Policy Studies Governance

Regulatory harmonization between the United States and Canada

Renewed interest in regulatory reform in Washington is a necessary and positive development.

A decadeslong accumulation of red tape and burdensome regulations imposes significant costs on the U.S. economy. One estimate finds the total annual cost of federal regulations now exceeds $2 trillion and represents a financial burden of $233,182 for the average firm. Thus, the case for reform can quite literally be measured in basic dollars and cents. And although the recent enactment of regulatory budgeting and the usage of the Congressional Review Act’s veto powers should be applauded as important steps toward extricating American businesses and entrepreneurs from the labyrinthine regulatory state, there is still more work to be done.

One area of regulatory reform that remains neglected is the possibility for greater regulatory harmonization with Canada. Although past bilateral progress has been made, it is often in the form of minor steps that focus primarily on “low-hanging fruit” instead of fundamental regulatory convergence. However, greater ambition in this regard could boost bilateral economic relations, enable investment and create jobs on both sides of the border.

The economic relationship between the United States and Canada is already the most extensive and successful in the modern world and it is essential that the two countries continue to work together, particularly on issues of mutual interest like border security, energy and climate change. However, superfluous policy differences can impose undue economic costs with little benefit to improved health and safety or to consumer protection. And this is especially true with respect to areas like product approvals (including agricultural goods and pharmaceuticals), transportation, energy infrastructure, labor rules and rules of origin.

Accordingly, the purpose of this paper is to examine recent efforts to improve regulatory harmonization between the United States and Canada, and to recommend opportunities to further reduce these unnecessary and counterproductive regulatory differences. Its aim is to highlight the often “unseen” costs that stem from regulatory divergence and set out a practical plan for greater regulatory convergence.

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