Budget 2021 provides a bold blueprint for economic recovery with two objectives: managing the pandemic crisis and creating the conditions for greener, more socially inclusive sustainable long-term economic growth.

However, both can be derailed if provinces, territories and Indigenous governments choose protectionist or small-“n” nationalist policies to repel federal intrusions into their jurisdictions. The costs of those policies can be significant, including reducing labour mobility, restricting innovation, higher infrastructure costs and slowing the flow of capital.

Conversely, a co-ordinated and co-operative approach can achieve national goals and remove regulatory hurdles, link infrastructure and accelerate economic recovery, driving long-term economic growth. This is how federalism should work. This is something every Canadian should support.

During this pandemic, the federation has become upended once again, with the provinces making demands while the federal government provides money and does not interfere. This hasn’t worked particularly well. Instead, what is required is a first ministers’ agenda that puts our leaders’ respective shoulders to the shared wheel of the economy so that we all benefit. It seems straightforward but it is not. We need to understand why.

Tensions between federal and provincial governments are as old as Canada itself. In fact, conventional political science theories point to the counterintuitive tendency of the party running the national government to work more constructively with provincial governments if their political stripes are of another variety.

Successive prime ministers have managed these tensions by high-level agenda-setting and then tightly managing how items were dealt with and in what order. They have also managed trade-offs. Pierre Trudeau pursued more economic and policy independence from the United States, the repatriation of the Constitution and the nationalization of various sectors of the economy. Provinces advocated for regional equality, leading to Crown corporations locating in Calgary, Winnipeg and Montreal.

Conversely, Brian Mulroney’s agenda was closer ties with the United States, deregulation and attempts to bring Quebec into the Constitution through the Meech Lake and Charlottetown accords. Provinces supported free trade by and large but were unable to reach consensus on constitutional change.

Jean Chrétien adopted a hybrid “chairman of the board” or ”Team Canada” approach to managing issues of the day, such as implementing the Canadian Health and Social Transfer, managing reductions in other transfers, leading trade missions and getting the nation’s finances back in the black. Once again, provinces and territories jockeyed for position not to be disadvantaged.

Each of these prime ministers worked with their provincial and territorial counterparts with a clear agenda and toolbox full of ministers, strategies and incentives to make the federation work. Solutions were national with specific regional variations to take into account local circumstances. While not particularly elegant or smooth, it worked. It was co-operative federalism.

When Stephen Harper formed the government in 2006, he ushered in a new way of dealing with provinces and territories. Driven by the conviction that the federal government was too large and infringed on provincial jurisdiction, thus creating perverse economic and political outcomes, first ministers’ meetings were dialed back significantly. The federation shifted to bilateral talks between the federal government and the respective jurisdiction.

Give-and-take was used to advance the Harper government’s agenda. Often in exchange for federal assistance or approval, provinces and territories were able to advance pet projects in their region that might not otherwise have caught the attention of the federal government. It was a period of “transactional federalism.”

In 2015, the Justin Trudeau government brought back co-operative federalism when it reintroduced first ministers’ meetings, once again focusing on high-level issues, specifically the Pan-Canadian Framework on Clean Growth and Climate Change.

Leveraging COP21, the attention of the outgoing Obama administration and a renewed openness to federal/provincial co-operation on a national agenda, the Pan-Canadian Framework was signed within a year. This collective achievement did not come without consequences, such as creating a wedge between western fossil fuel-producing provinces and the rest of the federation.

Coincidently, this seems to have taken the wind out of co-operative federalism as no new national endeavors like the Pan-Canadian Framework have come forward. Rather, dialogue has been more transactional such as regional pipelines or Indigenous rights in the Atlantic fishery.

Surprisingly, co-operative federalism has remained elusive during the global pandemic. While the federal government has invested billions in its response to support provinces and territories, it has deliberately retrenched and yielded to provincial demands to not interfere. Rather, the federal government has offered instead a message of ready and willing to help “if asked.”

In the early days of the pandemic, premiers were quick to challenge federal leadership and any contemplation of using the Emergencies Act to facilitate national COVID goals. Some pundits even referred to Act as the nuclear option. While it is unlikely the proponents of using the act envisioned the nationalization of hospitals and health-care delivery, critics certainly interpreted it that way. The act, combined with a co-operative approach among first ministers, could have given the premiers a more direct line of sight on issues such as international travel bans, as well as federal assistance for interprovincial border management.

Unfortunately, with the benefit of hindsight, the results are clear. With the third wave and the variants overwhelming hospital ICUs across large parts of the country, the Canadian Medical Association is calling for national leadership to manage the pandemic. First ministers continue to point fingers while Rome burns. Clearly, Canada is only as strong in its defence against the virus as its weakest link.

There is another way. A sincere co-operative approach involving first ministers overseeing a national response to address the pandemic along with a plan for an economic recovery is possible. Declaring the establishment of a two-part agenda – pandemic response and economic recovery – would be the first step. In part, this Budget 2021 says as much but should be explicit in F/P/T/I-forward agendas.

Even small moves such as overcoming barriers to sharing public health information between jurisdictions could make an important difference. On economic recovery, regulatory harmonization and infrastructure co-ordination could accelerate provincial and national GDP growth.

It would not take much effort to fill out this two-part agenda. Quite apart from Budget 2021’s proposals, there are drawers of other ideas that could be pulled out and looked at more closely through the lens of post-pandemic recovery. Proposals such as a single national securities regulatory agency, professional licensing standards, interprovincial electricity grid connections and enhancing broadband to enable Canadians to work from anywhere in the country are just a few. Even interprovincial free trade could be possible. First ministers could task their respective ministerial lieutenants to sort out the details.

Budget 2021 presents both an opportunity and a choice for first ministers: co-operative or transactional federalism. Canadians’ health and future well-being are at stake.

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Stephen Van Dine
Stephen Van Dine is the senior vice- president of public governance at the Institute on Governance and has 30 years of public sector experience in sustainable development programing, policy and governance roles spanning local, provincial/territorial and federal governments.

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