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          As Intergovernmental Affairs Minister, I am especially pleased to attend this Diplomatic Forum. The Forum is a good illustration of the theme of my speech today: cooperation between the federal government and the provincial and territorial governments. For seven years now, the Diplomatic Forum has been proof positive of productive cooperation between the Government of Canada and one of our provincial governments. And now it is Saskatchewan's turn to host the Forum, and to help you discover its challenges and its vision for the future.

          Federal-provincial-territorial relations is a very complex issue, and I certainly have no intention of trying to cover it in its entirety here today. I shall rather limit my remarks to a few aspects of how FPT relations are conducted. After presenting one of the main characteristics of Canadian federalism, I shall talk about our financial obligations and then discuss my Government's vision and the means it plans to use to realize that vision.

1.       Characteristic of Canadian federalism: flexibility

          The desire to respect and promote specificity while building on the strength of the country as a whole is at the very heart of Canadian federalism. The first concern when the federation was established was the division of powers. To ensure the success of the union, this division of powers had to reflect the need to respect provincial realities. The flexibility that now permeates the dynamic of intergovernmental relations was already omnipresent at the time when powers were divided.

          The areas are either exclusively provincial, shared between the two orders of government or exclusively federal. Exclusively provincial jurisdictions include education, health care delivery, municipal institutions, and private law, areas which require provincial governments to be very active and deal directly with citizens. Notably, Canadian provinces have almost complete freedom to tax, which is far from the case in other federations, including Germany, where the Länder have no control over their taxes, and the constituent entities in Austria and Belgium, which control less than 10%. Even though this is a shared jurisdiction, the federal government occupies less than 50% of the tax fields, whereas in the United States and Germany, that proportion is over 65%.

          How does this approach play out in real time, how does it allow the provinces to meet their own challenges? Let me illustrate with some tangible examples.

          In Saskatchewan, improving the well-being of and promoting equal opportunity for Aboriginals are priorities. As you know, Aboriginals make up 13.5% of Saskatchewan's population, and that percentage is forecast to reach 30% within 30 years. To help meet that challenge, a joint Aboriginal strategy has been put in place as a result of cooperation among the federal, provincial and municipal governments, Aboriginal groups, and community organizations. Pilot projects on education, job training, housing, health and youth, among others, have been initiated in Regina and Saskatoon under this strategy. I should also note the Canada-Saskatchewan Northern Development Agreement, signed in 2002, as northern development is another of Saskatchewan's priorities.

          Another example stems from the discussions at the recent intergovernmental meeting on health. Our Premiers repeatedly noted how they use this flexibility to meet challenges, in this case those related to health care delivery. Although I was previously Health and Social Services Minister in the Government of Quebec, I must say that accompanying Prime Minister Martin at the First Ministers' Meeting taught me a great deal about the different ways the provinces use their skills and draw on flexibility. One example is the cooperation among Saskatchewan and its neighbouring provinces in the field of pediatric cardiac surgery. They have pooled their financial and medical resources in a single hospital in Alberta, to acquire the most specialized medical staff and equipment and thus provide children with the best possible care.

          I would also point out that the Government of Canada's financial transfers to the provinces and territories have clear objectives, but the provinces can be very flexible in meeting those objectives. Through Equalization, the Canada Social Transfer and bilateral federal-provincial labour market development agreements, the provinces are free to allocate the funding they receive to the programs they deem most conducive to improving the well-being of their residents, while honouring the public policy objectives of each transfer.

          The extensive flexibility that characterizes the Canadian federation allows the provinces to address their own challenges and promote their priorities. They can draw on this flexibility while recognizing the federal government's unifying role, the importance of its leadership. When necessary, provinces join forces to achieve objectives that address the needs of all Canadians.

2.       Financial capacity of the federal government, responsibilities and choices

          But all political discourse, however noble or idealistic, must take account of a very prosaic, down-to-earth reality: financial means. In the life of government, as in our own lives, those means are limited and we therefore have to make sometimes painful but essential choices.

