With the renewed focus on the provinces amid threats to Canada’s economy, we already have a blueprint for how to strengthen the federation from within.

By Bernard Etzinger

March 5, 2025

With the Trump tariffs now a reality, the urgent question is, “How can Canada best fortify itself against long-term damage in a way that protects the country from future shocks?”

Prime Minister Justin Trudeau has warned that the intent of these initial tariffs and others that may come into effect in the coming weeks is to collapse the Canadian economy.

As Canadians contemplate the tough road ahead, we need to consider all options to prevent that collapse. To that end, it may help to look back more than 30 years to the 1991 Allaire Report.

Once dismissed by many as a radical proposal to appease Quebec nationalism, the report of the Liberal Party’s internal committee on constitutional reform chaired by lawyer Jean Allaire may now hold the key to Canada’s survival in a world gone haywire. We’re not talking about some dusty exercise in federalism; this is about whether Canada can thrive, or even exist, in the face of unprecedented threats.

Let’s turn the clock back to 1995 for a moment. The country had nearly torn itself apart over Quebec’s sovereignty referendum. Our leaders rallied, Canadians mobilized, and we pulled back from the brink. But barely. With a .6% victory, Canada’s future was preserved but not guaranteed. Today, the threat isn’t only internal with the continued existence of Quebec separatism and Western anger over squandered energy potential; it’s external, and even more existential.

Back in 2016, we saw Trump’s “America First” protectionism as something from which we could shield ourselves with deft negotiations and a plea for comity. Today, America First is a battering ram against Canada’s economic integrity. Tariffs, trade wars, and a US president openly musing about annexing Canada fill our daily news cycle.

As we wake up to 25% tariffs, free trade with America is gone, at least for the foreseeable future. Trump doesn’t see a strong Canada; he sees a weakened, dependent Canada, one ripe for the taking. One he sees as unlikely to stand on its own. What Trump doesn’t see is that our provinces, with their sovereign control of energy and natural resources, are individually strong, and that the stronger each of our provinces, territories and First Nations are, the more the 51st state narrative fades away. But this means more than merely having provinces take centre stage for visits to Washington that receive scant attention from US decision-makers. It means that the federal government has to make them stronger.

Allaire’s Vision: Decentralize

Back in 1991, Jean Allaire saw something many in Canada did not. He saw that a centralized Canada, with Ottawa trying to micromanage everything, was a Canada vulnerable to political shocks. He proposed a radical decentralization, giving Quebec more power over its economy, immigration, and social programs. At the time, it seemed like a recipe for national fragmentation. Many opposed it because it represented an asymmetrical approach to federalism. Now, it may be our best shot at survival if we scale up what Allaire proposed and apply it to all provinces.

Why? Because a decentralized Canada could be free to move faster, adapt more quickly, fight harder and be more resilient to the collapse that our own prime minister says tariffs are designed to engineer. It could free Ottawa to focus on the existential threats — defending our borders, securing new trade deals, and protecting our currency from predatory speculators. Meanwhile, provinces can work together to become economic powerhouses, each leveraging its unique strengths to compete in a global marketplace where the US may no longer be our biggest customer.

Provinces Unleashed: Economic Engines of a New Canada

Our provinces are strong in a lot of areas — here are a few of those areas

that present the potential for growth in this model:

Newfoundland and Labrador: Better capitalize on offshore energy resources, fishing, and mining

• Quebec: Lead in aerospace, AI, pharmaceutical research, renewable energy, and forestry, forging trade deals with Europe and Asia.
• Ontario: Specialize into a high-tech manufacturing, value-added food processing, mining and capital hub, creating the environment to attract investment from around the world.
• Manitoba: A powerhouse for agriculture and clean energy, Manitoba can enhance its role as a global food producer while expanding hydropower exports to provinces and new international buyers
• Saskatchewan: Further leverage potash, uranium, and critical mineral deposits and agriculture sector.
• Alberta: Become a global energy superpower, supplying markets hungry for oil, gas, and uranium, diversifying from US pipelines and refineries, and exploring petrochemicals from heavy oil.
• British Columbia: Finally become a true gateway to the Pacific, a global trading powerhouse connecting Canada to the economies of Asia, along with mining and energy export infrastructure, forestry, and fishing.
• The North: Unlock its vast mineral wealth, responsibly developing critical minerals essential for the technologies of the future, in partnership with Indigenous communities. Energy and mining infrastructure are also crucial along with new development from defence investments.
• The Maritimes: Capitalize on its marine resources and strategic location, becoming a leader in sustainable fisheries, offshore energy, and ocean technology, and developing energy export infrastructure, forestry, and fishing.

This is a vision of a Canada in which provinces are empowered to act, to innovate, and to compete on a global scale. A Canada where the federal government plays a vital but focused role, defending our borders, securing our trade, and protecting our currency.

