paint and Coatings Association to bring forward new risk management approaches and pollution prevention instruments for products currently on the radar screen. This is especially so in cases where there is clearly a low level of risk from both a health and environmental perspective.

Reducing regulation, however, does not mean that there will be no government oversight for the many risks that exist and that require some form of risk management. The Commission recognizes this indisputable fact when it says, “Governments sometimes try to eliminate all risk, which is an impossible goal, and trying to do so can unnecessarily stifle innovation and growth in the process.” Clearly, the federal government recognizes the need to use other instruments besides regulation. These include, but are not limited to, both mandatory and voluntary instruments such as pollution prevention plans, environmental performance agreements and codes of good practice, all of which can stipulate the level of acceptable standards for particular product categories.

CPCA Capitalizes on Non-Regulatory Approach

As the leading voice for the paint and coatings sector in Canada on a host of issues impacting manufacturers, suppliers and distributors in the industry, CPCA has been successful in capitalizing on these two recent initiatives. Both Environment Canada and Health Canada have agreed to non-regulatory approaches on several products that had been scheduled for a regulation. The first initiative was on aerosols. After weeks of informal discussions, the federal government engaged with CPCA in a ‘pre-consultation review’ (meaning only the coatings sector was consulted) of how Canada might align its regulations with those of the United States, including California under CARB. Following this consultation, Environment Canada agreed that an instrument other than regulation would be the preferred route. They also agreed that we would wait to determine what new rules were adopted in California before proceeding. Once that is done the regulations in both countries would be aligned, and Canada will very likely proceed with a pollution prevention instrument over a regulatory approach. This is a less-time-consuming and less-costly solution for industry.

Another substance under review by regulators and used in the coatings sector is MEKO (2-butanone oxime). CPCA has been working toward a non-regulatory approach for it as well. Once again the federal government invited CPCA’s Paint and Coatings Working Group to an exclusive pre-consultation meeting for the paint and coatings sector for Batch 7 MEKO under Canada’s Chemical Management Plan. This consultation addressed a proposal from Health Canada for a first ever ‘code of practice’, which will be posted for wider consultation to other stakeholders at a later date.

The CPCA Paint and Coatings Working Group assessed the proposed non-mandatory risk management instrument and formulated comprehensive and specific recommendations for a better way forward. CPCA formally submitted its comments on behalf of the industry on August 10, 2012. The federal government plans to publish the proposed Code of Practice at the end of 2012, followed by a multi-stakeholder consultation with all stakeholders. At that time CPCA will once again have an opportunity to comment on behalf of the industry.

It should be noted that while codes of practice have been used for producers in the past, this is the first time ever for a code of practice for a consumer product like paint. Once the wider industry consultations have concluded, the code would then be finalized in the Canada Gazette I in 2013. The new labeling requirements contained in the code will likely be phased in over a three-year period after its approval.

This is a clear case of a non-mandatory risk management instrument being used in lieu of a regulation. This approach is evidence that the federal government is serious about implementing the recommendations of the Red Tape Reduction Commission. In cases were there is negligible impact from the use of a substance like MEKO, other non-regulatory instruments can and will be used to reduce the costs to both industry and government in Canada. This groundbreaking effort will surely lead the way for other products to be considered in a similar light.

Times, They Are a Changin’ in Canada

It is clear that Canada’s federal government believes that the administrative burden, and more importantly costs, can be greatly reduced when there are more appropriate risk management approaches beyond simply regulating. The savings in time, cost and aggravation for both industry and government are greatly reduced. When a government legislates a ‘one-for-one’ rule for regulations it is clear that it is serious about reducing red tape. Indeed, the times they are a changin’ in Canada.