SPP Institution Building: Regulatory Cooperation

UNCLAS SECTION 01 OF 02 OTTAWA 001199 SIPDIS STATE FOR WHA/CAN:TBREESE, AHOLST; EB/PDAS Donnelly WHITE HOUSE/NSC FOR FARYAR SHIRZAD, DEL RENIGAR WHITE HOUSE/OMB/OIRA FOR JOHN MORRALL III STATE PASS USTR FOR SAGE CHANDLER USDOC FOR 4320/ITA/MAC/WH/ONIA (WBastian, ARudman, GWord) E.O. 12958: N/A TAGS: ETRD CA SUBJECT: SPP Institution Building: Regulatory Cooperation and Business Dialogue Ref: (A) Ottawa 1104 (Scenesetter: Canada and the SPP) (B) Ottawa 3431 (December 2004) ¶1. Summary: This is the second in a series of cables discussing the background and possible future course of the Security and Prosperity Partnership (Ref A). Summary: As SPP working groups move through the first phase of reaching out to stakeholders and identifying key issues, we recommend that Washington propose institutional links that will give continuity to the process without creating a new bureaucracy. On the government side, SPP deliverables could include a commitment to a permanent dialogue between the two executive bodies charged with regulatory oversight, OMB/OIRA in the United States and the GoC's Regulatory Affairs (RAOIC) group in the Privy Council Office (PCO). This linkage could yield an enduring relationship, similar to the Canada-United States Smart Borders effort that has effectively managed border security. Another key element, in our view, is an independent business-driven mechanism to identify key barriers and highlight business priorities for officials. Some Canadian industry groups are already seeking a cross-border approach; we should encourage key industries and companies to take ownership of the process and present regulators with a common set of priorities. End summary. ¶2. BACKGROUND: One objective of the SPP Prosperity Agenda is to " Strengthen regulatory cooperation, including at the onset of the regulatory process, to minimize barriers." In its Smart Regulations intiative (Ref B),the GoC has already clearly expressed its willingness to address the "tyranny of small differences" that inhibits trade and reduces consumer choice on both sides of the border. The recent External Advisory Committee on Smart Regulation noted 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." �A;¶3. The Advisory Committee recommended that 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; and that Canada should promote joint product reviews and move toward accepting U.S. and EU product approvals in sectors with well-established conformity assessment procedures (Reftel). ¶4. Building on the Advisory Committee report, the GoC released its Implementation Strategy for Smart Regulation effort on March 25, 2005, which calls for increased cooperation with the United States to reduce regulatory mismatches. Smart Borders, Smart Regulations, Smart Markets? -------------- --- ¶5. SPP provides the opportunity to establish a mechanism for managing this cooperation, perhaps even within the initial 90-day window. In our view the logical first step toward reducing regulatory barriers in the long term is to open direct links between the two governments' bodies for managing regulation, the OMB's Office of Information and Regulatory Affairs (OIRA) and the Canadian PCO's office of Regulatory Affairs and Orders in Council (RAOIC). The two oversight bodies could work together to set timetables and jointly review existing regulations to identify regulations that should be harmonized, eliminated or be candidates for mutual recognition agreements. U.S. officials could also share experience on strengthening regulatory oversight and interagency coordination, a process that could also include Mexican experts. ¶6. A long-term bilateral dialogue among regulators could become the regulatory counterpart to the successful Canada- United States "Smart Borders" effort, which includes a detailed action plan that identifies and monitors, and to a lesser extent prioritizes, bilateral actions on border security and trade facilitation. Like "Smart Borders", if successful the regulatory dialogue could add momentum to the regulatory agenda without imposing a permanent secretariat or another layer of bureaucracy. ¶7. The agenda of these OMB/PCO bilaterals might include review of existing promising models, such as the joint Canadian (PMRA) and U.S. (EPA) pesticide review process, and a look at sectors identified for priority action in the Smart Regulation report such as some aspects of drug approvals, processed food containers, and federal/state/provincial regulatory requirements for construction products. Annual meetings of the oversight bodies as part of the existing SPP workplan could create additional pressure for resolution of existing items and build an agenda for long-term work, but could also create a useful umbrella for highlighting our many existing cross- border cooperative efforts between individual agencies. ¶8. Washington agencies are currently exploring how to involve business and other stakeholders in this process. 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, simpler 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. Under this model, governments would ask business on both sides of the border to work together to come up with a consolidated list of high- priority standards barriers and other regulatory issues, thus eliminating the impression that addressing certain regulatory barriers is a "win" for one side or the other rather than broadly beneficial to both economies. Some Canadian stakeholders, such as the Canadian Manufacturers and Exporters Association, are already reaching out to their U.S. counterparts (septel),but our experience suggests that this process is uneven across industries and could benefit from a push by the two governments. ¶9. Under this framework we could call on industry and regulatory officials to reach certain objectives within set timelines. For example in June the leaders could call on industry associations to begin work on a joint list of barriers to trade; in the 6-12 month timeframe industry associations would report to PCO/OMB their priority list of regulations to review. Dickson