In the design and operation of states, a new age of federalism has arrived. States with long-standing federal systems are rediscovering the virtue of their federal arrangements, and new regional groups of states, such as the European Union, are also adopting principles of federalism. The reason for this renewed interest in federalism lies in the changed circumstances of governance at the end of the twentieth century – in a word, globalization. The global linking of economies, the intense interdependence of states, and the internationalization of policy are all characteristics of the era of globalization. Contemporary federalism is about managing interdependence and...

The phenomenon of globalization discussed here is primarily economic and political. There are cultural and social aspects, but my focus is on the intensifying internationalization of the economy and the political structures that attempt to regulate it. Empirically, the phenomenon can be described as the increased degree of economic activity largely, but not exclusively, of private firms and individuals across national boundaries. This activity may be further described as:

1 increasing international trade in goods and services and increasing direct foreign investment

2 globally integrated production by transnational corporations and increased international networking and strategic alliances among firms

3 an...

In all industrialized democratic countries, there is an intense debate about policies of adjustment to globalization. For most countries, the question is one of removing barriers to the competitiveness of national business, mediating the effects of market liberalization, and integrating and adjusting social policy to new circumstances. In many cases, there is also the closely related task of paring back the state in fiscal terms to balance budgets, reduce tax burdens, or both. Setting aside for the moment fiscal and social policy implications, the cluster of policy instruments and sectors involved in economic adjustment policy is nonetheless large. It involves,...

In chapter 3, I introduced the concept of a federal economic union and its characteristic institutional features. These include: a common economic space and institutions for negative and positive integration, imbedded in a federal constitution with a protected distribution of powers; central executive and legislative institutions; and fiscal relations, intergovernmental relations, and a system of courts. One cannot understand the need for and significance of reform without understanding the basic shape and evolution of the economic union regimes in Australia and Canada. In the following discussion, I provide detail for readers unfamiliar with either or both of the Canadian and...

The movement to reform the Canadian economic union took place episodically over a twenty-year period. Throughout that period, the issues and focus of the movement underwent significant changes as domestic economic union reform became caught up in broader constitutional contests and in the policy-making of international integration. The Canadian experience is more complicated and drawn-out than Australia’s. This does not mean that the results in Australia are any less impressive – on the contrary. However, the narrative and analytical line is somewhat longer for the Canadian story compared with the Australian one.

This chapter and the next are organized in the...

The negotiations for the Agreement on Internal Trade (AIT) arose from the context, discussed in chapter 5, of an external policy of new international trade agreements and from the domestic experience of failed constitutional reform. The negotiations that led to the doomed Charlottetown Accord at least helped to define the scope of the reform to be tried next – i.e., an intergovernmental agreement focusing on non-justiciable provisions. Constitutional amendment as a route for reform was blocked and discredited, but governments were still under pressure to demonstrate that the federal system was capable of renewal. Internal trade became one of the most...

Australian governments achieved a significant reform of their economic union in the 1990s. The reform encompasses many separate initiatives but with a consistent theme to broaden and deepen competition in the national economy. The agenda for change included the process of intergovernmental relations: financial relations among governments, their respective roles and responsibilities, and their ability to reach common decisions. As with chapters 5 and 6, the next two chapters present and analyse the empirical evidence as found in key documents, interviews with policy-makers and other observers, and academic and media commentary. Due to the complexity of the reforms but also...

The reform outcomes produced by intergovernmental agreement in Australia are contained in several undertakings and range over a broader set of policy areas than the single comprehensive Agreement on Internal Trade in Canada. Thus, I divide this chapter into three parts to address the following:

1 Reform of Intergovernmental Relations

2 Fiscal and Social Policy Reform

3 Microeconomic and Related Reform

I conclude with an overall assessment of the effects of the reforms on the economic union in Australia.

Part of the reform agenda has been to change the very process of intergovernmental relations. Governments came to a collective assessment...

This work began with one very large issue and three subsidiary ones. The big issue is whether federal systems at the end of the twentieth century are capable of adapting to the changes wrought by economic globalization. To deal with this question, one must examine three more. First is the nature of the challenge to federal systems from economic globalization. Throughout this book, I have focused on the process of global and regional integration impinging on the two federal systems of Australia and Canada, and of a relentless program of economic liberalization that has tended to accompany the new forms...