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"Our Two Federations: Contrasting Evolutions and Common Challenges"

Notes for an address at the
Council of State Governments

Cleveland, Ohio

December 10, 1996


The U.S. and Canada would be unthinkable other than as federations. Federalism has served both our countries well in the past. It is also the way of the future. Indeed, the new global economy brings conflicting pressures, both for larger alliances and for greater regional autonomy. Federalism is a flexible way to reconcile these two pressures -- a fact which more and more countries are recognizing. In Europe in particular, but also elsewhere in the world, nation-states are grouping together in quasi-federal arrangements in response to global economic imperatives. We in the United States and Canada are lucky to be enjoying the benefits of a federal system, which many other countries are still striving to achieve.

But federalism is more than an economic advantage, it is an ethic and a moral principle. In a very fundamental way, federalist systems of government are helping human beings all over the world to live together more harmoniously. This is crucial in a world where, according to Professor Daniel Elazar of Temple University in Philadelphia, there are some 3,000 human groups who are conscious of their respective identities. Of the over 180 politically sovereign states now in existence, over 160 are multiethnic in composition. Living side by side, within the same state, with neighbours of different cultural backgrounds, teaches people tolerance and thus makes them better citizens.

The English poet John Donne once said that "no man is an island". His comment applies equally to cultures and peoples. There is no benefit in being isolated and separated from others, trapped behind walls of fear and misunderstanding. Federalism allows us to combine our strengths for projects that will benefit all, but is also sufficiently flexible to facilitate the full expression of regional identities. In short, it allows us the best of both worlds.

Even a cursory glance at the world's federations reveals that no two are the same. Your federation and ours are different. Their evolutions have been different. But like all countries we face certain common challenges. I will deal first with the past, tracing the contrasting evolution of our two federations. Then I will discuss certain challenges our two federations are now facing. What better forum than the Council of State Governments to have a useful and stimulating discussion on these issues. Thank you for inviting me here today.

A tale of two federations

Those who think constitutions are the first and last word in the development of a federation should be given pause by the experiences of our countries, which have two of the world's oldest constitutions. Although, in their written form, neither has changed a great deal, both our federations have evolved dramatically. They demonstrate that major changes can be brought about without altering a single comma in a constitution. Constitutions evolve -- often in fundamental ways -- through judicial interpretation, changing conventions, and the exercise, or non-exercise, of powers, rather than solely through formal amendments. The U.S. provides a clear example of this, since it has developed remarkably over time and yet, of more than 9,100 amendments that have been proposed since 1789, a mere 26 have been ratified. In Canada, some of the powers originally intended to give the federal government a strong hand -- such as the right of disallowance and the power of reservation, which allowed the federal government to overrule provincial legislation -- have fallen into disuse, although they were used extensively in the 19th century. And today, intergovernmental agreements and new collaborative approaches are permitting substantial evolution without requiring amendments to our Constitution.

Federal constitutions are thus not strait-jackets that prevent change -- they are instead frameworks which allow change to take place. That is why the U.S. and Canada have been able to evolve in very different directions. The U.S. has become more centralized over time, in spite of a relatively decentralist Constitution. By contrast, Canada's Constitution was centralist at the time of Confederation, but today we have one of the most decentralized of all federations.

The spirit of the U.S. Constitution was decentralist. It gave restricted powers to the national government and placed the residual authority with the states. James Madison, writing as Publius, felt obliged to demonstrate "that no one of the powers transferred to the federal government is unnecessary or improper". By contrast, at the time of Confederation in 1867, the distribution of powers in the Canadian Constitution had a strong centralist bias, including the allocation to the federal government of the major residual authority, phrased as "peace, order and good government".

Canada's Fathers of Confederation wanted to avoid what they saw as a main cause of the American civil war -- a weak federal government with an emphasis on state autonomy. They also wanted to ensure national security and pan-Canadian communications and economic development.

