The Afghanistan crisis and its impact on Pakistani federalism By Sajid Mansoor Qaisrani

Politics in Pakistan have been inextricably tied to the factional wars in Afghanistan. Until the recent US-ledmilitary intervention, a relatively small group of religious fundamentalists had influence out of proportion to theirnumbers on the country’s federal system. The recent war in Afghanistan has broken the link between thefundamentalists and Pakistan’s political elite, promising a new life for Pakistani federalism.

Softwood lumber: A trade dispute with the U.S. challenges Canadian federalism By Steve Mertl

The Canadian provinces have increasingly taken the lead in negotiations with the USA in the dispute over thecross-border trade of softwood lumber. As they respond to American accusations of unfair trading practices, theyface a further challenge: how can they reconcile provincial regional interests to come to a unified bargainingposition?

Taxes, transfers and spending in Spain: the regions and the centre seek the right balance By Violeta Ruiz Almendral

Spain recently implemented a second wave of tax reform, giving its Autonomous Communities greater controlover raising revenue. But Spain’s optional autonomy system means that these Communities can choose not totake on the responsibility of taxing their constituents. And many do opt out – preferring that the centralgovernment be perceived as the one that demands the most taxes.

US federalism in the aftermath of September 11 By Earl Fry

The United States is still coming to grips with its vulnerability to terror attacks against its citizens on its own soil.The governments in the USA are hurriedly inventing new intergovernmental institutions and new means ofcoordination in order to prevent and respond to terrorism. And local governments — on the front lines of this newwar — want federal support to match their increased responsibilities.

After the Bonn Accord: Is federalism relevant to Afghanistan’s future? By Reeta Chowdhari Tremblay

Representatives in the new Afghan interim administration come from each of the major groups which have viedfor power in the country’s many civil wars. Women, also, are now an integral part of the government. But asAfghanistan builds new institutions of government and a new constitution, will it develop a structure ofgovernance that will lead the country away from inter-communal strife?

The PRACTITIONER’S PAGE: Nicolas Lagasse of Belgium Constitutionalist Nicolas Lagasse describes Belgium’s recent delegation to the regions of responsibility foragriculture. He situates this development in the context of the Belgian practice of according significant power inthe field of foreign relations to the regions and communities.

FederationsWhat’s new in federalism worldwide

volume 2, number 2, february 2002

In this issue

Contributors to this IssueVioleta Ruiz Almendral teaches Finance and Tax Law at the University Carlos III, and is currently finishing her PhD thesis about allocation ofresources in Spain. Earl Fry is Professor of Political Science and Endowed Professor of Canadian Studies at Brigham Young University in Utah.He has written extensively on globalization. Steve Mertl is a staff reporter/editor in the Vancouver bureau of The Canadian Press, Canada’snational newsgathering co-operative of about 100 member daily newspapers and several hundred radio, television and online clients. He iscurrently acting news editor of the Vancouver bureau. Sajid Mansoor Qaisrani is currently working for the leading Pakistani women’s rightsNGO “Aurat Foundation” as Director of their Resource Service. He worked previously as a journalist for the Pakistan Television Corporationand as editor of the daily Pakistan Times. Reeta Chowdhari Tremblay is Chair of the Department of political science at Concordia Universityin Montreal.

In the fall of 2001 the Forum of Federations brought out a specialedition of this publication devoted to “federal options” for Afghanistan.The war was raging at the time and our purpose was, in part, tocontribute to a discussion of a role for the international community inthe post-war political reconstruction period. The situation in thecentral Asian region and in the world has evolved since then. Federalcountries in many parts of the world now have to deal with a wholenew set of contingencies. Three of our reports in this issue discussthese changing conditions and their impact.

Pakistan’s politics are undergoing a sea change brought on in largemeasure by the war in neighbouring Afghanistan and the generalized“war against terrorism.” In his article, Sajid Qaisrani points out that inthe past anti-democratic and fundamentalist elements in Pakistancould exploit east-west polarization to their advantage. The newpost-September 11 dialectic strengthens the hand of those who arepushing for a secular, federal democracy in Pakistan. There is,however, one big spanner in the works: the Kashmir conflict. For thetime being, the threat of war over that disputed territory has dieddown. But the Kashmir dispute continues to destabilize both Pakistanand its giant neighbour. We will have a report on that, and its importfor the practice of federalism in the region, in our next issue.

We also deal in this issue with domestic developments in the USA.The notion of having to defend the home front is new to Americans.Earl Fry points out that the last time US soil was invaded and occupiedwas during the War of 1812-14! States and municipalities are centralto the current American effort, and, as might be expected, are notalways happy with the attitude of the federal government inWashington.

Plus, we have a follow up to the special issue on federal options forAfghanistan we published in the fall of 2001. This time, ReetaChowdhari Tremblay discusses the usefulness of federal models forthe Afghan political reconstruction process — in the light of the BonnAccord and Afghanistan’s own constitutional history.

Our three other articles deal with questions of devolution and the roleof constituent-unit governments in the conduct of fiscal and foreignpolicy.

Spain has its own particular way of devolving fiscal powers to theAutonomous Regions. The most recent Spanish laws providing for thisdevolution form the basis of Victoria Ruiz Amendral’s story on the

practice of tax policy and federalism in Spain. Given the highlyasymmetric nature of Spain’s federal system, the regions have theright to opt in or out of the new fiscal arrangements as they wish. Thishas tended to create a situation where there is an uncomfortableimbalance between spending and the collection of revenue.

The Practitioner’s Page deals with devolution of a different sort.Belgian constitutionalist Nicolas Lagasse discusses the complexity ofhaving foreign policy conducted jointly by the Belgian centralgovernment and the regional governments. Agriculture has recentlybeen devolved to the regions in Belgium. Given that agricultural policyis totally bound up with the EU, this stage in Belgian devolution couldcreate genuine jurisdictional headaches.

And then there is Canada, where there are no constitutional provisionsgiving the provinces power in foreign affairs – but where the provincesdo take initiative nonetheless, especially when their own vitaleconomic interests are at stake. Steve Mertl describes how this hashappened in the current Canada-USA softwood lumber dispute.Canada does not have the same complex system of rules for theparticipation of provinces in foreign affairs that Belgium has for itsregions. When there are international disputes of the sort going onnow with the USA, established practice, historic precedent and areadiness to formulate flexible arrangements tend to determine theCanadian provinces’ participation.

Our next issue (April 2002) will appear at about the time we expectthe Forum of Federations to be organizing a major conference inNigeria. This event was originally scheduled for last October but wewere forced to postpone it because of September 11. For the Aprilissue we hope to have a significant focus on Africa to coincide withthe Nigeria conference.

We always welcome your suggestions or comments – about whatappears in this issue or what you would like to see in the future. Ifyou disagree with anything you’ve read here we’d like to hear fromyou. We use our web site for the “letters-to-the-editor” page and if youwrite us we will post your letter! Our e-mail address is:

forum@forumfed.org

And you can find our web site at:

www.forumfed.org

A publication of the Forum of Federations

700-325 Dalhousie, Ottawa, Ontario K1N 7G2 CanadaTel.: (613) 244-3360 Fax: (613) 244-3372forum@forumfed.org www.forumfed.org

Editor: Karl Nerenberg Associate Editors: John Ihnat, Marie Desjardins Editorial / Administrative Assistant: Rita Champagne

Federations is published five times per year by the Forum of Federations. Subscription rates are $20 CDN per year inCanada, $20 USD per year anywhere else in the world. Contributions of articles are welcome. Contact the Editors atthe above coordinates. The Forum of Federations cannot guarantee the return of unsolicited manuscripts.

