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"CANADA: A FAIR FEDERATION"
NOTES FOR AN ADDRESS
BEFORE THE
CALGARY CHAMBRE OF COMMERCE
CALGARY, ALBERTA
APRIL l 4, 1997 Alberta is the home of the pioneer spirit
in Canada. That spirit combines the determination to beat the odds and the
fortitude to open up new frontiers. But it is balanced by a gentler side. The
hardy pioneers who built this province knew that surviving the harsh conditions
on the frontier meant helping each other out. It meant sharing and making sure
that everyone was treated fairly. This aspect of the pioneer spirit still
informs Albertans' actions: 39.6% of Albertans volunteer, a higher percentage
than in any other Canadian province.
This January, an article in the Calgary Herald
caught my eye. The headline read "Calgarians united by their
gentleness." The writer, Peter Menzies, talked about Canadians' commitment
to fairness and sharing -- a commitment which led thousands of Calgarians to
offer their sympathy and cash to the family of Grayson Wolfe. As you will
remember, Grayson's parents were facing huge medical bills, which they could not
pay. "Instinctively, Calgarians know this is wrong," Mr. Menzies
wrote. "In our world, you do not have to go bankrupt to save your baby's
life."
This is what our federation is all about. It is
about fairness -- balancing our belief in individual initiative with a
commitment to sharing. Helping one another out in times of need. Supporting one
another's endeavours. This sharing makes Canada greater than the sum of its
parts.
Indeed, the vast majority of Canadians believe
that we have built something special together. Committed to fairness and sharing
as personal values, we have built a nation that embodies those same values writ
large. This is vital in so vast a country, which, while blessed with tremendous
natural and human resources, must nonetheless deal with the challenges which
accompany distance, disparity and diversity. It is important that we remain
committed to striking the right balance between the self-reliance of individuals
-- and individual provinces -- on the one hand, and the need for sharing and
fairness on the other.
Debates about fairness in Canada are as old as
our federation. Perhaps they are inevitable in a country so strongly committed
to the ideal of sharing. The National Policy Tariff of 1879, for example, which
aimed to develop Canada's manufacturing sector as a whole, to generate the
revenues necessary to construct national transportation networks, and to
encourage east-west trade, was nevertheless widely viewed in the West as being
geared solely to help the manufacturers of Ontario and Quebec. The Crow Rate,
popular with Prairie wheat farmers, was nonetheless seen by southern Alberta's
beef producers as inhibiting the livestock industry's development.
Then there are some policies that are just plain
wrong. Liberal politicians, beginning with my colleague, Natural Resources
Minister Anne McLellan, will forever be conscious of the consequences of the
National Energy Policy. This is also an example of what can happen if you don't
have representation from all regions of the country in government.
These debates continue today. An opinion poll
last October found that only 30% of Canadians believe the federal government
treats all provinces equally. Polls have shown that Canadians living outside
Quebec think that la belle province is treated better than the other provinces,
while Quebecers think that Ontario is treated best. These are very serious
concerns -- concerns which, as Minister of Intergovernmental Affairs with
special responsibility for national unity, I feel I must address. Interregional
jealousy is inherent to federations. But we in Canada are in a unique situation.
We are a federation threatened with break-up, and faced with a separatist
ideology which promotes suspicion, divisions and envy between citizens. When one
group of MPs arrives in Ottawa with the sole mandate of promoting the interests
of their own region, this encourages other regions to elect MPs who in turn
promote only their interests, and we lose any sense of a national opposition
committed to the good of Canada as a whole. It is important that our federal
political parties be capable of balancing different regional interests.
Otherwise, interregional jealousies will continue to escalate. And it is vital
for national unity that our spirit of generosity overcome these jealousies.
Canada should not be seen as a sort of zero-sum
game, because, within Canada, we are all winners. If our country dissolved into
ten inward-looking republics, Canadians would no longer enjoy the tremendous
advantages we share together today. In many provinces, the social safety net
would be substantially weakened. Furthermore, internationally, a united Canada
is a major plus. Our economy is sufficiently large to afford us membership in
the G-7. In major trade discussions, we have the critical size to be invited to
the table with the European Union, Japan and the United States. We constitute
the United States' biggest trading partner. Furthermore, Canada plays a key role
in the World Trade Organization and other international fora. Together, we enjoy
membership in APEC, the Commonwealth and the Francophonie.
