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Ottawa, September 26, 1995
1995-074

Notes for an address by the Minister of Finance, The Honourable Paul Martin, presented to l'Association des MBA du Québec

Montreal, Québec
September 26, 1995

Delivered text is official version

On the 10th of October, in 1864, the 33 Fathers of Confederation came together in a meeting at the legislature in Quebec City that was of the utmost importance. For seventeen days, representatives from the separate colonies deliberated.

The result?

A "new economic and political partnership" that three years later would be called Canada. Taché and Cartier and their colleagues built well.

Better, perhaps, than they knew.

Who would have thought then that this new economic and political partnership, our Canada, would one day become the envy of almost everyone in the world? And who would have thought then that there would be those today who would want to destroy it?

To turn away from our heritage. To rip apart our country. A country that exists because of Quebecers. A country built with pride by all of us.

The separatists insult all Quebecers when they say that we have not built what they call "a normal country".

Because surely, if we stand out for having not chosen the course of separation, it is because we had the opportunity to build Canada.

Of course, the separatists understand the importance Quebecers attach to over a century of great achievements within Canada, to our desire to protect those achievements, to our wish to be able to continue to call them our own. That is why, in the referendum question, more words are devoted to offering Canada a new partnership than to the real goal, the only one which really counts for the separatists -- separation itself.

Let's not fool ourselves. Separation is separation. Purely and simply, it means the certain destruction of our economic and political union with Canada.

What does that mean for Quebecers? There is nothing ambiguous about the consequences of breaking up. The use of the Canadian passport? Gone. Equalization payments? Gone. Federal transfers to Quebec? Gone. The full set of economic freedoms available in Canada, for instance the mobility of labour -- gone.

The stability, the protection, the mutual assistance that is at the very heart of the Canadian union? Gone.

All of those benefits come from being Canadian. We don't offer them to Costa Ricans or Australians. Nor would they be available to the citizens of a foreign country called Quebec.

A few more examples. The separatists are quick to offer assurances that Quebecers could keep their Canadian citizenship. But do you know of any other country in the world that has 25 per cent of its citizens living outside its borders?

You know the answer without even asking.

Use of the Canadian dollar? That might be possible, I suppose. But how would it make us more independent to use another country's currency, Canada's currency, over which we will have thrown away all the control and influence we now have as part of Canada?

Internationally, two of the greatest assets that we enjoy as part of Canada would no longer be available to Quebec. The G-7? Gone. We would be too small. Participation in the AsiaPacific Economic Cooperation Council? Gone. Canada borders the Pacific. But Quebec wouldn't if it separates from Canada.

Of course, none of this changes the fact that an independent Quebec could exist. Dozens upon dozens of countries "exist". But surely, for us, Quebecers, the issue is not merely the fact of existing. Our ambition is to be part of a strong, powerful, influential country; to be able to offer our children unlimited opportunity in a thriving country. That country is called Canada.

Understand me well. I am not saying that the cost of separation would be paid only by Quebec. That cost would be born by every Canadian, from coast to coast. And it would be high: economically, socially, culturally, politically. Separation would mean one large country being replaced by two very much diminished states. Everyone would lose.

The issues in this debate are very serious. There will be dozens of arguments and counterarguments raised during the campaign. But there are two that I would like to discuss in particular today. They go to heart of the separatist case. The first: the claim that there will be a partnership, indeed an economic symbiosis, between a separate Quebec and Canada. The second: the virtual certainty that Quebec will automatically acquire membership in NAFTA.

Both of these assumptions are dangerously and fatally flawed. And without them, the separatists' case collapses like a house of cards.

Let's look first at a possible economic union. The separatists claim that such a union is inevitable because it would be in the objective interest of Canada.

They are wrong. This has nothing to do with emotion or revenge. But everything to do with reality. Take for example the Canadian customs union which involves common tariffs vis à vis the rest of the world. The tariffs presently in place reflect a balance between all of the interests of Canada, those of the Atlantic provinces, Quebec, Ontario and the Western provinces.

