Chapter 6
Unity and the Health of the Economy

As members of the Task Force, we have had many opportunities during our cross-Canada tour to observe the connection a large number of Canadians make between the unity crisis and the present state of the economy.

For some of the participants at our hearings the greatest threat to Canadian unity was inflation, high unemployment, regional disparities in income and employment opportunities, or foreign control over large sectors of our economy and the regional frustrations and alienations they all foster.

Other participants, in particular business and labour leaders, pointed out the costly effects of political uncertainties on industrial development and on the climate of investment. The functioning of Canada as an economic union was questioned as well. Planning, they said, is not easy in an environment where there is constant haggling about which level of government is supposed to do what, where policies overlap and programs are duplicated, and where there are growing restrictions in interprovincial trade. Intergovernmental conflicts over taxation, marketing boards and provincial purchasing policies were raised as major subjects of concern.

We take these views as additional evidence to support our conviction that Canada's crisis has economic, social, political and psychological dimensions-all intimately related.

Perspective on the past

The link between the health of the economy and efforts to sustain unity is a theme that recurs in Canada's history. Even though Canada has progressed and developed enormously over time, it has encountered periods which have put its political and economic structures in doubt. In the colonial 1840s, after the loss of preferential treatment in the British market, there was a movement in support of annexation by the United States. In the 1860s, the loss of reciprocity with the United States helped to forge the four colonies into an economic union which could withstand the pressures of annexation. In the depressed 1870s, the National Policy was designed to protect Canadian industries with tariffs. In 1886, Nova Scotia vented its economic dissatisfaction with Confederation through the election of a government which advocated secession. In the 1930s, the Depression called the whole economic and financial structure of Confederation into question and led to a new and enhanced role for central government direction in the management of the economy. The Second World War greatly increased this predominance, and to a large extent this situation remains with us today.

Given the forces of dualism and regionalism in Canada, it is not surprising that provincial governments, Quebec being the most vocal of them, have reacted to this concentration of fiscal resources-and the power that goes with it-in the hands of the central government. The pendulum has been moving in their direction in recent years, but this, too, has added to intergovernmental tensions.

Current economic realities

Throughout our history a most obvious characteristic of the Canadian economy has been the high degree of dependence upon international trade. In a nutshell, Canada's prosperity is based on the export of raw and semi-processed commodities, the proceeds of which are then used to acquire equipment, material and finished products. Since its natural resources are usually costly to exploit, their exploration and development require massive doses of capital imported from abroad. Prevailing international circumstances in the postwar period favoured such trade until recently. As a result, Canada has enjoyed sustained economic growth for the better part of the last three decades. World trade began to slacken around 1972-74 and Canada found itself immersed in a world recession. Most advanced industrialized countries still continue to struggle with slack economic performance, poor investment climates, increased rates of inflation and high unemployment.

Moreover, Canada must contend with this international situation at a time when a greater proportion of-women and large numbers of young Canadians, who were born during the postwar baby boom, are joining the work force. The growth in the numbers of those seeking work has outstripped the ability of the economy to produce jobs. The result is that Canada's youth in general and regions of slow growth in particular face unacceptably high levels of unemployment.

While it may not be of great comfort to the unemployed, it seems to us that these very real difficulties must be put into a broader perspective. The performance of the Canadian economy, although sluggish, compares favourably with those of most of our trading partners. For example, in the last five years there has been a substantial reduction in the historic gap between Canada and the United States in terms of income and production per capita, even taking into account depreciation in the value of the Canadian dollar. Despite current rates of >unemployment, the Canadian record in creating jobs has been impressive by most international standards, and by the same standards Canada has managed to contain the rate of inflation within reasonable limits. Even more important are the positive prospects for our economy in the future. These will result from recent improvements in terms of trade for natural resources and unprocessed commodities, and from the possibility of restoring Canada's self-reliance in energy by achieving a balance between imports and exports. Also significant will be the expansion of our resource base through the exploitation and management of the continental shelf.

