Red Tape, Red Flags:
Regulation for the
Innovation Age
The 2007 CIBC Scholar-in-residence Program
by G. Bruce Doern
Foreword by Allan Gregg
The Conference Board of Canada • Ottawa, Ontario • 2007
©2007 The Conference Board of Canada*
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Library and Archives Canada Cataloguing in Publication
Doern, G. Bruce, 1942–
Red Tape, Red Flags : Regulation for the Innovation Age : the 2007 CIBC
Scholar-in-Residence Program / by G. Bruce Doern ; foreword by Allan Gregg.
ISBN 978-0-88763-793-3
1. Delegated legislation – Canada. 2. Administrative procedure –
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Author’s Acknowledgements
I am greatly indebted to Anne Golden and her colleagues at the
Conference Board for the opportunity to be the CIBC Scholar-inResidence and to complete the research for this book. It has been a great
pleasure to interact with, and learn from, Conference Board staff and
experts in several of the areas linked to this project. Special thanks are
owed to Gilles Rhéaume, Michael Bloom, Natalie Brender and others
who offered always-constructive comments and editorial advice on
earlier drafts. So, too, did my colleagues at Carleton University’s
School of Public Policy and at the Politics Department of the University
of Exeter. Thanks are also owed to officials and other stakeholder
experts who helped with interviews and advice in the three case-study
areas examined here. All these very supportive colleagues helped to
make this a better final product.
Any remaining gaps or weaknesses in the analysis are mine alone.
iii
Acknowledgements
The Conference Board of Canada is deeply grateful to CIBC for its farsighted investment in the Scholar-in-Residence Program, which made
this volume possible and will support eight more years of cutting-edge
research into topics of vital importance to Canada’s future.
We thank our media partner, The Ottawa Citizen, for publicizing the
May 2007 lecture that resulted in this volume and for giving Canadians
an advance look at the arguments presented here.
At the Conference Board, Michael Bloom, Gilles Rhéaume and Natalie
Brender organized the 2006–07 Scholar-in-Residence Program, and
Natalie Brender edited this volume.
And, of course, we thank G. Bruce Doern, as well as Elizabeth May,
Janet Yale, Rick Thorpe and Allan Gregg for the splendid contributions
to Canadian public debate that they have made.
About The Conference Board of Canada
We are:
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 Independent from, but affiliated with, The Conference Board, Inc.
of New York, which serves nearly 2,000 companies in 60 nations
and has offices in Brussels and Hong Kong.
vii
The Author
G. Bruce Doern is well known for his broad knowledge of Canadian
and comparative public policy and governance. He is the editor of How
Ottawa Spends, Carleton University’s annual review publication on
national priorities and public spending. He is director of the Carleton
Research Unit on Innovation, Science and Environment (CRUISE). His
current research focuses on science-based regulatory and research institutions; universities in the innovation economy; competition policy; energy
and environment policy; and intellectual property institutions. The
author of over 55 books, Professor Doern has been a faculty member at
Carleton’s School of Public Policy and Administration since 1968 and
also holds a chair in Public Policy, Politics Department, University of
Exeter, United Kingdom.
ix
The Commentators
Allan R. Gregg, Chair, The Strategic Counsel
Allan Gregg is one of Canada’s most recognized and respected senior
research professionals and social commentators. He has an intimate knowledge of the dynamics of policy making, as well as a deep understanding
of cultural change and the communications processes necessary to forge a
public consensus around government initiatives. As one of the co-founders
of The Strategic Counsel, he is a pioneer in the integration of consulting,
public opinion research, public affairs and communications. Mr. Gregg
appears regularly on CTV’s Question Period and is the host of TVO’s
highly respected talk show Allan Gregg in Conversation.
Elizabeth May, Leader, Green Party of Canada
Elizabeth May is an environmentalist, writer, activist and lawyer. Active
in the environmental movement since 1970, she has undertaken extensive
volunteer work on energy policy issues, primarily opposing nuclear energy.
In 1986, Ms. May became senior policy advisor to then-federal environment minister Tom McMillan. She was instrumental in the creation of
several national parks. In 1989, she became executive director of the Sierra
Club of Canada, where she led several successful campaigns (including
initiatives to protect vast areas of Canadian wilderness, to promote bylaws
against the use of dangerous pesticides and to act on the threat of climate
change). In March 2006, Ms. May stepped down as executive director of
the Sierra Club of Canada to launch her successful bid for the leadership
of the Green Party of Canada.
The Honourable Rick Thorpe, British Columbia Minister of Small
Business and Revenue, and Minister Responsible for Regulatory Reform
Rick Thorpe was appointed minister of small business and revenue, and
minister responsible for regulatory reform, in the Legislative Assembly of
British Columbia on June 16, 2005. He previously served as minister of
provincial revenue and as minister of competition, science and enterprise.
Mr. Thorpe earlier served as official opposition critic for small business,
tourism and culture. Before his election to the Legislative Assembly,
Mr. Thorpe worked in the Canadian brewing industry for 22 years in
a variety of senior management positions, in Canada and internationally. He was first elected in 1996 to represent the riding of Okanagan–
Penticton and was re-elected in 2001 and again in 2005 to represent
Okanagan–Westside.
Janet Yale, Executive Vice-President, Government and Regulatory Affairs,
TELUS Communications Company
Janet Yale is a senior business executive with TELUS, Canada’s secondlargest telecommunications carrier. She is responsible for the development and delivery of key strategies in the areas of public policy,
law, regulation, government relations and corporate communications.
Before joining TELUS, Ms. Yale was president of the Canadian Cable
Television Association. With more than 20 years of government and
regulatory experience, Ms. Yale has held senior leadership positions at
AT&T Canada, the Canadian Radio-television and Telecommunications
Commission, and the Consumers’ Association of Canada.
xi
Table of Contents
Preface
by Anne Golden
1
Foreword
by Allan Gregg
5
Introduction
13
The Three Central Arguments
16
Key Definitions and Conceptual Issues
18
Structure and Preview of the Framework
21
Chapter 1—Key Forces for Regulatory Change and
the Current Regulatory Policy Context
27
The Three Key Forces for Change
29
The Increased Speed and Complexity of Underlying
Economic and Technological Change
29
Consumer Demands for Faster Access to New Products
31
The Complex, Science-Based Nature of Risk–Benefit
Regulation
33
The Relationship Between Regulation and Innovation
34
Regulatory Policies and Reform: The Limits of the One Regulation
at a Time and Periodic Regulatory Reform Approaches
36
Current Federal Regulatory Policy and Decision Processes
37
Periodic Regulatory Reform Initiatives
41
Conclusion
47
xiii
Chapter 2—The Pharmaceutical Drugs–Public Health
Regulatory Regime: Access and the Common Drug Review
49
The Regulatory Regime: Core Features
51
Context, Regime Change and Evolving Criticism
56
The Thalidomide Model and the Pre-Market Safety Focus
56
The Backlog Problem and Slow Product Approval Times
57
Higher Volumes of Drugs, New Levels of Access, and the
Rebalancing of Pre- and Post-Market Review
58
Health Canada’s Blueprint for Renewal in an Innovation
Context
62
Illustrative Regime Change: The CDR, Access and the Drug–
Public Health Regulatory Regime
64
Conclusion
72
Chapter 3—The Biotechnology–Intellectual Property Regulatory
Regime: Access to Genetic Diagnostic Tests
75
The Regulatory Regime: Core Features
78
Intellectual Property Aspects of the Regime
79
Biotechnology Aspects of the Regime
82
Context, Regime Change and Evolving Criticism
83
IP and Biotechnology in Innovation Agendas
84
Industry Pressure and Fast-Changing Biotechnology
Industry Dynamics
86
IP Rights, Public Health and Global Access to Patented
Life-Saving Drugs
88
Illustrative Regime Change: Patented Genetic Diagnostic Tests and
the Biotechnology–Intellectual Property Regulatory Regime
90
Conclusion
97
xiv
Chapter 4—The Energy–Environment Regulatory Regime:
Environmental Assessment of Energy Projects
101
The Regulatory Regime: Core Features
104
Context, Regime Change and Evolving Criticism
109
Energy Industries, Project Approvals and Incentive-Based
Regulatory Flexibility
109
The Internalization of Environmental Costs in Energy Prices
113
Sustainable Development as a Policy–Regulatory Paradigm
115
The Climate Change Debate and Policy–Regulatory Failure
116
Alternative Renewable Energy Sources and Regulatory Push
120
Illustrative Regime Change: Environmental Assessment and
Energy Projects
122
Conclusion
128
Chapter 5—Federal Regulatory Policy: An Annual Regulatory
Agenda and Related Institutional Reform
131
What Is Wrong With the Current Approach to Regulation?
The Basic Case for an Annual Regulatory Agenda
135
To What Extent Does Regulatory Agenda Setting Occur Now?
139
A More Complete Regulatory Agenda and Agenda-Setting
Process: What Would They Look Like?
142
Related Institutional Reform: A Regulatory and Risk
Review Commission
146
Conclusion
148
xv
Chapter 6—Conclusion
151
Red Tape, Red Flags: Complex Interactions, Integration and
Role Shifts
154
The Gaps in Current Regulatory Policy and Governance
156
A Strategic Regulatory Agenda and Related Institutional Reform
158
From the Lecture: Richard Thorpe’s SIRP Lecture Comments
163
From the Lecture: Elizabeth May’s SIRP Lecture Comments
171
From the Lecture: Janet Yale’s SIRP Lecture Comments
177
From the Lecture: Panel Discussion and Q & A
183
Q & A With Audience
193
xvi
Preface
by Anne Golden
President and Chief Executive Officer
The Conference Board of Canada
F
or many years, Canadian business leaders have been complaining that this country’s excessively numerous and complicated
regulations are driving up costs and hurting their competitiveness. It is a problem only heightened by the inefficiencies of our fractured federal system—the theme of our inaugural Scholar-in-Residence
volume, which appeared in 2006. At the same time, however, consumer
and advocacy groups insist that Canada’s regulatory system is inadequate to protect individuals and the environment from potential harm
caused by new products and processes being brought to market.
For these reasons, The Conference Board of Canada chose to make
the topic of regulation—under the rubric of “Red Tape, Red Flags”—the
focus of the second year of our CIBC Scholar-in-Residence program.
We were honoured to have renowned Canadian public policy expert
Dr. G. Bruce Doern as our Scholar-in-Residence, and to have featured his year-long research project at the CIBC Scholar-in-Residence
lecture at the National Gallery of Canada in Ottawa on May 23, 2007.
The full fruits of his research are presented in this volume.
We were equally delighted to have on stage that evening a stellar
panel of commentators well acquainted with regulatory challenges: the
Honourable Rick Thorpe, Elizabeth May and Janet Yale. Presiding over
the event as host and moderator, for the second year in a row, was Allan
Gregg, whose own public policy expertise is formidable. The event is
represented in this volume in the form of the commentators’ remarks
and highlights from the subsequent discussion among Gregg, the panellists and the audience.
The Conference Board is deeply grateful to CIBC for its vision and
generosity in providing 10-year funding for our Scholar-in-Residence
series, which made possible the present volume and will fund future ones.
With its mission of advancing thought leadership for a better
Canada, the Conference Board is proud to present this important
research study and associated commentaries. We hope it will help
leaders—at all levels of government, as well as in the business and
non-profit sectors—improve Canada’s regulatory system.
Preface
Foreword
by Allan Gregg
I
started working on Parliament Hill, many years ago, for the
Office of Opposition Research. Funded by the Library of
Parliament, our job was to provide policy analysis and a counterbureaucratic resource for Her Majesty’s Loyal Opposition. Every day,
we would come to work brimming with excitement about the prospect
of Question Period. The parry and thrust of that one hour of singlemember combat always got our blood rushing. Opposition day—with
its remote possibility of making a difference to the government’s legislative agenda—was also always greeted with much anticipation. Even
committee work, where the MPs you worked with could score points or
hold ministers accountable, was exciting.
The one thing, however, that was typically met with dread and
groans was the moment when the departments we were monitoring issued their annual “regs.” These huge tomes were complicated,
impenetrable and often ridiculously arcane. Worse, no one cared. The
press gallery was bored gormless by the whole exercise, and there was
no way you were going to get any media attention, even if you were
able to unearth some onerous new regulation that had been slipped
in somewhere.
Yet we all knew that the “regs” could make a huge difference to
the lives of individuals and the operations of institutions. They set out
the broad rules of behaviour for society’s stakeholders operating in the
public sphere and were backed up by the sanction of the state. In other
words—regardless of whether anyone cared, or whether the lion’s share
of regulation occurred under the radar and out of the glare of press or
parliamentary scrutiny—they mattered. Regulations have the power
to put companies out of business; to create or destroy fortunes; and to
expose the public to, or protect it from, harm.
As you will find in reading this landmark work, regulations are
becoming more, not less, important in an age of exploding technology,
innovation and globalization. First, as Professor G. Bruce Doern has
discovered, creating, monitoring and implementing regulations represents a huge proportion of the government’s total output—about onethird of everything it does.
Foreword
Second, because most regulatory changes are amendments to existing regulations, they have a tendency to pile up. At the May 2007
public lecture on the topic of this publication, the Honourable Rick
Thorpe, British Columbia’s Minister of Small Business and Revenue
and Minister Responsible for Regulatory Reform, talked about his
Herculean efforts to reduce his government’s total regulatory burden.
They have been remarkably successful, having eliminated over 40 per
cent of provincial regulations—and yet B.C. still has approximately
220,000 left on the books!
Third, due to the increasing complexity of many of today’s issues
and organizations, regulations do not fit nicely into either the geographic or the administrative boundaries over which regulators have
jurisdiction. Imagine setting up an oil refinery in, say, Lloydminster
today. Which province would have a say over its emissions standards:
Alberta or Saskatchewan? Even discounting the geographic oddity of
this example, royalty structures would fall under provincial jurisdiction, yet capital cost allowance calculations would be submitted to
Ottawa. You would have to deal with Natural Resources Canada and
Environment Canada, too. And if you were seeking an export licence,
you would have to abide by regulations set out by Foreign Affairs and
International Trade Canada. If you had transmission lines that bordered on a reserve or ran through an area that was part of a land claim
dispute, you would be making a visit to Indian and Northern Affairs
Canada as well.
Canadian federalism, with its built-in character of “shared sovereignty,” adds inherent complexity to regulation. The apocryphal story
of the truck driver who has to stack his lumber one way, only to have
to unload and restack it another way as he crosses provincial borders,
is almost laughable—to everyone but the truck driver who is doing the
restacking.
In 1994, all provincial governments joined with the federal government to sign the Agreement on Internal Trade, designed to reduce
some of this regulatory complexity. Thirteen years later, scant progress
has been made in meeting that goal, and the consensus is that little
political will exists to tackle the monumental tasks of negotiating and
Red Tape, Red Flags
unravelling that would be required to harmonize regulation across
provincial boundaries.
As international trade agreements knit the world more closely
together, the movement of goods, services and people across national
borders generates another layer of regulatory asymmetry. While meeting in Montebello at their annual summit in the summer of 2007, the
leaders of Canada, the United States and Mexico illustrated the problem by drawing our attention to the plight of jelly beans: it seems that
Ganong, a Canadian maker of said jelly beans, has to comply with
three different national sets of packaging requirements in order to take
advantage of the North American Free Trade Agreement. The complexity of multi-agency, multijurisdictional and multinational regulation leads to the “red tape” that drives business to distraction. It can
have a demonstrably deleterious effect on Canada’s national competitiveness, not to mention its attractiveness as a place to invest.
But regulations do not produce only red tape. The fact that they
exist can also be a signal that someone has set off “red flags”—
warnings that, without regulation, public safety, health and the
environment might be imperilled. It seems perfectly logical that a
truck driver should be able to stack his wood the same way in Alberta
and B.C., but what if nursing certificates take two years to earn in one
province and four years in another? Do we eliminate interprovincial
differences in regulation and facilitate interprovincial employment by
lowering the bar to two years for all nurses, and in doing so set a similarly lower standard for the quality of our health care? (In this case, it is
far less likely that certification requirements would be raised, because
nurses with two-year degrees would then be functionally de-certified.)
Again, few would argue with the logic of implementing identical crossborder packaging regulations for jelly beans, but would Canada really
want to adopt U.S. standards for chemical warnings, or Mexico’s minimum wage policy?
In the larger context, the dual function of regulation—as red tape
and red flags—forces us to ask whether eliminating or harmonizing
regulations offers us the key to unlocking our national competitiveness,
or whether instead it represents a “race to the bottom” that invariably
Foreword
leads to lower standards and greater threats to our health, safety and
the environment.
From the latter perspective, regulation is seen not as a burden, but
as the bridle that reins in private interest when its pursuit threatens the
public good.
Even in those instances where government intervention and regulation is more often welcomed than feared, however, today’s realities
conspire to complicate straightforward regulatory decision making.
Most of us would agree that patent protection and testing of prescription drugs are good things in that they safeguard intellectual property
(thus offering companies an incentive to conduct future research)
and shield the public from the harmful effects of any unsafe drugs.
But what if a drug purported to cure cancer was patented in another
country or jurisdiction? Would Canadians be so accepting of a “madein-Canada” approval process for this new drug that might take years to
run its course? And what if the makers of this miracle cure then offered
to sell their drug through the Internet? Or, better yet, what if a generic
drug company produced a non-branded version and sold it through
its own virtual pharmacy? What then happens to the entire regime of
patent protection, drug testing and formulary registration in Canada?
What is clear from Professor Doern’s research is that the Internet
and digital transmission of content threaten to turn the regulation of
entire sectors completely on its head. Throw into this mix cutting-edge
disciplines such as biotechnology, reproductive technology and nanotechnology, and the question becomes whether governments have the
internal scientific know-how to generate a regulatory regime capable of
determining what is harmful and what is beneficial in these fields.
Even a cursory glance at the regulatory landscape would suggest
that there are no easy answers to these questions. What makes solutions
even harder to come by, however, is the fact that the issue is rarely, if
ever, the topic of discourse or debate anywhere, whether in Parliament,
the press or the public square. The result is that regulatory changes
are made incrementally, in isolated silos, and often in the absence
of a full understanding of their consequences. As a result, governments risk generating both too much bad regulation and too little good
10
Red Tape, Red Flags
regulation—with the public, industry and the nation the worse for
keeping the issue under a bushel.
Professor Doern’s pioneering study shines light into these murky
corners where regulation has been largely hidden from scholarly
analysis or public debate. He first looks outside of government to the
larger societal forces that are both driving and challenging the regulatory agenda. Here he finds that the speed of change itself—be it scientific or economic—has generated concurrent pressures to both reduce
existing regulations and generate new ones. Business cites the “red
tape” of regulation as a principal barrier to competitiveness, and consumers demand faster access to new products and innovations. At the
same time, however, rapid advances in science and commerce induce a
fear of the unknown that produces calls for greater protection, reduced
uncertainty and “science-based risk regulation.”
Against this larger background, Professor Doern examines how government actually operates and how regulations evolve. Notwithstanding
efforts such as “smart regulation” and more rational attempts to prioritize regulatory reform, he discovers that the prevailing tendency is
a “one regulation at a time” approach, with little cross-jurisdictional
coordination of activity. Indeed, he concludes that this ad hoc, “siloed”
approach, and the absence of any systematic evaluation and reexamination of regulations, have produced simultaneous cries for less
red tape and more red flags. Governments are required to deliberate
their priorities in the Speech from the Throne and their plans for spending in the Estimates; Professor Doern points to the wisdom of intro­
ducing a similar regulatory agenda-setting process.
As a young policy analyst, I, like so many others, believed that government regulations were both boring and unimportant. I think that, in
this book, G. Bruce Doern will convince you otherwise on both fronts—
as he has me.
Foreword
11
Introduction
M
aking regulations and rules, and enforcing and ensuring
compliance with them, is at least one-third of what governments do—either alone or, increasingly, in concert with
other key stakeholders in a modern 21st-century national and global
political economy. Governments also tax, spend and persuade. This
analysis of regulation in the innovation age will make some broad
comparisons between regulation and these other core modes of policy
making and governance, particularly taxation and spending, in order to
discuss a fundamental strategic gap in Canada’s regulatory architecture
and democracy.
This gap is three-fold. The first gap is an institutional weakness in
dealing with the complex regulatory regimes of multiple regulators, as
opposed to dealing with one regulation or one regulator at a time. The
second and closely linked gap is the absence of a visible regulatory
agenda or set of openly debated annual regulatory priorities. The third
gap is the misconception that the red-tape and red-flag values inherent in
regulation are as oppositional as they were in the past. In many practical regulatory situations where innovation is involved, these values
are often integrative; both business and social stakeholders have a
strongly linked interest in both reducing red tape and protecting health,
safety and environment as new products emerge. Of course, there are
still some tensions between these two concerns, but these values are
much more entwined than they were two decades ago.
The overall purpose of this study is to examine and draw more
considered attention to Canada’s complex regulatory regimes, as well
as the management challenges these regimes present. Such regulatory regimes consist of multiple regulatory agencies, laws, rules and
processes—not only within the federal government, but also across
international, provincial and local levels of government.
To deal with the three gaps mentioned above, Canada needs a much
more strategic approach to regulation, regarding both the development
of new rules and the enforcement of existing ones. Changes are needed
to deal fully and effectively with Canada’s regulatory challenges in
the innovation age, including the democratic deficits inherent in current approaches.
Introduction
15
The Three Central Arguments
In this study, I advance three closely linked central arguments tied
to the three gaps. This study expands these arguments through three
chapter-length case studies of regulatory regimes and through an
examination of federal regulatory policy. The central arguments are
as follows:
 The red-tape and red-flag regulatory issues that concern Canadians
are no longer as diametrically opposed as they once were. Rather,
to a much greater extent in the innovation age than before, they
reinforce each other. In many specific situations, both business
and social stakeholders have a mutual interest in enhancing efficiency and in managing risks effectively. Despite lingering tensions
between these two concerns, political interests can be configured
on both sides of the red tape/red flag equation, in different circumstances and situations.
 Current federal regulatory policy is based far too much on a oneregulation-at-a-time approach, combined with once-a-decade regulatory reform exercises. More effective ways of managing complex
regulatory regimes are needed. Regime-level issues need more
focused examination, both when new regulations are proposed and
when product and project approvals—and compliance and enforcement issues—are addressed under existing regulations.
 The federal government needs to develop a transparent annual regulatory agenda so that priorities and resource needs can be announced,
debated and agreed on. Such agendas are already broadly used for
governmental taxation and spending decisions and plans. For some
time, governments have had overall policies on regulation and have
thought about aspects of setting a regulatory agenda. However, they
have not come even close to establishing a transparent annual regulatory agenda that would complement their spending and tax agendas.
The architecture of federal regulatory governance also needs more
transparent arm’s-length advice, provided through a suggested
Regulatory and Risk Review Commission.
16
Red Tape, Red Flags
Examples of the new complexities of multi-agency and multi-level
regulation are not hard to find, nor are the reasons for finding a more
strategic approach to dealing with them.
Drug regulation, for example, increasingly involves dealing with
significantly rising volumes of new drug applications. The cycle of premarket review and approval, post-market assessment and monitoring,
and payment for such drugs under medicare, involves multiple regulators and participants, including Health Canada; networks of patients,
consumers and health professionals; and provincial health departments.
Shared knowledge and input from U.S. and international regulatory
agencies are also critical. Drug regulation is partly sectoral, but
pharmaceutical companies are simultaneously affected by hori­zontal
regulations from intellectual property bodies and regulations from
health authorities with broad public health concerns.
Canada’s dismal performance in reducing greenhouse gases, in
relation to the current climate change debate, is by no means the only
example of a non-strategic approach to energy and environmental regulation. Years ago, governments recognized the problems of coordinating the regulatory review of new energy projects with the need for
environmental assessments at different levels. At the federal level, this
process involves both Environment Canada’s Canadian Environmental
Assessment Agency and Natural Resources Canada’s National Energy
Board, to name only two entities. The environmental assessment
agency has a horizontal mandate, in that its assessments cover new
developments and projects across a range of firms and sectors, only one
of which is the oil and gas sector. While coordination between federal
agencies has been enhanced somewhat, progress has been slow. Taking
a decade or more to change is no longer good enough in a fast-changing
global economy. That is true both in terms of meeting energy needs and
meeting the always-connected need for environmental protection.
Introduction
17
Key Definitions and Conceptual Issues
This study of red-tape and red-flag regulation looks closely at regulation in the innovation age with the above institutional gaps in mind.
The key concepts in the title of this book are in one sense easy to
define, but in practice not easy for regulators and citizens alike to penetrate and deal with.
Red tape is, of course, one of the oldest negative labels for governing
in general and regulating in particular. It implies excessive rule making,
unnecessary procedural complexity, or inflexible behaviour and decision making by regulatory authorities, or simply by “bureaucrats.”
Red flags, as a label, has had less continuous historical use than red
tape, but it is nonetheless a useful shorthand term to depict concerns
about real or perceived danger or risk linked to health, safety or the
environment. Such risks range from the safety of nuclear reactors, aircraft and automobiles to fraudulent sales practices in any number of
product and service markets. The concept of red flags also increasingly
implies not just risks to current citizens, communities and firms, but
also to future ones and hence to intergenerational health and safety and
to longer term sustainable development.
The term innovation age is intended to capture the current socioeconomic era, in which entire systems or regimes of rule making and
compliance must be examined in relation to the knowledge-based
economy and to continuous rapid changes in product development,
industrial processes and institutional experimentation.
These dynamics are propelled by massive changes in telecommunication and information technology, by globalization at both economic
and social levels, by intricate and changing supply chains, and by
increasingly varied but also conflicting notions of the kinds of democracy that ought to be practised in the innovation age. Regulation in the
innovation age also strongly implies regulation that is science and technology based, even when the science is contested.
18
See The Conference Board of Canada, Including Innovation in Regulatory Frameworks (Ottawa:
The Conference Board of Canada, 2004).
Red Tape, Red Flags
Throughout this study, I define regulation quite broadly as rules of
behaviour backed up by the sanctions of the state. However, such rules
are variously expressed through laws, delegated legislation (or the
“regs”), guidelines, codes and standards. Thus, there are many levels
and types of rule making even in the core definition of regulation.
This issue of everyday importance in regulatory realms will also arise
when one is thinking about what ought to be included in and excluded
from an annual national regulatory agenda. Guidelines and codes, for
example, are often seen as realms of “soft law” or rule making in the
shadow of the law.
Regulatory regimes refers to areas of rule making and compliance
where two or more Canadian or international regulatory bodies jointly
and continuously affect, for good or for ill, the product cycles, production processes and investment choices of firms and the choices of
individual Canadians as consumers and citizens. Regimes include not
only the agencies involved but also the laws and rules themselves, the
rule-making process, and the product or project approval process. Such
regimes also have ever-more complicated accountability issues to face
and manage.
It is not difficult to find examples of such regimes. Three are examined in this study, but other analyses also highlight the existence of
these complex regulatory governance systems. For example, a recent
Conference Board of Canada study looked carefully at health profession self-regulation and discussed whether these professions could be
encouraged to use collaborative processes to break down some of the
barriers among professions in health-care diagnosis and delivery. The
authors mapped and analyzed a dozen or more medical and health
For definitional discussion, see G. Bruce Doern, Margaret Hill, Michael Prince and Richard
Schultz, eds., Changing the Rules: Canada’s Changing Regulatory Regimes and Institutions
(Toronto: University of Toronto Press, 1999), and P. Eliadis, Margaret Hill and Michael Howlett,
eds., Designing Government: From Instruments to Governance (Montreal and Kingston: McGillQueen’s University Press, 2005).
For discussion, see Doern, Hill, Prince and Shultz, Changing the Rules, Chapter 1.
See Peter J. May, “Regulatory Regimes and Accountability,” Regulation and Governance 1, 1
(March 2007), pp. 8–26.
Introduction
19
professions in each province, along with the laws and rules regarding
self-governance and ethics for these professional realms.
This book also deals with regulatory governance and the various
institutional forms it takes. Such governance increasingly involves a
series of joint actions between the public and private sectors, including
various kinds of self-regulation and co-regulation. A focus on regulatory governance recognizes that regulation has to be conceived as rulemaking processes, outputs, and compliance and enforcement actions
and outcomes that can emerge from varied top-down, bottom-up and
negotiated processes within the government, among governments,
among provinces and cities, and among economic and social interests
and stakeholder groups.
This study is therefore premised on a recognition that regulation and
regulatory regimes are increasingly characterized by multi-level regulation and governance. This has, in one sense, always been an issue
in any kind of political system. It has certainly always been a central
feature of Canadian federalism, where challenges regarding both regulatory competition and cooperation among national and provincial governments are well documented. Whereas it was once common to think
of regulatory levels mainly in terms of federal and provincial jurisdictions, it is now essential to include international levels of regulation and
dispute settlement in trade, corporate governance and competition law,
and in various sectoral realms such as drugs, energy, and telecommunication and Internet regulation. Significant and serious issues emerge
regarding international regulatory cooperation and harmonization but
also regarding the inherent challenge of a global disaggregation of
authority—regulatory and otherwise.
See The Conference Board of Canada, Achieving Public Protection Through Collaborative SelfRegulation: Reflections for a New Paradigm (Ottawa: The Conference Board of Canada, 2007).
J. Jordana and David Levi-Faur, The Politics of Regulation: Institutions and Regulatory Reforms
for the Age of Governance (Cheltenham, U.K.: Edward Elgar Publishing Ltd., 2004).
G. Bruce Doern and Robert Johnson, eds., Rules, Rules, Rules, Rules: Multilevel Regulatory
Governance (Toronto: University of Toronto Press, 2006), Chapter 1.
20
See James N. Rosenau, “Governing the Ungovernable: The Challenge of a Global Disaggregation
of Authority,” Regulation and Governance 1, 1 (Blackwell Publishing, March 2007), pp. 88–97.
Red Tape, Red Flags
The federal government does not routinely make public the number
of new regulations proposed or passed each year. A 2002 Organisation
for Economic Co-operation and Development (OECD) study of
Canadian federal regulation showed that the rate of growth in federal
regulation had declined in the preceding decade. This finding on
growth refers only to delegated legislation and does not include laws
or other forms of rule making, as discussed later in this introduction.
The overall number of annual new regulations (delegated law) would
appear to be in the range of 400 to 500; however, of these, about 90 per
cent are amendments. That suggests that 40 to 50 new regulations are
proposed each year and wind their way through the various regulatory
stages. (See Chapter 1 for further discussion.) Occasionally, there are
bursts of new regulation, such as the one that occurred in the wake of
post-9/11 security concerns.
It must be stressed, of course, that none of the above deals with
the existing stock of regulations, which remains large and which has
been subject in Canada and elsewhere to various efforts either to get
rid of old rules or to reduce the paper burden of accumulated rules.
None of the above includes the growth of provincial, regional or municipal regulation.
Structure and Preview of the Framework
To explore the logic of, and evidence supporting, these linked arguments and issues, the study proceeds in three main stages. Chapter 1
attributes the current dilemmas inherent in the first argument to three
interacting forces:
 The speed and complexity of underlying economic and technological change, which leads to concerns about (a) competitiveness, when the costs and burdens of regulation are too onerous
Organisation for Economic Co-operation and Development, Canada: Maintaining Leadership
Through Innovation, OECD Reviews of Regulatory Reform (Paris: OECD, 2002).
Introduction
21
(red tape); and (b) the protection of the environment, health and
safety for current and future generations (red flags).
 Expanding consumer demands for faster access to new products (red
tape) and continuing citizen concerns about democratic engagement
and openness in regulatory processes and decision making (red
flags), which may make regulatory decision processes longer.
 The increasingly intricate, science-based nature of risk regulation
and the need for government science and technology (S&T) capacity
in the innovation age. Regulation is more complicated in the innovation age because of the speed of scientific and technological change.
Thus, a related key reason why more strategic approaches to regulation are required is that the federal government has not invested in
its internal S&T capacities, even while signing up for more and more
regulatory obligations, nationally and internationally. Far too often,
the science-based regulatory system is playing a catch-up game
rather than a get-ahead-of-the-curve game.
These three forces are contrasted in Chapter 1 with the starkly
opposite nature of current federal regulatory policy, which, despite some
recent improvement, is still largely dominated by the one-regulationat-a-time approach and by periodic regulatory reform exercises every
decade or so.
In chapters 2, 3 and 4, I examine three case studies of complex
regulatory regimes in the following realms: pharmaceutical drugs and
overall public health (Chapter 2); biotechnology and intellectual property (Chapter 3); and energy and the environment (Chapter 4). The first
two regimes are quite closely linked, especially since they analyze and
approve related but different health products. Table 1 previews the overall
framework used in the three regime case studies.
