"Germany and Canada:
Federal loyalty in the era of globalization"
Notes for an address
by the Honourable Stéphane Dion,
President of the Privy Council and
Minister of Intergovernmental Affairs
To members of the
Atlantik-Brücke
Feldafing, Federal Republic of Germany
October 28, 2001
Check against delivery
Because our two official languages, English and French, are a reflection of a large part of our history, there are many among us Canadians who see Europe through the United Kingdom and France. But, in our understanding of Europe, we increasingly have an interest in adding its German dimension. I am convinced of this, just as you are, members of the Atlantik-Brücke, and this makes me very pleased to be invited here today.
The Federal Republic of Germany, the third largest economic power in the world, the largest direct investor in the world in terms of net outflows, the industrial economic engine of Europe, is Canada’s sixth largest trading partner, in both trade and investment. Canada is one of the largest investors and employers in the new Länder, especially in the railway sector, with Bombardier in particular. Trade and investment between our two countries are in full expansion.
At the political level, in light of the tragic events of September 11, it is imperative that we strengthen our ties and our friendship. Chancellor Schröder stated on October 11 that your country must henceforth, and I quote: "assume a measure of responsibility which is in keeping with our role as a key European and transatlantic partner, as well as that of a strong democracy and strong economy in the heart of Europe." And he added, "we Germans [...] now have an obligation to shoulder our new responsibility in full."1 The Government of Canada applauds that statement by Chancellor Schröder and sees it as yet another reason to strengthen cooperation between our two countries.
Our exchanges are intensifying in all areas, particularly in those of the sciences, technology, culture and education, as evidenced by the wide range of Canadian talent that Her Excellency the Right Honourable Adrienne Clarkson, Governor General of Canada, has brought together in the delegation accompanying her official visit to Germany this past week.
Canada is increasingly interested in Germany, and I sense this interest is mutual. Aside from the United States, it is in Germany that one finds the largest academic network of full Canadian studies programs.
One of the reasons why Germany and Canada benefit from a better understanding of each other is that our two countries have adopted a federal form of government. This common feature shared by our two countries touches directly on my ministerial responsibilities. As Minister of Intergovernmental Affairs, my responsibility is to ensure the smooth functioning of the federation and to help Prime Minister Jean Chrétien and the Government of Canada maintain the most productive relations possible with the governments of our ten provinces and three territories.
Germany and Canada are two modern federations which must adapt to the context of globalization. This context has two main characteristics from the perspective of federal governance. First, external trade is taking on increasing importance in relation to interprovincial trade in Canada and inter-Länder trade in Germany. Second, our countries sign international agreements that increasingly touch on the jurisdictions of our constituent entities, in the areas of the economy, agriculture, the environment, health, culture, and so on.
I know that this evolution has provoked debate in Germany. Adjustments have had to be made in the relations between your federal government and the governments of your Länder. I follow the evolution of your federation with much interest. But I will not claim to teach you anything about what is happening in your own country. Instead, I will present the Canadian federation in a way which I believe will be relevant to you.
In Canada, some people had predicted that the growing importance of external trade and international rules would exert a centrifugal pressure and that the cohesion of our federation would be increasingly difficult to maintain. According to these people, the federal and provincial governments would be progressively incapable of taking joint action, while citizens would identify themselves more and more with their respective provinces rather than with the country as a whole.
But that is not happening. On the contrary, the omnipresence of international issues is reminding Canadians of the importance of their national cohesion. The Government of Canada and those of the provinces see clearly that, above and beyond perfectly normal differences of opinion, they have an interest in cooperating more and more, while respecting each other’s jurisdictions.
This is what I want to show you, by first outlining the differences in context between the German federation within Europe and the Canadian federation within the area of NAFTA. I will then discuss the solidarity among Canadians and between our two orders of government.
