It has been argued that we live in an era of ‘glocalization’, in which the knowledge-based economy found in cities is of increasing importance to the vitality of national economies.  Despite their increasing economic importance, cities remain creations of the provinces with no constitutional independence and limited powers.  To quote Courchene “The dilemma for Canadian Federalism is obvious.  In spite of their enhanced importance, cities are “constitutionless”: They are creatures of their respective provinces.  Yet as their role increases, one would expect them, among other things, to dispatch “ambassadors” to their sister international cities in other nations and to engage in a range of activities that used to be the preserve of nation states.”[i] Indeed, a debate has occurred in recent years in which arguments in favour of providing municipalities with more powers has been put forward, with the hopes that these new municipal powers would bolster the knowledge-based economy’s competitiveness in Canada.[ii] To quote a former Mayor of Toronto, John Sewell “There was a shared sense that the restructuring of the municipal governance regime in Toronto, be it through a charter or otherwise, is a necessary reaction to the pressures brought on by globalisation in general and Toronto’s position in the global competition among cities in particular.”[iii] In fact, some proposals have even suggested creating a Province of Toronto or making municipalities another constitutionally based order of government.[iv]

This essay will argue that constitutional reform to provide municipalities with more power and autonomy is unnecessary and would in fact destabilize the federation, hurting global competitiveness.  In addition, through comparative analysis, this essay will show that the degree of autonomy that municipalities have does not appear to be a major factor affecting the knowledge based economy or a nation’s economic growth.

More effective and realistic non-constitutional recommendations to maintain the development of the knowledge-based economy will be proposed as a viable alternative to major constitutional reforms.  These will include maintaining the federal and provincial roles in funding research and educational centres without a major municipal role, as well as maintaining effective regional governance.  Furthermore, it will be suggested that the municipalities must article their demands in a more sophisticated manner in order to gain funding from higher orders of government if they wish to develop the knowledge-based economy.

Addressing Constitutional Reform

If past experience has taught us anything it is that constitutional reform can be divisive and unworkable.  The Meech Lake Accord and the Charlottetown Accord represent the most recent attempts to reform the constitution.

The Meech Lake Accord was an attempt to gain support for the constitution in Quebec by creating a number of amendments to appease the province after it failed to sign on to the 1982 constitution.[v] Unfortunately the demands of western Canada, eastern Canada, and natives, among other interest groups, were ignored.[vi] The Accord met resistance from many of the interest groups that were not included, which helped ensure its defeat in 1990.[vii] In response to this rejection of the Meech Lake Accord separatism in Quebec grew tremendously, destabilizing the country.[viii]

In the early 1990s the Mulroney government created the Charlottetown Accord in a second attempt to deal with the constitutional demands of Quebec.[ix] This time, however, a larger array of interests were represented in the Accord.  These interests included the provinces, natives, territorial leaders, women, and cultural minorities.[x] Ultimately a public referendum that was held in 1992 defeated the Charlottetown Accord.[xi] Many believed that the Charlottetown Accord had gone too far in appeasing the demands of various interest groups, while a majority of Quebecois, natives, and Western Canadians felt that the Accord had not gone far enough to meet their demands.[xii] As with the defeat of the Meech Lake Accord, the defeat of the Charlottetown Accord fostered separatism in Quebec and destabilized the country.[xiii]

Subsequent to these political disasters the federal government dealt with many of the demands emanating from interested parties using non-constitutional methods instead.  The list of achievements using such methods includes the Calgary Declaration,[xiv] a new amending formula,[xv] and the Social Union Framework Agreement.[xvi] This strategy was far more successful at meeting demands and saw a decline of separatism in Quebec,[xvii] followed by more stability in the country.

The problem with even attempting to meet the demands of interested parties via constitutional reform is that it entrenches winners and losers constitutionally.  Thus the demand for public input and the inclusion of various interests is high because the stakes are high.  In fact, the stakes can become so high that interests are less willing to compromise and more likely to feel that their demands have not been adequately met, or that the demands of others have been acceded to too much.  Non-constitutional methods of reform do not have this problem and thus face less opposition, making them far more likely to succeed.

Constitutional reforms are also highly multilateral by their very nature.  They must suit a multitude of parties and affect a multitude of parties.  Non-constitutional methods of reform can be carried through in a bilateral fashion, tailoring itself to an individual actor’s needs without being watered down in more complex negotiations.  It also allows other actors to remain unaffected and uninvolved, forgoing possible opposition.

