Regulatory Myths – Part I
Myth number-1: the fewer regulations the better.
While most media and academic attention is devoted to what happens in legislatures and to the statutes they produce, most governing is done through the enactment and enforcement of regulations. Because this workhorse of government is under the radar for most citizens, it is not surprising that this system is not well known or understood by the general public. More surprising is how many academics continue to fundamentally misunderstand the regulatory system.
In this and the next few columns we’ll look at some pervasive regulatory myths. Myth number-1: the fewer regulations the better.
The most common myth is the notion that the major problem for innovation and competitiveness is the volume of regulations. None of the various federally regulated industry sectors with which I have been involved over the last four decades say that they suffer from too many regulations. Indeed, to facilitate exports or to maintain a level playing field they often want more. Their problems arise from bad regulations or bad enforcement. The main cause of “regulatory burden” or “red tape” is the failure of the regulatory system to respond in a timely way to new science or to changes in the business environment.
Lack of responsiveness can arise from a sclerotic regulatory change system. Canada’s was described once as the slowest in the Western world. Or delays can arise from the fact that a proposed change would create winners and losers and the losers lobby hard to stall the change. When there is a lack of consensus within an industry or between industry and the protection of the public, our political leaders have to make difficult choices (what governing is all about) and this causes delays.
So the problem is responsiveness, not volume. And yet professor Cass Sunstein, a leading academic who also led the U.S. Office of Information and Regulatory Affairs (OIRA), constantly brags that thanks to OIRA the Obama Administration “issued fewer regulations in its first four years” than any president back to and including Reagan. That Sunstein still labours under this delusion shows how deeply engrained is the flawed assumption that fewer is always better. Many governments, thinking they are helping industry by reducing the volume of new regulations, put in place barriers to their speedy enactment, seemingly unaware that most regulations are to amend existing out-of-date regulations and so the barriers are actually counterproductive. Moreover, to get around these self-imposed delays in the regulatory process, bureaucrats resort to using guidelines, often resulting in regulatory uncertainty, an even bigger problem for industry.
A cursory review of the recent regulations enacted by the Canadian Food Inspection Agency (CFIA) illustrates that most regulations are to modernize existing regulations, not to impose new regulatory burdens. With responsibility for 26 sets of regulations, the CFIA regulatory regime has a huge impact on the competitiveness of several major industry sectors including the food industry, Canada’s largest manufacturing sector. In the past 18 months the CFIA brought forward 27 regulatory initiatives, all amendments to update existing regulations, none imposing new regulatory burdens. A good illustrative example is the recently published amendments to the Food and Drug Regulations to clarify the definition of beer and what ingredients can be added to beer because “existing standards no longer reflect marketplace realities.” These regulations to allow the industry to be more innovative and competitive are far more indicative of the role of regulatory enactments than the myth of the increasing burden of unnecessary regulatory volume.
According to Canada’s regulatory guru, Doug Blair of RIAS Inc., “the Government of Canada has recognized that the number of regulations is not a meaningful measure of regulatory burden, which is why over the past two years there has been an increased focus on measuring the burden imposed by the regulation.” This, of course, is easier said than done. Next month we’ll look at the much-vaunted value of risk-benefit analysis. The following month we’ll look at Sunstein’s overdone theory of “nudging” and his naive notion that politics can and should be kept out of science-based regulation making.
Ronald L. Doering, BA, LL.B., MA, LL.D., is a past president of the Canadian Food Inspection Agency. He is counsel in the Ottawa offices of Gowlings. Contact him at Ronald.firstname.lastname@example.org