          Prime Minister Martin made one of those difficult choices when he was Finance Minister. He used all the means at his disposal to put our public finances back in order. Thanks to his financial prudence, we went from being second-last among G7 countries in 1990 to number 2 in 2003 with respect to the debt-to-GDP ratio. We have come a long way. We have achieved the "virtuous circle"of decreasing debt, low inflation and sustainable economic growth. But there is still much to do. To build an even stronger Canada for future generations, we must commit to fiscal prudence: no deficits and decreasing debt. We must never lose sight of these financial constraints.

          Last week in Calgary, the Finance Minister noted that a plan for gradually paying down our debt will free up funds that will enable us better to fulfil our duties. The Government of Canada will thus be able to continue to invest in programs to reduce disparities, programs like the National Child Benefit, Early Learning and Child Care, and Infrastructure.

          Our government is also continuing to implement the Canadian ideals of sharing and solidarity, by redistributing part of our collective wealth so as to give the provinces and territories roughly the same financial capacities to serve their residents. Over the years, we have developed tools that now form a tax system which may be complex, but which translates that willingness to lend a helping hand. These tools include Equalization and specific transfers for areas such as health and social services. Those transfers allow the provinces and territories to promote their residents' well-being in accordance with their own priorities and their own approaches to serving their residents.

          In short, the financial choices the federal government makes must always take into account these two responsibilities: the inter-generational transfer and respect for regional differences. The Government of Canada must never lose sight on the one hand of its moral duty toward future generations and, on the other hand, of giving tangible expression to the Canadian ideal of sharing and solidarity by being unifier and conciliator for meeting the real needs of all Canadians and allocating the resources required.

          In this context, the Government of Canada heeds Canadian realities by respecting these fundamental principles. In developing its budget strategy, the Federal Government is sensitive to the pressures on the different orders of government. All governments must have the resources they need to help address the real needs of Canadians in every region of the country, as allows the last federal-provincial-territorial agreement, in the case of health services.

3.       The vision of Prime Minister Martin's government

          I would now like to talk about our government's vision for intergovernmental relations and the path it plans to follow to translate that vision into reality.

          I would first point out that that vision is part of a constantly evolving world. All orders of government face many growing, different needs, and tremendous challenges. Those needs, whether linked to demographic changes, globalization, local infrastructure problems or work-family constraints, definitely pose new challenges for the different orders of government.

          There is also a new dynamic. Last December the provinces and territories established the Council of the Federation – a forum that responds to the need for change. This interprovincial approach is noteworthy and is an integral part of evolving Canadian federalism.

          All governments must respond to these new needs, and adapt to constantly shifting contexts. And all governments are wondering how to meet those challenges.

          But before looking at the tangible means for achieving this, we must first ask which main principle ought to guide us, which beacon should show us the way. For me, the answer is very clear, and can be summed up in just a few words: promote an approach of citizen-oriented focused cooperation. That short phrase is very simple, but it means a great deal.

          The fact is that our intergovernmental relations have too often relegated citizens to a mere walk-on role on the political stage. Discussions about the political process have too often taken precedent over citizens' needs and aspirations. As the Prime Minister said in one of the lively discussions at our last First Minister's Meeting, let's get our priorities back in order. Let's not lose sight of our primary objective, which is to serve Canadians.

          Putting citizens at the centre of our federal-provincial-territorial deliberations goes a long way to avoid pointless squabbling; it helps us make compromises, and put aside ultimately pointless showdowns.

          Such an approach encourages us to focus on what unites us, to pool our energy and our creativity to achieve common objectives. It helps us strengthen our intergovernmental relations, and forge partnerships based on achieving tangible objectives.

          Finally, this approach, which seeks to obtain results for the well-being of all Canadians, promotes flexibility in intergovernmental relations. It calls on us to adopt the spirit of accommodation, openness to innovation and creativity that was the hallmark of Lester B. Pearson's government in the 60s. We can learn about the future by looking at the past. That flexibility in intergovernmental relations is at the core of our successful initiatives. Our government intends to continue on that path. Our federalism is not fossilized, it invites us continually to reassess how we do things. This flexibility is the key to serving citizens more effectively.