Canada is not a zero-sum game. Each province has
its own strengths and identity, which together add up to a strong and diverse
country. Today, Alberta is a "have" province, but should a time arrive
when the global market does not favour your particular strengths, then you know
that you can count on the help of other provinces, just as you are helping them
now. Indeed, as recently as 1986-87, Alberta received $419 million under the
Fiscal Stabilization Program because of a year-over-year decline in its revenues
-- the second province to benefit from this program, the first being British
Columbia. That is what Canada is all about. And this "insurance
scheme" aspect of our country also promotes investor confidence. Helping
one another helps our economy.
Perhaps our generosity as a country is most
evident at times of tragedy, when, like any family, we instinctively band
together to help one another out. The Canada-wide efforts in response to the
Edmonton tornado of 1987 and, more recently, the horrendous Saguenay floods in
Quebec, are good examples.
Canadians' commitment to generosity and fairness
is reflected in the fourth Paul Martin budget. In particular, this budget
addresses the need for fairness to young Canadians. Intergenerational fairness
means sticking to our course of fiscal responsibility, but making targeted,
responsible investments in future generations. Thus, following up on the work of
the federal-provincial-territorial council on social policy renewal, we
announced a federal-provincial partnership to create a new $6 billion Canada
Child Tax Benefit by July 1998. We enriched federal assistance for higher
education and skills training by $275 million and doubled the annual
contribution limit to Registered Education Savings Plans. We have also invested
in excess of $2 billion in a youth jobs strategy, to help young Canadians escape
the vicious circle of no job, no experience -- no experience, no job. To give
one more example among many, we agreed with our provincial partners, including
your premier, to increase the Canada Pension Plan (CPP) rate in steps to reach
9.9% by 2003, ensuring that it will be sustainable and that no additional
burdens will be passed on to Canada's younger generations.
In fact, all four of our budgets have been about
ensuring fairness for the Canadians of today -- and for tomorrow's Canadians
too. Our strict fiscal policy has been accompanied by a commitment to tax
fairness. To that end, my colleague Paul Martin established a Technical
Committee on Business Taxation. It is considering ways to enhance fairness of
the taxation system, to simplify business taxation and thus reduce compliance
costs and headaches, and to encourage job creation and economic growth. We are
committed to fairness for all categories of Canadians -- businesspeople,
language minorities, Aboriginal Canadians, young Canadians. But, of course,
fairness does not mean uniformity, which is why it is also fair to recognize the
specificity of Quebec. After all, if North America were a Francophone continent
and Alberta its only majority-Anglophone component we would need to recognize
that specificity too.
But my speech today is concerned with fairness
between Canada's provinces and regions. I believe that we have a fair
federation. That being said, our federation is constantly evolving, and we
should always be looking for ways to fine-tune and strengthen it. We must not
become blinded by interregional jealousies to everything Canada has to offer.
Interprovincial fairness
How do Canadians think their ideals of sharing
and fairness should shape the way our federation works? Well, according to a
1995 Canadian Policy Research Networks' study, only 10% of Canadians believe
that government spending on poorer regions should be decreased or eliminated,
while 60% believe that Canadians have a right to expect a minimum level of
service wherever they live, including 66% of Albertans. Furthermore, an October
1996 CROP & Insight poll revealed that 70 to 80% of Canadians across the
country like the fact that the federal system permits Canadians to share wealth
between poorer and richer provinces.
Our values of generosity and sharing have been
part of our federation from the start. As one of the Fathers of Confederation --
Georges-Étienne Cartier -- said, our federation was founded on the
"kindred interest and sympathies" of our different communities. And as
Queen's University professor Thomas Courchene has argued, the roots of the idea
of equalization can be seen at the time of the British North America Act, in,
for example, the special grants accorded to Nova Scotia and New Brunswick
because of their specific fiscal needs.
A key advance in interregional fairness was
proposed in 1937. That year, the Rowell-Sirois Commission recommended the
arrangements for federal transfers be formalized in a system of "national
adjustment grants" to the poorest provinces. In 1957, Canada adopted a
formal equalization program along these lines. Although it is hard to imagine
against the bustling backdrop of Alberta's economy today, your province was a
recipient for the first 8 years of the program. In 1982, the principle of
equalization was deemed sufficiently important to be enshrined in section 36 of
the Constitution, "to ensure that provincial governments have sufficient
revenues to provide reasonably comparable levels of public services at
reasonably comparable levels of taxation."
We have achieved a great deal together. However,
as I said before, our achievements have always been accompanied by debates about
fairness. These debates are, in my opinion, being aggravated and intensified by
the lack of a truly national federal opposition party.