Clearly a constitutional answer to the demands of municipalities in Canada is not an appropriate one.  Municipalities would be required to compete with many other demands that may run counter to theirs.  Even if municipalities could successfully negotiate their demands into a constitutional proposal, it is extremely unlikely that any such proposal would be passed or accepted by the public, due to the amount of competing demands it would entail.  Additionally, a failure or a passage would potentially result in increased political instability in the country, which would likely hurt the economy, countering a justification for increased municipal autonomy.  Given the ‘non-constitutional’ strategy that the federal government has adopted regarding demands for constitutional reform, it is also highly unlikely that any new constitutional proposals will be created in the foreseeable future.

Non-constitutional methods of reform may be bilateral and more flexible to meet the unique needs of individual municipalities without compromising said needs with the needs of other interested groups.  Non-constitutional reforms can also be highly institutionalized and secure, as evidenced by the early provincial Equalization program’s functionality and durability prior to its inclusion in the constitution,[xviii] as well as by the disuse of the federal powers of disallowance and reservation without constitutional reform.[xix] Indeed the currentt independence of municipalities also attests to the durability of non-constitutional reforms.  Although they owe their existence to the province, the democratic elections of local politicians and our history of local government have conferred a legitimacy and authority to municipal government that has mitigated provincial control to a degree, despite their technically-unlimited constitutional authority over them.[xx]

Thus efforts to meet the demands of municipalities must utilize non-constitutional methods of reform, in part due to the pitfalls of constitutional reform and in part due to the advantages of non-constitutional reform.

Addressing Decentralization and Economic Growth

Some have suggested that cities require more autonomy and power as they become increasingly vital to the national economy.[xxi] However, a comparative analysis of municipal centralization in the United Kingdom and municipal de-centralization in France will show that this is not a major factor affecting national economies or the knowledge based sector.

Up until the1980s the United Kingdom had strong municipal governance.[xxii] Indeed, the government of London was actively intervening in its economy to support business during the early 1980s.[xxiii] This interventionist policy went against the ideology of the national government, which perceived it as supporting doomed businesses.[xxiv] In response the national government hoped to increase economic productivity by centralizing municipal power in the hands of the central government.[xxv] Beginning in 1986, a series of reforms were enacted that saw municipal independence quashed.[xxvi] Municipal policy was subsequently guided primarily by the national government,[xxvii] as the following quote illustrates, “…the capacity of local authorities to steer was reduced through national government guidance, and they were compelled to enter in to new institutional interactions, most notably partnerships.”[xxviii] In 2000 the Local Government Act restored some of the autonomy that was lost.[xxix] However, the national government has retained a high degree of control over municipal policy[xxx] and municipal independence remains relatively limited.[xxxi]

France, on the other hand, pursued large scale decentralization beginning with the 1982 Decentralization Acts.[xxxii] These reforms gave the French municipalities more independence and economic power,[xxxiii] including the ability to give loans and tax concessions to businesses.[xxxiv] Indeed, municipalities in France gained a high degree of financial power as illustrated in the following quote, “the financial autonomy of French local authorities seems to be extensive, effective, strongly supported by the decentralization, and guaranteed by the political influence that local politicians have within national elected representative bodies”.[xxxv] Municipalities were also granted increased control over early education, local development planning, cultural policy, social services, and environmental policy.[xxxvi]

One would have expected the French economy to perform significantly better than the economies of Canada and the United Kingdom if the decentralization of authority to cities fostered growth in  knowledge based economies, and if cities in actuality drive the national economy.  However, this has not been the case.

Table 1. Comparative GDP Growth of France, Canada, and the UK[xxxvii]

Improving and Maintaining the Condition of the Knowledge Based Economy

As has been illustrated, constitutional reform is not an appropriate method to use to address the condition of our knowledge-based economy.  Nor is large-scale carte blanche decentralization of power to municipalities, be it financial or otherwise.  There are, however, some key steps that can be taken in Canada to enhance the development of our knowledge-based economy.

First, the municipalities must articulate their proposals for enhancing the knowledge-based economy and go beyond simply requesting more autonomy and resources.  The City of Toronto’s One Cent Now campaign is one example that demonstrates how the city struggles to articulate its demands clearly..  The campaign is seeking 1 cent of the federal GST tax to pay for general municipal services and infrastructure.[xxxviii] To quote Mayor Miller, “One cent of the GST will mean approximately $410 million for Toronto infrastructure, roads, bridges, expressways and the other structural and program supports required to maintain Canada’s largest city.”[xxxix] The justification for this request is that assuming cities drive the national economy, when cities lose, the nation loses as well.[xl]

The Federation of Canadian Municipalities is also requesting additional financial resources from higher levels of government to fund infrastructure that it deems vital to the national economy.[xli] The FCM lists as top priorities an Active Cities and Communities Fund for ‘sports’ infrastructure, and a Climate Change Adaptation Fund to study climate change’s impact on infrastructure.[xlii]

