Two-for-one special: Canada could deal out regulatory reform lessons to Trump

U.S. President Donald Trump and Prime Minister Justin Trudeau may be working at odds on some issues, like funding for contraception and family planning programs, but experts say regulatory reform may be an area for constructive engagement between the two administrations.

Trump signed an executive order in January to implement a “two-for-one rule,” requiring federal agencies to cut two existing regulations for every new regulation they implement.

In a video message, Trump explained that the rule was part of a broader effort to cut regulations “massively” for small business so that they can open and expand more easily.

Reactionary headlines from American publications about Trump’s two-for-one rule.

After the order, the Office of Management and Budget was tasked with designing the policy specifics, which are yet to be released. In the interim the media has reacted, debating whether or not it is a gimmick or whether, if implemented smartly, it could work to reduce regulatory burden on business.

Other articles have taken a different angle, identifying the order as an opportunity for Canada to offer lessons to the Trump administration.

Canada has utilized the one-for-one rule for five years. [Photo © Alex Parsons]

In Canada the federal government is coming up on the five-year anniversary of its one-for-one rule, which was implemented in 2012 and codified in 2015 with all-party consent. British Columbia has also had its own ‘net-zero’ rule since 2004, and the Government of Manitoba proposed a two-for-one bill in March.

Canadian policy expert Sean Speer, currently an associate fellow at Washington-based think tank R Street Institute, told Capital News that Trump’s order is an opportunity for Prime Minister Trudeau’s government to “have a constructive engagement with the Trump administration.”

“One of the things to be seen about the Trump administration’s model is whether they go about doing it smartly or stupidly,” said Speer. “I would say if they … generally speaking, follow the Harper government’s experience, it’ll be much more substantive and serious than a lot of people may be giving it credit for now.”

Speer, who previously worked as a special adviser for Stephen Harper, helping the Conservatives implement Canada’s one-for-one rule, acknowledges the tendency for such rules “to be dismissed as gimmicky and silly.” However, Speer says it’s really an issue of nomenclature and nuance.

Canada’s one-for-one rule exchanges one old regulation for one new one. [Photo © Alex Parsons]

“The one-for-one rule is a matter of political communications, in the sense that it is regulatory budgeting,” said Speer, explaining that communications people “weren’t all that enthralled” with referring to the rule as regulatory budgeting because it sounds “boring, technocratic and wonky.”

Speer writes in an RSI report that the one-for-one rule or regulatory budgeting uses budget concepts to manage regulatory costs – the administration’s costs to enforce regulations and the costs incurred by individuals and businesses to conform – and requires government departments and agencies to price their “regulatory expenditures” just as they do fiscal expenditures.

“Each year, the government establishes an upper limit on the economic costs of its regulatory activities,” writes Speer. “It then apportions that expenditure cap across the government to various departments and agencies, who are expected to live within their respective regulatory budgets.”

So if a department or agency wants to implement a new regulation beyond their regulatory budget, they must offset the costs of the new regulation by eliminating existing regulatory requirements.

The economic costs of regulations are estimated using “a broadly accepted measurement … used in the Netherlands, Denmark and Norway” called the Standard Cost Model.

According to the Treasury Board of Canada Secretariat, there has been a net reduction of 47 regulatory titles and a net savings of $30.5 million in administrative burden since 2012.

“One of the really cool things about the Canadian experience today is it’s not so much lead to departments cutting a bunch of regulations outright, it’s actually created a kind of incentive for them to think about doing regulations smarter,” he said. “We’ve seen a bunch of changes that departments have made in order to comply with the existing rules that have been more about improving the way regulations are done as opposed to just simply cutting regulations.”

For example, Speer writes in his RSI report, the Department of Health has begun to allow regulated pharmacy technicians to oversee the transfer of prescriptions from one pharmacy to another – a task that was previously restricted to pharmacists – to save individuals and business an estimated $15 million per year. According to the Implementing the Red Tape Reduction Action Plan 2013–2014 Scorecard Report, this represented the largest dollar value of administrative burden decreased in the first two fiscal years of the application of the rule.

This kind of culture change, where departments and agencies start approaching regulation-making more efficiently, “is the biggest outcome or the biggest benefit,” said Ryan Greer, director of transportation and infrastructure policy at the Canadian Chamber of Commerce.

However, Speer warns, “you can do regulatory budgeting smartly and you can do regulatory budgeting stupidly.”

“We don’t quite know what President Trump is going to do yet because all we have is this macro order and the Office of Management of Budget is basically responsible for filling in the blanks,” he said. “A stupid way to go about it would be to say every new regulation you introduce you need to get rid of two regulations, with the focus only on the absolute number of regulations … you could see a scenario where a government department enacts a huge regulation with massive costs on the economy – say for illustrative purposes a 2,000 page regulation – and you eliminate two one-page regulations that are pretty innocuous and have limited or no impact on the economy, and you’d be able to be in compliance with the two-for-one rule.”

Speer criticizes the B.C. rule for this reason, describing it in his RSI report as “a crude methodology that simply counts the number of regulatory requirements and require(s) departments and agencies to offset any new ones by repealing or eliminating existing requirements.”

Communications Manager Chris Harbord defended the B.C. Regulatory Reform Initiative, saying via email that “the count is a simple measure that is easy to understand and track,” and that “(al)though the B.C. approach does not involve reconciling costs of administrative burden on a fiscal-year basis, the province’s Regulatory Reform Policy requires all government ministries to report on how they have considered the costs of compliance and/or conducted a cost-benefit analysis.”

Further, Harbord argued that the federal one-for-one approach only applies to regulations, not other government rules. “B.C.’s Net Zero Increase commitment applies to all regulatory requirements found in legislation, regulation, policies and forms,” she said.

Speer admits the federal rule would be stronger if it was expanded to incorporate requirements from other government rules.

“In fact, the Conservative Party of Canada’s 2015 election platform committed to some improvements for the regime,” he said. “Obviously we didn’t win the election so we didn’t proceed with those changes.”

Asked if an expansion of the one-for-one rule has been discussed by the Liberal government, Dan Albas, Conservative MP for Central Okanagan – Similkameen – Nicola, said he hasn’t “seen any red tape reduction efforts by the government.”

“While they seem to want to consult about everything, red tape doesn’t seem to be one of them,” said Albas.

Representatives from the Prime Minister’s Office referred Capital News to the Treasury Board for comment. According to TBS media relations representative Martin Potvin, the federal one-for-one rule is mandated to have a review five years after the act was put in force, so sometime in 2020. “This would provide an opportunity to further consider the application of the rule,” he said in an email.

Lisa Gilbert, director of Public Citizen’s Congress Watch division, was quoted in The Hill as saying Trump’s order is “the next and most arbitrary attack in a litany of attacks against public protections.”

While Albas admitted that “one of the criticisms you heard time and again” when the act was initially being debated in the House of Commons was about health and safety, in his opinion “some members of Parliament … did not actually study what the bill had to say, and so looked at (it) simply being a deregulatory measure.”

“This isn’t meaning that there’s less regulations as far as to health and safety,” he said. “This is making sure that when people report to government, it’s done in as efficient a manner as possible … it doesn’t impact the actual health and safety requirements.”

Whether or not the U.S. Office of Management and Budget plans to include standards of protection for health and safety in its policy, as the Canadian government did in the preamble to the act that codified one-for-one, remains to be seen.