Trump’s assault on regulations and the NAFTA renegotiation

U.S. President Donald Trump’s January 30 executive action on reducing regulations has been obscured by the uproar in response to his Muslim immigration ban, Mexican border wall and other provocative actions. Canadian concerns around NAFTA renegotiation rarely mentions the impact of Trump’s deregulation agenda. It should, because it could profoundly affect health and safety protections not only in America, but here too.

The executive actionan order that violates the independence of all regulatory agencies-places an immediate freeze on new regulations followed by the implementation of a two-for-one rule, which mandates that for every regulation introduced by a government agency it must eliminate of two existing regulations. Trump’s stated goal is to reduce regulations by 75%.

There remain many questions to be worked out on how the two-for-one rule will be defined, measured and applied. However, the basic intent could not be clearer: to hobble the U.S. regulatory process.

Ironically, the Trump initiative is modelled on the Harper government’s deregulation agenda. Harper’s one-for-one rule was the centrepiece of its 2012 regulatory policy— the Cabinet Directive on Regulatory Management (CDRM), which is still in place under the current government.

My own research into the 2013 Lac-Mégantic rail disaster suggests that at the very time when oil-by-rail was expanding exponentially, and government desperately needed new regulatory capacity and tools to protect the public in the face of the oil boom, the Conservative one-for-one policy served to hamstring the regulatory process, stonewalling measures that could possibly have prevented Lac-Mégantic.

The North American economy is highly integrated. As the U.S. “deregulatory tsunami” washes across the Canadian border it will put intense pressure on regulators here to follow suit in a regulatory harmonization race to the bottom. Canadian-based companies will argue, as they have with the expected U.S. corporate tax cuts, that following the Trump lead is necessary to maintain their competitiveness and prevent the exodus of jobs.

The regulatory harmonization process takes places largely within a little known Canada-U.S. quasi-institutional forum called the Regulatory Cooperation Council (RCC). The CCPA has just co-published a report on the RCC by trade researcher and Monitor editor Stuart Trew, which you can read here. But a quick summary of its agenda will help us here.

Regulators from both countries from almost all sectors involved in, or affected by, cross border trade—automotive, drugs, workplace safety, transportation, etc.— meet regularly with the express purpose of aligning regulations and standards so as to eliminate differences that increase business costs. They are joined by industry representatives who collaborate in the process. Though public input is nominally part of the process, in reality it’s a pretty closed business-government exercise (with some NGO participation).

It is uncontroversial to say that the U.S.—the larger partner—drives the regulatory alignment process. Canada aligns to U.S. regulatory standards, not the other way around. Where the U.S. regulatory standards are higher, Canadian regulations do tend to harmonize upward. For example, Canada recently adopted the more stringent U.S. energy performance standards for a wide range of appliances and electric motors.

In cases where Canadian regulations are higher they do not have much wiggle room to be different. If they adversely affect business costs, pressure to roll back is enormous.

Business on both sides of the border is genetically programmed to push for the weakening or elimination of regulations. Cross-border harmonization of different regulations is also an important vehicle for reducing costs. At the top of the Canadian-American Business Council’s just-published wish list for the upcoming NAFTA renegotiation is the following:

a chapter on regulatory cooperation that codifies and strengthens the Canada/US Regulatory Cooperation Council as a permanent entity, and ensures the governments work on tandem on new major rules, with a process to ‘look back’ and align existing regulations.”

To implement his radical deregulation agenda, Trump is appointing business-friendly persons to head agencies—foxes to guard the chicken coops. As deregulation proceeds, cheered on by U.S. corporations, it is telegraphed through the RCC. Canadian regulators will be under pressure to move in tandem with the downward regulatory spiral.

If the resulting cost differentials conflict with health and safety protections, Canadian-based business will urge their regulatory agencies to prioritize the former. Similar pressure will be exerted on Canadian governments to reduce corporate taxes to match U.S. reductions. The difference is that deregulation will be carried out much more in the shadows, and its consequences will be much more diffuse.

Trump’s reportedly leading contender to head the U.S. Food and Drug Administration is, according to the president, a “fantastic person” who will turn the FDA into an industry-friendly shop that cranks out new cures on the double. In other words, someone who supports pharmaceutical company demands to loosen or abolish new drug testing rules to get faster approvals. This cost-saving measure would dramatically lower testing standards, allowing dubious, possibly life threatening drugs on the market.

Take oil-by-rail transportation. The U.S. railway industry has exercised major influence over the Department of Transport under previous administrations, though control was not absolute. Under Trump, remaining pockets of resistance within government disappear. Trump’s industry-friendly appointees to the transportation agencies, including Transport Secretary Elaine Chao, guarantee that industry demands will be met.

A case in point: railway and oil companies have opposed U.S. Department of Transportation efforts to require them to equip trains with modern air brake systems, and require that they remove the most volatile components of Bakken oil before loaded it onto trains.

This is the same oil that has exploded and burned in communities throughout North America, most devastatingly in the 2013 Lac-Mégantic disaster. Under Trump, industry will get its way. Communities will continue to be exposed to the dangers. And under Canadian industry pressure, Transport Canada will not likely buck this trend.

The erosion of health, safety and environmental protections will not happen overnight. It will occur piecemeal, out of the public spotlight. The Trudeau government’s (Business) Advisory Council on Economic Growth just released its pre-budget report, urging Canada to deepen its NAFTA relationship through key initiatives including: “Remove regulatory barriers. Harmonize standards and regulations to encourage value-chain integration.”

Extraordinary vigilance and resistance on the part of health, safety and environmental watchdog groups are required to ensure that the Trudeau government does not capitulate to corporate intimidation that Trump-led deregulation is the necessary price for “jobs and growth.”

Bruce Campbell is the former executive director of the Canadian Centre for Policy Alternatives and 2016 visiting fellow at the University of Ottawa’s faculty of law.

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