"THE JUST FEDERATION"

NOTES FOR AN ADDRESS TO THE CHAMBRE
DE COMMERCE DE TROIS-RIVIÈRES

TROIS-RIVIÈRES, QUEBEC

APRIL 21, 1997

I have called this speech "The just federation", and I'm going to say to you today more or less the same thing that I said to the Calgary Chamber of Commerce on April 4. It is important for Canadian unity to say the same thing everywhere in the country, and I am prepared to demonstrate throughout the country that Canada is a just federation, as much for Quebecers as for Albertans.

Our federation is founded on sharing and solidarity. Helping one another out at difficult times, encouraging one another's initiatives while sharing the same objectives of well-being and prosperity, makes Canada much more than the sum of its components. And, by staying together, Quebecers and Albertans will mutually guarantee a better future.

The vast majority of Canadians believe that we have accomplished something exceptional together, reflecting the values that inspire our society individually and collectively. Canadians are not alone in thinking that, because Canada represents an incomparable human ideal for many populations in the world.

My speech today is concerned with fairness between Canada's provinces and regions. I believe that we have a fair federation, and I intend to show you why. It is also a federation that is constantly evolving, and we should always be looking for ways to improve and strengthen it. We must not become blinded by interregional jealousies to the advantages Canada has to offer.

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. 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 we are treated better than the other provinces, while Quebecers think that Ontario is treated best. These are serious concerns -- concerns which, as Minister of Intergovernmental Affairs with special responsibility for Canadian unity, I feel I must address openly.

Interregional jealousy is inherent to federations. But we in Canada are in a unique situation: we are a federation threatened with break-up, because we are faced with a separatist ideology which promotes suspicion, division and envy between citizens. When one group of MPs arrives in the Parliament of Canada with the sole mandate of promoting the specific interests of their own region, this encourages other regions to elect MPs who, in turn, try to put their regional interests above all others. We thus lose any sense of a national opposition committed to defending the interests of Canada as a whole. All major federal political parties must be capable of balancing different regional interests. Otherwise, interregional jealousies will continue to escalate, driven by egocentric lobbies. It is essential to our country's future that our spirit of sharing and solidarity overcome these jealousies.

If our country dissolved into ten inward-looking republics, we would no longer enjoy the tremendous advantages we have by being together. Specifically, in most provinces, the social safety net would be substantially weakened, making living conditions very unequal from one region to another. The solidarity that unites us today would disintegrate.

Internationally, a united Canada, with its prestige and its network of embassies, is one of the greatest gateways there is. Canada's status as the largest trading partner of the United States has allowed us to negotiate NAFTA to our advantage. It is because we are together that we are members of the G7. It is because we are together that we are members of both the Commonwealth and the Francophonie, and can thus reach more easily 980 million human beings with whom we are dealing more and more. It is because we share this country with British Columbia that we, Quebecers, can be members of the Asia-Pacific Economic Cooperation Council (APEC), which Canada is chairing this year. You know how much that helps us to break into Asian markets, which are currently the most flourishing. As residents of Trois-Rivières, you are members of APEC, because you share this great country with your fellow citizens in Vancouver. A number of your businesses took part in the Team Canada mission in January. If any region's economy depends largely on international markets, it is yours, whether it be in the pulp and paper sector, lumber, aluminum, or magnesium.

Give me one good reason that you should deprive yourselves of that assistance. Why vote for parties like the Bloc and the PQ, which want to deprive us of that assistance?

These are the advantages we have acquired together, which we would lose if Canada were to break up. Thus, the Canadian federation is far from being a zero-sum game. Each province has its own strengths and identity, which together add up to a strong and diverse country; each province benefits in some way from the greatness and richness of the whole.

Take the example of Alberta, the wealthiest province in per-capita terms. In the 1930s, our grandparents helped Alberta, which was even more affected by the Great Depression than we were. Today, it is Alberta that is contributing to the equalization payments made to a number of other provinces, including Quebec. Albertans know, however, that their specific strength is more limited than the Canadian whole, and that the global market can sometimes work against them. 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: an insurance policy of solidarity that helps our economy and promotes investor confidence.

Perhaps that solidarity is most evident at times of tragedy, when, like any family, we band together. One can certainly think of last year's Saguenay tragedy. But let us also remember the Edmonton tornado of 1987.

Interprovincial fairness

How do Canadians think our sense of sharing 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. 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 provinces.

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 then accorded to Nova Scotia and New Brunswick because of their specific fiscal needs.

A key advance in interregional fairness was made 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 on the basis of this principle. 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, and that is where our attention should be focussed, rather than on interregional jealousies.

