MANITOBA PREMIER BRIAN PALLISTER ARGUES IT’S TIME FOR THE FEDERAL GOVERNMENT TO STEP IN WHERE THE PROVINCES HAVE FAILED — FREEING INTERPROVINCIAL TRADE. WILL THE OTHER PREMIERS AGREE? COYNE.

Pallister takes radical step for federal relations

‘It is time for Ottawa to shoulder its responsibilities,” argued an opinion piece in last Friday’s Financial Post, “by introducing a Charter of Economic Rights clarifying the vital rights of Canadians to sell their goods and services and exercise their trades and professions in every part of Canada.”

The idea of federal legislation guaranteeing the free movement of goods, services, labour and capital throughout the federation is not new. Neither is the article’s proposed quid pro quo for provincial acquiescence in such a bold assertion of federal authority: an end to federal meddling in provincial health care policy, notably via conditional transfers, granting to provinces instead the fiscal resources to match their constitutional responsibility. Why, I’ve argued for just such a “Grand Bargain” myself.

What is new, and remarkable, is the article’s co-author: Manitoba Premier Brian Pallister. For any premier to make any acknowledgment of federal authority over the economic union, with or without any offsetting concession on the feds’ part, is unprecedented. Though section 91(2) of the Constitution clearly assigns responsibility for “trade and commerce” to the federal government, the job of lowering interprovincial trade barriers has always been left to negotiations amongst the provinces, at provincial insistence.

But for Pallister to sign onto a proposal this radical is extraordinary. He is, after all, not only a premier, but one assigned by his fellow premiers to help find a way out of the interprovincial trade morass, last year’s much-heralded Canadian Free Trade Agreement having failed to make any greater headway than previous such “breakthroughs.” Pallister is now publicly conceding that the job cannot be left to the provinces — that it can only be done by a federal government armed with the power to strike down provincial trade barriers.

For that is what the proposed Charter of Economic Rights entails. As explained in a 2010 paper published by the Macdonald-laurier Institute — the institute’s director, Brian Crowley, is Pallister’s co-author on the FP piece — the legislation would not only entrench the “four freedoms” as legally enforceable rights, subject to the sort of “reasonable limits” familiar from the existing Charter of Rights, but would create a federal Economic Freedom Commission “with the power to investigate breaches of the Economic Charter of Rights on its own initiative.”

Citizens whose economic rights had been violated would no longer be left to challenge provincial legislation on their own, as in the doomed Comeau case (that was under another section of the Constitution, requiring “All Articles of the Growth, Produce, or Manufacture of any one of the Provinces” to be “admitted free into each of the other Provinces”), but would also have a federal body with the mandate to tackle the provinces on their behalf, proactively. That idea is no longer the preserve of think-tanks and crank journalists. Thanks to Pallister, it has crossed into the realm of practical politics.

Of course, Pallister is just one premier. But there is reason to think the “Grand Bargain,” in its latest incarnation, might find more traction with the others than it has in the past. One might wish for premiers with enough vision to dismantle trade barriers on their own, as one might wish for a federal government with enough gumption to assert its natural authority in this regard without the provinces’ approval. But in the absence of either, if it takes a bribe to seal the deal, a bribe it will have to be.

Why might premiers find such a deal attractive? One word: money. As the population ages, with unprecedented numbers of people in retirement, the provinces are staring at a future of ever-tightening budgets, squeezed between rising health care costs (all those retirees are expensive to look after) and slowing economic growth (more retirees equals fewer people of working age). The latest “fiscal sustainability” report of the federal Parliamentary Budget Officer suggests there is a real prospect of one or more of the provinces having to default on its debts in the decades to come.

Not having formal responsibility for health care, the federal government is not facing anything like the same demographic pressure. Not only are its finances on a sustainable track, according to the PBO, but it could be debt-free, on a net basis, by mid-century. Ottawa has the money, in short, and the provinces need it. As important, they need the freedom to experiment and innovate in health care delivery, and the discipline of being responsible to their electorates for the results. The current system of conditional transfers may not be quite the policy straitjacket sometimes claimed — provinces have frequently been in violation of the Canada Health Act without consequence — but it does blur accountability, at the same time giving rise to those periodic bouts of federal-provincial finger-pointing that prove so unedifying.

All of which suggests, as Pallister and Crowley argue, replacing cash transfers with a permanent shift in tax “points” — the federal government lowering its tax rates, the provinces raising theirs, in such a way as to leave the total tax burden unchanged. The gain in provincial tax revenues needn’t be exactly equivalent to the loss of federal transfers: the provinces are probably right to argue they will need more resources in the long run. What’s more important is the shift in responsibility.

Each part of the Grand Bargain, provincial acknowledgment of federal authority over the economic union and federal acknowledgment of provincial authority over health care, would be worth doing on its own. Combined, they offer a way to simultaneously address two of the most pressing items on the national agenda: raising national productivity and curbing runaway health costs. That they might also lead to less federal-provincial backbiting is something of a bonus.

WHY MIGHT PREMIERS FIND SUCH A DEAL ATTRACTIVE?