From the editors

The Forum of Federations, an international network, seeks to strengthendemocratic governance by promoting dialogue on and understanding ofthe values, practices, principles, and possibilities of federalism.

BY SAJ ID MANSOOR QAISRAN I

F e d e r a t i o n s volume 2, number 2, february 2002

The Afghanistan crisis and itsimpact on Pakistani federalism

Pakistan’s support for theinternational alliance in the wake ofSeptember 11th added a new dimensionto the Pakistani establishment’s relationswith its own citizens, especially religiousgroups.

All of a sudden, the fundamentalists wereno longer considered allies. Thoughalways devoid of mass support, theconsistent backing of the politicalestablishment had given these religiousgroups a false sense of invincibility. Theynot only thought that they could take onthe USA by fighting alongside the Talibaninside Afghanistan, but they also thoughtthat they could easily jam thegovernment machinery in Pakistan.

But all estimates of their so-calledstrength proved wrong. The speed withwhich the Taliban surrendered Kabul tookthem by surprise and sent them intodeep shock. They were still awestruckwhen the bubble of the exaggeratedvision of their power in the Pakistanistreet also burst.

A lot is going to change now in Pakistan,and for Pakistani federalism as well. Withany luck, the current developments inPakistan can lead to greater respect forminorities, greater provincial autonomy,and a revival of a culture of peace amongPakistani citizens, influencing not onlyinter-communal relations in Pakistan, butalso Pakistan’s relations with itsneighbours.

Islamic Fundamentalismand Pakistan

Before independence from Britishcolonial rule, the Muslims of Indiarejected the Muslim religious parties.They gathered under the banner of theAll India Muslim League, a party with aliberal leadership. In the general electionsof 1945-46 – the last beforeindependence and the partition of India– the Muslim League won a landslidevictory.

The leader of Muslim League and futurefounder of Pakistan was Muhammad AliJinnah. He envisioned Pakistan as amodern democratic state.

An influential group of politicians andbureaucrats consisting of Urdu-speakingimmigrants and Punjabis dominated thekey positions in the newly createdcountry. From the early days of Pakistanthey started using religion and the Urdulanguage as tools to consolidate andmaintain their hold on the stateapparatus. People demanding rights forfederating units and minorities wereinstantly dubbed as being against thereligion and ideology of Pakistan.

Jinnah, who was suffering fromtuberculosis, died in September 1948.The political-bureaucratic elite ruling thecountry buried his vision of Pakistan withhim.

On 12 March 1949 the ConstituentAssembly of Pakistan adopted theObjectives Resolution, tabled by thecountry’s Prime Minister Mr. Liaquat AliKhan. It declared Islam to be the statereligion. All of the non-Muslim members,and some Muslim members of theassembly opposed the Resolution.

Thereafter, the Pakistani establishmentconsistently used religion to denyprovincial rights and to suppress ethnicgroups and minorities.

This brought the religious elements —who have never won a single election inthe country — close to the Pakistaniestablishment. Taking advantage of this,they gradually made inroads into thestate institutions — especially the armedforces, educational institutions andmedia organisations. By the time ofGeneral Zia ul Haq’s Martial Law, theywere holding key positions in thegovernment institutions.

Pakistan’s involvement inAfghanistan

The democratic forces in the countrywere struggling against Zia’s regimewhen the Soviet Union invadedAfghanistan. It was a God-sentopportunity for General Zia. Not only didthe Western powers grant himlegitimacy, but he also received billionsof dollars of much-needed economic andmilitary aid.

Under Zia, Pakistan became a frontlinestate in the West’s fight againstcommunism. Before Pakistan’sinvolvement, the war in Afghanistan waslimited to Afghans only, where liberalelements resisted the communists. AsPakistan joined in, the war wastransformed into a Jihad, or holy war,between Muslims and communists.

Pakistan’s seminaries have a historic linkwith the religious elements ofAfghanistan. For centuries, Afghan youthhave been coming over to theseseminaries to receive religious education.Using his power over the Pakistanireligious elements, Zia ul Haq broughttogether a group of Afghan religiousleaders who sent their disciples to war —soon joined by hundreds of Muslimzealots from around the world.

The death of Zia ul Haq in 1988 and therestoration of a democratic order inPakistan resulted in a decrease ofPakistani moral and material aid toAfghanistan. With the dismemberment ofthe Soviet Union, the West also lostinterest in Afghanistan, and the flow ofinternational aid started to dwindle. Thismade Afghan religious warlords look fornew supplies of military and financialresources to maintain their positions.

Infighting for the control of scarceresources broke out along sectarian lines,and plunged Afghanistan into totalanarchy. Hungry, aimless armies startedlooting areas under their control. The

F e d e r a t i o n s volume 2, number 2, february 2002

long war had turned Afghanistan into adump of armaments, left by Soviet forcesand the Afghan army. Sophisticated US-supplied weapons that were left unusedwere available in abundance.

Afghan religious warlords had offices inPakistan, linked with Pakistani groups oftheir own sects. Gradually, the infightingspread to Pakistan. Afghan armamentsstarted finding their ways into Pakistan’scities and towns, which turned into minibattlegrounds between various religiousfactions. A large number of innocentpeople were killed as the groups startedsettling scores. To improve their financialresources a number of warlords startedgiving protection to the drug mafia. Theflow of foreign investment droppedsharply and life became insecure.Economic activity was greatly affected bythis atmosphere.

This was the context in which thePakistani establishment decided todistance itself from the fundamentalists.They needed the right time andopportunity to make their exit.

When the international alliance askedPakistan to extend its support againstinternational terrorism following thetragic incidents of 11 September, therewas no hesitation. Pakistan wasforthcoming.

After September 11th

The first major problem Pakistan is likelyto face now is that Taliban elementscould obtain safe haven in the 2,430 km-long border area between Pakistan andAfghanistan.

Pushtoon and Baloch tribes inhabit bothsides of the border. They share commonlanguages, cultures and religion. Thewhole border region is mountainous,making it difficult to police, and nomadsliving on both sides of the borderfrequently cross over in search ofpastures. Most of the border regionshave also been autonomous sincecolonial times under treaties concludedbetween the British colonial governmentof India and the rulers of Afghanistan.The reach of the Pakistan government inthese areas is limited.

If Taliban elements manage to hide inthese regions, it will be very difficult totrace them — especially without the helpof the local people. Pakistan canovercome this problem by wooing theold political elite of the tribal areas, who

have lost their power to the religiousleaders over the past two decades.Pakistan also needs to take bold stepsand gradually merge these areas intosettled areas. Such steps might provokeresistance from the tribal people, butwould help avoid this kind of situationfrom developing in the future.

After being impressed by the propagandaof religious elements, a number ofPakistanis — especially from these tribalareas — had gone to Afghanistan to fightalong side the Taliban. Their fellowtribesmen are hostile to the new Afghangovernment — and the Pakistangovernment for supporting it. It mighttake a lot of time and effort to pacifythese people, though their number is notgreat, perhaps only in the thousands.

Pakistan’s economy suffered losses ofabout US $3 billion on account of theAfghan situation. Although theinternational community has taken somesteps to offset this impact — includingwriting off some loans, bilateral aid,rescheduling of debts and favourableterms to increase exports — yet moresteps may be needed to help Pakistanovercome its economic woes.

On the positive side, the fundamentalistreligious elements have finally beenisolated from the Pakistani establishment.This development will help Pakistan in anumber of ways:

• Factional fighting and killings ofopponents might end.

• A liberal atmosphere is likely to returnto Pakistan, as well as a revival ofcultural and social activities.

• The Pakistani establishment has beenusing these religious elements againstpeople who demanded provincialautonomy, as well as rights for ethnicand religious minorities. This trend islikely to be reversed, and as aconsequence, it is likely that thefederation will be strengthened.