Interregional jealousies in the 1990s

You ought to listen to Question Period in the House of Commons sometimes, because, from the Government benches, the show going on in front of us is pretty pathetic. Day after day, Bloc members stand up and present Quebec as a minority under siege by a hostile and insensitive majority. The Bloc leaders repeatedly depict Quebec as the systematic victim of injustices by the federal government. And then, Reform MPs stand up and depict Quebec, on the contrary, as a spoiled brat living off the rest of the country, especially the Western provinces.

For example, look how they dealt with the difficult issue of the plight of Canadian Airlines. The Bloc leaders alleged that everything was being done to save the company because it is headquartered in Calgary, at the expense, naturally, of Montreal-based Air Canada. Reform said, on the contrary, that we were indifferent to Canadian Airlines, whereas we would certainly have "flown" to Air Canada's assistance.

In other words, the Bloc members want only one airline for two countries, while Reformers oppose any and all business subsidies, except for Canadian Airlines. So they sit there beside one another in a kind of perpetual one-upmanship of jealousy.

Imagine I am Preston Manning...

It's important that you hear what's being said in Western Canada, and that you understand that there are forces of jealousy at work there too, even though the grievances expressed may sometimes contain an element of truth. Because I'm not saying that the grievances are all unfounded. I'm not saying that the federal government has always, since the beginning of Confederation, made decisions that were fair for everyone. What I am saying, however, is that there has not been systematic discrimination against any one province or region. While some of the claims by the West and Quebec may be founded, no one is being picked on, and Quebecers are neither the victims nor the spoiled brats of the federation. In either case, interregional jealousies are taking up too much room in our debates about fairness.

Let's imagine two scenarios: one by the Reform Party, one by the Bloc. In the first, as Reform Party leader Preston Manning, I complain that -- and I quote -- "Under the current equalization form [...] the net effect of it is that you've got about three provinces carrying seven", in other words, Alberta, British Columbia and Ontario are propping up the less wealthy provinces, through equalization. Still as Mr. Manning, I denounce the fact that the Government of Canada is abandoning the West, a region it doesn't understand. That, and I quote Mr. Manning again, "About the only time the government recognizes British Columbia or Alberta is when it comes time to extract money", in other words 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.

So, what's the real story? Are Alberta and British Columbia "carrying" the poorer provinces, as Preston Manning said recently in Winnipeg? Let's start with equalization. Equalization payments are strictly calculated on the basis of formulas agreed on by the partners of the federation. Basically, the amount a province could raise at national average tax rates is compared with a representative standard (based on the fiscal 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 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 will top Canada's GDP-per-capita tables with $33,353 for 1997, while Newfoundland's per-capita GDP will be $17,785, twice as low as Alberta's; and yet, Newfoundlanders will receive only $1,704 per capita more in federal transfers.

What would be unfair to Newfoundlanders, Quebecers, and Canadians in the other beneficiary provinces, would be if federal equalization did not exist.

The same is true for the Canada Health and Social Transfer, which replaced the Canada Assistance Plan and Established Programs Financing with a single envelope. Is it unfair, as Mr. Manning suggests? Can it be improved? Well, in restructuring it, we took note of suggestions from various provincial governments 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 fiscal year 2002-03 as the benchmark for halving per-capita disparities.

The Government of Canada is not neglecting the interests of Alberta or British Columbia, contrary to what Mr. Manning is implying. The West has long benefitted from many regional development measures, such as 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. Various federal government initiatives have benefitted and still benefit the Western provinces, whether they are in the form of tax relief, multilateral trade negotiations, or otherwise. Only last month, we settled the issue of fair funding for immigrants, which was especially important to British Columbia. 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."

Imagine I am Gilles Duceppe...

Now that I've addressed the grievances of Mr. Manning and Western Canada, let's turn to the second scenario. Imagine, for a moment, that I am Gilles Duceppe, the Leader of the Bloc Québécois; make that superhuman leap of the imagination! I'll tell you that the real reason that Quebec is less wealthy than the Canadian average is that the decisions made by Ottawa systematically go against Quebec. Read Ensemble le défi, ça nous réussit, the working document of the Bloc's 1997 Congress: all the evidence is right there. In the first part, you'll read how, over the past three decades, the federal government has taken a number of "historic" decisions which have had negative repercussions on the Quebec economy.

Keep on reading, and you'll see how the distribution of federal government spending is unfair to Quebec. Yes, Quebec really is the victim of systematic discrimination by the Anglophone majority against its Francophone province.

