US embassy cable - 04OTTAWA3431

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, Paul Martin 
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.