In each of these case study chapters, I employ a common analytical
approach and set of analytical headings. First, I map the core features
of the regulatory regime. Each chapter begins with a text box listing the
agencies involved and a second text box listing some of the core processes involved in assessing and approving products—or, in the case of
the energy–environment regime in Chapter 3, projects. Then I set the
22
Red Tape, Red Flags
Table 1
Preview of Framework for Regulatory Regime Case Studies
Framework Element
Core regime agencies, actors
and processes (regulation
making, and product and project
approvals and compliance
processes) (Examples only:
see chapters 2, 3 and 4)
The Pharmaceutical Drugs–
Public Health Regime
The Biotechnology–Intellectual
Property Regime
The Energy–Environment Regime
Health Products and Food Branch
of Health Canada
Canadian Intellectual Property Office
National Energy Board
Commissioner of Patents
Provincial and territorial energy boards
Biologics and Genetic Therapies
Directorate of Health Canada
Canadian Nuclear Safety Commission
Therapeutic Products Directorate
of Health Canada
Networks of health professionals
and patients
Drug companies
Canadian Agency for Drugs and
Technologies in Health
Canadian Expert Drug Advisory
Committee
Canadian Biotechnology Advisory
Committee
Canadian Biotechnology Secretariat
Nuclear Waste Management
Organization
Natural Resources Canada
Environment Canada
World Trade Organization and the
Agreement on Trade-Related Aspects
of Intellectual Property Rights
Canadian Environmental Assessment
Agency
Patented Medicine Prices Review Board
Provincial environmental assessment
agencies
Provincial drug formulary approval
authorities
Canada’s Access to Medicines Regime
U.S. Food and Drug Agency
Genetics clinics, family physicians and
patient groups
Canadian Institutes of Health Research
granting rules and guidelines
23
Organisation for Economic Co-operation
and Development
U.S. Federal Energy Regulatory
Commission
North American Electricity Reliability
Organization
Commission on Environmental
Cooperation (North American Free
Trade Agreement)
(cont’d on next page)
24
Table 1 (cont’d)
Preview of Framework for Regulatory Regime Case Studies
Framework Element
The Pharmaceutical Drugs–
Public Health Regime
The Biotechnology–Intellectual
Property Regime
The Energy–Environment
Regime
Context, regime change and
evolving criticism
The thalidomide model and the premarket safety focus
Intellectual property and biotech in
innovation agendas
The backlog problem and slow
approval times
Industry pressures and fastchanging industry dynamics
Energy industries, project
approvals and incentive-based
regulatory flexibility
New and high volume drugs and
re-balancing pre-and post-market
regulatory review
Intellectual property rights, public
health and global access to patented
life-saving products
Health Canada’s Blueprint for Renewal
in an Innovation Context
Internalization of environmental
costs in energy prices
Sustainable development as a
policy–regulatory paradigm
The climate change debate and
policy–regulatory failure
Alternative renewable energy
sources and projects and
regulatory push
Illustrative regime change
Access to drugs and the Common
Drug Policy phase of the regime
Access to genetic diagnostic
test products
Environmental assessment
and energy projects
Conclusions re:
a) red tape and red flags
b) the three core forces in the
innovation age
c) the agenda-setting gap and other
institutional reform implications
See chapters 2 and 6
See chapters 3 and 6
See chapters 4 and 6
context for the regime, recent key changes in it and evolving criticisms
of it. These are clearly different for each regime for the obvious reason
that the substance of regulation in each regime is different. Each chapter
then focuses on a more recent illustrative example of regime debate
and pressure for change. For example, chapters 2, 3 and 4 respectively examine access to drug products under the Common Drug Policy,
access to genetic diagnostic tests, and the environmental assessment
of energy projects. Conclusions are offered in each chapter regarding
the regime’s red-tape and red-flag dimensions and changes; innovation issues linked to the three forces outlined above, as they relate to
regulation-making and regulatory compliance and enforcement issues;
and the reasons why the gap in annual agenda setting and related institutional reform matters.
It must be stressed from the outset that the three regulatory regime
case study realms are multi-faceted and that limits of space mean that
key issues and dynamics can only be highlighted rather than fully
mapped. The substantive nature of regulation in each regime and the
reasons for its intricacy must be appreciated within these brief portraits.
I am also obviously interested in key issues that emerge cumulatively
across the three chapters regarding mixtures of both new regulatory
proposals, but also the crucial dynamics of product versus project
approvals, and regulatory compliance and enforcement.
In the third and final stage in Chapter 5, the book zeroes in on what
is wrong with the current federal approach to regulation. It then examines the overall need to better manage regulatory regimes by making
the case for a national regulatory agenda and for related institutional
reform through the suggested creation of a Regulatory and Risk Review
Commission. It does so by first looking at whether a regulatory agendasetting process exists now, and then discussing what a more complete
process might look like and how it might function to Canada’s political,
economic and democratic advantage.
I make the case for a regulatory agenda partly by revealing and
examining the middle-level issues and evidence in the three case
studies, but also by using a macro and broader logic linked to the
overall red-tape and red-flag themes and to the meaning of regulatory
Introduction
25
democratic debate and governance in the innovation age. The case for
an annual regulatory agenda is not advanced as a panacea for all the
problems of politically and economically managing complex regulatory regimes. An agenda is seen as part of the missing architecture
of Canada’s regulatory governance system, along with the abovementioned Regulatory and Risk Review Commission.
The methodology employed in the analysis is fairly straightforward.
The larger aspects of the analysis draw on published literature and on
governmental and private sector studies. The same is true for the three
case studies, but research on these three regimes and on the current
regulatory system overall has been complemented by some interviews
with key players. It also draws on my past and recent research into
these complicated realms of rule making and compliance.
The question of how representative the three chosen case studies are
has also been central to my analytical considerations. Clearly, I could
have selected many other regulatory regimes, including transportation
(air, rail and water), competition law, trade, financial services, securities, corporate governance, or borders and security, to name only a
few. These regimes also possess the core characteristics of complexity
found in the case studies, as well as the mixtures of product approvals,
project approvals and spatial realities. Thus, I have a high degree of
confidence that the three case study regimes are reasonably representative of the complex regulatory regime issues and challenges examined
in this study.
26
Red Tape, Red Flags
1
Key Forces for Regulatory
Change and the Current
Regulatory Policy Context
T
he general argument about complex regulatory regimes and
about regulatory agenda setting being advanced in this study
needs to be made within a clear overall view of the key forces
for regulatory change in the innovation age and of the current regulatory policy and governance context.
This chapter first explores the three key forces referred to in the
Introduction: the speed and complexity of underlying economic and
technological change; consumer demands for increased access to new
products, and citizen demands for democratic engagement in regulation making; and the intricate, science-based nature of risk regulation.
I then examine the current regulatory policy that governs regulatory
decision making, a policy centred mainly on a one-regulation-at-a-time
approach, complemented by regulatory reform initiatives conducted
every decade or so.
The red-tape and red-flag challenges and choices of regulation and
regulatory governance are buffeted by the three interacting forces, albeit
in varied and sometimes contradictory ways. My discussion of the current regulatory policy context outlines what current regulatory policy
is, how it has evolved in relation to past regulatory reform initiatives,
and why it is inadequate for regulation in the innovation age, where
fast-changing and complex regulatory regimes must be managed.
The Three Key Forces for Change
The Increased Speed and Complexity of Underlying Economic and
Technological Change
The first force driving change is the increased speed and complexity of underlying economic and technological development. This force
leads to concerns about (a) competitiveness, when the costs and burdens
of regulation are too onerous (red tape); and (b) the protection of the
environment, health and safety for current and future generations (red
flags). It is taken as an analytical and practical given that regulation in
Chapter 1
29
the innovation age is propelled by rapid, wide-ranging change in fields
such as information technology, biotechnology and nanotechnology.
Examples here are not difficult to find, as any number of biotechnology food products and bio-health, genome-centred products line up
for regulatory review and approval in Canada and globally. Increasing
numbers of these products and production processes involve the convergence of biotechnology, information technology and nanotechnology.
These fields do not obey the normal boundaries of departmental regulatory jurisdictions or levels of government.
New, enhanced capacities to deal with regulation in these areas are
needed. Governments can no longer rely on regulatory reform every decade or so. There must be a greater capacity to assess regulatory change
on an annual strategic basis with more systematic, overall data on and
analysis of regulatory demands, risk profiles and risk-benefit issues.
Much of this change is linked to globalization, but globalization itself is a mixture of linked driving forces. These forces include
increasingly global production location and sourcing decisions, and
related supply-chain considerations; massive increases in the mobility and movement of capital; significant increases in the mobility of
labour, especially highly qualified personnel; and the development of
the Internet, and related telecommunication products and processes.
The business community has for some time expressed strong concerns about the adverse effect of regulatory costs and cumulative regulatory burdens on the investment climate. These arguments have been made
repeatedly and have linked regulatory costs and burdens to Canada’s
declining productivity vis-à-vis the U.S. The business community has
argued that Canada needs to look closely at entire regulatory systems to
Peter Philips, Governing Transformative Technological Innovation: Who’s in Charge? (Oxford:
Edward Elgar, 2007), and Bill Woodley, The Impact of Transformative Technologies on Governance (Ottawa: Institute on Governance, 2001).
Canadian Biotechnology Advisory Committee, Biotechnology and the Health of Canadians
(Ottawa: Canadian Biotechnology Advisory Committee, 2004).
30
Red Tape, Red Flags
determine whether they act as barriers or incentives to innovation and
investment in Canada.
Rapid, complex change increasingly requires that governments
have a capacity to continuously examine entire systems of rule making,
enforcement and compliance. In its 2004 report, the federal External
Advisory Committee on Smart Regulation partly recognized this need.
However, the committee did not tie it to another necessary institutional
capacity: namely, an explicit strategic regulatory agenda that is publicly
debated. This agenda would address regulatory priorities in an integrated way to limit the complexity of regulation and to ensure that new
regulations respond to economic and technological changes.
Consumer Demands for Faster Access to New Products
The second force influencing regulation centres on growing consumer demands for faster access to new products (reduced red tape),
linked to citizen concerns about democratic engagement and openness
in regulatory processes and decision making (red flags) that may make
regulatory decision processes longer.
Regarding product approvals in areas such as foods, drugs and
health products, consumers are likely to demand fast, safe access to
these products, especially when they know they are already available
and have been given regulatory approval in other countries.
E-commerce and the Internet in general are the main reasons
Canadians are becoming aware much faster of product availability
in other countries. Other countries’ consumers are equally aware of
Canadian products and may want access to them quickly. American
demand for online sales of lower-priced drugs from Canadian pharmacies is an excellent example of the latter trend.
The Conference Board of Canada, Including Innovation in Regulatory Frameworks, 4th Annual
Innovation Report (Ottawa: The Conference Board of Canada, 2002). See also Bryne Purchase,
Regulation, Growth and Prosperity (Ottawa: Policy Research Initiative, 2006), and Roy Atkinson,
Developing a Framework for Assessing Innovation, Productivity, and Business Impacts of Regulation (Ottawa: Policy Research Initiative, 2006).
External Advisory Committee on Smart Regulation, Smart Regulation: A Regulatory Strategy for
Canada (Ottawa: External Advisory Committee on Smart Regulation, 2004).
Chapter 1
31
The issue of fast access to drugs and related health products takes
on a special additional meaning when certain patients or disease groups
want new drugs immediately to help in life-saving situations. Drugs
targeted at small subpopulations are increasingly expensive for firms to
develop and for provinces to fund under public health care. As chapters 2 and 3 will show, more and more of these drugs are coming onto
the market with enormous impacts on Canada’s health-care system and
health-care costs.
Demand for fast access to new and cheaper drugs to help deal with
the AIDS epidemic in Africa and elsewhere is also an international
example of great importance, one in which Canada’s response still faces
serious contradictions between red tape and red flags.
While it is clear that Canadians as consumers want faster access to
products, it is also clear that Canadians as citizens still strongly support democratic engagement in decision-making processes related to
new regulations and product approvals. A 2004 study of public opinion
polls regarding regulation showed that Canadians tend to associate public interest regulation with regulation related to health, safety and the
environment. They also tend to think that such regulatory processes
should include opportunities for non-governmental organizations
(NGOs) and individual citizens to participate in transparent ways.
However, the study revealed that Canadians also believe that businesses in general are subject to too much regulation and that these
regulations are too complex. The study also showed that Canadians as
a whole are not opposed to regulatory cooperation at the international
level, but they are more critical than business interests typically are
about too close a link to the U.S. They feel this way even though, on
average, Canadians trust the capacity of U.S. regulators to be good
regulators. Indeed, every day, Canadians buy U.S. products approved
by such regulators.
See Matthew Mendelsohn, “A Public Opinion Perspective on Regulation,” paper prepared for the
External Advisory Committee on Smart Regulation (2004).
Ibid.
32
Red Tape, Red Flags
A strategic regulatory agenda would help better identify these fastoccurring tensions regarding access and democratic engagement. It
would also help identify the institutional arenas and capacities needed
to manage these challenges and tensions effectively.
The Complex, Science-Based Nature of Risk–Benefit Regulation
The third force to emphasize is the increasingly complex, sciencebased nature of risk regulation and the need for government science
and technology (S&T) capacity in the innovation age. Regulation is
more difficult in the innovation age because of the speed of scientific
and technological change and the nature of the science needed to deal
with interacting hazards, pollutants and emissions.
A related key reason why more strategic approaches to regulation
are required is that the federal government has not invested sufficiently
or regularly in its internal S&T capacities, even while signing up for
more and more regulatory obligations, nationally and internationally.
Far too often, the science-based regulatory system is playing a catch-up
game rather than a get-ahead-of-the-curve game.
This situation must be remedied. It will take a willingness and capacity to think and act strategically regarding science in government,
particularly the science needed to support regulation. The complex,
science-based nature of risk regulation—or, more accurately, “risk–
benefit” regulation—significantly influences regulatory governance in
many fields and in overlapping regulatory regimes.
Science-based regulation refers to regulatory (and related policy)
decision making in which scientific knowledge and personnel play significant roles. However, for several reasons, this definition is only a
starting point. First, science as an activity within government involves
both research and development (R&D) and related science activities
(RSA). Hence, it involves diverse tasks, such as research, monitoring
Christopher Hood, H. Rothstein and Robert Baldwin, The Government of Risk: Understanding
Risk Regulation Regimes (Oxford, U.K.: Oxford University Press, 2001).
See G. Bruce Doern and Jeffrey Kinder, Strategic Science in the Public Interest: Canada’s Government Laboratories and Science-Based Agencies (Toronto: University of Toronto Press, 2007).
Chapter 1
33
and assessment; technology and indicators development; and reporting
activities. As undertaken in government, science is thus not homo­
geneous but, rather, involves an interrelated set of activities.
The Relationship Between Regulation and Innovation
Cumulatively, the above three forces have led to analytical efforts to
better understand the key links and overall interactions between regulation and innovation in contexts where (a) excessive or improperly
designed regulation may prevent or lessen innovation; and (b) strong,
effective regulation may create opportunities for innovation to flourish.
All regulation shapes markets in some fashion. These “shape-shifting”
impacts may, in turn, help produce both intended and unintended innovations and ways of doing things in multi-faceted markets.
The basic argument to emerge from this discussion is that regulation,
depending on its nature, can either harm—or, indeed, prevent—product,
process and institutional innovation, or encourage it. Much depends on
the exact design of regulatory programs and on the complementary use
of other policy instruments. All of these should be aligned in such a way
that desired impacts—such as reducing pollution or improving health—
are achieved, but in ways that also foster efficiency and political legiti­
macy and support. Technologies produced through innovation are crucial to the capacity of the regulator to regulate and to monitor impacts.
For multiple regulators, these changes have two concurrent effects.
They simultaneously affect regulation in both the sectoral/vertical and
framework/horizontal realms of rule making. In short, they affect complex “regime” regulation, as examined in this study.10 Secondly, they
affect both overall rule making and compliance, and the product and
See Mark Jaccard, Mobilizing Producers Toward Sustainability: The Prospects for SectorSpecific, Market-Oriented Regulations, in Glen Toner, ed., Sustainable Production: Building
Canadian Capacity (Vancouver: UBC Press, 2006), pp. 131–153.
10 See G. Bruce Doern and Ted Reed, eds., Risky Business: Canada’s Changing Science-Based
Policy and Regulatory Regime (Toronto: University of Toronto Press, 2000).
34
Red Tape, Red Flags
project approval aspects of regulation that function within the ambit of
those larger rules. Product approvals in some sectors, such as drug and
food regulation, are the core high-volume business of regulators. Other
regulators, such as those in the energy–environment field, may be dealing
with a combination of new products and new projects, with the latter often
involving multiple environmental assessments by several regulators.
The analysis of the interactions between regulation and innovation
starts with a necessary discussion of the non-linear nature of innovation dynamics and of the need to be very cautious about simple “cause
and effect” or “stimulus and response” bases for assessing effects and
interactions. The analysis also shows that many studies have dealt
initially or mainly with the impacts of regulation on investment or competitiveness, which may be only partly or indirectly linked to innovation
per se.11 Innovation as a process that produces and commercializes new
products and processes is central to this discussion, but so also is institutional or organizational innovation. These issues suggest as well the
need to differentiate effects that might arise for firms from narrower
compliance impacts of a particular environmental regulation and those
that might affect the core business of that firm.
All governments are actively developing policies and debating
issues regarding how they can foster innovation in a world increasingly facing the global competitive challenges of a knowledge-based
economy and also a knowledge-based society. Innovation policies and
strategies are targeted at the development of new products and of new
production and institutional processes. They place a greater emphasis
on benchmark indicators such as rates of patenting and the creation of
spin-off companies than on traditional measures such as rates of R&D
as a percentage of gross domestic product (GDP).
Earlier linear models—which saw basic science leading to applied
science and then to product development—are increasingly seen as
overly simplified views of what happens in the dynamic economic and
technical settings of the new economy. Most current innovation policies
11David Vogel and Robert A. Kagan, eds., The Dynamics of Regulatory Change (Berkeley, California:
University of California Press, International and Area Studies, 2004).
Chapter 1
35
see the underlying dynamics as non-linear. As a result, a changed policy
debate is focusing on ideas such as national systems of innovation, and
local systems of innovation and clusters. Both systems are seen as multidirectional interactions among firms, universities and governments, and
their variously networked S&T personnel.12
One of the influencing factors that governments and industries are
examining in this innovation setting is regulation and regulatory governance. However, since both parties already concede that innovation
is non-linear, interactive and multi-dimensional, the study of regulation
and innovation must also consider interactive dynamics rather than
simple “cause and effect” impacts. One can see this fact at several levels
of analysis.
With regard to firms and markets, regulation and innovation must
traverse several intermediary relationships and processes. Rule making and compliance affect not only levels of profit, but also the decisions of firms to invest in new capital equipment, in human capital, in
locations for new plants, in any R&D they do, and in their capacity to
finance, patent, manufacture and market new products or to adopt new
production processes. Later observed successes or failures can thus be
attributed to one or more of these intervening processes and decisions,
including decisions by one or more states to regulate at all, to regulate
in particular ways, to avoid regulation or to deregulate.
Regulatory Policies and Reform: The Limits of the
One Regulation at a Time and Periodic Regulatory
Reform Approaches
The second element that is needed to set the scene for my analysis
is a basic sense of what regulatory policy is and how the federal regulatory system currently works under that policy. I will note briefly five
key features of the current policy and the process it generates: the federal
12 The Conference Board of Canada, Exploring Canada’s Innovation Character: Benchmarking
Against the Global Best (Ottawa: The Conference Board of Canada, 2004).
36
Red Tape, Red Flags
regulatory policy; the key regulatory decision stages; Department of
Justice legal review processes; Cabinet review processes; and recent
changes to the federal regulatory policy and new institutions. The current system has also been influenced by periodic regulatory reform
exercises conducted every decade or so, which are examined later in
this section.
Current Federal Regulatory Policy and Decision Processes
The first feature is the federal regulatory policy. Successive editions
of the federal regulatory policy have evolved from initial 1986 requirements requiring consultation with affected parties and the public, as
well as requirements for regulators to prepare a regulatory impact
analysis statement (RIAS) and to pre-publish the regulatory proposal.
Later additions to the policy included the following decision criteria:
ensuring net benefits to Canadian society (1992), minimizing regulatory
burden (1995), fostering intergovernmental coordination and cooperation (1995), reflecting the Regulatory Process Management Standards
(1995), and linking to Cabinet directives (1999). As Robert Johnson
notes, the current edition thus now requires the following:
 consultation and participation of Canadians in the regulationmaking process;
 identification of a problem or risk, and justification that regulation
is the best alternative;
 proof that benefits outweigh costs and that regulation is cost effective;
 minimization of regulatory burdens on the economy, which includes:
− minimizing information and administrative requirements at minimal cost,
− paying special attention to small business, and
− giving positive consideration to parties proposing equivalent
alternatives to regulation;
 adherence to international and intergovernmental agreements, and
coordination across government and between governments;
 effective management of regulatory resources with:
− Regulatory Process Management Standards,
− a compliance and enforcement strategy,
Chapter 1
37
− approval of adequate resources for enforcement responsibilities;
and
 adherence to Cabinet directives.13
This evolving set of policy add-ons does indicate that some concern
for coordination across governments and among levels of government
has arisen, but such recognition has been more exhortative than compulsory in nature.
The policy on regulation must also be linked to the overall steps
for approving regulations, which are governed by the Statutory
Instruments Act. There are three broad classes of regulations:
Governor-in-Council (GIC) regulations, which include most regulations; ministerial regulations; and GIC or ministerial regulations
affecting public spending. The 10-step process for approving regulations officially includes the following:
 planning of the regulation;
 drafting of the regulation;
 review by the Department of Justice;
 signature by the sponsoring minister;
 first review by the Privy Council Office (PCO);
 Treasury Board pre-publication in the Canada Gazette, Part I;
 updating of the proposal;
 second review by PCO;
 Treasury Board publication in the Canada Gazette, Part II (final
approval); and
 Standing Joint Committee for the Scrutiny of Regulations.
It must be stressed that these steps take place for each new regulation, one at a time.14
13 Robert Johnson, “Regulatory Policy: The Potential for Common Federal-Provincial-Territorial
Policies on Regulation,” in Doern and Johnson, Rules, Rules, Rules, Rules, pp. 52–79.
14Government of Canada, Regulation Policies, Processes, Tools and Guides [online]. (Ottawa:
Government of Canada). www.regulation.gc.ca.
38
Red Tape, Red Flags
Department of Justice review also plays a key role in regulation.
When a regulation is defined as delegated law flowing from a parent
statute, then statutory drafting must be done under the watchful eye of
Department of Justice lawyers to ensure the regulation falls within the
powers and terms of the parent statute. Canada’s Charter of Rights and
Freedoms also comes into play, as Justice lawyers must ensure that proposed and final regulations do not infringe on the Charter.
Cabinet-level review also warrants a mention here. Previously, a
special committee of Cabinet reviewed regulations as statutory instruments, along with numerous Orders-in-Council flowing from laws
and regulations or from the Governor-in-Council’s prerogatives. But
the high volume of these items meant that this committee was not a
priority-setting committee but, rather, a transactions-based, rapid-fire
review committee. There is no such committee on the current federal
government’s list of Cabinet committees. Other Cabinet committees,
such as the Treasury Board, are involved in the process, as noted in the
10 stages outlined above. Other policy committees, the full Cabinet,
and the Cabinet Committee on Planning and Priorities can certainly
consider regulatory matters as new or amended regulations—as well
as statutes packed with rules—proceed through the approval process.
However, these deliberations are also mainly transactional, in a different sense.
The internal processes also include some normal vetting of proposals by PCO and by the Regulatory Affairs and Orders in Council
Secretariat of the Treasury Board. Such vetting can include checking
on interdepartmental coordination issues, but at a highly transactional
level as each item proceeds.
None of these Cabinet-level or central agency-level processes
is designed to review new regulations as part of an overall regulatory agenda.
In the aftermath of the smart regulation process (discussed later
in this chapter), further recent changes have occurred. In 2006 a
Community of Federal Regulators was formed, supported by a very
Chapter 1
39
small secretariat.15 It was created largely to ensure that federal regulators actually met to discuss common problems of structure, approach
and capacity. However, it is certainly not intended to play a regulatory
agenda role.
In 2007, the federal Conservative government announced a new
Cabinet Directive on Streamlining Regulation.16 A new idea in the directive is that existing regulatory policy will be governed by a broader
“life cycle” notion of regulation. This approach will take the existing policy on regulation beyond its current focus on the initial making of a regulation to the full later cycle of enforcement, compliance
and eventual evaluation.17 The government’s first two commitments
to Canadians in the new directive are that when regulating, the federal
government will:
 “protect and advance the public interest in health, safety and security,
the quality of the environment, and social and economic well-being
of Canadians as expressed by Parliament in legislation; [and]”
 “promote a fair and competitive market economy that encourages
entrepreneurship, investment, and innovation.”18
The directive also requires departments and agencies to prepare
annual regulatory plans.
I will return to these basic policy and decision structures and processes in Chapter 5, once I have examined the three regime-level case
studies. However, what is crucial about overall federal policy is that
as a set of rules about rule making, it is essentially still centred on
a one-regulation-at-a-time approach now covering the full cycle of
development, analysis, implementation and compliance. There is some
recognition of the need for interdepartmental coordination, but that,
too, is couched in the one-regulation-at-a-time logic.
15Government of Canada, Community of Federal Regulators: Business Plan 2005–2007 (Ottawa:
Community of Federal Regulators, 2005).
16Government of Canada, Cabinet Directive on Streamlining Regulation (Ottawa: Treasury Board
of Canada, Secretariat, 2007).
17 Ibid., pp. 9–10.
18 Ibid., p. 1.
40
Red Tape, Red Flags
Periodic Regulatory Reform Initiatives
The second way in which governments have tackled regulation is
through periodic regulatory reform initiatives, once a decade or so.
This section looks at this reform ethos and approach, beginning with
the most recent federal smart regulation exercise and then quickly
working backwards to earlier measures, debates and exercises, most of
which still resonate today.
The Smart Regulation Agenda
The former federal Liberal government’s smart regulation agenda was
announced in the September 30, 2002, Speech from the Throne (SFT).
A multi-stakeholder External Advisory Committee on Smart Regulation
(EACSR) then guided and advised work on the initiative. The Chrétien
government explicitly linked the rationale for the initiative to the knowledge economy’s requirements for new approaches to regulation. The SFT
then referred to a number of regulatory realms that would be a part of the
reform initiative. These included intellectual property and new life rules,
copyright rules, drug approvals, research involving humans, the Canadian
Environmental Assessment Act, a single window for projects such as the
northern pipeline, the Agricultural Policy Framework, Canada–U.S. smart
border needs, and capital market and securities regulation.
The smart regulation initiative found its way into the SFT and thus
into a recognized high-priority status due to several pressures and arenas
of advocacy. One was certainly the federal innovation strategy paper that
had emerged earlier in 2002. Its consultation processes had revealed numerous areas in which business and consumer groups saw current kinds of
regulation as obstacles to innovation. There were also some areas where
insufficient regulation could be a bar to progress. So the notion that regulation had to be “smart” or “smarter” than in the past certainly emerged
from the innovation debate. Of course, there were also separate pressures
emerging from the departments and stakeholder groups concerned with
all of the more specific areas of regulation cited above.
The Chrétien government created the EACSR, composed of individuals drawn from business, environmental, consumer, and Aboriginal areas
of interest and knowledge. Following various consultative processes and
Chapter 1
41
building on some of its own commissioned research, the EACSR reported
in fall 2004.
Interestingly, the EACSR report begins by defining what smart
regulation is not. It “is not deregulation” because “Smart Regulation
does not diminish protection, as some may fear. It strengthens the system of regulation so that Canadians can continue to enjoy a high quality of life in the 21st century. The committee believes that regulation
should support both social and economic achievement. . . .”19
When raising the question of the consequences of non-action in smart
regulatory reform, the EACSR argues that “without change, [the regulatory system] will limit Canadians’ access, for example, to new medications, cleaner fuels and better jobs. An outdated system is an impediment
to innovation and a drag on the economy because it can inhibit competitiveness, productivity, investment and the growth of key sectors.”20
Thus the red-tape and red-flag themes are woven into the EACSR.
And when the EACSR asked what was driving the need for regulatory
change, it stressed three factors:
 “First, the speed of modern society has resulted in an explosion of
new technologies. . . .
 “Second, policy issues are increasingly complex. Boundaries between
once distinct areas and disciplines have become blurred. . . .
 “Third, public expectations of government have risen. . . .”21
Then, and only then, does the EACSR go on to define smart regulation in terms of its three characteristics:
 “Smart Regulation is both protecting and enabling. . . .
 “Smart Regulation is more responsive regulation. . . . [and] must
be self-renewing and keep up with developments in science, technology and global markets. . . .
19External Advisory Committee on Smart Regulation, Smart Regulation, p. 9.
20 Ibid., p. 10.
21 Ibid., p. 10.
42
Red Tape, Red Flags
 “Smart Regulation is governing cooperatively for the public
interest. . . .”22
With this smart regulation strategy at its centre, the EACSR went on
to examine key features of Canada’s regulatory system, along with five
case study sectors or realms of regulation, and then made 73 recommendations. Some are cast as immediate actions and others as longer
term in nature. A central thrust of the recommendations is greater regulatory cooperation with the United States, especially in situations where
there are only small differences in regulations and approaches. The
EACSR report is also careful to stress that the public interest in regulatory matters involves both social, health and environmental issues and
economic matters. Hence the smart regulation concept embraces both
“protecting and enabling,” with “enabling” as the code word for commercialization and new innovative products. “Responsive” means that
government needs to be sensitive to businesses and to the competitive
situations they face. In turn, governing “cooperatively” connotes the
new modus operandi: achieving public purposes through various governance arrangements (as opposed to command and control regulation,
as discussed later in this chapter).
A subsequent overall report on smart regulation actions and plans
highlighted several steps and initiatives that the Liberal government
took in its last year in power.23 An external regulatory advisory board
was appointed to be a forum for ongoing stakeholder participation.
Partly to deal better with interdepartmental regulatory barriers and
overlaps, the federal government established a series of “theme” tables
to “strengthen our ability to manage regulation, coordinate regulatory
renewal initiatives, and inform the regulatory process with up-to-date
and critical information that reflects the needs and expectations of
Canadians, as well as the concerns of stakeholders.”24
22 Ibid., p. 12.
23Government of Canada, Smart Regulation: Report on Actions and Plans (Ottawa: Treasury Board
of Canada, Secretariat, March 2005).
24 Ibid., p. 10.
Chapter 1
43
Five theme tables began their work on the following issues: a healthy
Canada; environmental sustainability; safety and security; innovation,
productivity and business environment; and Aboriginal prosperity
and Northern development. This idea of theme tables is a useful one
and can help governments address complex regulatory regime issues.
However, it tends not to engage ministers in a very direct way, nor does
it relate to developed annual agendas per se.
The table dealing with innovation, productivity and business
environment is intended to help federal departments find ways to
“enhance innovation . . . while more effectively meeting social objectives.”25 It was also intended to explore issues such as ways to focus
regulatory attention on areas that pose the greatest risk, so as to help
reduce the overall regulatory burden. This idea is important, and it is
why I argue in chapters 5 and 6 for the establishment of a Regulatory
and Risk Review Commission.
While the federal smart regulation agenda gained considerable
initial momentum in 2003–04 and 2005, the political climate since then
has not been as propitious. Given the uncertainties of first a Liberal
minority government and now a Conservative one, it is fair to say that
the smart regulation agenda may lose some of its momentum. The same
result often occurred after the regulatory reform efforts in the 1980s
and early 1990s referred to in the next section.
Earlier Debates and Assessments of Regulation and Its Reform
Space does not permit a full account of past debates and diagnoses
of regulation, but a summary of earlier or related key ways of viewing
and critiquing regulation is useful. This section briefly surveys regulatory reform, deregulation and re-regulation; the issue of so-called
“command and control” versus “incentive-based” and “flexible” regulation; and risk-benefit assessment and management concepts and
related issues centred on the precautionary principle. Each issue and
development is discussed briefly, as are the key links among them.
25 Ibid., p. 14.
44
Red Tape, Red Flags
A major regulatory reform in the 1980s was combined with various
actions leading to de-regulation in specific sectors, such as telecommunication and transportation, but also re-regulation in such sectors.26
Focused reform efforts occurred in the mid-1980s under the Mulroney
Conservative government and, in milder forms, in the late Conservative
government and early Chrétien Liberal government of the 1992–93
period. Both of these efforts sought to reform regulatory decisionmaking processes and to deregulate to some extent. Both also urged
government to search for non-regulatory alternatives before pursuing
regulation as a policy choice. Economic values and ideas were certainly a part of these reform exercises, but it is fair to say that neither
was driven by a full-blown innovation–new economy paradigm that is
the focus of this study, and of the “smart regulation” agenda described
earlier in this chapter.
In the 1980s and 1990s there was a general effort to move from
command and control regulation—the approach said to be dominant
in the previous four or five decades—to more flexible, incentive-based
and performance-based forms of regulation, including guidelines,
codes and standards.27
The concept of command and control regulation implied too many and
too detailed input-oriented or process-oriented kinds of rule making. It was
seen as a one-size-fits-all approach that didn’t reflect the fact that industries, firms, communities and individuals face diverse situations and contexts. There were and still are many reasons for this effort to change the
approach to regulation, such as business pressure and budget cutbacks.
Incentive-based regulation recognizes explicitly the complex cost and
production situations that different firms, industries and consumers face.
The growing presence and importance of trade rules has also resulted
26Margaret Hill, “Managing the Regulatory State: From ‘Up’ to ‘In and Down’ to ‘Out and Across,’ ”
in Doern, Hill, Prince and Shultz, Changing the Rules, pp. 259–276.
27 See John Braithwaite and Peter Drahos, Global Business Regulation (Cambridge, U.K.:
Cambridge University Press, 2000).
Chapter 1
45
in rule making that is premised on regulating outputs and performance
rather than on prescribing inputs and processes.28
In the last decade, governments have been leading or encouraging
initiatives that, by their very nature, had to rely on non-regulatory and
non-statutory processes, and that sought to work patiently through
diverse marketplace stakeholders. Several initiatives of this type have
been carried out.
As I noted earlier, in the 1990s regulation began to be debated more
explicitly in terms of risk assessment and risk management concepts,
especially in the broad realm of health, safety and environmental rule
making. In particular, this trend occurred among a large set of regulators and their clients whose activities are dependent on science-based
regulation or on sound science but also on ideas centred on the precautionary principle.29
Federal science-based departments engaged in health, safety and
environmental regulation all have basic decision-making frameworks
for identifying, assessing and managing risks. However, what does not
exist is any cross-governmental institutional process for ranking risks. I
return to this point in Chapter 5 in relation to the discussion of the need
for a Regulatory and Risk Review Commission.
When environmental groups began promoting a precautionary
approach, trade regimes began to defend the norm of sound science
more vigorously. Trade regimes were often suspicious of precautionary concepts because they feared such ideas could reduce the emphasis
on sound science and become the proverbial “Mack truck” clause that
would drive right through trade agreements.
Precaution implied that some decisions could be made even in
the absence of such science, where there were reasonable concerns
that observed hazards might produce irreversible effects unless some
preventive action was taken. The precautionary principle gradually
28 See Lester M. Solomon, ed., The Tools of Government: A Guide to the New Governance
(Oxford, U.K.: Oxford University Press, 2002) and Malcolm K. Sparrow, The Regulatory Craft
(Washington, D.C.: Brookings Institution, 2000).
29Doern and Reed, Risky Business, Chapter 1.
46
Red Tape, Red Flags
appeared in many international protocols and in several federal statutes,
such as the Oceans Act, the Canadian Environmental Protection Act
and commitments regarding bio-diversity.
While each of the above features of regulatory reform, study and
practice has been presented as a brief historical portrait, few if any
of these issues and debates have disappeared from the scene. Thus,
when one implies that the smart regulation agenda, the recent federal
Directive on Streamlining Regulation, or some combination of the two
is now the favoured paradigm and discourse, it is not clear exactly what
it is replacing.
