An independent think tank dedicated to economic progress in Atlantic Canada.

ARC Q&A

APEC will be providing responses to common questions, concerns or comments on APEC’s proposal for an Atlantic Regulatory and Cooperation (ARC) agreement. We will continue to add to these Q&As as questions arise. If you have additional questions or comments, please email them to: info@apec-econ.ca

General

Why did you produce this new report?

Our 2016 report, Trade Barriers in Atlantic Canada: Opportunities for Regulatory Reform, explained how Atlantic Canada’s small market is further fragmented by four sets of provincial regulations and standards, which raise operating costs for business, reduce efficiency and client service, and hamper investment. We recommended that Atlantic regulatory reform prioritize areas with the

the largest economic impact, including areas with broad economic reach and industries that have the largest spillovers to other sectors. However, with so many regulations in a large number of areas to address, we also recommended an effective and comprehensive trade and cooperation agreement among the Atlantic provinces to help regulatory reform move forward. This new report provides our advice on what such an agreement should look like.

Why do we need this initiative when the Premiers are making progress on this file?

In 2015-2016, the four Atlantic Premiers committed to better regulation through a regulatory Charter and to regulatory alignment though the establishment of a Joint Regulatory Office. Although progress has been made in a number of areas, it has been slow and in relatively small areas compared to the large number of regulatory issues that need to be addressed. There is a high risk that the current initiative will lose momentum. Our proposal provides the clear objectives, timelines, processes, accountability and governance changes that are missing from the current initiative.

Will this proposal boost economic growth?

This is a pro-growth proposal. It reduces the barriers that prevent businesses from expanding and facilitates labour mobility. It allows firms to redirect resources that are currently devoted to meeting different provincial regulations and standards to business development and innovation. It will also reduce the fiscal pressure on businesses and workers, creating a stronger business climate.

Isn’t 10 years too long for implementation?

Our initial idea was for a 5-year timeline but when we reviewed what needs to be achieved, five years did not seem feasible. Moreover, our approach requires a cultural change in the approach to regulation and government cooperation and five years is not sufficient time for this. Our 10-year plan allows provinces to develop trust and see success in the early years that will prepare them for addressing more challenging areas in the later years. However, it is important to have all the key commitments identified in the initial 10-year plan; a 5-year plan followed by a subsequent 5-year plan risks indefinite deferral of some key items.

Winners and Losers

How will this benefit ordinary citizens?

Over time, tax payers will benefit from a reduced fiscal burden. As regulatory alignment and government cooperation increases, the resources required to maintain regulatory standards and oversee public services in each province will decrease. Individuals and families moving between provinces will be able to work in other provinces without additional accreditation and will find similar standards for public services, such as the same education curriculum. Individuals will be able to purchase alcohol from other provinces. Consumers will benefit from lower prices and better service.

Who will benefit from this proposal?

Small firms will find it easier to expand into other provinces and existing multi-province firms will experience a reduction in their operating costs. Workers will be able to work in other provinces without additional accreditation. Apprentices and students will be able to transfer credits and continue their programs in other provinces. Tax payers will benefit from a reduced fiscal burden. Consumers will benefit from lower prices and better service.

Will anyone lose out?

While some firms will face increased competition, providing incentives to innovate and strengthen their position, they will also have greater opportunities to compete in other provincial markets. Some professional firms, such as lawyers and accountants, may see fewer requests for help to comply with different provincial standards but should see increased demand for services to help their clients expand.

What will be the consequences of not implementing this proposal?

The Atlantic region is facing a “slower for longer” economic outlook with a diminishing labour supply due to population aging. The pressure on the public service will intensify as they strive to maintain the same level of services, administering four separate regulatory regimes and duplicate sets of government services, with fewer public servants. This may lead to a reduction in the level or quality of public services or higher tax rates to attract and retain enough public sector workers.

Employees in small regional offices may lose their jobs as more firms consolidate oversight of their Atlantic operations in Toronto or Montreal because the cost of maintaining an Atlantic head office for a small fragmented market is too great. Some small firms may cease operation because they lack economies of scale to remain competitive and provincial regulatory barriers prevented their expansion.

Regulation

Will your proposal undermine labour, safety and environmental standards?

No. Our proposal recognizes that regulation and standards have an important role to play in the effective functioning of our economy and society. The four Atlantic Premiers have already committed to a regulatory Charter that outlines key principles to ensure that regulations are effective while minimizing any unnecessary burden or unintended consequences upon businesses and consumers. Our proposal incorporates this Charter.

Doesn’t your proposal create more red tape?

No. Our proposal is designed to move us from four sets of red tape, regulatory standards and processes to just one, reducing the regulatory burden created by unnecessary differences in provincial standards.

Our proposal strengthens the goals, timelines and governance processes to advance the regulatory alignment process that has already been initiated. The four Atlantic Premiers have already created the Joint Regulatory Office which is needed to oversee and coordinate this work: we recommend that they now commit sufficient staff and financial resources to make it an effective, functioning regional office. This is a key lesson from APEC’s review of other jurisdictions and agreements. While increased commitment is required at first, over time there will be a reduction in the regulatory bureaucracy required in each province. 

Why not harmonize regulations on a national basis?

Canadian provinces have committed to improve internal trade through the Canada Free Trade Agreement and to reduce regulatory barriers and differences through the Regulatory Reconciliation and Cooperation Table. However, these processes involve a large number of diverse parties, making progress slow and challenging. Our proposal allows the four Atlantic provinces to leverage their similarities and history of cooperation to move further and faster. This regional alignment will be consistent with and enable national regulatory alignment.

