The Canada-United States regulatory regime as the road to recovery.

• Author: Sands, Christopher
• Position: PROCEEDINGS OF THE CANADA-UNITED STATES LAW INSTITUTE HENRY T. KING, JR. ANNUAL CONFERENCE on THE CANADA-UNITED STATES REGULATORY REGIME: REVIEW, REFORM, RECOVERY: Cleveland, OHIO: April 8-10, 2010

Session Chair--Christopher Sands

United States Speaker--Donald B. Cameron, Jr.

Canadian Speaker--James P. McIlroy

Canadian Speaker--Larry L. Herman

Canadian Speaker--J. Michael Robinson, Q.C.

United States Speaker--R. Richard Newcomb

INTRODUCTION

MR. SANDS: My name is Christopher Sands, and I am a senior fellow from the Hudson Institute. (1) It is a great honor to not only listen to three days of terrific presentations, but now to be able to moderate what will be the grand finale of the panel. In this panel, we will try to put into perspective some of what you have seen and heard in previous panels. My role is similar to that of William Shatner's in the closing ceremony of the 2010 Vancouver Winter Olympics, (2) in which he gave a sort of comedic opening, but also set the tone for the rest of the presentations.

As the William Shatner role, I am to set in motion a cavalcade of Canadian Law Institute celebrities: people who have been well involved with this organization for a long time, who are well involved in the issues of Canada-United States law, and who will bring their perspectives to what we have heard as well. Let me briefly introduce the panelists for this final session, who actually need no introductions.

Don Cameron is the practice group leader for the International Trade group at Troutman Sanders LLP in Washington, D.C. (3) Next to him is Jim McIlroy, who is counsel on Public Policy at McIlroy & McIlroy in Toronto. (4) Larry Herman is a partner at Cassels, Brock, & Blackwell in Toronto. (5) Michael Robinson is counsel at Fasken, Martineau, DuMoulin's Toronto office. (6) Finally, Rick Newcomb is the chairman of the International Trade practice group and a partner at DLA Piper, LLP in Washington, D.C. (7)

I am going to make a few contextual remarks, after which each of these gentlemen will have a chance to comment.

First, as a general observation, one of the rules you learn early on about political economy is that as people become wealthier, they become much more insistent on having a voice in the governance of the transactions that have made them wealthy. That is very logical. You want to have a say in the rules that affect your livelihood, and the wealthier you are, the better you have means to insist and make sure that governance systems respond to you. This is an old human problem with the way we organize ourselves. This was a problem even in the Roman Empire: as Egypt and Byzantium became wealthy, they wanted a say in the politics of Rome.

Those of you who are involved with our Anglo-American tradition here will remember that, while we think of the Magna Carta as a foundational document in law, (8) it came about because of the wealth of barons against the wealth of kings and the desire to have a say in the way in which the government was run.

As the Thirteen Colonies along the Eastern Seaboard became wealthier and wealthier, they wanted, as Englishmen, seats in Parliament. When they did not get those seats, we had a revolution to change the rules.

Canada stayed loyal to the British Empire, but nevertheless, as the Canadian colonies became wealthier and wealthier, the Canadians insisted in having a voice in the management of the empire. First this insistence was through imperial councils and later in dialogue with Great Britain concerning foreign laws or other issues, including issues of when to go to war.

This problem has been with us for a long time and is very human; it is the same problem we now face in North America between Canada and the United States.

One other brief comment: it is not coincidental that we have seen a great spread of democracy as a means of governance around the world. You will find more and more countries that have democratic or quasi-democratic systems as we see wealth and prosperity grow from one side of the world to the other. Increasingly, we see the connection between those two factors and globalization. At least for North America, deepening economic integration is moving faster than the governance mechanisms we set up to manage those transaction flows. This is something we have heard again and again in different ways from these panels.

