Lots on the menu when first ministers meet

A green-energy corridor to move power among the provinces could be a major topic

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The Gazette, Friday, December 21, 2007

Stephen Harper is inviting the provincial and territorial premiers to dinner at 24 Sussex Dr. in early January. Under the general rubric of the economy, the premiers will bring their various shopping lists to Ottawa. Harper would be well advised to have his own agenda.

For example, Jean Charest is quite anxious to discuss the dollar, and the effects of exchange- rate parity on Quebec's forestry and manufacturing sectors.

But the fact is there isn't anything to be done about the dollar because the Bank of Canada has a policy of a floating rather than fixed exchange rate. And monetary policy is set by the governor of the bank, not by the provinces.

While the loonie recently soared to alarming heights of $1.10 U.S., it has lately settled in around par, where it's probably going to remain. The Bank of Canada doesn't need to defend the dollar by raising interest rates, nor does it need to encourage further consumption in a full-employment economy by lowering them. As long as the fundamentals of Canada's fiscal framework remain the strongest among the G8 nations, and as long as the oil-driven commodity boom continues, there's not going to be any downward pressure on the dollar.

Message to the premiers: Get over it, and encourage your exporters to make the most of the strong dollar by investing in technology upgrades.

For a federal agenda, Harper's starting point two months ago would have been his proposal in the Throne Speech to limit the federal spending power in areas of provincial jurisdiction, while seeking to strengthen the economic union by reducing barriers to interprovincial trade, the infamous BITs that inhibit free trade in goods and services within the federation.

This is entirely consistent with Harper's reading of the constitution as a classical federalist. The powers of Ottawa are defined under Section 91 of the Constitution, the powers of the provinces under Section 92. And the common-market clause, Section 121, calls for goods made in one province to be accepted in the others, an inconvenient constitutional truth for the provinces.

However, the moment for reducing, if not eliminating, BITs might be at hand. The 2006 agreement between Alberta and British Columbia allows for the free movement of goods and services between Canada's two fast-growing provinces. And booming Saskatchewan, with a new free-market government, can join this western provinces' free-trade club just for the asking.

But more currently, Charest has called for a free-trade agreement between Quebec and Ontario, and Ontario Premier Dalton McGuinty, recently re-elected, is himself a proponent of trade liberalization between Canada's two largest provinces.

Normally the premiers would take whatever gains they could obtain on the federal spending power, and leave town without conceding anything on strengthening the Canadian economic union.

But this time, the stars are beginning to align in a positive direction. The two fastest-growing provinces have already moved that way, and the two biggest ones are in favour of doing so. When the Big Four provinces are on the same page, Ottawa's leadership opportunity is greatly enhanced.

But Harper, if he chooses to do so, can entertain another idea around the table. An idea whose time has come, and one he has already endorsed as prime minister--a green electricity corridor.

This is a vision thing, one that would provide clean energy for electricity-starved Ontario from the hydro-rich provinces of Manitoba, Quebec and Newfoundland and Labrador, provided Danny Williams agreed to engage.

Here's the deal: Charest, in his economic-vision speech in Montreal last month, announced plans to build another 8,000 megawatts of capacity to go along with the 36,000 megawatts already in Hydro-Québec's system. Then, Newfoundland and Labrador have 4,000 mw of undeveloped capacity in the Lower Churchill, and the obvious route to the Ontario market is the Upper Churchill route through Quebec.

But Newfoundland has carried a grievance for decades over the giveaway on the Upper Churchill in the 1960s, and any new deal with Quebec would have to be front-end loaded to heal the wound.

That would take some statesmanship from Charest, and a clear sign from Williams that he is prepared to deal. And in his meeting with Harper in St. John's a few weeks ago, Williams sent an important positive signal: If Ottawa would guarantee the multi-billion dollar financing of the Lower Churchill, he would set aside part of his grievance over equalization payments and offshore oil revenues.

A green east-west power corridor would be a major visionary policy for Harper on economics in the federation, and one that would be environmentally sustainable. But these are provincially-owned resources. It's up to Quebec and Newfoundland, to Charest and Williams, to show leadership.

We know who's coming to dinner. Let's see what they have to say.

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