Back On Track

By Michael S. Serrill

FOR 30 YEARS, CANADA HAS projected a puzzling image to the world: a wealthy and comfortable nation that keeps warring peaceably with itself. During all that time, the French-speaking province of Quebec demanded additional powers to preserve its language and unique culture, while separatist pressure, generated by the Parti Quebecois, threatened breakaway if the demands were frustrated. The nine mostly English-speaking provinces were often resentful of Quebec's push for special status but eager to defend their own vision of the union. In one failed constitutional negotiation after another, doomsayers declared that the country's future was at stake. From afar, the country seemed caught in a permanent state of paralysis.

Surprise! After the latest constitutional debacle on Oct. 26, when voters rejected yet another complicated package of reforms, the result appears to be something akin to anticlimax. Rather than aggravating French-English tensions, the outcome seems to have left 27 million Canadians relieved that, at least for now, the perennial constitutional issue has been swept off the table. The compromise proposal, supported strongly by Prime Minister Brian Mulroney, lost by a nationwide vote of 54% to 45%; it was rejected in six of the 10 provinces, including Quebec. That, noted Brian Falesky, a lawyer in Calgary, Alberta, "was the first time Canadians became passionate about the destiny of the country since World War II. Sure, there was divergence on issues. People rejected the package, but they emphatically didn't reject Canada."

If anything, as Scott MacKay, an Ottawa computer consultant, put it, "people decided the politicians were hiding behind constitutional reform to avoid more pressing issues." Like the economy. The downturn in Canada has been much steeper than in the U.S., the country's chief trading partner: the unemployment rate stands at 11.8%, vs. 7.2% south of the border. More than 400,000 manufacturing jobs -- 20% of the total -- have been lost in the past three years, many of them permanently. Federal and provincial governments are awash in red ink.

In Quebec, where the unemployment rate is 14%, the constitutional fight over the role of the province within Canada today borders on the irrelevant, compared with economic concerns. "Quebec sovereignty is all well and good," says Mayor Ulric Blackburn of the St. Lawrence River town of Chicoutimi, which was once solidly separatist, "but we're a little tired of that battle when jobs are really what matter." Quebec's 55.4% rejection of the constitutional agreement produced quite the opposite of political ferment. "After all these years of debates, referenda and what have you, what are we left with?" asks Louise Roy, a senior vice president of the Laurentian financial group in Montreal. "A dead end."

If a single factor defines the new mood, it is distrust of politics as usual. Prime Minister Mulroney's approval rating has hovered around 15% for years. Now, rising disenchantment with conventional parties means that in the next national election, which must take place by November 1993, at least five parties will compete for votes, including the Western-based and business- oriented Reform Party, which gained ground on the basis of its opposition to the latest constitutional package.

The French-English disagreements may have cooled, but Canada's confederation is still likely to change dramatically in the years ahead, according to a panel of experts convened recently by TIME to consider the country's future. The main reason: sweeping changes wrought by the 1988 U.S.-Canada Free Trade Agreement, which will be reinforced by the prospective North American Free Trade Agreement between the U.S., Canada and Mexico.

For 125 years, Canada sheltered its national identity behind tariff walls, most of which are gradually being ratchetted down to zero under the trade treaty. One consequence, TIME's panelists agreed, is that the country's economy is rapidly reorienting itself north-south rather than along the historical east-west lines from British Columbia to Newfoundland. Provincial jurisdictions that regulate everything from natural-resource extraction to pollution to stock-market rules are following suit. The outcome is a thickening network of business and government ties between separate parts of Canada and their neighboring U.S. states, which will result in complex transnational regions.

The regionalization is already under way. The Atlantic provinces, once heavily dependent on Ontario and Quebec for manufactured goods, have now opened up wide to trade with northeastern U.S. states. Quebec and New York State have been forging similar links, while in the West, British Columbia's commerce with Washington State and Oregon has expanded far more rapidly than with the rest of Canada.

Ontario, Canada's industrial engine, reports the same trend. "We have a stronger relationship with Michigan than any other jurisdiction around," said Premier Bob Rae, one of TIME's panelists. Trade within the Great Lakes region, which Rae called "our natural economic and geographical basement," has become "natural and inevitable." The idea "of going back to a highly centralized structure of government is neither desirable nor possible," he noted.

For some provinces, the continental shift already seems to be yielding benefits. As federal funds have dried up, Ottawa has cut back heavy subsidies to Canada's have-not regions. Nonetheless, hardscrabble New Brunswick last year registered 3% growth, more than any other province. Frank McKenna, the provincial premier, attributes much of the gain to the reduction of trade barriers among the Atlantic provinces and to growing opportunities for export to the U.S. "The launching of free trade has reshaped our relationships with the federal government in many ways," he says. "But overall, our experience has been positive. It means working harder and smarter. What we're doing here is taking a lemon and making lemonade."

There are still likely to be sour moments ahead. Like the U.S., Canada faces a continuing challenge to its competitiveness, especially as more highly skilled, high-paying jobs are likely to flee south to lower wage levels after ratification of the free-trade accord with Mexico. By the year 2000, said TIME panelist James McNiven, the dean of management at Dalhousie University in Halifax, Nova Scotia, the number of Canadians working in manufacturing jobs will have dropped from today's 20% of the work force to only 8%. Most other jobs will be in the services area, including such sophisticated sectors as environmental engineering and computer-information systems. Workers who do not measure up or cannot be retrained will join the unemployment rolls. Like the Clinton Administration, Canadian governments will have to combine education, retraining, social-welfare and immigration strategies to create and retain a pool of highly skilled workers -- and the jobs.

One of the most divisive issues that will face the country, observed noted panelist Barbara McDougall, Secretary of State for External Affairs, concerns the claims and rights of Canada's 1.5 million indigenous people. They have made important gains in recent years, including the agreement a year ago to transfer 772,000 sq. mi. from the Northwest Territories to 17,500 native Inuit (Eskimo) people in the self-governing region of Nunavut. The latest rejection of constitutional reform cost indigenous people recognition of the "inherent right to self-government" that would have been theirs under the deal. Nonetheless, McDougall noted, they retain rights to land and autonomy under laws and treaties that go back 125 years. "What will be the rights of those people who live on the same land as the ((native)) band but are not < members of the band?" she asked by way of example. "What rights will they have in terms of voting and being taxed? There are going to be genuine difficulties that will test Canadians as they have never been tested before."

Despite all those challenges, the panelists agreed, the outlook for Canada in the years leading to 2000 compares very favorably with that of other industrialized nations. William Thorsell, editor in chief of the Toronto-based Globe and Mail, Canada's national newspaper, pointed out that Canada is enjoying record merchandise exports to the U.S., a performance that is likely to improve further with the recent weakness of the Canadian dollar. Canada is becoming lean and productive, he said, predicting that "we could have by mid- decade a strongly reviving economy."

"All countries have problems," concluded Thorsell. "Our prospects are better than our recent memory would lead us to think. We've got a more worthy basket of problems than a lot of countries." Especially now that the threat of national disintegration appears to have gone dormant.

With reporting by Joelle Attinger/Chicoutimi and Gavin Scott/Ottawa