However, in spite of its centralist thrust, the Constitution Act of 1867 granted significant powers to the provinces -- for example, over language, education and law. Canada's nation-builders believed that they could construct a country with a strong central government, without destroying minority cultures and languages or the particularities of Quebec and other regions. They believed that French and English could live side by side and work together to strengthen our nation. These beliefs are one of the greatest legacies our founders left us.

At the outset, then, Canada's federation was a great deal more centralized than yours. Yet, today, even though there have only been four amendments to the distribution of powers, our federation has become in many respects more decentralized. This is shown by a variety of indicators. For example, in 1991, federal expenditures, after intergovernmental transfers, as a percentage of total government expenditures, were 58.5% in the U.S., as opposed to 40.8% in Canada. In 1961, the comparable proportion for Canada was 49.7%. Furthermore, according to a specialist in comparative federalism, Professor Ron Watts of Queen's University in Ontario, approximately 80% of federal transfers to state and local governments in the U.S. are conditional grants. In Canada, by contrast, no less than 76% are now unconditional. How can we explain this paradox? As I see it, five socio-economic and institutional factors, together, provide at least a partial answer.

First, while the original distribution of authority in the U.S. identified several shared functions, in Canada demarcation of the exclusive responsibilities of each government was emphasized. In the U.S., the federal and concurrent powers are set forth explicitly, but the Constitution left a large unspecified residual power to the states. The courts have tended to interpret what is "implied" in the federal powers as broadly as possible, which, over time, has contributed to increased centralization. By contrast, in Canada, where both provincial and federal powers were explicitly listed in the Constitution, the courts have, since the late 19th century, interpreted certain federal powers narrowly so as to expand provincial powers. Later, the courts' focus on provincial authority over "property and civil rights" effectively transformed that power into a replacement residual clause.

Second, the circumstances of our major minority groups are very different. In your country, minorities are dispersed, and no one group is so concentrated in a single state as to form a majority of that state's population. Therefore, your minorities have tended to look to the federal government to support their interests. In Canada, French-speakers are our most important minority group. They are especially concentrated in Quebec, the second most populous province, where 83% of the population is French-speaking. French-speaking Quebecers have a special relationship with their provincial government, since it is the sole government where the majority of elected representatives are French-speaking. Although the Quebec government has at times supported centralist measures, it has usually acted as a strong advocate of provincial autonomy. There is no equivalent of this situation in the U.S.

Third, in the U.S., the executive and legislature are separated in both orders of government, while in Canada legislative and executive powers are fused in the executive-centred system of parliamentary government. Therefore, in the U.S., divisions between President and Congress have been emphasized. In Canada, the system is defined much more by federal-provincial relations than by the division of powers between the legislative and executive branches of government.

Fourth, while there are 50 U.S. states, Canada has only 10 provinces. This means that the relative clout of each province is considerably greater in relation to the federal government than that of the individual American states. The comparatively smaller number of provinces also contributes to achieving consensus among governments, through such mechanisms as First Ministers' Meetings, and to the building of partnerships between the federal government and the provinces. Then again, it is also easier for the provinces to form strong coalitions in their relationship with the federal government.

Finally, the differing international roles of the U.S. and Canada have had important implications for the domestic status of their federal governments. The superpower rank of the U.S., and its consequent military spending, have focused attention on the central government. Canada, by contrast, is a middle power internationally. Our federal government has therefore not been the focus of a similar level of attention.

The challenges we share in both our countries

Federalism has served our interests well in the past. It has helped us become leaders in terms of economic development and the standard of living our citizens enjoy. It is surely not an accident that four of the world's five richest countries are federations: Canada, the United States, Germany and Switzerland. Today, we face the question of whether federalism will continue to serve us as well in the 21st century. I am confident that it will. One of the strengths of federal systems is that they are flexible enough to adapt and evolve when faced with new challenges and new contexts.

It is clear that both our federations do face a number of challenges. Today, I will talk about two of the major ones: first, the need to get our fiscal houses in order while maintaining our social policies; and, second, the need to maintain unity while adapting to our increasing cultural pluralism.

