SUMMIT AGENDA ON COMMON PROSPERITY: THOUGHTS ON

UNCLAS SECTION 01 OF 03 OTTAWA 003431

SIPDIS

STATE FOR WHA/CAN:TBREESE, AHOLST; EB/TPP/BTA/EWH:AARON

WHITE HOUSE/NSC FOR FARYAR SHIRZAD

STATE PASS USTR FOR SAGE CHANDLER

USDOC FOR 4320/OFFICE OF NAFTA/GWORD/TFOX; 3134/OIO/WESTERN
HEMISPHERE

SENSITIVE

E.O. 12958: N/A
TAGS: ETRD CA
SUBJECT: SUMMIT AGENDA ON COMMON PROSPERITY: THOUGHTS ON
NEXT STEPS ON THE REGULATORY FRONT


1. (SBU) SUMMARY: AT THE BILATERAL SUMMIT ON NOVEMBER 30,
2004, THE PRESIDENT AND CANADIAN PM PAUL MARTIN AGREED TO AN
AGENDA FOR "COMMON SECURITY, COMMON PROSPERITY" THAT
COMMITTED THE TWO SIDES TO "PURSUE JOINT APPROACHES TO
PARTNERSHIPS, CONSENSUS STANDARDS, AND SMARTER REGULATIONS
THAT RESULT IN GREATER EFFICIENCY AND COMPETITIVENESS, WHILE
ENHANCING THE HEALTH AND SAFETY OF OUR CITIZENS". WE
UNDERSTAND THAT DISCUSSIONS ARE ALREADY UNDERWAY AMONG
CAPITALS ABOUT HOW TO MOVE FORWARD ON THIS COMMITMENT.


2. (SBU) CANADIAN INTEREST IN THIS AGENDA PROBABLY STEMS
FROM THE RELEASE OF THE "SMART REGULATION" REPORT, WHICH
MADE IT CLEAR THAT NORTH AMERICAN STANDARDS AND REGULATORY
REGIMES SHOULD BE A PRIORITY FOR CANADIAN REGULATORS. WE
BELIEVE THAT THE COMBINATION OF A BILATERAL COMMITMENT TO
JOINT APPROACHES AND GOC CONSIDERATION OF THE SMART
REGULATION AGENDA PRESENTS AN OPPORTUNITY TO DEVELOP A
PROCESS THAT CAN EVENTUALLY REDUCE REGULATORY DIVERGENCE -
THE "TYRANNY OF SMALL DIFFERENCES" THAT INHIBITS TRADE AND
REDUCES CONSUMER CHOICE ON BOTH SIDES OF THE BORDER. THIS
CABLE DESCRIBES THE "SMART REGULATION" INITIATIVE AND
OUTLINES OUR IDEAS FOR MOVING TOWARD MORE LONG-TERM, BROAD-
BASED REGULATORY COOPERATION. END SUMMARY

INTRODUCTION: THE SMART REGULATION INITIATIVE
--------------

2. (U) FOR CANADA, THE BENEFITS OF NAFTA HAVE BEEN CLEAR,
INCLUDING THE DOUBLING OF TRADE THAT IS NOW STRAINING BORDER
INFRASTRUCTURE. FURTHER GROWTH, HOWEVER, WHILE LIKELY, WILL
BE CONSTRAINED BOTH BY BORDER INFRASTRUCTURE LIMITATIONS,
WHICH ARE BEING ADDRESSED IN THE SMART BORDER PROCESS, AND
BY REGULATORY DIFFERENCES WHICH CONTINUE TO IMPEDE ENTRY OF
NEW PRODUCTS INTO THE MARKET AND LIMIT CONSUMER CHOICE.

3.(U) CANADA HAS JUST COMPLETED A THOROUGH STAKEHOLDER
REVIEW OF ITS REGULATORY PROCESSES AND STRUCTURE. THE
CANADIAN "EXTERNAL ADVISORY COMMITTEE ON SMART REGULATION",
CONVENED IN 2003, RELEASED ITS FINAL REPORT IN SEPTEMBER

2004. THE COMMITTEE OBSERVED THAT ".CANADA AND THE UNITED
STATES MAINTAIN PARALLEL PROCESSES AND STRUCTURES ACROSS
ALMOST ALL AREAS OF REGULATORY ACTIVITY. THEIR TWO SETS OF
PROCESSES REFLECT A CONVERGENCE IN POLICY OBJECTIVES AND
REGULATORY PROCEDURES. HOWEVER, MUCH OF THIS WORK IS
DUPLICATIVE, PARTICULARLY GIVEN THE INTEGRATED NORTH
AMERICAN MARKET. THE OUTCOME CAN BE POOR REGULATORY AND
ECONOMIC RESULTS AND HIGHER COSTS FOR GOVERNMENTS, CONSUMERS
AND BUSINESSES."

4.(U) THE COMMITTEE MADE THE FOLLOWING RECOMMENDATIONS,
AMONG OTHERS:

--THE GOC SHOULD INCLUDE INTERNATIONAL REGULATORY
COOPERATION AS A DISTINCT OBJECTIVE OF CANADIAN FOREIGN
POLICY, WITH A PRIMARY AND IMMEDIATE FOCUS ON NORTH AMERICA,
AND DEVELOP AN AGENDA FOR NORTH AMERICAN REGULATORY
COOPERATION.