• For a long time these religiouselements had been acting as the mainpressure groups against thenormalisation of relations with India.With the weakening of these groups,there is every possibility of normalizingthe relationship (assuming theKashmir conflict can be resolved!)

• With the establishment of a propergovernment in Afghanistan, the inflowof arms and drugs from Afghanistan toPakistan might also decrease.

• Since the start of the war inAfghanistan, Pakistan has been a hostto about 2.5 million Afghan refugees.With the restoration of peace inAfghanistan, the bulk of the refugeepopulation will return to Afghanistan,easing Pakistan’s economic burden.

• Pakistan’s relations with its neighbours— especially Iran — which were badlydamaged due to its support for theTaliban will improve. Relations withIran are already much better thanbefore, and a promising dialogue hasbegun.

The first-ever elected governments in thedistricts have been a great help inthwarting attempts by the fundamentalistelements to create law and orderproblems in the country. In the past suchsituations had provided the centre withroom to impose stringent measures,restrict civil liberties and send in federalsecurity agencies.

The elected district nazims (mayors), bygiving full support for the centralgovernment’s policies and measuresvis-à-vis Afghanistan, have provided morethan enough political support to thegovernment, enabling it to move aheadwith its liberal agenda.

The National Reconstruction Bureau, theofficial think-tank assigned theresponsibility of preparing aconstitutional reforms package, is likelyto come out with amendments that willprovide constitutional status for thedistrict governments. It will also redefinethe relationship between the federationand provinces making it difficult for thecentre to interfere in provincial matters.And, the Bureau is likely to suggestamendments that will ensure that thePakistani state functions as a liberaldemocratic polity as against its presentidentity as a religious state.

But all this depends on continuedinternational support to the Pakistanileadership. The religious forces and someof the opposition parties in Pakistan arealready threatening to launch amovement against the Musharrafgovernment. In order to destabilise hisgovernment the religious forces will alsomake an effort to further deterioratePakistan’s relations with India. If stabilityis disturbed in Pakistan, there is everychance that forces of reaction will reartheir heads, endangering the entireregion.

BY STEVE MERTL

F e d e r a t i o n s volume 2, number 2, february 2002

Softwood lumber

A trade dispute with the U.S.challenges Canadian federalism

Canada and the United States enjoythe single biggest two-way tradingrelationship in the world. With almost$2 billion CDN per day in goods movingback and forth across the border, thereare bound to be a few hiccups.

But a long, bitter dispute over Canadiansoftwood lumber exports has been morelike a sustained coughing spasm thatabates for a while, then breaks out again— loud, painful and bringing no apparentrelief.

It has also presented challenges forCanadian federalism, with the centralgovernment largely powerless in a battlethat pits the American lumber industryagainst Canadian lumber-exportingprovinces.

Dispute over alleged subsidies

Canadian exports of lumber, used mainlyfor home building and renovation, havebeen under repeated attack fromAmerican lumber interests for 20 years. Apolitically influential coalition of U.S.producers claims Canadian lumber, whichcurrently has about a one-third share ofthe American market, is subsidizedthrough low stumpage fees – the royaltiescompanies pay for logging timber inpublicly owned forests.

At stake are lumber exports worth$10 billion CDN in 2000, less than aweek’s worth of the total two-way tradebetween the two countries. But it’s pivotalto several regions of Canada, especiallyBritish Columbia, the westernmostprovince where forestry remains thelargest resource-based industry and majoremployer. Quebec and Ontario in centralCanada, as well as Alberta (next door toBritish Columbia), are also big lumberproducers. The four Atlantic provinceshave increased their share of exports inrecent years.

Under Canada’s constitution, the10 provinces have overriding authority inmany areas. Perhaps none is morejealously guarded than provincial control

of natural resources, which remainimportant levers of regional economicdevelopment.

In forestry, that control is enhanced by thefact that most timber — in BritishColumbia it’s 95 per cent — is located onCrown land, publicly owned and directlycontrolled by the provincial government.So besides regulating aspects such assafety and environmental standards, theprovince has a direct economic interest inlogging through the issuing of timberlicences to forest companies andcollection of stumpage fees.

That’s the crux of American criticisms. U.S.producers argue the provinces setstumpage rates and other licencerequirements to extract maximum socialbenefits from the resource — such asemployment and value-added processing— instead of pricing according to the truemarket value of the timber. That putsAmerican lumber producers, whosedomestic wood costs are based mostly onauction prices for logs from private treefarms, at a competitive disadvantage, theycontend.

The provinces don’t deny they want thebenefits of a publicly owned resource toflow to their citizens but claim those goalsaren’t incompatible with stumpage feesthat reflect the market value of the wood.

The American industry’s response hasbeen to file countervail complaints againstCanadian lumber — four since 1982 —attempting to impose punitive duties onCanadian exports. They’ve been a boonfor Washington trade lawyers but aheadache for almost everyone else.

The latest, which added a complaint ofdumping for good measure, was filedwith the U.S. Commerce Department onApril 2, 2001, two days after a five-yearbilateral agreement that restrictedCanadian lumber imports to the UnitedStates expired.

U.S. trade officials imposed provisionalcountervailing and anti-dumping dutiestotalling an average of 32 per cent.

Pending a final determination of dutiesthis spring, Canadian exporters must postbonds covering their potentialobligations. The anticipated cost of theduties, coupled with a slumping demandfor lumber, caused many mills to shutdown, especially in British Columbia,which accounts for more than half ofCanadian export volume.

An intergovernmental conundrum

The dispute has always left Ottawa in apolitically awkward position. Foreigntrade is clearly a federal responsibility butthe policies that the Americans findegregious are within provincialjurisdiction.

To complicate things further, individualprovinces and regions view the disputedifferently, depending on the importanceof forestry to their economies.

The Atlantic provinces, for instance,managed to avoid the latest countervailcomplaint because U.S. trade officialsdecided their auction-based timber-pricing system resembled the Americanideal. However, they were still ensnaredin the anti-dumping action, which targetsindividual companies with allegations ofselling at below their cost of productionor at prices lower than the domesticCanadian market.

British Columbia, which as late as the1970s accounted for two-thirds of lumberexports, was the biggest player in thisdispute and Ottawa was sometimes seenas catering to its interests at the expenseof the other lumber-producing provinces.

To complicate things even more, federalofficials have had to be mindful of thepolitics of Quebec sovereignty. The PartiQuebecois, whose aim is to take themajority French-speaking province out ofthe Canadian federation, rarely misses anopportunity to exploit federalism’sperceived shortcomings in terms ofQuebec’s interests.

And the past 20 years have seen theprovinces gaining an increasing share of

F e d e r a t i o n s volume 2, number 2, february 2002

decision-making power in formulating aCanadian response to US trade actions.

Feds fight the first rounds

The first trade action in 1982 endedrelatively quickly one year later with theU.S. Commerce Department concludingprovincial forest-management programsdid not constitute contervailablesubsidies.

But three years later, the Americans wereback with largely the same complaints.This time U.S. trade officials sided withtheir domestic producers, levying a15 per cent countervailing duty againstCanadian lumber.

Canadian priorities had changed too. TheProgressive Conservative government inOttawa was preparing to negotiate acomprehensive free-trade agreement withthe United States. It didn’t want lumberto potentially derail the treaty. Everyonegot their own lawyers this time.

‘‘This is not generally known, but B.C.itself had started its own talks secretlywith the U.S. government,’’ says a veteranof the lumber wars who has worked bothfor government and industry, who doesn’twant to be named. ``That certainlystimulated the federal government inCanada to do a deal, and they did.’’