The smart regulation paradigm differs from deregulation and earlier
reform agendas in that, as we have seen, it is much more informed by
innovation agendas and notions about the knowledge-based economy
and rapid technological change. But smart regulation does sweep into
its conceptual arms many of the basic notions of incentive-based and
flexible regulation, and risk–benefit regulation. In these senses it is not
replacing earlier concepts; rather, it is complementing them or layering
itself on top of them.
The Directive on Streamlining Regulation adds the life-cycle
approach but otherwise retains the earlier policy add-ons.
Conclusion
This chapter has set the context for the analysis by examining three
key forces that are affecting regulation in the innovation age in Canada
and elsewhere, and by exploring the policy context for federal regulation and recent regulatory reform exercises and issues.
By its very nature, rapid, complex economic and technological
change creates both new products and production processes whose proponents are anxious to find an unencumbered route to market success.
However, it also inevitably creates concerns about health, safety and
the environment.
Chapter 1
47
Consumer demand for increased access to new products is premised
on a significant reduction of red tape, but related red-flag concerns are
never very far from the surface.
My brief discussion of the science-based nature of risk regulation—
and, thus, of the overall interactions between regulation and innovation—
highlighted the delicate balancing acts involved. Caught up in these
complex processes are core concepts such as safety versus risk-benefit,
where different notions of what red flags might actually be are central
and often not clear cut.
The analysis of past regulatory reform initiatives showed how each
initiative dealt in its own way, in different time periods, with the core
trade-offs between red tape and red flags in specific situations, as well
as with the growing integration between red tape and red flags. In the
case of the recent federal smart regulation initiative, these core tradeoffs were more explicitly linked to innovation itself and to the growing
need for Canada to compete in the knowledge-based economy.
Last but not least, the above discussion of federal regulatory policy
and the current regulatory decision process and how it evolved through
add-on elements of suggested good regulatory practice showed how it
had to continuously try managing red-tape and red-flag values, processes and concerns.
In the three regulatory regime case studies that follow in the next
three chapters, I look more closely at the forces and elements traced
in this chapter as they relate to the drug regulation and public health
regime, the biotechnology and intellectual property regime, and the
energy and environment regime.
48
Red Tape, Red Flags
2
The Pharmaceutical
Drugs–Public Health
Regulatory Regime:
Access and the Common Drug Review
O
ur first regulatory regime case study analysis centres on
the pharmaceutical drugs–public health regulatory regime.
This regime of multiple regulators and players deals with
the complex full cycle of regulation and regulatory enforcement. In
this cycle, drug companies develop new drugs; regulators assess and
approve the drugs at the pre-market stage, then monitor them in the
post-market stage; and provincial health authorities, private drug plans
and the federal government decide whether they will fund these drugs
or reimburse people for them. The federal government’s involvement in
this last process relates to its role in providing health care directly for
people such as military personnel and prison inmates.
This chapter begins with an initial broad discussion of the regimelevel interactions of the main regulators and players, and of the inherent
red-tape and red-flag choices and pressures involved in the current innovation age, as outlined in Chapter 1. The second section briefly examines
the context of the regime and the regime’s evolution in response to criticism over the last two decades, propelled by the three main forces examined in the previous chapter. The chapter then looks more closely but
briefly at one example of regulatory regime change, the Common Drug
Review (CDR). In this newer phase of the regulatory regime, regulators must face difficult issues of access to expensive new drugs that are
focused on small populations who might benefit from such products.
Conclusions then follow regarding the regime analysis as a whole.
The Regulatory Regime: Core Features
The regulatory regime for drug products functions through a set of
agencies and processes related to therapeutic products. (See text box
titled, “Core Agencies in the Pharmaceutical–Public Health Regulatory
Regime.”) I have also included a list of the key stages in the regulatory
approval of drugs and in their post-market review and use. (See text box
titled, “Main Stages of Pre-Market Drug Approvals and Post-Market
Review.”) The stages of the CDR are outlined later in the chapter.
Chapter 2
51
Therapeutic products include medical devices, natural health products and drugs, including pharmaceuticals, radiopharmaceuticals, biologics and genetic therapies. In Chapter 3, I will focus on products
involving biotechnology, particularly their links to the intellectual
property regulatory system.
Health Canada defines a drug as
“any substance used in the diagnosis,
Core Agencies in the Pharmaceutical–
treatment, mitigation or prevention of
Public Health Regulatory Regime
a disease, disorder or abnormal physi­
 Health Products and Food Branch of
cal state, and in restoring, correcting
Health Canada
or modifying organic functions in
 Therapeutic Products Directorate of the
humans and animals.” Health Canada
Health Products and Food Branch
and its agencies function under the
 Drug companies, and S&T staff within
provisions of the Food and Drugs Act
drug companies
and Food and Drug Regulations. The
 Networks of health professionals and
patients, especially in post-market review
Health Products and Food Branch
(HPFB) of Health Canada provides
 Patented Medicine Prices Review Board
overall policy and strategic guidance,
 Canadian Agency for Drugs and
Technologies in Health
but it is the HPFB’s Therapeutic
 Canadian Expert Drug Advisory Committee
Products Directorate (TPD) that plays
the lead regulatory role for drugs and
 U.S. Food and Drug Agency
medical devices. TPD is our initial
institutional focus for some key stages
of the drug review and approval process, although Health Canada reports
on the drug regulatory process often describe HPFB as the entity officially
taking action and making decisions.
However, the regulatory regime in a larger sense also includes the
Patented Medicine Prices Review Board (PMPRB). PMPRB is responsible under its Patent Act mandate for regulating the prices patentees
charge for prescription and non-prescription drugs sold in Canada to
wholesalers, hospitals or pharmacies for human or veterinary use, to
See Health Canada, Access to Therapeutic Products: The Regulatory Process in Canada (Ottawa:
Health Canada, 2006), p. 3.
Ibid., p. 26.
52
Red Tape, Red Flags
ensure that they are not excessive. PMPRB will loom larger in Chapter 3’s
analysis of biotechnology and intellectual property, but it also warrants
mention in this chapter’s analysis of the pharmaceutical drugs–public
health regime.
The regime also includes, as
Main Stages of Pre-Market Drug Approvals
we see in more detail below,
and Post-Market Review
the Canadian Agency for Drugs
 Pre-clinical trials
and Technologies in Health
 Clinical trial authorization
(CADTH). CADTH develops
 Regulatory product submission
evidence-based clinical and
 Review of product submission
pharmaco-economic reviews to
 Market authorization decision
assess a drug’s cost effectiveness.
CADTH is centrally involved in
 Public access
the CDR, which began in 2003
 Surveillance, inspection and investigation
and which involves a single process to assess new drugs for
potential coverage by participating federal, provincial and territorial drug
benefit plans. Provincial and territorial health ministries are also part of
this regime because they ultimately make regulatory and expenditure decisions about whether a new drug will be funded and listed for reimbursement under medicare services delivered at the point of in-patient care.
A more detailed sense of the seven stages of drug pre-market assessment and post-market review can be found in the descriptions of each
stage by Health Canada:
 Pre-clinical trials: These are studies carried out in vitro (using test tubes)
and in vivo (using animals) to assess the performance of the drug,
including the existence and extent of toxic effects.
 Clinical trial authorization: HPFB reviews the information sponsors
submit in the application to ensure that the trial on humans is properly
designed and that participants are not exposed to undue risk. Trials
must be conducted in accordance with internationally accepted
principles of good clinical practice.
This summary is adapted from ibid., pp. 6–23.
Chapter 2
53
 Regulatory product submission: If clinical trials indicate that a new
drug has therapeutic value that outweighs the risks associated with
its proposed use, the manufacturer may seek authorization to sell
the product in Canada by filing a new drug submission. HPFB submissions typically involve between 100 and 800 binders of data, as
well as details on the production of the drug and its packaging and
labelling. Such new drugs are commonly referred to as brand-name
drugs created by companies that have previously patented them.
Companies also submit generic drug product applications to HPFB
based on reproductions of brand-name drugs.
 Review of product submission: HPFB staff screens the submission for
completeness and quality; thoroughly reviews the submitted data,
sometimes using external reviewers and expert advisory committees;
reviews the information that the manufacturer intends to provide to
health-care practitioners and consumers; and requests additional
information as needed. HPFB may grant priority review status to
new drug submissions when the drug is intended for the diagnosis
of serious, life-threatening or severely debilitating illnesses or conditions and when one or both of the following conditions exists: no
comparable product is currently marketed in Canada; or the new
product significantly increases efficacy or significantly decreases
risk such that its overall risk-benefit profile is better than that of
existing therapies. HPFB sets target times for completing reviews
of different classes of products, as discussed in more detail later in
this chapter.
 Market authorization decision: If, after completing a new drug review,
HPFB concludes that the benefits outweigh the risks and that the
risks can be mitigated or managed, it issues a letter known as the
Notice of Compliance (NOC) and a Drug Identification Number
(DIN). This allows the manufacturer to sell the product in Canada.
If the HPFB finds that the application fails to comply with requirements set out under the Food and Drugs Act and Regulations, it
will issue a Notice of Non-Compliance (NON). This notice outlines
HPFB’s concerns and usually requests additional information. The
manufacturer must respond by a specified date. A manufacturer may
54
Red Tape, Red Flags
appeal a decision made by HPFB on a submission. HPFB also operates a Special Access Programme (SAP), which allows health-care
professionals to gain access to drugs, natural health products and
medical devices that have not been authorized for sale in Canada.
Special access can be requested for emergency use, or if conventional therapies have failed or are unavailable to treat a patient.
 Public access: While SAP is part of overall access, the public
access stage mainly involves meeting certain labelling requirements
once a new drug has been approved for the Canadian market. For
instance, manufacturers must provide drug product monographs that
tell consumers what the medication is for, how to use it and what
the potential side effects are. Access information is also provided
via the HPFB Summary Basis of Decision (SBD). Databases are
also available on authorized therapeutic products. This stage also
involves the price review of patented medicines process and the
CDR (see more below).
 Surveillance, inspection and investigation: This is the final, or postmarket, stage. Manufacturers are responsible under the law for
monitoring the safety of their products and are required to report
any new information they receive concerning serious side effects
(adverse reactions), including any failure of the product to produce
the desired effect. Patients and health professionals are also involved
in monitoring and reporting adverse reactions. HPFB also carries
out other inspection and compliance activities related to a range of
legal requirements.
While it is necessary to appreciate the above “stages” portrait as
a core drug regime feature, the portrait is not in itself a sufficient or
dynamic enough picture of the regime. It does not sufficiently reveal
the statutory issues around the Food and Drugs Act and Regulations and
their current content and reform needs, as discussed further later in this
chapter. Moreover, at the pre-market stage, the core relationships tend to
be between drug firms and their S&T staff on one side, and TPD assessors and reviewers on the other. Hence, these relationships are intensely
bilateral and detailed. The pre-market stage also involves core internal
Chapter 2
55
relations within drug firms and other applicants, as new drug products
emerge through internal self-regulation and scientific review.
On the other hand, at the post-market stage, the range of players
widens enormously, as thousands of patients, health professionals and
health institutions become a daily, even hourly, part of the post-market
review process, functioning as a complex information and reporting network. At this stage the system also becomes more multi-level in terms
of its regulatory governance participants, which include federal, provincial, local and international agencies. Relationships with the U.S. Food
and Drug Agency (FDA) are also close and frequent at the technical and
regulatory level.
This summary of the regulatory regime is important for the analysis
in this chapter and in Chapter 3. We need to understand the regime’s
complexity and full range of stages, actions and players. However,
we also need a complementary assessment of the way this regulatory
regime has evolved and the way it was criticized and changed, as the
three main forces outlined in Chapter 1 took hold and as red-tape and
red-flag challenges diversified quickly in the innovation age.
Context, Regime Change and Evolving Criticism
The Thalidomide Model and the Pre-Market Safety Focus
As in other regulatory realms, specific controversies or crises often
influence the drug–public health regulatory regime significantly, leading to path-breaking changes that shift the entire regime’s climate,
context and focus. One such change resulted from the thalidomide disaster of the late 1950s and early 1960s. In a sense, this serious regulatory failure and the resulting response caused the federal regulatory
regime for drugs to focus, quite naturally and overwhelmingly, on more
56
For analysis, see G. Bruce Doern and Ted Reed, eds., Risky Business: Canada’s Changing
Science-Based Policy and Regulatory Regime (University of Toronto Press, 2000), Chapter 1,
and Joan Murphy, “Multilevel Regulatory Governance in the Health Sector,” in G. Bruce Doern
and Robert Johnson, Rules, Rules, Rules, Rules, pp. 305–324.
Red Tape, Red Flags
stringent pre-market processes where “safety” was the dominant value.
Regulatory mandate statements spoke unambiguously about safety (red
flags) and the internal culture of the regulatory regime was, not surprisingly, dominated by this value.
All regulatory agencies and regimes have dominant cultures and ways
of thinking about and acting on issues. Canada’s drug regulators clearly
have had a dominant safety focus. This focus was ingrained in the public
discourse even when concepts such as risk–benefit were recognized. In
recent years, risk–benefit considerations began playing a stronger role
in discourse. However, when cases such as Vioxx emerged in the last
couple of years, the ongoing importance of safety as a norm quite validly
re-emerged. Exceptional cases are always crucial. However, regulatory
regimes must operate in relation not just to these exceptional cases but
also in relation to “normal” drug approvals, where a balance between
risks and benefits is much closer to the norm and what is actually being
sought most of the time.
The Backlog Problem and Slow Product Approval Times
The problem of backlogs and slow drug approval times began in
the late 1980s and continued until well into the early years of the new
century. Very early in the 1990s, the business community and other
parts of the federal government voiced serious regulatory red-tape concerns. They criticized what was then called the Therapeutic Products
Programme (now TPD) for its slow review times and large backlog
of unreviewed proposals. However, it took much longer—until about
2005—for Health Canada to deal with the backlog problem.
When the backlog problem was solved, attention then focused in part
on improving the normal drug proposal review time lines. Here, comparative benchmarking showed that Health Canada’s average review
time was still significantly slower than that in other jurisdictions, such
as the U.S. and the U.K., but that the gap was beginning to close.
For an analysis of change in the late 1980s and 1990s, see G. Bruce Doern, “The Therapeutic
Products Programme: From Traditional Science-Based Regulator to Science-Based Risk-Benefit
Manager?” in G. Bruce Doern and Ted Reed, eds., Risky Business, pp. 185–207.
Chapter 2
57
There was also a related significant regulatory lag. Throughout
the 1990s, many recognized that the decades-old Food and Drugs Act
and Regulations needed a major overhaul, but this revision had still
not occurred as of mid-2007. This delay is discussed further later in
this chapter, in the section dealing with the Health Canada Blueprint
for Renewal.
In the first decade of the new century, the drug regulatory regime
was speaking in terms of a more explicit access strategy. The 2002
SFT called for “speeding up the regulatory process for drug approvals to ensure Canadians have faster access to the safe drugs they
need, creating a better climate for research on drugs.” The Romanow
Commission’s recommendations on Canadian health care strummed a
similar theme.
As a result, Budget 2003 provided $190 million over five years to fund
a Therapeutics Access Strategy (TAS), and a National Pharmaceuticals
Strategy also emerged. A further $170 million over five years became
available in Budget 2005 to enhance the safety and efficacy of drugs.
There were clearly considerable catch-up aspects to these announcements but also a sense of a need to deal with future volumes of new
drugs. For example, in 2005 there were 63 new drug submissions but,
earlier in the regulatory cycle, there were 1,982 clinical trial applications
to HPFB. Not all such trials lead to new drug submissions, but these
clinical trial numbers certainly point to a likely need to deal with much
higher submission volumes in the future.
Higher Volumes of Drugs, New Levels of Access, and the
Rebalancing of Pre- and Post-Market Review
As a new century emerged, the actual and potential emergence of
new biotechnology and bio-health products also increasingly influenced the drug regulatory regime. I discuss biotechnology more fully
Quoted in Health Canada, Access to Therapeutic Products, p. 4.
Health Canada, Access to Therapeutic Products, p. 12.
58
For discussion, see Canadian Biotechnology Advisory Committee, Biotechnology and the Health
of Canadians (Ottawa: Canadian Biotechnology Advisory Committee, 2004).
Red Tape, Red Flags
in Chapter 3. However, some aspects of new bio-health product volumes and characteristics need to be noted here in terms of how they
affected the drug product and related therapeutic product realms. Such
products, also labelled as biopharmaceuticals, are therapeutics or preventive medicines derived from living organisms using recombinant
DNA technology. Relatively recent global examples include a nasally
delivered influenza vaccine and a drug to treat osteoporosis in postmenopausal women at high risk of fracture. However, products range
across several aspects of disease prevention and treatment. These products
include vaccines, tests that speed diagnosis and enhance patient response
to treatment, genetic testing products (see Chapter 3), therapeutic drugs,
stem cell therapy products and biologics.
These new products and greater product volumes have several
implications, but I note here only two: the need to rethink assumptions because more tailored products are aimed at smaller markets than
normal pharmaceutical drug products; and the need to rebalance the
pre- and post-market assessment aspects of regulation.
The notion of more tailored products means that more drugs and
devices are now derived from the genome mapping and DNA characteristics of small sub-populations. Typically, most drug products are now
aimed at huge target markets, but bio-health products are different.10
However, the extent to which companies create niche-market drugs
depends, as we will see in Chapter 3, on the availability of risk capital,
especially for the numerous small firms developing these products.
Similar pressures, but on a smaller scale, were previously encountered
in relation to so-called orphan drugs. These were drugs that would not
normally have reached the market because of economic imperatives but
which were crucial to smaller sub-markets of patients. The U.S. and the
See World Health Organization, Genomics and World Health, Report of the Advisory Committee
on Health Research (Geneva: World Health Organization, 2002).
10 The Economist, “Pharmaceuticals: Beyond the Blockbuster,” The Economist 383, 8535 (June
30, 2007), pp. 75–76.
Chapter 2
59
EU developed special incentives to enable some such products to get to
market11 but Canada has no such system.
There will be many more such potential orphans in the emerging
tailored bio-health product market. This situation also means that a
much larger proportion of drugs may not be available in a middle-sized
country such as Canada, since the local market may be too small to
support the cost of regulatory review.
This characteristic is important in its own right, but it is ultimately
tied to other features of likely market and patient pressures. As Chapter 1
highlighted, the Internet and the existence of patient lobby groups
means that individuals will learn about prospective new bio-health
drugs, devices and products, and will exert pressure on national regulators to approve them or to allow them to be imported.
One impact of greater volumes of new products is that drug and
health regulators may have to make greater use of provisions regarding exceptional circumstances: regulatory provisions that allow faster
approval or temporary use of products. These provisions have been
used for some AIDS-related drugs and other products, for instance. As
noted earlier, Health Canada’s SAP provides access to non-marketed
drugs to practitioners treating patients with serious or life-threatening
conditions when conventional therapies have failed, are unsuitable, are
unavailable or offer limited options.
However, the combined logic of the volume and complexity dynamic
and the tailored product dynamic is that there may be more and more
exceptions or “special access” needs. With these products approved
and available in other countries, and likely flowing into middle-sized
countries such as Canada (increasing the number of products covered
by special access programs), serious questions will likely arise about
the value added by the regulatory system, and whether the system is
worth the cost.
11 See Thomas Maeder, “The Orphan Drug Backlash,” Scientific American, 288, 5 (May 2003),
pp. 70–77.
60
Red Tape, Red Flags
The second impact of greater volumes of new products is the need
to rebalance the mix of pre-market versus post-market regulation. The
current drug-regulation system is still strongly pre-market-oriented, as
it largely dates back several decades to the thalidomide crisis. There
are aspects of post-market regulation as well, but typically far fewer
regulatory regime resources go into this kind of monitoring and reporting activity.
One of the broad implications of the current regulatory system is
that once drugs are approved and licensed, they are on the market for
the long term. But the changed regulatory regime for drug products
based on biotechnology will need to rebalance pre-market and postmarket aspects of regulation. Stringent pre-market processes to ensure
safety and efficacy will still be crucial, but greater post-market activity
is also likely to be needed simply because drug use by actual diverse,
larger populations will occur. In addition, closer post-market monitoring will be particularly important in bio-health areas focusing on
smaller but more numerous sub-populations. By discovering adverse or
unforeseen effects, increased post-market assessment of actual product
use, efficacy and impacts is also likely to increase the number of drugs
that are recalled or reviewed (see the discussion of Health Canada’s
Blueprint for Renewal plans later in this chapter).
Concerns are also growing in the regime as a whole regarding regulation of research that leads to new drugs. These concerns include the
need to prevent the unintended release of experimental chemicals.
Some are concerned that xenotransplantation could make humans susceptible to new diseases originating in donor species. And numerous
ethical and other issues are centred on the treatment of donor genetic
material for scientific research.12
The 2004 EACSR report also examined the drug review process as
one of its five case studies.13 The report stressed the regime’s complex
12 See Claire Foster, “Regulation for Ethical Purposes: Medical Research on Humans,” in
J. Abraham and H. Lawton Smith, eds., Regulation of the Pharmaceutical Industry (Basingstoke,
U.K.: Palgrave MacMillan, 2003), pp. 181–194.
13External Advisory Committee on Smart Regulation, Smart Regulation, pp. 79–88.
Chapter 2
61
characteristics and agreed that safety should be the system’s paramount
concern, but also argued that review and approval processes, as of 2004,
still took too long. The report also highlighted the issue of Canadians’
access to new drugs and the need to improve the regulatory regime to
avoid “disincentives for the development of new pharmaceuticals in
Canada and lost opportunities for innovation.”14
When comparing Canada’s regulatory capacities to those of the
U.S., the smart regulation report argued that “Canada cannot support a
review agency as large as the FDA, nor can it afford to carry out drug
reviews as extensive as those of its American counterpart. It must be
strategic in its use of its limited resources.”15 Further, it said that Health
Canada and its regulatory partners needed to look more strategically at
international regulatory cooperation, particularly with the U.S. but with
others as well. The smart regulation report recommended that Health
Canada “focus on determining the areas of the drug approval process
for which an independent approach does not contribute to the quality of
the decisions or generate a benefit to Canadians.”16
Eventually, responses to these kinds of problems have emerged,
but it is important to show how long that has taken. Why were these
responses not higher up on someone’s overall regulatory agenda—
Health Canada’s or that of the federal government? Taking a decade
and more to deal with these issues is simply not good enough, either in
the 1990s or in the current decade. I will return to this issue later in my
analysis of agendas and in the Conclusion.
Health Canada’s Blueprint for Renewal in an Innovation Context
The most recent review process has come in the form of Health
Canada’s Blueprint for Renewal, an October 2006 discussion document.17
The Blueprint covers both health products and food, but my summary
14 Ibid., p. 79.
15 Ibid., p. 82.
16 Ibid., p. 83.
17Health Canada, Blueprint for Renewal: Transforming Canada’s Approach to Regulating Health
Products and Food (Ottawa: Health Canada, October 2006).
62
Red Tape, Red Flags
here focuses on the drug regime aspects of it. Health Canada’s own case
for renewal is a broadly self-critical admission that its approaches over the
past 20 years have been insufficient for the world it has faced for some
time. The document stresses that since 1953, the Food and Drugs Act
and Regulations have been “largely intended to be a consumer protection statute.”18 Health Canada’s new approaches to regulation have had
to deal with five challenges:
 an outdated regulatory toolkit that is increasingly limited and inflexible in responding to today’s health products and food environment;
 the regulatory system’s current incapacity to consider a given health
product or food through its entire life cycle, from its discovery or
development through to its “real world” benefits and risks in the
market;
 the impact of social and economic changes, such as accelerating scientific and technological advances, the rise of transborder health and
environmental threats, and a more informed and engaged citizenry;
 a regulatory system that currently works in isolation from R&D activi­
ties and policies, and those of the broader health-care system; and
 a regulatory system with insufficient resources for long-term efficiency and sustainability.19
The Blueprint then goes on to discuss each of these challenges and
self-diagnosed inadequacies, all of which have been known since at
least the early 1990s. Its recommendations and suggestions for change
include moving to the following:
 a product life-cycle approach, under which manufacturers might be
required to include pharmaco-vigilance plans in their pre-market
submissions;
 a system where regulatory interventions are proportional to risk, a change
that would require revamping the product categorization system;
 a proactive and enabling regulatory system, which would not only
keep pace with trends but which would also be ahead of them where
18 Ibid., p. 6.
19 Ibid., pp. 6–7.
Chapter 2
63
possible (partly through greater regulatory foresight programs and
activities related to new and changing technologies);
 a system that makes the best use of all types of evidence, by complementing current pre-market assessments with more extensive
post-market monitoring;
 an emphasis on specific populations regarding patient drug responses,
which would include a capacity to deal with new, tailor-made products
for diseases that affect smaller patient or genetically specific populations; and
 an integrated system.20
Other analyses have not been quite so accepting as mine of the
innovation- and access-driven logic of the Blueprint and of the previous smart regulation logic.21 They think that logic is influenced too
strongly by business pressure, rather than by public health and safety
concerns, and that, by agreeing with it, Health Canada is weakening
its central and core regulatory mandate. In my terminology, these critics argue that the new logic focuses too much on reducing red tape in
the name of speed and innovation and not enough on addressing redflag issues, which are increasing in number and scope. This view also
seeks to ensure that pre-market rigour is not sacrificed on the altar of a
greater post-market complementary focus in the regulatory regime.
Illustrative Regime Change: The CDR, Access and the
Drug–Public Health Regulatory Regime
Thus far, I have not discussed in any detail another element of the
drug regulatory regime: namely, the eventual approval or non-approval of
drugs for funding under Canada’s health-care system. More attention has
20 The above list is adapted from ibid., pp. 7–24.
21 See Trudo Lemmens and Ron A. Bouchard, “The Regulation of Pharmaceuticals in Canada,” in
J. Downie, T. Caulfield and C. Flood, eds., Canadian Health Law and Policy, 3rd edition (Markham,
Ontario: Butterworths, 2007).
64
Red Tape, Red Flags
been focused on this element recently because of the establishment of
the CDR in 2003 and because of the growing number of new drugs being
approved to which Canadians want quick but safe access. I will now look
at this area as a particular example of regime change and inertia.
I have already noted the basic mandate of two of the agencies, or
groups of agencies, involved in this aspect of the regime: CADTH
and the provincial and territorial health ministries. I have also referred
briefly to the public access stage of the drug regulatory regime and
process. CADTH is not a regulatory body. Rather, in the context of
the CDR, it develops evidence-based clinical and pharmaco‑economic
reviews to assess a drug’s cost effectiveness. These reviews are used
by the Canadian Expert Drug Advisory Committee (CEDAC), an
independent advisory body of professionals with expertise in drug
therapy and evaluation. This committee in turn makes recommendations on which drugs to include in the formularies of the participating
drug plans.
In more particular terms, the CDR process consists of the following
basic stages:
 the complete submission is received;
 submission plus information received through independent literature review search is reviewed by clinical and pharmaco-economic
reviewers;
 reviews are sent to the manufacturer for comments;
 the manufacturer’s comments are sent to reviewers for replies;
 reviews, comments and replies are sent to CEDAC and participating
drug plans;
 CEDAC deliberates;
 CEDAC issues its recommendation and reasons for the recommendation to drug plans and the manufacturer; and
 final CDR reviews are sent to the manufacturer for information.22
22 Canadian Agency for Drugs and Technologies in Health, Submission Brief to House of Commons
Committee on Health (Ottawa: Canadian Agency for Drugs and Technologies in Health, April 25,
2007), p. 7.
Chapter 2
65
The ultimate regulators and decision makers regarding what drugs
most Canadians have access to under medicare are the federal, provincial and territorial governments. They include the Quebec provincial
government, though it is not a part of the CDR process. The provincial
and territorial health ministries examine the CDR process recommendations “but retain the final say over which drugs to include in their
respective formularies.”23 In making these decisions, the governments
are both regulators and spenders since, if coverage is approved, they are
deciding to increase their budgets for these new drugs.
According to its mandate, the CDR conducts “objective, rigorous
reviews of the clinical and cost effectiveness of new drugs, and provides formulary listing recommendations to the publicly funded drug
plans in Canada (except Quebec).”24 Canada’s public drug plans differ,
however, regarding the drugs they cover and the populations they serve.
Moreover, decisions governments need to make regarding each new
drug involve issues and questions such as the following: how the drug
compares with alternatives, which patients will benefit, and whether
the drug will produce value for money.
In October 2005, first ministers directed those involved in the CDR
to expand its role by making recommendations “for reimbursement to
all drugs and to work towards a common national formulary” so as to
eventually produce more consistent access to drugs across Canada.25
Ultimately, a number of aspects of the political economy of health care
drive these kinds of aspirations for access to funded drugs.26 One aspect
is certainly the notion that national medicare is a right. That has never
been strictly true for funded access to drugs. Governments fund access to
drugs given to patients in hospitals while they are under treatment there.
23Health Canada, Access to Therapeutic Products, p. 19.
24 Canadian Agency for Drugs and Technologies in Health, Common Drug Review [online].
(Ottawa: Canadian Agency for Drugs and Technologies in Health, 2006.) www.cadth.ca/
index.php/en/cdr.
25 Ibid., p. 19.
26 See Allan Maslove, “Health and Federal-Provincial Fiscal Arrangements: Lost Opportunity,”
in G. Bruce Doern, ed., How Ottawa Spends 2005–2006: Managing the Minority (Montreal and
Kingston: McGill-Queen’s University Press, 2005), pp. 23–40.
66
Red Tape, Red Flags
However, when Canadians are not in hospital, drugs are paid for under
any private plans they may have.
Secondly, if access to new drugs is seen to be part of what the
British refer to as “postal code” health care—where your access to new
drugs depends on where you live—political volatility could result. An
equal right to medicare is often cast as a crucial feature of Canadian
national unity.
Thirdly, studies show that drug costs are the fastest growing driver
of overall health-care costs and that, in turn, health-care costs are the
fastest growing and largest part of provincial budgets. Since the median
age of the population is rising, the need for access to health care is
increasing relative to earlier post-war demographic periods. A 2004
Conference Board of Canada study concluded with respect to drug
costs that:
The rate of increase in drug spending has consistently outpaced the overall rate of increase in health
care spending since 1984. Total Canadian spending on
drugs, estimated at $18.1 billion in 2002, now accounts
for 16 per cent of all spending on health care. This is
up from 12 per cent in the early 1990s and 8.8 per cent
in 1975.27
That ultimately means, for the purposes of the analysis in this chapter, that provincial governments in particular want to promote access to
new drugs while also controlling their cost and use. They do so in part
by delaying—or ultimately not approving—the addition of some of
these drugs to their formularies.
Not surprisingly, the CDR can be seen as part of the access aspect
of the regulatory system and also as new red tape. It is not unreasonable
red tape in the sense that decisions for formulary inclusion do need to
undergo a form of new or further drug analysis. This further analysis
27 The Conference Board of Canada, Understanding Health Care Cost Drivers and Escalators
(Ottawa: The Conference Board of Canada, 2004), p. 33.
Chapter 2
67
potentially goes beyond what TPD does, by dealing with the further
three questions posed under the CDR phase, each of which raises different kinds of red-flag issues for the people deciding which drugs to
include in formularies.
After its first few years of operation, the CDR has already garnered
criticism that it is not performing efficiently nor providing access. The
industry lobby group Rx&D, which represents Canada’s researchbased pharmaceutical companies, released an initial evaluation of the
CDR in October 2005. It argued that:
The evaluation unveils exactly what patient groups and
Rx&D feared would happen with this added layer of
review of new drug submissions which seems to function
with limited or no transparency; further delays in making
innovative medicines available to needing patients. . . .
In fact, by the time the CDR recommendations are
reviewed by federal, provincial and territorial governments, an additional five months, if not more, has been
added to the time it takes to get medicines to patients.28
A year later, a further Rx&D evaluation argued that the CDR was
acting as a barrier to access.
The evaluation compared patient access to new drugs in Canada,
Sweden, Switzerland, France and the U.K. It showed that Canada
approved only 26 out of 50 drugs (52 per cent), compared to Sweden
(82 per cent), Switzerland (80 per cent), the U.K. (76 per cent) and
France (58 per cent). Overall, the evaluation concluded that the CDR
“has resulted in duplication and delays in listing new medicines” (an
average delay of more than seven months) and that “the CDR process is a disincentive for more research and development into new
medicines.”29
28 Canada’s Research-Based Pharmaceutical Companies. CDR report: patients fail to gain timely
access to new medicines. Press release. October 14, 2005.
29 Canada’s Research-Based Pharmaceutical Companies. Study Shows Canada’s Common Drug
Review is a Barrier to Access to New Medicines for Patients. Press release. December 8, 2006.
68
Red Tape, Red Flags
These analysts presented the issue entirely as a red-tape barrier, since
in their view all the red-flag concerns had been dealt with at the earlier Health Canada pre-market review stage. A largely similar but more
complete view was advanced in a 2007 Fraser Institute assessment.30
The study compared the global wait for the development of new drugs
with Canada’s, with Canada’s wait times being an amalgam of the time
needed for three processes: marketing approval from Health Canada;
reimbursement recommendation by the CDR; and a decision on eligibility for provincial reimbursement. The authors calculated a consolidated
average wait time for access to pharmaceuticals and biologics across
these three elements, but looked separately at times for each type of
product. The study concluded that:
The data for the period from 2001 to 2005 suggest
that Health Canada’s approval times have improved
for pharmaceuticals since 2003 but have gotten longer
for biologicals. Comparing the wait internationally
(averaged across both biologicals and pharmaceutical
medicines, and across all drug submission types) suggests that Health Canada’s performance also improved
relative to Europe’s in 2005 but has been longer than
in both the United States and Europe in the majority
of the five years studied. This segment of the wait for
access to new medicines equally affects all patients
in Canada, whether they pay for their drugs through
private insurance, out-of-pocket expenditure, or public
drug programs.31
30 See Brett Skinner, Mark Rovere and Courtney Glen, Access Delayed, Access Denied: Waiting for
Medicines in Canada (Vancouver: Fraser Institute, March 2007).
31 Ibid., pp. 1–2.
Chapter 2
69
With respect to the CDR’s effect on wait times, the study concluded that:
The CDR’s contribution to the wait time for new
pharmaceuticals is 257 days compared to 186 days for
new biologics. By comparison, the wait for provincial
approval of reimbursement adds, on average, another
201 days for pharmaceuticals and another 187 days
for new biologics. The total average wait for approval
of reimbursement is 458 days for pharmaceuticals and
373 days for biologics. In other words, patients who
are dependent on public drug benefits that are delivered
only through in-patient settings must wait more than a
year after Health Canada has certified a new drug as
safe and effective before they have access to it.32
The study also drew attention to the fact that new drugs covered
by private insurance are generally eligible for reimbursement as soon
as Health Canada has certified they are safe and effective, but that private insurance sometimes has annual coverage limits that might expose
patients to significant out-of-pocket costs.
