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EACC Insights: Cities as Drivers Of Prosperity: What’s Behind the Success of Urban Centers

by Scott Ferguson, Chief Executive Officer, World Trade Centers Association

It is no secret that cities are drivers of economic prosperity. As national governments and policy makers seem engaged in an ever-shifting tug-of-war, urban centers have found a way to create wealth and opportunity for their people in a way that larger governing bodies just haven’t mastered. But even among them, some cities seem to prevail where others continue to struggle.

When we partnered with FP Analytics to craft and release our first “World Trade Centers Association Trade and Investment Report,” we used locations with World Trade Centers as our data set to uncover why cities are positioned to lead. Capturing the insights from our unique global network, we looked to shed light on the innovative ways that cities are navigating the “new normal” of uncertainty in global trade and investment. Among the immense amount of data we uncovered, three prevailing variables emerged as critical.

Human Capital

Access to a skilled workforce is arguably the most essential factor in attracting FDI and strengthening local competitiveness, a sentiment consistently echoed by WTCs around the world. This applies across sectors, transcends geography, and is a fundamental driver of local growth and continued prosperity — whether in India or Indiana. Around the world, trends such as technology integration and automation are diminishing the weight of labor cost on investment decisions and are magnifying investors’ focus

on the capacity and skill sets of local labor forces to meet the increasingly specialized needs of industry. In fact, cities that experience greater immigration are attracting more FDI and exporting more, and every 1,000 additional foreign-born citizens are associated with an estimated $1.2 million increase in FDI flows and $30 million in additional exports.

Connective Infrastructure

Connective infrastructure represents the lifeblood of cities everywhere. While geography and natural endowments provide some locations with intrinsic advantages, infrastructure decisions and associated investments in all cities carry major implications for local growth and relative attractiveness as they affect productivity of every segment of the economy and represent a key determinant for attracting FDI in developed and developing economies alike. And it is not just about roads and ports—digital infrastructure is also a key variable. For example, for every 10-percentage point increase in household mobile phone penetration in a city, there was an associated boost in city GDP growth by nearly 0.2 percentage point.

The Network Effect

In the face of geopolitical uncertainty and unpredictable national leadership, local stakeholder networks are defining a new era of international diplomatic and commercial engagement that is driven from the bottom up and aimed at fostering local economic growth and prosperity by deepening international ties. The global-local network effects generated are facilitating inbound investment and helping to drive local job creation and productivity while opening new market opportunities for growing local companies. As businesses and investors attempt to navigate evolving global risks, the networks and partnerships that provide local insight, facilitate direct connections, and provide explicit trade support and training are becoming ever more important. To illustrate this potential, consider that while SMEs contribute 50-60 percent of value added, and 70 percent of jobs in the OECD, their share of international trade is typically under 10 percent. This underscores the importance of trade-related support services—like those offered by WTCA Members—to unlocking their potential and making them an economic force multiplier for cities.

Our report details a great deal more data and insight but suffice it to say that we are incredibly proud of the work done on this report, and on the ground by our more than 300 members in nearly 100 countries. We encourage everyone to have a read, and for more information please visit www.wtca.org, or contact us at info@wtca.org.

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