Business Study Warns Quebec Against Separatism

QUEBEC has a lot to lose by leaving Canada, and a lot to gain by staying. That is the conclusion of an economic study done by the province's largest business group, the Conseil du Patronat. The 64-page report details the economic benefits Quebec reaps as a province of Canada, especially transfer payments from the federal government and federal spending within Quebec. In 1988, the report finds, Ottawa spent $1 billion (Canadian; US$857 million) more in Quebec than it received in taxes, or C$157 per resident.

``Canadian federalism has been and remains profitable for Quebec,'' says Andre Raynauld, an economist at the University of Montreal who was hired to do the job.

The report comes four months after the failure of the highly controversial Meech Lake Accord, which would have won Quebec's signature on Canada's 1982 constitution by recognizing Quebec as a ``distinct society'' and giving all provinces additional powers. A commission sponsored by the provincial government is now studying Quebec's role, if any, in the Canadian federation.

The Conseil du Patronat - which literally means council of bosses, or employers - is an association representing 440 big companies which employ about 7 percent of Quebec's population. The group's report compares Quebec, Canada's second most populous province with 6.7 million people, to Ontario, with 9.5 million people.

When it comes to trade within Canada, Quebec is the winner. It had a trade surplus of C$3 billion in 1984, the year the study uses as benchmark.

For example, in 1988 Ontario produced 41 percent of the gross national product, paid 45 percent of all federal taxes, but received only 28 percent of federal expenditures. Quebec produced 24 percent of GNP, paid 23 percent of federal taxes and received 24 percent of federal expenditures.

Quebec depends on the rest of Canada more than any other province does, the report says. Other Canadian provinces bought 26 percent of Quebec's manufactured products; by comparison, 17 percent of Ontario's manufacturing output is sold in other provinces.

The report says Quebec benefited from belonging to a large integrated economy. It can, for example, buy subsidized grain for its dairy farmers.

The national energy policy, in effect during the 1970s under a Liberal government in Ottawa, saved Quebec several billion dollars during the two energy crises, says Mr. Raynauld.

In arguments involving nationalism, however, emotion sometimes determines decisions. Lucien Bouchard, who was a minister in the federal cabinet until earlier this year, dismissed the report. ``It's not serious, it's fiction,'' said Mr. Bouchard, who is now leader of the separatist Bloc Quebecois in Ottawa.

``We have so many reports concluding that sovereignty would be perfectly viable,'' said Mr. Bouchard.

The report Quebec nationalists most often bring up was published earlier this year by Merrill Lynch & Co., a major underwriter of Quebec bonds.

Another unlikely source saying Quebec might be able to go it alone, is the Fraser Institute, a Vancouver-based free-market think tank. It cites a study which shows that the province's credit rating - and especially that of Hydro Quebec, a major money earner through electricity exports to the United States - would not be severely hurt by independence.

Michael Walker, an economist and director of the Fraser Institute, says he once believed an independent Quebec would pay higher interest rates - as would Hydro Quebec. But he is not so sure now.