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3 of 4 DOCUMENTS

Copyright 1996 FDCHeMedia, Inc. All Rights Reserved.
Federal Document Clearing House Congressional Testimony

September 25, 1996, Wednesday

SECTION: CAPITOL HILL HEARING TESTIMONY

LENGTH: 2631 words

HEADLINE: TESTIMONY September 25, 1996 CHRISTOPHER SANDS RESEARCH ASSOCIATE AND
COORDINATOR, CANADA PROJECT CENTER FOR STRATEGIC AND INTERNATIONAL STUDIES HOUSE
INTERNATIONAL RELATIONS WESTERN HEMISPHERE SITUATION IN QUEBEC

BODY:

    PREPARED STATEMENT

    Christopher Sands

    Research Associate and Coordinator, Canada Project

    Center for Strategic and International Studies

    September 25, 1996

    before the

    United States House of Representatives

    Committee on International Relations

    Subcommittee on the Western Hemisphere

    It is an honor to be asked to testify before you today on U.S. interests in
the future of Canada and Quebec, and the efficacy of current policy to safeguard
those interests.

    The Timing of this Hearing

    This hearing is a useful opportunity to evaluate the subtle repositioning of U.S. policy on the issue of Canadian unity, and Mr. Campbell and the subcommittee should be commended for undertaking this first step in exercising congressional oversight over U.S. policy in this area.

    Now is an appropriate time to review this aspect of U.S. policy regarding Canada. Why?

    * First, because there are actions which can be taken now that can improve the U.S. policy position before this issue returns to the fore in Canada.

    * Second, we cannot become complacent because there is reason to believe that the next Canadian unity crisis could come more quickly than in three years, as many now expect.

    Today, nearly a year after the 1995 Quebec referendum as this year's congressional calendar will permit, it is prudent that the United States take stock of its current position.

    U.S. Policy Changed During the 1995 Quebec Referendum

    U.S. foreign policy regarding Canadian unity, and specifically the possibility of Quebec independence, has traditionally been summarized by a phrase that has become known as the Mantra: "The United States enjoys excellent relations with a strong and united Canada. The future of Canada, however, is for Canadians to decide."

    This position of mildly pro-unity Public detachment was sharpened during the referendum by several statements by senior U.S. officials. President William Clinton praised Canada's tradition of respect and tolerance for cultural
diversity and toasted a united Canada during his February 1995 state visit to Ottawa. Secretary of State Warren Christopher remarked in the heat of the referendum campaign that the complex architecture of U.S.-Canada relations,
based on numerous treaties and agreements, would be very difficult to reconstruct in a bilateral relationship between the United States and an independent Quebec. In so doing, Mr. Christopher acknowledged the position of most U.S. experts on international law and U.S. diplomatic practice, that Quebec is not likely to be treated as a successor state to Canada if it became independent, and would therefore be required to negotiate access to existing treaties if it wished to retain the benefits it enjoyed as part of Canada. Ambassador James Blanchard stressed publicly that the United States had offered and would offer no assurances regarding membership in the North American Free Trade Agreement (NAFTA) for an independent Quebec.

    However, debate in Canada and Quebec over the possible U.S. response to Quebec's independence continued, despite the changes made to the U.S. public line. Voters in Quebec have become as cynical as those elsewhere in North America, and many dismissed the statements of our policymakers as threats or "politics-as-usual" attempts to affect the outcome of the referendum. This is not the case -- these statements by U.S. officials simply acknowledged the limitations on our ability to respond should Quebec become independent. Therefore, while the subtle but real shift in U.S. policy is a step forward, it is necessary to go further, to be explicit, on those issues where U.S. flexibility is non-existent.

    The National Interest and U.S. Policy Objectives

    The United States must begin by defining clear political and economic objectives for our Canada policy, or the substantial U.S. interests in Canada will fall prey to the negative effects of drift. The U.S. will not be the victim of decisions made in Canada unless we abdicate responsibility for the protection of U.S. interests to decision makers in Canada.