The challenges of the future

Nevertheless, there is considerable evidence that an improvement in the country's economic performance will require major and, in some instances, difficult adjustments in Canada's economic structure. In traditionally strong export markets for forestry products, minerals and other raw materials, Canada faces severe competition, primarily from the emerging states of the Third World. Some of its established domestic industries, such as textiles, clothing, footwear and the assembly of colour TV sets and other electronic products, are increasingly unable to compete with lower-priced imports. Canada along with other industrialized states must also contend with a limited supply of resources, particularly non-renewable energy resources, and also with the results of the abuse of such resources as the land and the natural environment.

Most important, the challenge of restructuring and managing Canada's economy has to be met while recognizing the realities of modern Quebec and the aspirations of Canada's regional communities. Indeed, it seems to us that reform of the constitution and political institutions would be justified even if our sole purpose were to improve the ability of the Canadian public and private sectors to address themselves to the economic policy requirements of the future.

The nature of economic Integration

It is generally recognized that substantial economic gains come from integrating into larger and more complete types of economic association. Integration allows regions to take advantage of a venerable principle of economics: the division of labour and the specialization of production which goes with it. By operating within an integrated whole, regions can specialize in the production of goods and services in which they have a comparative advantage. At the same time, the possibility of interregional trade permits greater volumes of production, and hence lower costs. The size of the market in which the enterprises of a province, a region or a state can trade determines the limits of specialization.

Obviously there are limits to the benefits a region can gain from specialization and from the integration of its economy into multi-regional units. Otherwise regions would not resist the attraction of integration; there will be disadvantages or sacrifices, the majority of which may be of a non-economic nature.

To see where Canada fits and to appreciate more fully the economic advantages and disadvantages of economic unions, seven forms of integration found around the world may be considered. They are classified in ascending order of integration.

The first, the free trade area, consists simply of a reciprocal elimination of tariffs between members, each being free to levy its own tariffs against non-members. Experience has shown that this type of association generally does not last long. Free trade areas have usually either been dismantled or have evolved toward more complete forms of integration.

The second, the customs union, allows free trade among members but sets up common tariff policies against non-members. Like the free trade area, customs unions have not proved very enduring.

The third, the common market, goes further by removing restrictions on the movement of goods, services, capital and labour among members. The best, although not a pure, example is the European Economic Community. The EEC satisfies the criteria of a customs union, but it appears to be less than a full-fledged common market because labour and capital are not perfectly mobile. At the same time, the EEC has some of the attributes of an economic union and, to a certain extent, presents some aspects of a confederation or even a federation, its proclaimed goal.

The fourth, the economic union, involves, in addition to a common market, varying degrees of harmonization of state economic policies in order to remove discrimination arising from disparities in these policies. Examples of possible areas of harmonization are taxation, agriculture, transportation, social security and regional development. In economic unions common agencies are usually created to administer common policies on behalf of the member states.

The fifth, the combined monetary and economic union, adds to the economic union the elements of a common currency. The union between Belgium and Luxembourg, which provides us with one of the few concrete examples of this type of union, unfortunately casts little light on its possibilities. The small size of Luxembourg causes it to be largely dominated in economic and financial policy by Belgium. In any case, such an arrangement would pose certain theoretical and practical difficulties for a country such as Canada, due to the fact that it entails, almost by definition, a single capital market. It is difficult to conceive of how such a market could resist becoming balkanized without the degree of fiscal coordination that could only be achieved in a federation.

The sixth is the federation. It is a substantially more complete form of integration because it adds to the customs, economic and monetary union the dimension of a political association with a common government responsible for matters of federation-wide concern.

The seventh and most complete form of integration is found in unitary states, such as Britain, France and Japan, where the regions are fully integrated under a single political authority.

Thus Canada, as a federation, ranks high in the scale of economic integration. It is at one and the same time a free trade area, a customs union, a common market, a monetary and economic union, and its structure is capped by a measure of political integration.