Well, I can't take much more of being Gilles Duceppe, so let me go back to being Stéphane Dion! Let's take a closer look at those so-called historic, anti-Quebec decisions, according to the Bloc leaders.

The so-called "historic" decisions of the federal government

The Borden line

The Bloc document claims that the 1963 decision to establish the Borden line favoured the development of refineries in Ontario, to the detriment of Quebec. It should be remembered that the Borden line was established to help create a domestic oil industry by establishing a market for Western Canadian crude oil. All refineries west of the Ottawa Valley were required to purchase crude oil from Western Canadian sources, at higher than international prices. Quebec, far from being discriminated against, was allowed to continue to import crude oil at the lower, international price, thus giving Montreal refineries a clear competitive advantage.

When the international price of oil surpassed the domestic price for the first time in 1970, concerns about the accessibility of international sources of oil developed. In response, a pipeline was extended between Sarnia and Montreal to ensure Quebec access to crude oil. The Borden line was abolished in 1973. Some Montreal oil refineries were closed down in the 1970s and 1980s, it is true, but not because of the Borden line; the same thing happened elsewhere, as a result of economic factors, especially the oil crisis, which significantly diminished demand.

The Auto Pact

The Bloc alleges that the Auto Pact concluded with the United States in 1965 concentrated automobile production in Ontario, to the detriment of Quebec. What it neglects to mention is that the Auto Pact does not stipulate where producers must locate facilities; it simply provides a general framework to encourage production in Canada, without favouring one region more than another. The federal government has no control over U.S. economic geography or the independent locational decisions of the private sector, let alone the fact that Detroit, the "motor city", is located in close proximity to the southern Ontario border, rather than that of Quebec.

It is incorrect to say that Ontario's benefitting from the Auto Pact implies that Quebec has somehow suffered. Positive economic developments in one province are not a detriment to other provinces. As well, two points need to be made. First of all, had there been no Auto Pact, Canada-wide automobile prices would have been higher and there would have been a much smaller Canadian auto industry. This would have been detrimental to all Canadian consumers, including those in Quebec. Second, automotive exports accounted for the largest share (30%) of Canadian exports to the U.S. in 1996, and the economic benefits are not exclusive to Ontario: GM's Ste-Thérèse facility (which will reportedly be the beneficiary of new GM investment of several hundred million dollars over the next five years) is an excellent example, as is the flourishing Quebec auto parts industry.

Air transport

Still according to the Bloc document, the 1986 decision of the federal government to cease forcing foreign air carriers to serve Mirabel in order to gain access to Toronto impacted negatively on Quebec. The measure originally imposed on foreign air carriers to serve Mirabel in order to gain access to Toronto was actually counter-productive, because it was driving interested carriers away from not only Montreal but from Canada as a whole. Major international air carriers do not want this type of barrier to entry. They want to choose where to serve on the basis of their market studies. Rather than insisting that a particular airport must be served, government and local leaders must demonstrate to carriers that service is both attractive and potentially profitable.

As for the operation, management and development of airports, the federal government has been turning over these responsibilities to local authorities, which are in a better position to respond to the specific needs of the airport and the communities they serve. Although both the federal government and the local authorities can make projections about air traffic, no one can guarantee those numbers. The level of activity is determined by users and the travelling public. Over the past four years, Aéroports de Montréal has invested $140 million in capital works, and over the next five years, it plans to spend another $190 million, which will create some 800 jobs.

The rail industry

Again according to the Bloc document, the Government of Canada went out of its way to favour rail transport in the West, while allowing Quebec's sector to dwindle and die.

Restructuring of the rail transport industry has been made necessary, in the interest of all Canadians, to meet increased competition both from the U.S. and from other forms of transportation. Incidentally, Eastern Canada is not the only region where rail lines have had to be abandoned; it has happened in British Columbia as well.

Privatization has meant that CN is now subject to the rules of the market, as is CP. With its current restructuring, CN is positioning itself for a future of long-term growth as a strong, Montreal-based transportation company.

Now let's look at the transportation industry as a whole. Since Canada's earliest history, the Government has invested billions of dollars to build transportation infrastructure throughout the country. This has been very important in expanding the Canadian economy, in particular the Quebec manufacturing sector. Although the railway was a vital transportation link to the West, Quebec had an alternative: the St. Lawrence Seaway. In 1959, the Government of Canada invested $320 million on the five locks of the Montreal-Lake Ontario section of the Seaway, approximately 85% of which went to the four largest locks, which are located in Quebec. Further expenditures were made in cutting channels, moving islands, and building and managing bridges. In fact, the federal government still subsidizes the Jacques Cartier and Champlain Bridges in Montreal, to the tune of $40 million a year.