Labour

Will your proposal lead to large layoffs in the public sector?

No. This proposal does not affect the number of teachers, doctors or nurses. Over time, our proposal should lead to savings in the number of positions required to create and oversee regulatory standards and the administration of public services where there is duplication among provinces. These reductions can be achieved through natural attrition or enabling individuals to transition to positions where they can provide more value.   

How will your proposal affect the construction trades?

The four provincial governments are already working to align standards and curriculum as part of the Atlantic Apprenticeship Harmonization Project. APEC’s proposal advances this initiative. If implemented, it will be easier for apprentices and trades workers to complete their training at different institutions and for different employers. Once qualified, it will ensure that their training and certification is accepted in all four provinces – they will not need to re-take training to work in another province.

How will your proposal affect regulated professions?

APEC’s proposal is designed to reduce and eliminate restrictions on professionals providing services or working in other Atlantic provinces, including the need to secure multiple provincial certifications. How this is achieved is not prescribed. The four regulatory bodies in a specific field could be invited to submit a proposal to governments that meets the objectives of the ARC. 

Business

Will your proposal benefit small firms or just big business?

Small firms will find it easier to expand into other provinces – they will no longer have to pay additional corporate registration fees to do business in another province. They will no longer have to pay professional fees or dedicate in-house resources to figuring out how to ensure compliance with different provincial standards and regulations in another province. These savings can be reinvested in their business.

Larger firms that already operate in more than one Atlantic province will experience a reduction in their operating costs from having to comply with four different sets of labour standards, environmental regulations, corporate registrations and industry-specific regulations. They will find it easier to operate their business on an Atlantic basis, moving equipment and personnel across provincial borders, and improving their service delivery. 

Indigenous

Does your proposal have any specific implications for Indigenous peoples?

No. Indigenous firms will also find it easier to expand into other provinces and Indigenous professionals will find it easier to work in other provinces. 

Government

Won’t this proposal divert much needed resources from important government programs?

Maintaining four different sets of provincial government regulations and services is already diverting important resources that could be invested in frontline public services. APEC’s proposal eliminates unnecessary duplication and frees up resources that could be better utilized elsewhere. Our proposal requires a modest short-term investment of staff time focused on implementing regulatory alignment to achieve the long-term gains of improved regulation and a reduced regulatory burden for firms, governments and tax payers.

Why is your proposal so detailed and prescriptive?

It was not our initial intent to provide such a detailed proposal. However, as we thought through the key elements of the proposal, a number of questions and issues arose that needed to be addressed. Our advice on how to address these various issues is based on our research and draws upon how other jurisdictions have successfully implemented similar agreements. Therefore, much of the heavy lifting to think through the details of how this ARC agreement would work and how it needs to be structured to ensure effectiveness is already done.

Is there anything left for governments to decide if they choose to proceed with this idea?

Yes. The four provincial governments need to discuss and agree on the key goals for regional alignment in the ARC; what elements will be included in the Ten-Year Roadmap and when they will be achieved; and they need to set up a fully-functioning Joint Office of Regulatory Affairs. This requires some work and negotiation, but it is not so onerous and time-consuming that the agreement could not be implemented in a timely matter – a key lesson from other agreements. Once implemented, governments will be involved in finalizing the regulatory solution for each area covered by the ARC agreement.

Can the four provincial governments pick and choose which elements of this proposal they want to use?

Our proposal has been carefully thought through and structured to make it work effectively. Each element and recommendation is designed to contribute to the overall effectiveness of the proposal and incorporates our research as to what makes such agreements successful.

Does your proposal undermine provincial government autonomy?

Our proposal recognizes each province’s right to govern along with a voluntary commitment to pursue regional regulatory solutions and cooperation. Each province can participate in discussions to design the regional solution for each area and can exclude themselves from alignment in any area if necessary. In many cases, the disparities between provinces are minor and historical and are not due to explicit policy differences.

Do your exclusions give governments too much scope to opt out?

Our proposal balances a need to create incentive for regulatory alignment and inter-provincial cooperation with the need for sufficient flexibility. Governments may request an exclusion where alignment does not make economic sense, cannot be achieved by the specified deadline, or there is a strong rationale to maintain an independent approach. Overall, our proposal minimizes the use of exclusions: their rationale must be made public, can be challenged by stakeholders, and must be renewed periodically. 

Isn’t this another attempt to pursue Maritime or Atlantic union?

No. A political union is a much bigger question and we have not examined the costs and benefits of such a proposal. Our proposal recognizes the existing jurisdiction and constitutional authority of the four provincial governments. However, in light of the economic circumstances facing these four small provinces, it commits them to pursue regional solutions and cooperation wherever possible.

Accountability

An audit of progress seems unnecessarily heavy handed

It is important that stakeholders see progress and have confidence in the process. To ensure credibility, our proposal includes an independent audit of the annual Progress Report, which is prepared by the restructured Joint Regulatory Office. This is not a typical audit of government performance by a provincial Auditor General with detailed recommendations for improvement. Instead, it would be like a financial audit in the private and public sector – an independent verification that the regulatory progress reported is an accurate representation. It could also include an audit of select new regulations introduced each year to report on compliance with commitments made under the ARC.

It seems unnecessary or risky to allow the courts to have a role in the operation of the ARC

We included a role for the courts based upon our review of other agreements. It is important that the commitments made by governments are credible and fully implemented for an agreement of this type to be successful. The potential for a court challenge is designed to ensure that governments take seriously their commitments under the ARC. In our proposal, the courts are the final step of a three-stage dispute resolution process. Ideally, disputes never reach this stage.

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