Economic adjustment and the federation

An important consideration with respect to a federal union has to do with what is called the process of economic adjustment. The comparative advantages on which regional specialization is based do change over time, as old resources are depleted and new ones are discovered; as changes occur in technology or the cost of transportation; as people acquire new skills or develop new tastes. In other words regional economies are not static, but constantly change relative to one another, and economic adjustment is a continuous process. There are many reasons to believe that Canada is at present in a critical phase in this regard, with some regions or provinces going through favourable mutations (Alberta at the present time, for example), as others continue to struggle with persistent economic problems.

In terms of economic adjustment, a federation represents a significant advantage, particularly at the present time, from the point of view of the regions or provinces such as Quebec and the Atlantic provinces; it affords them the opportunity to benefit from interregional transfers of public funds raised by the central government. If these funds are properly directed at restructuring and reorienting their economies, the adjustment process will be substantially easier than if the regions or provinces had to rely solely on the resources at their disposal. This point is equally valid for every region in the federation, since areas that are favoured at a particular moment may well require adjustment assistance at some point in the future. On the other hand, Alberta and Saskatchewan are examples of provinces which went through economic difficulties in the past but now are among the strongest provinces economically.

Gains and sacrifices from economic Integration

Our analysis indicates that greater economic benefits should result from increasing levels of integration. Some of these benefits are associated specifically with the integration of regional economic activities into a larger market. For example, larger markets provide a greater scope for the diversification of sectors and specialization, resulting in a better allocation of the factors of production. Competition is enhanced; industries can take advantage of economies of scale; and a larger and more efficient financial sector may be created. Moreover, the availability of a more diversified and broader natural resource base is an important benefit-when the market for one commodity is low it may be counterbalanced by the more favourable position of other commodities.

Other benefits related to size come into play, particularly when integration takes the form of federal union. We have in mind a variety of aspects related to the efficiency and effectiveness of the larger public sector, such as the economies of scale in the delivery of public goods (for example in national defence), and a greater scope for interregional policy coordination which would take into account programs whose impact could not be restricted to a single region. Also significant is the enhanced capacity of the public sector to raise funds through external borrowings.

In a federal union, the regions can expect their economies to perform better as a result of the free movement of labour, capital goods and services. Other advantages are the greater chance of restraining undue competition among the regions for development projects and the improved leverage of the regions in securing international trade advantages. Finally, as we have noted, a federation allows for interregional transfers of funds through income support measures and adjustment assistance to the regions.

While such benefits may be difficult to measure precisely, they are nevertheless very real, and they are reflected in the standard of living Canadians have long enjoyed. In a nutshell, integration creates a surplus, because the whole is greater than its parts. And the surplus, using the central government as an instrument, can be redistributed so that the strong parts help the weak to the benefit of the whole.

At the same time we must recognize that increased economic integration also entails greater sacrifices, or costs, particularly for regions that are sufficiently developed and internally cohesive to be able to consider the possibility of alternatives to a particular form of integration. This may be assumed to be the case for a number of Canadian provinces, among them Quebec.

The cost entailed by integration may be described as essentially social and political. Even when an association has not passed beyond the stage of a customs union, the ability of component units to influence corporate decisions is limited, as is their access to cheaper imports which do not compete directly with regional production, and their ability to promote local employment by means of tariff barriers. Furthermore, any higher degree of economic integration imposes additional constraints on the autonomy of the regional unit.

It becomes less able to manage its own economy since it is no longer allowed to restrict the movement of its people, capital or goods, and it must bear the social costs of this increased labour mobility. Moreover, the priorities of the regional unit may be distorted by the existence of common policies which do not sufficiently take into account the distinct regional circumstances.

One example of the political constraints imposed on provincial and state governments by the higher degree of integration which is required in a federation is the constitutional provision which normally confers upon a central government exclusive power over interprovincial and international trade. In Canada, for example, natural resources, which are owned by the provinces, come under central government control when they are traded outside a province. Finally, there are political costs associated with the distance of the central government from regional problems. It has been argued that it is more difficult to signal regional grievances to a remote central government than it would be to the closer regional or provincial government.

