Wednesday, December 12, 2012

Metro cities and International trade


A very interesting piece by Brookings Institution on the inextricable relationship between growth of international trade and metro cities is found here. Titled "Metropolitan Trade:Cities Return to Their Roots in the Global Economy" it argues that metro cities have been, over the centuries, the hub of economic activity and international trade. They have been the engines of international trade because of their emphasis on innovation, specialization and being potential markets. The point that cities and not nation states spur international trade makes an important point about the centrality of urban growth to trade.
"Trade defines a metro economy’s global economic character. Not all cities are “global cities” in the way that researchers have defined the term, but all cities are touched by the process of globalization by virtue of their distinctive specializations and positions in complex global supply chains. Not only New York, London, and Tokyo, but also São Paulo, Buenos Aires, and Seoul lead in the production of advanced services. Madrid, Hong Kong, and Dubai are centers of media and information. Nagoya, Hannover, and Milwaukee are globally significant manufacturing hubs. And U.S. metro areas such as Wichita, Greenville, and Portland rank among the nation’s most trade-oriented economies by virtue of their world-class local industry clusters."
What implication does this analysis have for countries that are largely rural in nature with the majority of the population being reliant on agricultural activity? Does international trade have a minimal impact on rural communities? Are only large metro cities the major benefactors? Can the fruits of trade be spread so that communities across the country are benefitted? While metro cities are the engines of international trade is there a way to broad base the benefits and multiplier effects of trade so that larger communities are positively impacted? How does one participate in the global economy in a local setting? Unless this issue is tackled, the criticism that international trade and globalization increases inequities may be difficult to address. 

The reality of inequity and some strategies are discussed here by Uri Dadush and Kemal   Dervis in their "The Inequality Challenge". 
"Inequality in the world defies simple characterization. Over the past 30 years, hundreds of mil- lions of the world’s poorest people have seen their lot improve as the forces of technology, global- ization, and better macroeconomic policies have transformed the globe. A large middle class has emerged in some of the world’s largest and rela- tively poor countries. At the same time, in most countries, the relatively affluent have seen their incomes soar, and in some instances their share of national income has increased so rapidly that the bulk of the population has seen little gain.
Sustaining the transformational force of technology and globalization, and the impetus they are providing to the growth of the global economy, while mitigating their polarizing effect within countries, is likely to prove one of the twenty-first century’s great challenges. It is unlikely, and indeed undesirable, that either globalization or technological advances will be stopped. Still, a failure of public policy to promote greater balance in the distribution of the gains accruing to society as a whole could result in fissures so deep that our ability to derive the benefits of the new age could be severely impaired." 
Can international trade be made more equitable catering to the large rural population we have? How should trade policy address this question? While developing metro cities to be the hubs of economic activity to facilitate trade is of primary concern, how do we make the benefits of trade more inclusive and impactful?

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