Interregional jealousies in the 1990s
Let me transport you for a moment to the House of
Commons last fall. We, as a government, were faced with a very strange
situation. To caricature it, day after day, the Bloc Québécois stood up to
complain that when Calgary-based Canadian Airlines has a problem, everyone
stampedes to help. On the other hand, the Bloc alleged, nobody cares about
Montreal-based Air Canada because, as usual, Quebec is the victim of the
federation. The Bloc wants one airline for two countries, while we want two
airlines for one country. Then Reform stood up, saying that if Air Canada were
in trouble, we would all rush to help it, because Quebec is the spoiled brat of
the federation. But, according to Reform, we were dragging our heels about
helping Canadian Airlines because it is a Western-based company, and the West
always loses out.
Imagine I am Gilles Duceppe...
Imagine, for a moment, that I am Gilles Duceppe,
the Leader of the Bloc Québécois. In "Ensemble le défi, ça nous
réussit," the working document of the Bloc's 1997 Congress, I will tell
you that over the past three decades, the federal government has taken many
decisions which have had negative repercussions on the Quebec economy. That the
Borden line favoured the development of oil refineries in Ontario, at the
expense of Quebec. That the federal government's decision to cease obliging
foreign air carriers to service Montreal's Mirabel airport in order to gain
access to Toronto's Pearson airport made the former lose its position as a major
international gateway. That the 1965 Automobile Pact with the United States
ensured Canada's car manufacturing industry was concentrated in Ontario, at the
expense of Quebec. And that the federal government went out of its way to favour
rail transport in the West, while allowing Quebec's sector to dwindle.
Still as Gilles Duceppe, I look at the Chrétien
government's record and tell you that the proposed Canadian Securities
Commission will undermine Montreal's role as a financial centre. That Coast
Guard fees will have negative repercussions on the competitiveness of Quebec's
ports. That AECL's decision to move 26 positions from Montreal to Mississauga
will undermine the former's position as a centre of nuclear expertise.
It's difficult to pretend to be Gilles Duceppe.
Being the leader of the Bloc Québécois requires a very active imagination. So
now I'll go back to being Stéphane Dion.
The Borden line was established, as you doubtless
know, to create a domestic oil industry by establishing a market for Western
Canadian crude oil. Did it negatively impact Quebec's petrochemical industry?
Far from it. While all points west of the Ottawa Valley were required to
purchase Canadian crude at higher than international prices, Quebec and points
east were able to continue importing cheaper foreign crude. This actually gave
them a competitive advantage. Montreal oil refineries were closed down in the
1970s and 1980s, it is true, but so were refineries elsewhere -- as a result of
economic factors stemming from the oil crisis, not because of the Borden line.
Did the federal government's 1986 decision on
foreign airlines hurt Mirabel airport? Well, what we do know for sure is that
its previous, coercive position was driving interested carriers away from not
only Montreal, but from Canada as a whole. The best way to attract international
air carriers to a particular airport is for government and local leaders to
demonstrate that servicing it is both attractive and potentially profitable.
The Auto Pact does not stipulate where companies
should locate their production facilities. Rather, it provides a framework to
encourage production within Canada. Did the federal government negotiate a pact
to favour Ontario? No. But the federal government cannot control U.S. economic
geography nor the locational decisions of the private sector, and the plain fact
is that Detroit, the U.S. "motor city", is located close to the
southern Ontario border. Furthermore, whereas Quebec now has a flourishing auto
parts industry -- not to mention General Motors' factory in Ste-Thérèse --
without the Pact, Canada's auto industry would have been much smaller.
Has the federal government favoured Western rail
transport at the expense of Quebec? Historically, the federal government has
invested billions of dollars to build transportation infrastructure of various
sorts throughout Canada. This has been very important for expanding the Canadian
economy -- and has historically benefitted Quebec manufacturers, for example.
Today, it is no longer possible to invest billions in new transportation
infrastructure, and the emphasis has shifted to restructuring and modernization.
Privatization has placed CN and CP on a level playing field, and CN is
positioning itself for a future of long-term growth as a strong, Montreal-based
transportation company.
The Canadian Securities Commission is a voluntary
one and Quebec will therefore not be penalized for choosing not to participate.
Rather, Quebec-based companies wishing to raise capital elsewhere in Canada
would benefit from the single window a national securities commission could
provide. Moreover, a national securities commission would work with its
provincial counterparts to improve coordination and promote harmonization of
securities regulations. The argument that it would remove a large part of
Montreal's remaining financial sector is simply not true.