Ottawa’s response was to propose amemorandum of understanding with theUnited States. Canada would impose anexport tax on lumber equivalent to theU.S. tariff, which would be lifted. TheCanadian tax would be reduced asprovincial stumpage fees were increased,although there was no admission ofsubsidy.

The advantage for Canada was that theexport tax would be funnelled back to theproducing provinces, whereas anAmerican tariff went into the U.S.Treasury.

The federal initiative, accepted by theprovinces and the Americans, allowedOttawa to red-circle lumber and concludethe free-trade deal. Lumber tradewouldn’t be free, though it would becovered by the new treaty’s dispute-settlement rules.

A few years later, Ottawa pulled out ofthe memorandum of understanding,satisfied provincial policy changes hadeffectively raised wood costs. The U.S.Commerce Department apparentlydisagreed, self-initiating a thirdcountervail case.

Increasing federal-provincialcooperation

‘‘The third lumber investigation is perhapsthe most clear-cut case of how thesethings should go, as far as Canada’sconcerned at least,’’ says an un-namedsource. ‘‘The federal-provincialco-operation at that time was quite good.’’

A 6.51 per cent duty imposed on the fourmain producing provinces, as well asSaskatchewan, Manitoba, the Yukon andNorthwest Territories was successfullyappealed under provisions of the nowoperative Canada-U.S. Free TradeAgreement and was quashed in 1994.Canadian producers eventually got back$800 million CDN in duties.

But the victory proved hollow. TheAmericans served notice that they wouldbe back again and Canada, backed by aweary lumber industry, opted to discuss adeal with the United States to forestallanother costly legal battle.

‘‘It was not unanimous,’’ says an insider.``Many provinces were telling the feds, ‘donot do this’ because these consultationswill inevitably turn into negotiations.’’

They did indeed become negotiations,resulting in the 1996 Canada-U.S.Softwood Lumber Agreement. The five-year deal, whose expiry last Marchtriggered the latest countervail case,limited Canadian lumber exports into theUnited States to a percentage of 1995sales, with an export charge levied onhigher volumes. A quota system was setup, based on export levels by provincesand individual companies.

Provincial governments took a secondaryrole in the talks that led to the deal, saidJake Kerr, chairman of Lignum Corp., aVancouver lumber company.

‘‘Industry was in the front row, with theprovincial governments in lockstep andthe federal government sort of providingoversight but frankly not terribly activeexcept when it came to winding it up andnegotiating broader issues like access,’’said Kerr, a key industry negotiator in theagreement.

Manoeuvring began more than a yearbefore the managed-trade deal expired.

Central Canadian lumber producers, withrelatively smaller quotas to protect,wanted to take a hard line against theAmericans, replaying the 1991 case thatCanada had won.

British Columbia producers, fearful thatamended U.S. trade legislation wouldmake the case harder to win, initially

pushed for new negotiations towards arevised lumber agreement.

Provinces do the talking

On the eve of the 1996 agreement’sexpiry, Ottawa moved pre-emptively tochallenge aspects of U.S. trade law beforethe World Trade Organization.

The decision was to fight the countervailand dumping cases while holding``consultations’’ with the Americans to getat their core concerns and perhaps openthe door to a real, long-term settlement.Central Canadian industry lobbyists wereworried these would lead to anothermanaged-trade deal to appease theAmericans.

But the major producing provinces by allaccounts showed surprising unity, at leastin public. They tabled proposals aimed atmaking their stumpage systems appearmore market sensitive but, led by BritishColumbia and Quebec, they rejected anysolution that limited Canadian access tothe U.S. market.

In face to face discussions with theAmericans, the provincial delegationshave taken the lead role.

Ottawa sees its role as a kind offacilitator, stepping in when it appearsU.S. officials don’t understand some pointa province is making, or vice-versa.

The Canadian players so far appear tohave maintained their united front.Quebec’s Parti Quebecois governmentcaused a brief stir in November whenNatural Resources Minister JacquesBrassard seemed to suggest the provincehad reached its own accord with theAmericans but needed Ottawa’s approvalto proceed.

The Canadian Minister of InternationalTrade quickly vetoed the notion but theexpected backlash never came. Federalofficials now say the news media spunBrassard’s comments.

And in British Columbia, where stakes arehighest and pressure for a deal thestrongest, Provincial Forests Minister Mikede Jong has taken on the province’straditional leadership role.

The federal government’s balancing acthas received good reviews in the West.

‘‘There have been divisions in the country— talk now, talk later, don’t talk, nevertalk,’’ said John Allen, president of theB.C. Lumber Trade Council. ``I thinkthey’ve let it unfold as best they could,given the different interests in thecountry.’’

BY VIOLETA RU IZ ALMENDRAL

F e d e r a t i o n s volume 2, number 2, february 2002

Taxes, transfers and spendingin Spain: the regions and thecentre seek the right balance

Spain is in the process ofdecentralizing its fiscal system to givemore power and responsibility to theAutonomous Communities. (*)

In July 2001 the central governmentand the Communities of Spain agreedto expand and broaden the scope ofwhat the Spanish call “ceded taxes.”This was the second phase in a reformthat started in 1996.

The main objective of that originalreform was to make the Communitiesas responsible for the money theyraised as they already were for themoney they spent — thus decreasingwhat in fiscal federalism literature isknown as “vertical fiscal imbalance.”(This occurs when the revenues of oneorder of government do not correspondto its expenditure responsibilities.Frequently this imbalance takes theform of central government revenuesexceeding its legislative and executiveresponsibilities while the constituentunits’ revenues are inadequate for theirresponsibilities.)

Until the 1996 reform, ceded taxes hadbeen taxes levied by the centralgovernment whose yield was “ceded”or granted to Communities accordingto the amount raised in eachcommunity. In effect, ceded taxes werea kind of transfer, by which some ofthe central government’s taxes werecollected and administered by theCommunities.

The 1996 reform contained a numberof important provisions. First, thePersonal Income Tax became a cededtax – albeit only partially. Second, thecentral government gave to

Communities the power to regulatesome aspects of these taxes. TheCommunities gained control over suchmatters as tax brackets, tax rates andsome tax credits.

Centre still has ultimate authority

The means of transferring this authoritywas what the Spanish call “adelegation of legislative powers” fromthe central government to theCommunities. Unlike the constitutionsand established practices of most otherfederations, the Spanish Constitutionpermits this sort of “delegation.” Butbecause the central government onlydelegates powers that are still inprinciple its own, it can both controlhow the Communities exercise thosepowers and, perhaps more important,revoke them at any time it chooses.

It is generally agreed, however, that ifthe central government were to actuallytry to exercise its power of revocation itwould create great stress on therelations between the two tiers ofgovernment. For this reason, the newpowers of Communities regardingceded taxes are seen by most as beingvirtually permanent.

Following the reform, the yield fromceded taxes still accrues to eachCommunity on the basis of taxes paidby its own taxpayers. But now, should aCommunity exercise its new legislativepowers, the yield will be the result ofthe Community’s own taxing autonomy.What until 1997 had been a form oftransfer became a form of tax sharing.

The 2001 reform expanded theCommunities’ legislative powers and

added to the list of taxes that could beceded to them.

There are a great many different kindsof ceded taxes, ranging from thepersonal income tax to death and gifttaxes to gambling taxes. Depending onthe tax, the yield totally or partiallyaccrues to Communities, which may ormay not take on legislative powers,and may or may not be in charge ofthe tax’s administration.

In fact, the powers that Communitieshave vary so widely, depending on thetax, that in some cases the ceded taxstill operates as a mere transfer (forinstance, in the case of the valueadded tax). In other cases, the broadscope of the powers granted makesthe ceded tax something very similarto an autonomous tax (for example, inthe case of gambling taxes).

