Submission to Treasury Board Secretariat Regarding Supply Chain Regulatory Review

February 5th, 2024
Mr. James van Raalte
Executive Director
Regulatory Affairs Directorate (RPCD)
Treasury Board of Canada Secretariat

Submitted Via e-mail to regulation-reglementation@tbs-sct.gc.ca

Canadian Chamber of Commerce Submission to the Treasury Board Secretariat on the Supply Chain Regulatory Review

Dear Mr. van Raalte:

We welcome the opportunity to submit comments in response to the Treasury Board of Canada Secretariat’s consultation on the Regulatory Review of Supply Chains. Canada’s business sector needs support from the federal government to build resilient supply chains to ensure a more competitive business and regulatory environment in Canada.

The Canadian Chamber of Commerce is the country’s largest business association with a network of over 400 chambers of commerce and boards of trade representing nearly 200,000 businesses of all sizes, in all sectors and regions of our country.

Our supply chains remain fragile and have been under constant strain in recent years. This has been due to COVID-19, global crises, shipping delays, cross-border trade interruptions and, in the case of our food supply, businesses’ inability to bring in seasonal migrant labour to complete production processes and labour disruptions, leaving Canadians to contend with a high cost of living and shortages of goods they rely on every day.

While supply chains have recovered from their peak difficulties, they remain problematic for our members. According to our 3rd quarter Survey on Business Conditions, 23 per cent of respondents facing supply chain challenges expect conditions to worsen over the next three months, while 63 per cent expect challenges to persist over that same period.

To build resilient supply chains, we have the following recommendations in the attached submission:

• Recommendation 1: Work with governments and industry to develop a Canada Trade Infrastructure Plan, investing in long-term trade-enabling infrastructure.
• Recommendation 2: Develop trade corridor gateway strategies to improve abilities to receive goods.
• Recommendation 3: Extend the accelerated investment incentive by postponing the 2024 phase-out period and 2027 end date to promote investment in supply chains.
• Recommendation 4: Increase investment in trade corridors to ensure the more efficient transportation of goods across Canada’s value chains.
• Recommendation 5: Ensure labour stability by giving the government the ability to compel binding arbitration to resolve bargaining impasses.
• Recommendation 6: Improve government coordination on incident reporting to alert industry of any potential future major disruptions to allow companies to make contingency plans.
• Recommendation 7: Modernize Canada’s regulatory framework to increase investment, economic growth, and jobs in Canada.
• Recommendation 8: Mandate an economic lens for regulators to encourage manageable regulations that support economic growth and consider our competitiveness in the global marketplace.
• Recommendation 9: Work with industry to ensure regulatory efficiency and alignment with our international trading partners.
• Recommendation 10: Reconvene the Regulatory Cooperation Council and introduce forward looking workplans accurately to reflect Canada and U.S. business priorities.
• Recommendation 11: Canada and the EU should engage more deeply with the private sector in the processes of the RCF, particularly by minimizing exclusive government-to-government talks, increasing transparency in the work of committees, and working groups, and increasing consistency of reports across CETA committees.
• Recommendation 12: Work with major trading partners to advance the resiliency of critical mineral supply chains and extraction of critical mineral-based products by exploring the use of procurement, tax, and regulatory measures.
• Recommendation 13: Ensure clearer plans, accelerated timelines, and firm commitments for infrastructure development in areas with high mineral potential.
• Recommendation 14: Advance implementation of the new and expanded investment tax credits (ITCs) as outlined in the 2023 Fall Economic Statement.
• Recommendation 15: Work closely with industry to develop and foster a regulatory framework built on a data-driven, performance-based approach that supports innovation and adapts to evolving technologies.

We welcome the opportunity to discuss our comments with you in more detail and look forward to continuing to work with the Treasury Board Secretariat to build resilient supply chains in Canada. If you have any questions or would like to schedule a meeting to discuss our submission, please do not hesitate to contact us.

Sincerely,
Alex Greco
Senior Director, Manufacturing and Value Chains
Canadian Chamber of Commerce

Cc: Tina Green, Assistant Secretary, Regulatory Affairs, Treasury Board Secretary
Brennan Young, Executive Director, Regulatory Policy and Cooperation

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Introduction

In an era marked by global uncertainties, the need for stable and resilient supply chains has never been more pronounced. The federal government has a role to play in setting the policy direction for our supply chains to succeed. Any federal actions must be based on a holistic view of all modes of transportation and their interaction in interconnected transportation and value systems. As we navigate complex geopolitical landscapes, extreme weather events, and unforeseen challenges, the federal government should take informed actions, grounded in facts and the spirit of supply chain collaboration, to help build a robust and adaptable supply network.