    The U.S. national interest in Canada's unity is fundamentally economic, as Canada is by far our largest trading partner, responsible not only for purchasing more U.S. goods and services than any other country in the world, but also for the co-production of many of the goods we ourselves are making. Canadians are not just our best customers, but in strategic sectors like the auto industry, they are our co-workers. A domestic crisis that interferes with Canadians' full participation in the North American economy will affect U.S. gross domestic product (GDP) directly, and seriously damage the immediate prospects for the U.S. economy. Secure, free and prosperous Canadians are the best neighbors we could have ever hoped for. Keeping Canadians secure, free and prosperous is, and will always be, in the U.S. national interest.

    It follows from this that the U.S. also has a political interest in how the debate over Canada's future proceeds.

    First, the U.S. interest ties in a democratic decision process because nothing less can bring about a final resolution to this dispute that will be acceptable to all sides.

    Second, U.S. policy must seek to assure the Canadians that the United States is informed about the situation in Canada and that it is prepared to react responsibly.

    Third, U.S. officials must explain to Canadians the limitations on our ability to respond if Quebec should become independent. We cannot expect that ordinary Canadians understand our system of government any better than we
understand theirs, and so it is worthwhile to draw attention the roles that Congress and the administration must play in U.S. policy. For example, as any member of Congress knows, the President of the United States cannot unilaterally
extend trade benefits to even our best trading partners. We must make clear that we cannot automatically continue to grant NAFTA treatment to Quebec if it leaves Canada, and that this is not negotiable in advance of congressional
authorization. When all Canadians understand the fixed aspects of the U.S. position, they will be better able to make informed decisions about their future be it together or apart.

    The status quo of U.S.-Canada relations has been enormously beneficial for the citizens of both countries. If there is to be change, the primary objective of U.S. policy must be to promote a smooth transition process involving the minimum amount of deviation from the status quo acceptable to Canadians on all sides. Some of the possible, but not yet probable, scenarios discussed today should be taken primarily as warnings, to reinforce the importance of fostering
the quickest possible return to stability. The United States should do everything in its power to reassure Canadians outside Quebec and to dissuade them from abandoning Canada in the potentially traumatic aftermath of Quebec's
departure.

    With these policy objectives in mind, I will now address some specific steps that can be taken soon to improve the U.S. policy position in advance of the next crisis for Canadian unity. These include making our current position more
clear to Canadians, and planning to respond in support of a stable, smooth transition n the event of change.

    Before Another Crisis

    To strengthen our current policy position the event of another Canadian unity crisis, whether prompted by a referendum or other measures the United States should consider taking the following specific steps:

    * The United States should clarify its position on whether Quebec would be considered a successor state to Canada, inheriting Canada's rights and obligations under treaties and agreements with the United States. Secretary of State Christopher's statement during the 1995 referendum campaign that the complex architecture of the U.S.-Canada relationship would be difficult to reconstruct suggested that the United States might not grant an independent
Quebec successor state status, consistent with U.S. diplomatic practice elsewhere. This is not a small consideration for Canadians living in Quebec, and unless the State Department considers this point negotiable, it should send a stronger signal that an independent Quebec would not be considered a successor state to Canada.

    The United States should, in concert with its partners, issue a clear statement on the process by which a country will be considered for accession to NAFTA. Many Quebec voters are under the mistaken impression that NAFTA is a
kind of "safety net" that would preserve the preferential access they now enjoy to the U.S., Canadian and Mexican markets.

    * U.S. influence should be employed privately Bilateral moves by responsible parties on all sides which might attempt to impose a solution. The U.S. will benefit from the end of the instability and tension generated by the debate of
Quebec's status and Canada's future, whether it comes as a result of a successful negotiation or popular resignation. However, we must not simply adopt a "peace at any price" position that could lead us to place pressure on the parties to come to terms that would later prove unacceptable to the wider publics in Canada and Quebec.

    All of these steps are best taken before another referendum is called or some other measure is taken to bring this issue to the fore in Canada. Otherwise, such moves will not be credible in the eyes of Quebec nationalists, who may suspect that they are being taken in support of the federalist cause. The objective of U.S. policy in this case is not to scare Quebeckers, but to level with them, so that they can make any future decisions about their place in the world fully aware of the potential consequences.