From dictatorship to a gradualfederalization

When Spain developed a democraticconstitution in 1978, following thedeath of Franco, it provided for theformation of the distinctly Spanishentities known as AutonomousCommunities. Regions could opt for astatus similar to that of constituentunits in other federations – or theycould choose not to assume thatstatus. What happened in practice wasthat all of the regions in Spain decidedto assert their autonomy and thewhole country is now divided intothese Communities.

The Constitution does not define Spainas a federal state. Actually, it does notdefine the form of the state at all —

* Note: Spain is divided into 17 Autonomous Communities. What is said in the discussion in this article does not apply to the Basque Country andNavarra which, according to the Constitution, have special status (i.e. more autonomy), implying different taxation powers than apply to the rest of theCommunities. The commentary in this article also does not apply to the two Autonomous Cities (Ceuta and Melilla), since they do not have legislativepowers. The Canary Islands also have a special tax regime in some aspects (i.e. no Value Added Tax), but it does not differ greatly from the generalsystem, so they do have most ceded taxes.

F e d e r a t i o n s volume 2, number 2, february 2002

after Franco’s centralized government,consensus on this matter was anythingbut easy to obtain. But it is generallyagreed that, given the broad scope ofits decentralization, Spain is in practicea federation.

In the years immediately following1978 the Communities were financiallydependent on transfers from thecentral government. They did not levytheir own taxes to any significantextent.

This was not a problem, in partbecause during that period manySpaniards tended to regard theCommunities with certain distrust. Infact, voters rejected Community effortsto establish their own taxes — ashappened in the Community ofMadrid, in 1987.

But, as time passed, the Communitiesgradually gained more authority andtheir financial needs grew. This resultedin a gradual expansion of the transfersystem, and more financiallydependent Communities.

Soon, debates about the Communities’fiscal responsibility became one of themain characteristics of the relationshipbetween the central and Communitygovernments. By the end of theeighties, some Communities wereready to play a more active role intaxation policy. In fact, they establishednew taxes.

The central government did not alwaysaccept such taxes and was unwilling togive up its de facto taxationsovereignty. It challenged some ofthese new taxes in Spain’sConstitutional Court. The war on thesharing of taxes had been declared andit became obvious that there was aneed to reassign taxation powers. Thefiscal reforms of 1996 and 2001 were away to buy peace between the centreand the regions and to get theCommunities to take greaterresponsibility both for spending and forcollecting revenue. Many doubtwhether that purpose has yet beenachieved.

The reforms have not yet deliveredthe hoped-for results

Autonomous Communities are giventhe option to choose whether theywant to exercise their regulatorypowers. This is coherent with the so-called “optional autonomy system” inthe Spanish Constitution, by whicheach Community may decide whatpowers and authorities it wants to takeon.

But the way that this option has beenstructured – and the fact that thecentral government still guaranteesCommunities lump-sum grantsallocated on the basis of what theyhave historically received – serves tocreate a strong disincentive forCommunities to use their new taxationpowers.

Proof of this disincentive is the factthat, since 1997, Communities havemainly used their powers to create newfiscal benefits – assuring that they willbe seen by taxpayers as the “FairyGodmothers” who offer services tocitizens without asking for money inexchange, while the taxing role of the“Wicked Stepmother” is played by thecentral government.

So although there has been areassignment of taxation powers, andCommunities now have more roomthan they ever had for designing theirown taxation policies, they still prefer

to rely mainly on transfers from thecentral government.

In the year 2000, conditional andunconditional transfers still representedroughly 60% of the Communities’ totalrevenues while the yield derived fromceded taxes represented 25%.However, if we take into account thatmost ceded taxes act as “transfers”(where the Communities do notexercise any regulatory powers on thetax rates), transfers from the centralgovernment still represented, in theyear 2000, the overwhelming bulk ofthe Communities’ total revenues. Giventhat the Communities spend about40% of total expenditure – whilecollecting only about 15% of therevenue — many observers argue thatthere is something askew in the fiscalsystem of Spain.

If one of the reasons for the reformwas to increase the Communities’ fiscalresponsibility and make them moreaccountable to taxpayers for the moneythey spend, it has failed to attain itsgoal. It remains to be seen whether thelatest increase of Community taxationpowers will help to change thissituation.

Most knowledgeable observers thinkthat it will not, since the incentiveproblems just described remain largelythe same in the laws putting the newagreements into practice.

The distribution of taxation powers in the Spanish Constitution

The constitution gives Autonomous Communities taxation powers (sections133 and 157) but the central state can limit them through a special law(section 157.3). The central government made use of this power as early as1980 by approving the Autonomous Regions Finance Act. This law imposessevere limits on the creation of new taxes by the Communities. The mostimportant is the prohibition of double taxation, which prevents autonomoustaxes from being similar to central state and municipal taxes. Since these twobodies had already established taxes on most of the imaginable sources ofrevenue, little tax room was left for Communities. Moreover, theConstitutional Court has interpreted these limits broadly, making it almostimpossible for Communities to invent new taxes.

Therefore, despite constitutional provisions that guarantee Communities boththe power to establish taxes and financial autonomy (section 156.1), thelimits established by the central state have led to a system where taxationpowers remain mostly in its own hands.

BY EARL FRY

F e d e r a t i o n s volume 2, number 2, february 2002

U.S. federalism in theaftermath of September 11

The tragic terrorist events ofSeptember 11, 2001 have had aprofound impact on the United States ingeneral and on American federalism inparticular. The 19 terrorists who wereresponsible for the four plane crashes inNew York City, the Pentagon, and ruralPennsylvania were probably working withan annual budget of about one milliondollars, but their activities resulted in theloss of over 3,000 lives and literally tensof billions of dollars in damage to theU.S. economy and to many othereconomies around the world.

Most Americans had never heard theterm “homeland security” prior toSeptember 11. The last major destructiveact perpetrated by foreign forces onAmerican soil was the attack on PearlHarbor in 1941, and the last significantincursion on the mainland was the Britishtakeover of Washington, D.C. in 1814.

All Americans are now painfully aware ofpotential threats from abroad, and withinthe U.S. federal system, state and localgovernments will be expected to playmajor roles in protecting the homeland.The National Governors’ Associationreleased the following statement:

“Governors play a critical role inhomeland security. State and local lawenforcement and health personnelprovide the first line of defence inprotecting critical infrastructure andpublic health and safety. Should anincident occur, state and local personnelare the first to respond to an emergencyand the last to leave the scene.Governors, with the support of thefederal government, are responsible forcoordinating state and local resources toeffectively address natural disasters,accidents, and other types of majoremergencies, including terroristincidents.”

Municipal leaders have echoed similarsentiments about their own key roles,with Mayor Rudy Giuliani and hiscolleagues being living examples of thecritical need for effective local leadershipin times of major disaster.

A new “czar” for homelandsecurity

At the national governmental level,President George W. Bush issued anExecutive Order creating the HomelandSecurity Council and named Tom Ridge,the former governor of Pennsylvania, tobe the Assistant to the President forHomeland Security. Approximately three-quarters of the state governmentsfollowed suit by naming their ownhomeland security directors or task forcesto deal with the specific threat ofterrorism. With almost 75 percent ofAmericans living in metropolitan areas

having at least 250,000 people, manymayors and city councils also rushed toset up special teams to deal withmunicipal security.

If the fight against terrorism is to besuccessful, intergovernmentalcooperation and coordination must beenhanced. After all, the major federal lawenforcement agency, the Federal Bureauof Investigation (FBI), has only about12,000 agents, while at the state andlocal levels law enforcement personnelnumber 650,000. Active-duty militaryforces in the United States totalsomewhat less than 1.4 million, whileanother 460,000 are in Army and AirNational Guard units under the directcommand of state governors (unless“federalized” by the President of theUnited States in instances of extremeemergency).

