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Campbell the odd premier out

When Premier Gordon Campbell skipped the final vote on the harmonized sales tax in the legislature this spring, he did so to attend the signing of an economic agreement with his counterparts from Alberta and Saskatchewan.

When Premier Gordon Campbell skipped the final vote on the harmonized sales tax in the legislature this spring, he did so to attend the signing of an economic agreement with his counterparts from Alberta and Saskatchewan.

The New West Partnership is crafted to break down trade barriers and encourage investment in the three provinces, similar to the earlier trade, investment and labour mobility agreement between B.C. and Alberta.

"A historic step forward," declared Saskatchewan Premier Brad Wall following the signing ceremony in his capital city of Regina April 30. "We are combining the strength of our three vibrant economies and working together to create lasting prosperity."

"There's going to be tremendous competition for investment, and investment will naturally navigate to those areas that have the same regulations," added Alberta's Ed Stelmach as the trio announced plans for a trade mission to China and Japan in mid-May.

"When we speak with one voice, it's a much stronger voice," echoed Campbell. "I see it as a common benefit to us all."

The accompanying documentation laid out the details: A single market with a combined population of nine million and a gross domestic product of half a trillion dollars. Common standards, regulations, policies, wherever practicable. All in all it sounded like - dare I say it? - harmonization. But of course the "h" word was barely mentioned, because in this province it could only mean one thing - harmonization of the provincial sales tax with its federal goods and services counterpart.

The harmonization vote that Campbell missed on April 29 was a prelude to the implementation of the HST on July 1, ironically the same day as the three provinces begin phasing in the terms of the New West Partnership.

The partners agree on many ways to promote trade and investment. But they sing from different song sheets on sales tax harmonization.

Alberta is technically harmonized with the five-per-cent federal GST since the province has no sales tax whatsoever. But that lack of a PST is a competitive advantage that stokes much of the anti-HST anger in communities along the B.C. border with Alberta. Blair Lekstrom, MLA for Peace River South, said as much in resigning from the B.C. Liberal cabinet and caucus last week in protest over the HST.

"The more I've learned about the impact on our border communities has led me to rethink my support," he told reporters. "We face challenges beyond what others do, and I'm not prepared, either as an elected official or as a resident of this region, to support something that actually piles more problems on top of what we face already."

Alberta is ground zero in the fight against sales taxation. But Saskatchewan is almost as strong in rejecting proposals to combine its existing provincial levy with the federal tax.

The province was the first in the country to experiment with harmonization, back at the dawn of the GST era in 1991 under the government of premier Grant Devine. The voters subsequently liquidated the Devine administration in a general election, whereupon a New Democratic Party government under premier Roy Romanow promptly de-harmonized and raised the provincial sales tax by a point instead.

Harmonization has remained a nonstarter ever since. Current premier Wall, whose Saskatchewan Party is a more populist successor to Devine's Conservatives, rejected the option out of hand in the 2008 election. When his finance minister, Rod Gantefoer, hinted at reconsideration recently, he was persuaded into issuing a clarification: "We will not be harmonizing the provincial sales tax with the GST."

In a week when the Western premiers were meeting in Vancouver, one ought to mention Manitoba as well. Premier Greg Selinger, a New Democrat with that party's ingrained dislike for freer trade, has determined that the New West Partnership should stop at the border with Saskatchewan.

At the same time, he's fully in agreement with his neighbours on sales tax harmonization. Manitoba looked at the option, Selinger told me during a brief chat in Vancouver last month, "but it didn't work for us."

His finance minister, Rosann Wowchuk, laid out the details in a report posted on the government website.

The shift to a single tax on the HST model would mean half a billion dollars in savings for business in Manitoba, and a $400-million wallop for provincial consumers. Ottawa's offer of $344 million in "transition funding" was a one-time payment that wouldn't begin to compensate consumers for a tax that would bite them each year.

"It would in fact cost the province more money than would be gained by it," Wowchuk said. "We are not prepared to risk the economic recovery by undermining Manitoba's growing consumer confidence."

So on the question of sales tax harmonization, Campbell is the odd man out among the four Western premiers. No small point of disagreement, given his insistence that it is the single most important thing the government can do to improve the investment climate and thus the economy. Starting July 1, we'll see if he's right.