Not surprisingly, CADTH sees its red-tape and red-flag record quite
differently. In a recent statement to a House of Commons committee,
CADTH stressed that:
. . . prior to the CDR, the [drug] reviews often took longer,
and the level of rigour varied considerably across the jurisdictions. Evidence shows that the total time to formulary
listing has not increased since before the inception of the
CDR. This is despite establishing a standardized process
that has both increased the level of rigour of the reviews
and added many transparency elements to the process.33
32 Ibid., p. 3.
33 Canadian Agency for Drugs and Technologies in Health, Submission Brief to House of Commons
Standing Committee on Health. Ottawa: April 25, 2007.
70
Red Tape, Red Flags
CADTH also notes that a recent evaluation of the CDR concluded
that “the impact of the CDR on participating drug plans has, according
to drug plan representatives, been wholly positive. The drug plan’s perceptions were that the process is rigorous, consistent, and has reduced
duplication.”34
The CDR has received 94 submissions to date and issued 68 final
recommendations. Drug plan formulary listing was recommended for
about 50 per cent of drugs reviewed. CADTH also stresses that drug
plans’ decisions have followed CDR recommendations 90 per cent of
the time.35 Further aspects of regime development are now underway.
The CADTH budget has been more than doubled to $5.1 million so
that the CDR can cover new indications for old drugs and CADTH can
carry out initiatives to increase transparency.
Regulatory politics and concerns related to the CDR and drug
access also arise at the individual level and via the lobbying of patient
NGOs. For example, the Colorectal Cancer Association of Canada
has lobbied hard for cross-Canada funding of the colon cancer drug
Avastin, which is currently covered only in B.C. and Newfoundland.36
The drug can cost $35,000 for a course of treatment. Some patients are
paying for the drug themselves after failing to obtain coverage in their
home province.
This kind of highly personalized health-care regulatory and funding
politics has also garnered responses from drug companies other than
general criticism of regulatory lag. For example, in the U.K., a drug
company called Janssen-Cilag has proposed a scheme whereby the U.K.
National Health Service (NHS) would pay for a certain drug, which
costs £18,000 per patient, only when the drug worked.37 Under the
U.K.’s rough equivalent to Canada’s CDR process, it was recommended
34 Ibid., p. 5.
35 Ibid., p. 5.
36 See Joanne Laucius, “Patients Buy Cancer Drugs at New Clinic,” The Ottawa Citizen (June 3,
2007), p. 6.
37 BBC News, “Cancer-Drug Refund Scheme Backed,” BBC News [online]. (June 4, 2007),
newsvote.bbc.co.uk/mpapps/pagetools/print/news.bbc.co.uk/1.
Chapter 2
71
that multiple myeloma patients showing a full or partial response to the
drug after a maximum of four cycles of treatment would be kept on it,
with the treatment funded by the NHS.
Conclusion
This analysis of the pharmaceutical drugs–public health regulatory
regime shows the complex nature of the regime, including the stages
of drug approval through to post-market review, and the pressures to
rebalance the weight given to both pre-market and post-market processes. It conveys regime complexity by describing the number of
agencies involved, focusing on the HPFB and TPD in the early decision
stages and then listing the wide array of players involved in the postmarket phase, including numerous health professionals, hospitals and
patients. The discussion of the CDR then extends the scope of regime
agencies to include CADTH, CEDAC and, crucially, provincial health
ministries and their processes for approving drugs for reimbursement
under medicare and related drug programs.
Accordingly, the analysis shows the inherent overall complexities
of regulatory regimes. There are multiple agencies and diverse regulatory review cycles and stages, each with its own statutory and related
objectives tied to health, safety, risk-benefit, price control and monitoring, and cost-effectiveness concerns. The full regime links and involves
federal and provincial governments and drug companies, business
interest groups, patient and disease groups, and complex networks of
health professionals and individual patients, consumers and citizens.
Each of the three forces examined in Chapter 1 has helped shape the
nature of the regime and regime change over the past two decades. The
speed and complexity of underlying economic and technological changes,
and drug companies’ concerns about competitiveness, are evident in the
continuous pressure by business to speed up approvals while preserving
72
Red Tape, Red Flags
effective health and safety red-flag values, since they are also essential to
drug company profitability and market share.
Consumer-citizen demands for increased access to drugs was
increasingly evident in the time period covered by my brief account
of regime change. Due to the Internet and the wider availability of
medical and health information, consumers have become increasingly
impatient patients. This pressure for access helped create demand for
the Common Health Policy and then fuelled criticisms about the sluggishness of its processes for approving funding for those drugs under
medicare. At the same time, however, regulators need to engage citizens
in diverse ways, including collectively via stakeholder groups, and individually through Internet-based processes and other initiatives.
The complex, science-based nature of risk-benefit regulation is evident in the long learning curve underlying debate on pre-market and postmarket elements of this regime. Safety and risk-benefit are evident as
overarching norms in the red-flag debate. Good science is crucial at the
front-end approval stage to deal with key safety concerns, such as those
revealed by classic examples of regulatory failure as in the thalidomide
and Vioxx cases. However, more complex risk-benefit values also emerge
not only at the approval stage but also at the post-market stage, where
even more complex systems of networked, science-based knowledge and
intelligence are crucial to dealing with both risks and benefits.
The chapter also shows the inherent sluggishness of the government’s response to problems that emerged in this realm, such as backlogs of unreviewed proposals and long drug approval times. That
sluggishness is also evident in the slow way Health Canada revealed
its Blueprint agenda, which was recognized in 2006 but whose key features were evident as far back as the early 1990s. Parts of the political
and bureaucratic arms of the federal government have long been aware
of environmental and technological changes and have pressed for a
response. But the review system is still not sufficiently aware of the
patterns of change to act in a more timely and integrated way.
Chapter 2
73
I return to this issue in my conclusions regarding the need for
an annual regulatory agenda and for a Regulatory and Risk Review
Commission. Overall, the preceding account of the evolution and criticism of the regime shows the continuing presence of the conjoined
red-flag and red-tape conundrums, in the context of the demands of
the innovation age coming from both industry and consumers/citizens
regarding product access and changing views on the urgency and speed
of access.
74
Red Tape, Red Flags
3
The Biotechnology–
Intellectual Property
Regulatory Regime:
Access to Genetic Diagnostic Tests
T
he second regulatory regime case study analysis centres on the
biotechnology–intellectual property regulatory regime. This
regime of multiple regulators deals with rule making regarding
biotechnology and intellectual property (IP), the approval of biotechnology products and the assessment of patents for inventions related to such
products. In this chapter, my focus is on bio-health products and related
regime issues regarding access to patented genetic diagnostic tests. Due
to space limits, the chapter does not deal with biotechnology in food,
nor with broader aspects of biotechnology’s use as a major enabling or
platform technology in forestry, environmental remediation, and auto
parts and other areas of manufacturing. The food aspects of the regime
are referred to only contextually and for historical purposes.
I do, however, draw again on the discussion in Chapter 2 of the full
cycle of drug regulation and regulatory enforcement. This time, the
focus is on how major drug and numerous small biotechnology companies develop new bio-health drugs and biologics, and how regulators
assess and approve these products in the pre-market stage and monitor
them in the post-market stage.
Regarding the even earlier-stage patent aspects of the regime, I
examine the process of approving patents, the increase in patent application volumes, and the role of patented products in the conduct of mainly
publicly funded research on biotechnology and the human genome.
Again in this regime, red-tape issues centre on the speed of the
linked approval processes in the regime as a whole. In addition, red-tape
issues arise when patents, and what some regard as excessive patenting,
produce so-called “patent thickets.” These thickets either block public
health research, or create significant uncertainties and increase transaction costs, thus harming innovation rather than helping it. Red-flag
concerns in this regime revolve around product efficacy and safety, the
ethics of product development and use, and protection of the integrity of
the Canadian and international patent systems.
The chapter begins with a broad discussion of the regime-level
interactions of the main regulators, and of the inherent red-tape and
red-flag choices and pressures involved. The second section briefly
examines the context and evolution of the regime, including problems
Chapter 3
77
identified and criticized over the last two decades. The chapter then
looks more closely at one example of regulatory regime change and
inertia: namely, control over access to patented genetic diagnostic tests.
These tests are used to identify
and diagnostically assess speCore Biotechnology (Bio-Health) IP
cific diseases or susceptibility
Regime Agencies
to specific diseases, including
 Canadian Intellectual Property Office
conditions affecting very small
 Commissioner of Patents
sub-populations. The number
 Industry Canada (regarding changes to the
of patents for these tests has
Patent Act)
increased significantly in recent
 Patented Medicine Prices Review Board
years. Conclusions then follow
 Health Products and Food Branch of
regarding the regime analysis as
Health Canada
a whole.
 Biologics and Genetic Therapies
Directorate of Health Canada
 Canadian Biotechnology Advisory
Committee
 Canadian Biotechnology Secretariat
 World Trade Organization—Agreement
on Trade-Related Aspects of Intellectual
Property Rights (TRIPS)
 Canada’s Access to Medicines Regime
(linked to TRIPS and the Patent Act)
 Major drug companies and smaller biotechnology firms
 Genetics clinics, public researchers, family
physicians, and patient groups and networks
 Canadian Institutes of Health Research
(granting council rules and funding)
 Genome Canada (rules and funding)
 Organisation for Economic Co-operation
and Development
78
Red Tape, Red Flags
The Regulatory Regime:
Core Features
This section provides an
initial glimpse of the core agencies. [See text box entitled,
“Core Biotechnology (BioHealth) IP Regime Agencies.”]
I have also listed the key features of the regulatory patent application and product
approval cycles. [See text box
entitled, “Core Biotechnology
(Bio-Health) IP Regime Patent
and Product Approval Stages.”]
Core Biotechnology (Bio-Health) IP Regime Patent and Product Approval Stages
Patent stages and processes:
 Patent application by corporate, university and individual inventors
 Examination of patent by Canadian Intellectual Property Office examiners to ensure the
product meets the following criteria: newness (it is the first in the world); usefulness
(it is functional and operative); and inventive ingenuity (it would not be obvious to someone skilled in that area)
 Possible patent appeal process and re-examination process, at the request of either the
patent applicant or a third party
 Granting of the patent and its continuation through annual fees
 Dissemination of the patent by making it public
 Licensing under the patent through negotiation with the patent holder (the Commissioner
of Patents can also order compulsory licensing for public purposes)
Biotechnology product stages and processes:
 Stages similar to the stages outlined for drugs in Chapter 2
 Related advisory, non-regulatory review and study of emerging issues and products by the
Canadian Biotechnology Advisory Committee and the Canadian Biotechnology Secretariat,
in the context of national biotechnology and innovation strategies
 Application of research granting body and ethical rules and guidelines
Intellectual Property Aspects of the Regime
The IP aspects of the regulatory regime are typically the first part of
the full regulatory regime that biotechnology firms and other inventors
encounter. The term “intellectual property” embraces patents, trademarks, copyright and other IP rights, but in this case study I focus only
on the patent aspects of IP. On the advice of lawyers and patent agents,
Canadian-owned firms based in Canada and Canadian inventors apply
for patents mainly in Canada and in the United States, although they do
sometimes also apply for patents in other countries. The patent system
is very much influenced by lawyers and patent agents, who both defend
Chapter 3
79
the IP system and earn a living from it as intermediaries between firms
and inventors and the patent regulator.
In Canada, the patent regulator is the Canadian Intellectual Property
Office (CIPO), with statutory authority for patents residing in the person
of the Commissioner of Patents (the head of CIPO) under the provisions
of the Patent Act. Patent examiners in CIPO examine patent applications
against the three criteria for granting a patent. First, the invention must
be new (first in the world). Second, it must be useful (functional and
operative). Third, it must show inventive ingenuity and not be obvious
to someone skilled in that area.
Once a patent is granted, it confers on the holder a monopoly property
right of 20 years, provided the patentee continues to register the patent
by paying an annual fee. CIPO is funded mainly by such user fees, rather
than by taxpayers.
Most accounts of the patent system stress the property rights it
confers and hence the protection role it plays. But at the core of the
IP-patent system is a larger fundamental trade-off between protection
and dissemination. Once a patent is registered, the patent office makes
the invention public so that others may view it, study it and potentially
improve on it through further invention. Most patents are improvements on previous patents. Thus the patent system’s role in innovation
turns on both protecting the inventor and rewarding that inventor for his
or her ingenuity, and on encouraging subsequent inventors.
Another feature of this kind of trade-off has been the role played in
the past by compulsory licensing. These requirements, which are now
seriously restricted, were based on a view that inventions made and patents granted should benefit consumers and society; thus, if the inventor
was not going to turn the invention into a product or process available
See G. Bruce Doern and Markus Sharaput, Canadian Intellectual Property: Innovating Institutions
and Interests (Toronto: University of Toronto Press, 2000), and P. Drahos and R. Mayne, Global Intellectual Property Rights: Knowledge, Access and Development (Basingstoke, U.K.: Palgrave, 2002).
See Doern and Sharaput, Canadian Intellectual Property, Chapter 2. See also Lester Thurow,
“Needed: A New System of Intellectual Property Rights,” Harvard Business Review 75, 3 (1997),
pp. 94–103, and Wagner R. Polk, “Information Wants to Be Free: Intellectual Property and the
Mythologies of Control,” in Columbia Law Review 103, 4 (May 2003), pp. 995–1034.
80
Red Tape, Red Flags
in the market, then others should be able to do so, after paying a licence
fee to the patent holder. Licensing certainly exists in the current system, but persons or firms that want to use the patented item or process
then have to negotiate with the patent holder. In the end, the patent
holder may decline to license the invention. Licensing issues are at the
centre of my later discussion of patented genetic diagnostic tests.
With respect to innovation, it is important to stress that patents do
not themselves produce innovation in the form of actual products and
processes available in the marketplace. Innovation of this more complete kind only occurs when firms or entrepreneurs who hold patents
can acquire investment capital to get through the rest of the regulatory
approval system for products, as well as the manufacturing, marketing
and sales stages of the full innovation process.
Inventors and firms, and their patent agents, naturally seek speedy
approvals of patents. They criticize CIPO if Canada’s system takes
longer than other countries’ patent agencies—particularly the U.S.
Patent and Trademark Office—to examine and approve patents. Once
patents are granted, industry attention regarding red tape and efficiency shifts to dealing with possible patent infringements and hence
to enforcement, a process that relies entirely on the courts. Here the
regime takes on different characteristics for big and small firms. Large
firms, particularly multinational companies, can afford to use the
courts, while small firms often cannot. (I discuss the economics of the
small-firm-dominated Canadian biotechnology industry, especially in
relation to bio-health inventions and products, later in this chapter.)
It is crucial to mention two new regulation and rule-making features of the IP-patent regulatory system. The first is that the minister of
industry is responsible for changes to the Patent Act. Patent policy staff
at Industry Canada advise the minister directly, while staff at CIPO—
which has by far the largest core of expertise in the Government of
Canada on patent matters—provides indirect advice. The second feature to note is that regulations (as delegated law) under the Patent Act
can emerge out of operational issues and challenges at CIPO. If that
happens, they are governed by the normal processes of publication in
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81
the Canada Gazette and consultation under the provisions of the federal
Regulatory Policy.
Biotechnology Aspects of the Regime
The biotechnology aspects of this regulatory regime emerge at the
patent application stage. However, my discussion of biotechnology
aspects in this section concentrates more on the subsequent processes
for biotechnology product approvals than on patent approval alone.
The latter is the regulatory and operational process that assesses and
approves products derived from the application of biotechnology before
they are allowed on the market. This regime also engages in some forms
of post-market review, makes the overriding rules that govern biotechnology, and has key compliance and enforcement responsibilities.
In Canada, when the biotechnology regulatory regime focused
mainly on bio-food products, it centred on four departments and
agencies. They included Environment Canada and the Department of
Fisheries and Oceans; however, in bio-food product approval terms,
by far the most dominant were Health Canada and the Canadian Food
Inspection Agency (CFIA).
The largest political controversies for this regime have tended to
relate to food. These controversies escalated at the global level due to
serious differences between the U.S. and the European Union (EU).
Key differences arose in part because of stronger support in the EU
for concepts such as the precautionary principle. The net result was
that the EU often opposed or was skeptical about biotechnology food
products.
In these disputes bio-health products initially stood in the background of political consciousness and controversy, relatively speaking. There have been, of course, important health and biotechnology
For detailed discussion, see G. Bruce Doern, Inside the Canadian Biotechnology Regulatory
System (Ottawa: Canadian Biotechnology Advisory Committee, 2002).
See Garbriele Abels, “Experts, Citizens and Eurocrats: Towards a Policy Shift in the Governance
of Biopolitics in the EU,” European Integration 6, 19 (2002), pp. 121–141, and Robert Paarlberg,
“The Global Food Fight,” Foreign Affairs, 79, 3 (2000), pp. 24–38.
82
Red Tape, Red Flags
debates on such crucial ethical issues as cloning, assisted reproduction
and stem cell research. New bio-health products were certainly available, but they were initially few in number. But since the mid-1990s,
much larger numbers of such products have emerged and are now in
the research and regulatory pipeline. I noted this trend in Chapter 2
regarding the drug regime, but other features of this growing volume
are highlighted below.
The biotechnological regulatory regime now explicitly gives much
more attention to including the rule-making realms listed earlier.
[See text box entitled, “Core Biotechnology (Bio-Health) IP Regime
Agencies.”] These realms include IP bodies, biologics and genetic
therapy directorates, human reproduction regulators, research ethics
bodies, research granting bodies, and agencies such as the Canadian
Biotechnology Advisory Committee (CBAC) that conduct technologyand ethics-related assessments of these new technologies.
The regime also crucially includes, as Chapter 2 has also noted, the
governmental regulatory bodies that determine which products and services can be offered and paid for under medicare, and the pricing of
pharmaceutical products by government purchasers of drugs—which,
in Canada, include federal bodies such as the Patented Medicine Prices
Review Board. In short, these other regulators and the core bio-food
regulatory bodies noted above constitute the full biotechnology (biofood and bio-health) regime.
Context, Regime Change and Evolving Criticism
Three key developments—all linked to overriding but shifting redtape and red-flag themes and to regulation in the innovation age—
provide the context for regime change. These three developments are
the explicit location of both IP and biotechnology in emerging federal
and provincial innovation agendas; the lobbying of the fast-changing
See Martin Bauer and George Gaskell, Biotechnology: The Making of a Global Controversy
(Cambridge, U.K.: Cambridge University Press, 2002).
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83
Canadian and global biotechnology industry to modernize the full regulatory regime; and the emerging criticism of the IP patent rights system
by interests focusing on public health and global access to patented
life-saving drugs.
IP and Biotechnology in Innovation Agendas
With respect to most industries, the federal government is, in a very
real sense, both a regulator and a promoter or enabler of that industry
or emerging technology. That is certainly the case with biotechnology.
Initially, the biotechnology strategies led by Industry Canada and its
predecessor departments focused on broad support of what was then
a bio-food-focused industry, particularly through support for R&D. In
the late 1990s, the biotechnology strategy focused on a more balanced
regulatory and enabling role. CBAC was formed to foster broader public
engagement and to advise the government on health, environmental and
ethical issues (all red flag in nature). Its mandate ended in May 1997.
It must be stressed that CBAC was not a regulator; it was only an
advisory body. The Canadian Biotechnology Secretariat (CBSec) supported CBAC but was also the main Industry Canada staff agency
supporting the larger federal biotechnology strategy process. CBSec
reported to a group of biotechnology assistant deputy ministers and
ultimately to a further group of deputy ministers (DMs) whose departments had mandate roles in this field.
While CBAC and CBSec certainly advanced the biotech file, it was
evident fairly early on that neither the relevant DMs nor their ministers
were particularly engaged with the biotechnology file. At best, biotechnology issues on both the bio-food and bio-health sides received only
episodic attention. Biotechnology in food rarely resonated with ministers
largely because public opinion on bio-food was never robustly supportive. As bio-health issues began to loom larger, more political positives
came to be associated with biotechnology. However, even in this domain,
biotechnology as an overriding label presented difficulties. Increasingly,
84
See Michael Prince, Regulators and Promoters of GM Foods in the Government of Canada: An
Organizational and Policy Analysis (Ottawa: Canadian Biotechnology Advisory Committee, 2002).
Red Tape, Red Flags
in Canada and in other countries, the promotional or enabling sides
found greater political comfort under broader general labels such as the
bio-economy.
In 2002, biotechnology did find some pride of place in the Liberal
government’s innovation strategy. However, it was pitched at a much
more general level, grouped with other enabling technologies, such as
information technologies and nanotechnology. The formation of Genome
Canada provided further visible support for bio-health research.
The current Conservative government has essentially closed down
the CBSec and CBAC machinery in favour of a new, broader S&T
advisory body whose full mandate is still being determined. Thus, the
overall strategic place of biotechnology has not been a high-level one
but, rather, one that has functioned mainly at the middle levels of the
bureaucracy and somewhat more visibly through the public advisory
role of CBAC.
In this innovation strategy context, federal policy generally supported the growing importance of IP as a crucial feature of innovation.
IP was seen as vital to ensuring that Canada’s companies were patenting, and were aware of their patent rights and of the need to patent in
the innovation age. Key changes occurred in the 1990s, particularly
after stronger patent and other IP rights emerged after the Uruguay
Round of trade negotiations that led to the creation of the World
Trade Organization and the Agreement on Trade-Related Aspects of
Intellectual Property Rights (TRIPS).
In this climate of greater focus on innovation rather than just S&T
or R&D strategies, federal policy focused more on indicators such as
rates of patenting rather than on earlier focal indicators such as R&D
spending as a percentage of GDP. Rates of patenting in the global league
tables of industrial development were seen as more output-oriented indicators than R&D. CIPO, with Industry Canada’s strong encouragement,
took steps to encourage Canadian firms and inventors to patent more.
See G. Bruce Doern, Global Change and Intellectual Property Agencies (London: Pinter, 1999).
For discussion, see Doern and Sharaput, Canadian Intellectual Property.
Chapter 3
85
Industry Pressure and Fast-Changing Biotechnology Industry Dynamics
The core pressure for change in the regulatory regime came from the
biotechnology industry, which lobbied hard to ensure that its member bioeconomy firms could survive and prosper as they developed new technologies, inventions and products. Any discussion of this industrial pressure
must be set in the context of the structure of the biotechnology industry
and how rapidly its composition has changed in the last few years.
In 2005, Canada’s 490 biotechnology companies invested over
$1.5 billion in R&D and generated revenues of $3.8 billion. The
$15.3 billion in market capitalization of Canada’s public biotechnology companies is second only to that in the United States. The industry stresses its uniqueness regarding the amount of time and financial
resources needed to fully develop a new product. This view has shaped
not only its view of the combined IP and biotechnology products regulatory regime that it must traverse but also of other rules and provisions
embedded in tax laws, such as the Scientific Research and Experimental
Development (SR&ED) tax credit program.
Since 46 per cent of the Canadian biotechnology industry consists of firms involved with bio-health therapeutics, BIOTECanada,
the industry lobby group, has focused its criticism of the regulatory
regime on the Biologics and Genetic Therapeutics Directorate at Health
Canada in an effort to reduce the submission backlog and improve
approval times. Some improvements have occurred in relation to these
key industry concerns in recent years. As noted in Chapter 2, the industry
has also been very critical of the CDR phase of the drug regulation
system, a phase important to bio-health product companies.
Several other dynamics of the industry need to be highlighted. First,
in some respects, the biotechnology sector is not yet a full-fledged
industry, as a majority of its firms do not yet have actual products to
sell. Because so many of its bio-health firms are still in the R&D and
regulatory approval stages, it is often better to refer to biotechnology as
86
BIOTECanada, BIOTECanada Submission to Pre-Budget Consultations 2007 (Ottawa: BIOTECanada,
September 5, 2006).
Red Tape, Red Flags
a technology platform.10 A recent Ernst and Young study of the industry showed it to be both dynamic and vulnerable.11
A second feature is that the industry is awash in fast-changing corporate restructuring as new sub-sectors of the industry emerge, including integrated bio-pharma companies, contract research companies,
drug discovery companies and diagnostic companies. It must also be
stressed that virtually all the 490 or so Canadian companies were
founded in the last decade.
The industry is essentially dominated by small and medium-sized
firms with limited cash flows to survive the high front-end R&D and
regulatory costs. These shortages in risk capital are likely to be even
greater as the issues of high volume and tailored niche products discussed in Chapter 2 affect the regulatory and production pipeline. The
bio-health industry lobby strongly argues that the regulatory regime is
much wider than the drug or product approval process. Access to patients
and to the managed medical market requires attention to all aspects of
rule making and rules that affect products. These aspects include IP
regulatory processes and capacities in the new high-volume context, but
they also extend, as we have seen in Chapter 2, to drug formulary processes largely controlled by provincial governments in Canada but also
by the federal Patented Medicine Prices Review Board.
The industry has argued that market forces increasingly require
nationally and internationally efficient and effective regulatory regimes.
The high proportion of international alliances among smaller and larger
firms has also been linked to this argument. In a 2004 discussion paper
on regulatory performance, BIOTECanada argued that “the rest of the
world is outstripping our efforts to develop this technology and Canada
will quickly find itself lagging behind countries throughout the world
10 See The Conference Board of Canada, Biotechnology in Canada: A Technology Platform for
Growth (Ottawa: The Conference Board of Canada, 2005).
11 Reported in Roberto Rocha, “Canadian Biotech Industry Remains Volatile: Report,” The Ottawa
Citizen (April 17, 2007), p. D1.
Chapter 3
87
who are establishing long-term programs aimed at financial and regulatory security for their burgeoning biotech interests.”12
In the field of biotechnology, governments have never automatically
marched to the drum of such industrial lobbies. There is considerable
inertia involved as they take into account alternative points of view.
These alternative views come from NGOs opposed to biotechnology
(particularly bio-food) or insistent on appropriate public interest and
stewardship standards of regulation and regulatory processes. Such
pressure has certainly been present in Canada and, indeed, such NGOs
have been given explicit arenas, such as CBAC, for expressing their
concerns. Moreover, the regulators themselves—armed with complex
statutory mandates and duties—have never simply done the bidding of
the industry.
IP Rights, Public Health and Global Access to Patented Life-Saving Drugs
As noted earlier, the global and national IP systems have focused on
the protection side of the core protection-versus-dissemination tradeoff inherent in IP, especially patents. But after the Doha trade negotiations began in 2001 and as criticisms emerged, the focus turned more
toward the dissemination side and, hence, to the “public good” side of
knowledge and invention. In an overall sense, patents cover all inventions, whether they are new bottle top widgets or new drugs. But of
course, in human terms, these products are not all alike in their social
importance.
A key manifestation of this shift came in the realm of public health
access to patented life-saving drugs. At the WTO, this concern emerged
through changes to the TRIPS agreement that were intended to create
greater access to medicines by WTO member countries with little or
no pharmaceutical manufacturing capacity, by allowing them to make
effective use of the compulsory licensing allowed under TRIPS. In
12 BIOTECanada, Strained at the Leash: A Discussion Paper for Improving Regulatory Performance
for Biotechnology (Ottawa: BIOTECanada, July 2004).
88
Red Tape, Red Flags
Canada, these changes took the form of Canadian legislation to create
Canada’s Access to Medicines Regime by amending the Patent Act.13
Under the provisions of TRIPS (Article 31), compulsory licensing
or government use of patents is allowed without the authorization of the
patent owner under certain conditions—for instance, when such use is
predominantly for the supply of the domestic market. However, TRIPS
also prevents WTO members with manufacturing capacity from issuing
compulsory licences “authorizing the manufacture of lower-cost, generic versions of patented medicines for export to countries with little or
no such capacity.”14 In 2003, WTO members agreed to a waiver regarding this provision whose purpose was to “facilitate developing and
least-developed countries’ access to less expensive medicines needed
to treat HIV/AIDS, tuberculosis, malaria and other epidemics.”15
Canada was the first country to announce that it would implement
this waiver. In May 2004, Canada’s legislative framework was given
parliamentary approval, and a year later its regulatory provisions came
into force. Nonetheless, since then, the Canadian Access to Medicines
Regime has “not resulted in the export of any eligible pharmaceutical
products to eligible importing countries,”16 nor have any occurred in
other countries with similar waiver regimes. Some critics have blamed
Canada’s failure to meet the red-flag goals of access to needed medicines on the red-tape provisions inserted at the industry’s insistence
into both the amended Patent Act and its accompanying regulations.17
The Canadian access regime contained a statutory requirement that
a parliamentary committee formally review the access regime in two
years. This review is now nearing completion. In this chapter, I am not
13 For discussion, see Health Canada, Canada’s Access to Medicines Regime: Consultation Paper
(Ottawa: Health Canada, 2006), and Lisa Mills and Ashley Weber, “Access to Medicines: How
Canada Amends the Patent Act,” in G. Bruce Doern, ed., How Ottawa Spends 2006–2007: In
From the Cold—The Tory Rise and the Liberal Demise (Montreal and Kingston: McGill-Queen’s
University Press, 2006), pp. 229–246.
14Health Canada, Canada’s Access to Medicines Regime, p. 1.
15 Ibid., 1.
16 Ibid., p. 2.
17Mills and Weber, “Access to Medicines,” pp. 242–244.
Chapter 3
89
concerned with the details of this provision or the regime’s current
review. Rather, I cite it as an important indicator of evolving criticism
of the patent system.18
Both the WTO’s waiver and later permanent amendment on this
matter, and the Canadian regime to implement it, were motivated by
broad and wholly desirable foreign and international development and
health policies. But the policy of access, backed up by legislative and
regulatory change, also had to ensure that Canada was still complying
with its international obligations under TRIPS and the North American
Free Trade Agreement (NAFTA), was respecting the integrity of its
own patent law, and was responding to the competing industry and
NGO interests involved in this issue.
The access to medicines debate was only one facet of the underlying critique of the patent regime. There was also criticism related to
excessive patenting, the ease of getting patents for questionable inventions, and the rise in some fields of patent thickets that were harmful
rather than conducive to innovation. These aspects and their links to
biotechnology are best seen through the discussion that follows regarding patented genetic diagnostic tests, but the criticisms are by no means
confined to this sector.
Illustrative Regime Change: Patented Genetic Diagnostic
Tests and the Biotechnology–Intellectual Property
Regulatory Regime
Concerns have emerged about the effects of granting IP rights over
human genetic materials in the health sector.19 A recent particular
18 For information on broader global issues, including recent decisions by Thailand and Brazil
to overrule patents, see “Pharmaceuticals: A Gathering Storm,” The Economist 383, 8532
(June 9, 2007), pp. 73–74, and Oliver Mills, Biotechnological Inventions: Moral Restraints and
Patent Law (Aldershot, U.K.: Ashgate Publishing, 2005).
19 See Canadian Biotechnology Advisory Committee, Human Genetic Materials, Intellectual
Property and the Health Sector (Ottawa: Canadian Biotechnology Advisory Committee, 2006),
and Health Canada, Human Genetics Licensing Symposium (Ottawa: Health Canada, 2007).
90
Red Tape, Red Flags
manifestation of these concerns has arisen in relation to control over
access to patented genetic diagnostic tests. Several high-profile cases
triggered these concerns, when patent holders exercised their rights in
ways that many felt harmed the provision of health services and innova­
tion by impairing access to patented genetic diagnostic tests in areas of
public health research. A related concern centred on the potential for
patent holders to charge excessive prices for their products or services,
thereby imposing heavy cost burdens on the health system.
One such case involved Myriad Genetics. Ontario and several other
provinces objected to the way the firm exercised its patent rights and
called for the inclusion of a compulsory licensing provision in the
Patent Act. An Ontario report argued that such an amendment “should
not obligate the provinces to first negotiate with patent holders for a
licence.”20 Section 19 of the Patent Act does not require a priori negotiation where the use is public and non-commercial.
The President of the Canadian College of Medical Geneticists
points out that the demand for these testing services is increasing “as
the number of disease genes identified and the number of tests offered
in North America increases….Genetics was once considered an esoteric speciality that did not affect the services provided in other parts
of the hospital. Even five years ago, most referrals to labs came from
genetics clinics and specialized doctors. . . . Now there is an increasing
trend for referrals to come from family physicians and a wider variety
of specialists.”21
Because of these concerns, Health Canada and Industry Canada
asked CBAC to review these linked biotechnology–IP regime issues
in 2004. CBAC in turn asked an expert working party to examine the
issue, and that body presented its report to CBAC in August 2005.
CBAC then sought further input from stakeholders and issued its own
views of the matter.
20 Quoted in Canadian Biotechnology Advisory Committee, Human Genetic Materials, Intellectual
Property and the Health Sector, p. 9.
21Diane Allingham-Hawkins, “Addressing Challenges to Providing Medical Genetics Services,” in
Health Canada, Human Genetics Licensing Symposium, p. 9.
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91
CBAC agreed overall with the expert working group’s main twolevel approach to dealing with the problem, expressed as “prevention”
and “remediation”:
 Prevention. Modify the patenting process to reduce the potential for
abuse, by preventing patents from being issued that grant too-broad
IP rights; establish guidelines for licensing of IP rights under patent
that promote behaviour consistent with the public interest and that are
fair to the patent holder; and provide statutory exemption from claims
of patent infringement for certain uses of patented inventions.
 Remediation. Provide statutory remedies for dealing with cases of
abuse; and use market regulatory measures and competitive methods
for increasing bargaining power to meet certain objectives, such as
moderating process of products and services.22
CBAC itself then went on to comment on other key issues in the
debate, including some areas where it disagreed with the expert panel.
A summary captured some of the red-tape and red-flag issues involved
in relation to the larger dynamics of innovation already noted earlier in
this chapter:
 CBAC agreed that the patent regime should be improved to broaden
the opportunities for mutual advantage, to deal more effectively with
any undesirable consequences of the exercise of patent rights, and to
improve the timeliness and transparency of patent processes.
 CBAC agreed that human genetic materials should not be excluded
from patentability on ethical grounds and that to do so “would set
Canada apart from other countries, including its major trading partners.” It argued that these and related concerns could be dealt with
“outside the patenting process.”
 CBAC concurred with the main thrust of the expert panel’s opposition to
“excluding diagnostic methods from patentability or providing an exemption for their clinical use—actions which could seriously slow innovation
in this field,” but then suggested other enhancements to the IP system.