The fiscal and social policy challenge

Federalism has been wrongly criticized as promoting duplication and overlap, and thus inflating government spending. This is simply not true. A study released by the OECD in 1985 found that government expenditure as a share of GDP was, on average, some 7% lower in federal as opposed to unitary states. Moreover, today, among the least indebted industrialized countries, you find such federations as Australia and Switzerland. Federalism does not increase the risk of indebtedness, but it does not protect states from it either. However, if a federal state has a debt problem, the flexibility inherent in federalism can help it cope. Both our countries are good examples of this.

The U.S. federal deficit-to-GDP ratio stood at 5.2% in 1986, but in 1998, it will be 1.1%. In Canada, our efforts are also bearing fruit. In 1985-86, Canada's federal deficit-to-GDP ratio was 7.2%, but in 1997-98, that deficit will be only 2% of GDP. On a borrowing requirements basis -- the measurement that is used in the U.S. -- our budget will be balanced in 1998-99. Canadian short-term interest rates are now about 1.5 % lower than those in your country. Our efforts have also, in some cases, directly benefitted the provinces. For example, the lower interest rates between January 1995 and June 1996 have provided provincial governments with cumulative savings of about $1.3 billion. Furthermore, the flexibility of our federation has allowed the provinces to find their own ways to address their budget deficits, and seven have now balanced their budgets or are showing a surplus.

Leaders of state and provincial governments in our two countries have expressed concern that budget-cutting at the national level will be off-loading: in the U.S. through what you call unfunded mandates, and in Canada through cuts in transfer payments. You will not have any difficulty in finding provincial premiers who suggest that there has been off-loading. But let me tell you that between 1994-95 and 1998-99, transfer entitlements will fall by 10.5%, while total federal department spending will decline by 21.5%. Furthermore, provinces were notified a year in advance that such cuts were going to be necessary. Making decisions about budget cuts is tough. But I can assure you that, despite the need to make such cuts, Prime Minister Jean Chrétien, Minister of Finance Paul Martin and our government have chosen to cut spending significantly in areas such as transportation in order to preserve our social programs. We are ensuring that cuts, where necessary, are fair to all provinces.

We have also responded to concerns about the use of the federal spending power, which allows the federal government to make payments to governments, institutions and individuals even in areas outside its jurisdiction. The division of responsibilities in federations refers to legislative power, not spending power. A federal spending power within the jurisdictions of member states exists in all federations. In Canada, it has been the basis, for example, of the national health system, a great source of pride for all Canadians. Nevertheless, the provinces have argued that its unilateral use can undermine their ability to set and follow priorities. Therefore we announced this year that the federal spending power will no longer be used to create new shared-cost programs in areas of exclusive provincial jurisdiction without the consent of the majority of provinces. The federal government has taken the unique action of voluntarily limiting its own spending power. This limitation reflects our commitment to moving toward more harmonious and cooperative relations between the federal government and the provinces.

In both countries, we are seeing some redistribution of responsibilities and an attempt to give more flexibility to the states and provinces. In your country, there has been a lively debate on welfare reform, with states taking clearly divergent approaches. At the same time, the public on both sides of the border want assurances that basic standards will be maintained, and that a "race to the bottom," in which states and provinces compete to offer the most stingy policies, will be avoided.

In Canada, we are working with the provinces to clarify the roles of the different levels of government, to find innovative ways to pool our strengths, and to build new partnerships. Two policy areas where we are seeing real progress are job training and child poverty. By 1999, we will have transferred the management of all job training funded through the Employment Insurance program to those provinces interested in taking on this challenge. Meanwhile, the federal government will continue working to ensure the interprovincial labour mobility rights of Canadians are fully respected, and it will continue to provide certain services such as the national labour-market information and exchange system. Last Friday, we announced the first agreement in this area between our government and the province of Alberta. With these new agreements, an important element of flexibility will be injected into a public policy area that is crucial in the new global economy.