Since COVID-19, supply chain performance has been tested globally. The pandemic’s health impacts and ensuing policies (e.g., vaccine mandates, travel restrictions, etc.) caused recurring labour disruptions in Canada, and globally. These disruptions negatively impacted both the production, transportation, and distribution of goods across the supply chain.

Moreover, countries and companies had allowed their sources of supply of key products to become highly concentrated and therefore vulnerable to disruption. Canada discovered that reality when the United States refused the export of N-95 masks at a time when Canada was not producing them. As this occurred, consumer demand also changed radically. Consumers shifted their consumption patterns and exacerbated the mismatch between supply and demand.

A proactive and strategic approach from the government is not just a necessity but a catalyst for a resilient and prosperous future. Without serious investment in building resilient supply chains, we risk hindering Canada’s economic growth, competitiveness, and international reputation as a reliable partner for business. Investing in supply chain resiliency will be critical in moving forward to ensure supply chains can continue to operate without disruption. Supply chain resilience and optimization can help our own domestic prosperity.

With this premise in mind, the Canadian Chamber has the following recommendations to strengthen the resilience and stability of supply chains across Canada.

Recommendations

Theme #1: Build Trade Enabling Infrastructure

Long-term investment through a Canada Trade Infrastructure Plan and Gateway Strategies

As a trading nation, Canada’s trade infrastructure matters more to Canada than many other countries around the world. According to the World Bank, trade accounted for more than two thirds of Canada’s GDP in 2022. This is significantly higher than the OECD average of just over 50 per cent. When Canadian businesses cannot import or export goods reliably, we undermine our ability to grow our economy.

An efficient and reliable transportation network is key to Canada’s economic growth. Positive steps have been taken, such as increased funding through the National Trade Corridors Fund. However, without a long-term strategy, we are jeopardizing the success and livelihood of thousands of Canadians and their businesses, and the growth and prosperity Canada needs. We need stable supply chains to get goods like critical minerals and agricultural products from where they are produced to the ports of export and beyond. As such, the government must look to work with businesses to develop new gateway strategies, including those for Western, St. Lawrence, and Arctic Gateways.

Each corridor strategy would lay out how government would work with provinces, the private sector, communities, and Indigenous peoples to identify capacity challenges facing our corridor transportation systems and develop a pipeline of actionable solutions. Developing domestic and international trade corridors should solidify supply chains and establish Canada as a reliable business partner. Misguided regulatory interventions in complex markets must be avoided.

There is also a need for funding for projects that support redundancy in critical infrastructure to reduce the risk of critical failures to supply chains. Some of these investments include investing in projects that will increase bridge capacity and industrial lands around airports and ports to sustain trade growth.

Currently, federal tax policies do not promote increased investment and are misaligned with other jurisdictions like the United States. Simply put, the current tax rates and depreciation rules are not supportive of business investment in Canada. These low rates constrain investments that could be made to reduce emissions and benefit Canadian supply chains and the broader economy. The federal government should extend the accelerated investment incentive for all supply chain participants that make investments to maintain or expand capacity. This is one of the best tried and tested options for the federal government to boost private sector investment.

Finally, the government must work to increase the speed at which projects receive funding. Too often, projects are stalled due to government inefficiencies. It must work with business on ensuring transparency for projects and by continuing to demonstrate how funding is helping address supply chain challenges of both today and tomorrow. Canada must build and maintain trade infrastructure that reliably and efficiently transports goods to and from market. Without serious investment, we risk hindering Canada’s economic growth, business competitiveness, and international reputation as a reliable partner for business.

• Recommendation 1: Work with governments and industry to develop a Canada Trade Infrastructure Plan, investing in long-term trade-enabling infrastructure.
• Recommendation 2: Develop trade corridor gateway strategies to improve abilities to receive goods.
• Recommendation 3: Extend the accelerated investment incentive by postponing the 2024 phase-out period and 2027 end date to promote investment in supply chains.
• Recommendation 4: Increase investment in trade corridors to ensure the more efficient transportation of goods across Canada’s value chains.

