Presentation at the CHC Annual Meeting March 4, 2009 Regulatory Reform in Canada’s Agri-Food Sector A Catalyst for Change

Some Background on CAPI Canadian Agri-Food Policy Institute A catalyst for change Promotes dialogue across the value chain Identifies significant emerging issues and trends An independent voice on medium and long-term issues Has a Board of Directors Guided by a diverse Advisory Committee A non-profit corporation – established by the federal government in 2004 to advance the success of Canada's agri-food sector

What We Heard At CAPI Forums Regulatory issues such as Need for regulatory reform (modernize the system) Remove excessive regulatory burden More flexibility in regulations Quicker decision-making by regulators Harmonization of standards with major trading partners Comparable enforcement on imports as on domestic products With continental free trade in food products, we must have – access to comparable technology and – accept technology based on regulatory decisions made in the US Do any of these apply to the horticultural sector?

Regulatory Reform – A CAPI Priority CAPI’s Board was concerned that the sector’s success and competitiveness were being threatened by the regulatory system Regulatory reform to improve the competitive position of the sector quickly became a priority area for CAPI CAPI initiated a project on facilitating regulatory change

CAPI Regulatory Project - Purpose Assist in implementing regulatory flexibility and reform through use of a “regulatory policy framework” Provide input that results in a more flexible regulatory system, which: – Protects consumers; – Enhances competitiveness; – Fosters innovation; – Contributes to the sustainability of the Canadian agri-food system. Project focus is not on specific regulations A Steering Committee with industry and government representation has provided guidance on this project

CAPI Regulatory Project - Overview A three phase project 1.Where is the sector today on regulatory reform? 2.Focus on regulatory issues in specific areas through “blue ribbon panels” – Possibly the horticulture sector as a case study 3.Leverage learnings to the national level and communicate findings to a broader audience – Possibly a national symposium A very desirable outcome is to have a coalition (representing the entire agri-food value chain) moving forward on regulatory reform issues with government

Current Status of the CAPI Project Phase 1 is essentially complete – Completed an issues paper to promote discussion and debate on regulating in the agri-food sector – Paper is being posted on the CAPI web-site ( Phase 2 is being designed to help the industry move forward with regulatory reform – Can use horticulture to show how industry and government can work together on regulatory reform The overall project objective is to move the regulatory agenda forward for the agri-food sector

What We Have Found to Date – Current Action On Moving Forward Canada has a framework and approach to regulation – Cabinet Directive on Streamlining Regulation Based on “Smart Regulations” report – TB supporting documents Guidelines for Effective Regulatory Consultations Assessing, Selecting, and Implementing Instruments for Action Guidelines on International Regulatory Obligations and Cooperation Canadian Cost-Benefit Analysis Guide: Regulatory Proposals Some progress is being made in some agencies – too slow for some Government view on progress varies from industry view A focus on implementing these regulatory concepts is required

What We Have Found to Date – Constraints To Moving Forward Progress is slow because: Regulators cannot make quick regulatory decisions Regulatory change often requires amending legislation Some agencies have insufficient infrastructure and capacity to support the regulatory process Agencies are starting to adopt the “Cabinet Directive” but this has not been fully executed – Result is minimal demonstrated action The will is there to move forward – examples exist such as the fertilizer forum

How About a Regulatory System that: Is more flexible Seeks industry input Is based on agreed on regulatory policies and principles Doesn’t always use a regulation to fix a problem Eliminates unnecessary regulation or modifies regulation Has the outcome of: – Protecting consumers; – Enhancing competitiveness; – Fostering innovation; – Contributing to the sustainability of Canada’s agri-food system. Is more timely Moving Forward on How Canada Regulates the Agri-Food Sector

Using a Framework to Move Forward on the Regulatory Agenda In our first phase we developed a regulatory framework Which is consistent with the federal government’s direction The next phase of the project will be guided by focusing on a “policy regulatory framework” Such a framework will consider an array of key regulatory issues A Regulatory Policy Framework will be used to guide the process, which is highlighted over the next few slides

A Regulatory Policy Framework A regulatory policy framework for the agri-food sector is not a list of regulations Rather it encompasses: 1. Regulatory policies 2. Regulatory institutions 3. Regulatory tools and processes Does the agri-food sector have all of these elements?

When Should Government Intervene? To provide public goods –those goods and services that the market would not otherwise provide To protect the public interest –safe food supply To provide information to help consumers make decisions –E.g, labelling To ensure that private sector outcomes match societies objectives –through standards, regulations, incentives, etc. Government intervenes to help society achieve desired outcomes When should government not intervene? Government intervenes to help society achieve desired outcomes When should government not intervene?