The problem with these requests is that they lack explicit mention of the knowledge-based economy along with very specific proposals about how to enhance it.  There is no doubt that the One Cent Now campaign would use the additional funds for general spending.  Yet general infrastructure spending alone is not adequate to develop the knowledge-based economy.[xliii] In fact, localities such as Cambridge,[xliv] Hyderabad,[xlv] and Silicon Valley[xlvi] all have significant infrastructure issues and yet excel in the knowledge-based economy.  In addition, Canadian cities are currently in relatively good condition to compete in the knowledge-based economy due to the quality of their infrastructure and social environments.[xlvii]

Municipalities must articulate specific proposals for building the advanced education, cultural and research centres that facilitate the creation and development of knowledge-based clusters.[xlviii] For instance, advanced educational centres create the local labour force and networks that these clusters require.[xlix] Government-funded research and cultural centres also build networks and create jobs in these clusters.  Educational, cultural and research centres incubate entrepreneurs who create their own businesses in the locality.[l] Government facilities, too, provide an important function by employing the knowledge-based sector in the locality when business cannot during economic downturns.[li] As these knowledge-based clusters grow, they can sustain and reinforce themselves, while still benefiting from government funded facilities.[lii] Unfortunately municipal proposals appear to lack such examples of the well-articulated demands that may actually benefit the knowledge-based economy and secure funding from higher levels of government.

Another major problem with the city-centric view is that it ignores the importance of the resource-based rural economies, as well as their infrastructure problems.[liii] This sector is an essential component to the success of the knowledge-based economy for several reasons. First, the resource sector requires engineers, environmental scientists, geographers, and geologists, among many other knowledge-based professions. Thus, this creates demand for more skilled workers and jobs. Second, many of the technologies and tools used in resource extraction must be invented in the knowledge-based sector. Major projects such as carbon sequestration must necessarily involve knowledge-based expertise.      The. Indeed, resource extraction is becoming increasingly high-tech, which bodes well for the knowledge-based economy. If our cities were assisted at the expense of rural and resource-based sectors, there is no doubt that the knowledge-based economy would be negatively impacted in the process because they are so integrally linked to one another.

Thus regional governance is vital to building the knowledge-based economy, as opposed to increasing the autonomy of municipalities alone.  Only a regional government has the perspective necessary to develop the broad and diverse base of the knowledge-based economy.[liv] Furthermore,  only a regional government has the means and perspective needed to develop the regional infrastructure that connects clusters to markets and each other.[lv]

Both the federal and provincial governments are involved in research and development policy, although the federal government reigns supreme in terms of total dollars spent.[lvi] The federal government has also involved itself in the funding of advanced education to foster the knowledge-based economy,[lvii] along with the provinces.[lviii] Fortunately this has not led to significant conflict between the orders of government in recent times[lix] given that federal and provincial policies on the knowledge-based economy are generally congruent.[lx]

One of the conclusions that can be made is thus the federal and provincial governments should retain their preeminent roles in the development of the knowledge-based economy. The lack of conflict between their respective roles, as well as the experience each order of government has in funding and developing the knowledge-based economy justifies the continuation of their current roles.  This justification becomes even more evident when contrasted with poorly articulated municipal demands, municipal parochialism, and a lack of experience in developing and funding the knowledge-based economy.

Conclusion

In conclusion, multilateral constitutional methods of dealing with urban demands are not practical and would only serve to destabilize the country, hurting global competitiveness.  Non-constitutional and bilateral methods of dealing with urban demands are more practical, and may be effective and durable.

Although cities are important to national economies, there is no clear correlation between the level of urban autonomy, or lack thereof, and national economic prosperity.  However, government support for advanced educational, cultural, and research centres has been shown to foster the development of knowledge-based economic clusters and should thus be encouraged. Since these clusters require regional level planning, increased municipal roles may in fact hamper their development.  Indeed, poorly articulated municipal demands, a lack of expertise in developing the sector, and parochialism in relation to the rural resource based economy do not inspire confidence for the expansion of municipal roles in developing the knowledge-based sector.  If municipalities wish to gain a greater role in developing this sector they must first articulate their demands in a more sophisticated manner, create more sophisticated plans, and gain valuable experience.  Lacking this, higher orders of government have no reason to entrust municipalities with additional financial or political powers to develop the knowledge-based sector. At the end of the day, the result is that municipalities appear to be exploiting an economic argument to gain funding and power for generalized purposes as opposed to clear economic purposes.

