U.S.-Canada Regulatory Cooperation To Boost Economic Growth

Monday, August 20, 2012 - 13:55

Consider this: meat produced at a federally registered plant in Southwest Ontario can be shipped from the plant straight to Canadian retail stores. However, if bound for the U.S. market, that same shipment must report to a border inspection house where it might be off-loaded and sampled for re-inspection. Despite Canada and the U.S. both utilizing strong meat safety programs with inspection systems that regulators recognize as equivalent, the first shipment (within Canada) could travel 1,200 miles to kitchens in Nova Scotia before the second has even cleared the Buffalo border crossing a mere 110 miles from the plant. These delays generate transportation costs, supply chain disruption and loss of shelf life, all of which are felt by exporters, importers and, finally, consumers.  

While the Canada-U.S. trade relationship is the largest in the world, this example illustrates what some refer to as the “tyranny of small differences,” in this case the regulatory red tape that stymies economic recovery, business growth and the flow of trade.

Consider as well the case of the ubiquitous Campbell’s Soup can. Plants in Canada are tasked with making 19-ounce cans while Campbell’s simultaneously runs U.S. production lines turning out 16-ounce cans. The company would like to remedy this discrepancy with a one-size-fits-all approach, allowing for the same specifications and production lines in both countries. So far, however, it has been prevented from doing so because of different imposed production standards.

Enter the Joint Action Plan for the Regulatory Cooperation Council, which Prime Minister Harper and President Obama announced in December of last year. This initiative represents an opportunity to move beyond previous approaches to cooperation and advance the U.S.-Canada regulatory relationship to a new level. In fact, this initiative has become one of President Obama’s top priorities for creating jobs and growing the United States economy.

Business groups, stakeholders and regulators in both countries informed the development of the Joint Action Plan, and stakeholders have been overwhelmingly supportive of this initiative. The creation of the Joint Action Plan, however, is not the end of the journey; rather, it represents an important step along the path to enhanced regulatory cooperation between Canada and the United States. Continued support, especially among industry, is needed to ensure the Plan remains a top-of-mind priority.

Canada is an ideal partner for the U.S. on regulatory harmonization; with existing robust regulatory regimes achieving the same general outcomes, the neighboring countries are unique in that they already have the prerequisites for high impact and success. And because the U.S. and Canadian manufacturing sectors and supply chains are highly integrated – we are each other’s greatest export market – any improvements would yield immediate benefits.

Even our most highly integrated sectors illustrate the great need for further alignment. The North American automotive sector, for example, represents 22 percent of all trade between the United States and Canada, but inconsistent regulatory requirements between our countries increase costs for vehicle development and design and, accordingly, impose additional engineering expense as well as reductions in plant capacity utilization.

Greater efficiencies for the automotive sector – just one of many industries affected by our incompatible regulatory policies – would eliminate costs and delays that are largely self-imposed, increase trade and, ultimately, make manufacturing in Canada and the U.S. more competitive. The increased economic strength of our joint marketplace makes us more competitive globally and increases jobs for both countries.

A starting point for change, this plan for greater regulatory alignment consists of 29 initiatives concentrated in four sectors of the economy: agriculture, transportation, health and personal care products and the environment. Each of these 29 initiatives represents a vehicle to create a new form of advanced cooperation that will spill over into all sectors of the economy on both sides of the border.

Reducing and eliminating duplicative requirements, partnering on regulatory standards development, and streamlining submission and approval processes are all on the agenda. The Joint Action Plan would, for example, implement a Common Electronic Submission Gateway to allow industry applicants in the pharmaceutical sector to simultaneously submit electronic documents relating to their products to both Health Canada and the U.S. Food and Drug Administration, further catalyzing increased review and collaboration between these two crucial regulatory agencies.

Joint Action Plan working groups, led by senior officials from the primary regulatory departments in Canada and the U.S., have developed work plans detailing concrete objectives, deliverables and milestones to achieve tangible progress within a two-year mandate. Together, the U.S. and Canada are working towards an aligned regulatory system that will benefit citizens and businesses on both sides of the border.

John F. Prato is Consul General of Canada in New York.