For Quebec, all this is swollen by its own particular problem-by English-speaking predominance in its business sector, by its concern for a distinct heritage, and by the social and cultural cost any French-speaking person may have to pay on moving, for economic betterment, to English-speaking areas.

Taking both benefits and costs into account, equilibrium is reached in practice when the advantages in favour of a higher level of integration are counter-balanced by the social and political costs which each region is prepared to tolerate. In the case of Canada the limits to integration are imposed by those Canadian realities which we have previously described as the principles of dualism and regionalism.

Enlarging the surplus from economic union

One of the main conclusions to be drawn from this perspective on economic integration is that the well-being of all Canadians is critically dependent upon their capacity to maximize the benefits of integration and to increase the surplus it creates. At the same time account must be taken of the fact that most of the economic benefits from integration can entail regional sacrifices and that these must be kept at a reasonable and acceptable level in relation to benefits.

We turn now to ways in which the economic benefits of federal union may be increased relative to the costs.

Removing Interregional barriers

Although the Fathers of Confederation intended to secure the complete free movement of goods within Canada, judicial interpretation of the BNA Act, in particular sections 91(2) and 121, has made possible a variety of non-tariff barriers.

As a result, most provincial governments have developed a multitude of regulatory measures, have evolved practices such as preferential purchasing policies, quotas, and preferential pricing, and have established marketing boards, all of which have reduced interprovincial trade and therefore the efficiency of Canada's common market. In addition, the constitution does not prohibit restraints on the international and interprovincial exchange of professional and commercial services such as legal and engineering consulting and computer data processing. Because these provincial barriers contradict the spirit of economic union and should be prevented as far as possible, we are proposing that section 121 of the BNA Act be clarified and strengthened, and that it be extended to cover services.

Similarly, we think preferential provincial purchasing policies should be permitted only in those cases where the province requires them to alleviate acute economic hardship. We further suggest that the justification for such practices and the time they are expected to last should be specified and should be agreed to by other provinces.

Provincial legislation regulating the professions and trades has created barriers to mobility. It has had this effect even though the essential purpose of establishing standards for qualification and training is to protect the public. The lack of uniformity in standards from province to province should be corrected and country-wide mobility encouraged as far as possible, even if it means that common standards would have to be reviewed periodically through a process of consultation between provincial governments and organizations representing the people involved.

In the same way, we are aware that provincial legislation can impede the movement of capital, especially with regard to corporate mergers and the purchase of land. We think the constitution should expressly forbid such barriers.

Tax coordination

Wide provincial taxing power is essential to the high degree of fiscal decentralization that now characterizes Canadian federalism. Overlapping taxing powers, however, can pose serious problems within our common market, and the problems can only be resolved by effective intergovernmental coordination both among the provinces and between the central and provincial governments. It is very important that the provinces coordinate their tax policies in order to prevent fiscal competition that would seriously distort the preferences of businesses and individuals with respect to location. Here again, exceptions should be agreed upon only when specified social and economic objectives would be served.

Economic stabilization

Broadly, the recognition of duality and regionalism should go hand in hand with acceptance of the vital role of the central government in economic and financial matters. In an age that encourages and even forces interdependence and confronts Canada with growing world competition, we believe the answer lies in better coordination between the two orders of government. We think this calls for a greater degree of mutual respect and in particular for a more willing acceptance by Ottawa of the maturity of the provincial governments. On the one hand, in their own interests, the provinces need a central government which can do things which benefit them all. On the other, as we shall be recommending in a subsequent chapter, steps should be taken to give them a greater voice in those federal institutions and policies which affect them.

One area where coordination is essential is economic stabilization. One way such stabilization may be pursued is through monetary policy, a field which should remain under federal control. When applied to government budgets, the term stabilization refers to the conscious variation of government taxation, expenditure and borrowing in order to counteract business cycles and to maintain the pace of activity close to the potential of the economy.

In a federal union such as ours, fiscal decentralization is pronounced and yet regional economies are in various ways highly integrated with one another. The fact that the public sector is broken down into a number of separate political entities makes it difficult to use budgetary instruments for stabilization purposes, a drawback that can only be overcome through effective joint policy coordination.

