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Archived - 9. Driving Change: A Canadian Competitiveness Council

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By itself, competition law enforcement without supporting policies and institutions to promote competition is insufficient to realize the economic benefits of competitive markets or innovative and efficient businesses. The concept of competition, and the value it has for our society is not fully realized or widely appreciated by Canadians.

Improvements to our competitive performance will not be accomplished in a month or a year or solely by statutory reform. Sustained effort and focus are required in order to realize improvements. In research commissioned by the Panel and in views expressed in submissions and consultations, Canada has been identified as a country that does not place sufficient importance on competition in the conduct of its affairs.1 The Panel agrees with this conclusion.

Australian National Competition Council

In the early 1990s, in response to the decline in Australia's economic performance, the Government of Australia undertook a broad review of the country's economic and competition policies. Important findings from this review were that the country's competitiveness was not given sufficient priority in policy-making, and that the levels of government were not working well enough together to improve economic performance and opportunity for Australians.

In response, the Australian National Competition Council was established in 1995, reflecting an agreement among the federal, state and municipal governments that focused, coordinated action was needed if Australia was to address its economic challenges. While its mandate continues to evolve, its mission is to improve the well-being of all Australians through growth, innovation and rising productivity, and by promoting competition that is in the public interest.2

This theme is brought into greater relief by the Panel's belief that collaboration and progress in Canada between levels of government and the private and public sectors on competitiveness issues is sorely lacking.

International Comparisons

The Panel consulted with Australian experts, including Fred Hilmer, who chaired a review of Australian competition policy in the early 1990s. The Australian review arose from that country's unique circumstances and challenges in the 1990s. Canada's situation in 2008 is obviously not the same as Australia's in the early 1990s. Yet there are useful lessons that can be drawn from Australia as well as other OECD countries that make competition a pillar of economic policy. We have been impressed by Australia's success in addressing complex competitiveness issues in the context of a federal state. A key factor was establishing a National Competition Council to spur productivity improvements.

Australia is unique in establishing an institution devoted solely to competition advocacy and has successfully broadened competition policy beyond traditional competition law enforcement. Other nations have used other institutional approaches to strengthen competition advocacy. In some countries, competition advocacy institutions foster market integration in a federal state, eliminate special rules and exemptions that blunt the impact of competition and promote greater adherence to competition values in regulatory decision making.

As examples:

  • The Australian Competition and Consumer Commission, the US Federal Trade Commission and the Irish Competition Authority, among others, have powers to conduct studies of industry sectors and the interaction between government regulation and economic performance.
  • Australia has two other institutions that participate in competitiveness matters, the previously mentioned National Competition Council and the Productivity Commission, which conducts in-depth studies of competitiveness issues.
  • The Office of Fair Trading in the United Kingdom has responsibility to review all new regulations proposed by other government ministries and agencies to evaluate their impact on competition.
  • In 2007, Sweden established The Globalization Council to promote a deeper knowledge of globalization issues, develop economic policy and broaden public dialogue to ensure that Sweden can compete successfully in a world marked by continued rapid globalization. This institution focuses largely on independent research but is also mandated to develop public policy recommendations for the Swedish government by 2010.
  • The European Commission is responsible for enforcing rules on discriminatory state subsidies and liberalizing former state-regulated or controlled sectors such as transport, energy, postal services and telecommunications. It also undertakes market studies and approves new regulations following a competitive assessment process.

While these examples highlight the importance that other industrialized countries place on a dedicated focus on competition, the Panel does not recommend that Canada should directly mimic any single country's model. Other countries have benefited from the presence of a dedicated competition advocate or have given their competition law enforcement agencies, the equivalent of our Competition Bureau, additional competition advocacy powers.3

Giving Voice to Competition

Earlier in this report, we propose a change in the regulation-making process to ensure that the impact of proposed regulations on competition and Canadian competitiveness is given due weight in the regulatory process. However, an important contributor to the competitiveness issues which the Panel was established to address is the long-standing inaction with respect to these issues on the part of public policy-makers and regulators at all levels of government. The private sector bears at least equal responsibility with government in this regard.

The change in public and private sector mindset that will be required to elevate competitiveness to the priority needed to assure Canada's continuing prosperity will not be achieved easily or quickly. It will require a profound recalibration of Canadians' attitudes and understanding of the elements of national economic success. Accordingly, the Panel has concluded that the absence of a national institution independent of both government and the private sector with a focused mission to advocate for specific measures to improve the levels of competition and competitive performance in specific sectors of private and public endeavour in Canada based on rigorous expert analysis is the most significant gap in Canadian competition policy.4 Such a body, staffed with the right people, has the potential for positive and lasting impact on the well-being of Canadians. Over time, the Panel believes that this will rival the impact of all the other measures discussed in this report.

Institutional Structure

International experience shows that there is no one "right" model for competition advocacy. Some countries place advocacy functions within the central government, others grant advocacy powers to the competition law enforcement agency, and a few have created an independent advocacy institution. Several countries distribute advocacy responsibilities across government institutions.

The Panel believes that a made-in-Canada approach, with the adoption of a specialized competition advocacy institution, is likely to provide the best prospects for sustained improvements in Canada's productivity. The increasing economic and legal complexity of competition law enforcement in Canada is a challenge for the Competition Bureau. Indeed, competition law enforcement is not restricted to the domestic arena; it has an increasingly complex international dimension where enforcers coordinate investigations. Providing the agency with additional advocacy responsibilities risks diluting the Competition Bureau's core enforcement effort.

