The rest of Canada has more to lose from an independent Alberta and the numbers show it - National Post

 It would make sense the rest of Canada to consider a fair deal for Alberta to keep Confederation whole

Alberta wants a fair deal from Canada, but can’t seem to get one. Should it build a firewall? Stop trying? Separate? This is one of a series of opinion pieces adapted from the new book, “Moment of Truth: How to Think About Alberta’s Future,” in which some of Canada’s most respected thinkers on the subject debate what the best next steps are for Alberta — and for Canada.

Alberta’s demand for a “fair deal” in Confederation is not taken as a serious issue outside of that province. Some of that complacency comes from a perspective that despite the large transfers of tax revenues to the rest of the country, Alberta has gained from being part of Canada. Financial Post columnist Kevin Carmichael stated that, “There are some Albertans who seem to think they would be better off as their own country. Maybe, but only because the province has enjoyed the benefits of being a member of a stable, diversified economy for more than a century.”

To understand whether Alberta is losing out economically as part of Confederation, or whether Albertans are ingrates who cannot see the importance of Canada for their economic success, as Carmichael suggests, Kent Fellows, a research associate at the University of Calgary’s School of Public Policy, and I investigated two questions: How important is trade with Alberta for the rest of Canada? And how important is trade with the rest of Canada for Alberta?

Beyond the direct impact of energy exports on the national economy, Alberta is important to the economies of other provinces as a market for their goods. Alberta imports from other provinces and territories goods and services for consumption, and intermediate inputs for Alberta’s production of goods and services. ...

Using a computational model of the Canadian economy, we investigated the impact of higher trade barriers between Alberta and the other provinces. We simulated the impact of imposing 100 per cent tariffs on interprovincial imports into Alberta and 100 per cent tariffs imposed by other provinces on imports from Alberta. Our modelling assumes that Alberta maintains the Canadian dollar, and that the trade cost increases have no impact on the Canada-U.S. dollar exchange rate.

The rest of Canada clearly benefits from relatively unfettered trade with Alberta. Our model suggests that for the rest of the country, the value of trade attributable to having Alberta as part of the national market is $24 billion, or around 2 per cent of gross domestic product.

The value of trade with Alberta is 20 per cent higher than the value of annual federal fiscal transfers from Alberta to the rest of Canada over the past 20 years (nearly $20 billion per year). Those fiscal transfers from Alberta, in addition to the trade values, come in large part from the higher incomes and tax collections arising from international energy exports. ...

In seeking a “fair deal” from Confederation, Albertans are testing the foundations of the Canadian federation. Should the federal government choose not to bring more balance between the costs that federal policies, decisions and inaction imposes on Alberta and the rents it extracts from the province through its fiscal arrangements, Alberta separatists could find growing political support in the province. Secession, if it occurs, will result if enough Albertans find being treated like a disrespected cash cow intolerable.

Read full article Here.