22 Ibid., p. 2.
92
Red Tape, Red Flags
 CBAC agreed with the expert panel’s views of sections 19 and 65
of the Patent Act. These provisions allow governments and other
potential licensees to apply to the Commissioner of Patents to use
patented inventions without the permission of the patent holder,
when they have been unable to secure licences on reasonable terms.
Since neither governments nor other potential licensees had apparently used these provisions, there was no evidence that they were
inadequate. Accordingly, CBAC agreed with the panel that there
was no need to reintroduce a general compulsory licensing provision in the Patent Act. However, CBAC added that other steps
should be taken to enhance sections 19 and 65 of the Patent Act.23
These enhancements included developing clearer definitions of
“government use,” clarifying the criteria used to test the reasonableness of patent holders’ terms and conditions regarding licences, and
addressing other definitional issues.24
Canadian discussions of these issues have also been linked to the
work of international bodies such as the OECD. The OECD is not a
regulatory body, but its review and discussions of biotechnology–IP
regime issues have focused on closely related “soft law” instruments,
such as guidelines and best practices. This work led it to elaborate
Guidelines for the Licensing of Genetic Inventions.25 National experts
developed these guidelines after consulting with a wide range of stakeholder groups across the biotechnology–IP regime spectrum.
As one OECD official put it, “permeating the Guidelines is the idea that
innovation is well served by a wide availability of technology, research and
information.”26 But as soft law, the guidelines are clearly more exhortative
than regulatory. Several concerns were at play in the OECD process.
23 Ibid., pp. 3–4.
24 Ibid., pp. 9–10.
25Organisation for Economic Co-operation and Development, Guidelines for the Licensing of
Genetic Inventions (Paris: OECD, 2006).
26 Christina Sampogna, “The Licensing Guidelines Project and Biotechnology IP Initiatives at the
OECD,” in Health Canada, Human Genetics Licensing Symposium, p. 17.
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93
One concern related to excessive information sharing. Thus, the
guidelines call for parties to come to an explicit agreement on the release
of information that balances the public interest in speedy dissemination
(red tape) with the parties’ interest in IP protection (red flags).
The guidelines reflected another concern by encouraging appropriate access to, and use of, genetic inventions to address unmet and
urgent health needs, including those in developing countries. However,
no definition of these possible unmet and urgent health needs could be
agreed on.
The guidelines also address concerns about research freedom. These
concerns centre on licensing from the private to the public sector, where
overly restrictive confidentiality clauses may stifle research and research
diffusion—either through actual restrictions or uncertainty about such
restrictions.
Last, but hardly least, in this debate are issues regarding commercial
development. A very big challenge in getting a genetic product or service to market is that of negotiating multiple licences. The guidelines
encourage the exploration of mechanisms such as patent pooling and
standardized licensing agreements.
The ultimate front line of these combined biotechnology–IP regulatory and soft law issues is occupied by patients and medical clinicians,
with the latter serving as the mediator between patients and laboratories.
As Barbara McGillivray observes, “case studies reveal the vulnerability
of patient and patient family interests in the rollout of genetic health
technologies and genetic testing in particular. As with public trust in
scientific research, there is a question as to whether patient, community
and public trust in genetic services [is] being maintained.”27
Health-care providers seek to provide clinically useful tests. But the
Myriad case referred to earlier resulted in unequal front line healthcare delivery. In British Columbia, for example, testing stopped due to
Myriad’s threat of litigation. As McGillivray further observes, “overnight, the price of a test became $3,800 for initial cases, and, if a
27 Barbara McGillivray, “Balancing Industry and Health System Interests in Genetics Research and
IP,” in Health Canada, Human Genetics Licensing Symposium, p. 44.
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Red Tape, Red Flags
mutation was found, an additional $500 per family member. . . . This
immediately separated families into haves and have-nots. Few people
took Myriad’s test, even though it had the advantage of producing
much faster results. Testing was not resumed under the public system
for two years.”28
The above example, along with others that could be cited, tests a
key aspect of the normative thrust of the OECD guidelines. As we have
seen, the guidelines favour access, but access itself is an ambiguous
concept. As Fiona Miller points out, access “encompasses at least four
dimensions: availability (what technology is ‘out there’); attainability
(including local capacity for delivery); affordability; and quality.”29
She notes as well that the patent regime itself “introduces a bias for the
distribution of patentable inventions, e.g., a (patentable) vitamin A analogue instead of (unpatentable) vitamin A.”30
An even broader view of the hard law and soft law aspects of the biotechnology–IP regime is found in the work of Richard Gold of McGill
University. Gold argues that the patent system goal of encouraging innovation “is subverted by patent thickets where individuals with relevant and
necessary patents block research. Despite claims that patents are necessary
(to innovation) there is very little concrete evidence, especially in the biotechnology field, that patents either help or hurt the rate of innovation.”31
He notes, however, that clinical diagnostics are an exception to this argument. Gold stresses that one hard law option would be to amend the Patent
Act to include a specific discretionary licensing provision for health-care
applications. Doing so would not recreate a compulsory licensing provision, such as the one that existed before industry succeeded in getting rid of
it. However, the above discretionary compulsory licensing provision could
provide a credible threat and might lead firms to modify their behaviour.
28 Ibid., p. 44.
29 Fiona Miller, “Licensing Guidelines and Health Policy in Human Genetics,” in Health Canada,
Human Genetics Licensing Symposium, p. 24.
30 Ibid., p. 24.
31 Richard Gold, “The Uptake of OECD Guidelines in Canada,” in Health Canada, Human Genetics
Licensing Symposium, p. 22.
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Gold also rightly points out that, within the realm of soft law,
options also range from hard to soft. Any range or part of the continuum of rule making involves different degrees of legitimate coercion. As an example of a “harder” soft law or rule, the three federal
granting councils could attach a binding set of IP management obligations regarding the funding of grants.
The issues surrounding genetic diagnostic tests are not the only
ones leading to increasing criticism of patenting and the patent system.
A recent U.S. Supreme Court decision has raised the strong likelihood
that excessive patenting and the ease of patenting dubious “inventions”
may be seriously reined in, both in the U.S. and in other countries. The
case before the U.S. Supreme Court dealt with a patent dispute that
centred on the addition of electronic sensors to car accelerator pedals.
The court ruled that the combination of the two existing technologies
was not sufficiently “non-obvious” to warrant a patent.32 A series of
earlier Supreme Court cases resulted in similar judgements, making it
more difficult to obtain a patent. Different interests have for some time
been calling for stricter standards on patenting, especially regarding
the non-obvious criterion. These interests include some industry associations that have sought ways to thwart frivolous lawsuits by “patent
trolls”—firms that make a living out of suing others for violating
questionable patents.33
Relative to a decade ago, more voices are now critical of, or skeptical about, the automatic positive link between patenting and innovation. These voices are much more prepared to argue that some forms
and degrees of patenting are, in fact, a damaging form of red tape and,
thus, are harmful to innovation and to the public nature of invention and
knowledge transmission, in biotechnology and other commercial fields.
32 “Intellectual Property: Patently Obvious,” The Economist 383, 8527 (May 5, 2007), p. 70.
33 Ibid. See also Don E. Kash and William Kingston, “Patents in a World of Complex Technologies,”
Science and Public Policy 28, 1 (2001), and Sunil Kanwar and Robert Evenson, “Does Intellectual Property Spur Change?” Oxford Economic Papers, 55, 2 (2006).
96
Red Tape, Red Flags
Conclusion
This chapter examined core features of the Canadian biotechnology
(bio-health)–IP regulatory regime, both by commenting on how various
interests, experts and institutions have assessed its evolving changes,
and by looking closely at the issue of access to patented genetic diagnostic tests. As stressed from the outset, the chapter has not dealt with
the bio-food aspects of the full regime or with even broader aspects
of biotechnology—which, as a major enabling or platform technology, is used in forestry, environmental remediation, and auto parts and
other areas of manufacturing. I have referred to the food aspects of the
regime only contextually and for historical purposes. Thus, the significant complexities of the full biotechnology–IP regime are by no means
fully captured here.
Both the biotechnology and patent aspects of the regime, and their
interactions and collision points, reveal important elements of innovation policy. Both biotechnology and patenting are seen as crucial to a
modern innovation agenda, and overall Canadian policy has embraced
them as such during the past two decades. Both reveal the diverse,
complex ways in which red-tape and red-flag issues, tensions and role
reversals emerge.
Industry initially raised red-tape concerns regarding backlogs at the
CIPO patent examination and Health Canada product-approval stages,
and regarding the need to improve the efficiency of the approval process. Improvements have occurred but very slowly—too slowly, given
that the Canadian biotechnology industry is made up largely of small
and middle-sized firms. These companies generally have limited financial resources to play the long game of regulatory survival and eventually create successful products, while facing the demands of global
competition.
Red-tape concerns also emerged from other players in the case of
access to patented genetic tests. Here the concern was partly that patents themselves, as well as excessive patenting or the emergence of
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patent thickets, were harming the public health research process and
hindering access by medical practitioners and their patients to new and
improved genetic tests.
On the red-flag side of the innovation era regulatory equation, this
chapter has shown the logical flipside of the red-tape issues. Initially,
NGOs and others were concerned that both the patent exam­ination and
biotech approval processes were not robust enough to guarantee the
safety, health and efficacy of biotech products. There were also growing ethical concerns about biotechnology. Later, as the biotech focus
shifted to large volumes of new bio-health products, the red-flag concerns of these groups shifted to interest in getting quick access to all
biotechnology products, including new genetic tests.
The red-flag concerns of industry were initially much more muted.
Of course, industry wanted an effective and safe regulatory system for
biotech products, and it knew that governmental regulatory approval
was essential to the market value of, and public trust in, its products. In
the genetic tests realm, some of industry’s red-flag concerns centred on
sustaining the integrity of the patent system and its protection role. The
industry also argued that solid patent protection was essential to ensuring that Canada had a strong innovative economy.
The three core forces examined in Chapter 1 have emerged strongly
and interactively in the evolution of this regime. Arguably, biotechnology is the best example of an industrial sector strongly affected by the
speed and complexity of technological change, particularly due to the
mapping of the human genome in the last decade.
Even more than in the case of drugs, as discussed in Chapter 2, consumer demand for rapid access to new life-saving products and processes has influenced the evolution of bio-health products, including
genetic diagnostic tests. The complex S&T and risk-benefit aspects of
regulation also emerge strongly in the intense and more in-depth arguments now emerging about whether patenting is conducive to innovation or whether it can actually harm it in certain circumstances.
98
Red Tape, Red Flags
With regard to the issue of agenda setting, this chapter shows how
neither the policy nor the regulatory aspects of IP or biotechnology
ever regularly engaged ministers and politicians. The various biotechnology strategies and the CBAC machinery were useful, but they were
also several steps removed from high-level consideration in any continuous way. The federal government has now abolished CBSec, its
internal secretariat, and seems to have folded CBAC into a larger and
as yet undefined S&T advisory body. So far, the discussion of genetic
diagnostic tests has taken place mainly in middle-level bureaucratic and
policy community circles centred on CBAC, but CBAC itself has been
seemingly neutralized or downgraded in the current federal government’s S&T and innovation policy and regulatory architecture.
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4
The Energy–Environment
Regulatory Regime:
Environmental Assessment of
Energy Projects
O
ur third and final regulatory regime case study deals with the
energy–environment sector, a realm that involves the work of
upwards of 30 regulatory bodies in Canada, including at least
five federal ministers and their departments. In this complex regulatory
regime, at the operational level, the focus shifts from a direct emphasis
on products, as in the previous two chapters, to one on energy projects,
such as pipelines, new or extended refineries, offshore developments,
electricity grids, and hydroelectric dams and facilities.
Of course, “product” is ultimately involved as well, since all projects are related to the supply and transportation of energy sources,
products and services that range from oil and gas, coal, electricity,
nuclear power and uranium, to renewable fuels and sources, such as
wind and solar sources, biomass, ethanol and hybrid fuels, and hydrogen fuel cells. The regime is also intricately involved in projects and
products tied to exports of energy, especially to the United States, and
hence also to energy and environmental regulators in the U.S. and elsewhere under key agreements such as the Kyoto Protocol.
On the environment side of the regime, rule making, compliance
and enforcement relate to the environmental impacts of energy production and use by consumers, by firms in all industries, and by governments and thousands of public sector organizations. Rule making has
focused historically on issues ranging from lead in gasoline, fuel additives, nuclear reactor safety and long-term nuclear fuel waste storage,
and fuel efficiency and emission standards in vehicles and appliances,
to complex and wide-ranging concerns about climate change, greenhouse gas (GHG) emissions and endangered species.
The environment side of the regime is clearly project-related, but it
is also spatially related. Therefore, because ecosystems are involved, it
crosses normal political jurisdictions, be they federal, provincial, local or
international. For many years, environmental regulation focused on socalled “end of pipe” pollution and emissions control for air and water.
However, from the mid-1980s on, environmental regulators became
concerned about sustainable development, a policy and regulatory
paradigm focused on preventive action—action that would ensure that
the environment would be in a least as good a condition for the next
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generation as it was for the current generation. This kind of regulation is even more complex and is also clearly characterized by debates
about the nature of science-based regulation, where the hazards being
assessed are ever-more interrelated.
Like previous case study chapters, this chapter begins with an
initial broad discussion of the regime-level interactions of the main
energy–environmental regulators and of the inherent red-tape and redflag choices discussed in Chapter 1. The second section briefly examines the context and evolution of the regime as earlier problems with
it were identified and criticized over the last two decades. The chapter
then looks more closely at one example of regulatory regime change:
namely, environmental assessment laws, regulations and processes as
they relate to energy projects. Conclusions then follow.
The Regulatory Regime: Core Features
The section includes a list of the key agencies of the energy–
environment regime. (See text box entitled, “Core Energy–Environment
Regulatory Regime Agencies.”) I have also noted the key aspects of
process and of project approvals. (See text box entitled, “Core Energy–
Environment Regulatory Regime Project and Related Processes.”)
The sectoral energy aspects of the regime refers to a set of regulatory laws, agencies, values, interests and processes that govern energy
as a vertical industrial sector. The core of this system of rules consists of the federal and provincial energy boards. At the federal level,
the National Energy Board is joined by the Canadian Nuclear Safety
Commission and by the other federal agencies, such as the Nuclear
Waste Management Organization, and the offshore energy joint management bodies and agreements between the federal government and
Newfoundland and Nova Scotia.
104
See G. Bruce Doern and Tom Conway, The Greening of Canada: Federal Institutions and Decisions (Toronto: University of Toronto Press, 1995), and Glen Toner, ed., Sustainable Production:
Building Canadian Capacity (Vancouver: UBC Press, 2006).
Red Tape, Red Flags
Core Energy–Environment Regulatory Regime Agencies
 National Energy Board
 Canadian Nuclear Safety Commission
 Nuclear Waste Management Organization
 Natural Resources Canada
 Department of Fisheries and Oceans
 Transport Canada
 Indian and Northern Affairs Canada
 Environment Canada
 Foreign Affairs and International Trade
Canada
 Provincial and territorial environmental
assessment agencies
 Provincial independent electricity system
operators (such as in Ontario and Alberta)
 U.S. Federal Energy Regulatory
Commission
 North American Electricity Reliability
Organization
 North American Electricity Reliability
Council
 International Energy Agency
 Major Projects Management Office
(recently announced)
 Organization of the Petroleum Exporting
Countries
 Canadian Environmental Assessment
Agency
 International Atomic Energy Agency
 Provincial and territorial energy boards
 Commission on Environmental Cooperation
and other energy provisions of the North
American Free Trade Agreement
 Provincial and territorial environment
ministries
 Intergovernmental Panel on Climate Change
The sectoral aspects of the regime necessarily extend to the federal
and provincial-territorial parent energy ministries (variously titled)
where political control is centred and where ministers typically hold
some share of the rule-making power with the regulatory board. At the
federal level these parent ministries extend beyond Natural Resources
Canada to Indian and Northern Affairs Canada (INAC), which has
some key responsibilities in the North.
The other key feature of the energy sectoral regime is that the core
energy boards have historically dealt with an industry that had natural
monopoly features. Hence, regulation was seen as a substitute for
markets to protect consumers but also, quite importantly, citizens as
consumers of an essential service industry. Some of these monopoly
features have begun to break down in the last two decades because of
new energy technologies, but also because of more market-oriented
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105
Core Energy–Environment Regulatory Regime Project and Related Processes
Energy (sectoral) aspects:
 Federal, provincial, territorial and Aboriginal energy board hearings on pipelines, and land
and offshore energy projects
 National Energy Board processes regarding gas prices and adequacy of national supply
and reserves
 Energy board dispute resolution processes
 Nuclear safety assessment processes for new reactors or reactor problems and refurbishment
 Nuclear waste disposal review and site selection processes
 Energy emergency and supply rules and processes under the International Energy Agency
and the North American Free Trade Agreement
 Electricity reliability review and emergency processes
 Security agency and energy agency processes for ensuring security of energy installations
Environmental (horizontal) aspects:
 Periodic hearings/processes for product quality (lead in gasoline; gas additives)
 CEAC and provincial environmental assessment processes on projects via screening,
comprehensive study, mediation, and assessment by a review panel
 Federal and provincial sustainable development strategy processes and auditing and reporting
 International convention and protocol-setting processes (e.g., Kyoto Protocol)
 Citizen-triggered environmental complaints under the NAFTA Commission on
Environmental Cooperation
ways of thinking about how to regulate more flexibly, keeping efficiency and choice more clearly in mind for at least some consumers.
The regime is intended to serve both firms and consumer-citizens.
Since it is mainly private firms that ultimately deliver energy products
and services, the regulators not only regulate such firms but also have
obligations and commitments to such firms. In particular, the regulators
have to be conscious of these firms’ ability to raise capital, which also
requires firms to have the capacity to earn a reasonable rate of return
106
See Donald N. Dewees, “Electricity Restructuring in the Provinces: Pricing, Politics, Starting
Points and Neighbours,” in Burkard Eberlein and G. Bruce Doern, eds., Governing the Energy
Challenge: Germany and Canada in a Multi-Level Regional and Global Context (manuscript
under review), Chapter 4.
Red Tape, Red Flags
on investments. As the energy sector has become more market-oriented
but still not a fully competitive market—in effect, a managed market—
the structure of firms (and therefore interests) within the purview of
sectoral regulatory boards has become much more complex.
As recently as the early 1990s, the typical energy regulator would
deal with a small set of very large firms. In the early 21st century, such
regulators must deal with some very large players but also with numerous new, and typically smaller, incumbent firms or firms seeking entry.
That is especially the case in restructured electricity markets, but it also
is true for the oil and gas and alternative energy industrial sub-sectors.
The horizontal environmental aspects of the energy–environment
regulatory regime refers to a set of regulatory laws, agencies, values
and processes that govern energy from a horizontal perspective. In this
area, energy is simply one among many industrial sectors governed by
rules regarding environmental matters but also health, safety, fairness,
and the quality of products and services, including the nature and quality of competition. This is also a vast and complex terrain.
This aspect of the regime is horizontal because it typically applies
across the economy and society, in a sense, regardless of sector. A
proper institutional mapping of this regime would necessarily include
not only particular environmental regulatory bodies and departments,
federal and provincial, but also ministers of the environment with some
share of rule-making powers and coverage in these realms.
While considerable deregulation has occurred in relation to the sectoral aspects of this regime, rule making has expanded in relation to the
horizontal aspects of the regime and there is pressure for yet more rule
making there. For example, energy–environment regulation of oil and
gas in the North and on Canada’s frontiers is now influenced by laws
such as the Oceans Act, which covers all three of Canada’s oceans.
Centred in the Department of Fisheries and Oceans (DFO), this
legislation extends the authority of DFO but also is supposed to engage
other northern regulators, such as INAC. Such legislation prescribes
such concepts as sustainable development, the precautionary approach
and the ecosystem approach, along with the need for integrated management plans. There are also newer connections between energy and
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rules regarding endangered species. So there is little doubt that the
environmental and sustainable development aspects of the regime are
growing in scope, with regulators expected to bring a greater range of
concepts to bear on energy development. Climate change is by far the
most challenging of these concepts, as I discuss later in this chapter.
The environment aspects of the regime can also be seen as simply a system of rules and processes for ensuring the quality of energy
products and services in an essential service industry, or in an industry
with essential service elements. Environmental quality can relate to any
number of risks and third-party effects regarding an energy product or
service, such as leaded gasoline or new fuel additives; the safety of oil
and gas pipelines; environmental assessments of new production plants
or coal mines; and sustainable development involving reduced use of
hydro-carbon and GHG-emitting fuels.
The role of firms and consumers in this horizontal aspect of the
regime involves a different set of dynamics. Firms face an array of
federal and provincial environmental and quality regulators. Thus
industry concerns, some tactical and some principled, centre on issues
such as multiple requirements for hearings, long time periods to obtain
approval for the use of products, and other logistical complexities
related to dealing with multiple regulatory bodies. The role of industry
and consumers in horizontal issues is a central element of my analysis
of environmental assessment later in this chapter.
The potential consumer-citizen split becomes even sharper in the
environmental realm because when consuming an essential service
product, individual Canadians may think and behave as citizens as
much as consumers. In short, many consumer-citizens are aware of
their desire to preserve and use energy in an environmentally friendly
and sustainable way. Of course, they do not behave with total consistency on these matters, but there is little doubt that many such
108
See G. Bruce Doern and Monica Gattinger, Power Switch: Energy Regulatory Governance in the
21st Century (Toronto: University of Toronto Press, 2003), Chapter 2. See also Michael Wenig,
“Federal Policy and Alberta’s Oil and Gas: The Challenge of Biodiversity Conservation,” in Bruce
Doern, ed., How Ottawa Spends 2004–2005: Mandate Change in the Paul Martin Era (Montreal
and Kingston: McGill-Queen’s University Press, 2004), pp. 222–244.
Red Tape, Red Flags
consumer-citizens are interested both in what energy they consume and
use, and in the quality of that consumption.
Under increasingly globalized trade and free trade arrangements, as
well as global environmental protocols, an international and continental
set of actors, processes and rules also has to be factored in. They include
bodies such as the International Energy Agency, the Organization
of the Petroleum Exporting Countries, the International Atomic
Energy Agency, the NAFTA-centred Commission on Environmental
Cooperation and other provisions of NAFTA.
Context, Regime Change and Evolving Criticism
Five key issues have set the context for energy–environment regulatory regime change and criticism over the last 20 years:
 energy industry views about the need for flexible, incentive-based
economic and environmental regulation in a world where energy
companies compete for investment and projects on a global basis;
 economic arguments about the need to internalize environmental
costs in energy pricing;
 the impact of the sustainable development paradigm as a critique of
both traditional energy and environmental regulation;
 the climate change debate, and Canada’s failed or non-existent regulatory strategy for dealing with it; and
 the role of alternative, renewable energy sources.
Each of these issues is profiled briefly below.
Energy Industries, Project Approvals and Incentive-Based
Regulatory Flexibility
Both the energy industry’s own assessments and those of independent analysts look at the regulatory regime in the context of national
and global energy developments and forecasts, especially in the oil
and gas sector. The core of the industry discussed in this section is
involved with exploration, development, production and refining; oil
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109
and gas pipeline transportation; and electricity generation, transmission and distribution. This core energy industry is clearly a crucial one
for national economic development and for exports, especially to the
United States. In Alberta, it is the anchor for the province’s current and
future prosperity, centred on the massive oil sands development. Every
industry forecast indicates that this core industry will need to continue
to invest heavily in the coming decades to increase sources of supply
and refinery capacity, and improve transportation.
In this context, the energy industry’s future is strongly linked to energy–
environment regulatory regime matters. As a recent Conference Board
study stressed, three major challenges face the oil and gas industry:
 First, major energy investment projects are being delayed and have
higher than expected costs because of skill shortages. The industry,
like many others, faces the problem of an aging workforce, which
will create a human resources challenge the industry will need to
address within the next decade.
 Second, complex, time-consuming regulatory approval processes
are also having an impact on major energy projects, whether they
are oil and gas plants, pipelines, or electricity power generation or
transmission. These processes are delaying projects that are needed
to meet growing energy demands. Public resistance during the proposal and approval stages also hinders such new energy projects.
 Third, the energy industry must address major environmental issues.
The expansion of oil sands projects is increasing industrial water
use and could tax watersheds and affect Aboriginal communities.
The projected growth in fossil fuel production and consumption will
lead to a rise in air pollution and GHG emissions.
All three of these challenges have regulatory regime links, but they
are especially pivotal in relation to the second and third challenges.
See The Conference Board of Canada, Mission Possible (Ottawa: The Conference Board of Canada, 2007), Volume II, Chapter 5, and House of Commons, The Oil Sands: Toward Sustainable
Development, Report of the Standing Committee on Natural Resources (Ottawa: House of Commons, March 2007).
The Conference Board of Canada, Mission Possible, Volume II, p. 70.
110
Red Tape, Red Flags
I will say more about that later in this section and in my discussion of
the environmental assessment process.
For at least the last decade, federal and provincial energy boards
as regulators, under pressure from energy firms and associations, have
generally tended to adopt more flexible and less “command and control”
approaches to regulation. These approaches include alternative dispute
resolution and, more recently, “goal-oriented regulation” as an alternative to so-called prescriptive regulation. This trend has been true of
the federal National Energy Board and other key regulators, such as the
Alberta Energy Utilities Board—not to mention the main U.S. energy
regulator, the Federal Energy Regulatory Commission (FERC), whose
approaches have had major impacts on Canada’s regulatory system.
Overall, market-led approaches have been clearly in the ascendant over
the regulatory approaches that prevailed before the 1980s. Much of this
evolution made overall sense and helped generate considerable energy
and economic prosperity.
In the context of climate change pressures, the industry has favoured
voluntary approaches and emissions intensity–based systems of regulation rather than absolute mandated reductions. As the main petroleumproducing province, Alberta in particular has practised this approach
within the province and advocated it nationally. Alastair Lucas has
concluded that Alberta has adopted this voluntary sectoral agreement
approach to addressing provincial GHG emissions, particularly energy
sector emissions, for three reasons:
First, the emission reductions required are relatively
undemanding. The provincial GHG emission target is
expressed in terms of emissions intensity—GHG emissions relative to GDP—not absolute reduction. This, it
becomes clear in the review of the Alberta Plan below,
is not likely to reduce emissions, but merely to reduce
the rate of increase in a rapidly growing provincial
See National Energy Board, Goal-Oriented Regulation: Successes and Challenges in Partnering,
presentation to the Community of Federal Regulators (Ottawa: November 7, 2006).
Chapter 4
111
economy. A second reason is that volun­tary compliance in the energy sector is not new, but is reflected in
the long-standing government–industry collaboration
in regulation of air emissions and generally in the economic, social and environmental management of energy
resource development in Alberta. The third reason is
that Alberta’s proposed sectoral agreements are not
purely voluntary. There is an explicit regulatory backstop, thus ensuring a firm legal basis for enforcement
should voluntary arrangements fail in particular cases.
From this perspective, the voluntary sectoral agreements
are a valuable adjunct to legal requirements.
There have, of course, been criticisms by environmental NGOs and
others regarding the extent to which such approaches should be permitted or should dominate. Approaches do vary considerably among the
provinces, both on core energy regulation and on the environmental
side of the regulatory equation.
A final but important aspect of energy-environment regulation centres
on the degree to which an innovation agenda informs regulatory change.
We have seen that such concerns have been crucial in the two previous
case study chapters. However, in energy and the overall natural resources
sector, the innovation dimensions are often somewhat more subliminal,
although important nonetheless.
The traditional energy sectors of oil and gas are often lumped in
with natural resources as part of the “old” economy, rather than as part
of the new knowledge-based and innovation-centred economy centred
on telecommunication and biotechnology. Federal departments such as
Natural Resources Canada have tried to counteract this “old” versus
“new” economy perception. It has been right to do so, because although
traditional energy companies do less R&D than many other sectors of
112
Alastair Lucas, “The Alberta Energy Sector’s Voluntary Approach to Climate Change: Context,
Prospects and Limits,” in G. Bruce Doern, ed., Canadian Energy Policy and the Struggle for
Sustainable Development (Toronto: University of Toronto Press, 2005), p. 293.
Red Tape, Red Flags
the economy, they are, nonetheless, strong and continuous adapters
and users of new technology in their core exploration, production and
transportation segments, especially regarding innovation in production
processes and plant modernization. Key federal and provincial government R&D is also targeted at energy development, including oil sands
development. These kinds of innovation-based activity are closely tied
to the overall regulatory regime and its efficiency, approval times and
efficacy in a world where decisions about where to invest and locate the
next plant are increasingly global and fast.
The innovation aspects of the energy–environment regulatory
regime are also tied to each of the four analytical items that follow in
this section: the internalization of environmental costs in energy prices,
sustainable development, climate change and alternative energy.
The Internalization of Environmental Costs in Energy Prices
The energy aspects of the regime deal with several energy challenges, both in a global context and in respect of Canadian energy systems
functioning within national, provincial and North American milieus.
These energy challenges for energy regulators and policy-makers
include the following: future prices, demand and supply for oil and
other fuel and energy sources; broadening notions of energy security;
natural gas, including liquefied natural gas, as a global energy source;
climate change, the Kyoto Protocol and efforts beyond Kyoto; electricity and industry restructuring; alternative energy sources; and nuclear
energy. All of these have environmental and sustainable development
aspects that are increasingly inextricably linked.
In one sense, there is consensus among energy economists, many
environmental economists and some national energy policy-makers
about what the optimum energy system for a country ought to be in the
For discussion, see G. Bruce Doern and Jeffrey Kinder, Strategic Science in the Public Interest:
Canada’s Government Laboratories and Science-Based Agencies (Toronto: University of Toronto
Press, 2007), Chapter 4.
For discussion, see G. Bruce Doern, ed., Canadian Energy Policy and the Struggle for Sustainable Development (Toronto: University of Toronto Press, 2005).
Chapter 4
113
first decade of the 21st century.10 Ideally, all energy sources and supplies should be fully costed, with environmental costs internalized in
market prices. Then, under a market system but with vigilant regulators, all sources should be allowed to compete on a level playing field,
with incumbent suppliers having no contrived forms of protection and
new entrants allowed entry into markets.
In principle, oil, gas, coal, nuclear, hydro and alternative energy—
such as wind power, solar power, and biomass—would compete openly
and fairly. This approach would not only mean that alternative energy
suppliers would not be encumbered by established green energy suppliers,
but also that particular forms of alternative energy would not have unfair
incumbent status over other forms of alternative energy.
Each form of energy would, of course, have inherent technical and
physical advantages and disadvantages as an energy source. And the
demand side of the energy equation would be anchored in normal market
behaviour, with no concentrations of buying power and with open and fair
market prices, as well as good information about energy product quality.
Overall, the energy–environment regulatory regime would regulate
any monopolistic aspects and leave competitive forces to operate where
energy truly functioned like any other market good. It would also regulate the industry through good environmental regulation, and good and
open competition law and trade law. There would be a clear recognition
that energy regulation has to govern an essential, networked service
industry upon which industries and individual Canadians depend.11
While many of these aspirations for a good energy–environment
regime garner considerable policy and institutional support, the realworld regime in Canada and elsewhere has not yet reached this state of
affairs and might well never do so. Not surprisingly, the gap between
ideal and real-life energy systems is due not only to the imperfections
of markets but also to conflicting interests and fundamental political
10 See Dieter Helm, Energy, the State and the Market: British Energy Policy Since 1979 (Oxford,
U.K.: Oxford University Press, 2003), and Dieter Helm, ed., Climate Change Policy (Oxford, U.K.:
Oxford University Press, 2005).
11 See Doern and Gattinger, Power Switch.
114
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power relations, in a context where governments, their regulatory agencies, companies, and individuals as citizens and consumers compete,
cooperate and collide in complex ways.
Sustainable Development as a Policy–Regulatory Paradigm
Criticism by advocates of the sustainable development paradigm
has influenced the energy–environment regulatory regime. As mentioned earlier, sustainable development policies are designed to ensure,
in any number of areas of governance, that the environment is left in
at least as good a state for the next generation as it was for the current
generation.12 Cast somewhat more loosely, governments often see such
policies as those that consider economic, social and environmental
effects—the so-called “triple bottom line.”13
In more specific energy policy terms, sustainable development
progress is assessed using measures of energy efficiency—for instance,
whether countries such as Canada have reduced per-capita energy use
over the past 20 years. In Canada, such per capita usage has increased
marginally, or improved only sluggishly in certain sectors but not
others, so there is clearly much more to do. When the Kyoto Protocol
and its requirements for reducing GHG emissions are added as a core
test of sustainable development, then the Canadian record, as discussed
later in this chapter, is still dubious in basic energy terms.
Sustainable development as a policy goal has been endorsed by the federal government and is part of the statutory mandate of Natural Resources
Canada, but it is not typically part of the statutory mandate of federal or
provincial energy regulators. The federal government has pursued various
rolling three-year strategies for sustainable development. They have been
12 See William M. Lafferty and James Meadowcroft, eds., Implementing Sustainable Development
(Oxford, U.K.: Oxford University Press, 2000), and Francois Bregha, “The Federal Sustainable
Development Strategy Process: Why Incrementalism Is not Enough,” in Bruce Doern, ed.,
Innovation, Science and Environment: Canadian Policies and Performance, 2006–2007 (Montreal
and Kingston: McGill-Queen’s University Press, 2006), pp. 82–104.
13Glen Toner, “Canada: From Early Frontrunner to Plodding Anchorman,” in William M. Lafferty
and James Meadowcroft, eds., Implementing Sustainable Development (Oxford, U.K.: Oxford
University Press, 2000), Chapter 3.
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115
exhortative in nature, with federal departments producing targets and commitments. However, the follow-up on these promises has been criticized
as being very inadequate. Moreover, the strategies are very decentralized at the departmental level. They are not complemented or guided by a
government-wide federal strategy, much less an actual agenda.14
Despite the weakness of sustainable development strategies and
their uncertain links to any actual regulation, let alone to preventive
regulation, there is little doubt that the sustainable development paradigm will increasingly influence the energy–environment regulatory
regime, in relation to both parent statutes and delegated rule making. In
this context, regulatory tensions and challenges are bound to grow.15
The Climate Change Debate and Policy–Regulatory Failure
The climate change debate and Canada’s failure to meet its international commitments under the Kyoto Protocol regarding GHG emission reductions are very large issues for the energy–environment
regulatory regime. Space does not allow a full assessment in this section,
but it is important to see how the evolving debate has coloured the regime
and its larger politics and economics, including national unity issues.