How Government Should Decide if Intervention is Necessary? Act without consultation –or Consult with industry and affected stakeholders –On the problem –On the solutions –On the type of intervention Current government directives are heavy on consultation

Government Intervention Based on Principles? Smart regulations (2004) Effectiveness Cost-Efficiency Timeliness Transparency Accountability & Performance Federal Government (2007) Protect and advance the public interest Promote a fair and competitive economy Make decisions based on evidence Create accessible, understandable, and responsive regulation Advance efficiency and effectiveness of regulation Require timeliness, policy coherence and minimal duplication We have some way to go to see the benefits of these regulatory principles being fully applied

Is Regulation Always Necessary? Government intervenes using policy instruments to influence behaviour Regulation is only one of many ways Behaviour can be influenced through: –Preaching (and providing information) –Pricing (using market mechanisms, taxes, incentives) –Policing (regulations, standards) The approach taken can affect innovation and competitiveness Many policy instruments exist to achieve desired outcomes – regulation is only one of them

Range of Policy Instruments A regulatory system should first decide whether regulation is required, and then have have flexibility on use of the type of policy instrument used, including self regulation.

Is Regulation Always Necessary? When is a regulation required to implement an industry desired standard? Do we often choose government regulation versus industry self regulation? –Does this result in over-regulation? Is government regulation pursued at times to ensure that all companies comply with an industry standard? –That is, no free riders Many policy instruments exist to achieve desired outcomes – regulation is only one of them

What Type of Regulation to Choose? Prescriptive rules Performance-based rules Principle-based rules Self-regulation by industry Co-regulation –sharing between industry and government Or market based instruments (incentives) Choice of regulatory instrument can be based on a variety of considerations, including impact on innovation

Choice of Regulatory Instruments In Canada, regulations are more prescriptive compared to places like Australia and New Zealand, which take approaches that are more risk or outcome based (which can be more supportive of innovation)

Implementing the Regulation? Twenty years to implement regulatory harmonization (e.g., CUSTA) –Or Implementation within months Our track record on implementation time is not world class

Should Regulations be Equally Enforced? Unbalanced enforcement of compliance with existing regulations can affect industry competitiveness –E.g., labelling, MRLs on imports –Or All regulations should be equally enforced –Does this have cost implications? –Should this influence the type of policy instrument used Has equal enforcement been an issue, or is it an issue of regulatory priorities – food safety being first?

Should Regulations be Reviewed for Effectiveness or Necessity? Should we keep old regulations on the books? –Or Should regulations be reviewed as to their effectiveness Many policy instruments exist to achieve desired outcomes – regulation is only one policy instrument

Does the Agri-Food Sector Require a Regulatory Oversight Body? The agri-food sector is affected by a number of regulators –E.g., CFIA, PMRA, Health Canada, Industry Canada Does this result in a few too many silos? Will an agri-food regulatory over-sight body improve competitiveness and innovation in the sector?

What Does All of this Suggest? Progress on regulatory reform needs to occur in the agri-food sector There is a better way to regulate An over-arching regulatory policy framework can be used to guide how we regulate in the agri-food sector A Regulatory Policy Framework will be Used to Guide the Process

Institutions, Regulatory Bodies and Oversight Institutions, Regulatory Bodies and Oversight Regulatory Policies and Principles Regulatory Tools and Processes Consultation Through-out Perceived Problem Elements of a Possible Regulatory Policy Framework Assess Public Policy Issues Set Public Policy Objectives Determine Need to Regulate Choose Type of Regulatory Instrument Implement Chosen Instrument Administration, Compliance and Enforcement Performance Assessment of Regulation

Next Steps Being Considered Help the sector move forward with regulatory reform – Considering using the horticulture sector (as well as possibly other sectors) Allows for specifics versus generalities Based on the regulatory policy framework approach To help implement the Cabinet Directive and TB guidelines Forming a “Blue Ribbon Panel” involving industry and government: – Would involve regulators and industry representatives in the horticulture sector – Your support and input is requested Is there an opportunity to move forward in partnership?

Moving Forward on the CAPI Project Blue Ribbon Panels designed to have senior decision makers in regulatory agencies, government and industry Government participation on “Blue Ribbon Panels” at the senior decision making level includes: – Agriculture Canada – CFIA – Health Canada – PMRA Partnership models with industry – Financial considerations – Can help shape the scope of inquiry and regulatory issues addressed Moving Forward on how government regulates to “ provide the greatest overall benefit to current and future generations of Canadians ”.

Moving Forward on the CAPI Project Blue Ribbon Panels designed to – identify issues, regulatory gaps and constraints – develop solutions – derive consensus on action steps, and – seek commitment to action Facilitator to help the process – ensure a non-confrontational process – ensure the process is guided by the concepts in the regulatory policy framework Moving Forward on how government regulates to “ provide the greatest overall benefit to current and future generations of Canadians ”.

Moving Forward on Regulatory Reform There are many options that can be used by the sector: Case studies on a sector basis Case studies by broad regulatory issue or program – E.g., labelling and heath claims, access to pesticides National symposium to leverage learnings and insights Build broad based coalitions to support regulatory reform Moving Forward on how government regulates to “ provide the greatest overall benefit to current and future generations of Canadians ”.

Questions or Comments? Any feedback can be directed to CAPI’s Project Manager John Groenewegen JRG Consulting Group CAPI’s web-site A Catalyst for Change