03 July 2007

Plus ca change: 1987 version

First there was 30 years ago.

How about 20 years ago?

Province seeks focus for action
Financial Post
Jun 1, 1987
p. 16

Regional development programs here, as elsewhere, suffer from lack of focus.

Provincial officials complain they can't plan development properly because there is little co-ordination in Ottawa of the many federal aid programs (although there is a local federal co- ordinator). In fact, each program has to be dealt with separately.

It is possible this problem will disappear with creation of the Atlantic Canada Opportunities Agency, which is expected to be announced by Prime Minister Brian Mulroney this week. This agency will likely bring most federal-originating regional development programs in the Atlantic provinces under one authority, perhaps a cabinet minister. That should clear up some confusion.

The provincial government itself is not innocent of confusion. Its departments sometimes work at odds with one another, following different ideologies (some favor co-operatives, some don't) and different game plans. The province has never provided an overall development plan to Ottawa, with the possible exception of "managing our resources," which ended in 1985.

Disdainful treatment

In Newfoundland's case, however, there are mitigating circumstances. The province has a unique culture and a distinctive economic history, but it is not master in its own house.

Its people complain the province is treated with disdain by the federal system and by some provinces. The reasons, they say, are: the smallness of Newfoundland's population (580,000), its dependence on Ottawa (49% of revenues come from this source), and its relative lack of power in the House of Commons (seven seats out of 282).

In addition, the province has little or no control over three major resources:

- Fisheries, which accounted for 44% of the average annual employment in the goods producing sector in 1986, are a federal responsibility.

Recently, Ottawa conceded to France various fishing rights off Newfoundland and Labrador, at the expense of Newfoundland fishermen. The idea was to bring France to the table over fishing rights in the disputed St. Pierre and Miquelon waters.

Newfoundland, which had attended Canada-France negotiations for eight years, was excluded from the key meeting in which the concessions were given.

- Offshore oil is governed jointly by Canada and Newfoundland under the 1985 Atlantic Accord. But when federal Energy Minister Marcel Masse came to St. John's recently to announce PetroCanada's intention to drill its Terra Nova field, he did not feel it was necessary to inform Newfoundland in advance.

- Hydroelectric generation in Labrador is held up indefinitely because Quebec will not allow Newfoundland to send power through Quebec's grid to U.S. markets. As a result, a Lower Churchill River generating facility is not feasible.

Newfoundlanders ask why gasoline can be transported interprovincially in road tankers, and natural gas can travel the TransCanada PipeLine, but electricity can't move interprovincially without the provinces' consent.

In the past 13 years, Newfoundland has been forced to spend $800 million on thermal plants and small, expensive hydro generators. As a result, the price of its electricity is the second highest in Canada (after Prince Edward Island). The high cost of power is one deterrent to badly needed economic growth.

Newfoundland has been the helpless victim of outside economic forces for generations. The growth of technology, for example, has lured Newfoundlanders into wanting higher incomes in order to buy glamorous cars and televisions. At the same time, it has robbed them of jobs.

Newfoundland fishermen no longer make their own nets and hardware, but import plastic ones manufactured "from away." Mechanical tree harvesters, built on the mainland with non- Newfoundland labor, have replaced teams of men with axes.

The statistics tell a grim tale. In 1987, Newfoundland is in much the same condition relative to Canada as it was when it joined Confederation in 1949.

In the past 20 years, the gap in personal income per capita between Newfoundland and Ontario hasn't changed much (see chart). Official unemployment statistics are bad enough (see chart) but if discouraged workers are included, the jobless rate is about 33%.

Low incomes and high unemployment generate lower tax revenue for the provincial government. Newfoundland tries to compensate through its retail sales tax, at 12% the highest in Canada. That tax generates $436 million, 37% of provincial revenues. (In comparison, Ontario's 7% tax produces $5.4 billion, 19% of provincial revenues.)

Newfoundland's tax base is so poor, its revenues have to be matched almost dollar for dollar by Ottawa, which in 1986-87 is expected to provide $1.1 billion.

However, Newfoundlanders feel such huge payments are not less than their due; they see them as returning the federal taxes paid on the large quantities of mainland goods sold in the province.