4.       Changing our attitudes, evolving in our approaches:

          Citizen-oriented cooperation

          Our vision must translate into tangible action, so it can rise to new challenges.

          The federal government needs to engage in a dialogue with its partners. Prime Minister Martin committed to holding regular federal-provincial-territorial meetings, and he has kept his promise. Two such meetings have already been held, and they were very successful. A third meeting will be held on October 26th. These meetings are an opportunity for frank and open discussion among all the partners of the federation. Such dialogue is the very foundation of productive intergovernmental relations.

          We need to continue to give all regions of the country their rightful place and role. The Prime Minister has already taken measures to that end. For example, from August 10th to 14th, Mr. Martin travelled to the three territories to meet with leaders, community groups and residents in their own communities, something few Canadian prime ministers had done before. He has also given many important Cabinet posts to Western MPs, including one MP from Regina, the Finance Minister. And last week, he appointed an expert from Saskatchewan, Dr David Butler-Jones, as Chief Public Health Officer and head of the new Public Health Agency of Canada, one component of which is located in Winnipeg. He also announced that Winnipeg will become the home of the International Centre for Infectious Diseases: another demonstration of his desire to ensure a fairer geographic distribution of federal institutions.

          Finally, there is no doubt that, in the past, the federal government shied away from recognizing the existence of asymmetrical federalism, a flexible and nuanced approach for better governance. Asymmetry, both in law and in practice, has existed in Canada since Confederation. Example include: denominational schools, Manitoba's bilingual legislative system, separate pension plans for Quebec and the rest of Canada, different immigration agreements with the provinces, joint sales tax collection in the Atlantic provinces, Equalization payments to some provinces and not others, etc.

          The recently completed First Ministers' Meeting further advanced the principle of asymmetry, as it resulted in open recognition of this kind of federalism. Indeed, for the first time in our history, all partners of our federation, the federal government, our ten provincial governments and the three territories, recognized asymmetrical federalism, that is, the possibility of taking different paths to reach common objectives.

          Under the health agreement we just signed, only Quebec wanted to take advantage of that opportunity. This does not mean it made no commitment to the objectives. On the contrary, Quebec's general objectives are the same: what is different is that Quebec will prepare its own detailed plan on how it intends to achieve those objectives. It is thus committed, like the other provinces, to establishing comparable indicators and being accountable to its residents.

          While Quebec was the only one to do so this time, I want to emphasize that all the provinces and territories can adopt this asymmetrical approach, which is flexible and adaptable to their specific contexts. As the Prime Minister stated so well last week, the health agreement with Quebec is a sound practice of our federalism, a practice that helps make Canada stronger, not weaker.

          Fostering dialogue, drawing on our rich diversity and promoting flexible federalism through asymmetry: these avenues will help us achieve citizen-oriented cooperation.

Conclusion

          We, as governments, need to regain the trust of our citizens. The only way to do that is to put citizens at the heart of our intergovernmental cooperation.

          Canadian federalism is based on intergovernmental relations, and for those relations to succeed, all our governments must give secondary importance to their own interests. They must give citizens – their well-being and their aspirations – their rightful place.

          Our governments are from different political parties and have quite different, and sometimes opposing, political platforms. Every federal system gives rise to disagreements, divergent points of view; one might even talk of positive tensions between orders of government. But it is important for all governments, when citizens' interests are at stake – which is why governments are there, after all – to be able to rise above those differences, and for our leaders to support one another to achieve common objectives, and show the flexibility needed to accommodate and draw on the diversity that characterizes our country.

          We must also bear in mind that the challenge for our federation lies not only in striking the best balance between promoting the well-being of all citizens and respecting specificity. It also lies in not promoting specificity to the extent that we no longer have a common identity, or promoting centralization to the extent that we lose the richness of our tremendous diversity.

          Our strength lies in respecting our diversity. Our strength lies in promoting our common interests. But first and foremost, our strength lies in our ability to put citizens at the heart of our intergovernmental relations.