Steer or Drift? Taking Charge of Canada-US Regulatory Convergence

The Study in Brief

The potential benefits of greater regulatory convergence between Canada and the United States have been well-documented. At issue: reducing the “tyranny of small differences” in Canadian and American regulations that is frustrating businesses, adding costs, and stymieing the benefits of further economic integration.

In June 2005, the Canadian, US, and Mexican governments agreed that they would develop “a trilateral Regulatory Cooperation Framework by 2007 to support and enhance existing, as well as encourage new cooperation among regulators.” Progress, however, has been glacial. The default option has been to stay on the very Canadian path that has gradually emerged: cooperation if necessary but not necessarily cooperation. This Commentary argues that the time has come for Canadians to decide whether they will stay the default course or opt for a more strategic, top-down approach of deliberately steering and determining the pace of this process.

Operating in a small, export-dependent economy next door to the world’s most vibrant economy, Canadian suppliers and regulators alike have learned the benefits of Canada-US regulatory cooperation. The result has been an inexorable drift toward ever-greater convergence. This trend is unlikely to change, but Canadians can take steps to harness it and ensure that it develops in ways that bring greater benefits and more control than is currently the case.

As a first step, the two governments should change the current practice of discretionary cooperation at the federal level to a mandatory process of information exchange, consultation, and even coordination. The aim should be to advance a jointly agreed mandate to improve regulatory outcomes, eliminate duplication and redundancy, reduce regulatory differences between the two countries, and effect a North American approach to regulation. Much of this mandatory cooperation can be implemented on the basis of existing institutions and be focused on priority sectors. Its most critical results will be experience and mutual confidence.

This program of regulatory cooperation should form part of a larger vision; one in which both countries share a commitment to the creation of the necessary legal framework and institutions that will govern accelerating cross-border integration and ensure that both Canadians and Americans enjoy its benefits.