In the last decade, climate change policy, with a focus on the 1997
Kyoto Protocol, has been the centrepiece of the core interactions
between energy policy and regulation on one hand, and environmental
and sustainable development policy and regulation on the other. In
2007 some action seemed much more likely, although still of a very
uncertain kind. This uncertainty was due both to national politics,
where the Conservatives had to make policy as a minority government
and reverse their pre-election position in the process, and global climate change politics.
Comparative analyses show the wide variety of commitments Kyoto
signatory countries made to reducing their GHG emissions by taking
domestic measures or by arranging credits for reductions achieved in
14 Bregha, “The Federal Sustainable Development Strategy Process.”
15 See The Conference Board of Canada, Sustainability and Energy Security: Wrestling with Competing Futures, briefing (Ottawa: The Conference Board of Canada, April 2006).
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other countries.16 Canada undertook to reduce its GHG emissions by
6 per cent below its 1990 levels, averaged over the 2008 to 2012 period.
But due to a huge lag in action, that commitment now requires us to
cut emissions by over 30 per cent and hence represents an embarrassing failure by Canada to meet its international commitments. The
federal Liberal government of Jean Chrétien only made the crucial
decision to ratify the Kyoto Protocol in September 2002, a process
completed late in 2002.
In real terms the practical economic and technological decisions are
only now being seriously and publicly debated, though they have been
discussed semi-privately in policy-making circles for several years.17
The core problem is how to achieve the reduction targets, which
Canada set without reference to the cost of meeting them or any clear
sense of the mixture of regulation and technology to be used to do so.
The global context of Kyoto since the early 1990s has been forged
around the refusal of the U.S. to sign the protocol and to opt instead,
during the George W. Bush presidency, for a technology-first approach
rather than any regulatory, interventionist approach. In February 2002,
the Bush Administration announced its own unilateral alternative to
Kyoto, centred on voluntary approaches for U.S. energy producers and
incentives for developing new alternative energy technologies.
The politics of the Kyoto Protocol also centred on the fact that
developing countries were not part of the protocol, on the grounds that
the developed western countries had essentially created the problem and
that developing countries would need more energy as they grew and,
hopefully, prospered economically. Increasingly, particularly following
the 2005 Gleneagles G8 summit, the Bush Administration—backed by
big U.S. energy interests—began forging a small, alternative, “beyond
Kyoto” coalition of countries around the Asia-Pacific Partnership on
16 See Mark Jaccard, Sustainable Fossil Fuels (Cambridge, U.K.: Cambridge University Press,
2006).
17Debora VanNijnatten and Douglas MacDonald, “Reconciling Energy and Climate Change Policies: How Ottawa Blends,” in G. Bruce Doern, ed., How Ottawa Spends 2003–2004: Regime
Change and Policy Shift (Oxford, U.K.: Oxford University Press, 2003), pp. 72–88.
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Clean Development and Climate. It consisted of Kyoto non-signatory
countries that, crucially, included China and India, the two dynamic
developing economies with insatiable energy needs whose fast-growing
GHG emissions could also negate climate change progress in other
ways. Indeed, key advocates of the Kyoto Protocol saw the protocol,
even if implemented successfully, as merely the first in a series of steps
that would be needed to tackle climate change in the decades beyond
the protocol’s end date of 2012.
As Canadian analysts have shown, Canada’s underperformance was
largely due to policy and regulatory failures. However, it was also due
to Canada’s greater population growth and economic growth relative to
many other countries during the last decade.18
Canada’s strategies were proceeding in tandem with international
developments through new domestic institutional processes. After the
1997 Kyoto Protocol was negotiated, Prime Minister Chrétien and the
first ministers directed the federal, provincial and territorial ministers
of energy and environment to examine the impacts, costs and benefits of implementing the Kyoto Protocol, as well as the options for
addressing climate change. However, they were to do so under a guiding principle that no region should bear an unreasonable burden due to
implementing the Kyoto Protocol. Thus was implanted, at the political
level, the central importance of equity considerations among Canada’s
regions, analogous to the larger equity debate in the global negotiations
among countries.
Such a guideline was undoubtedly needed in an overall national
unity sense, particularly to accommodate Alberta. Alberta was already
often rhetorically casting federal policy on Kyoto as “another National
Energy Program,” a reference to the highly interventionist 1980 Liberal
policy that Albertans detested. Of course, Alberta knew that it was
the province at the heart of the carbon-producing part, albeit not the
core carbon-using part, of the Canadian economy. Central Canadian
18Nic Rivers and Mark Jaccard, “Talking Without Walking: Canada’s Ineffective Climate Effort,”
in Burkard Eberlein and G. Bruce Doern, eds., Governing the Energy Challenge: Germany and
Canada in a Multi-Level Regional and Global Context (manuscript under review), Chapter 11.
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industries were also major carbon emitters and, of course, Canadian
consumers were also energy “polluters” in a fundamental sense.
The current Conservative government of Prime Minister Stephen
Harper has its power base in Alberta, Canada’s oil and oil sands heartland, and it has spoken openly about alternatives to Kyoto in two
ways.19 First, the government has argued that Canada’s current Kyoto
policy is based too much on using foreign credits rather than on actually
taking action in Canada. Accordingly, it initially called for a “made in
Canada” policy that would take action on energy and clean air, and that
would foster more voluntary approaches in close consultation with the
provinces and industry. It also cancelled several previous Liberal government Kyoto funding initiatives, later crafting some alternatives.
Secondly, the government has joined the Bush “second front” coalition, which favours a technology-first approach. An anti-Kyoto and
beyond-Kyoto position is also inherent in Prime Minister Harper’s
declaration that he believes Canada is, and will remain under his
government’s pro-energy policies, a global “energy superpower.”
The federal government also had to backtrack quickly. In April 2007,
it presented its somewhat regulation-centred climate change strategy.
The strategy committed Canada to a 20-per-cent reduction in emissions below 2006 levels by 2020.20 That is a far cry from the much
deeper Kyoto commitments, which the federal Conservative government argued would seriously harm the Canadian economy, especially
given its trade dependence on the U.S. market where U.S. competitors
did not have to deal with a Kyoto regulatory burden.
These dynamics, however, are not the only ones at play in Canada.
Several provinces are strongly pro-Kyoto, as are the three main federal
opposition parties. Quebec has announced that it will introduce a
carbon tax. City governments have also announced a pro-Kyoto alliance.
19 See Peter Calamai, “The Struggle Over Canada’s Role in the Post-Kyoto World,” in G. Bruce Doern,
ed., Innovation, Science, Environment: Canadian Policies and Performance 2007–2008 (Montreal
and Kingston: McGill-Queen’s University Press, 2007), pp. 32–54.
20Environment Canada, Turning the Corner: An Action Plan to Reduce Greenhouse Gases and Air
Pollution (Ottawa: Environment Canada, April 2007).
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119
Regardless of these developments—some very rapid and some not
well planned—climate change issues will colour the overall political
economy of the energy–environment regulatory regime.
Alternative Renewable Energy Sources and Regulatory Push
The final but still crucial aspect of regime context, change and criticism centres on the place—or lack thereof—in the energy–environment
regulatory regime of alternative renewable energy sources. It also poses
challenges for environmental assessment, to be discussed in the next
section of this chapter.
Alternative energy sources are the preferred energy option of most
environmental lobby groups, which strongly oppose current energy
policies focused on coal, oil, natural gas and nuclear energy. Such
alternatives include low-impact renewables, such as some biofuels,
wind, solar, biomass and small hydro (with big hydro often excluded as
a “renewable” because of its major adverse environmental impacts in
creating huge hydro dams).
Advocates believe policies and rule making on alternative energy
will meet multiple key objectives, including sustainable development, climate change reduction and protection, air quality enhancement and—because of the decentralized nature of alternative energy
sources—energy security. Because they involve new technologies,
these energy sources are also often advanced as part of national industrial and innovation policies.21
The general public’s views of alternative energy sources are mixed.
Wind power is supported, but often only as long as proposed wind turbines are not in one’s proverbial “backyard” as environmental eyesores.
Some people see renewables in a vague, overall way as small, popular
and pricey.
21 International Energy Agency, Energy Technology Perspectives: Scenarios and Strategies to 2050
(Paris: International Energy Agency, 2006).
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Policies regarding renewables are mixtures of price subsidies, frontend innovation and R&D incentives, and regulatory targets for the
proportion of energy supplied by such sources. Clearly, the extent to
which such renewables are fostered in different countries depends on
the power and influence of incumbent energy suppliers and providers
relative to that of new supplier industries, in combination with environmental groups and lobbies, and regional and national political and public opinion (especially in a federation). Municipal pressure can also
be at play here, especially when municipalities own and operate local
electrical utilities.
But despite considerable lobbying and some governmental support,
renewable energy is still seen as a small (but growing) share of world
energy supply. International Energy Agency forecasts see it tripling
by 2030 but still only occupying 6 per cent of use globally. Germany
is pre-eminent in the promotion of renewable energy sources for electricity generation.22 By 2005, Germany had installed wind power
capacity of 18,427.5MW and photovoltaic capacity of 1,537MW, compared with Canada’s 683MW for wind and 14.9MW for photovoltaics.
In Canada, alternative energy has been barely visible in terms of
overall energy regulatory and policy practice. That is partly due to
strong provincial governmental control over electricity policy and
partly to the fact that there is scarcely any east–west electricity grid,
which would give the federal government some policy leverage. But
even if there had been pan-Canadian control and infrastructure, it is
unlikely that federal initiatives would have emerged.
Federal policies, as we have seen, have focused on oil, gas and
nuclear power. For most of the 1980s and 1990s, they were based on
strong support for liberalized markets, a view that did not extend to the
necessary task of creating markets for alternative energy through “regulatory push.” In the early years of the 21st century, some initiatives
22Danyel Reiche, Handbook of Renewable Energies in the European Union: Case-Studies of the
EU-15 States, 2nd ed. (Bern, Switzerland: Verlag Peter Lang, 2005). See also Herman Scheer,
Energy Autonomy: The Economic, Social and Technological Case for Renewable Energy
(Vancouver: UBC Press, 2007).
Chapter 4
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for so-called green power began to emerge in some provinces, such as
Ontario, Quebec and Prince Edward Island.23 These are likely to grow
and to receive various kinds of increased technology and innovation
funding. However, overall, the place of alternative energy in Canada
has been very marginal in the face of interests and governments whose
priorities have been elsewhere. As mentioned earlier, even Canada’s
hydro power sources are rarely seen as truly renewable. In Quebec,
Aboriginal groups are still engaged in lawsuits against Hydro-Québec
and the Quebec provincial government for the damage caused by the
earlier building of huge hydroelectric dams. Only small hydro, which
is less disruptive of the environment, fits the current definitional bill of
renewable energy.
Illustrative Regime Change: Environmental Assessment
and Energy Projects
My more detailed illustrative example of regime change and inertia
centres on the dynamics involved in regulation through environmental
assessments of energy projects. As noted earlier, this process involves
an array of regulators at several levels of government. (See text box
entitled, “Core Energy–Environment Regulatory Regime Project and
Related Processes.”)
The mandate of the main federal agency, the Canadian Environmental
Assessment Agency (CEAA), is to “provide Canadians with high quality
environmental assessments that contribute to informed decision making
in support of sustainable development.”24 The president of the CEAA
reports directly to the minister of the environment and functions under
the Canadian Environmental Assessment Act, the Canada-Wide Accord
23 Judith Lipp, “Renewable Energy Policies and the Provinces,” in G. Bruce Doern, ed., Innovation,
Science, Environment: Canadian Policies and Performance 2007–2008 (Montreal and Kingston:
McGill-Queen’s University Press, 2007), pp. 176–199.
24 Canadian Environmental Assessment Agency, Report on Plans and Priorities 2006–2007 (Ottawa:
Canadian Environmental Assessment Agency, 2007), p. 3.
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on Environmental Harmonization, bilateral agreements with provincial
governments, and international agreements, including the United Nations
Economic Commission for Europe Convention on Environmental Impact
Assessment in a Transboundary Context.
The Environmental Assessment Act was amended in 2003 to consolidate the way federal environmental assessments are conducted. In 2004,
the federal External Advisory Committee on Smart Regulation made
further recommendations about environmental assessment (as discussed
later in this chapter).25
The principle of self-assessment is the basis of the federal environmental assessment regime. Thus, federal departments and agencies
conduct their own assessments in their mandate areas, drawing on their
expertise. Often, several departments can be involved in assessing the
same project. Departments and agencies must conduct assessments
before they carry out a project if they: provide financial assistance
to enable a project to be carried out; sell, lease or otherwise transfer
control or administration of land to enable a project to be undertaken;
or issue authorizations to enable a project to go forward. The volume
of assessments ranges between 6,000 and 7,000 annually, and since
the Act came into effect in 1995, more than 50,000 projects have been
assessed.26 There is no publicly available breakdown of these projects
by sector, although energy projects are bound to comprise a reasonably
significant percentage of the total.
Environmental assessment is seen broadly as a project planning
tool used to help eliminate or reduce potential harm to the environment
resulting from the above-noted forms of federal involvement. Federal
legislation provides for four types of environmental assessment: screening, comprehensive study, mediation and assessment by a review panel;
but most projects are assessed through quite minimal screenings.
The Comprehensive Study List Regulations under the Act identify those projects likely to result in significant environmental effects,
25 See External Advisory Committee on Smart Regulation, Smart Regulation: A Regulatory Strategy
for Canada (Ottawa: External Advisory Committee on Smart Regulation, 2004), pp. 100–111.
26 Canadian Environmental Assessment Agency, Report on Plans and Priorities 2006–2007, p. 9.
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which thus require a comprehensive study assessment. Screenings can
take several months, whereas comprehensive studies require about a
year and review panels can take over a year.27
The 2003 amendments to the Canadian Environmental Assessment
Act resulted in several changes in response to a decade or more of criticism. These changes included:
 the creation of a federal environmental assessment coordinator role;
 a mandate to establish a quality assurance program to examine federal
assessments;
 a requirement to create an Internet database of all federal environmental assessments;
 mandatory follow-up programs for specified projects;
 tools to deal efficiently with projects that have inconsequential effects;
 a more certain comprehensive study process;
 more opportunities for public participation in the comprehensive
study process, supported by participant funding; and
 the use of regional environmental studies.28
In 2005, the follow-up Cabinet Directive on Implementation of the
Canadian Environmental Assessment Act took effect. Its purpose is to
ensure that the administration of the Act results “in a timely and predictable environmental assessment process that produces high quality
environmental assessments.”29 This directive was an interim measure
until other legislative amendments to achieve consolidation took effect.
Thus, though efficiency and timeliness were the overriding goals, the
directive also had to specify that it did not fetter the powers, duties,
functions or discretion of federal authorities.
27External Advisory Committee on Smart Regulation, Smart Regulation, p. 100.
28 Ibid., p. 101.
29 Canadian Environmental Assessment Agency, Cabinet Directive on Implementing the Canadian
Environmental Assessment Act (Ottawa: Canadian Environmental Assessment Agency, November
2005), www.ceaa.gc.ca/013/010/directives_e.htm
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In Budget 2007, the current Conservative government announced
that it was creating a Major Projects Management Office to streamline
the review of large natural resource projects. With an investment of $60
million over two years, “the Government seeks to cut in half the average regulatory review period from four years to about two years, without compromising our regulatory standards.”30
This kind of red-tape and red-flags commitment regarding projects
raises a key issue about environmental assessment as it affects energy.
Energy is but one sector subject to environmental assessment processes,
so such processes are not designed with only energy in mind. Even the
Major Projects Management Office is designed for “natural resource
projects,” which will cover mining, minerals and forestry projects as
well as energy projects. In addition, major projects will have to be differentiated from minor or smaller ones in some way. Nonetheless, there
is evidence that the CEAA is more sensitized to energy issues, since it
notes in its Report on Plans and Priorities 2006–2007 that an “increase
in demand for energy is likely to result in more energy-related development projects” and that “environmental assessment is a useful tool for
ensuring that the Government’s climate change policies are considered
in project development and that projects take into consideration the
potential effects of changes in climate.”31
The mapping of the environmental assessment system has thus far
only referred to its federal government aspects. The provinces and territories also have policies and regulations regarding environmental
assessment. Space does not allow a full account of these 13 further systems, but key features need to be noted.
First, most provinces carry out their environmental assessments
through one agency rather than using the federal government’s selfassessment process for its departments and agencies. Second, there
are inevitable areas of split and overlapping jurisdiction. Canadian
federalism’s constitutional division of powers was devised well before
30Department of Finance, Budget 2007: Aspire to a Stronger, Safer, Better Canada (Ottawa: Department of Finance, 2007), Chapter 5, p. 2.
31 Canadian Environmental Assessment Agency, Report on Plans and Priorities 2006–2007, p. 12.
Chapter 4
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governments even had environmental policies. The split jurisdiction
nonetheless found its way into de facto practice in areas of natural
resource development largely because of provincial ownership of natural resources. But even in this sphere, there are areas of federal jurisdiction for projects that cross interprovincial and international boundaries
and for projects that affect fish habitat and navigable waters.
Coordination problems regarding this kind of multi-level regulation
have been the subject of complaints for many years. One initial response
to complaints about multiple assessments of the same project, serious
time delays and different assessment criteria was the establishment of
the Sub-Agreement on Environmental Assessment under the previously
mentioned Canada-Wide Accord on Environmental Harmonization.
The purpose of this sub-agreement is to “promote the effective
application of environmental assessment when two or more governments are required by their respective laws to assess the same proposed
project. It includes provisions for shared principles, common information elements, a defined series of assessment stages and a single assessment and public hearing process.”32
Some progress has occurred under these coordination mechanisms, such as the joint review of some oil sands projects by the federal
government and the Alberta Energy and Utilities Board. However,
when the External Advisory Committee on Smart Regulation reviewed
environmental assessment in 2004, it heard in no uncertain terms from
industry and from NGOs about serious problems regarding timing,
information requirements and public participation.33
The smart regulation study’s review of federal and provincial
environmental assessment regulation did not focus specifically on
energy projects. However, much of its overall commentary and assessment of this system, and of the larger energy–environment regulatory
regime of which it is a part, is important to note.
The study stressed that “the environmental assessment process is one
of the issues about which the Committee heard the most complaints and
32External Advisory Committee on Smart Regulation, Smart Regulation, p. 103.
33 Ibid., pp. 102–104.
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it was viewed as a key priority for regulatory reform by many industry
and environmental non-governmental organizations. . . . It also heard
skepticism over whether the [then] recent changes to the CEAA would
make the environmental process much more effective or, in some cases,
even more cumbersome.”34
The smart regulation study concluded that the remaining problems were such that a new approach was needed that moved “beyond
harmonization and towards a single, nationally integrated approach
encompassing federal, provincial and territorial processes” and that
such an idea “was generally supported by both industry representatives
and non-governmental organizations during our consultations.”35
If such reforms were not carried out, the smart regulation committee
argued, the “credibility of the assessment process will continue to erode
and its effective use will be jeopardized.” Moreover, the committee said,
such reforms would help governments conduct “a more holistic assessment of a project and [enable] the development of expertise in this
area. . . . and also improve the consideration of cumulative impacts of
several projects on a single eco-system and ensure that the environmental assessment process adapts to new scientific advances and changing
circumstances.”36
Clearly, such reforms would require almost unprecedented levels
of cooperation and coordination within the federal government, and
among the federal government, the provinces and the territories. They
would also require statutory change and regulatory–legal change, not to
mention significant resource commitments.
At time of writing, there is clearly some level of recognition of
the problems at hand. The CEAA’s three stated priorities under the
Conservative government are as follows: “build a framework for a more
integrated environmental assessment, assume a more active leadership
34 Ibid., p. 101.
35 Ibid., p. 104.
36 Ibid., pp. 104–105.
Chapter 4
127
role in federal environmental assessment and build the capacity to
deliver on existing and new responsibilities.”37
In addition, there is the newly announced Major Projects Management
Office for natural resource projects, whose links to the CEAA process
are still highly ambiguous, in terms of both regulatory law and practice.
Conclusion
The energy–environment regulatory regime presents a regulatory
realm that in some respects is quite different from those explored in the
two previous chapters but in other respects is very similar. The differences begin with the relatively greater focus in the energy–environment
regulatory regime on projects rather than products, and with the growing
need to deal with different spatial and ecosystem aspects of energy–
environment interactions.
The similarities centre on the need by complex sets of federal, provincial, local and international regulators to deal with the speed and
complexity of energy investment and location choices. These choices
are crucial for an ever more globally focused industry but also for
an essential networked service industry, some aspects of which are
unambiguously market centred and other parts of which are very much
managed markets.
In this regime, the issue of consumer and citizen demands for faster,
wider access to new products does not seem as obvious as it was in the
sectors analyzed in previous chapters, in part because projects rather
than products seem to be the dominant initial focus. However, projects
are intricately tied to providing fast access to badly needed energy
products, sources and services. In addition, faster access to the right
mix of energy products, services, sources and production processes
is central to the politics and economics of the climate change aspects
of energy–environment regulation. For instance, environmental NGOs
37 Canadian Environmental Assessment Agency, Report on Plans and Priorities 2006–2007, p. 5.
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Red Tape, Red Flags
and consumer-citizens interested in the sustainable quality of the energy
they use, rather than just its price, exert pressure to introduce or factor in
more alternative energy sources and products through regulatory push.
The complex nature of science-based regulation also does not
initially seem to have as strong a connection to this case study as to
our two previous case studies, in part because energy is too often easily
cast as part of the old resource economy rather than the science- and
innovation-based knowledge economy. This view, however, is far too
simplistic, in that environmental science is crucial to understanding the
issues to be addressed. Scientific evaluation of new technologies is also
required to ensure they are environmentally superior. Thus, this core
force for change is very much a central driver of the energy–environment regulatory regime as well. That is true in many of the ways in
which regime evolution has been discussed in this chapter.
First, new energy projects subject to environmental assessment are
imbued with decisions and views about which new production technologies and processes are best suited to meeting environmental and
sustainable development goals and requirements. The more that sustainable development values are added to the equation, the more S&T
and innovative ideas emerge as a necessary corollary. Climate change
issues also go to the heart of the way technology-forcing strategies
become part of regulatory regime strategy. Discussions of alternative
energy sources also focus strongly on the role and availability of new
and improved technologies.
The earlier discussion of the particular dynamics of regulating environmental assessments via the CEAA and federal departments highlighted
continuing red-tape and red-flag dilemmas and choices. For at least the
last decade, industry has protested about the slowness and rigidity of the
federal assessment regime and of federal–provincial coordination.
Environmental NGOs still focus on red-flag issues, but to a much
greater extent than in the past, they too see the need for speed. That
may be increasingly the case as NGOs press for new renewable energy
sources whose environmental politics may produce considerable local
opposition of the “okay in principle but not in my backyard” variety.
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Regarding the agenda-setting argument and the need for related
institutional reform, the energy–environment regulatory regime is a
good example of the need for more strategic approaches to linked areas
of rule making. The slowness of project approval reforms is evident.
The climate change aspect of regime development is a national embarrassment, and alternative renewable energy development lags seriously
behind that in other countries. There has been no serious mechanism
for fully and seriously debating these issues, either in Canada’s regulatory system or in other policy realms.
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5
Federal Regulatory Policy:
An Annual Regulatory Agenda and
Related Institutional Reform
T
he previous chapters have shown, in three case studies, the
degree to which the real regulatory world is increasingly composed of intricate regulatory regimes rather than single regulators or simple processes. This kind of complex rule making is no longer
the exception but, rather, is the norm. Regulation in the innovation age
requires reform that goes beyond periodic reform exercises and beyond
current federal regulatory policy statements, which are still largely
centred on a one-regulation-at-a-time approach and on the stages that
proposed new regulations go through.
The process of dealing with both red-tape and red-flag issues and with
the set of forces and pressures examined in Chapter 1 requires an actual
regulatory agenda and related institutional reform as a needed chapeau
for regulatory governance in Canada. Because most rule making involves
multiple departments and agencies within the federal government—and
among federal, provincial and foreign governments—an agenda process
is needed to focus on the most crucial areas of regulation and to improve
coordination, eliminate duplication and maximize the benefits of regulation. Such a process also needs arm’s-length institutional expertise
and advice provided regularly through a Regulatory and Risk Review
Commission, rather than just once a decade through periodic regulatory
reform exercises.
In this chapter, I look at several features related to establishing a
fully functioning federal regulatory agenda and agenda-setting process,
and a new Regulatory and Risk Review Commission. The suggested
agenda-setting process would set annual priorities for new regulation
more transparently than current processes do, through a Cabinet-led
process that could better handle some of the regime-level coordination
problems and other issues explored in this study. The Regulatory and
Risk Review Commission would be an arm’s-length expert body that
would monitor and report on regulatory trends and cross-governmental
risk profiles.
While this chapter focuses on a federal regulatory agenda, similar
arguments can be mounted for each province to have an overall regulatory agenda as well. Regulation in Canada is increasingly multi-level,
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and regulatory regimes clearly involve both federal and provincial governments, not to mention foreign and municipal rule-makers.
The Province of British Columbia has an overall regulatory strategy
that in some ways comes close to what I am suggesting in this study.
It is a premier-led initiative that has focused on reducing red tape and
significantly eliminating rules, and it has annual reporting requirements. (See the commentary by the lead B.C. minister at the end of
this volume.) It is not a complete agenda as suggested in this chapter,
in that it does not annually reveal provincial priorities for new regulations in different policy fields. However, the fact that it is a premier-led
initiative is extremely important as a model for efforts that other jurisdictions might make.
Chapter 1 has provided an initial look at the way the current federal
regulatory system functions, but we now need to go well beyond this
account to see what a regulatory agenda process would involve.
To do so, this chapter proceeds in four sections. The first section
looks at what is wrong with the current federal approach to regulation
and makes the basic case for a regulatory agenda based on the previously discussed three forces of political, economic and democratic
change, the growing need to manage complex regulatory regimes, and
the broader need for democratic and more transparent agenda setting
to complement processes that already exist for taxation and spending.
The second section examines a key logical question: namely, “To what
extent does regulatory agenda setting occur now?” The third section
examines what a more complete regulatory agenda and agenda-setting
process would look like and what they would consist of. The fourth section examines the need for a complementary, arm’s-length expert advisory Regulatory and Risk Review Commission. Conclusions follow.
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What Is Wrong With the Current Approach
to Regulation? The Basic Case for an Annual
Regulatory Agenda
What is wrong with the current federal approach to regulation in
relation to the growing importance of complex regulatory regimes, as
discussed in the three case studies? Furthermore, if an annual regulatory agenda dealt only with new regulations, as suggested below, how
would it help address the issues raised in previous chapters?
The heart of the “what is wrong” question is that far too much of the
current federal approach to regulation is premised on a one-regulationat-a-time approach. This approach essentially drives the official federal
regulatory policy. Such an approach does not properly evaluate new
regulations in relation to current ones across federal departments and
agencies and in others levels of government. It fails to deal adequately
with the interacting features of the regulatory environment, including
a government-wide view of risk profiles and priorities, and thus falls
short of meeting the requirements for regulation in the innovation age.
As Chapter 1 showed, federal regulatory policy has evolved since
1986, when regulators were required to consult affected parties and
the public, to conduct analysis and produce a regulatory impact analysis
statement (RIAS), and to pre-publish the regulatory proposal. The
policy was later expanded to include decision-making criteria, such
as ensuring net benefits to Canadian society, minimizing regulatory
burden, fostering intergovernmental coordination and cooperation,
meeting regulatory process management standards and linking to
Cabinet directives. Intergovernmental and interdepartmental coordination is mentioned in the policy, so some complex regulatory regime
issues are acknowledged, but the policy does not include adequate,
regular cross-governmental review and institutional support.
Even the decision in the recent federal Directive on Streamlining
Regulation to add a life-cycle approach to this policy, while highly
desirable, still largely reflects a one-regulation-at-a-time approach. The
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life-cycle approach will extend the policy past the regulation proposal
and approval stages to include subsequent enforcement, compliance
and evaluation stages.
Can one even imagine the federal government managing its tax and
spending system in the way it manages its regulatory system? Would
a government have an overall tax policy or spending policy that simply
said, “Each time a new tax decision or a new spending decision is contemplated, be sure to conduct a tax or spending impact assessment,
consider alternatives to spending and taxation (such as regulation), use
a life-cycle approach and consult with Canadians”? Such a system for
taxation and spending is unthinkable, precisely because governments
know that they must have an annual agenda for both these halves of
the fiscal coin. Governments also assemble the required data to inform
their tax and spending priority setting. This kind of agenda setting is
not perfect, of course, but it is far more developed than its counterpart
in the regulatory realm. In addition, it is seen to be a crucial responsibility of democratic government, all the more so in an interdependent
international setting.
What is wrong and inadequate about the current federal regulatory
system is that—as discussed in more detail later in this chapter—the
federal government has no obvious or transparent way to determine
which areas of regulation are most important. Such a process would
allow it to deal with priority areas in a considered, cross-governmental
manner and then to implement new regulations, along with the necessary S&T underpinnings, and financial and staffing resources.
The federal government does not even routinely present systematic
information to Parliament or Canadians on the annual rate of growth (or
contraction) of regulation. There are, to be sure, some issues regarding
what kinds of further data are needed­—hence the suggestion to establish a Regulatory and Risk Review Commission. But regulatory agenda
setting does not need to wait for perfect regulatory data. Historically,
public spending and tax agenda setting proceeded without perfect data;
later, agenda-setting needs triggered improvements in the ways governments acquired, analyzed, interpreted and debated data. The point
is, however, that governments have simply been lax in making an
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equivalent effort regarding regulation. Such an effort is needed not only
for normal democratic and accountability reasons, but also to support
the kind of annual agenda setting suggested in this chapter. Regulation
is at least a third of what governments do—but considered, transparent
government-wide agendas do not openly inform it or anchor it.
The difficulty with the current approach is that more and more regulation is complex. When proposing new rules and implementing current
ones, multiple sets of regulators affect each other, as well as any number
of firms, consumers and citizens. In short, multiple cycles, and multiple
life cycles of rule making and enforcement, are increasingly the norm.
For example, as we have seen, the full regulatory process for new drugs
involves decisions on intellectual property (patents), clinical trials, drug
review and approval, and approval for funding under medicare.
The answer to the second question posed above—namely, “If an
annual regulatory agenda dealt only with new regulations, as suggested below, how would it help address the issues raised in previous
chapters?”—is closely linked. Such an agenda could help address complex regulatory regime problems because new regulations are almost
inevitably linked to existing ones, and to past and future enforcement
and compliance issues. If new regulations are reviewed and ranked in a
more overt way than they are at present, and in relation to multi-agency
regulatory cycles and science and risk profiles, then coordination issues
are far more likely to be recognized and managed.
It must be stressed that an annual regulatory agenda would not solve
all coordination problems, any more than the annual tax and spending
agendas fully solve tax and spending coordination problems. Some of
these coordination problems undoubtedly require action at other middle
and micro agency levels, or actions among agencies and stakeholders
carried out through bodies like the theme tables mentioned in Chapter 1,
which were established in the post-smart regulation reform period.
Overall, however, government would be better able to respond to the
three forces examined in Chapter 1 and revealed in more detail in the three
regulatory regime case studies if it had an annual regulatory agenda. This
agenda would address regulatory priorities in a strategic, integrated way
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to better manage the complexity of regulation and to ensure that new regulations respond to economic and technological changes.
This agenda would better balance, in a transparent way, the need
to limit regulatory burden to ensure business competitiveness and the
need to protect the environment and people. An annual agenda would
also help better manage the challenges posed by growing consumer
demand for faster access to new products and the desire for democratic
regulatory processes. Finally, this agenda would better ensure that
science-based and related risk analysis capacity is properly allocated
to aid regulatory decisions, enforcement and compliance.
The basic argument for an annual regulatory agenda reflects the
interacting impacts of all three forces operating in the innovation age.
However, it is also based on larger but closely related concerns about
democratic agenda setting.
The speed of economic and technological change, and demands to
deal with both red-tape and red-flag concerns, mean that governments
need to have a more concerted way to think about, set and act on regulatory priorities.
In part, this call for a more explicit regulatory agenda is also an
appeal for greater rationality in regulatory governance, to complement the greater sense of agenda setting that already exists regarding
taxation and spending. Agenda setting for taxation and spending takes
place partly via the annual budget process and partly via the SFT. The
latter agenda-setting process occurs every 18 months or so, at the discretion of the prime minister.
There is, of course, crucially present here an inherent democratic
argument for more formal agenda setting that can be subject to scrutiny and criticism. The current federal government won power in
2006 by presenting a five-point agenda, precisely on the grounds that
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For analyses of the rational, tactical and random nature of agenda setting, see Stuart N. Soroka,
Agenda-Setting Dynamics in Canada (Vancouver: UBC Press, 2001), and John Kingdon, Agendas,
Alternatives, and Public Policies, 2nd edition (Harper Collins, 1996). For a discussion of Canadian
federal agenda setting or priority setting linked closely to prime ministerial leadership and preferences, see G. Bruce Doern and Richard Phidd, Canadian Public Policy: Ideas, Structure, Process,
2nd edition (Scarborough, Ontario: Nelson Canada, 1992), chapters 8 and 9.
Red Tape, Red Flags
government needed more focus so that Canadians could better understand what it believed were its key initial challenges.
I return to this basic argument in the conclusion to this chapter; but
first, more needs to be said about two logically linked questions and
issues noted in the introduction to this chapter. First, does the federal
government already have some kind of internal, informal annual regulatory agenda that is simply not very apparent to the rest of us? And
second, what would a more complete and democratic annual regulatory
agenda process look like, and how might it work?
To What Extent Does Regulatory Agenda Setting
Occur Now?
We need to ask the first question because if such a system exists
and is working well, why should the regulatory agenda argument being
advanced here be carried any further? We therefore need to look at four
elements that provide partial answers to this question:
 the agenda setting that goes on within departments that have major
science-based regulatory tasks, and within other regulatory bodies;
 departmental reports on plans and priorities, which are submitted
during the annual expenditure process;
 the SFT and related priorities regarding legislative bills that go
before the House of Commons; and
 the recent launch of an experimental “triage” process, whereby
departments are invited to identify high, medium and low priorities
for regulation, which will then receive different levels of regulatory
focus and resource support.
Agenda setting within departments and individual regulatory bodies is
something one is tempted to assume must “obviously” occur, somehow.