If the Bloc followed its own reasoning, it would find it unfair that the West doesn't get its fair share of spending for developing the St. Lawrence Seaway. Not very logical, is it?!

Decisions by the Chrétien government

The Bloc's document also criticizes a number of decisions by the Chrétien government as hurting Quebec's economy.

National securities commission

The document's claim that a national securities commission would remove a large part of the financial centre of Montreal is simply not true.

A Canadian Securities Commission would be a voluntary organization; the Government of Quebec would not be obliged to participate. This national commission would work in cooperation with the securities commissions of non-participating provinces. Quebec-based companies wishing to raise capital elsewhere in Canada would benefit, because they would only have to apply once instead of 11 times outside of Quebec. Quebec capital markets and businesses, therefore, stand to benefit from the establishment of a national commission, even if their provincial government did not wish to participate.

Coast Guard Services

Another of the Bloc's claims is that new fees for Canadian Coast Guard services is a decision that would hurt the competitiveness of the St. Lawrence ports, especially Montreal.

It should be borne in mind that the 1995 federal budget committed the Canadian Coast Guard to a system of cost recovery for services such as aids to navigation and ice-breaking. An economic impact study commissioned by the federal government concluded that the average impact over the next two fiscal years would be minimal, representing only 0.09% of the value of commodities shipped and 1.3% of transportation costs.

Fisheries and Oceans Minister Fred Mifflin responded on March 20th, 1997, to the impact study and announced changes to the fee structure, moving towards fees based on the direct costs of providing services rather than on revenue targets. The Minister also committed to working closely with industry partners to establish principles to guide regional fee structures and service levels. The introduction of ice-breaking fees was deferred until 1998-99, thus further lessening the impact on regions such as Quebec which are reliant on such services. 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.

Atomic Energy of Canada (AECL)

The Bloc document claims that Atomic Energy of Canada's (AECL's) decision to move 26 positions from Montreal to Mississauga could undermine the former's position as a centre of nuclear expertise.

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 hurt Quebec's nuclear industry? Not at all. In fact, Quebec industry benefits to the tune of some $100 million to $150 million on average from each CANDU reactor sale abroad. Therefore, it is in Quebec's interests that AECL operate as competitively as possible.

Federal spending

The second part of the Bloc's document denounces an imbalance in federal government spending which is never in Quebec's favour. It claims there is a shortfall in "structural" spending and a surplus in "compensatory" spending. The Bloc asserts that these two different types of spending have different consequences for the economic and industrial structure, and that, even with the "compensatory" surplus it receives, Quebec still loses out.

What the document neglects to mention is that federal "compensatory" spending in the form of equalization payments to Quebec does not come with strings attached, and the Quebec government is free to use these monies in any way it sees fit, including on structural investments such as R&D. The flexibility of our federal system thus gives it a completely free rein to pursue its own objectives.

The Bloc's document also curiously neglects to give the overall picture, which shows that Quebec receives assistance as a province that is currently less wealthy than the national average. In 1994, the latest year for which data are available, federal spending in Quebec stood at 24.5%, whereas Quebecers provided 21.4% of the Government of Canada's revenues. (Provincial Economic Accounts: 1961-95, Statistics Canada, 1996).

So-called "structural" spending

The Bloc's document qualifies expenditures on goods and services and investment expenditures as "structural". Calling current federal expenditures on goods and services "structural" spending is spurious. Current expenditures are consumption, not investment, and do not provide a foundation for long-term economic growth or long-term job creation.

Current federal expenditures vary depending on the structure of each provincial economy; they are not equally divided by each province's share of population. The Bloc is complaining that Quebec received only 20% of federal goods and services spending in 1994. In British Columbia, for example, those expenditures were 8.8% in 1994, according to the latest available data, whereas the province's share of the population was 12.7%. Nova Scotia receives more than its population share (6.8% of federal expenditures and 3.2% of population), largely due to naval defence spending in that province. Its apparent surplus stems from logic and efficiency, not favouritism.

Investment expenditures

Turning to federal investment expenditures, the Bloc's document claims that Quebec has received only 18.6%. The Bloc has obviously used figures that serve its purposes. If we look at the Provincial Economic Accounts, it's quite a different story: we find that Quebec benefited from 22.5% of total federal investment expenditures in 1994 -- the latest available data -- which is closer to its share of the population (24.7%). Ontario received 34.6% of federal investment expenditures in 1994, while it accounted for 37.4% of the population. So it cannot be said that Quebec is being discriminated against.