--CANADA-SPECIFIC REGULATORY REQUIREMENTS SHOULD DIFFER FROM
INTERNATIONAL OR NORTH AMERICAN MODELS ONLY WHERE THERE ARE
IMPORTANT NATIONAL PRIORITIES, UNIQUE CANADIAN CONDITIONS OR
CONSTITUTIONAL ISSUES, OR EXISTING MODELS ARE INADEQUATE TO
CANADIAN POLICY OBJECTIVES;

--CANADA SHOULD PROMOTE JOINT PRODUCT REVIEWS AND MOVE
TOWARD ACCEPTING U.S. AND EU PRODUCT APPROVALS IN SECTORS
WITH WELL-ESTABLISHED CONFORMITY ASSESSMENT PROCEDURES;

--CANADA SHOULD STRENGTHEN INTERAGENCY REGULATORY
COORDINATION AND DEVELOP OVERARCHING REGULATORY POLICY
FRAMEWORKS FOR KEY SECTORS.


IN ORDER TO PUT THESE RECOMMENDATIONS INTO OPERATION, THE
COMMITTEE PROPOSED THAT THE GOC FORM MULTISTAKEHOLDER "SWAT
TEAMS" TO IDENTIFY TROUBLESOME REGULATORY DIFFERENCES AND
PROPOSE SOLUTIONS. THE COMMITTEE IDENTIFIED AS PRIORITY
AREAS:

--MANUFACTURING/PRODUCT APPROVAL;
--BIOTECHNOLOGY/LIFE SCIENCES;
--ENABLING ECONOMIC DEVELOPMENT FOR FIRST NATIONS;
--ENVIRONMENTAL ASSESSMENT PROCESSES; AND
--OIL AND GAS EXPLORATION AND DEVELOPMENT.

(THE FULL REPORT IS AVAILABLE AT
HTTP://WWW.SMARTREGULATION.GC.CA)

A "SMART" NORTH AMERICAN PROCESS?
--------------
5.(SBU) We suggest that, in the context of our commitments
in the November 30 statement, Washington agencies think
about developing a broad-based bilateral or trilateral
review of regulations that draws on these recommendations.
While such a process could yield short-term deliverables,
more importantly, it would set the stage for real progress
in finding and eliminating a broader list of longstanding
regulatory barriers than the NAI process has addressed so
far.

BRINGING REGULATORY EXPERTS TOGETHER
--------------
6.(SBU) In our view, the logical first step would be to
develop channels of communication between the regulatory
oversight bodies, OMB and the GoC Privy Council Office (PCO)
to exchange information on regulatory initiatives underway,
set compatible timetables where possible and review existing
regulations to identify areas for revision, or areas where
we could negotiate mutual recognition agreements. U.S.
officials could also share experience on strengthening
regulatory oversight and interagency coordination, a key
recommendation of the Smart Regulation report.

7.(SBU) The agenda for these exchanges could include review
of existing promising models, such as the joint PMRA and EPA
pesticide review process, and a look at sectors identified
in the Smart Regulation report and previous NAI discussions.
These could include some aspects of drug approvals,
processed food containers, and federal/state/provincial
regulatory requirements for construction products.

INVOLVING STAKEHOLDERS
--------------
8.(SBU) Second, Washington agencies may also want to
explore how to involve business and other stakeholders.
Options include expanding the Canadian approach to convene
North American "SWAT teams" of government, industry and
consumer representatives that review regulatory issues by
sector and report back to governments. Another model might
be a North American equivalent of the "Transatlantic
Business Dialogue (TABD)" which effectively articulated
business priorities for US-EU regulatory cooperation in the
1990s.

9.(SBU) Alternatively, or in parallel, both (or all three)
governments could encourage maximum participation by
stakeholders in the "smart regulation" process within
Canada. The Committee urged the GoC to designate a Minister
to invite interested stakeholders to identify those
regulatory differences for which elimination would not
impede Canadian social (including health and safety) and
environmental objectives. In any case, we should ensure that
the USG and the U.S. private sector participate in this
process as stakeholders and make recommendations by June

2005.

TIMETABLE AND DELIVERABLES
--------------
10.(SBU) Under this framework we could call on regulatory
officials to reach certain objectives within twelve months,
to serve as deliverables at a future NAFTA Summit or meeting
of the New Partnership in North America. Examples of twelve-
month deliverables include:

--Swat Team Reports: Stakeholder groups or "Swat Teams"
issue reports on priority list of regulatory differences to
address via harmonization or mutual recognition. Such a
list could include both bilateral and trilateral priorities,
depending on feasibility.

--Regulatory oversight bodies: OMB and PCO develop mechanism
for consulting on new regulatory projects, decision
mechanism for selecting regulations for parallel
consideration or MRAs. (e.g. applying EPA/PMRA pesticide
model to other agencies)

--Joint approvals: Independent agencies develop consultation
process for joint approvals. Example: CFIA and USDA could
look into simultaneous approval processes for new seed
varieties.

--Initiation of joint reviews: An 18-month deliverable could
be announcement/Federal Register/Gazette notices of first
joint reviews of regulations in priority sectors.

11.(SBU) Such a framework would be a long-term investment
in addition to an effort to identify "low-hanging fruit" in
the regulatory sphere, although such a broad-based process
might bring to light additional areas where early results
are possible beyond those already identified in NAI
discussions. Post (Econ and FCS) would be prepared to
support the process by working intensively with local U.S.
and Canadian business contacts and regulators, DOC, and USTR
to identify possible items for short, medium and long-term
work programs across a number of sectors.