Cutting red tape could boost Canada’s economy, StatCan report finds
The growing number of regulation has been dragging down Canada’s business sector, costing the economy valuable growth and slowing job creation, according to a new Statistics Canada report.
The study found that, from 2006 to 2021, regulatory requirements reduced business-sector GDP growth by 1.7 percentage points. The impact also extended to employment growth, which was reduced by 1.3 percentage points, and labour productivity, which was slowed by 0.4 percentage points.
The findings paint a troubling picture for businesses navigating a regulatory landscape that has expanded by 37% over the past decade and a half, with over 300,000 regulatory requirements now in place.
The study noted that if regulations had remained at 2006 levels, Canada’s business environment would have been more dynamic and competitive.
The number of regulatory requirements in Canada rose by 37% between 2006 and 2021, bringing the total to over 300,000. This expansion has made it harder for businesses to operate efficiently, according to the report, contributing to declining business investment and slower economic expansion.
The study comes at a time when federal and provincial governments are looking for ways to strengthen Canada’s economic position, particularly as the US considers imposing new tariffs on Canadian products like steel and aluminium
Reducing regulatory inefficiencies could help “completely offset” the economic impact of US trade policies, former Bank of Canada Governor Stephen Poloz said in a speech in Toronto last week.
As an example, Poloz pointed to the different portable-washroom standards across provinces.
“If you’re on a construction site, there are rules about what the ring looks like in the ‘Johnny on the Spot,’” he said. “It has to be a perfect ring in some provinces; it has to be a split ring in other provinces.”
These types of small but costly regulatory hurdles add up, making it harder for businesses to operate efficiently and expand across regions.
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Economists estimate that removing interprovincial trade barriers alone could add four to seven percentage points to GDP, a potential boost that could help Canada regain economic momentum.
The StatCan report highlights a decline in business investment as a percentage of GDP since 2015, while per capita economic output has slipped back to 2017 levels.
Canada’s recent economic growth has been largely driven by record immigration, which has increased consumption. However, the report suggests that regulatory barriers are preventing businesses from growing at the same pace.
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