Economists Weigh the Costs of Independent Quebec

QUEBEC'S economy would suffer if it were to become independent, say many economists and business people. ``Quebec could separate and we might see our standard of living reduced to much lower levels than we know today,'' wrote Paul Desmarais, president of Power Corporation and one of Quebec's top businessmen. In an open letter to La Presse - a Montreal newspaper which he owns - he said federalism, not independence, is what Quebec needs.

``We will become a small nation in North America that will be seen to have been responsible for having destroyed Canada, a country that is today almost a copy of the common market that Europe is trying to build,'' Mr. Desmarais said.

And it isn't just Quebec's economy which would be thrown into disarray with independence. Economists say the rest of Canada would suffer too.

``Canadians haven't begun to understand the cost of Quebec independence,'' says a prominent Canadian economist who asked not to be named. ``It would be a bitter breakup and would cause economic havoc for two generations.''

The Belanger-Campeau Commission, a provincially appointed group of 35 business, labor, and political leaders looking into the future of Quebec, will make its report by the end of March. The submissions it has heard have generally been in favor of independence. And the latest opinion polls show 64 percent of Quebeckers want some form of independence.

Jacques Parizeau, the leader of the separatist Parti Quebecois, made a trip to Toronto last month to tell business people in Toronto's financial capital what the economic arrangements of separation would be. He wants a customs union with Canada and a common currency, saying Quebeckers ``would find it more comforting to keep the Canadian dollar as their currency.''

But much as the English Canadian business audience was cool to Mr. Parizeau's vision of the future, so too might the rest of the country balk at Quebec's demands when it came time to negotiate the fine details.

``The Europeans are moving to a common central bank, but they are friendly towards each other. It is hard to see an independent Quebec and the rest of Canada operating a common central bank,'' says William Watson, an economist at McGill University.

If English Canada doesn't like what Quebec has to offer, there have been suggestions that Quebec might just go it alone and worry about the consequences later. During the Belanger-Campeau commission hearings, Jean Beland, one of the committee members said: ``The best way to do it is for Quebec to state its sovereignty and then decide as a state who its partners will be.''

THESE are not of the words of a firebrand. Mr. Beland is one of the most respected financial voices in Quebec as head of the Mouvements Desjardins, a province-wide grouping of credit unions with deposits of $46 billion (Canadian; US$40 billion) and the largest financial institution in Quebec. Beland suggested economic union and a common currency with Canada, but if English Canada balked, Quebec should have its own dollar tied to the United States dollar.

``It is wildly naive and unrealistic,'' says Mr. Watson. ``Who would they negotiate with?''

Industrialist Desmarais shares that gloomy view. ``In New York, they have enough difficulty accepting the Canadian dollar,'' wrote Desmarais. ``They would have even more difficulty accepting a Quebec dollar.''

However, Jean Lambert, president of the 60,000-member Quebec Chamber of Commerce countered such views by saying, ``Quebec's business people are convinced that Canadian federalism is an economic failure.''

Nationalistic Quebec economists who appeared before the Belanger-Campeau commission said Quebec would be a rich country. It's gross domestic product of C$136 billion (US$118 billion) in 1989 is about the same as that of Belgium. It has huge natural resources, especially cheap electrical power, 95 percent of it generated by water.

``You can't build the permanent wealth of a nation on the basis of cheap hydro power and sales of it to New England,'' says Desmarais. And he says Quebec's high standard of living owes a great deal to tariff protection within the Canadian federation.

Quebec dairy farmers say they might lose up to C$450 million in federal subsidies in a sovereign Quebec.

Watson, who is in favor of Canada staying together, says the tough economy could make Quebeckers think twice about the benefits of going it alone. ``The only hope for keeping Canada together is a hair raising recession.''