Is Canada's food sector less competitive due to overregulation?
Many companies harbour a general aversion to regulations, often perceiving them as excessive burdens that hamper their ability to navigate an intricate web of rules. In sectors like food production, which encompasses areas such as food safety, fiscal constraints and labelling requirements, these challenges are a constant struggle. Some of this resistance to regulation is undoubtedly rooted in corporate interests, but it is increasingly evident that the regulatory burden on companies, especially within the food industry, is exacting a toll.
Let's examine Canada's thriving natural health product sector as a case in point. This sector has emerged as a significant contributor to the national economy, showcasing robust growth and innovation. However, its promising trajectory is currently under threat due to what many perceive as overregulation, particularly stemming from new labelling rules that present substantial challenges for the industry. The health products sector encompasses a wide range of products, from vitamins and herbal remedies to traditional medicines and organic hygiene products. According to a recent Deloitte report, sales in this sector have surged from an estimated $4.3 billion to approximately $13.2 billion in recent years, with exports also expanding from $0.7 billion to $3.6 billion. This growth is not only reflected in sales figures but also its significant contribution to Canada's GDP and employment, providing livelihoods for approximately 92,000 full-time equivalent jobs – a truly substantial impact.
Regrettably, most Canadians are unaware of the regulatory shifts occurring across various facets of this sector, including cost recovery, labelling and health product regulations. While consultations are ostensibly carried out for each change, public authorities seldom heed the concerns raised by industry stakeholders. For instance, the ongoing open consultation on cost recovery, which concluded in August, is poised to be implemented by 2025 with no significant adjustments. In 2022, new labelling regulations were introduced, with a phased implementation plan stretching into 2025. Additionally, the recent Royal Assent for Vanessa's Law in 2023, with implications for Natural Health Products, anticipates the introduction of further regulations in 2025 and beyond, underscoring the evolving Canadian regulatory landscape, with one change following another in quick succession.
These recent regulatory changes, particularly those related to labelling, are poised to unravel the significant progress made in the natural health sector. Although well-intentioned, these regulations disproportionately impact the predominantly small and medium-sized businesses that constitute the sector. Many of these enterprises have already been severely affected by the COVID-19 pandemic and have limited capacity to absorb the additional costs associated with these new rules. A recent Deloitte survey paints a grim picture: 50% of respondents foresee a negative impact on business attractiveness, 76% anticipate reducing their product offerings, and 21% are contemplating shutting down their operations in Canada. The prospect of one in five businesses exiting the industry is well beyond the norm, potentially fostering more competition and competitive pricing overall – a double-edged sword.
What makes these developments especially worrisome is that they revolve around health products, which have gained paramount importance for Canadians in the wake of the pandemic. As Canadians prioritize their health more than ever before, the competitiveness of our food sector becomes pivotal.
READ: Post-COVID, consumers are taking a more proactive approach to their health
The repercussions of these regulations are vast, extending beyond stifling innovation and competitiveness to encompass significant job losses and reduced product diversity. This is deeply concerning, given that the health products sector has not only been a source of entrepreneurial potential but has also offered healthier lifestyle choices for Canadians.
Furthermore, the sector's challenges highlight broader issues within regulatory policies. Regulations, originally designed to ensure safety and efficacy to protect the public, can inadvertently stifle growth and innovation. This is particularly true in sectors like natural health, where small businesses dominate and lack the resources to navigate complex regulatory landscapes.
As Canadians and Ottawa grapple with ways to enhance competition in our nation, it's crucial to strike a balance between consumer safety and health on one hand and innovation and business growth on the other. The current trajectory strongly suggests the need for a comprehensive review of these regulations, potentially exploring alternative policies that achieve the same objectives without jeopardizing this vital sector. Only through such a reassessment can we ensure that our food sector, not just health products, continues to thrive, contributing to Canada's economy and the well-being of its consumers.