If Quebec separates, what possible incentive would Canada have to satisfy the needs of the foreign country Quebec would become?

The separatists focus on the close trade links between Ontario and Quebec. But what about Western Canada? British Columbia and Alberta ship only 2 or 3 per cent of their goods to Quebec. Their major markets are across the Pacific, south of the border, and in other parts of Canada.

If Quebec separates, what would be Western Canada's interest in allowing Canada to grant special privileges to the foreign country Quebec would become? If you consider this a purely academic question, ask the people working in the textile sector what they think about it.

Let's be clear. Countries are not in the business of doing favours for foreigners. That's not what governments are elected to do. It's not what their citizens expect. And it is not what a separate Quebec should expect.

Having said this, for the sake of argument, let's take the question further. Let's assume for the moment that Canada was willing, in principle, to negotiate an economic partnership with a separate Quebec similar to the one we now enjoy.

The question then arises: Could it? The answer is clearly NO.

Why? Because Canada would be jeopardizing hardwon, major trade advantages it spent many long years negotiating with other countries.

Under the terms of NAFTA, Canada could offer the financial institutions of a separate Quebec the rights and privileges of an economic union only if it offered exactly the same privileges to Mexico and the United States.

Offering American banks a carte blanche to establish themselves in our market has never been in the interest of Canada. It isn't now. It wouldn't be after Quebec's separation.

We are not talking here about trivial things. Investing, innovating, building opportunity, the financial sector -- our banks, our insurance firms -- are among the most dynamic sectors of our economy.

And so, on that basis alone, economic union between Quebec and Canada would create enormous difficulties. For Canada would have no choice but to protect its domestic market.

Quebec would find itself in an even more difficult position, trapped between a rock and a hard place. Either it would allow the powerful American institutions to invade its market. Or our Quebec financial institutions would face reduced access to the Canadian market.

But in fact the stakes are even higher than that. For Canada, opening negotiations on a new economic union with Quebec would amount to opening a Pandora's box .

Once again, let's suppose Canada and Quebec entered into negotiations. The reaction of the Americans would be automatic: they would insist on being at the table. The precedent is already there. When Washington and Mexico decided to negotiate a bilateral trade deal, Canada rightly insisted on being at that table. It was imperative that we protect our interests. We took our rightful place and we became signatories to NAFTA.

That means one thing: right from the beginning of Canada-Quebec negotiations, the Americans would be part of the equation.

And that's the nub of the problem, one which goes far beyond the banking sector. The United States would jump at this opportunity to re-open many of the key protections Canada fought hard to secure, for itself as well as for Quebec.

There is no way on earth that a Canadian government would open itself up to such risk. Yet negotiation of a privileged deal with a separate Quebec would do precisely that.

Ask yourself if Canada would ever expose itself to that vulnerability? Particularly when the stakes are so high. Particularly when today, the importance of the rest of Canada's trade in goods with the United States is seven times larger than its trade with Quebec. The answer is no. And that is why there would never be a new economic partnership. Not because Canada would not want one, but because it would have too much to lose.

This has nothing to do with emotion. It is simply the way in which foreign countries do business. A practice ruled by logic and selfinterest.

Let me turn now to the second myth in vogue with separatists -- Quebec's easy and automatic accession to NAFTA. Here too, the real world is very different from the separatists' dream world. Membership for a separate Quebec would not be automatic. It would not be fast or easy. And, worse still, it could very well carry a high price.

Why? Because NAFTA would not be the first step. NAFTA itself builds on the rights and obligations of the World Trade Organization, the WTO -- the former GATT -- which regulates the vast majority of world trade. Quebec must first gain membership in the WTO. Quebec would face a long and difficult road, strewn with many obstacles and delays. And negotiations for membership in the WTO could not begin until Quebec officially declared its independence.