When this happens, as we have seen and heard in the last few days, we fall back on the law to reconcile differing systems of governance to try to allow the flows to continue in the best way possible, which is according to a consistent rule of law. That is why the work of the Canada-United States Law Institute is so essential: at the moment, there is no overarching governance for what is increasingly a shared economy, and we have a lot of work to do sorting out the gaps and differences in our governance systems to allow that integration to continue to deepen.

According to the discussions we have heard so far, I would argue that what we have seen are four types of governance that are coexisting and attempting to give structure to the economic flows that are shaping our integration between the United States and Canada.

The first and most logical place to begin is with federal-to-federal government arrangements. Most notably, these arrangements include the North American Free Trade Agreement (NAFTA), (9) but also, as we have heard earlier this morning, tax treaties designed to govern the way in which we manage taxation, intellectual property rights, and some of the border security arrangements that do bring us back to federal control of national borders.

Secondly, we see the emergence of an interesting area that came up yesterday in the first panel: state and provincial interactions. These occur particularly in the areas of environmental climate change policy, (10) as in the Western Climate Initiative, (11) the Regional Greenhouse Gas Initiative, (12) and other organizations among states and provinces. Others include organizations attempting to deal with carbon trading, not only across the broad region, but also among these different jurisdictions.

A third area is the private-to-private interaction; in other words, businesses that are working together to try to define rules. The most notable example of that involves Underwriters Laboratories and Canadian Standards Association, (13) which have both tried to create baseline reconciliations of the national systems that we have for governing engineering and safety standards. These are reconciliations that do not trump what the governments do, but they try to define business with a clear set of operational standards for product safety that will give them the ability to produce a product that works in multiple markets. Instead of superseding government standards, it helps government standards work more effectively by building a bridge between them.

Perhaps the most fascinating area for me, and one that a number of panels mentioned, is the public-private partnership for the governance of these transactions. More panels may have mentioned this, because it is an area of growing concern. The private sector has a good window on what is needed, and the public sector nonetheless has the authority to provide the governance. With their own perspectives, the two work together.

An example of this is food-safety standards where private groups provided supply chain verification for food safety, but the actual testing was done by a government agency.

In addition, the auto industry is one where there needs to be dialogue between the governments and the industry to figure out how to effectively reach goals, especially with respect to the technical challenges of building a car that is green, or building a car that needs to meet certain fuel efficiency standards.

Data protection and privacy is another area where there needs to be a compromise between private parties and government. Companies are doing their best to protect data--obviously for reasons not just of liability, but also out of a concern for their clients and employees--but they are also trying to make sure this can be verified with minimal intrusion by governments in a way that allows them to move data and manage multinational enterprises.

Tax treaties can also fall back on business to help them figure out things like transfer pricing. And, as we heard on the last panel, we have programs like the customs trade partnership for tariffs, partners in protection, and other programs designed to build a partnership between the private sector, which manages security across the supply chain, and the public sector, which has to use that information to expedite the secure passage of goods across our border. And, with new areas, such as "10 plus 2," (14) for example, we are moving further down this road.

All of this interaction and attempts to establish governance between these two countries to manage a deepening integration raises a couple of broad questions that I think this panel is very well suited to begin to address.

First, remember that the conference title we have been working under here is the "Canada-United States Regulatory Regime: Review, Reform, and Recovery." Certainly we have discussed reform and recovery, but this also includes how we can facilitate the recovery of some of the best of these two countries' cooperative traditions to bring about further economic recovery.

This raises some questions for me. First, how can the current law be adapted, extended, and refined to provide adequate governance for today's integration? What can we do to reform the current laws in their application, administration, and function to make them work better?

Secondly, what role should be played as we move forward to adapt additional governance by the Canadian Parliament, and the United States Congress? Also, what role should state and provincial legislatures play? What role should judiciaries play? We have already heard a little of the judicial contribution in the area of data privacy, and while that may be good, perhaps it is not as good as if the legislature itself had opined. What role should be played by administrative agencies? The EPA, (15) for...