If we look at federal investment here in central Quebec between 1984 and 1995, for example, the Federal Office of Regional Development-Quebec, which is currently headed by my colleague Martin Cauchon, spent around $161.5 million on 685 projects. The Government of Canada is an important partner in the region, which is home to the following strategic economic and institutional activity sectors, among others: the Institut de recherche sur l'hydrogène (R&D); the only lactulose production plant in North America, the Canlac Corporation (pharmaceuticals); Disque Amérique Inc.; and the CDM laminés Inc plant. And that's not counting the impact of the $400 million that the presence of 12 federal organizations in the region represents.

R&D spending

The Bloc leader is telling whoever will listen that ever since statistics have existed, Quebec has never received its fair share of federal research and development spending. And yet, according to Statistics Canada data, the proportion of federal R&D spending in Quebec rose from 19% in 1984-1985 to 23.8% in 1994-1995, which is close to our demographic weight (24.7%) and greater than our proportion of the Canadian economy (22.4%). Those data include laboratories in the National Capital Region, such as the National Research Council, which has a non-profit, auxiliary vocation of assisting research throughout the country. Quebec has greatly benefitted from federal government initiatives in the past 20 years to decentralize R&D facilities. In terms only of spending distributed on a regional basis, Quebec's share is even more substantial: Quebec businesses receive 40.2% of federal R&D grants and 42.8% of federal R&D contracts, while Quebec universities receive 27.6% of funding to Canadian universities. In addition, some 70% of Technology Partnerships Canada investments have gone to Quebec so far, a clear indication that the federal government is not ignoring leading-edge sectors in Quebec. (Source: Science Statistics Service Bulletin, Statistics Canada, Volume 20, No. 8, pages 1 to 5.) Public service

The Bloc claims in its document that Quebec has an "inequity" of more than 20,000 federal jobs, because only 19% of federal government employees are based in Quebec.

That the federal government has a smaller presence in Quebec than in other provinces is not evidence of injustice toward our province. It is simply because our provincial government has concluded specific agreements to take over certain areas which are looked after by the federal government elsewhere in the country. For example, Quebec has its own provincial police force; it collects its own provincial individual income tax; it selects its own immigrants and receives them and integrates them into society. That at least partly explains why Quebec's public service represents at least 30% of the country's entire provincial public sector.

When the Canada-Quebec Labour Market agreement in principle comes into effect, some one thousand federal employees will become provincial employees. This will lower the percentage of federal employees in Quebec. According to the Bloc leaders' logic, this will be a bad thing!

Quebecers' proportion of 19% of the federal government employees is thus far from an example of discrimination against Quebec. The situation in fact reflects the specific status Quebec has acquired. And, speaking of structural spending, if you take into account government business enterprises that generate such spending, then 23.7% of all those jobs are in Quebec.

The claims of unfairness by the Bloc leaders are inconsistent and, more often than not, are based on partial data which serve the separatist interests they are defending.

Fairness does not mean uniformity. The Government of Canada cannot distribute spending among the provinces on an equal per-capita basis; that would be irrational and inefficient. That would be confusing justice with levelling. According to the logic that the Bloc leaders apply to Quebec, namely that "fair share" must always be equal to our province's demographic weight, or about one quarter of federal spending, we should give Saskatchewan the equivalent of its demographic weight in fisheries spending! That's clearly illogical.

Whatever grievances a particular province may have, fairness and solidarity remain the fundamental principles guiding the evolution of our federation. Not a single Canadian province can complain that it is a victim of neglect, and Quebec is neither the poor relation nor the spoiled child of the federation.

Conclusion

I hope there will never be an Ontario Bloc or a Bloc from any other province in the House of Commons. I hope there will never again be another Bloc from anywhere in Canada. I don't want to hear them demand in the House that the Technology Partnerships Canada program, the lion's share of which currently goes to Quebec, be distributed equally to businesses in all the provinces on the basis of their percentage of the population, regardless of considerations of logic or efficiency. Because that's where the Bloc's jealousy is leading.

Canada is not an exercise in accounting. Our federation is a family of provinces, territories and populations which share the values of justice, solidarity and fairness. Quebecers are generous people. The calculating mind set of the Bloc leaders dishonours us and is not in keeping with our true values.

Canada is a fair federation, and together, united, we have the best chance of making it even better. By staying together and continuing to improve this federation, Quebecers and their fellow citizens throughout Canada will collectively and individually acquire the means to take on the major challenges of the next century.

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