US embassy cable - 05QUEBEC75

C O N F I D E N T I A L SECTION 01 OF 02 QUEBEC 000075 
 
SIPDIS 
 
E.O. 12958: DECL:  5/19/2015 
TAGS: ECON, PGOV, CA 
SUBJECT: QUEBEC FEDERALISTS: SEEKING MORE FROM OTTAWA 
 
REF: A) 04 OTTAWA 2837; B) OTTAWA 1029; C) 04 OTTAWA 3865 
 
CLASSIFIED BY: Abigail Friedman, Consul General, Quebec City, 
State. 
REASON: 1.4 (b) 
 
1. (SBU/NOFORN) Summary:  In a May 17 meeting with Quebec City 
CG, Quebec Minister for Canadian Intergovernmental Affairs 
Benoit Pelletier was upbeat about the government of Quebec's 
success in negotiating deals to its advantage with the federal 
government.  At the same time, he expressed support for the 1995 
Agreement on Internal Trade (AIT), which aims to reduce 
obstacles to trade among Canadian provinces.  Referring to 
Quebec's regulation on margarine coloration, Pelletier said 
Charest will have a political crisis if Quebec loses before the 
AIT dispute resolution panel, given that Canada's Supreme Court 
earlier upheld the regulation and that Charest's Liberal Party 
government agreed despite this to put the matter before the 
panel.  Pelletier said that for Quebec's liberal government, the 
three provincial-federal battlegrounds are equalization 
payments, fiscal imbalance, and Quebec's role on the 
international stage.  End summary. 
 
2.  (U) Quebec Minister for Canadian Intergovernmental Affairs 
Benoit Pelletier told CG that he was recently given another 
ministerial portfolio, that of Minister for the Agreement on 
Internal Trade (AIT).  (Note: The AIT is a 1995 Canadian 
intergovernmental agreement which aims to remove obstacles to 
intra-Canada trade and, by so doing, reinforce Canadian unity. 
End note).  Pelletier said that Quebec, a long-time supporter of 
free trade, took the lead in the 1994 negotiations to conclude 
the Agreement and that Quebec will be hosting a Federal and 
Provincial ministerial-level meeting on internal commerce next 
month in Quebec City. 
 
3.  (SBU) CG asked Minister Pelletier how Quebec's support for 
reducing intra-Canadian obstacles to trade could be reconciled 
with Quebec regulations preventing the manufacture and sale of 
margarine in Quebec that has the same color as butter. 
Pelletier acknowledged the political sensitivity of the issue, 
asserting that the margarine regulation has the strong support 
of Quebec's influential dairy farmers.  He noted that Canada's 
Supreme Court has upheld Quebec's margarine regulation and that, 
despite this, Charest's Liberal Party government agreed to 
Alberta's bringing the matter before an AIT dispute resolution 
panel.  Pelletier expected the Panel to issue its findings 
perhaps this fall.  If the Panel rules against the Quebec 
regulation, Pelletier said the Charest government would be faced 
with a "political crisis" as the Premier will have to contend 
with a political backlash from Quebec's agricultural sector. 
 
4.  (SBU) Turning to provincial-federal battles, Pelletier, a 
former constitutional law professor, said that Quebec is 
contesting: in provincial courts, the constitutionality of a 
federal law on access to information in the public domain; in 
Canada's Supreme Court, federal legislation on parental leave; 
in Quebec's Court of Appeals, a federal law on e-commerce 
privacy; and, in that same court, federal legislation on 
fertility treatment. 
 
5.  (SBU/NOFORN) Pelletier believed that despite chronic 
jurisdictional tension between Quebec and the federal 
government, the Charest government's track record on 
intergovernmental relations is running solidly in favor of 
Quebec.  In December, 1993, Charest lobbied successfully for the 
creation of the Council of Federation; in September, 2004, the 
GOQ wrested a favorable agreement from the federal government on 
health; in January, 2005, the GOQ scored a success on parental 
leave funding; and in April, 2005, he concluded, Charest came 
home with 1.2 billion CND for infrastructure. 
 
6.  (U) That said, Pelletier noted that many more areas remain 
under negotiation between Quebec and the federal government. 
These include funding for child care; earmarking a percentage of 
the federal gas tax that would go to municipalities via the 
provincial government; nominations to the Supreme Court of 
Canada; and defining the role of Quebec at the international 
level. 
 
7.  (SBU/NOFORN) Pelletier cited defining Quebec's international 
role as one of three key battlegrounds between the GOQ and the 
federal government, along with equalization payments and "fiscal 
imbalance" (Reftels).  He felt some progress had been made in 
righting the scales regarding equalization payments and the 
fiscal imbalance but that more needed to be done.  Pressure on 
the federal government to address these two problems was 
mounting, he said.  First, there was the intergovernmental 
equalization payment conference of last October, then the GOC 
created a commission of experts on equalization and, following 
that, the Council of Federation created a commission of experts 
on fiscal imbalance.  The Canadian House of Commons has now also 
created a committee on fiscal imbalance. 
 
8.  (C) Comment:  CG's meeting with Minister Pelletier took 
place against the backdrop of intense political horse-trading 
back in Ottawa, including a host of budgetary concessions to the 
provinces by PM Martin in a last-ditch effort to salvage his 
government.  Le Soleil chief editorial writer Pierre Paul Noreau 
told CG that over the last three weeks, PM Martin's 
"concessions" had averaged a billion dollars Canadian a day. 
Not something the federal government can continue for long but 
certainly something that the Quebec government appears eager to 
cash in on. 
 
 
 
FRIEDMAN