How to actually fight separatism

The debate over national unity in Alberta often focuses on the fairness of federal transfers: Is equalization broken? Is Quebec gaming the system? And so on.

These are real questions, and the formulas really are in need of reform. But this frames confederation as a financial ledger, where one side pays, and another receives. The argument is about how to divide a fixed pie.

And much of the separatist case in Alberta rests on the claim that the federation does not deliver enough value to justify membership.

This isn’t new, of course, and is a common feature of regional disputes throughout Canada’s history. But the value of Canada’s federation is not only in the financial transfers it moves between governments. It is also in the economic union itself.

And the more freely Canadians can live, work, and do business across the country, the more the value of the federation shows up in ordinary life rather than in transfer formulas few people see, and even fewer understand. A worker who can take a job in another province without re-credentialing, or someone who can serve clients nationwide without duplicate registrations, are concrete, everyday demonstrations of what Confederation could provide.

Doubling down on Canada’s economic union with some clear reforms is also a positive argument for provinces like Alberta to remain.

A BETTER RESPONSE

The standard response to talk of separation is to warn about its costs, and those warnings are largely correct (I’ve written about those costs several times), but may not be all that effective. A more constructive response is to highlight and grow the value of the federation itself.

To deepen the economic union rather than retreat from it.

Of course, we have seen real progress lately. The past couple of years have seen more movement on interprovincial trade than the previous couple of decades, with governments (led by Alberta) removing exceptions to the internal trade agreement and signing mutual-recognition deals. But much of it has concentrated on goods, where the politics are easier, and the gains, unfortunately, are relatively small and not particularly visible to most people.

There has been much less action on the harder and arguably more valuable issue of why a worker licensed to practise a trade or profession in one province often cannot practise in another. Such barriers make it hard to move and, perhaps more importantly, harder to sell one’s services to clients elsewhere. Hundreds of regulatory bodies with countless rules, restrictions, procedures, and so on, add up to a substantial drag on the economy.

THE ECONOMIC PRIZE

How large the gains are is hard to say with precision, but my own estimates suggest that barriers to services trade between provinces alone (thanks in part to professional credentials that aren’t recognized) could shrink the Canadian economy by just under six per cent. That’s roughly $180 billion in foregone income, worth about $4,300 per person.

That might be an overestimate (and no estimate is perfect), but whatever the true magnitude, it’s a worthwhile initiative. It carries little or no direct fiscal cost, since there is no new spending, tax change or subsidy involved.

PROVINCES COULD ACT ALONE

The most useful feature of this issue is that much of the lever sits with the provinces, not Ottawa. And even better, a single province can pursue this alone and could recognize, unilaterally, the credentials and registrations of every other Canadian jurisdiction: a worker or firm in good standing anywhere in Canada would be free to work or operate there, full stop.

In other work, I estimate that most of the available gains from improving interprovincial trade, especially in services, can be achieved by a province moving unilaterally. For Alberta, over 60 per cent of the gains are achievable alone. It could be a concrete policy for the provincial government to lead on and use to more effectively make the case to remain.

Unilateral recognition by one might also invite mutual recognition by others: once Alberta opens its doors, others face pressure to match it so their own firms are not left at a relative disadvantage.

None of this would be easy. Professional credentials are administered by several hundred regulatory bodies across the country, each with its own standards, fees, processes, etc. Many would naturally resist having credentials from elsewhere fully and automatically recognized. Some of that might reflect genuine concern for quality and public safety, to be sure, but much of it may simply be protectionism by another name.

Either way, the cumulative cost of allowing a fractured national economy to persist is significant, especially when the non-economic objectives like enhanced national unity are considered.

A REAL OPPORTUNITY

The separatism debate will likely keep returning to grievance, partly because the fiscal formulas really are imperfect and worth fixing. But there’s a real opportunity to instead focus on making the economic union function well enough that its value is more obvious.

The right to live, work, and do business anywhere in the country is among the more tangible things the federation offers, and among the easier things to expand. The gains are real, the fiscal cost is close to zero, and a single province like Alberta can begin on its own and may well draw the others along.

National unity is not only a question of how the pie is divided. It is a question of how large we are willing to make it.

» Trevor Tombe is a professor of economics at the University of Calgary, the director of fiscal and economic policy at The School of Public Policy, a senior fellow at the Macdonald-Laurier Institute, and a fellow at the Public Policy Forum. This article originally appeared in The Hub.