Mechanisms for this purpose already exist in Canada. One is the conference of finance ministers, held annually in November. We believe the conference could be used more actively. More specifically, it should be used to develop a consensus on the country's economic outlook and to make short-term economic forecasts. It should also provide the opportunity for both levels of government to share and consolidate information about planned expenditures and anticipated revenues and borrowings. The importance of this type of meeting can hardly be exaggerated for the preparation of both federal and provincial budgets.

Regional economic development

In addition to the need for maximizing the size of the surplus produced by the federal union, consideration must be given to regional equity in the sharing of the benefits of the union. The simple reason is that people from any one region may see no reason for remaining within the economic association if they are convinced that the sacrifices they make exceed their benefits.

In any economic association. some component parts are bound to reap greater benefits than others from tariff, transportation, industrial development and other common policies. Whether this may be attributed to the functioning of the economic union or to other factors, large disparities in income, growth and employment opportunities among regions inevitably become sources of tension and grievance.

This very difficult problem is not unique to Canada, for it can be found both in other federations and in common markets and unitary states. For our part, we sympathize with the many speakers who came before us to explain how it affects the life of millions of Canadians and handicaps whole regions in their social or cultural development.

The problem of regional disparities has traditionally been viewed in Canada in terms of the difference in the average well-being of inhabitants. The alternative approach would be to focus on the relative size of regional economies. Because of the way regional disparities are usually seen by economists, Canada's corrective measures have included encouragement for migration of people from one region to another with greater opportunities, and the movement of capital to regions where return on investment is high. But Canada has also developed substantial measures to redistribute financial resources among the provinces. Particularly significant is the complex network of interregional transfers which now embraces a variety of programs. Major components are equalization payments from Ottawa and federal contributions to post-secondary education and to provincial programs of health and welfare. Of significance too are the interregional transfers implicit in national programs such as unemployment insurance. By itself, this complex network constitutes one of the main ways benefits from the union are shared in Canada.

All these measures have helped Canadians to understand and deal with regional disparities, and the system of provincial revenue equalization is particularly imaginative and praiseworthy. Because it is now an essential element of benefit sharing-the third of our main principles-we propose that the principle of equalization and the central government's responsibility for it be entrenched in the constitution.

But, good as they are, we doubt that current approaches to equalization and to regional development will produce an enduring balance among regions. Because serious disparities remain, additional efforts by the provincial and central governments must be made. For this reason, we propose steps to equalize not only the standards of public services, as is presently the case, but economic opportunities as well.

The current program of equalization now includes only 50 per cent of the provincial revenues from non-renewable natural resources. Notwithstanding the necessity to contain the burgeoning costs of equalizing the energy resources accruing mostly to a single province (Alberta), the 50 per cent limit introduces an arbitrary element into a formula which purports to equalize to the per capita national average virtually all provincial revenue sources. It also reinforces the need recognized by many experts, to have non-renewable resources equalized on a different basis.

We suggest that the equalization formula should be modified by dividing the provincial revenue sources into two groups. The first group would contain the twenty-two "ordinary" revenue sources which would be equalized and distributed according to existing arrangements; these payments would amount to $1.9 billion in 1978-79. Entitlements associated with equalizing 50 per cent of the revenues from non-renewable resources would constitute a second set of payments. Total equalization payments now attributable to these revenue sources would be increased from over $800 million to about $1.6 billion, because the positive entitlements of Ontario and British Columbia (presently non-recipient provinces) would be included. Unlike the case for ordinary revenues, the second set of entitlements would be unrelated to the relative fiscal capacities of the provinces; rather these payments would be allocated according to some indicators measuring the degree in which provincial economies have experienced below average economic performance. They would be block grants for the purpose of encouraging economic development in provinces of relatively low rates of growth. In other words, the economically disadvantaged provinces would get a share of the benefits from integration, which could be used exclusively for their development.