    Should Quebec Establish Independence

    It is not yet certain that the majority of Quebeckers will find it impossible to reconcile their differences with the rest of Canada. However markets and ordinary citizens often react to rumor when faced with a frightening degree of uncertainty. Should Quebec resort to independence, however, the United States must be prepared to repair the breach in its trade relations with Quebec, and to provide any assistance necessary to aid Canadians during the transition, including supporting the unity of the rest of Canada. Several concrete steps should be considered by U.S. policymakers in preparation for this potential crisis, for example:

    * The president should request authority from Congress to negotiate a limited, bilateral trade agreement covering only those sectors where U.S. investment and commercial interests have been seriously hurt by the break. This would be a provisional arrangement to protect U.S. interests only, not an attempt to extend broad new benefits to Quebec, nor an attempt to restore NAFTA-equivalent access for Quebec to the U.S. market. As a second step, the U.S. should consider sponsoring Quebec admission to the WTO to allow for a broader framework for bilateral trade and investment. NAFTA membership, while not inevitable, could be considered at some point in the future if it would be of benefit to U.S. interests, and the support of other NAFTA members was likely.

    * The United States should signal that the remaining Canadian provinces should continue to deal with the United States through the federal Government in Ottawa, and discourage any province that might seek its own independence. In
this respect, U.S. officials should caution Canadians outside Quebec that by seeking a bilateral trade agreement with Quebec, the United States does not commit itself to the same for all provinces that seek recognition as independent
countries. Each such negotiation will require separate authorization from Congress.

    * The United States should signal that it does not favor changes in the present boundaries of Quebec that might severely damage its economic viability as an independent country. Some in Canada have suggested that northern Quebec remain part of Canada, which poses little risk to U.S. interests. The status of all or part of Montreal, however, would directly affect the economic prospects of an independent Quebec, and set up a region of political and economic
instability close to the borders of New York state that could pose serious issues for the United States.

    * The United States, working with international financial institutions and other major allies, should be prepared to refinance Canada's international debt, to allow it to continue debt service while Quebec's contribution is uncertain
and/or under negotiation. This will reassure bond markets that the United States will not permit the collapse of the Canadian economy in the Aftermath of Quebec independence, and further discourage other provinces from abandoning
Ottawa.

    The United States should be prepared to lead an international effort to support the Canadian dollar, which is important in the short run to Canadians and Quebeckers, who will continue to hold Canadian dollars in the days after independence.

    Why Change Now

    The traditional U.S. position kept U.S. policy in the shadows. Some will argue that it was better for the U.S. to operate in this way, as we have in the past. The Clinton administration took U.S. policy on Canada partially into the daylight, by strengthening its statements in support of a united Canada and hinting at some of the consequences of Quebec separation. Unfortunately, this shift has left U.S. policy exposed to misinterpretation by Canadians on all sides of the unity debate. Today, the United States faces a strategic choice between a retreat to the shadows and taking a step further into the light of day by clarifying the core of the U.S. position should Quebec separate.

    Retreat to the shadows of our former position is probably impossible. U.S. statements during the referendum clearly reflected U.S. interests and constraints on our policy options. To suggest now that we are truly indifferent, or to attempt to withdraw our concerns over trade agreements the rest of the infrastructure of the U.S.- Canada relationship would not be credible in Canada.

    Of course, it Is also possible to attempt to continue the current balancing act in the hope that we can escape paying a price when Canadians misunderstand our intentions. The problem with this option is that its weakness will not become widely apparent until we are once again faced with a crisis of Canadian unity, and then our policy options will be limited. Our current position leaves U.S. interests vulnerable to misunderstanding.

    The fact is that something profound happened during the 1995 Quebec referendum. The United States for the first time became publicly engaged in the Canadian unity debate. Canadians, especially Quebeckers, began to debate the
U.S. role in resolving this crucial question. If we fail to articulate our interests and the goals of our policy on this matter, Canadians and Americans will be forced to guess, and may assume the worst -- that the United States cannot be relied upon in this crisis -- and they, and the international financial markets, will act accordingly.

    When that happens, every American who works for a company that does business in Canada, and every American with family and friends there, will share in the suffering, all of it unnecessary.

    We have nothing to fear if we will be forthright. Canadians are our friends, whether they live in Quebec or elsewhere, whether they vote for the independence of Quebec or not. The future of Canada is for Canadians to decide.
Our obligation to them, and to the American people, is honesty about both our intentions and our limitations.

LOAD-DATE: September 27, 1996