1. The German and Canadian federations in the face of globalization: some differences in context
Your model of federalism is much more integrated than ours. Indeed, it is often difficult to separate the responsibilities of your federal government from those of your Länder. In Canada, the division of powers is generally clearer. This is due to two factors. First, whereas your Basic Law provides for no fewer than 26 concurrent jurisdictions and seven other areas in which your federal parliament can enact framework laws requiring the Länder to pass compatible legislation, our Constitution makes provision for only three concurrent jurisdictions, two of which have federal paramountcy, immigration and agriculture, and one has provincial paramountcy, old age pensions. Second, our Constitution does not provide for the equivalent of your Bundesrat, that is, for a chamber of provincial governments. The latter have no institutional presence in the Canadian Parliament.
As a result, our provinces have much larger exclusive jurisdictions than those of your Länder; the latter, however, have a much stronger influence over the federal parliament, and thus over the actions of the federal government. Your federal model is that of the fusion of powers: your Länder are strong within federal institutions; our model is that of a distribution of powers: our provinces are strong in relation to the federal government and they are very protective of their legislative, budgetary and fiscal autonomy. The contrast between the two models becomes evident in different ways:
- At the legislative level: Normally, our provinces implement their own legislation, not federal laws over which they actually have no direct influence. In your country, a large part of the activities of the Länder consists in applying federal laws. Your Länder administer these laws, which they have helped to shape through the Bundesrat.
- At the budgetary level: The cash transfers that our provinces receive from the federal government are subject to very few conditions, fewer than in your country and much fewer than in the United States.
- At the fiscal level: Whereas our provinces have full leeway in determining their tax revenue, this is not the case for your Länder. The tax bases, tax rates and revenue share attributed to the Länder, the municipalities and the federal government are all established by federal legislation. That legislation, however, is passed with the consent of the Bundesrat.
In Canada, the absence of a parliamentary forum that would institutionalize the relations between the two orders of government means that federal-provincial cooperation is conducted almost exclusively by the executive branches: the first ministers and the federal and provincial ministers meet regularly to coordinate their actions. They consult and inform one another of legislative or other initiatives they intend to take.
Our two models of federalism are reflected in our respective political cultures. Thus, your party system is relatively similar for the two orders of government, whereas political life is much more compartmentalized in Canada. The federal liberal party and the provincial liberal party of Quebec, for example, although they are allies, have no organizational link between them. Similarly, your centralized union system would be completely unthinkable for us. It would be inconceivable in Canada for the status and working conditions of our provincial and municipal employees to have to comply with rules set by federal framework laws.
Just as your model of federalism is more integrated than ours, the immediate international context in which you operate is as well. Whereas NAFTA is a trade agreement without a parliament, without a cabinet, without a central bank or common currency, the European Commission’s regulatory power applicable to European Union countries is in some ways more extensive than that of Canada’s federal government applicable to the provinces. That tells you how different the context is.
North America is not Europe and will not become so, despite what some people in our country may think. The context is too different. The main difference lies in the clout of the United States. It makes up 68% of the North American population, and 86% of its economy. In comparison, Germany, the largest member country of the European Union, makes up 22% of its population and 25% of its economy. As you well know, the European Union could not function with the institutions it has if one of its members was itself bigger than all the others combined.
Germans are reflecting on the ongoing construction of Europe in a context in which "federalization" is one of the options being examined, and that does not undermine their German identity. And we, Canadians, want to work together with the United States without disappearing into the American melting pot. We are intensifying trade with our other NAFTA partner, Mexico, and are actively working to make the Free Trade Area of the Americas a reality.
2. Solidarity among Canadians
Even though NAFTA entails a level of integration much less extensive than the European Union, the fact remains that North American free trade has helped to develop our external trade considerably. In 1990, Canada’s exports to the rest of the world were equivalent to 22% of its GDP. In 2000, they stood at 40%. The volume of imports saw similar growth.
Let us take the case of our most populous and most industrialized province, Ontario. In 1981, Ontario’s exports to the other provinces slightly outstripped its exports abroad. As of 1994, its international exports were twice as large as its provincial exports.