Once that occurred, there would begin several years of intensive discussions. Particularly since there are already 30 countries standing in line. In the meantime, Quebec would be the only developed country not included in the most fundamental trade agreement in the world. And that is not all.

What would those negotiations be like? Consider for a moment that every single one of the 117 members of the World Trade Organization would have the right -- and many would have the interest -- to pressure Quebec to give up advantages it now has. That is the price to be paid for joining the club.

Quebec itself would have to negotiate separate deals with dozens of WTO member countries. Not only with the developing countries, but with the G-7 -- the United States, Japan, the Europeans ... and Canada. The conditions set by these countries could be substantial.

The Americans and the Europeans would certainly want to reopen negotiations concerning agriculture and Quebec's system of supply management. For example, they would seek tariffs well below the 300 per cent that apply today to protect Quebec's butter industry.

The same reasoning applies to many other sectors of our economy. For example, Quebec's policies on government procurement -- policies protected now because Quebec is a province of Canada. Policies that would not be tolerated if Quebec became an independent country. We are talking about billions upon billions of dollars. Money that creates thousands of jobs in Quebec, thanks to preferential policies.

Quebec Hydro is at the centre of this issue. Its preferential procurement rules have been central to the establishment and unparalleled growth of many firms.

These practices, which are legal in today's framework, would undoubtedly become the target of our competitors the day that Quebec declares its independence.

Moreover, during any negotiations, Quebec would generally be dealing with players more powerful than itself. Its relative strength, its real negotiating power would be proportional to its smaller size.

Canada has always stood up for Quebec's trade interests. The agreements that we have signed testify to the strength of that defence. A separate Quebec would lose all of these advantages. Their loss would be sorely felt.

The separatists want to expose us to all of these risks, to all these uncertainties and to the enormous costs of membership. Why?

To try to regain all of the benefits that Quebec already enjoys by being a part of Canada. That may be a grand gesture, but it is very risky and ridiculous.

Now, let us assume for the moment that Quebec passes the WTO test. The problems does not stop there. NAFTA is far from a done deal. In effect, the United States gets two kicks at the can. Concessions it didn't get from Quebec at the WTO table, it would surely seek at the NAFTA table. Quebec would be facing even greater risks.

One of the historical constants of Quebec has been the protection and advancement of our language and our culture. French, in all its aspects, has experienced phenomenal growth over the past 200 years. And the separatists are willing to blindly risk this heritage at the roulette table of independence.

Today, as we speak, there are forces in Washington that would like to renegotiate NAFTA's cultural provisions -- provisions that protect Canada's, as well as Quebec's cultural industries. Canada can stand up to the pressure because NAFTA has already been negotiated and ratified. This would not be the case if Quebec had to negotiate membership.

For those who think language would protect Quebec from American pressure, they should recall the fierce fight the United States had with France recently over protection of that country's cultural industries -- a fight that the United States does not consider over. And they should consider whether a separate Quebec -- a much smaller economy than France, a country seeking accession to NAFTA, a country that would need trade with the United States much more than the United States would need trade with it -- would be able to withstand such pressure.

With such a precedent, do you really believe that Quebec would succeed where France, the flagship of French culture in the world, had such difficulty? How ironic it would be if Quebec were to separate, and as a result, lose cultural guarantees essential to our identity that we benefit from today as part of Canada.

Would membership in NAFTA be costly for Quebec? Of course. But just as costly would be the time and energy lost to acquire that membership. And, at the end of the day, that translates into lost jobs, a great many jobs.

The separatists like to point to Chile as an example of how quick Quebec's accession to NAFTA would be. This argument simply does not hold water. The U.S. Congress has still not approved the «fast track» for Chile's accession. There is no reason to believe that this "favour" would be extended to Quebec.

And if there is no fast track, the American Congress - not the most pro-free trade institution
today - would have all the time in the world to review, question and assess each and every single provision of NAFTA that would apply to Quebec.