We therefore recommend the separation of enforcement from the advocacy and review function. The administration and enforcement of competition law should remain exclusively with the Competition Bureau. These two sides of competition policy demand different skills and orientation. As Daniel Crane says:

The enforcement function may require primarily "tough-minded" prosecutorial personnel with expertise in legal processes whereas the advocacy function may require primarily policy-oriented personnel with expertise in political and regulatory processes.5

Moreover, concerns were expressed in submissions to the Panel that housing both enforcement and advocacy functions in the same agency might impair the agency's credibility in both its enforcement and advocacy activities.

Similarly, the Panel does not believe that assigning competition advocacy functions to the federal government or to departments or agencies responsible for specific industry sectors is likely to be successful. Competition is likely to become just one of many factors considered in the calculus of government decision making. Moreover, ministers with sectoral responsibilities may be perceived to be motivated by sectoral interests unrelated to competition. Independence is critical. A council that is free to speak out without being constrained by the bureaucratic or political ramifications of its work will be the most effective way to advance an agenda for a more competitive Canada.

Finally, because all levels of government must engage in a national effort to make Canada more competitive, provincial and municipal representation should help to assure that competitiveness issues are addressed regardless of where they reside. As stated earlier, we believe that there needs to be greater recognition of the importance of urban centres to our economic prosperity.

Therefore, the Panel recommends that a Canadian Competitiveness Council should be structured along the following lines:

  • The Council should be independent of government, but with a clear, annual reporting relationship to Parliament.
  • It should be initially mandated for five years and have secure and sufficient funding so that the Council could carry out its mandate in an effective and responsible manner.
  • The Council should be governed by a nine-member Board of Directors appointed by the Minister of Industry for a five-year term and made up of persons who are knowledgeable and experienced in matters of economics, business and government affairs pertaining to competition, industry, regulation and consumers.
  • The Board of Directors should include a majority of representatives from outside government:
    • six non-government (i.e., business, labour, academic)
    • three representatives who bring the respective perspectives of the federal government, the provinces and cities.
  • The Chair should be a person experienced in matters of business, appointed by the Minister of Industry.
  • The Chief Executive Officer of the Council should be appointed by the Board and should sit as an ex officio Board member.
  • The form in which the Council is established should allow it both to be established quickly and to be independent.

Mandate

The Council should serve as the primary Canadian advocate for competition. It should take a global perspective on competition issues in both the public and private sectors using evidence-based economic analysis. It should also have a small core staff who would conduct analysis and commission independent research.

The Council's mandate should not be restricted to examining government activities. A broad mandate is preferable to a narrow one. The Council should set its own agenda and not display a bias for or against government or the private sector.

Examples of the activities that the Panel envisages the Council might choose to undertake include:

  • reviewing existing laws and regulations, regulatory agencies and processes that affect competitiveness, and issuing reports with actionable recommendations.
  • reviewing private sector activity affecting competition, markets and productivity outside the realm of competition law enforcement, and issuing public reports with actionable recommendations addressing competition and productivity issues.
  • reviewing progress toward the elimination of internal barriers to the free flow of goods, services, people and capital.
  • conducting research on any other issues that the Council deems to have a material impact on Canada's competitiveness, and publicizing the results and recommendations.

The Council could choose to participate in and report on policy reviews at the invitation of a federal minister. The Council would be well positioned to review and report on sectoral regimes, in line with the five-year reviews the Panel recommends in this report. Provincial ministers and civic mayors should also be entitled to bring issues to the attention of the Council. In the Panel's view, the ability to partner with other non-government policy research organizations would also underscore the Council's independence and potential contribution to advancing Canada's competitiveness agenda.

At the same time, independence and effectiveness could be undermined by government requests to study issues that are unrelated or immaterial to competition. The ability of the Council to control its agenda and set its priorities will be essential to the Council's independence.

In addition to conducting research and issuing reports, a public voice is needed to foster national debate and dialogue on competitiveness issues. The Council should be free to comment on these issues in the media, interact with federal–provincial and municipal leaders and public officials as well as to participate in conferences and debates before the general public. In the same vein, reporting on activities and expenditures to assure public accountability would be achieved by requiring the Council to report annually to Parliament through the Minister of Industry.

Of course, political commitment is a necessary requirement for the Council to get off the ground and become successful. Resources and access to information and decision makers will be critical. Finally, it is also critical, in the Panel's view, for the Council to be given sufficient powers in its mandate to be seen and to act in an independent fashion. This is important not only in the day-to-day course of its work, but also for ensuring that the Council can attract and retain a Board of Directors, Chief Executive Officer and core staff of the necessary calibre to succeed.


The Panel recommends that:

60. The federal government should establish as expeditiously as possible an independent Canadian Competitiveness Council under the Minister of Industry. The Council should be staffed by a Chief Executive Officer and a small core staff, overseen by a Board of Directors.

61. The Council's mandate should be to examine and report on, advocate for measures to improve, and to ensure sustained progress on, Canadian competitiveness. The Council should not enforce laws and regulations but should have a public voice, including the power to publish and advocate for its findings.

62. The Council should set its own agenda, reviewing matters or conducting research on its own initiative as well as in response to the request of a federal or a provincial minister or a municipal mayor. Governments should not have the power to compel the Council to undertake or discontinue a review or study.

63. The Council should be required to report to Parliament on its activities on an annual basis through the Minister of Industry.

64. The Council's Board of Directors should consist of not more than nine persons, including the Chair, and should include a majority of non-governmental members, as well as members with experience representing the federal, provincial and municipal governments.

65. The Council should be mandated and fully funded in a manner that would allow the Council to operate in an effective and responsible manner for a five-year period. Prior to the end of the five-year period, the Minister of Industry should undertake a review to determine whether the Council's mandate should be renewed and, if so, on what terms.