Canada Makes a Bold Change in Business Regulation, Will it Work?

Canada's fans celebrate at the end of the Women's Ice Hockey semifinal match Canada vs Switzerland at the Shayba Arena during the Sochi Winter Olympics on February 17, 2014. Canada won 3-1. (Photo by Alexander Nemenov/AFP/Getty Images)

Alexander Nemenov/AFP/Getty Images

Legislating is, in many cases, a matter of compromise. Though America’s legislative process has more or less grown to be completely ineffective over the past several years, due to an unwillingness to compromise, the basic premise on which a government functions is that competing ideologies face off over an issue and find a meeting point at which things can get done. In the case of business regulations, dismantling the old and implementing the new has proven to be incredibly difficult, especially as people have become more entrenched in their ideologies.

North of the border, however, they’re taking a different approach. Last year, the Canadian government sought to become the first in the world to implement a ‘One-For-One Rule‘, which would stipulate that for each new business regulation put into law, another would need to be taken off of the books. The goal of the legislation was to lessen the “administrative burden” on businesses, or the time and money spent to “show compliance with regulatory requirements.”

It’s an innovative and interesting proposal, for sure, but there are many questions as to whether or not it’s actually a good idea, and if such a framework would even be functional. But it’s clear that the Canadian government has the intention of loosening things up to give businesses more flexibility, and also to attract more investment and increase rates of entrepreneurship.

“All Canadians benefit from the Action Plan’s regulatory reforms,” reads a press release from the Canadian government. “By reforming the regulatory system, the Government is freeing Canadian businesses from unnecessary red tape so they can focus on creating jobs for Canadian workers and expanding their enterprises. In this way, the red tape reduction reforms are helping to secure Canada’s long-term economic prosperity.”

This has also been a part of an ongoing plan to help spur the Canadian economy. Canadian leaders report that “as of December 2013, under the Rule, the Government had reduced the administrative burden by almost $20 million and achieved a net reduction of 19 regulations. This represents 98,000 hours in time saved for business annually.”

Essentially, how this sort of legislation would work is that for any new type of regulation — say on a bank, or financial institution — another would need to be stricken from the law. The idea would allow for legislators to trim the fat, so to speak, while adapting regulations to fit current circumstances, instead of allowing them to pile up into a jumbled and incomprehensible mess.

By avoiding that mess, and making it easier for businesses to become compliant with up-to-date regulations, there’s a lot of benefits to the economy.

The millions of dollars and tens of thousands of hours saved by avoiding legalese and extra paperwork are hard to ignore, and would probably have the pro-business and conservative crowds in the U.S. salivating at the prospect of it happening in America. There are plenty of business laws on the books in the U.S. that many would find to be ridiculous, and could probably be done away with tomorrow with little to no consequence. But there are plenty that are there for a reason, and that would leave an awful lot of people worried about the fallout from dismantling legislation the Canadian way.

Surprisingly enough, even left-wing politicians and groups in Canada have apparently jumped on board with the One-For-One Rule. Tony Clement, a cabinet minister and member of Canada’s conservative party, spoke with NPR about the government’s success in tackling it’s ‘red tape’ problem, and how it’s been supported by those on both sides of the political spectrum — even the Green Party.

While the Canadians are carrying out their experiment, you’d better believe that there are many on the American side of the 49th parallel that would like to see the legislation exported to the U.S. That could lead to some very interesting happenings in both the American economy and legislative chambers, but given that U.S. legislators have been able to get barely anything done, it’s hard to imagine a monumental new rule like the One-For-One proposal being implemented.

Then again, it seems that Canada is having some success. If that success is sustained, American lawmakers probably should give it a long look, and estimate its feasibility in the U.S. After all, if there’s one way to spur entrepreneurship and the economy, it’s by making it easier to get into business.

Follow Sam on Twitter @Sliceofginger

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