So our trade is more and more externally oriented, essentially toward the United States. As I have mentioned, some people think that this structural change in our economy undermines the cohesion of our federation.
This is not so. Canadians’ solidarity with one another is just as strong now as it has ever been. Polls indicate that, year after year, some 80% of Canadians say they are very attached to their country. No decline can be observed on this front.
Of our ten provinces, Ontario has reported the largest increase in its international exports in relation to its GDP in the past two decades. But this development of external trade has in no way dampened Ontarians’ feeling of belonging to Canada. The polls confirm it: Ontarians are the most likely to identify themselves as citizens of Canada rather than citizens of their province. After Alberta, it is in Ontario that the prospect of annexation with the United States encounters the most widespread opposition.
As you probably know, the current government of Quebec is secessionist. One of its favourite arguments is that globalization makes the Canadian federation useless and even harmful to Quebec. But Quebecers are not accepting that argument. In a recent poll2, they were asked which of the two following statements they agreed with more: "A united Canada would be better able to face the challenges of globalization" or "A sovereign Quebec would be better able to protect itself from the challenges of globalization." Nearly two thirds of the respondents (64%) chose the first statement, and only 23% the second. In fact, an increasing majority of Quebecers want Quebec to remain a province of Canada and are turning away from the secessionist project.
Another sign of the good health of Canadian solidarity is the equalization program, through which the Government of Canada transfers money to the less wealthy provinces, that is, those whose revenue-raising capacity is below the national average. As in Germany, this tangible demonstration of federal solidarity is entrenched in the Constitution. However, transfers under the Canadian equalization program come solely from the federal government. The less wealthy provinces do not receive money directly from the wealthier ones, unlike what happens here in Germany among the Länder. It is Canada’s federal government that ensures that no province has a fiscal capacity substantially lower than the national average. Currently, the program makes it possible to maintain all the provinces above 95% of the average fiscal capacity.
Canada’s equalization program is worth quite a lot of money: year after year, it amounts to a little over 1% of our GDP. It accounts for a growing proportion of federal program spending: 9% compared with around 7% ten years ago. Three of the ten provinces receive no equalization payments: Alberta, Ontario and British Columbia. The taxpayers in these provinces finance a very large part of the equalization payments made by the federal government. Those three provinces alone contain 61% of Canada’s population, which corresponds essentially to the demographic proportion (66%) of the five Länder that directly finance the lion’s share of equalization payments in your federation.
Naturally, equalization payments occasion some debate. In your country, that debate has been exacerbated by the extensive financial transfers needed to turn around the economy of the eastern Länder, and no doubt because of Germany’s contribution to financing Europe, which also requires an appreciable financial effort. But equalization is a regular subject of discussion in Canada as well. Some economists claim that the equalization-receiving provinces are maintained in an unhealthy dependency that is detrimental to sound economic management. Some recipient provinces would like to see the program enriched, or to have some of their revenues excluded from the calculation of equalization payments.
Nevertheless, political parties of all stripes and Canadians in every region of the country support this principle of redistribution between the wealthier and the less wealthy provinces. All the polls confirm it.
In short, solidarity among Canadians is alive and well. What about among their governments?
3. Solidarity among the governments of the Canadian federation:
the example of international relations
Our provinces, like your Länder, want to develop their own strategies to break into international markets more effectively. Like them, our provinces want to clarify their role on the international scene, where agreements are negotiated which increasingly touch their jurisdictions directly. And as in your country again, our federal government, while wanting to help the provinces draw on their full potential, ensures the maintenance of the overall cohesion of the country’s foreign policy. It is obvious that a country which no longer has a coherent foreign policy no longer has a foreign policy at all. The process of developing our international trade policy is occasionally a source of intergovernmental tension, a dynamic which you would recognize within German borders and in the European context.
