Cutting the red tape on the U.S. border

Canada and the U.S. plan to end the ‘tyranny’ of regulations that raise the costs of goods crossing the border


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Robert Carberry is as passionate as it’s possible to imagine a bureaucrat who bears the unwieldy title of assistant secretary regulatory co-operation council secretariat. Sitting in a conference room at the Canadian Embassy in Washington, he speaks with the rapid-fire excitement of a person whose dreams are about to come true.

After 13 years of leaders pushing for Canada-U.S. regulatory co-operation—with only fitful progress to show for their efforts—it is about to arrive wholesale.

On Tuesday and Wednesday in Washington, some 70 regulators from Canada will sit down with 134 from the U.S. to begin the daunting task of bringing the two regulatory systems into greater sync. They represent about 90 per cent of the regulators responsible for goods that cross the border—from food to automobiles. Another 200 representatives of industry and associations will sit down with the regulators on Wednesday to give input into the kinds of regulatory differences that impose unintentional costs on businesses and consumers.

“We have been blown away by the interest in this,” said Carberry.

The goal is to fundamentally change the relationships between regulators in both countries—to make the alignment of rules and procedures the default, rather than the exception—and to end the “tyranny of small differences” that raise costs.

Until now, progress has been ad hoc and tentative: some veterinary drugs have been approved through joint testing, and the two countries have collaborated on vehicle emissions standards, for example. Carberry says that’s about to change as the regulatory agencies meet and design a work plan for the coming year.

“Over the next year we want to see a lot of tangible things delivered,” said Carberry, a former vice-president at the Canada Food Inspections Agency.

In the slow-moving world of bureaucracies this promises to herald a new era: institutionalizing co-operation inside the regulatory bodies. Until now, the process has been driven from the centre: by Carberry’s office inside the Treasury Board Secretariat and the White House Office of Information and Regulatory Affairs.

If the plan succeeds, the impacts for consumers could be potentially huge. “It’s going to ease the movement of products, lower the costs of manufacturing, and hopefully that translates into either lower costs or better products for the consumers,” said Carberry.

Based on anecdotal evidence from industry, he says it is “self-evident” that regulatory differences drive up prices of consumer goods in Canada as businesses retrofit their inventory to make it comply with different rules. He gives the example of lipstick: if it includes sunscreen, in Canada it is classified as a drug and faces different regulatory requirements than in the U.S. As a result, it costs $150,000 to introduce a new lipstick with an SPF factor to Canada—compared to only $700 in the U.S., said Carberry.

He said the goal is not for one country to move to the other’s standards but to update the standards together, or adopt international standards simultaneously.

The issue has preoccupied Canadian leaders since 9/11, when industry cried out against “border thickening” driven by security, but also by regulatory red tape. At a leaders’ meeting in Montebello, Que., in 2007, Jean Chrétien complained that jellybeans were subject to different rules in each country. Later, Barack Obama’s first ambassador to Canada, David Jacobson, noted that Cheerios were differently regulated on both sides of the border.

After the Chrétien-Bush co-operation initiative, dubbed the Security and Prosperity Partnership, fizzled out in  2011, Obama and Harper launched the Regulatory Cooperation Council (RCC) in both countries.

The resistance to the regulatory co-operation agenda came from two sources: Some on the political left worried they would lead to a “race to the bottom” with Canada being pressured to accept weaker U.S. regulations. Meanwhile, industry expressed frustration that the process was too slow, with too few results.

Carberry insists the approach will avoid a “race to the bottom” of regulation, stressing that many of the regulatory differences are unintentional. “We find that there is rarely any fundamental difference in the desired outcomes we are looking for,” said Carberry.

Industry is optimistic. Kelly Johnston, vice-president of Campbell Soup, whose operations are integrated on both sides of the border, said the level of alignment in new food labelling requirements the two countries have been working on has been “impressive.”

“Ultimately, the big prize will be a ‘seamless’ inspection system where food items are inspected once in North America—eliminating duplicate inspections and allowing more food products to cross the border without being stopped,” said Johnston. “We’re obviously not there yet, but that’s where the RCC is headed.”

There are real issues to be worked out about information sharing as well as joint funding. But Carberry says it’s the future. “Regulatory co-operation is finding its way into all the dialogues over free agreements. So we think it’s going to be big over the next 10 years,” he added. “I think Canada and the U.S. have a real advantage because we’re getting this farther down the road.”

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