Take action to ensure supply chain stability

Recurring labour disruptions continue to inflict damage to Canada’s economy and reputation. The federal government should consider providing new dispute resolution tools, including the authority to the federal cabinet to compel binding arbitration for the resolution of a labour dispute in sectors that are essential to Canada’s supply chains, including railways and ports. The introduction of Bill C-58, which aims to prohibit the use of replacement workers during strikes suggests that the government actually wants to move away from preserving stability. It is doubling down on Canada being seen as an unreliable and unstable trading partner.

We need our leaders to engage in an honest dialogue that will provide our government with the tools it needs to address our labour challenges, while allowing employers and employees to bargain the way they should. There absolutely must be a more certain and timely mechanism to resolve disputes, after all parties have exhausted all other processes through collective bargaining and mediation/conciliation, to protect Canadians from harm.

Legislation like Bill C-58 need to be avoided to prevent the destabilization of our already-fragile supply chains or making it easier to bring our economy to a standstill and undercut our ability to act as a stable and reliable trading partner for our allies around the globe and keep our economy and our country moving. The federal government needs tools in the toolbox to protect Canadians from damaging work stoppages, while respecting collective bargaining.

When an emergency or significant disruption occurs or is about to happen, timely information is critical for industry to plan for alternative routes to maintain the free flow of goods. As the illegal cross-border blockades highlighted, industry needed to receive this information in a timely fashion from one government contact. What happened, however, was that information was not shared early enough, and it was communicated in a disorganized manner by multiple departments at three levels of government. This was unnecessarily time-consuming for companies focused on keeping their essential products moving across the border and within Canada.

• Recommendation 5: Ensure labour stability by giving the government the ability to compel binding arbitration to resolve bargaining impasses.
• Recommendation 6: Improve government coordination on incident reporting to alert industry of any potential future major disruptions to allow companies to make contingency plans.

Theme #2: Ease the Burden of Doing Business

Accelerating Regulatory Modernization

Regulatory modernization continues to be a growing concern. Several of our members who trade interprovincially cite increased red tape and differing certification and technical standards as major obstacles to doing business within Canada. Unfortunately, Canada has a complex network of overlapping regulations from all levels of government that make a lot of things more expensive and difficult than they need to be for businesses.

Complying with all these layers of regulations is expensive and time-consuming, and combined with inefficient and unpredictable regulatory processes, businesses are not set up for success. Every hour and every dollar spent dealing with redundant paperwork and confusing compliance issues is an hour or dollar not spent on running and growing a business. This is especially true for small businesses, which often lack the specialized staff and financial resources of larger companies to deal with regulation and compliance.

While the Canadian Chamber commends the government for pushing a regulatory modernization agenda, we ask the government to move more boldly and more urgently to modernizing our regulatory framework. Regulatory effectiveness is integral to a competitive environment and requires regulating smarter to attract new economic opportunities to Canada.

To achieve this, we believe that it is imperative that regulators and businesses work together to share perspectives to develop optimal regulatory approaches. An economic lens mandate for regulators would add a new tool that will encourage stable, manageable regulations that supports economic growth.

The government must also ease the regulatory burden facing Canadian business, and work with industry and our international trading partners to ensure regulatory efficiency and alignment. This is critical to ensuring that putting Canadian industry at a disadvantage. As we navigate uncertain economic times and ongoing geopolitical challenges, the federal government needs to encourage predictable timelines to encourage predictable investment. Increased uncertainty combined with changing expectations in the regulatory process are significant to those looking to invest billions of dollars developing new pipelines, new mines and other large-scale nation building infrastructure projects.

• Recommendation 7: Modernize Canada’s regulatory framework to increase investment, economic growth, and jobs in Canada.
• Recommendation 8: Mandate an economic lens for regulators to encourage manageable regulations that support economic growth and consider our competitiveness in the global marketplace.

Ensuring Regulatory Effectiveness

Regulatory effectiveness is critical to a competitive environment and requires regulating smarter to attract new economic opportunities to Canada. Currently, the federal government is also currently layering additional labour regulations that harm the competitiveness of Canadian business. For example, additional paid medical leave minimum requirements and other changes can, without consideration of existing benefits, negatively impact productivity and supply chains and lead to shortages of labour resulting in delays at airports, rail, and ports.

The Canadian Chamber urges the government to modernize individual regulatory frameworks to better align with domestic and international standards. The government must actively work to improve collaboration and alignment to ensure Canadian businesses are not at a global disadvantage. Where the government intends to adopt a Canada-specific approach regulatory, it must provide a rationale.