Airport security, which will soon be“federalized,” is currently bolstered bythe presence of National Guard troops.A state such as Utah, which will host the2002 Winter Olympic games, hasrecently activated a greater number ofNational Guard troops than were calledto full-time service during either theVietnam or Persian Gulf wars.

Co-operation among the states

Combating bioterrorism, whether in theform of anthrax, smallpox, or some otherscourge, will also fall mainly on state andlocal government health-care units.During and shortly after World War I, theso-called Spanish flu killed 675,000people in the United States, a largernumber of Americans than perished onthe battlefields of Europe. The smallenvelope sent last fall to Senator PatrickLeahy of Vermont contained enoughanthrax to kill up to 100,000 people,showing the lethal potential of modern-

"If the fight againstterrorism is to be

successful,intergovernmentalcooperation and

coordination must beenhanced. After all, the

major federal lawenforcement agency, the

FBI, has only about12,000 agents, while at

the state and local levelslaw enforcement

personnel number650,000."

F e d e r a t i o n s volume 2, number 2, february 2002

day bioterrorism and illustrating howserious state and local governmentofficials must be in their counter-terrorism, emergency-preparedness, andpublic-health planning endeavours.

The need for overall disaster relief andcoordination is prompting greatercooperation among state and federalofficials. Indeed, since 1996, 41 U.S.states and 2 territories have joinedtogether to participate in the EmergencyManagement Assistance Compact whichpermits areas suffering from disasters torequest assistance from other memberstates. The Council of State Governmentsis also working to extend suchcooperative-assistance pacts to Canadianprovinces and Mexican states. TheCanadian provinces of Ontario andQuebec were particularly noteworthy inextending assistance to the State and Cityof New York following the September11th attacks.

Ironically, the National Governors’Association sponsored a policy summiton domestic terrorism in July 2001,bringing together state and local levellaw enforcement, public health, fire, andemergency management personnel tomeet with federal officials in an effort towork out a coordinated plan for disasterassistance. A mock exercise was held atthe summit, which dealt with thefictional city of “Gotham” in the U.S.northeast. Unfortunately, what actuallyoccurred in New York City two monthslater went far beyond the parameters ofthe disaster simulated in the Gothamplanning exercise.

Regional governments want abigger role

Intergovernmental planning is only in itsearly stages as federal, state, and localgovernment officials prepare for disastersas diverse as additional plane crashes,anthrax dissemination, dirty bombswhich use conventional explosives todisperse deadly radioactive materials, thepoisoning of food supplies and watersources, cyber-terrorism, or thedestruction of key parts of theinfrastructure such as bridges, airports, orhydroelectric dams.

Most state and local leaders want TomRidge’s position to become permanentand accorded a cabinet-level status. Theyalso want additional federal assistancemodeled after the Homeland SecurityBlock Grant Act proposed in the U.S.Senate, which would provide over threebillion dollars in discretionary funds tostate and local governments to help themprepare for terrorist-related activitieswithin their own areas of jurisdiction.

In addition, state and local governmentswould like to see communicationsbetween the federal and regionalgovernments be increasingly two-way,with Washington, D.C. both giving andtaking advice on how to prepare for thefuture. In particular, they want the FBI toshare more sensitive information withlocal law-enforcement agencies and tohave these agencies receive advancednotification before the NationalHomeland Security czar issues anationwide alert warning of possibleterrorist acts.

A nasty side of globalization

Violent terrorist activity is just onemanifestation of the effects ofglobalization on the United States andother federal systems around the world.Other dimensions of globalization, bothpositive and negative, include:

• international trade, investment,and tourism;

• immigration;

• organized crime;

• diseases;

• natural resources;

• energy;

• sports and entertainment;

• wars and conflict;

• the proliferation of weapons ofmass destruction;

• the environment;

• education;

• religion and ideology;

• and cyberspace.

The United States has benefited frommany aspects of globalization, including18 million jobs, which are directly linkedto export, direct investment, andinternational tourism activity.

Currently, the United States leads theworld in the volume of imports andexports, inward and outward foreigndirect investment flows, revenuesgenerated from foreign tourists, and thenumber of foreign students enrolled ininstitutions of higher learning.Immigration into the United States wasalso higher during the 1990s than anyother decade in American history,reflected in the fact that people born inover 80 different countries perished inthe World Trade Centre disaster.

This globalization process has promptedabout 40 of the 50 U.S. states to openmore than 240 offices abroad and tosponsor frequent international trademissions. Unfortunately, afterSeptember 11, some of these trademissions have been cancelled orpostponed and many other internationalpursuits curtailed. The reasons for thiscurtailment of activities include cutbacksin state government budgets as a resultof recessionary conditions, shifting ofbudgetary items to reflect “homelandsecurity” priorities, and a general fear ofbeing targeted by unfriendly groupswhile traveling overseas.

More co-ordination needed

Without any doubt, the terrible terroristacts of September 11 have been verycostly for American society in terms ofthe loss of precious lives, the deepeningand prolongation of an economicrecession which began in March 2001,the termination of hundreds ofthousands of jobs, a significant decreasein revenues collected by all levels ofgovernment, and the diversion ofgovernment funding from “butter”programs for societal improvements to“guns” programs for enhanced domesticand international security.

The priorities of almost all governmentsin the U.S. federal system have shifteddramatically over the past few months.Greater cooperation among thosegovernments will be imperative in orderto overcome the repercussions ofSeptember 11 and prevent similarcataclysmic events in the future.

BY REETA CHOWDHAR I TREMBLAY

F e d e r a t i o n s volume 2, number 2, february 2002

After the Bonn Accord:

Is federalism relevant toAfghanistan’s future?

On December 22, 2001, in conformitywith the Bonn Accord (the UnitedNations-sponsored blueprint fordemocracy, peace and stability inAfghanistan) Hamid Karzai, a Pashtun,took over the job of chairman of theexecutive council of the interimadministration of Afghanistan for a termof six months.

The framers of the Accord had made aconscious attempt to balance the newinterim administration along ethnic andpolitical lines. In addition to includingtwo women in a 30-member executivecouncil, ethnic balance was achieved byincluding eleven Pashtuns, eight Tajiks,five Hazaras, three Uzbeks and threemembers from smaller minorities.

The Bonn Accord provides for anincremental process by which temporaryand provisional structures of governanceare to be replaced by a democraticconstitution for Afghanistan andpermanent structures of popularly electedrepresentative government. Six monthsafter taking over office, the present Karzaiadministration is to be replaced by abroad-based Transitional Authority,agreed upon by an Emergency LoyaJirgha (traditional grand council).

That transitional government must, inturn, be replaced by a popularly electedrepresentative government, no later thantwo years from the date of the conveningof the Emergency Loya Jhirga. Withineighteen months of the establishment ofthe Transitional Authority, a ConstitutionalLoya Jhirga is to be convened. The latterwill establish a ConstitutionalCommission to prepare a newconstitution for Afghanistan.

Karzai’s government has inherited acountry that has been ravaged by war forthe past 22 years. The result is ahumanitarian situation that is disastrousby virtually any measure:

• extreme poverty, • a population highly vulnerable to

communicable diseases, • deplorable sanitation systems, • a 25 percent child mortality rate,• one physician for every 50,000

people, • 17 maternal deaths per 1,000

women (the second highest in theworld),

• life expectancy for both men andwomen under 46 years,

• a literacy rate of 15 per cent forwomen and 31 per cent for men,

• and a massive emigration of asignificant part of the populationinto the neighboring territories ofPakistan and Iran.