It should be clear that we feel the central government should have wide responsibility for regional economic balance, and the broad taxing and spending powers to meet it. This, of course, does not mean Ottawa should use its powers without regard to the interests of the regional governments or without limitations.

Medium-term economic strategy

In addition to short-term stabilization policy, there are other policy areas in which a federation may fall to realize full benefits and reasonable equity because of institutional deficiencies. These areas are so broad and involve the coordinated use of so many instruments that the boundaries between the two orders of government are inevitably crossed. The most obvious example is industrial strategy, the main weapon for economic adjustment. Here there appears to be no substitute for further concentration of power in the central government, a solution which runs counter to the realities of dualism and regionalism. Yet we believe both principles can find expression in such policies.

In this regard, we feel that the experience of two recent conferences of first ministers on the economy indicates real promise. Indeed, we think such conferences should be held on a regular basis, possibly two or three years apart, so that the medium-term character of the policies developed could be better defined. The process of intergovernmental discussions might also be improved by allowing participation of business and labour groups.

The Quebec economy and federation

Quebec's dissatisfaction with Confederation goes beyond economic considerations. It is rooted in the Canadian federal system which in the eyes of Québécois has somehow failed to give Quebec the desired degree of political autonomy in several important policy areas. While the issues are exceedingly complex they largely revolve around political matters such as the distribution of powers. Yet in the debate over the possible secession of Quebec economic considerations loom very large.

We have examined the evidence provided by a number of recent studies dealing with interregional trade, the interprovincial shipments of manufactured goods, the number of jobs dependent upon the Canadian market, federal expenditures in Quebec, and other related topics. The major conclusion to be drawn from trade data is that Quebec's economy is highly dependent upon the Canadian common market. Canada's tariff structure and trade policy have a major impact on the level of production, employment an income of that province's manufacturing sector. Compared with its international exports, whose production takes relatively large inputs of natural resources and technology, Quebec's trade within Canada is based upon the manufacture of labour-intensive products. It relies on Canadian markets for the sale of about $7 billion of these goods, most of which could not withstand foreign competition. Severing the ties to Canada's customs union would profoundly disrupt Quebec's economy. Quebec's and Ontario's favourable trade balances with the rest of Canada unquestionably indicate that both provinces derive definite advantages from the Canadian customs union.

Income disparities between francophones and anglophones

Per capita income in Quebec now is approximately 90 per cent of the Canadian average. This figure, however, obscures the fact that the average income of francophones is considerably below that of anglophones in the province. Even so, there is substantial evidence that this gap has dramatically decreased in recent years. The decrease in the difference of average salaries for male workers has been most impressive: from 52 per cent in 1960 to 32 per cent in 1970 to 15 per cent in 1977. Similarly, what might be called the bonus for being bilingual has decreased in the case of francophones and increased for anglophones. What this implies is that French is increasingly becoming the language of work in the province of Quebec. It is reasonable to conclude that the remarkable reduction in the earnings gap may be attributed to two main factors: improvement in the education and training of the labour force, and a significant rise in the status of French as the language of work. Both changes should mainly be credited to the policies of the Quebec government, though the federal government has had a complementary role.

Quebec and the surplus from economic union

Several reasons have been offered to explain Quebec's poor economic performance and the problem of chronic unemployment: deterioration in the competitive position of weak manufacturing industries, the vulnerability of resource-based industries to changing international conditions, an inadequate rate of economic development and an insufficiently mobile labour force. Yet many Quebecers view the problem as a failure of those federal postwar policies which were designed to achieve full employment. For them, the record of central government policies aimed at economic stabilization is poor; such policies have failed to create the economic development needed to provide adequate jobs. Moreover, regional adjustment policies directed at curing unemployment through increasing the mobility of labour have been particularly unsuited to Quebec. Here, the social and cultural sacrifices both to the individual who is required to move and to the community he leaves behind, are very significant. While this is also the case for other provinces, it is especially pronounced for those leaving Quebec, where mobility may mean moving to a different linguistic community.