Moreover, Canada’s international trade obligations under numerous binding free trade agreements prohibit Canada from adopting regulations that present obstacles to trade in the absence of clear scientific justification. Canadian regulators can benefit from the experience and learnings of their international peers, enabling the Canadian public interest to benefit from a similar approach. When regulations are not aligned, we miss opportunities to harmonize the Canadian market with our global competitors, and to adopt smart, effective approaches that are deployed successfully elsewhere. When regulations are more consistent between jurisdictions, Canadian companies are better able to trade both within Canada and beyond our borders. The government must look to ease the regulatory burden facing Canadian industry, and work with businesses and our international trading partners to ensure regulatory efficiency and alignment.

• Recommendation 9: Work with industry to ensure regulatory efficiency and alignment with our international trading partners.

Encouraging Canada/US Regulatory Cooperation:

In the ever-evolving landscape of global trade and economic

cooperation, the importance of regulatory alignment cannot be overstated. The Regulatory Cooperation Council (RCC), established to enhance regulatory cooperation between the United States and Canada, stands as a testament to the benefits achievable through collaborative efforts. However, as we navigate new challenges and opportunities, there is a pressing need for the RCC to reconvene and reassert its pivotal role in fostering economic growth, innovation, and regulatory efficiency.

The Canada-United States Regulatory Cooperation Council (RCC) has provided a structured forum for regulators from Canada and the US to tackle regulatory differences that hinder trade. As the 2018 RCC MOU notes, stakeholder engagement is a critical function that informs all RCC activities to ensure that the RCC’s work remains relevant and impactful. The MOU also notes that the regulator-stakeholder forum is intended to occur every two years, alongside ongoing dialogue, to solicit new ideas. The pandemic has understandably created challenges to achieve this rhythm. However, as we look beyond the pandemic, now is the time to formally resume regular opportunities for stakeholder input.

Regulatory cooperation is the nuts and bolts of trade that allows companies to sell goods and services across borders. In an increasingly shifting global economic context, it is critical that Canada and the United States revitalize the Regulatory Cooperation Council so that workplans accurately reflect business priorities. This includes launching a formal stakeholder call for input and agreeing on forward-looking work plans to help cross-border business operations.

In our view, the RCC has proven to be a catalyst for positive change in the U.S.-Canada regulatory relationship and should be used as a forum for evidence-based discussion on shared approaches to regulatory approaches to meet the needs of consumers and business. Reconvening the RCC is not just a matter of continuity but a strategic imperative to address new challenges and opportunities. By doing so, we reaffirm our commitment to a stronger, more innovative, and economically resilient North America, reinforcing the enduring partnership between the United States and Canada. The time is ripe for renewed collaboration, and the RCC stands as a key instrument to forge ahead into a future of shared prosperity.

• Recommendation 10: Reconvene the Regulatory Cooperation Council and introduce forward looking workplans accurately to reflect Canada and U.S. business priorities.

Canada-European Union Regulatory Cooperation Forum

The Regulatory Cooperation Forum (RCF), a special committee of the Canada-European Union Comprehensive Economic and Trade Agreement (CETA), is an important mechanism for facilitating and promote regulatory cooperation between Canada and the European Union (EU). However, although the RCF provides a framework for effective and meaningful regulatory dialogues, more needs to be done to coordinate efforts and improve outcomes.

To address the regulatory issues that are most pressing to businesses, it is important that the private sector be meaningfully engaged in the processes of the regulatory dialogues. To this end, whenever possible, Canada and the EU should avoid exclusive government-to-government talks that exclude key stakeholders. Both countries should also increase transparency in the work of the working groups. For instance, there should be greater transparency regarding the criteria for selecting issues, how initiatives linked, and how is success measured. Moreover, given the importance of transparency to promote engagement and build trust among stakeholders, it is important that a higher degree of consistency in format, detail, and time of publication be applied to the reports of CETA committees.

• Recommendation 11: Canada and the EU should engage more deeply with the private sector in the processes of the RCF, particularly by minimizing exclusive government-to-government talks, increasing transparency in the work of committees, and working groups, and increasing consistency of reports across CETA committees.

Theme #3: Ensure Sustainable Critical Mineral Supply Chains

Encourage Capital Investment in Critical Minerals

Critical minerals are the backbone of countless industries, from renewable energy to electronics, and ensuring their reliable availability is crucial for economic growth and global stability. Past disruptions have underscored the vulnerability of these supply chains, prompting the need for a strategic and collaborative approach to build resilience.