In addition, the past three years ofdrought cruelly worsened Afghanistan’salready poor economy, dependent as it isupon farming and livestock raising.Moreover, a whole generation has grownup amidst this great poverty, with apervasive gun culture and under thereligious oppression of the Taliban.

It is estimated that in the upcomingTokyo reconstruction for Afghanistanconference, international donors willpledge US$15 billion for the economicrehabilitation and development of thecountry.

A constitutional framework

For a country with ethnic and linguisticdiversity, as well as strong tribal and localtraditions, what kind of constitutionalframework would be appropriate tosimultaneously promote the principles ofthe Bonn Accord, democracy, pluralism,social justice and Islam?

Afghanistan is highly diverse in terms ofethnicity, language and religion. Itspopulation is composed of: Pashtuns38%, Tajiks 25%, Hazara 19%, minor

ethnic groups (Aimaks, Turkmen, Baloch)12% and Uzbeks 6%. In addition tothree major languages, Pashtu, Dari(Afghan Persian), and Turkic, about 30minor languages are spoken inAfghanistan. While a large majority of thepopulation is Sunni Muslims, 15% of thepopulation are Shi’a Muslims. The Hazaragroup is predominately Shi’a.

There are also small numbers of IsmailiShi’as living in the central and northernparts of Afghanistan. The Ismailisconsiders the Agha Khan their spiritualleader. And even within the Sunnimajority, there are those who follow theDeoband school of India, implementingorthodox and pure Islamic practices (theTaliban were the followers of this group)and those who follow a mystical versionof Islam known as Sufism, emphasizingtolerance and peaceful co-existence withother religious traditions.

The Bonn Accord stipulates that theAfghanistan constitution of 1964 is toserve as the legal framework for theorganization of the interim governmentof Karzai. While the 1964 constitutionenshrines equal political rights andfreedoms for its citizens, it also providesAfghanistan with an administrationbased upon the principal ofcentralization.

For such a pluralistic and so deeplydivided society along ethnic, linguisticand tribal lines, a centralized form ofgovernment would seem to be a sure-fire recipe for discontent and forincreased demands for autonomy. Itwould promote the unity of the countryat the expense of the rich diversity of itscitizens’ cultural inheritance. And thismeans that the ConstitutionalCommission, which is to be formed bythe constitutional Loya Jhirga within twoyears, will have to pay serious attentionto the need to create both a single,

F e d e r a t i o n s volume 2, number 2, february 2002

indivisible nation as well as a set ofconstituent unit governments whose rolewould be to maintain Afghan diversityand the plural cultural identities of itspopulation.

Federalism is the only option whereby astrong central government can becombined with strong regional units.

Moreover, federalism provides anopportunity to the framers of theconstitution to mould the structure of thegovernments, both national andconstituent, to adjust to the specificpluralistic realities of the country.Multicultural societies such asAfghanistan require that federalismaddress both the territorial dimensionand the question of cultural diversity, thelatter directed to the issues of culturalrepresentation and identity within theconcept of a multicultural society.

One of the tasks of a multiculturalfederalism is to provide culturalrecognition. It should ensure that thedeviations of minority groups from thedominant regional norms do not result intheir being consigned to powerlessnessand to a marginalizing of their identities.Such a federal project is indeed difficultand will require an enlightenedleadership and an enlightened citizenry,for there is a constant struggle betweenthe need to recognize the claim of equalcitizenship for all individuals and theexigencies of collective identities andinterests.

National standards, social justiceand equal citizenship

The government of Afghanistan faces athree-fold challenge: nation-building,economic development and stateformation. It will not succeed unless itcan provide both a strong centralleadership and meaningful regional andlocal initiative.

A strong central government will be ableto set the national standards foreducation, public health and regionaldevelopment. During the past twodecades, the nation’s education systemhas been used by each successive set ofrulers to socialize the population towardsthe regime’s ideology. Since 1996, theTaliban eliminated most of theopportunities for girls’ education. Anational policy on education will ensure

proper facilities, equal access ofeducation to both boys and girls and astandard curriculum. Education ensures abetter-informed citizenry andconsequently a stiffer requirement ofaccountability for elected representatives.

A policy for balanced regionaldevelopment is not only desirable as amatter of principle, but it is necessarybecause of potentially explosive regionaleconomic disparities. The majorityPashtuns live in the agricultural drought-devastated south, while the minority Tajikand Uzbek areas in the north holdsignificant gas and oil resources. Whilethe major economic activity of theAfghans is agriculture, only 12 percent ofthe land is arable. It will fall to thenational government to create a strategyof economic development (using ananticipated massive inflow of foreign aidfor both short-term reconstruction andfuture development). Not surprisingly, thePlanning Minister of the interimadministration, Haji MohammadMohaqiq, has asked for a staggeringUS$45 billion in aid.

Strong regional governments andlocal participation

The 1964 constitution of Afghanistandivides the country into provinces andmunicipalities, but endows them withlimited autonomy and insufficientcapacity for initiating policy in theeconomic sphere. In a federal system,decentralization of powers to the regionaland local governments would ensure notonly the protection of the cultural andcollective identities of its population, butalso facilitate effective governance andequitable political participation.

Strategies of poverty alleviation in anagrarian society with strong patriarchaland feudal institutions can best achieveresults if the otherwise marginalizedpopulation is involved in a partnershipwith policy makers relating to issues oflocal significance. It is also at the locallevel that women are more likely to havea voice. Both India and Pakistan haveprovided for compulsory participation ofwomen in their local governments. Toensure that the targets of economicwelfare reach the poorest of the poor, themarginalized population must beempowered.

By increasing the representation ofwomen in local political institutions, Indiaand Pakistan have gone a certaindistance toward empowering womenand equipping them for their new role inthe exercise of effective leadership. It is amodel that Afghanistan may well wish toadopt.

Prerequisites for federalism

Does Afghanistan have the prerequisitesfor creating a workable federation?

In the past two decades, the breakdownof Afghan society was more a product offoreign intervention than the result of afailure of its domestic social and politicalculture. While in 1919, King AmanullahKhan laid the foundations of a modernstate, and in 1963 King Zahir Shahintroduced a democratic constitution, ithas been the turmoil of the past twenty-two years that led to the disintegration ofthe Afghanistan state.

But the legacy of democratic institution-building, essential for establishing afederal system of government, hassurvived the state. The proof of that is theBonn Accord, which, in creating anethnically balanced interimadministration, has been an excellentexercise in observing the federal principleof equitably representing distinctness.

And there is an older tradition that willalso work in favour of developing Afghanfederalism, namely the tribal society’sreliance on a traditional democraticculture of consensus in the working ofboth local Jhirgas and national Jhirgas. Asuccessful federal bargain depends upona solid institutional framework as well asthe capacity to generate consensus fromoften difficult and contradictory interestsand demands.

At the present time Afghanistan has aunique opportunity to create permanentconstitutional structures that incorporateelements of federal models, suitable forits pluralistic society. What is needed is astrong domestic political will and theconcurrence of international interests tosupport such a project.

If that opportunity is not seized,Afghanistan could face the grimprospects of continuing turmoil andchaos for the foreseeable future.

F e d e r a t i o n s volume 2, number 2, february 2002

Nicolas Lagasse of Belgium:

The role of the regions in Belgium’s foreign relationsA constitutional lawyer, NicolasLagasse works with the Belgian Ministryof Foreign Affairs and the FrancophoneMinistry of Institutional Reform. He wasinvolved in the negotiations andimplementation of the last majorinstitutional reform in Belgium, whichincluded granting increased autonomy toits regions and communities. In thiscomment he discusses the implications,especially for Belgium’s foreign relations,of the recent devolution of responsibilityfor agriculture to the regions.