Will Coast Guard cost-recovery fees hurt Quebec
ports? Well, according to an in-depth economic impact study commissioned by the
federal government, the average impact over the next two fiscal years would be
minimal -- a mere 0.09% of the value of commodities shipped. Furthermore, the
Minister of Fisheries and Oceans will be working closely with industry
stakeholders to establish principles to guide regional fee structures and
service levels. Additionally, the introduction of ice-breaking fees was deferred
until 1998/99, lessening the impact on regions such as Quebec which are
dependent on this service. And it should be remembered that the whole point of
cost recovery fees is to decrease the burden on Canada's taxpayers, while
continuing to ensure the safe and efficient operation of Canada's waterways.
Moving 26 AECL positions from Montreal to
Mississauga is part of an overall internal restructuring geared to making Canada
the world leader in the nuclear reactor field. Will this undermine Quebec's
nuclear industry? Not at all. In fact, Quebec industry benefits to the tune of
some $100-150 million from each CANDU reactor sale abroad. Therefore, it is in
Quebec's interests that AECL operate as competitively as possible.
Imagine I am Preston Manning...
Now that I have briefly dealt with Mr. Duceppe's
complaints, let's imagine that I'm Preston Manning. I will tell you that Alberta
and British Columbia are carrying the seven poorer provinces, through programs
like equalization and the Canada Health and Social Transfer. That the federal
Liberals do not care about or understand Western issues. That when times are
bad, the British Columbia and Alberta economies are left to fend for themselves,
but when times are good, they are exploited for the benefit of Eastern and
Central Canada. That the federal government's regional development programs also
exploit the West. Mind you, I should mention that Reform's ability to make
political capital out of interregional jealousies has been blunted by the
realization that, as Preston Manning told a Vancouver audience, "the real
test of Reform's progress is whether we break through in Ontario and to what
extent."
Sadly, this did not stop Reform's Monte Solberg
suggesting that federal aid to flood victims in Quebec's Saguenay region was
politically motivated. With a particularly unfortunate choice of words, Mr.
Solberg alleged that "the floodgates opened when it was time to provide aid
in Quebec", but that there had been little help for the victims of flooding
in his riding. For the record, federal financial assistance to disaster victims
is based on a fixed formula.
Are equalization payments fair -- are Alberta and
British Columbia "carrying" the poorer provinces, as Preston Manning
said recently in Winnipeg? Equalization payments are calculated on the basis of
a formula that is set out in legislation. Basically, the amount a province could
raise at national average tax rates is compared with a representative standard
(based on the capacities of Quebec, Ontario, Manitoba, Saskatchewan and British
Columbia). If a province's total revenue-raising ability falls short of this
standard, its per capita revenues are raised to the standard level through
federal equalization payments.
Taken out of context, the figures involved might
seem unfair. For example, in 1996-97, Newfoundlanders are estimated to have
received, on average, $2,520 per person in major cash and tax federal transfers,
compared with $1,469, on average, for every Quebecer and $816, on average, for
every Albertan. But put these figures in context: Alberta tops Canada's
GDP-per-capita tables with a predicted $33,353 for 1997, while Newfoundland will
produce only half as much ($17,785). Let me stress that again: Alberta's GDP is
twice that of Newfoundland, yet Newfoundlanders will receive only $1,704 per
capita more in federal transfers.
Would it be fair to Newfoundlanders, Quebecers,
and other beneficiaries if these payments did not exist? I don't think so and,
as I indicated earlier, nor do the large majority of Canadians.
Let's look at the Canada Health and Social
Transfer, which replaced the Canada Assistance Plan and Established Programs
Financing with a single envelope. Is it fair? Well, in restructuring it, we took
note of suggestions from the Alberta government and others about how to make it
more equitable. As a result, each province's allocation of funding will be
gradually adjusted to more closely reflect the provincial distribution of
population. For example, we have set financial year 2002-03 as the benchmark for
halving per capita disparities.
Has our government ignored the interests of
Alberta, British Columbia and their Prairie neighbours? You will remember that,
during the Mulroney years, Mr. Manning campaigned with the slogan "the West
wants in." I haven't heard him use that line in quite some time, because
with Prime Minister Jean Chrétien's government, the West is in. I can assure
you all that Natural Resources Minister Anne McLellan and Senate Leader Joyce
Fairbairn are very strong voices in our Cabinet, as are David Anderson, Lloyd
Axworthy and Ralph Goodale.