Child poverty is a second area where Canadian governments are forging a renewed partnership. Canada and the U.S. are the two industrialized countries with the highest level of child poverty, and I know we are all looking seriously at ways to address this. In the U.S., your new welfare reform law gives states increased flexibility in managing programs for poor families, while encouraging recipients to move from welfare to work. In Canada, a federal-provincial ministerial council on social policy, jointly established last summer, has agreed to treat benefits for children as a top priority. The ministers are pursuing the idea of folding the existing federal child tax benefit and provincial welfare payments for children into a new joint program.

The challenge of unity and pluralism.

Like the U.S., Canada is a very multicultural country. Cultural pluralism will become more and more of a salient issue for both of us. Canada is also bilingual, and both French and English are recognized as official languages. As I mentioned earlier, our most prominent minority is concentrated in a single province, Quebec. This has led to an additional challenge, as it has provided an impetus for a secessionist movement.

It is important that I put the 1995 Quebec referendum on secession into perspective. I am speaking to you as a Quebecer and a Canadian who is very attached to both his identities. I am immensely proud of what Quebecers have achieved together, building a vibrant, flourishing, predominantly French-speaking society in a continent where English dominates. But I am also extremely proud of what Canadians -- our wider family -- have achieved together, in building a society in which respect for diversity and compassion prevails.

The vast majority of Quebecers feel as I do -- they are proud of both identities. What we, as a government, must do, is show Quebecers that they do not have to choose between the two identities that they cherish. We must show them to what extent the Quebec identity and the Canadian identity complement each another.

As a government, we must also demonstrate how well federalism responds to Quebecers' needs, and encourage other Canadians to show how important Quebec is to their sense of being Canadian. We can amply demonstrate the former, and we are working toward recognition of Quebec's uniqueness within the Constitution as a way for Canadians to demonstrate the latter. In the meantime, Parliament passed a resolution in December 1995 recognizing "that Quebec is a distinct society within Canada" by virtue of "its French-speaking majority, unique culture and civil law tradition".

Americans are friends of Canada. The overwhelming majority of Americans support a united Canada. And I know that they want a united Canada not only for economic reasons. You want a united Canada because you don't want Canada setting a bad example for the world, that of division, rather than a positive example, that of unity. I know, for the same reason, that all Canadians -- Albertans no less than Quebecers, Nova Scotians no less than Manitobans -- must work toward reconciliation. We must do so not just for ourselves and our children, but also for the many other people elsewhere who look to Canada as a source of hope. Many of them can only dream of the advantages we enjoy as part of the Canadian federal system. They want Canada to continue to send the right message, and to show the world a model of harmonious cohabitation.

Let me give you an example which is particularly pertinent, because the country in question has just, in an occasion important for all of us, signed a new Constitution today. That country is South Africa. Unlike Canada, South Africa doesn't have two official languages that are important internationally, but rather 11 official languages. Also unlike Canada, South Africa is not recognized as one of the best countries in the world in which to live. On the country, it has just emerged from the vile experience of apartheid. Through reconciliation and striving for a harmonious cohabitation of cultures, South Africa will gradually regain the strength it needs to take on the human and socio-economic challenges it faces. The only solution for South Africans is unity, not fragmentation. Surely Canada, a country so blessed by fortune, should offer South Africa hope, not an example of break-up.

Conclusion

Our federal systems, which have served us so well in the past, face major challenges on the eve of the 21st century. We can both take inspiration from how the other responds to the challenges we share. Through our trade links and all manner of exchanges, like this meeting today, we can share our ideas, our solutions, and our dreams.

Canada faces a unique challenge -- that of secession. Some say that the proof that Canada doesn't work is the existence of a separatist movement in Quebec. I think that, on the contrary, Canada works well. Our federation works, it can be improved, and it will be improved if Quebecers and other Canadians resolutely decide to work together. And we will choose to stay together, because the forces of unity will prevail. I am confident that our two federal partners in NAFTA -- your country and Mexico -- will have a united, federal Canada as their partner for many years to come. There is no doubt in my heart and mind that federalism is the way of the future.

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Last Modified: 1996-12-10  Important Notices