Statistical evidence from recently developed provincial accounts fails to establish that Quebec has been a major net recipient of federal funds (that is, federal expenditures minus tax contributions from Quebec) until quite recently, when temporary subsidies for oil imports were established. Moreover, the evidence confirms in part the current contention that central government expenditures have been concentrated in income support measures, while the province has been receiving a disproportionately small portion of funds to generate employment. Most comparisons with Ontario's economic performance since the Second World War show Quebec losing ground in terms of investment, employment, manufacturing activities, and in service activities of the private sector. These indicators tend to reveal that Quebec's share of benefits from the union have been progressively decreasing. Hence, its net surplus from union, while still positive, has been progressively eroded, and now may well come mostly from the protection provided for soft economic sectors, a dubious advantage from a long-term perspective. Hence, it is not surprising that more and more Quebec economists are critical about current federal economic arrangements.

The principal conclusion to be drawn from this analysis brings us back to the surplus generated by economic union and its use for economic adjustment and industrial restructuring. It is no secret that the Quebec economy and particularly large portions of its manufacturing have to be restructured and reoriented to other forms of production. It should be clear that a challenge of such magnitude would be easier to meet if financial and economic resources from elsewhere were available. It is precisely one of the main economic features of Canada's federation to provide interregional transfers. Thus, for a region facing massive economic adjustments, a federation offers definite advantages if they are put to use.

Consequences of Quebec separation

Everywhere the Task Force went, the question inevitably came up: "What would be the economic consequences of the secession of Quebec?" No one has been able to tell us conclusively what these consequences would be. But we have views on the subject.

First of all, we have heard from a number of provincial political, business and labour leaders outside Quebec who have said, or at least implied, that their province too might do better outside the federation. Some were even willing to consider that possibility if the rest of the country continued to ignore their particular regional needs. In short Quebecers are not alone in voicing such feelings.

We know that a country is not a business deal. Reliance on a "balance sheet" approach is certainly no sign of commitment to Canada. Economics will be an important factor, but not the only factor in the decision of Quebecers for or against the Canadian economic union. Nor will the return to prosperity by itself solve most of our basic problems, although it would obviously be of some help. But it says something in favour of the present economic union that the Parti Québécois would like to retain many of its elements, although admittedly in a different political framework.

During our journeys we have heard a lot about "sacrifices being made for Quebec," and about "special treatment being given to Quebec," favours of all kinds distributed by that "French power" in the central government cabinet. There is simply no evidence to support the contention that Quebec has been or is getting more than a fair share of the "surplus" generated by the Canadian economic union. Moreover, French-speaking Quebecers experience considerable social and political costs as a result of economic union.

To arrive at precise facts and figures about the economic consequences of Quebec's secession would imply a number of assumptions based on factors that cannot be measured. Prospective economic decisions of individuals, groups and political entities are based on beliefs, impressions, moods and reactions that can hardly be anticipated. One cannot predict the reaction of Canadian or foreign investors, traders and tourists if Quebec does secede. Some might be pleased, others disconcerted. Furthermore, Quebecers of both language groups might vote with their feet, or with their chequebooks; indeed, some already have.

It is equally hazardous to predict how secession would affect the economy of Quebec and Canada because we cannot see in advance the way it would happen. Would it take place in calm or in anger, suddenly or gradually, in full or in part, and with or without an association arrangement that would preserve a good deal of economic integration? The Task Force has no answers to such questions. As political or economic forecasters, we are not ashamed to admit our limitations, and we are in good company in doing so.

It seems to us that Quebecers will not be convinced to stay in Confederation by others raising the spectre of the dire economic consequences of secession, although it might be wise for Quebecers to think carefully about the possible risks. Nor will Quebecers be convinced by an attempt to reinterpret their economic history in Confederation in a more rosy light, although a balanced and clearer vision of the facts would help the debate. What is needed instead is that Quebecers be shown that they can have a more promising future within Confederation than outside of it. To this effect, we are convinced that the Canadian federation can be restructured and can achieve a better overall balance that would both suit and support a distinctive character for Quebec. We will take up this issue in the next chapter.

Last HTML revision: 10 May, 1996

William F. Maton