The initiatives taken by both levels of
government to change the oil sands tax regime have helped current investors and
contributed to Shell's recent announcement that it will be investing $1 billion
in a new oil sands project. I should mention that a 1995 study conducted by the
Institute for Research on Public Policy showed that, in terms of federal tax
breaks, Alberta is the biggest winner in relative terms, benefitting from almost
16% of total tax breaks while its economy accounts for under 11% of GDP. At the
international level, we have pushed forcefully for reductions in agricultural
subsidies during the Uruguay Round of Multilateral Trade Negotiations, and now
under the auspices of the World Trade Organization. And our government is
putting the combined strength and solidarity of all Canadians behind your bid
for Expo 2005. Your city, in turn, will make an excellent showcase for all of
Canada.
The issue of equitable immigration settlement
funding was of particular importance for British Columbia. Last month, we
announced extra funding for certain provinces to reflect the number of
immigrants they are welcoming. British Columbia will receive an additional $22.4
million this year, Alberta $2.9 million and Manitoba $730,000. In responding to
the announcement, B.C. Premier Glen Clark observed: "We've had grievances
with the federal government....The Prime Minister listened. He listened to us
and we worked hard and we resolved several historic problems." This is an
excellent example of our step-by-step approach to resolving regional grievances
and was, as Premier Clark observed, "a victory for British Columbia and a
victory for Canada".
The West has benefitted from many development
measures, such as, historically, grain transportation subsidies, funds for
branch-line subsidies, and funds for hopper car purchases. And, as I mentioned
earlier, the first two provinces to receive funding under the Fiscal
Stabilization Program were B.C. and Alberta. The federal government has also
provided substantial amounts of cash for "one-offs", including $200
million for the Calgary Olympics, $27.8 million for the Fraser River Action Plan
and funding to the B.C. government for this year's APEC infrastructure.
Other regional grievances
Of course, other regions have their grievances
too -- I will mention one or two briefly. The Atlantic provinces sometimes argue
that federal industrial policy favours Central Canada. Yet the Atlantic region
has benefitted from the frigate program, assistance to the fishery sector, and
the important support provided by the Atlantic Canada Opportunities Agency to
the region's industries. Certain Atlantic provinces have raised a concern about
the current formula used in the equalization transfer program, which means that
"have-not" provinces see their equalization benefits decline as
natural resource revenues increase. Yet the equalization transfer can be, and
has been, adapted to provide flexibility when a "have-not" province
depends heavily upon a natural resource revenue that is cyclical or temporary in
nature. And, of course, it should not be forgotten that equalization payments
are there to provide transitional funding to ensure reasonably comparable levels
of services regardless of the level of income flowing from the local economy
into the provincial treasury, not to provide a permanent source of revenue.
Meanwhile, Ontario shared British Columbia's
complaint about immigration settlement funding, but will receive some $35.3
million in additional funding this year. And, of course, there are also
intra-regional grievances -- need I mention the rivalry between your city and
the provincial capital?
We should look for fairness in the big picture.
In that picture, no Canadian province can say it is getting a raw deal. Canada
should not be seen as a sort of cheque book to be divided out among provinces.
Canada is a family of provinces, territories and people, which has equity as its
underpinning principle. As Premier Klein has said, "our goal must be a
strong Alberta, in a strong and united Canada."
Your former -- and greatly admired -- provincial
treasurer, Jim Dinning, has earned kudos across Canada for helping your premier
put Alberta's fiscal house in order. Mr. Dinning eloquently summed up the
fairness issue when he said:
"Albertans believe in the principle of
equity. Clearly those who have sometimes are going to be asked to pay more than
those who have not ... I don't believe this government is a believer in cheque
book federalism." Reflecting on Alberta's experience in the 1920s, 1930s
and 1940s, Mr. Dinning concluded that Albertans "are in fact net
beneficiaries of being a partner in this country."
Conclusion
In fact, Canadians from coast to coast to coast
are net beneficiaries of being partners in our country. Canada is a fair
federation. It responds to the varying needs of its citizens and component
regions, but it does so in a way that ensures all are treated in a just manner.
The big picture is a fair picture, one in which we can all take pride. Of
course, we must keep working to ensure that this fairness is maintained, and
that legitimate grievances are addressed. The recent Paul Martin budget took
major steps to address the concerns of young Canadians. And our government will
continue its step-by-step approach to addressing other fairness issues, and to
building a better future for us all.
I am confident that, in spite of the challenges
we face, our federation will enter the 21st century strong and united. Why?
Well, one reason is my faith in the generosity of Canadians. As I've already
said, Albertans are very generous Canadians and will contribute a lot to the
movement for national reconciliation. Canadians do not pass by on the other side
of the road. Our generosity and fair-mindedness will win out against
interregional jealousies, and against those who seek to manipulate these
jealousies for short-term political gain. For the sake of our country, it must
do so.
Check against delivery.
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