Interprovincial standardization drives innovation and facilitates trade by enabling interoperability.Sean Kilpatrick/The Canadian Press
Ryan Manucha is a leading expert on interprovincial trade and C.D. Howe Institute research fellow. Colin Deacon is an independent senator and former entrepreneur who is focused on innovation and the digital economy.
Talk to Canadians about internal trade barriers and their minds turn to booze, pipelines and trucking. These are just the tip of the iceberg. Underneath the surface? Mismatched spools of red tape in every province and territory. A solution? Standards.
Hardly sexy, standards are critically important to the competitiveness of every sector in our economy. Canada’s regulators are mishandling the strategic value of standards, federally and subnationally, and that’s threatening our country’s economic resilience and prosperity.
A tale from early Canada tells us of the vital importance of standards. Prior to Confederation, Canada’s colonies had different standards for the distances between railway tracks. In Upper and Lower Canada it was 5 feet 6 inches, and in the Maritimes it was 4 feet 8½ inches. As a result, freight and passengers had to be offloaded and reloaded at intercolonial junctions. Interprovincial standardization enabled interoperability and brought immense savings and productivity gains.
Opinion: Canada’s innovation policy: designed in Ottawa, owned in America
A pan-Canadian consensus to finally crack down on internal trade barriers marked the start of Trump 2.0. But then the knives came out. Publicly, some critics called the push a “mirage.” Others declared the potential lift from trade barrier resolution to be a “myth” and “distraction.” Canadian Imperial Bank of Commerce determined it to be a “modest pot of gold.” And the Canadian Centre for Policy Alternatives launched a cannon barrage of its own.
Thoughtful dialogue is vital in a democracy and is always welcome. However, critics emerge too often when an achievable solution to a prolonged problem is not obvious.
In this case, the problem is that each jurisdiction created and entrenched trade barriers because they each developed their own version of regulations, rather than relying on consensus-based standards. The recent Canadian Mutual Recognition Agreement on the sale of goods, signed by most Canadian governments in November, is a major achievement itself and a key step in the larger march toward broader regulatory interoperability.
Opinion: Culture eats strategy: Overcoming Canada’s innovation barrier
Standardization benefits an economy tremendously. Standards drive innovation by capturing and disseminating cutting-edge technology and know-how. They facilitate internal (and international) trade by enabling interoperability (think of the global alignment on USB-C connectors). And they promote economic exchange by providing credible signals of quality that reassure buyers. The intuition is backed by data: Economic research from around the world tells us that standardization contributes up to 28 per cent of the growth in gross domestic product.
Canada’s approach to regulation has not kept up, especially in the fast-paced age of digital technologies. Canada cannot hope to be at the vanguard of global innovation, nor fuel its prosperity ambitions, with the way we regulate today. Canada desperately needs a more agile, efficient and effective regulatory system. This call has come from far and wide across the country. And this can start with two simple tweaks to Canada’s standards system.
The first is a much-needed update to the federal rulebook for making rules: the Statutory Instruments Act (SIA). This law guides the creation of regulations. It should be changed to make explicit that compliance with consensus-based standards will be how Ottawa will enforce compliance with legislation. The simple truth is that standards advance much faster than any one government’s regulators can keep up.
Opinion: How can we innovate if Canada does not properly protect intellectual property?
The Europeans embraced this concept as far back as the 1980s. The Americans did it in the 1990s. Ontario did it in 2020 with its push for regulatory modernization. This simple legislative change keeps Canada competitive without sacrificing safety or the environment. It leverages the trusted, expert-driven process behind Canada’s standards system and allows Canada to keep pace with the rest of the world. An amendment to the SIA would be accompanied by companion changes to certain cabinet and Treasury Board directives.
The second change is a modernization of Canada’s standards development institutions. Canada’s standards ecosystem has not kept up with global best practices. The Standards Council of Canada (SCC), a federal Crown corporation, oversees Canada’s standardization system. But it has a conflict of interest between its for-profit and not-for-profit arms. The SCC oversees standards development (not-for profit) and sells accreditation services (for-profit). More simply: It sets the rules of the game and then charges you to check if you’re playing by them. Overhauling the SCC by stripping out its for-profit function would bring Canada in line with modern models in Australia, Britain and the United States.
Canada’s approach to standardization could have an outsized impact on our future prosperity, and it would only take a few modest modernizations to get us on that track. As we work to strengthen our economic outlook and break down internal barriers, these modernizations will create a solid foundation.