How are you going to deal with citizenship/borders? I'm sure that plenty of the cities will take a stance against "illegal immigration". If all of the cities have different regulations for consumer goods that will make trade very problematic.
Citizenship will be done more as memberships, which can be renewed, cancelled or changed. The best thing about this is the ability to choose which 'country' to live in. Right now people are born and forced into a certain citizenship. They didn't choose this. Introducing choice in citizenship will be a great way to expand individual freedom.
Border agreements can allow areas as large as the United States or the whole of Europe to be border free. Suppose there are 2 adjacent countries. The people of both countries would like to be able to travel to the other country freely, so they allow membership cards of the other country to enter freely into their country. They could do this by entirely removing the border between them, much in the same way you can drive from France to Italy today. Yet each country remains responsible for security within its jurisdiction.
As for consumer goods, non-governmental agencies can provide testing and industry standards for products that consumers themselves won't eat unless they are 'ISO 9001', pasteurized, organic, or even non-pasteurized.