Tyler Cowen links to a recent paper on Canadian regulatory reform by Laura Jones of the Canadian Federation of Independent Business. In April, Canada enacted the Red Tape Reduction Act, under which the federal government must eliminate at least one regulation if it wants to create a new one. According to the paper, British Columbia has been doing this since 2001.

The paper argues that language matters when talking about regulatory reform because there are two types of regulations:

Red tape refers to rules, policies, and poor government services that do little or nothing to serve the public interest while creating financial cost or frustration to producers and consumers alike. . . . Red tape, as the term is used in this paper, stands in contrast to government laws, regulations, rules, and policies that support an efficient and effective marketplace and provide citizens and businesses with the protections they need. For the sake of keeping a clear distinction between the two, the latter will be referred to as “justified regulation” in this paper. The “broad regulatory burden” is composed of both justified regulation and red tape.

Having a cap on the total number of regulations that can be in effect brought about an interesting change in how regulators work and think:

It put the onus on the government to make the case that additional regulation was necessary, to ensure adequate consultation, to keep compliance flexible, and to reduce the total amount of regulation. One public official commented that it changed her role from regulation “maker” to regulation “manager.”

In this way, you get more justified regulation and less red tape. In BC,

The results have been impressive. The government has reduced regulatory requirements by 43 percent relative to when the initiative started. During this time period, the province went from being one of the poorest-performing economies in the country to being among the best. While there were other factors at play in the BC’s economic turnaround, members of the business community widely credit red tape reduction with playing a critical role.

As the Opportunity Washington research report notes, ". . . the costs of regulatory compliance have a direct impact on investment and job creation." Similarly, the State Auditor's Office wrote this year,

By streamlining business regulations without sacrificing other essential objectives, such as preserving the environment or ensuring a safe workplace, we may find that the lower costs – to both businesses and government – will help the state attract and support business opportunities.

In a special report this summer, we wrote about a series of regulatory reform audits from the State Auditor's Office. They are mostly focused on how to make existing regulations work better — a worthy effort. This Canadian initiative seems to represent the next level of regulatory reform.