[lx] Herman Bakvis, “The Knowledge Economy and Post-Secondary Education: Federalism in Search of a Metaphor”, in Herman Bakvis and Grace Skogstad ed. Canadian Federalism 2^nd ed. (Don Mills: Oxford University Press, 2008)

The present system in place to protect low-income families from the negative effects of poverty is multi-faceted. Included in this system are Ontario Works, the provincial welfare agency, and the Ontario Food Banks. The first two of the three programs are intended to protect vulnerable and marginalized citizens from the effects of an unequal distribution of wealth. They form the basis of the Canadian social safety net, and the image of Ontario as a “welfare state” as created in the 1960s.

Conversely, the Ontario Food Banks were introduced in the 1980s by private citizens’ initiatives and religious organizations to deal with the particularly devastating recession during that age. Food banks were intended as a stopgap measure at the time, but they have evolved over time to become generally accepted as part of the social safety net. I challenge the necessity of continuing to deny low-income citizens of healthy food and of continuing the psychological trauma that food banks naturally engender.

“The Stop” is a food bank and kitchen in Toronto that works to deliver a better standard of living to those who cannot afford healthy food. In its largely-volunteer-run kitchen, The Stop teaches cooking and nutrition to children and adults, and provides healthy meals to locals. The fact is that Ontario Works does not provide enough support to individuals to properly meet their nutritional needs. Part of this is due to low levels of Ontario Works disbursements (approx. $570/month) and part of this is due to the difficulty of receiving Special Diet allowances with Ontario Works. However, it should be noted that The Ontario Coalition Against Poverty has worked diligently in their effort to improve accessibility to Special Diet allowances and for this, deserve respect for their efforts.

The truth is that the current system in place is failing to ensure all citizens can access healthy food. With the meager monthly disbursements from Ontario Works barely covering housing costs, many must resort to finding food at their local food banks. The psychological burden of continued dependence on food banks is felt most by low-income and single-parent families. Without the resources to emerge from the poverty trap, these citizens are denigrated into second-class status.

“The Stop”’s Green Barn Project is at the forefront of raising awareness for food security issues and reversing the trend of increasing dependence on food banks. The Green Barn is in a converted industrial building in Toronto and offers many services to the community. As well as providing fresh and organic produce to The Stop food bank and kitchen, the Green Barn serves as a space for an after-school program for youth in the community. In the Green Barn, children and youth learn about food security from the ground up. They help plant seeds, promote plant growth and learn valuable lessons about our eco-system and the food supply. They are also taught basic cooking skills and nutrition. However, the Green Barn remains in large part supported by private donations. There is thus a clear role for the government or public sector to play. In order to more properly meet the needs of all citizens to access clean and healthy food and water, the government of Ontario should promote association-building between schools, farms and food banks along the lines of the model used at The Stop Green Barn. If we can teach the next generation of the importance of food security, in the long-term we will strengthen the social-safety net to the benefit of all Ontario citizens.

(For more information on this issue please visit dothemath.org)

Research Analyst, The Public Policy Research Initiative

Freeing up trade by lowering or removing barriers such as tariffs and quantitative restrictions usually gets support from economists and observers of international relations who see economic cooperation as conducive to broader harmony among countries. Aside from countering the political appeal of protectionism, advocates for free trade face a choice that has become especially acute in recent years: whether multilateral or bilateral arrangements are the best approach. Since the 1980s, Canada has made bilateral and regional arrangements its principal focus. Despite the practical appeal of this approach, however, evidence that bilateral arrangements can undermine multilateralism suggests that Canada should switch its focus, making completion and development of the World Trade Organization’s Doha Round its first priority.

Good trade policy is crucial for any country, due to its potential to boost the country’s economic and social development. The protectionist approach of mercantilism, founded on the premise that a country must run a trade surplus, with burgeoning exports but restricted imports, has historically held little appeal for consumers. As cross-border flows of intermediate goods and services have grown, however, its drawbacks are becoming more obvious to producers as well. The best method of boosting a country’s economy through trade is to facilitate the free flow of goods and services to the greatest possible extent, recognizing that cross-border trade today involves vast quantities of intermediate goods (Dymond & Hart, 2008). Reducing restrictions is preferable to adding concessions, and the most effective way to hasten the flow of intermediate goods is to abolish cross-border tariffs.