The cooperation needed between the federal government and the provincial governments on the international scene is reflected in constitutional principles. While the federal government is the only one able to ratify legally binding treaties in international law, it cannot force the provinces to implement them within their fields of jurisdiction. For this reason, before signing such agreements, the federal government has every interest in closely consulting the provinces. It spares no effort to improve the quality and effectiveness of those consultations.
In addition, the Government of Canada helps the provincial governments in many ways to raise their profile abroad in their jurisdictions and in such a way that contributes to the strengthening of the federation. The network of Canadian diplomatic missions is regularly used to organize trade missions led by provincial premiers or ministers. The Government of Canada supports provincial governments’ efforts to open up foreign offices or offers them the opportunity to integrate their representatives within a Canadian mission. In fact, negotiations are underway to house provincial representatives from two provinces within the Munich consulate. Canada’s provinces have some 50 of these representation units in some 40 countries. The Government of Quebec alone has 35 offices in 24 countries. In 1998, it spent "more and [had] a larger international staff than all 50 U.S. states combined."3 One of the gems is the Quebec Government Office in Munich, which allows Quebec and Bavaria to maintain close and productive relations.
Representatives of provincial governments are also part of Canadian delegations in international fora, as was the case at the recent conferences on climate change in the Hague and Bonn. And the Council of [provincial] Ministers of Education represents Canada with international organizations.
There is also the Team Canada concept, developed by Prime Minister Jean Chrétien in 1994. A Team Canada mission is led by the Prime Minister of Canada and brings together the premiers of the provinces and territories and a delegation of businesspeople. These missions travel to one country or one region in the world to promote Canadian exports from all the provinces and territories. Since 1994, seven of these missions have visited various regions of the world, mainly in Asia and Latin America. Other Team Canada missions are in the planning stages and some, eventually, will target countries on this side of the Atlantic.
I could say much more about federal-provincial cooperation on foreign policy, but I think I have highlighted the fundamental aspect: it is perfectly desirable that all governments of the Canadian federation, over and above the inevitable tensions, pursue the same objective in international policy, that of cohesion of the whole based on the full potential of a diversified country able to speak with a credible and convincing voice abroad.
Conclusion
While in no way minimizing the contrast between our two federations, or between the two contexts in which we are evolving, NAFTA and the European Union, I have depicted a reality that leads to debate in our country, a reality which I believe is familiar to you: federal cohesion in the era of globalization. I have sought to show that the centrifugal forces that may have arisen from the boom in external trade and the omnipresence of international issues have in no way lessened the cohesion of the Canadian people and its federation.
Indeed, I would say the very opposite is true. Canadians increasingly feel that their unity is a strength. They clearly see that Canada is a country that is respected, with an excellent reputation, a country that has been able to combine cohesion of the whole and great diversity: provinces and territories with complementary strengths, two official languages that are international languages, two legal systems, civil law and common law, that enable us to speak the legal language of the vast majority of countries, a geographic location that gives us a window on the Americas, Europe and Asia, a multicultural population that opens doors for us in every continent. We have undeniably made our diversity a strength that we will need to rely on more and more.
As you can see, I am optimistic about the future of my country. But our success will depend on us, Canadians, especially on our capacity to put into practice the principle of federal loyalty that has been the subject of my speech today, a principle eloquently expressed by your Federal Constitutional Court:
"The constitutional principle of federalism applying in the federal state therefore places a legal obligation on the Federation and all of its constituent states to be ‘pro-federal’ in their behavior, that is to say, all members of the constitutional ‘alliance’ are required to cooperate with one another in a manner compatible with the nature of that alliance and to contribute to its consolidation and to the protection of its interests and the well-considered interests of its members."4 [translation]
Federal loyalty invites every partner of the Federation to work, at home as abroad, to strengthen the constitutional alliance and to promote the interests of all, not just one’s own. This is a key to success at this dawn of a new century. This principle of federal loyalty is not only German, it is universal, it is valid for all the federations of the world. I hope for Canadians that all the governments of our federation fully adhere to it. And I also see in this principle the proof that Canada benefits from understanding Germany. Long live our two federations.
Notes