Report calls for regulatory merger

Canada’s fractured regulatory landscape is much more than an inconvenience for registrants — it’s part of an overarching structure of artificial barriers that serve to stifle the entire economy, according to a new study.

In a report entitled Mission Possible: Stellar Canadian Performance in the Global Economy, the Conference Board of Canada calls for the tearing down of inter-provincial barriers, claiming that without serious structural reforms, the country will not be able to compete on a global basis.

“Our balkanized domestic economy is poorly suited to compete globally. In the same way that the European Union has been developing one market for more than two dozen countries, Canada needs to create a single Canadian market,” said Glen Hodgson, senior vice-president and chief economist of the Conference Board of Canada.

“We see glimmers of hope in actions such as the British Columbia–Alberta trade and investment agreement and other regulatory reforms, but we need to move further and faster to tear down barriers.”

The report calls for improved alignment between the various levels of government, with regulatory harmonization being “ideal.” Such a streamlined system of regulation would reduce costs to business in terms of compliance, as well as cutting the cost to government in terms of enforcement.

“The fact that problems persist in the design and implementation of regulation after years of initiatives aimed at reducing such barriers is, frankly, discouraging,” the report says. “Something different needs to be done to give more intelligent regulation the priority its economic importance warrants.”

The call for regulatory harmonization extends beyond the financial sector, but the report does specifically address the fragmented securities regime. The report calls the proposed passport system “a step in the right direction” but calls on the provinces to go further.

“The optimal outcome would be to bite the bullet and create a single national securities system and regulator,” the report says. “The same boldness is required in the financial services industry, where consolidation and openness to international competition should be advanced as core integral elements.”

The report cites a “vast web of regulatory and other non-tariff barriers” that need to be reformed. The report says these barriers fragment the domestic market, allowing companies to avoid the usual competitive pressures of an unprotected marketplace.

Without the pressure of competition, companies are lulled into a false sense of security, and they do not improve productivity. If Canadian businesses operated in a vacuum, they might get away with this, but foreign competitors are steadily gaining ground.

“Canada’s economic performance is slipping compared to other countries because their productivity is increasing at a faster rate,” says Hodgson. “Productivity is ‘smart growth,’ so let’s make productivity gains a national imperative.”

Filed by Steven Lamb, Advisor.ca, steven.lamb@advisor.rogers.com