Since World War Two, Canada, the United States, and many other countries have actively embraced the concept of freer international trade. Their principal focus, however, has shifted over time. In the early post-war years, the multilateral negotiations under the General Agreement on Tariffs and Trade were the main event. More recently, bilateral and regional arrangements have dominated. The World Trade Organization estimates that nearly 400 regional trade agreements will be active in 2010, the vast majority of which are Free Trade Agreements (FTA) (World Trade Organisation, 2009). The question that arises is which method of free trade states should pursue. The argument for bilateral trade agreements is one of practicality. Multilateral trade is an appealing ideal, but nearly 200 countries will never be able to successfully negotiate a deal that will please everyone; the situation has parallels with the December 2009 Copenhagen conference on climate change. The Doha Round has therefore entered a state of paralysis, with participants unable to successfully work around special interests, while bilateral trade treaties continue to be negotiated across the globe.

With the Doha Round stymied, and potentially doomed to fail, Canada has rushed to establish FTAs on a smaller scale. Canada’s FTA with the European Free Trade Association came into force in July 2009 and was followed a month later by an FTA with Peru. The impetus for this can be clearly seen in the number of FTAs the United States has signed in recent years, which pose a potential threat to Canada’s importance as a trading partner. Canada has historically feared a hub-and-spoke system of bilateral agreements with the United States at the centre and Canada as one of many spokes; this was a driving factor in the Canadian push for a trilateral free trade agreement with Mexico after the U.S. and Canada had already ratified a bilateral deal, instead of the bilateral negotiations underway between Canada’s continental neighbours. Canada’s trading position is not diverse and strong enough to avoid some degree of isolation if the U.S. establishes many bilateral arrangements with other countries (Robson, 2007).

In the past two decades Canada and the U.S. have each pursued numerous bilateral deals. Some of the American ones have jeopardized Canada’s importance to the U.S. economy – such as the 2004 FTA with Australia. Thus, it is important for Canada to encourage multilateral negotiations, particularly including the United States, rather than standing by while its most important trading partner negotiates bilateral agreements with other countries.

In addition to the potentially isolating effects of bilateral agreements for any country that is not privy to them, such agreements can impede broader, multilateral negotiations. In his 2006 study for the American Economic Review, Nuno Limão found American preferential trade agreements in the 1980s and 1990s to have been detrimental to the United States’ efforts at multilateral trade. The study provides empirical evidence that the United States, when reducing tariffs in accordance with multilateral agreements, tends to make smaller reductions for goods that are already included in its bilateral preferential agreements (Limão, 2006).Thus, some countries are already paying lower tariffs for these goods when they export them to the U.S., but the other countries involved in the multilateral negotiations will not receive the same level of reduction. This finding also holds true for Canada. In a 2007 study, Matthew Adler found similar results for Canadian tariff reductions, concluding Canada’s reductions in the Uruguay Round on goods encompassed by NAFTA would have been greater without the trilateral arrangement (Adler, 2008).

Advocates of freer trade would justifiably argue that Canada is better off engaging in bilateral negotiations than no negotiations at all. As long as there is potential for substantial multilateral negotiations, bilateral and regional talks pose important risks. Canada has only so many trade negotiators and only so much attention its leaders can give trade negotiations, so focusing on bilateral and regional arrangements inevitably means neglecting the multilateral alternative. As emphasized by Adler, moreover, for Canada as for the United States, FTAs may impede the viability of prospective future multilateral agreements (2008).The practicality argument is compelling; with globalization and increasingly integrated cross-border production, facilitating trade, even on a bilateral basis, has clear economic benefits. However, successful multilateral trade deals are the best means of ensuring substantial trading benefits for all countries involved.

References

1. Dymond, Bill and Michael Hart. (2008, March). Navigating New Trade Routes: The Rise of Value Chains, and the Challenges for Canadian Trade Policy. C.D. Howe Institute Border Papers Series, No. 259. Retrieved December 15, 2009 from http://www.cdhowe.org/pdf/commentary_259.pdf.

2. World Trade Organization. (2009). Regional Trade Agreements. Retrieved December 20, 2009 from http://www.wto.org/english/tratop_e/region_e/region_e.htm.

3. Robson, William. (2007, August 16). Stuck on a Spoke: Proliferating Bilateral Trade Deals are a Dangerous Game for Canada. C.D. Howe Institute e-brief. Retrieved December 15, 2009 from http://www.cdhowe.org/pdf/ebrief_47.pdf.

4. Limão, Nuno. (2006, June). Preferential Trade Agreements as Stumbling Blocks for Multilateral Trade Liberalization: Evidence for the United States. The American Economic Review, 96 (3). 897.

5. Adler, Matthew. (2008, October 15). Stumbling Forward on Trade: The Doha Round, Free Trade Agreements, and Canada. C.D. Howe Institute e-brief. Retrieved December 15, 2009 from http://www.cdhowe.org/pdf/ebrief_65.pdf.