Indigenous Nations: Partners in Prosperity

Indigenous peoples are more than stakeholders in Canada’s future; they are an intrinsic part of the foundation. Any vision of a decentralized Canada that doesn’t put Indigenous economic empowerment front and centre will only serve to stir up the dust of previous, failed constitutional efforts. This means:

• Resource Revenue Sharing: Ensuring that Indigenous communities receive a fair share of the benefits from resource development on their traditional territories.
• Economic Partnerships: Supporting Indigenous businesses and entrepreneurs, creating joint ventures, and fostering economic opportunities in Indigenous communities.
• Infrastructure Investments: Investing in critical infrastructure in Indigenous communities, such as housing, transportation, and communication networks.
• Respecting Indigenous Governance: Recognizing and supporting Indigenous self-governance and decision-making authority over their lands and resources.

Money Talks: Giving Provinces the Fiscal Firepower They Need

Allaire knew that real power comes with control of the purse strings. He wasn’t a fan of provinces having to go, cap-in-hand, to Ottawa for every project. He wanted Quebec to have the financial muscle to chart its own course, to invest in its priorities, and to build an economy of the future. So why not extend that vision to all provinces?

What did Allaire have in mind? A few key things:

• More Taxing Power: Give provinces more freedom to set their own tax rates and even introduce new taxes. Let them raise the revenue they need to get things done. What does this mean? The Constitution gives the feds the power to raise revenue “by any Mode or System of Taxation” while the provinces are limited to “Direct Taxation within the Province in order to the raising of a Revenue for Provincial Purposes.” This creates an incentive to provincial trade barriers and inefficient taxation. It’s time to give this division a rethink.
• Less Federal/Provincial in-fighting: Cut back on Ottawa’s ability to use conditional grants to dictate how provinces spend their money. Let provinces decide what’s best for their own residents. They may work better together among themselves than in a typical federal-provincial deal making framework.
• Fairer Fiscal Deals: Rework the system of federal-provincial transfers, including equalization payments, to make sure everyone gets a fair shake.

Practically, this could mean provinces negotiating a new fiscal pact with Ottawa, perhaps through a First Ministers’ Conference by 2026, to set clear boundaries. Equalization could be reformed to a needs-based formula, factoring in infrastructure deficits rather than just GDP gaps, ensuring smaller provinces like PEI aren’t left behind. Ottawa’s role wouldn’t vanish—it would oversee a fiscal stability fund to buffer provinces against economic shocks, like a sudden US tariff hike, maintaining a safety net without micromanaging.

With the right safeguards in place, this could be a game-changer. Imagine provinces with the financial clout to invest in infrastructure, attract businesses, and build the industries of tomorrow. That’s a Canada ready to survive and thrive in this new world.

Maintaining National Standards: A United Front

Decentralization doesn’t mean fragmentation. We need a Canada where provinces work together, not against each other. Back in Allaire’s day, fed/prov relations were often marked by self-interest, suspicion and brinkmanship and a fundamental lack of trust among provinces and between provinces and the federal government. In the face of an existential threat, provinces must trust each other to do the right thing and unburden the federal government from having to play national arbiter. That means provinces need to take the lead on:

• Interprovincial agreements: Hammering out deals to ensure consistent standards in healthcare, education, and social programs.
• Pan-Canadian institutions: Creating or strengthening bodies that can coordinate policy and share best practices across the country.
• Mutual recognition: Making it even easier for professionals and skilled workers to move between provinces.

To avoid past pitfalls, we could establish a fortified Council of the Federation, chaired on a rotating basis, to mediate disputes and align policies—like harmonizing carbon pricing or nursing certifications. Ottawa’s role here would be as a convener, hosting annual summits to ensure cohesion without overreach. Historical rivalries, like Alberta-Quebec energy differences, could be managed in these agreements, fostering trust through enforceable rules.

The Time for Action is Now

The challenges facing Canada are real and urgent. This Allaire vision can be a calculated shift to resilience, balancing provincial autonomy with federal stewardship and Indigenous partnership. By embracing a decentralized model, empowering our provinces, partnering with Indigenous nations, focusing the federal government on its core responsibilities, and implementing innovative solutions, we can build a stronger, more resilient Canada.

The Allaire Report, long dismissed as a relic of the past, could offer a blueprint for the future. It’s time to dust it off, reimagine it for the 21st century, and consider it as a bold vision for all of Canada.

Bernard Etzinger is a former Canadian diplomat with assignments in New York, Silicon Valley and Washington, DC, where he served as press office spokesperson to Ambassadors Kergin, McKenna and Wilson. He also served as the senior executive leading communications in two federal government departments, and as Chief Communications Officer for The Ottawa Hospital.