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Making regulation a competitive advantage

It’s long been recognized that competitiveness is key to economic prosperity. According to the World Bank’s Ease of Doing Business international ranking, Canada fell from fourth to 22nd position between 2006 and 2018.

Canada has a competitiveness challenge—and a recent Business Council of Canada survey identified regulation as the single most important policy area for our governments. If we can create effective regulations that achieve the public interest with the least economic disruption, we can foster economic growth and improve the country’s standard of living. We can also reduce the regulatory burden Canada’s businesses face, improving our investment attractiveness and ease of doing business in the process.

Read Making regulation a competitive advantage to find out how we can help Canada turn its regulatory environment into a global competitive advantage—and spur business growth in the process.

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Five dimensions affecting Canadian competitiveness

Canada’s current regulatory environment is creating a range of economic costs and distortions that can erode economic competitiveness, as seen in five dimensions:

Design
Relevance
Overlap
Burden
Enforcement

Seven dimensions for regulatory reform

To help counter these critical challenges and increase Canada’s growth and competitiveness, we highlight seven dimensions that should be considered by Canadian governments that want to make meaningful progress on the issue:

1

Seven dimensions for regulatory reform

Use new technologies for design and review

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2

Collect and publish more performance data

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3

Evaluate all regulations on a cost-benefit basis

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4

Ensure a pre-determined review mechanism

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5

Improve harmonization and
co-creation

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6

Promote the use of regulatory sandboxes

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7

Facilitate the use of new technology in regulation

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Businesses and governments should work together to conduct a regulatory cost-benefit analysis that assesses a variety of economic factors, including the impact such regulations could potentially have on competitiveness. Cost and competitiveness should be a consideration when regulators think about duplication and misalignment with other jurisdictions.
The market moves so fast it’s challenging for regulators to keep pace, which creates a significant lag between regulation and the day’s social and economic challenges. Any review of existing regulations and the development of new ones should consider how to facilitate the use of new technology. Regulators should also have dedicated teams to actively monitor and prioritize the quick development and management of regulatory issues. These teams should consult with business stakeholders so the latter can stay ahead of regulatory developments, opening the door for entrepreneurialism, and stimulating demand for new products and services.
The purpose of regulatory sandboxes is to provide a “safe space” for companies to test new business models or activities that are constrained by current or absent regulation. It’s something more governments should be considering.
To facilitate regulatory design and review, governments should maximize the use of new and advanced technologies such as artificial intelligence (AI), machine learning, and blockchain (i.e., distributed ledger), among others. AI and machine-learning technology, for instance, can sift through vast amounts of data to identify out-of-date regulations and overlap, while distributed ledgers offer an efficient, lower-cost substitute for existing regulatory practices such as land registries.
When governments collect and publish meaningful regulatory data, it enhances accountability and the scope for improvements. Each level of government—federal, provincial, and municipal—should collect data on the regulatory impact on each industry or sector and, where possible, the public interest of regulations should be cited with greater disclosure of regulatory costs.
When governments create an expectation that regulations will be regularly reviewed, the regulatory environment immediately becomes more adaptive, effective, and in-tune with stakeholder needs. That’s why all regulations should have a regular review mechanism in place, by means of sunset clauses, mandated reviews, or formal consultations on effectiveness.
Governments should adopt regulatory best practices—both from across Canada and beyond—and seek to co-create regulations with federal, provincial, and territorial regulators, as well as the business community, through a harmonization council.

Getting it right

Sound, effective regulation is a mechanism that both protects public interests and fosters market success. Making regulation a competitive advantage outlines tangible ways Canada can use this powerful tool to fuel a flourishing and globally competitive economy.

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Stay connected

At Deloitte, we believe Canada’s economic growth and competitiveness isn’t simply about driving greater business profits, it’s about making life better for all Canadians. The more productive businesses are, the more income they generate—which leads to higher wages, more tax revenue, better social programs, and an improved standard of living. If you’d like to receive future reports on how businesses and governments can contribute to greater Canadian competitiveness, please subscribe below.

 

Key contact

Craig Alexander

Partner & Chief Economist
Economic Advisory

craigalexander@deloitte.ca


Craig Alexander is the first Chief Economist at Deloitte Canada. He has over twenty years of experience in the private sector as a senior executive and leading economist in applied economics and forecasting. He performed macroeconomic research, regional and sector analysis, and fiscal market forecasting and modelling.


Craig is a passionate public speaker and holds a graduate degree in Economics from the University of Toronto.

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