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CommentInsight & Opinion

Re-emergence of the trading city network

Alan Berube says the rise of a network of thriving global cities should put policymakers on notice about their importance to commerce

PUBLISHED : Thursday, 31 January, 2013, 12:00am
UPDATED : Thursday, 31 January, 2013, 2:27am

Recently, a group of officials gathered to plot a new trade strategy. It was a typical trade-policy discussion: the participants diagnosed competitive export sectors, identified key trading partners, described how public and private investment could resolve barriers to global integration, and forged a new bilateral relationship.

But the meeting was not hosted by the World Bank or the World Trade Organisation. It was held in Portland, Oregon, where then mayor Sam Adams and Greater Portland, Inc (a public-private partnership dedicated to driving regional economic growth) have collaborated to develop a new export plan for the Portland metropolitan area.

In the age of the WTO, free-trade agreements and currency wars, why would a city have a trade strategy? The answer is simple: as Portland's initiative - one of a growing number of metropolitan-led trade efforts worldwide - recognises, cities, not countries, are the real centres of global trade.

More than 2,000 years ago, before the emergence of the nation-state, the Silk Road connected Xian , Baghdad, Istanbul, and hundreds of other cities through trade. In the Middle Ages, Zanzibar and other East African cities served as trading hubs for Asian merchants.

Cities make trade possible. But advanced economies have traditionally neglected this when designing trade policies. By contrast, China considers city-building a crucial aspect of its export policy.

Furthermore, policymakers often forget that trade increases city residents' prosperity by bringing in new wealth, in turn contributing to job creation and bolstering demand for services in the local economy.

According to a Brookings Institution report, the 300 largest cities and metropolitan economies in the world contain only 19 per cent of its population, but account for 48 per cent of global gross domestic product and 51 per cent of recent GDP growth.

The evolving idea of the "global city", coined two decades ago by the sociologist Saskia Sassen, further demonstrates the city's crucial position in global trade. Although the moniker initially referred to just three financial centres worldwide - New York, London and Tokyo - Sassen now identifies 75 cities - including newer hubs, such as Sao Paulo, Buenos Aires, Seoul and Taipei - as global cities.

But finance alone does not make a city "global". Centres of manufacturing (Detroit, Stuttgart), academia (Boston, Nanjing ), maritime activities (Antwerp, Singapore), and media (Madrid, Sydney) all participate in influential global circuits, defined by what they trade.

This does not mean that countries do not play a crucial role. Cities lack the geographic scale, political and fiscal capacity, and legal standing to influence broader policy debates. Just as trade should be at the forefront of cities' economic policies, cities should be at the forefront of national trade strategies.

Global trade is fiercely competitive. It also provides a route to long-term prosperity - one that runs squarely through cities. Two millennia after the opening of the Silk Road, a global network of trading cities is beginning to re-emerge. Local and national trade policy should aim to advance this process.

Alan Berube is a senior fellow and deputy director of the Brookings Institution's Metropolitan Policy Programme. Copyright: Project Syndicate

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