OECD Product Market Regulation (PMR) Indicators: How does Canada compare? ___________________________________________________________________________________ Competitive product markets foster economic growth and can improve the living standards of citizens. OECD’s Product Market Regulation Indicators assess the alignment of a country’s regulatory framework with internationally accepted best practices. The Economywide Indicator measures the distortions to competition that can be induced through the involvement of the State in the economy, as well as the barriers to entry and expansion faced by domestic and foreign firms in different sectors of the economy. This indicator is complemented by a set of Sector Indicators that measures regulatory barriers to competition at the level of specific network and service sectors.
Overall PMR Indicator Index scale 0 to 6
Canada
1.76
OECD average
1.38
5 Most competitionfriendly countries 5 Least competitionfriendly countries
1.00 1.82 0.0
2.0
4.0
6.0
Economy-wide PMR Indicators: a breakdown by major components Index scale 0 to 6 from most to least competition-friendly regulation
6
Canada OECD average 5 Most competition-friendly countries 5 Least competition-friendly countries
5 4 3 2 1 0 Public Ownership
Involvement in Business Operations
Simplification and Evaluation of Regulations
Admin. Burden on Start-ups
Barriers in Service Barriers to Trade & Network sectors and Investment
Note: All the averages include only OECD countries. Information refers to laws and regulation in force on 1 January 2018. When the regulatory issues included in the PMR are not determined at the federal level, the information refers to Ontario. Source: OECD 2018 PMR database.
ECONOMY-WIDE HIGHLIGHTS
Product market regulation in Canada is somewhat less competition friendly than in most OECD countries. The rules governing public procurement fall short of key OECD best practices, which is also the case for the governance of state-owned enterprises. In addition, the licensing regime could better facilitate entry by new businesses, and barriers to entry for foreign suppliers are higher than in most OECD countries in both service and network sectors. However, regulatory procedures are simple and administrative requirements necessary to set up new firms are low. Similarly, public ownership of large network operators is quite low.
Economy-wide PMR indicators: a breakdown by sub-components Index scale 0 to 6 from most to least competition-friendly regulation Distortions Induced by State Involvement Simplification and Evaluation of Regulations
Complexity of Regulatory Procedures
6 5 4 3 2 1 0
Interaction with Interest Groups
Involvement in Business Operations
5 Least competition-friendly countries
Assessment of Impact on Competition
6 5 4 3 2 1 0
Price controls
Governance of SOEs
Direct Control
Scope of SOEs
Gov’t Involv. in Network Sectors
Public Ownership
6 5 4 3 2 1 0
5 Most competition-friendly countries
Public procurement
OECD average
Command & control regulation
Canada
Barriers to Domestic and Foreign Entry
Barriers to Trade Facilitation
Barriers to Trade and Investment
Treatment of Foreign Suppliers
6 5 4 3 2 1 0
Tariff Barriers
Barriers in Service & Network sectors
5 Least competition-friendly countries
Barriers to FDI
6 5 4 3 2 1 0
5 Most competition-friendly countries
Barriers in Network sectors
Licenses and Permits
Admin. Burden on Start-ups
Admin. Requirements for Lim. Liab. Companies and Pers.Owned Enterp.
6 5 4 3 2 1 0
OECD average
Barriers in Services sectors
Canada
Note: All the averages include only OECD countries. Information refers to laws and regulation in force on 1 January 2018. When the regulatory issues included in the PMR are not determined at the federal level, the information refers to Ontario. If the blue bar does not appear on the chart for a specific indicator, it means that its value is 0. Source: OECD 2018 PMR database.
SECTOR-SPECIFIC HIGHLIGHTS Regulation of network industries in Canada is in line with the OECD average, with the exception of water transport. Most professions are more strictly regulated than in many OECD countries, especially in terms of barriers to entry. Retail distribution faces considerable regulatory constraints to competition. In contrast, the regulatory framework for the retail sale of medicines is competition-friendly.
Regulation in network and service sectors PMR Indicators for network sectors Index scale 0 to 6 from most to least competition-friendly regulation Canada 5 Most competition-friendly countries
6
OECD average 5 Least competition-friendly countries
5 4 3 2 1 0 Electricity
Gas
Rail
Air
Energy
Road
Water
Fixed
Transport
Mobile
E-Communications
PMR Indicators for professional services* and retail distribution Index scale 0 to 6 from most to least competition-friendly regulation
6
Canada
OECD average
5 most competition-friendly countries
5 Least competition-friendly countries
5 4 3 2
1 0 Lawyers
Accountants
Architects
Civil engineers
Professional services
Real estate agents
Retail distribution
Retail sale of Medicines
Retail trade
* When comparing the indicators across countries, it should be kept in mind that the activities undertaken by specific professions may vary between countries. Note: All the averages include only OECD countries. Information refers to laws and regulation in force on 1 January 2018. When the regulatory issues included in the PMR are not determined at the federal level, the information refers to Ontario. Source: OECD 2018 PMR database.
OVERALL ASSESSMENT
With regulatory barriers to competition that are higher than the OECD average in several areas, there is scope for improving product market regulation in Canada.
Strengths
Challenges
The administrative burden imposed on new firms, whether limited liability or personally owned firms, is one of the lowest among OECD countries.
The direct involvement of the government in network sectors is limited. The government only owns, directly or indirectly, shares in the largest operator in the electricity and railway sectors.
Rules regulating the interaction between interest groups and policymakers are among the most transparent in the OECD. Regulations exist to address and mitigate the involvement of senior civil servants, members of legislative bodies and appointed public officials in cases of conflicts of interest. In addition, the framework for engaging stakeholders in public consultation on new regulations is clear.
The governance of state-owned enterprises is not in line with OECD best practices. For example, state-owned enterprises benefit from exemptions from laws and regulations that apply to privately owned firms, and in some sectors, they have better financing conditions. In some sectors, there is also no clear separation between the public body that exercises the ownership rights and the industry regulator.
The regulatory framework for public procurement does not provide a level playing field for all potential bidders, in particular with respect to the procurement of public works.
The licensing regime does not include a one-stop shop for issuing and authorising permits, and for accepting all notifications necessary to open up a business. There is no "silence is consent" rule that would limit the time required for approval.
Retail distribution regulation is less competitionfriendly than in other OECD countries, mostly due to a burdensome registration and licensing regime.
Further information
“What are the 2018 OECD PMR indicators?” PowerPoint presentation on OECD PMR website
Vitale, C., et al. (2020), " The 2018 Edition of the OECD PMR Indicators and Database – Methodological Improvements and Policy Insights", OECD Economics Department Working Papers
Please visit our website : http://oe.cd/pmr Contact us at: PMR2018@oecd.org