Now, I am not saying that Quebec could not eventually become a member of the WTO or NAFTA. That is not the issue. The issue is time. The issue is delay. The issue is uncertainty. The issue is the risk. The issue is lost jobs. The fact is: is the price worth it?

Clearly, the separatist assumptions have little to do with reality. Would a separate Quebec be able to negotiate an economic union with Canada. The answer is clearly no. Would a separate Quebec be able to negotiate membership in NAFTA? Possibly. But the question is: when and at what price?

So far we have talked about two of the major myths perpetrated by the separatists. But they are not the only ones. There are others. For example, the myth that separation will give Quebecers greater control over their own destiny. Nothing could be further from the truth.

We have just looked at several areas in which Quebec would be backsliding, leaving itself vulnerable to losing current benefits.

Rest assured: separation would represent nothing less than the erosion of our heritage as "Maîtres chez nous". How can the separatists claim that we will be more "Maîtres chez nous" when they know that the consequences of separation would be decided by others?

When it is Canadians, not Quebecers, who will decide on the granting of Canadian citizenship.

When it is the Bank of Canada that will run Quebec's monetary policy if a separate Quebec decides to use the Canadian dollar.

When it is the Americans, Mexicans and Canadians -- not Quebecers -- who will decide if and when a separate Quebec may be admitted to NAFTA, and on what terms.

We have to be honest: separation would place us at the mercy of others. Separation would not increase the control of Quebecers over their destiny. Ironically, it would make us more dependent.

The separatists enjoy calling themselves "the camp of change". Maybe they are.

It would indeed be a change to deny Quebecers the considerable benefits of the economic and political union that already exists with Canada.

It would be a change to deprive Quebecers of the right to send MPs to Ottawa.

It would be a change to require Quebecers to give up their membership in the seventh largest economy in the world to whose success we have contributed a great deal.

It would be a change to no longer enjoy the third highest standard of living among G-7 countries.

It would be a change to deny Quebecers the influence that comes from size, from pulling together.

And it would be a change to leave Canada, which the World Bank recently declared the second richest country in the world.

One fundamental question must be asked of the separatists: before reaching the point of no return, before making us leap into the void, please tell us how can you do better?

One last myth that the separatists disseminate centers around conversations that Quebec business people would have with their Toronto counterparts after a vote in favour of separation. In these conversations, cool and calm heads always prevail over emotion and resentment. They are right, but not in the way that they think. There will be cool and calm heads. We have already begun to see where that will lead.

Foreigners send our dollar up as the polls show the separatists losing -- and they send our dollar down when other polls show results that are much closer.

Cool and calm heads are also the trade mark of entrepreneurs who can choose from among dozens of countries who, unlike ourselves, are not in the process of tearing themselves apart.

Cool and calm heads are also the mark of business people who can also look to less uncertain horizons for what they want most: stability, clear rules, stable currencies and well-established frameworks.

Yes, calm and cool heads would prevail. But it is not an encouraging prospect for a separate Quebec.

That is the scenario if there is a yes vote on the referendum. It is the separatists' scenario. But I would like to offer you another one.

A scenario of a country that has put uncertainty behind it, that has eliminated the risk and has finally embraced stability.

That of a Quebec within Canada that is focusing -- as it does so well -- on conquering the markets of the world, rather than worrying only about building barriers and borders at home.

That of new joint projects, of new investments that Quebecers and Canadians will undertake together.

A scenario that could liberate an economy too long on hold.

That of a country with the healthiest economic fundamentals seen in years -- low inflation, increasing productivity and declining interest rates.

Of a country focused on the real issues: jobs, science and technology, and a better environment for business.

A scenario that illustrates and confirms our membership in one of the most powerful economies in the world, an economy which asks nothing more than to be enriched by the extraordinary potential of Quebecers.

By voting no on October 30, that is the kind of future we can build for ourselves and for our children.

And that is the kind of nationalism that reflects our aspirations: a nationalism of openness, a nationalism without walls.