International -- Intl' Business: CANADA
THE CALL OF THE WILD IN WESTERN CANADA (int'l edition)
Edward E. McNally, CEO of Calgary-based Big Rock Brewery Ltd., is fed up with Canadian federalism--and Quebec's separatism. His sentiments are shared by a growing number of executives in Western Canada who see taxes from their resource-rich provinces going to subsidize Eastern provinces, especially Quebec, half a continent away. Besides, Quebec's high taxes and provincial trade barriers make it a poor place to sell his beer, says McNally: "It's easier to sell in the U.S. than it is in Quebec." McNally is so frustrated that if Quebec wants independence from the Canadian federation, he says, they should be told "to get the hell out."
Welcome to Canada's Wild West. Even as an aggrieved Quebec inches ever closer to secession, a Newt Gingrich-style right-wing movement is building momentum in Western Canada. Championed by the Calgary-based Reform Party, the movement wants to slash federal spending and give provinces control over programs ranging from health care to education. Meanwhile, the party's open hostility to Quebec's long-standing demands for a special role in Canada could give the separatists just the push they need to destroy the confederation. "The Reform Party is playing a very dangerous game," says former Prime Minister Joe Clark.
Certainly, the timing is risky. On Oct. 30, Quebec voters narrowly defeated a referendum to withdraw the province from the Canadian federation. But the vote didn't put secessionist sentiment to rest. Polls show it has actually risen. And that has led Quebec federalists to renew demands for constitutional recognition of Quebec as a "distinct society" and for veto power over constitutional changes.
Prime Minister Jean Chretien's challenge is to meet enough of Quebec's perennial demands to quell the rising support for sovereignty--without permanently alienating increasingly vocal Westerners. But his latest unity plan, introduced in Parliament on Nov. 29, has been rejected by both the separatists and the Reform Party. Unless Chretien comes up with a new strategy fast, "he'll lose the next and last contest with the separatists," warns Reform Party leader Preston Manning.
Manning argues that there's a way around the stalemate. He notes that both the West and Quebec agree on one thing: that Canada needs to be radically decentralized. But Chretien has offered provinces more control over just one program: employment training.
Another major sticking point for the Reform Party is the number of Alberta tax dollars it says wind up subsidizing Quebecker's lifestyles. University of Calgary economist Robert L. Mansell says that since 1961, Alberta has contributed more than $100 billion more to the federal budget than it has received in benefits, while poorer Quebec has received about $125 billion more from Ottawa than it has paid in taxes.
TRADE TIES. Western Canadians say huge government spending and the taxes needed to support it have hobbled them in competing with companies based in the U.S., which has a much leaner welfare state. That's becoming a critical issue as U.S.-Canada trade has soared more than 50% since North American free trade was phased in starting in 1989. Today, "Calgary has a lot more to do with Denver and Houston than it does with Halifax and Montreal," says James K. Gray, CEO of Canadian Hunter Exploration Ltd., a Calgary oil company.
Alberta already has embraced the new religion of fiscal austerity. Premier Ralph Klein is enormously popular after slashing spending 20% as part of a plan to wipe out a $2.6 billion budget deficit by next year. "These steps have absolutely improved the business environment," says Doug Mitchell, president of the Calgary Chamber of Commerce. He bolsters his argument by noting that Alberta's unemployment rate is now just 7.6%, compared with 11.2% in Quebec and 9.4% in Canada as a whole. Mitchell predicts Klein will soon cut Alberta's taxes, which he says are already the lowest in Canada.
The Reform Party has taken this crusade to Ottawa, where it is demanding sharp spending cuts to balance Canada's budget in three years while turning control over many programs to the provinces. Western business leaders argue that this would produce smaller, better-run programs, though opponents contend that quality standards would deteriorate if control were passed to the provinces. Already, Alberta has tried to chip away at Ottawa's control over health care by opening private clinics to offer services that have long waiting lists, such as cataract operations and some diagnostic tests. Citing erosion of "national standards," Ottawa retaliated by withholding some of Alberta's health-care funding.
Albertans and British Columbians upset with Ottawa's meddling are the backbone of the Reform Party, founded in 1987 by Manning, son of longtime Alberta Premier Ernest Manning. Under the leadership of the 53-year-old former management consultant, Reform has won 52 seats out of 295 in the House of Commons--just one shy of the Bloc Quebecois, which, as the second-largest party in Commons, holds the status of Official Opposition. If, as expected, Bloc Quebecois Leader Lucien Bouchard resigns to become Premier of Quebec early next year, Manning will most likely argue that his party should be named Opposition.
VIRULENT. But Manning isn't waiting to take on Chretien. "Traditional federalism has brought this country to the very brink of disaster," Manning tells supporters. Such talk has put the West on a collision course with Chretien's more traditional, conciliatory approach to Quebec. The Prime Minister's move to recognize the French-speaking province as a distinct society and offer it a veto over constitutional amendments would make Quebec superior to the other provinces, say Reformers. With such virulent Western opposition, even Chretien concedes he won't be able to enshrine the proposals in the constitution.
That may play into the hands of Quebec separatists. But to quench the separatist flames, the Reform Party is preparing a tough-minded plan to make it "crystal clear, before another referendum, exactly what the negative implications of secession are," says Manning. His party would challenge Quebec's current boundaries--especially those in the resource-rich northern portions of the province--and would threaten to veto an independent Quebec's application for membership in the North American Free Trade Agreement.
Despite growing pressure for change from Quebec and Western Canada, Chretien is determined to fight for the status quo, with as few changes as possible. If Ottawa can't put a lid on its debt, it will eventually be forced to proffer a larger role to the provinces. The only question is whether that will happen in time to head off divorce with Quebec or as part of a messy breakup.By William C. Symonds in Calgary, Alta.