Large regulatory departments, such as Health Canada, Environment
Canada and Transport Canada—and major regulatory bodies, such
as the Canadian Food Inspection Agency, the Therapeutic Products
Directorate, the Canadian Radio-television and Telecommunications
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Commission, and the National Energy Board—have to plan their activity
regarding new regulations or major amendments.
Senior officials within these organizations have to determine which
regulatory changes should come first as they schedule their notices of
proposed new regulations, their planned RIASs and other features of the
overall federal policy on regulation.
Research for this study suggests that some kind of agenda setting of
this kind does occur at the departmental level, but it is not aggregated
at the centre of government. Nor is it announced as a series of forthcoming or even implicitly ranked regulatory changes. And, of course,
it is hard to know what regulatory proposals never see the light of day,
having been screened out through discussion within the department or
at ministerial levels.
In the early 1990s, departments were required to publish annual
regulatory plans, an experiment that lasted only a couple of years. It
was scuttled when heavy budget cuts occurred in the battle against the
then-huge federal deficit. Even these so-called plans were, in fact, just
veritable “wish lists” of forthcoming new regulations. The recent federal
Directive on Streamlining Regulation also indicates that departments
must prepare regulatory plans, but there is no indication that an overall
annual regulatory agenda will emerge from these disaggregated plans, or
that it will deal with complex and changing regulatory regime issues.
If informal departmental and agency planning of some kind exists, it
is certainly not aggregated in any departmental documents—including
the annual plans and priorities documents, which are discussed later in
this chapter. And these departmental plans are not aggregated higher up
at the central agency or Cabinet level, either.
We might also glimpse agendas and planning in the annual plans and
priorities documents that departments are required to submit as part of
the annual expenditure process. These documents are supposed to aid
On the related federal expenditure and tax processes, including their agenda-setting features and dynamics, see David Good, The Politics of Public Money (Toronto: University of
Toronto Press, 2007), and Geoffrey Hale, The Politics of Taxation (Guelph, Ontario: Broadview
Press, 2001).
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parliamentary scrutiny, both at the level of the initial plans and during
later parliamentary review of performance and results.
The author’s reading of a sample of these departmental documents
over the past few years reveals that regulatory items certainly may be mentioned in them. However, information on these items is cursory. Moreover,
the priorities shown are an amalgam of spending and regulatory changes,
with spending clearly given the dominant focus. There is little evidence
of a regulatory agenda for each department and, again, there is no overall
aggregation of these plans on a government-wide basis.
The SFT and related legislative priority setting comprise another
obvious and central part of the system. I stressed earlier that the SFT is
not an annual process, but it clearly must be looked at regarding overall
agenda setting.
In the past, SFTs were mainly occasions to announce legislative priorities. Since such laws always contain rules in the body of the statute,
they perforce reveal something about rule making, though not necessarily about delegated law. That comes later, after bills have become law.
Over many years, however, SFTs have evolved to become major
occasions when governments present their overall values and themes,
along with some specific policy priorities, within which might well
be some regulatory matters. To the extent that such regulatory matters get mentioned in an SFT, one is entitled to argue that they are
somehow high priorities for the next SFT period, which lasts roughly
18 months. For example, the current Conservative government mentioned
its Federal Accountability Act in its first SFT in 2006. The eventual parent law, the changes to many other laws and the new required regulations
approved as delegated law were all unambiguously regulatory in nature.
I will return later to the SFT’s role in revealing regulatory priorities.
Suffice it to say at this point that it is a very imperfect occasion for such
regulatory agenda setting.
The last and most recent reform with possible agenda-setting implications is the experimental framework for the triage of regulatory submissions, a process currently underway between the Treasury Board
Secretariat’s Regulatory Affairs Division and a few departments.
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The External Advisory Committee on Smart Regulation suggested
the triage concept. The idea is that departments would ask themselves a
series of questions early in the regulatory proposal stage. On the basis
of the answers to these questions, they would separate their new rulemaking plans into high, medium and low priorities. These priorities
would imply different levels of resources and, perhaps, different decisions about conducting RIASs, or different treatment if international
obligations and regulation were involved.
The triage experiment is a partial recognition that something more
closely resembling a regulatory agenda is needed, at least at the departmental level. However, there is no mention here of a cross-governmental
triage process. Thus, once again, there is a hint of the need for agenda
setting but only quite weak or experimental follow-through in practical
governance terms.
These examples of partial, informal and unclear regulatory agendasetting processes and dynamics can certainly be built upon. However,
they do not at present indicate that there is any full-blown or obvious
agenda-setting process or arena for strategic regulation. Agenda setting
is at best a hit-and-miss process, from the perspective of any outsider
looking at how and why governments regulate in some areas but not in
others each year.
It is, without doubt, a far less explicit and transparent process than
either the tax and expenditure agenda-setting processes or the overall SFT process. None of these latter processes is perfect, but they are
each informed by the view that agenda setting is important and should
be reasonably transparent. I will return to these issues after discussing
what a more explicit regulatory agenda process might look like.
A More Complete Regulatory Agenda and AgendaSetting Process: What Would They Look Like?
A more complete, transparent and strategic regulatory agenda-setting
process that debated, set and announced federal regulatory priorities would
have several features. Some of them are similar to features of the tax and
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spending agenda-setting processes, and others are different because regulation itself is different. These features are:
 a process whereby all proposed new regulations from across federal
departments and agencies would be aggregated annually and priorities determined at the Cabinet level;
 a determination of what would be included as proposed new
regulations;
 a provision and processes for handling contingencies and emergencies
requiring new regulations;
 an appreciation of the many possible criteria that might legitimately
be used to distinguish high-priority from low-priority new regulations; and
 an annual ministerial regulatory agenda statement and debate in the
House of Commons.
In addition, consideration should be given to the question of whether
such an agenda process should stand alone, or whether it should be
appended to the existing tax or spending agenda process to avoid duplication in matters such as stakeholder consultation, or for other reasons.
The annual regulatory agenda-setting process would have to be determined at the Cabinet level, either by a designated Cabinet committee
on regulation or by processes similar to those that currently determine
tax and spending priorities. This approach would anchor the process
close to the prime minister and the minister of finance, and their departments and staff.
However, on regulatory matters, there would have to be mechanisms
to feed in S&T advice and expertise on risk, neither of which are part
of the capacities and expertise of the prime minister or the minister of
finance and their immediate supporting central agencies.
That is the reason why some kind of Cabinet committee with a
broader mandate for regulatory priority setting may be needed—keeping
in mind, of course, that choices of Cabinet committee structure and mandate are entirely the prerogative of the prime minister.
The purpose of this process would be, as with the taxing and spending process, to give at least some key ministers and officials some sense
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of the volume of proposed new regulations bubbling up from below,
and to allow them to set priorities as to which new regulations would
proceed and which would not. As I have noted, departments already
have some idea of which new regulations are queuing up and which are
more important, and some screening will have occurred at that level.
There are numerous coordination and capacity issues among regulatory agencies involved in almost all new regulations or in operational
compliance. The committee could crucially flag and discuss these
issues as the agenda took shape. That would not be an easy process,
of course. However, it would be much more likely that the government
would deal with complex regulatory coordination and capacity issues
if ministers focused annually on a smaller sub-set of regulatory agenda
proposals, rather than using the current highly uncertain and narrower
one-regulation-at-a-time approach.
The issue of defining regulation is an important one. As noted in the
introduction to this study, overall federal rule making can be revealed
and contained in laws, delegated legislation (the “regs”), guidelines,
standards and codes.
To keep the proposed regulatory agenda process manageable, it may
make sense to focus only on the “regs” per se. However, the inclusion
of new statutes warrants serious attention, for the simple reason that
many new laws contain serious rule-making provisions in concert with
delegated authority, which will in turn produce more “regs.”
A provision for contingencies and emergencies would have to exist so
that new regulations to deal with crises or hazards could still go forward from ministers or Cabinet, even if they were not on the annual
regulatory agenda. A contingency budget exists in the federal spending
process and there would have to be a functional equivalent for unforeseen regulatory requirements.
It must also be stressed that normal emergency procedures in regulatory governance would continue at the operational level for product
approvals, compliance and enforcement under existing regulations. Thus,
any operational crises or contingencies would still be handled in the
established ways under numerous regulatory programs. Such operational
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actions occurred in relation to the Canadian “mad cow disease” crisis, the
SARS crisis and other hallmark crises.
In other words, it must be kept fully in mind that the regulatory
agenda being discussed in this chapter refers to new regulations.
The criteria for setting a regulatory agenda are also important. The
arguments mounted as to why a given new regulatory proposal should
be ranked high and should proceed to adoption will, without doubt,
reflect the same diversity of rationales, values and ideas as arguments
for new tax and spending proposals. The minister of finance and the
prime minister control tax priority setting, whereas new spending,
though tightly controlled by a few ministers, does involve a formal and
informal bidding process by all ministers.
Proposals for new regulations would undoubtedly come from many
ministers as well. The rationales and criteria would include risk assessments of diverse kinds, and levels of real and perceived severity. I will
return to this issue in the discussion later in this chapter on the rationale
for additional institutional change via a suggested arm’s-length Regulatory
and Risk Review Commission. There would also, in any given year, be
criteria related to electoral promises, international obligations, regional
pressures, and numerous health, safety, environmental and sustainable
development values.
In a complex Cabinet of more than 30 ministers representing a federation, the criteria for pride of place on the regulatory agenda will be
as diverse as they are for spending and taxation. As indicated above,
agenda setting inevitably reflects a mixture of political and economic
rationality, but also involves tactical and opportunistic behaviour by
political and economic players inside and outside of government taking
advantage of windows of opportunity.
Current federal regulatory policy already contains quite diverse
criteria reflecting political, economic and public interest concerns.
Any reading of past budget speeches and documents, and of SFTs,
reveals a mixture of criteria—some hard and rigorous, and some softer
and based on the fine arts of tactical political judgment. Criteria that
included relative regulatory burden and benefits, degrees of risk, international obligations, election promises and normal political judgment
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would—and should—undoubtedly apply. Regulatory agenda setting
would be very much a function of complex political–economic judgments, as is the case with spending and tax agenda setting.
The notion of an annual regulatory agenda speech or statement could
also be part of a proposed federal regulatory agenda. This could be a
stand-alone statement by a lead minister or the prime minister leading
to a two- or three-day debate in the House of Commons, as happens
after the budget speech and the SFT. The intent here would be to draw
attention to, and focus debate on, the government’s strategic regulatory
agenda, in somewhat the same manner as the current taxing and spending process. The SFT, presented every 18 months or so, would also
reflect the annual regulatory agenda statement.
Finally, it is important to raise the issue of whether such an agenda
process should be a stand-alone one or one that is appended to the existing
tax or spending agenda process so as to avoid duplication in matters such
as stakeholder consultation, or for other reasons. I argue strongly for a
separate process to ensure that complex regulatory regime issues and
overlap issues can be examined more seriously.
However, others may well argue that the process should be married to these other agenda-setting processes. If so, tying it to the budget
speech and its prior processes may make sense. If it was tied to the current formal spending plans and priorities process discussed earlier, that
process would need major reform to capture the regime-level issues
that are increasingly the norm in modern regulation.
An annual regulatory agenda would need to link new regulations
with current ones to minimize duplication and overlap, and to ensure
that the right agencies and departments are accountable, responsible
and transparent.
Related Institutional Reform: A Regulatory and Risk
Review Commission
While the discussion of an annual regulatory agenda is the key feature of this chapter, consideration also needs to be given to the previously
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mentioned need for an arm’s-length expert Regulatory and Risk Review
Commission. The premise of this chapter is that governments will, and
should continue to, use both the requirements of the federal regulatory
policy and the new Directive on Streamlining Regulation. Periodic, oncea-decade regulatory reform exercises will also undoubtedly be used. The
analysis above also stresses that the criteria that might inform agenda setting are likely to be varied, and that the federal government and its departments and agencies—pressured by their varied stakeholder groups and
constituencies—will largely drive the suggested agenda-setting process.
The case for a complementary Regulatory and Risk Review
Commission is based on the argument that external, arm’s-length expert
public input is needed. Some of this advice is needed to provide a regular overview of regulatory regime changes and challenges emanating
from new international pressures and from emerging technologies.
Specific advice is also needed on risk profiles that cut across government and society, which may then require regulation, or other forms
of non-regulatory action or information. At present, risk assessment is
necessarily and properly focused in departments and agencies, but there
is scarcely any capacity for forming views and setting priorities related
to real and perceived risk across the government. Such a review commission would not be involved in any regulatory approval decisions,
nor should it function as some kind of appeal body. (These tasks would
properly be the job of front-line regulators and the courts.) Rather, it
would review information, conduct research and advise regulators on
the above types of cross-governmental developments, all linked to the
nature of regulatory regimes in the innovation age.
Such an advisory commission could also assemble—and advise
the government on assembling, through agencies such as Statistics
Canada—further systematic data on regulatory growth, regulatory
change, and related risk matters and issues, both on Canada itself and
on how Canada compares with other countries.
The implication in this argument for complementary institutional
change is that the commission would be a federal agency. However, a
case could be made for it to be a federal–provincial agency funded by
both levels of government.
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Conclusion
This chapter has examined further what is wrong with the current
federal approach to regulation in relation to the growing importance of
complex regulatory regimes, as discussed in the three case studies. It
has also explored the question, “If an annual regulatory agenda dealt
only with new regulations, how would it help address the issues raised
in previous chapters?”
Canada needs a much more strategic approach to modern regulatory
governance in the innovation age. Accordingly, this chapter has made
the case for establishing a fully functioning federal regulatory agenda
and agenda-setting process, one that more transparently sets annual
priorities for new regulations through a Cabinet-centred process. It has
also argued that consideration should be given to establishing complementary institutional change via the suggested Regulatory and Risk
Review Commission.
The red-tape and red-flag realities of regulation in the innovation
age make such strategic regulatory agenda-setting and review capacities essential. So, too, do the interacting effects of the three forces discussed in Chapter 1 and highlighted in the case studies.
Because most rule making involves multiple departments and agencies within the federal and provincial governments, as well as at international levels, an agenda-setting process is needed to focus on the most
crucial areas of regulation; to achieve better coordination, economic
efficiency and innovation; to eliminate duplication wherever possible;
and to maximize the benefits of regulation. Complementary external
review capacity is also needed.
The chapter has looked broadly at how regulatory decision making
compares with taxation and spending decision making—two federal
processes that are anchored in an annual agenda-setting process. It has
explored whether there is an existing, latent regulatory agenda that is
simply not very transparent, and whether aspects of it could be built
upon to create a more explicit regulatory agenda.
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The analysis above also laid out briefly what a formal regulatory
agenda and an agenda-setting process might look like and how they
might work. In addition, it has made the case for the advantages of
such a system compared with the status quo. It also raised the issue of
whether such a process could be appended to existing processes, such
as the tax and spending agenda processes.
The analysis concludes that there is still a strong case for a separate regulatory agenda process to deal with growing regulatory
regime-level issues, with the three interacting forces and pressures
examined earlier, and with the need for more transparent democratic
regulatory governance.
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6
Conclusion
T
his study has examined the nature and growing importance of
complex regulatory regimes and the changing dynamics of redtape and red-flag regulation in the innovation age. The three
key interacting forces examined in Chapter 1 are propelling regulatory
change, shifting the shape and contours of regulatory regimes and their
mix of multiple agencies, statutes, processes and stakeholders at the federal, provincial, international and local levels of regulatory authority.
The study has also examined overall federal regulatory policy and
periodic federal regulatory reform exercises with a view to assessing
the capacity of federal policy and reform to deal with complex regulatory regimes in an innovation era.
Three conclusions flow from the analysis, each of which draws on
the findings of the three case study regulatory regimes and the related
weaknesses of regulatory policy and past reform exercises:
 The red-tape and red-flag regulatory issues that concern Canadians
are no longer in as continuous opposition to each other as they once
were. Rather, in the innovation age and to a much greater extent
than before, they are integrative and reinforcing in nature. In many
specific situations, business and social stakeholders have a mutually
reinforcing interest in efficiency and in effective risk management.
Some tensions, of course, still exist between these two concerns,
but the configuration of political interests and their concerns can be
on either side of the red tape/red flag equation, in different circumstances and situations.
 What is wrong with current federal regulatory policy is that it is
based far too much on a one-regulation-at-a-time approach combined with periodic, once-a-decade regulatory reform exercises.
More effective ways of managing complex regulatory regimes are
needed. Regime-level issues need more focused examination, both
when new regulations are proposed, and when product and project
approvals—and compliance and enforcement issues—are addressed
under existing regulations.
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 The federal government needs to develop a transparent annual regu-
latory agenda whose priorities and resource needs are announced,
debated and agreed upon annually in ways that already broadly
exist for governmental taxation and spending decisions and plans.
For some time, governments have had overall policies on regulation
and how regulation should be conducted, and have thought about
aspects of regulatory agenda setting. However, they have not even
come close to establishing a transparent annual regulatory agenda
that would complement their spending and tax agendas. The architecture of federal regulatory governance also needs access to more
transparent, arm’s-length expert advice provided through a suggested Regulatory and Risk Review Commission.
Red Tape, Red Flags: Complex Interactions,
Integration and Role Shifts
With regard to the first conclusion, my analysis in Chapter 1 showed
how three interacting forces have had a major impact on the nature
of regulatory governance. Fast, complex economic and technological
change, by its very nature, creates both new products and production
processes whose proponents are anxious to find an unencumbered route
to market success. However, it also inevitably creates concerns about
health, safety and the environment.
Consumer demands for increased access to new products are premised on a significant reduction of red tape but always with red-flag concerns never very far from the surface.
My discussion of the science-based nature of risk regulation—and
thus of the overall interactions between regulation and innovation—
highlighted the delicate balancing acts involved. Caught up in these complex processes are core concepts such as “safety” and “risk-benefit,” where
different notions of what red flags and risk might actually be are central,
often unclear and often subject to variation in particular situations.
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In the not-so-distant past, the conventional summary political logic
suggested that business was the stakeholder that most often expressed
concern about red tape. Environmental and consumer NGOs, on the
other hand, were the stakeholders most associated with concerns about
red-flag health, safety and fairness issues. Government regulators and
their political masters seemed broadly to accept this summary logic of
core regulatory politics and were, in some sense, caught in the middle.
In varied and more specific ways, each of the three case study
chapters revealed the changing red-flag and red-tape dynamics,
integrating forces and roles. More and more, business, NGOs and
Canadians overall are concerned about similar red-tape and red-flag
issues. Integrative and reinforcing behaviour can increasingly occur
in specific situations where innovative products are involved, because
both business interests and NGOs have a common interest in reducing
red tape and in getting access to efficacious products that are safe or
that can be sensibly managed on a risk–benefit basis.
Of course, spirited debates still arise between these groups. However,
it is important in regulatory governance not to instinctively pigeonhole
these stakeholders into easy and often unconsidered political categories.
Specific situations and cases do matter, as do the nature of the risks and
where interests sit. Modern regulatory governance requires good casebased political intelligence in these situations, rather than simplistic
prior categorization.
In both the drugs–public health and biotechnology–IP regime case
studies, speedier access (less red tape) to safe or risk–benefit-managed
drugs and diagnostic tests (red flags) was increasingly the concern of
business, NGOs and Canadian consumer-citizens. “Access” became the
watchword of all of these stakeholders, albeit in different specific ways
and contexts.
The fact that core stakeholders could shift sides on particular redtape and red-flag aspects of complex regulatory regimes was revealed
in the biotechnology–IP case study, where businesses’ excessive patenting was seen by some stakeholders as growing red tape for patients,
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health professionals and public researchers. Businesses, meanwhile,
saw the protection of the integrity of the patent system and the latter’s
role in enhancing innovation as their red-flag concern.
The analysis of the energy–environment regulatory regime also
showed complex role adoptions on either side of the red tape/red flag
equation. In the realm of environmental assessments, NGOs often historically sought slower deliberative processes when energy projects
were oil, gas or nuclear projects. However, when energy projects involve
renewable energy such as wind, solar and other sources, NGOS often
prefer speedy decision making and assessments, because these forms of
energy are seen as more sustainable.
None of the above arguments is intended to imply that there are no
remaining tensions and traditional divisions in the red-tape and red-flag
debates. What is central to the argument is that stakeholder dynamics
are often more integrated than in the past, in particular circumstances.
Circumstances do matter, as does the design of particular regulatory
instruments to deal with problems where key players have complex
interests, not simplistic ones.
Therefore, regulatory regimes—in both their new regulation aspect
and their operational approval and compliance aspect—need to be able
to both observe and respond to such changes. In these fluid situations,
interests shift in complex ways; effects are dispersed among many
phases or aspects of regulation; and, almost inevitably, multiple regulators are as involved in interpreting these political interest groups’ shifts
as they are in the science and economic aspects of regulation.
The Gaps in Current Regulatory Policy and
Governance
The discussion in chapters 1 and 5 of federal regulatory policy, the
current regulatory decision-making process and the way that process
evolved through add-on elements of suggested good regulatory practice
showed what is wrong with the basic federal one-regulation-at-a-time
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approach. Exhortations to consider interdepartmental coordination were
a later part of these official policy “add-ons,” but they were still essentially buried inside a one-regulation-at-a-time logic.
The analysis of past formal regulatory reform initiatives showed how
each initiative dealt in its own way, in different time periods, with different
accumulated problems of regulation and regulatory governance. In the
case of the recent federal smart regulation initiative, these problems were
more explicitly linked to innovation itself and to the growing need for
Canada to compete in the knowledge-based economy.
It must be stressed that there is nothing inherently wrong with
having such approaches in the architecture of Canadian regulatory
governance. Guidance on how to make each regulatory decision is
undoubtedly needed and useful. Periodic, once-a-decade regulatory
reform can be useful. Governments will undoubtedly use such exercises in the future, if for no other reason than that new governments
of different partisan makeup will want to conduct even larger periodic
reviews. However, what is wrong is that neither of these ways of
addressing regulation and governing capacity on regulatory regime
matters can now keep pace with actual regulatory change or with the
speed and complexity of economic and technological change.
Again, the three regulatory regime case studies showed the inherent
sluggishness and inertia of decision making, as problems accumulated
but spilt over the cracks of these two partial approaches. It took a decade
or more to even begin to deal with the backlog and approval times lag
in the drugs–public health regime, and even longer to begin to address
the overall common drug policy issues tied to access via the funding of
new drugs. Part of the problem was also the lack of scientific capacity
to review new drugs.
The biotechnology–IP regime analysis showed similar delays of a
decade or more in dealing with the different notions of access related
to both bio-health products overall and genetic diagnostic tests. The
energy–environment regime chapter also showed the absolute debacle of
Canada’s climate change responses, regulatory and otherwise, over a decade or more, and the snail-like responses to the reform of environmental
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assessment law and assessment processes, both within the federal government and among levels of government. There was a clear lack of political leadership to tackle the climate change issue, partly because changes
would adversely affect some individuals and some regions of Canada
more than others.
The standard response to these kinds of inertia is often that they
are just the price to be paid for democratic processes. The problem is
that real democracies must also be able to make timely decisions that
address real problems in effective ways. The current regulatory architecture does not do this, nor is it particularly democratic in the sense
of direct accountability and transparency, given the nature of complex
regulatory regime problems and characteristics.
A Strategic Regulatory Agenda and Related
Institutional Reform
Canada needs a much more strategic approach to modern regulatory governance in the innovation age. Accordingly, this study has
made the case for establishing a fully functioning federal regulatory
agenda and agenda-setting process, one that more transparently sets
annual priorities for new regulations through a Cabinet-centred process. If the federal government on its own approves about 50 new
major regulations a year, then a linear projection for the next decade is
500 new regulations. If parent laws are added, these numbers of new
rules are even greater. At present, it is virtually impossible for ministers, Parliament, or Canadians and their stakeholder groups to have
any clear sense about what regulatory priorities are or ought to be. It is
virtually impossible to have a strategic view of regulation.
An annual regulatory agenda is needed to complement and complete the current regulatory governance architecture. This analysis has
also made the case for some kind of arm’s-length Regulatory and Risk
Review Commission. This body would support cross-governmental
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regulatory agenda setting with ongoing, arm’s-length expert advice and
data dealing with regulatory regimes, priorities and risk profiles.
The red-tape and red-flag realities of regulation in the innovation age
make such a strategic regulatory agenda and such cross-governmental
advice a necessity. So do the interacting effects of the three forces discussed in Chapter 1 and highlighted in the case studies.
Because most rule making increasingly involves multiple departments and agencies within the federal and provincial governments, as
well as at international levels, an agenda-setting process is needed for
the following reasons: to focus on the most crucial areas of regulation;
to achieve better coordination, economic efficiency and innovation; to
eliminate duplication wherever possible; and to maximize the benefits
of regulation.
Accordingly, I have looked briefly at how regulatory decision making
compares with tax and spending decision making—two federal processes that are anchored in an annual agenda-setting process. This study
has discussed whether there is an existing latent regulatory agenda that
is simply not very transparent, and whether aspects of it could be built
upon to create a more explicit regulatory agenda.
The analysis has also laid out briefly what a formal regulatory
agenda and agenda-setting process might look like and how they might
work. In addition, it has made the case for the advantages of such a
system compared with the status quo. It has also raised the issue of
whether such an agenda process could be appended to existing processes, such as the tax and spending agenda processes.
Overall, I conclude that there is still a strong case for a separate
regulatory agenda process to deal with growing regulatory regime-level
issues and with the three interacting forces and pressures examined.
There are, of course, counter-arguments and cautionary tales about
such an agenda for new regulations. As we saw in Chapter 5, all systems of political agenda setting are partly rational in a formal sense
but are also tactical and opportunistic, as players take advantage of
moments of opportunity. That is certainly true of the tax and spending
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agenda-setting processes and of overall SFT agenda-setting processes
as well. But no one would argue that the federal government should
make its spending or tax decisions without an agenda-setting process—
in short, by making tax and spending decisions simply on the basis of a
one-tax-at-a-time or one-expenditure-at-a-time approach.
A spokesperson for the telecommunication industry (see the three
commentaries at the end of this volume) pronounced such an agenda
idea as “overkill” and impractical. She preferred a sectoral approach.
Many problems of regulation do need attention at sectoral levels.
An annual regulatory agenda is not a panacea, but it is, nonetheless, a
key missing part of the overall regulatory architecture. A sectoral-only
approach easily translates into excessive stovepipe regulatory governance
and is, quite literally, impractical given the growing cross-governmental
need for a strategic view of regulation.
Thus, if anything is overkill, it is the status quo governance of regulation. The status quo is by no means a fully effective system for dealing with complex regulatory regimes and strategic rule making, nor for
handling red-tape and red-flag issues and diverse notions of risk and riskbenefit that exist across a complex government, economy and society.
Many regulatory departments and agencies may well oppose a formal
regulatory agenda on the grounds that it would centralize new rulemaking decision processes too much. Regulators also enjoy their stovepipe status and independence; feel that their work is already complex;
may think that the current federal policy on regulation is already too
complicated; and may believe that they are already pulled and stretched
by the varied demands of stakeholders, international treaties and other
governments.
However, in the final analysis, they are part of one government, be
it federal or provincial, affecting all Canadians. There are, of course,
many regulatory jurisdictions such as British Columbia, where efforts
to reduce regulatory burdens are underway and, as noted in Chapter 5,
where a premier-led strategy is in evidence. The federal Smart Regu­
lation review process also yielded some useful changes and recognition
of problems.
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Still others—inside government and outside it among NGOs—may
fear that a regulatory agenda may simply mean, on balance, less regulation. For other interest groups, that would be a virtue. In both cases,
having a formal annual agenda and new advisory institutions increases
the odds that new regulations will be based on a more considered
assessment—at the centre of elected government—of the most important
regulatory challenges, linked to assessments of relative risk, of complex regime issues, of the precise kinds of rule making that should be
applied, and of the costs and benefits relative to lower-ranked priorities.
It must also be stressed that new regulatory proposals can also include
proposals to reduce rule making or, indeed, to deregulate in specific
industrial or social realms.
Red-tape and red-flag regulatory challenges are entrenched in the
innovation age. Canada’s current regulatory governance system is not
at all well suited to addressing the country’s strategic need to deal with
complex regulatory regimes and the changing stakeholder coalitions on
both sides of the red tape and red flags regulatory coin. Canada’s political
democracy and its economic prosperity will both be diminished unless
more open regulatory agendas and risk review institutions become a
normal part of the way we govern ourselves in the innovation age.
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From the Lecture:
Richard Thorpe’s SIRP Lecture Comments
These commentaries were delivered at the Scholar-in-Residence lecture on
May 23, 2007, in response to a presentation by G. Bruce Doern that consisted
of excerpts mainly from Chapter 5 of the larger report published in this volume.
I
t’s a pleasure for me to be here tonight to bring British Columbia’s
perspective to Professor Doern’s presentation on Regulation in the
Innovative Age. If one accepts his assessment that one-third of the
role of the government is making regulations and enforcing compliance, then a strategic, government-wide approach to regulatory reform
is essential. Economic competitiveness depends on it. And, as Professor
Doern has noted, citizens are very concerned about the mounting red
tape at all levels of government. The cost to individuals and business
of complying with regulation rivals the cost of taxation—both of which
are key competitiveness factors. If you accept this fact, which I do, then
you must agree with Professor Doern that governments should put as
much effort into their annual regulatory agenda as they do into their
annual fiscal agenda.
Allow me to share with you British Columbia’s experience in
addressing regulatory reform. Since 2001, our government, under
the leadership of Premier Gordon Campbell, has developed what we
believe to be one of the most innovative and comprehensive regulatory
reform initiatives. British Columbia’s approach to regulatory reform
has included the elements of an effective regulatory reform agenda,
one that both the Canadian Federation of Independent Business and
the Advisory Committee on Paperwork Burden Reduction have recommended that other governments follow. Premier Campbell’s vision and
commitment was to reduce our regulatory burden by one-third over a
three-year period. We knew we had to understand the magnitude of the
regulatory burden in British Columbia, and thus we needed to establish
a baseline count of that burden.
Our journey began with a very comprehensive account of all regulatory requirements contained in legislation, regulation and interpretive policies in British Columbia. To achieve our goal of a one-third
reduction over three years, each minister was required to develop a
three-year regulatory reform plan as part of his or her ministry’s threeyear service plan—what are known in the private sector as business
plans. Priority was given to regulations viewed as impeding economic
competitiveness; but, at the same time, we committed to ensuring that
health, safety and the environment were not compromised.
From the Lecture: Richard Thorpe’s SIRP Lecture Comments
165
Regulatory reform achievements are reported publicly through
British Columbia’s annual budget, and quarterly reports for all ministries are posted on my ministry site. As well, each ministry must
provide a regulatory update in its annual service plans and a monthly
report to Cabinet. I keep the scorecard, and it is discussed every month
in Cabinet.
Achieving a positive regulatory environment requires the highest
level of political commitment—in our case, Premier Campbell’s vision
and commitment. For our government’s first two and a half years,
regulatory reform was given its own portfolio, with the Minister of
State being responsible for deregulation (similar to the January 2007
appointment by Prime Minister Harper of the Honourable Gerry Ritz
as Secretary of State for Small Business and Tourism).
We’ve succeeded in cutting more than 41.19 per cent of regulatory
requirements faced by citizens, small business and industry in British
Columbia—a total of just under 158,000 regulations. That’s a lot of
red tape. British Columbia is committed to being Canada’s most smallbusiness-friendly jurisdiction. Reducing red tape plays a key role in
achieving this goal and helping us with our goal to lead the nation in
job creation.
In April 2006, British Columbia and Alberta signed the British
Columbia–Alberta Trade Investment Labour Mobility Agreement. This
agreement, over time, reconciles regulations and standards to ensure
that businesses and workers in both provinces have seamless access to
a larger range of opportunities across sectors. A recent report by The
Conference Board of Canada has suggested that lowering tariff trade
barriers could help narrow the Canada–U.S. productivity gap.
In view of this and other regulatory innovations in our province,
last year the Canadian Federation of Independent Business presented
Premier Campbell with an award recognizing him for his leadership
and for British Columbia’s groundbreaking work in promoting regulatory reform and accountability. More recently, recognition of British
Columbia’s efforts came in the March 2007 federal budget, in which
Minister Jim Flaherty said, “We will reduce the business paper burden
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by 20 per cent by November 2008, following the excellent example
set by the government of British Columbia.” It’s very encouraging to
see the federal government acknowledging British Columbia’s efforts.
British Columbia is committed to working with the Prime Minister,
ministers Flaherty and Ritz, and their government to enhance Canada’s
and British Columbia’s global competitiveness.
Our government’s ongoing commitment is to have a zero per cent
increase in regulation—a target we continue to meet and, in fact,
exceed. As I mentioned earlier, health, safety and environment remain
paramount. In fact, we have maintained environmental integrity and
improved environmental protection through a new Environmental
Management Act. This Act came into force in 2004, replacing a
23-year-old Waste Management Act. A key aspect of it is the adoption
of a scientifically based, principled approach to environmental management, one that ensures sustainability, accountability and responsibility. This allows our province to address the cumulative impacts of
pollution, penalize violators quickly and encourage environmentally
responsible behaviour through innovative new approaches.
Building on our success, we recently introduced Track II of
our Regulatory Reform Plan. It’s called Citizen-Centred Regulatory
Reform—or, as I like to call it, Saving People Time. The Saving People
Time approach is all about saving time from the perspective of the individual and small business. Small businesses have told us that they want
to spend less time on red tape and more time on what’s important: running and building their successful small businesses. We agree.
We’re seeing the results of this at work in British Columbia, where
small business is booming. Fifty-seven per cent of all private sector
jobs come from the small business sector in British Columbia, which is
seeing record-setting job creation and the lowest unemployment rate in
30 years. For 15 quarters, nearly four years now, British Columbia has
led Canada in business confidence. Two-thirds of British Columbia’s
small businesses and industry expect stronger performances in the year
ahead, and more than one-third expect to hire more staff. This has been
reported by the Canadian Federation of Independent Business.
From the Lecture: Richard Thorpe’s SIRP Lecture Comments
167
Through our continued work on regulatory reform, we will continue to take steps, in partnership with small businesses, to help turn
their expectations into reality. In October 2006, I received the government’s first Small Business Roundtable Annual Report. This permanent
Small Business Roundtable has provided a very successful platform
for ongoing dialogue with small business in British Columbia. The
small business lens, a key recommendation of the Small Business
Roundtable, was developed to ensure that the needs of small business
are fully explored each and every time our government proposes new
or amended laws and regulations. It poses to ministers and public servants a number of tough questions related to regulatory criteria, and is
included in our regulatory checklist. We are also building exciting new
streamlining initiatives with other levels of government.
