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Montreal's Place in the North American Economy

The position of Montreal and its regional economy in the economic space of North America, and indeed the world, has experienced considerable change during the past three decades. This is the result of, first, a series of events in the evolution of the global economy and, second, specific policy initiatives. The most recent and powerful of these has been the advent of the process of globalization--that is, of trade liberalization and changes in the technologies of production, transportation, and communication. Montreal has lost its historic position of primacy in the Canadian economy and has become a second-tier urban economy in North America. All cities have been affected by these changes and the result has been a competitive struggle as each city tries to discover a role or function for itself in the global hierarchy of cities. Since almost all cities are going through a similar process of discovering their most effective vocation in this new environment, Montreal faces considerable competition in its efforts. Because of this, the metropolitan leadership in both the public and the private sectors will have to be clear on Montreal's real advantages and handicaps, on what is realistically possible, and on what specific policy steps should be taken so as to ensure success. This paper examines Montreal's circumstances as it moves into the twenty-first century. Contemporary Contexts of Urban Economic Development. In explaining the contributory factors to the process of urban economic development, six important contextual elements must be considered. First, the liberalized international or global context in which the city must function. During the past two decades the most powerful force affecting all cities has been trade liberalization--that is, the reduction in the tariff and nontariff barriers to the international exchange of goods and services. Tariffs have been reduced to insignificance in the vast majority of Standard Industrial Classification (SIC) categories. Services and agriculture have been the two most intransigent sectors, but it is expected that the next round of the WTO talks will tackle both of these areas. Of equal importance have been the initiatives at the regional level, among the developed economies of North America (the North American Free Trade Agreement) and Western Europe (the European Union), but also in most parts of the world. The consequence of this freeing of the movements of goods and services is to dramatically increase the "potential economic space" in which an individual city is situated. Conscious implementation of trade liberalizing policies has opened all markets to new competitors located thousands of miles away. Canadian cities face competition not only from other urban economies in North America but also from scores of them in Europe, Asia, and Latin America. Concomitantly, they have new opportunities to penetrate these same distant markets. Second, changes in the technologies of production, communication, and transportation have made it possible for urban economies to realize, or to make operational, this potential economic space. Technological change in production has made it possible to lower the efficient scale of production--that production at which all significant economies of scale can be gained--so that, for example, steel can now be made in mini-mills rather than in the enormous "Fordist" production centers of Pittsburgh, Gary, and Hamilton. This has forced producers to reconsider the advantages of agglomeration, clustering, and industrial districts, as well as the relative advantages for specific production activities on the periphery as opposed to the center. It gives many cities the chance to plan their economic development with an entirely new set of possibilities before them. Developments in the technology of communication (satellite and fiber optic communication as well as the use of computers) enable the effective coordination of economic activity to be accomplished from every greater distance. …