On January 1, 2002 the Belgiangovernment transferred the jurisdiction ofagricultural policies to the regions. Thisnew transfer of power entails thedisappearance of the federal Ministry ofAgriculture. From now on the regions willbe responsible for representing Belgiuminternationally for all agricultural matters,including the negotiation and signing oftreaties, and representing Belgium insupranational and internationalorganizations. This situation is notunusual given the Belgian federalframework where for over ten yearsconstituent units have had power on theinternational scene.

But agriculture in Europe is a field thatinvolves a great deal of co-ordinationinternationally, which means theautonomy accorded to the regions inagricultural policy runs the risk of beingcomplex and the source of manyorganizational difficulties.

The distribution of power inforeign affairs

Belgian federalism is federalism bydisaggregation or disassociation. Theformerly unitary state disaggregated itselfinto constitutionally sovereign units. In

the field of federalism Belgium is aleading model of delegating responsibilityto constituent units, especially on theinternational scene. This creates an“institutional maze” virtually withoutequal.

As for foreign affairs, the constituentunits’ autonomy fits into the principle of“parallel responsibilities”, allowing for theauthority of the regions and thecommunities to be applied on theinternational scene. These constituentunits have the same powerinternationally as they do within thecountry. The federal authority does notoverride the constituent units when itcomes to negotiating a treaty or taking aposition within an internationalorganization.

Consistency within bilateral andmultilateral agreements

As clear as the principle appears,delegation based on parallelresponsibilities raises certain questions asto consistency. The number of possibledelegates on the international scene isparticularly high since the country, thethree regions and three communities allhave authority in international relations.That being the case, it was important toensure a certain consistency in thepractice of foreign affairs as much intreaty-making as within internationalorganizations. This consistency is based essentially oncollaboration and on the Conférenceinterministérielle de la politiqueétrangère (Inter-ministerial Committeeon Foreign Policy), a forum of ministersresponsible for foreign affairs at thefederal, regional, and community levels.This committee decides on Belgium’s

representation and the members conferand consult each other on theconsistency of the country’s foreignpolicy. It is only when an agreementcannot be reached or under othersimilarly exceptional circumstances thatthe federal authority, solely invested withjudicial power in international law, willeither take over or restrict the constituentunits’ authority to conclude treaties.

Only the Belgian federalgovernment has legal status ininternational law. The Constitution’sarticle 167 gives the constituentregions the right to exercise theirauthority in international affairs andclearly establishes that, “eachregional and communitygovernment may conclude treatieswhich concern them and which fallunder the authority of their council.These treaties become effective aftertheir councils’ assent”. This is afundamental measure because itsupports the constituent units’authority in exercising authorityexternally. Indeed, the question hasarisen as to whether the constituentunits could delegate authority inthese matters to other organs otherthan the central government. Wenow have the answer: internal lawtakes precedence over internationallaw. The Constitution’s article 167clearly allows for the delegation ofauthority when it comes to treatymaking and representation ininternational or supranationalorganizations.

representing Belgium abstains fromvoting if negotiations between the partiesconcerned in the preparatory sessions fail.

The same type of work method andsystem of delegation applies to Europeanbodies. The regions and communitiesdefine Belgium’s position in these bodies,including the European Union’s Council ofMinisters. They send their delegates there.During the Belgian presidencies of theEuropean Union, such as the one fromJuly to December 2001, the ministers ofconstituent units headed several Councilsof Ministers.

A common viewpoint is reached underthe stewardship of the centralgovernment’s Minister of Foreign Affairs.Likewise, when no consensus is reachedbetween the concerned parties in theEuropean Union Council’s preparatorysessions, the minister representing theBelgian central government must abstainfrom voting.

The latest devolution: agriculture

The recent regionalization within Belgiumof agricultural policy could be difficult inpractice. Its integration at the Europeanlevel makes it difficult to assignresponsibilities. It will not be possible tosystematically gather the variousrepresentatives concerned to negotiate acommon position because of the numberand frequency of meetings in Europeanorganizations.

The regional agricultural law calls for amember of the central government torepresent the regions in order to have aBelgian voice in agriculture and to avoidnot reaching a consensus due to a lack oftime. This twist in parallel responsibilitiesat the federal and constituent levelsshould lead to the creation at the federalgovernment level of a coordinatingcommittee responsible for unifying andharmonizing the regions’ opinions inorder to present a common position. Thisfuture coordinating committee will beviewed as success if it can meet thechallenge of European representationwithout infringing on the substantialresponsibilities of the regions. If not, itmay disappear in future institutionalreforms.

Translated from the original French byBetter Reicher

other in regional and communityagencies when either of them defaults ontheir international obligations.

If negotiations fail, the federal authoritycan, as a last resort, act in lieu of adefaulting constituent unit by using someof the money it has received from theunits.

Representation in internationaland supranational organizations

In this system of parallel foreign andnational responsibilities, representativesof constituent units attend multilateralsessions of organizations such as Benelux,the European Council, UNESCO, theOECD and the UN when theirresponsibilities are concerned.Nonetheless, the Belgian centralgovernment exercises only one voice ininternational proceedings, not thenumber of voices it has nationally that isequal to the number of levels of power.One person is mandated to representBelgium. It remains to be seen which ofthe regional, community or federalministers will really occupy the positionreserved for the country.

The solution is consistent with thegeneral principle of parallelresponsibilities. When a subject fallsunder the domain of the regions orcommunities, the federal systemconcedes Belgium’s seat to a regional orcommunity representative.

The issue of representation requires somediscussion. It is within the Inter-MinisterialCommittee on Foreign Policy that thedifferent levels of power come to aconsensus and decide who will speak forand vote on Belgium’s behalf. Acooperation agreement lays out theprocedures to be followed, sets up asystem to exchange information, andestablishes a method of ongoingcollaboration and rules as to thecomposition of the delegations.

The Ministry of Foreign Affairs isresponsible for ongoing collaboration andconsultation and for the positions that theBelgian central government will take. Thiscollaboration is significant because theregional or community minister who iscalled to a session will only represent theBelgian central government’s position.The agreement is that the minister

The law allows the federal authority tooppose a treaty project only in thesehypothetical situations: when Belgiumdoesn’t recognize one of the contractingparties or does not have diplomaticrelations with it, when diplomaticrelations have been broken, suspendedor seriously compromised, or when thepotential treaty conflicts with Belgium’sinternational and supranationalobligations.

At the concluding of “mixed level”treaties, such as the founding treaties ofthe European Union that involve several,if not all levels of authority, negotiationstake place to determine the levels ofpower affected by the text. Each level ofpower is called upon to take part in thenegotiations, to sign and vote its approvalof the text. It is therefore necessary todecide which authorities are to beresponsible before implementingcooperative mechanisms.

The conditions that apply to theconcluding of or adherence to theseinstruments of the law are regulated byan agreement to cooperate — a “how to”on concluding treaties in Belgiumbetween the central government and itsconstituent units. This cooperativeagreement specifies the differentprocedural phases: shared information,the signature of each level of authority,and the assignment of a key role to theInter-ministerial Committee on ForeignPolicy.

The federal authority’sresponsibility in international lawwhen one of the constituent unitsdoes not meet its obligations

In international law, only federalgovernments have judicial power. Theresponsibility to fulfill their obligationsfalls on them when one of theirconstituent units fails to do so. Forexample, the European Community’sCourt of Justice sentences the federalgovernment when a constituent unit doesnot follow a directive. In a federal system,the autonomy that comes withdecentralization goes hand in hand withthe constituent units being responsiblefor the financial consequences of failingto meet their obligations. TheConstitution offers the federal legislativearm and the federal government thepossibility of temporarily replacing each

F e d e r a t i o n s volume 2, number 2, february 2002