Critical minerals impact technology, food, and energy. They are essential materials that enable the production of consumer products, defence and industrial applications, and our ability to transition to a low carbon economy. Countries like China and the US have strong existing clusters within many critical mineral-based supply chains, in some cases, developed with the support of interventionist industrial policy. However, Canada is currently behind the curve in many aspects of the critical minerals supply chains. Both China and the US have highly competitive clusters in many critical minerals-based industries, and they are aggressively pursuing further growth to deliver strategic resilience and unlock economic opportunities.

Canada should be seen as a reliable partner in supplying critical minerals vital to North American development of clean technologies and energy supply chain resiliency – inclusive of providing minerals required to develop solar photovoltaic systems, wind energy, energy storage solutions, smart grids, hydropower, nuclear energy, hydrogen, semiconductors, magnets, catalysts, CCUS technologies, and other digital components vital for cybersecurity. In many of these areas, the U.S. currently sources required critical minerals (as well as finished products) from China, which presents risks to our shared economic, security, and environmental priorities.

To alleviate risks, Canada needs to develop and protect our supply of critical minerals and work with allies to advance resiliency and shared economic and environmental interests. Canada and the U.S. should accelerate collaboration under this mechanism by exploring the use of government procurement and tax and regulatory measures to support the extraction of these products. Where there is limited interest in private investment, government should assess potential benefits of support for supply chain resiliency or strategic value, including cases in which global players have significant command of global supply or pricing dynamics.

Additionally, the development of critical mineral projects needs to be sped up. Currently, it takes 10 years + to get projects approved and are significantly influenced by the speed at which several processes can be conducted, including environmental assessments, and approvals. As a result of the complexity and the nature of Canada’s regulatory regime, the federal government should commit to accelerating development as of critical mineral projects at key junctures. This can be achieved in three ways.

First, improved coordination between federal and provincial processes and alignment in scoping Indigenous engagement. Umbrella agreements with each province, outlining how the federal and provincial governments will work together would boost predictability, efficiency, and reliability.

Requirements and processes should be streamlined, using a single window, electronic-based approach. Second, there needs to better coordination between Impact Assessment Agency of Canada (IAAC) and permitting departments, particularly Environment and Climate Chance Canada (ECCC), Fisheries and Oceans Canada (DFO), Transport Canada (TC) and NRCAN to reduce delays and improve timelines of project approvals. Finally, where possible the federal government should set out clearer plans, timelines, and commitments for infrastructure development in areas with high mineral potential. It should accelerate shovel-ready projects and consider the potential for greater investments in critical infrastructure.

• Recommendation 12: Work with major trading partners to advance the resiliency of critical mineral supply chains and extraction of critical mineral-based products by exploring the use of procurement, tax, and regulatory measures.
• Recommendation 13: Ensure clearer plans, accelerated timelines, and firm commitments for infrastructure development in areas with high mineral potential.

Theme #4: Enable an Innovative Economy

Support Technology Adoption to Build Resilient Supply Chains

Improved regulatory efficiency, especially the elimination of redundancies, is needed to support the development and adoption of technologies with proven supply chain and other benefits. While we applaud the intent of the federal government’s “delivery timeline” for investment tax credits in the Fall Economic Statement for major decarbonization projects, time has already been lost. While the US is adopting technology quickly to build resilient supply chains with the assistance of the Inflation Reduction Act (IRA) our investment levels in technology adoption is lagging our major trading partners. In a single year, the IRA spurred $110 billion in clean energy investments and created more than 170,000 new clean energy jobs. We need to see carbon capture, utilization, and storage (CCUS) projects moving ahead, and the federal government still needs to deliver on the plans it first announced in 2021 and in subsequent budgets and statements.

The federal government needs to advance the implementation of the new expanded investment tax credits (ITC’s). The federal government should work closely with industry to develop and foster a regulatory framework built on a data-driven, performance-based approach that supports innovation and adapts to evolving technologies. For example, Transport Canada’s exemption process should be streamlined to allow the implementation of technologies being recognized as equivalent or better than existing required regulatory practice, to stimulate investments in innovation. Otherwise, Canada is at risk of being left behind in technology adoption and we are limiting our potential to building more robust and resilient supply chains.

• Recommendation 14: Advance implementation of the new and expanded investment tax credits (ITCs) as outlined in the 2023 Fall Economic Statement.
• Recommendation 15: Work closely with industry to develop and foster a regulatory framework built on a data-driven, performance-based approach that supports innovation and adapts to evolving technologies.