In April, British Columbia and the federal government became the
first jurisdictions to sign a new five-year memorandum of understanding regarding BizPal. This user-friendly, time-saving tool builds on our
government’s commitment to cut red tape and make it faster and easier
to do business in British Columbia. BizPal is a partnership of three
levels of government—municipal, provincial and federal—working
together to reduce the regulatory burden on individuals and small businesses. In British Columbia today, each and every one of our 23 ministries is currently working on time-saving and streamlining regulatory
reforms to help to improve the lives of our citizens.
To conclude, British Columbia has seen success in regulatory
reform, but there is still more work to be done, especially by all levels
of government. British Columbia believes in partnerships, and we have
indicated to the federal government that we are willing to work on a
provincial–federal pilot project to look at how overlap in regulations
(in such areas as mining, fisheries, oceans and the environment) can be
addressed. Working together, governments can save citizens and businesses time, money, confusion, unnecessary paperwork and red tape,
while enhancing Canada’s competitiveness.
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With respect to Professor Doern’s powerful presentation, British
Columbia actually has fixed election dates, fixed Throne Speech
dates and fixed budget dates. So British Columbia fully supports the
view that governments need a strategic approach to regulatory reform.
We believe very strongly that this strategic approach should be tied
directly to individual ministries, government annual business plans
and the annual budget process. We do not believe that it should stand
alone; you’ve got to link the money and the accountability on regulatory reform or, in our opinion, it won’t happen. This, we believe, will
result in accountability, transparency and real regulatory reform that
will build Canada’s competitiveness.
Thank you very much.
From the Lecture: Richard Thorpe’s SIRP Lecture Comments
169
From the Lecture:
Elizabeth May’s SIRP Lecture Comments
These commentaries were delivered at the Scholar-in-Residence lecture on
May 23, 2007, in response to a presentation by G. Bruce Doern that consisted
of excerpts mainly from Chapter 5 of the larger report published in this volume.
F
ollowing Minister Thorpe’s remarks, I want to give you a small
insight into my own experience with small business. My father
was a manager and the CEO of our vast empire, which at that
time was a restaurant and gift shop on the Cabot Trail, employing
30 people seasonally. He took up the challenge, and he enjoyed all the
notices he got from the Government of Canada. He enjoyed them so
very much that he thought he should share them with the travelling
public. So he maintained a bulletin board right next to our coffee shop
that was titled “The Government of Canada Never Sleeps,” and every
time he received a new notification of some new regulatory provision
(some of these were just regulations, some of them were the tariffs on
Bangladeshi textiles and whatever else was going on), he would post
it. He also kept track of how much of his time as a small businessman
was spent doing the work that he regarded as his time working for the
government unpaid, and that was generally about a third of his time.
In other words, I was not brought up to love laws and regulations.
I do, though, coming from the environmental movement, probably stand
for the red flags side of the red flags–red tape equation—which is to say, by
all means let’s get rid of the red tape, but let’s not so undo those essential
functions of government that we actually lose our ability to regulate and to
protect human health and the environment at a time when these issues are
increasingly critical and our margin for error is increasingly small.
So it becomes a real challenge to get regulations right. There have
been various government efforts—I am sure they have been advertised
as smart regulation—often seen and sometimes misunderstood by the
environmental movement, I think, as translating into deregulation. There
are certainly ways in which we can reduce unnecessary burdens.
I want to focus on another aspect of the paper, though, and that’s the
question that Professor Doern raised about there not being a central process within government—a failure to centralize what’s going on. I put it
another way as well: there is a lack of policy coherence, and not just in
regulation setting. The fiscal framework often is set for different reasons
than the regulatory framework, and that’s just speaking about the federal
government. When you look at the lack of policy coherence around certain of the issues with which I am most familiar, you are looking at one
From the Lecture: Elizabeth May’s SIRP Lecture Comments
173
set of rules and regulations at the federal level, sometimes another at the
provincial level, sometimes one as well at the municipal level and sometimes another at the international level. This does tend to create a pulling in different directions and in­effective regulation, which by definition
can’t be smart regulation. We see this happening in a number of ways,
and I want to speak about them specifically.
But before that, I also want to suggest that we shouldn’t just oppose
tough regulations and competitiveness as if they are working in opposition. We know from the studies conducted by Harvard Business School
Professor Michael E. Porter that those countries and those companies that
have the highest required achievement of regulatory standards in terms of
the best environmental performance are also the most competitive. This
is not a real surprise. It means that the companies that avoid regulation,
that continue to pollute, that plead for extra time, are the ones that are not
modernizing; they are falling behind. And by definition, if you are falling behind, you are not competitive. So we need to uncouple these issues,
making sure we have not just adequate but robust policies in regulatory
reform, and fiscal frameworks that work together with policy coherence
to deliver the best results with the least excess red tape. It’s important to
see that serving the public interest in health and safety and the environment is very congruent with the public objective of competitiveness.
So what’s the key driver for regulation? What is the primary driver for
public policy when, for instance, you go to regulate pesticides? Well, there
really isn’t a primary driver. If you ask the minister of health, who now
has the responsibility for the Pest Control Products Act, you will probably
hear that protecting the health of Canadians is his or her number one concern. But that isn’t evident when you look at the decisions that are made.
There is also the pressure from the agricultural community: “We need to
be competitive because on the other side of the border something might
be regulated and we want to get access to it and maybe it will be better.”
Meanwhile, you also have pressure from the pesticide manufacturers.
I was once on the advisory committee to the minister of health, an
advisory committee that was dominated by representatives of user groups
and industry, and I was the only representative from an environmental
group. I was really struck when the only medical doctor in the group said,
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Red Tape, Red Flags
“Don’t you find this a little funny as an advisory group? How would it be
if the government structured a group to advise the minister of health on the
problem of peanut allergies, and the com­mittee struck was composed of
the people who grew peanuts, the people who grind up peanuts, the people
who sell peanuts, the people who market peanuts and one doctor?”
So there is an imbalance there. There are so many competing interests, even in this one area of pesticide policy, and that is just at the federal
level. We have the Pest Control Products Act, and manufacturers may
well say that there are onerous regulations. There are certainly hoops
through which they must jump, but the actual effectiveness of our regulations in protecting public health is very much in doubt. Every time the
Commissioner for the Environment and Sustainable Development (under
several different watches) examined whether this system was working
and protecting Canadians’ health, he or she found the regulatory system
sadly wanting—it wasn’t driven by protecting public health.
So that’s why you see the provincial governments coming to their own
decisions: “Well, it may be regulated federally, but we don’t have to use
it provincially, because we can make our own determination of whether
it’s safe or not.” Then you get to the municipal level, where increasingly
the most proactive preventative work is being done through bylaws to
say, “We don’t want chemicals that cause cancer used on our lawns.”
Then you get to another whole level of government, which are the
bi-national or regional trade agreements. Ever since the North American
Free Trade Agreement, Canada has tried to harmonize our regulations
with the United States. And every time, there has been a harmonization
toward the maximum residue levels of pesticides on fruits and vegetables. Canada insists that our fruits and veggies have to have less pesticide than U.S. law allows, but the harmonization means that Canadians
are allowed to have more pesticide in their fruits and vegetables, never
that people in the United States should have lower levels in order to
harmonize with us. That is quite different from, for instance, the way
the European Union trade bloc works, where the highest standards are
the ones that must be adhered to.
On another topic (which could easily be more than the whole
10 minutes I have)—the climate issue. We are not seeing effective use
From the Lecture: Elizabeth May’s SIRP Lecture Comments
175
of regulations in dealing with our Kyoto commitments. Obviously,
we are not seeing any effort at all to reach the Kyoto commitments;
that is now official government policy. But there was one item that I
thought worth raising tonight, which is the so-called economic study
that Minister John Baird brought forward. If any of you happened to
look at it, you will have noted that there were a number of assumptions
built into that study about how much it would cost to reach Kyoto targets, and the assumptions predetermined the outcome that it would
mean economic ruin.
One of the things that was stated was that “for the purposes of this
economic study, we will assume no new regulations on anything”—
with the excuse that it takes too long to pass regulations. That’s quite
interesting when you have a government body, Environment Canada,
with the mandate to act on an international, legally binding treaty. Of
course, I do think that there was a bias in the way the assumptions were
selected—that is, in saying essentially that we are not even going to try
to use regulations for the purpose of the study, because they take too
long. That’s an admission of failure.
If you are going to have a proper regulatory process, and you are
going to engage, as Bruce Doern’s paper says, you need to have public input. There is a very clear demand by Canadian citizens, I think,
for transparent regulations that protect public health and the environment. And that demand is a good deal stronger than their demand for,
for instance, new products (unless those products are connected to new
drugs needed for medical treatments).
So we do need to get to a better system. My plea actually goes
beyond Bruce Doern’s excellent proposal that we have a regulatory
agenda that’s systematic and well developed; that meets expectations
throughout the government system and the private sector; and that protects the health and environment of Canadians. I would add that the linkages to the Speech from the Throne in the fiscal framework also need
to be thought through. And please—as we have heard Minister Thorpe
say is possible—we need federal–provincial cooperation to ensure that
regulations coming forward are both sensible and coherent.
Thank you.
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Red Tape, Red Flags
From the Lecture:
Janet Yale’s SIRP Lecture Comments
These commentaries were delivered at the Scholar-in-Residence lecture on
May 23, 2007, in response to a presentation by G. Bruce Doern that consisted
of excerpts mainly from Chapter 5 of the larger report published in this volume.
I
want to thank Anne Golden and the Conference Board for putting on a very stimulating talk and for inviting me to be a part of
this discussion and presentation. Given my background, I really
appreciate the opportunity to comment on Bruce Doern’s lecture on
Regulation in the Innovation Age, and the issue of regulatory reform in
particular. I may as well say at the outset that while I applaud the red
tape/red flags distinction in the paper, I have some big issues with the
manner in which he is proposing to set a regulatory agenda.
Let me start by saying that regulation, as you know, is a topic that’s
near and dear to my heart, and to those of my colleagues at TELUS.
And when I use the word “dear,” I don’t mean “loved,” I mean “costly,”
because for us, regulation is all about the cost of doing business.
Let me also start by positioning my comments in the context of how
we at TELUS see regulation in the innovation age. We are really living,
I think, what Dr. Doern is lecturing about, in that regulation is happening in an incredibly innovative environment. We in the telecom business
certainly see that innovation as a key to success and staying alive. If you
just look around, I am sure that some of the innovation we have provided
at TELUS is in your pockets as we speak, in the form of a small handheld device that lets you make phone calls, surf the Internet, now watch
TV, listen to music, navigate to unfamiliar locations and, of course, check
your e-mail—all of that from almost anywhere in the world.
That innovation isn’t cheap. It takes billions of dollars of investment and the willingness to undertake that kind of risk capital. Just as
a small example of the kind of money we are talking about, we bought
a national wireless network for $6.6 billion, at a time when others were
exiting the wireless business. That risk has paid off for us big time, but
the point is a simple one: innovation and the willingness to make those
kinds of investments are about seeing the right signals in the marketplace. For us, that is about an environment governed more by market
forces than regulation.
The second reason that regulation is near and dear to us at TELUS is
that for many years we have continued to labour under what we call the
yoke of restrictive economic regulation, while our competitors—cable
companies who are offering telephone service—have been free to take
From the Lecture: Janet Yale’s SIRP Lecture Comments
179
market share away from us completely unencumbered by any regulatory restrictions, whether on their pricing, marketing, restrictions in
terms of service, or whatever. When we can’t make our best offers to
customers, those costs of regulation are borne in fact by consumers in
the form of higher prices and less innovation.
Government has begun to recognize that this kind of regulation ultimately hurts consumer welfare and productivity. Still, I think we have miles
to go in terms of regulatory reform. We welcome fighting for consumers in
the marketplace, but we have had to spend a huge amount of our attention
on fighting the regulator for the freedoms that would allow us to compete.
The good news for us and for the telecom sector, as you may be
aware, is that we expect to be deregulated for local service in 2007,
hopefully by the end of the summer in markets where we face competition from two or more carriers. That is going to be a real sea change in
the telecom environment. As you may know, long-distance wireless and
Internet services were deregulated years ago. Wireless service, in fact,
has never been regulated; and from our perspective (I hope you will
agree), innovation has really been a hallmark of that service. Internet
access is another service that’s never been regulated, and Canada is a
world leader when it comes to high-speed Internet access. So the bottom line is really simple: look to competition, not to regulation, when
you want to see innovation and investment.
That is where I am coming from when I look at papers like
Dr. Doern’s. I was pleased, frankly, to hear him acknowledge that regulation can harm or prevent product, process and institutional innovation. That’s certainly been our experience with regulation. But the
heart of his proposal is for federal and provincial governments each to
create an annual regulatory agenda, whereby new regulations from
across departments and agencies would be aggregated annually and
priorities determined through a central process at Cabinet level, with
regulatory statements that would be debated for up to three days in the
House of Commons and provincial legislatures.
When I hear about that kind of process, I think “overkill.” In my view,
the centralization of new regulatory initiatives would be very cumbersome
and very time consuming, in light of the diverse and complex array of
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government activities. You just have to hear Elizabeth May’s discussion of
the single issue of trying to get a coordinated regulatory strategy around the
environmental agenda, and pesticides in particular. You think about trying
to do that for every department and every issue, and I think the thing would
collapse of its own weight. But more importantly, I think, it’s not necessary
to approach it in that way in order to achieve the rationale for Dr. Doern’s
approach: the goal of a visible and openly debated opportunity to discuss
regulatory changes that are addressed in an integrated way.
Let me give you an example. Canada has recently gone though a
major review of the regulatory regime that governs the provision of
telecommunication services, a review that led to much less reliance
on regulation and much greater reliance on market forces in the provision of telecom services. The primary goal of that change was to
foster innovation. In April 2005, the Government of Canada appointed
a three-person Telecommunications Policy Review Panel to review the
regulatory framework for telecom service. The panel conducted public
policy forums, considered more than 200 submissions and issued its
final report in March 2006.
In this process, there was visible and open debate, and the proposed changes were debated in an integrated way. The panel heard, for
example, from the Competition Bureau, the Canadian Radio-television
and Telecommunications Commission (CRTC), and 10 provincial and
territorial governments. Reflecting all of those recommendations, in
December 2006 the government for the first time issued a policy direc­tion
to the CRTC under the Telecom Act, directing the Commission to rely on
market forces to the maximum extent feasible. That direction was considered by Cabinet, and I think it is fair to say that Cabinet considered its
direction in relation to its other regulatory priorities. Last month, the government issued the CRTC another key direction—to implement the new
test for deregulation. Prior to doing so, the government invited public comment on the direction and a parliamentary subcommittee held public hearings. Again, there was visible and open debate, with integration in terms of
input from the Competition Bureau, the CRTC and many other parties.
This is not to say that, due to the much-improved approach to
telecom regulation, everything is fine and nothing more remains
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to be done. What I would like to leave you with is the notion that
a comprehensive review of the regulatory framework for particular
industries—as was done for telecom—is a terrific idea. We have advocated a similar approach in the area of broadcasting regulation, and
the new Chair of the CRTC, Konrad Von Finckenstein, has launched
a review of the existing statutory and regulatory framework for broadcasting. It’s being done quickly, in four months, and I would anticipate
that the document will be the subject of a public consultation process in
which a variety of issues can be addressed in order to develop a prioritized agenda for regulatory reform in broadcasting services.
In addition to thinking things through on a sectoral and crossgovernment basis, I believe that the process of developing and proposing new regulations would benefit from what we do as a matter
of course in the private sector: namely, disciplined risk assessment.
Risk assessment brings more certainty and predictability to new areas
of risk—to so-called red-flag issues—by assessing the likelihood that
a particular event or action will occur, and then assessing the impact
associated with that particular risk. The results of a risk assessment can
be used to develop priority areas for regulatory intervention, including
the elimination of regulation where necessary.
That kind of disciplined risk assessment is a matter of course for us
at TELUS. Every year, we conduct an enterprise-wide risk assessment
that uses interviews and web-enabled surveys to develop and prioritize
our approach. We integrate the results of that exercise into our strategic
planning process and our internal audit and compliance programs. This
ensures that when we think about deploying scarce resources on priorities, we are doing it where the need for risk mitigation is highest. In
my view, that kind of comprehensive and disciplined approach to risk
assessment would bring similar benefits to governments, particularly
with red-flag issues such as the environment and health care.
That’s just some food for thought. Let me conclude by congratulating Dr. Doern for focusing our attention on the need for regulatory
reform and the role of regulation in the innovation age.
Thank you very much.
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From the Lecture:
Panel Discussion and Q & A
Allan Gregg:
Bruce, I want to start with you. You heard Janet: she said that your
proposal for regulatory review is overkill, and there are other ways of
doing this. She uses the example of sector-wide or industry-specific
regulatory reviews that put an industry under the microscope and make
assessments. What is your response?
Bruce Doern:
Well, they are not mutually exclusive. There are many things you
need to do at a sectoral level, and I agree it is difficult. [Creating] a
regulatory agenda is, in my view, inherently not more difficult than
what we now do for taxation and spending. Spending is a very aggregated process. There is a smaller set of ministers who actually make the
final choices in a massive bidding process on the spending side. So if
one is thinking about a regulatory agenda system, one has to imagine
what kind of politics would occur around it. Some sectors might not
like some of the politics, because if they are not on the high-priority
list, that may itself be a problem. I think one has to imagine ways in
which interest groups would behave and ministers would have to talk
to each other in moving toward having a more explicit agenda. I am not
arguing that this is an easy process, because they will have to figure out
some fairly tough priorities.
The other view that I want to state is that the usual way one tends to
think about how governments function in a 30-member Cabinet is that
they have a system that’s there to make decisions and to set priorities.
But in fact, a lot of the time what they are doing is finding new ways
to say “no.” They have to say “no” most of the time because otherwise
we’d have 10 times the taxation, 10 times the spending and 10 times
the regulation. In fact, there are processes now where they try to
figure out ways to say “no”—but my proposal would make it much
more explicit, and they would have to defend their positions much
more demo­cratically and transparently.
From the Lecture: Panel Discussion and Q & A
185
Allan Gregg:
Elizabeth, when it comes to environmental protection, is all regulation good regulation?
Elizabeth May:
No, of course not. Some regulations are not—if, for instance, you
were to regulate in a way that curtailed the ability of companies to
seek the very best technology and move faster than the bare minimum.
I think you need to pick a bit of both. You need regulations to ensure that
the laggards are not so far behind the curve that they are actually contributing to creation of pollution havens. At the same time, though, you
want regulations and a mix of fiscal instruments that will allow innovation to happen, because that’s what’s going to make the difference.
The companies that have set the pace on previous environmental
issues are the ones that decided not to wait for the regulations but to
do more than what’s required of them. If regulation required you to
make a certain minimal effort and no more, if it didn’t leave you free
to excel, that would be bad regulation. But you generally can get regulations right, particularly if you have taken the time to think through
what the policy objective is. Picking up on Bruce’s point, one thing that
happens a lot is that there are people within a bureaucracy working on
new regulations who are largely uncoupled from their political masters.
And then you end up having a politician who thinks, “I want to make
an announcement—what’s lying around?” Regulation for the purpose
of press release is a very bad idea.
Rick Thorpe:
I totally agree with that—and I am not just a politician but also
an elected official, a mirror reflection of those who have voted for
me three times. I want to pick up on something Elizabeth said on the
environmental side, because we’ve been doing this now for about six
years in British Columbia, and we did have some people say that the
world would come to an end; surprisingly, it hasn’t. You may be familiar with a very bad contaminated site in British Columbia, the Britannia
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Mine site, which has been there for a long time through many governments. If we had approached it in the traditional way through the public
service, I think the clean-up bill was estimated at $75 million, which
probably would have turned out to be about $125 million. Instead, we
had somebody come forward with an innovative, creative public partner
proposal. The minister of the environment, the minister responsible for
integrated land management and the Treasury Board (of which I am the
vice-chair) all looked at it, and we decided to go with a new, innovative
approach. I think it ended up costing $10 million; and more importantly, we got a disaster cleaned up. I think that was what Elizabeth was
saying in suggesting that our approach can’t be so restrictive, and that
we have to take innovative approaches. With respect to environmental
and climate action, we in British Columbia believe that we can achieve
a reduction of 33 per cent in greenhouse gas emissions by the year
2020, and that doing so can actually turn out to be a great economic
activity for us. It just depends on how you want to look at the picture.
We look at it and see the blue sky.
Allan Gregg:
Janet, same kind of question with a different spin: when it comes to
the telecommunication sector, is all regulation bad regulation?
Janet Yale:
No, absolutely not. I think there are three buckets of regulations
generally: economic regulation (which is what you can and can’t do in
the marketplace in terms of retail); regulation on prices and the terms
and conditions under which you offer service; and technical regulation
that enables our networks to talk to each other and interconnect appropriately. There are all kinds of technical rules that have to exist to make
sure that we don’t duplicate investment just because we can’t agree on
how to connect our networks. Social regulation is about all of the things
we do from an affordability perspective to help those who have disabilities and need special telecom services.
From the Lecture: Panel Discussion and Q & A
187
It’s the economic regulation piece that I was most focused on in terms
of whether or not you can increasingly rely on market forces rather than
regulation to protect consumers. At the end of the day, regulation is only
a substitute for market forces where there isn’t sufficient competition to
protect consumers. I don’t quarrel with the need for a regulatory agenda
and I don’t quarrel with the need for a systematic approach to eliminating red tape. To your point, Rick, it may be great to have government
mandating the elimination of red-tape regulation and making that a priority, because then you can make it happen. I am saying that in telecom
and broadcasting, there can be the will to undertake that overhaul of
red tape. I don’t see why it has to be done on a governmental, enterprise-wide basis. It’s just happening, sector by sector, in the sectors that
I worry about. Maybe this is not true so much on red-flag issues, where
you need a strategic framework in which to do it; but I don’t think you
need to wait for a government-wide view of where red tape needs to be
eliminated in order to get moving sectorally on its elimination.
Bruce Doern:
Well, there are lots of things that do go on at a sector level, so I think
that’s quite appropriate. However, there is a difference when you start
thinking about what the government does. For example, let’s suppose
you have 50 regulations a year and you decide to really focus on 10 of
them for the following year or two. Those 10 will have different consequences for different industries. They have different economic impacts
and they have different social impacts. It seems to me, on balance,
especially in the era we are living in, that you need to have a strategic
view of what those ought to be; and it may then mean that you don’t
work on other regulations that year.
Allan Gregg:
That’s your argument for why government should reduce its
agenda—so it can set priorities in a strategic way?
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Bruce Doern:
Corporations do it in a certain way already, so the other argument
is that governments need to be strategic in the same sense. It’s an addon to the current system. I don’t think that it in any way prevents lots
of other good things from being done sectorally or in the environment.
They will live lives of their own—for example, on things like product
approvals. There’s a lot that can be done there that doesn’t require new
regulations, just better coordination.
Elizabeth May:
I want to come back to one of the things that Janet said about economic regulations and social regulations, and how they are different.
This is a big difference when it comes to the issue of market forces.
The reason we need to have regulations to protect human health and to
reduce greenhouse gases, and the reason why regulations are a tool that
people look to so often, is that we’ve allowed these to be externalities
in the marketplace. If we had full-cost accounting, if we had carbon
taxes, if we got the prices right, it would be a lot easier to say there
should be a lesser regulatory burden. Then it’s more like getting the
prices right, and letting market forces prevail. Just to make the obvious
point: the reason that social and economic regulations are so different
is that when you come to the issue of “Is this chemical carcinogenic?”
that’s a good enough reason to ban it, even if the farmers want it. These
are real-life examples where human health has lost out. But if you are
able somehow to internalize the cost of cancer in society into the regulatory decision making, it might be very different.
Rick Thorpe:
I want to talk on two points. One is the social aspect. Unfortunately,
when you start on regulatory reform, some people think you are trying
to hurt those people who can’t defend themselves. I can tell you that as
a minister, but more importantly as an MLA, I had a constituent, a disabled constituent, who phoned me one day with an issue having to do
From the Lecture: Panel Discussion and Q & A
189
with homeowner grants, and what he was telling me that the government was doing didn’t seem fair to me. As I started unpeeling the onion,
I really became quite irritated, because five or six different ministries in
our government are dealing with people with disabilities, but we found
out they’re not actually talking to each other. So we undertook our
Citizen Centred Reform Track II—or, as I call it, Saving People Time.
I pushed, as an economic minister and a revenue minister, for something
to be done with folks with disabilities, because of my constituent. Five
ministries were involved, and there were 17 different items that the individual had to deal with. We brought those ministries together, breaking
down the silos. There is now one contact point, and it takes 10 minutes.
So it can be done. The biggest reason why I believe strongly that it has
to be done is that if you let it be a stand-alone thing, it becomes the
flavour of the day and will just go away some day; but if it’s integrated
and part of a budget process, then that’s scrutinized and people have to
put forward their regulatory accounts and what they’re trying to achieve
as part of a business plan. In British Columbia, the government is a
$40-billion organization, the largest organization in British Columbia.
Why should we not be disciplined in how we approach these issues?
I don’t know what the federal budget is now, but I’m going to guess it’s
$200 to $225 billion. But there will be resistance—this was our experience in British Columbia, I don’t know if it’s going to be in Ottawa—
because when you start talking about regulatory reform, you’re talking
about change, and the first thing that goes through people’s minds when
you talk about change is, “I’m going to lose my job.” It’s not about
people losing their jobs, but it is about providing effective customer
service and protecting health care, safety and the environment. It’s a
journey that I believe strongly that the country has to get on, and we’re
very hopeful that Canada will work with British Columbia on a couple
of pilot projects we’ve proposed on mining, the environment, and fisheries and oceans. It can be done, but Professor Doern is right: it’s not
an easy task.
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Allan Gregg:
Janet, you said in your remarks that at TELUS you go through a
systematic assessment of risk, and that this same methodology could be
applied to all regulatory frameworks. Would you expand on that?
Janet Yale:
Obviously, you have to look at the need for interventional regulation. The issue is whether it’s an end or a means. When I talk about risk
assessment, it’s not looking at risk in isolation from a strategic agenda.
We have our three- to five-year strategic plan and our business plan for
the year. We make that risk assessment in the context of our business
agenda and our business priorities; it’s not about looking at risk in isolation from the key imperatives that we’re trying to deliver. We identify
all of the risks that we think might stand in the way of our being able
to achieve our business plans and priorities. We do internal and external
stakeholder assessments, and we look at the likelihood of those risks
materializing, as well as the impact if those risks happen. Every year,
for example, we have weather impacts, and we have to have disaster
recovery plans in the case of floods. Some of the risks are weather
related and some aren’t. And then we have risk mitigation plans with
respect to all of the risks that have a high potential of occurring and significant impacts if they do occur.
Allan Gregg:
And the same process could be used to gauge the benefits or liabilities
of regulation?
Janet Yale:
That’s right. Then you can say “Okay, these are the areas that need
priority attention.” I was thinking of them in the context of health care
and the environment, where you can use that kind of approach to say,
“Given all of the issues we can focus on in the area of health care
or the environment, which are the ones that, based on a disciplined
assessment, require us to get the prior claim on resources?” At the
From the Lecture: Panel Discussion and Q & A
191
end of the day, if you don’t know what your top priorities are relative
to the list of 200, you don’t really have a sense of what you’re trying
to accomplish.
Allan Gregg:
Bruce, one of the areas in your lecture that interested me most was
your comment that you can set up a framework and a process, but when
it comes to science-based regulations—that is, regulations that require
science to say whether this is good or bad, needed or not needed—the
government often does not have the capacity to make those evaluations,
because it just doesn’t have the scientific horsepower. Given that, what
kind of framework or process is going to make any difference? How do
you deal with that?
Bruce Doern:
My overall argument is that there needs to be significant reinvestment in the government’s in-house science and technology in order
to be able to do some of that work. The problem with the science and
technology is that the higher up in the government you go, the less
literacy there is about science. It’s just the way the system is. I think
it’s very closely related to the business of an agenda on the red-flags
side of things. Try to imagine if any one of you were appointed tomorrow in the federal government as minister of risk, and you had to
figure out what risks you would actually focus on as a government in
the next three or four years. Well, in a sense, when the red-flags part of
the agenda emerges, it could be that groups of ministers would in fact
be talking, because it literally could be the risks of climate change on
the one hand versus the risks of bungee jumping on the other, because
somebody may want laws against bungee jumping. Now that ought to
be a fairly easy choice as to which you may give priority, but nonetheless there is a whole series of issues at play, some informed by good
science and some where the science is controversial. And you certainly
have to have government investment in the science. I don’t think you
can rely, in most areas of regulation that governments have to do, on
placing all your marbles on either universities or industries to do this
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kind of work. The research, the science and the monitoring have to be
available in a timely way to governments and decision-makers. It has
to be framed in a certain way. That’s why the in-house science really
has to be supported, even if there is no political capital, no votes in that
at all. That has to be a part of this equation—building up the scientific
capac­ity and then having some kind of agenda that flows from it.
Q & A With Audience
Audience member:
Professor Doern, when considering a public policy, one often hears
that the greatest consequences are the unanticipated ones. Can you
comment on how your system might, in fact, do better at taking into
account the risk mitigation [element] of regulation, which I assume
often has the same type of unintended consequence?
Bruce Doern:
All analytical government regulatory impact assessments and so
on would be geared to narrowing those senses of unanticipated consequences. You never get it perfectly, because the issues do change and
new products come up that you’re not familiar with. But I do think that
the probabilities of getting more of this risk caught increase the more
that you spend serious time on it. By that, I mean ministers spending
some serious time even though they’re busy, as well as senior officials.
Of course, interest groups, NGOs and business groups will also be
engaged, because once they know they’re either ranked high or low on
this kind of list, stuff will happen. One has to imagine that kind of process occurring, along with lots of other issues that will be raised across
a wide spectrum of activity. And Minister Thorpe is quite right that
you can have a strategy for regulatory priorities that says we are really
going to focus on this area in the next two or three years, which does in
turn have budgetary implications. It means that if you really are going
to staff this area, the budget has to kick in with the resources. One of
my biggest concerns about federal regulation is that Canada has been
From the Lecture: Panel Discussion and Q & A
193
signing onto all sorts of international treaties and agreements that we
nobly wish to achieve, but there is no automatic follow-up with a consideration of what kind of resources you will need to do a really good
job on execution, as opposed to a sort of good job. We need a change in
terms of paying more attention to this arm of government.
Audience member:
Every year, the Canadian government is bringing hundreds of
thousands of new Canadians with skills and talents into this country.
However, we know that most of these people are not utilizing their
skills in the job market. Do you think that this is a problem of red tape
or something else? We new Canadians don’t understand if it is something else.
Rick Thorpe:
We do many of our immigrants a disservice in attracting them to
Canada and not telling them what they have to go through when they
get here. I don’t think that’s right. In British Columbia, we are working very closely with the minister of immigration to see how we can
streamline the processes. I don’t think that if people can show that they
are qualified doctors, they should be driving taxicabs in Vancouver or
Victoria. It’s been a long-standing issue, and we have to work with the
professionals in the province. I think we have to start by providing a
better service to people before they come into the country, so that they
are made aware of some of the hurdles they’ll encounter in fulfilling
their dreams. We should also be doing better at understanding what the
hurdles are, so we can get rid of them. In British Columbia and Alberta,
we need more and more very qualified technical people in all walks of
life, so it’s an issue that we should be addressing.
Elizabeth May:
It’s an issue that occupies some space in the Green platform as well,
and we’re very concerned about it. I don’t think it comes down to red
tape in the sense of government red tape; it would take government
creativity to undo the red tape of professional associations. I have been
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a lawyer, admitted to the bar in Manitoba and then in Nova Scotia and
Ontario, and I had to go through many hoops that really didn’t have to
do with my legal qualifications. They had to do with creating barriers
to entry to the legal profession in Ontario because I was a mere lawyer
in Nova Scotia. The reality of closed shop unions from one province
to another is quite extreme. As for one country to another—well, the
medical profession wants to retain its standards and the legal profession
wants to retain its standards. We could commit to work with the professional associations to find a way to expedite the accreditation of qualified new Canadians so they can gain positions as doctors and nurses
and architects and engineers and all the things that they’re skilled and
trained to do. I will mention one flip side that niggles at my brain as
a concern: we mustn’t, in a wealthy country like Canada, rob developing countries of their best brains and bring them here as cheap and fast
additions to our professional societies. We must expedite it for new
Canadians, but at the same time be cognizant that we don’t want to rob
developing countries of their best people. We need to ensure that we
raise the standards of living for everyone globally through the elimination of poverty, which is a much bigger question than what we are talking about tonight.
Audience member:
This is a question for Elizabeth May: Could the Government of
Canada, specifically Environment Canada, improve its effectiveness
vis-à-vis protecting the environment with fewer regulations—and, if
so, how?
Elizabeth May:
It certainly could. I want to pick up a point here that gives me a
chance to agree vigorously with what Bruce Doern said about science
capacity. Environment Canada is a shadow of its former self in terms of
its brainpower, its ability to understand the science and the issues that
it has to oversee. We have lost core competence in science throughout
the Government of Canada, but in Environment Canada in particular.
When I worked in the minister of the environment’s office 20 years
From the Lecture: Panel Discussion and Q & A
195
ago, we had some national experts in their field; we no longer have
that, we have managers. This is not a universal state—there is some
good science—but there is not anything like what we used to have.
Regulations aren’t even the beginning of the issue of what Environment
Canada needs to do. We are no longer even tracking the issues well
enough to be able to put together the kind of state-of-the-environment
reports that used to be done 15 years ago and that were cancelled in the
budget-slashing of the early ’90s. We couldn’t put together that kind of
report now because we are not tracking the same indicators. We don’t
know about freshwater health across Canada, since we have closed the
research stations. So it’s not a question of fewer regulations to do a
better job. I think we need to have a better capacity within the department. We certainly could do a better job if we enforced the regulations
we have. We could do a much better job if we reviewed all the regulations to see if they are consistent with one another. And why don’t we
focus on best practices? Global best practices—for instance, in pesticide regulation—would say that we should regulate fewer products,
understand them better and know what we are doing, rather than being
on a constant treadmill of how many new pesticides we should register.
We’re behind the eight ball with thousands of commercial chemicals
that have not been properly assessed.
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