The WTCA Trade and Investment Report

Global
Connections,
Local Growth

During this time of geopolitical turmoil, when many national governments are unable or unwilling to advance a positive trade and investment agenda, cities are positioned to lead. This study, conducted in partnership with the World Trade Centers Association (WTCA), is a product of original city-level data analysis, as well as polling and interviews with WTCA members around the world. These cities constitute in excess of $26.7 trillion, or more than 35 percent of global GDP, and nearly 1 billion people. Capturing insights from this unique global network of World Trade Centers (WTCs) in more than 300 cities and nearly 100 countries, this analysis seeks to shed light on how global economic trends are shaping trade and investment at the local level and the innovative ways cities are navigating this “new normal,” building global connections to drive local growth.

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Polling Question: How likely is a significant disruption in global trade and investment this year?

49%

Likely

22%

Highly Likely

20%

Unlikely

6%

Unsure

3%

Highly Unlikely

Globally Integrated Cities Outperforming

Globally integrated WTCA cities have captured nearly a quarter of global greenfield foreign direct investment over the last 15 years.

These cities, on average, draw FDI per capita at twice the rate of their respective countries as a whole and export goods on a per capita rate of 1.55 times the national level.

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Globally integrated WTCA cities...

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increasing graph Draw 2X rate of their respective countries FDI per capita

increasing graph 1.55X the national level exports

Cities are engines of job creation: For every $1 billion in annual FDI, one can expect a 1.5% higher workforce participation as a share of the population.

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$1 billion in annual FDI

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increasing graph 1.5% higher workforce participation

Human Capital

Access to a skilled workforce is arguably the most essential factor in attracting FDI and strengthening local competitiveness. This applies across sectors, transcends geography, and is a fundamental driver of local growth and continued prosperity — whether in India or Indiana. The rapid evolution and competitive pressures of the economy make human capital investment increasingly urgent and a skills-based focus an imperative — with some global cities already leading the way.

“In order to be an attractive destination for FDI, it used to be all about cost, and now it’s all about talent.”
– Nikia Clarke, WTC San Diego

Data collected from WTCA cities show that on average, a 1 percentage point higher growth rate of the population with higher education is associated with a boost in GDP growth by a 0.79 percentage point.

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+1 percentage point increase in growth rate of the population with higher education

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increasing graph +0.79 percentage point GDP growth

Further, for every 1,000 people with tertiary education added to a city’s population, one can expect an associated $381,000 in FDI inflows.

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1,000 people with tertiary education

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increasing graph +$381,000 FDI inflows

Migration- and Immigration-enabling Factors

Migration and immigration are key factors in this competitive landscape, as policies that facilitate or inhibit human capital flows across regions directly impact cities’ ability to attract and retain the skilled workers they need. While migration pressures and immigration debates remain highly controversial and fuel concerns about the economic security of local populations, the positive impacts of foreign-born workers for local economies are compelling, with cities increasingly competing for talent.

Among WTCA cities, on average, a 1 percentage point higher net migration rate is associated with a 0.08 percentage point higher GDP growth rate.

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+1 percentage point net migration rate

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increasing graph +0.08 percentage point GDP growth

Additionally, 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.

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+1,000 additional foreign-born citizens

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increasing graph +1.2 million FDI flows

increasing graph +30 million additional
exports

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St. Louis represents a local government putting immigration at the heart of its growth strategy. Falling behind other major cities with only 4.5 percent foreign workers compared with other top regions of nearly 20 percent, St. Louis developed the Mosaic Project to attract and retain foreign-born workers to boost the city’s economy and competitiveness. The public-private immigration and innovation initiative between the St. Louis Economic Development Partnership and WTC St. Louis connects 27 partnering agencies that support immigrants in the community, allies with local universities for a four-year career plan for international students, and works with local employers that commit to action items targeting diversity and inclusion in the workplace.

Connective Infrastructure

Connective infrastructure represents the lifeblood of cities everywhere and infrastructure investment decisions carry major implications for growth and competitiveness in both developed and developing economies.

Airports Enabling Global Connections and Driving Local Growth

Airports are powerhouses in terms of facilitating business and commerce.

An analysis of airport passenger traffic, FDI flows, and GDP data from 2005 to 2017 across 207 cities globally found that for every 1,000 people transiting through an airport, one can expect an increase of $30,000 in FDI inflows, $940,000 bump in exports, and increase of $7.3 million in GDP.

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1,000 people transiting through an airport

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increasing graph +$30,000 FDI inflows

increasing graph +$940,000 additional
exports

increasing graph +$7.3 million GDP increase

Expanding airport infrastructure and air traffic have been the focus of emerging commercial hubs around the world, notably the United Arab Emirates, and have been at the heart of regional development plans to boost tourism and trade.

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Dubai’s aviation sector highlights the manifold economic impacts from airport-related investment. As part of its strategy to diversify its economy and become an international hub for business and tourism, Dubai focused on expanding its airport and air-related infrastructure capacity with remarkable success. According to Oxford Economics, in 2013 the total economic impact of the aviation sector was estimated at $26.7 billion, with $10.2 billion of that related to tourism. The sector constituted nearly 27 percent of Dubai’s total GDP, supported 416,500 jobs — more than one-fifth of total employment — and has been growing ever since.

Digital Connectivity Advancing New Industries, Accelerating SMEs

While foundational infrastructure remains paramount for competitiveness, the productive potential of digital technologies presents undeniable opportunities for growth through greater efficiency, evolution of work, and facilitation of e-commerce and services trade, among myriad other potential impacts.

Among WTC cities with below average internet penetration of under 54.5 percent, every 10 percentage point increase in household internet penetration is associated with a boost in GDP per capita growth by half a percentage point.

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+10 percentage point household internet penetration

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increasing graph +0.5 percentage point GDP per capita growth

Every 10 percentage point increase in household mobile phone penetration in a city is associated with a boost in city GDP growth by nearly 0.2 percentage point.

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+10 percentage point increase in household mobile phone penetration

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increasing graph +0.2 percentage point GDP growth

A boost of this magnitude on the national level would translate into an estimated additional $100 million in additional GDP in Ghana, $4.1 billion in Brazil, and $5.2 billion in India.

Connective Infrastructure Facilitating Trade & Streamlining Supply Chains

In addition to being foundational for city functioning and attracting FDI, connective infrastructure is the primary enabling factor for interregional and international trade — providing access to new markets and lowering costs for consumers by minimizing costs along the supply chain.

Polling Question: How will further technology integration most significantly impact trade and investment?

52% of those polled indicated technology integration will create greater efficiency in trade and logistics

52%

Create greater efficiency in trade and logistics

21%

Drive development of new industries and hubs

18%

Make business connections easier to form/sustain

9%

Reinforce the status quo of current leaders

Global Connections Driving Local Growth

The Network Effect

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 are becoming ever more important.

Polling Question: Which represents the biggest roadblock to enabling global trade in your area?

32%

Disruptive government policy

24%

Lack of connectivity to global economy

18%

Economy is more locally focused

18%

Weak ecosystem to foster opportunities

8%

Other

Academic Institutions

Local academic institutions can be key to cities’ relative competitiveness by cultivating a skilled workforce and fostering innovation.

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Toronto’s MaRS, a public-private incubator model, provides an illustrative example of the type of collaborative ecosystem driving the local innovation economy. The platform — which focuses on core areas of energy and environment, finance and commerce, health, and work and learning — brings together educators, researchers, social scientists, entrepreneurs, and business experts in an innovation district to test new business concepts while providing start-ups access to local networks, business mentorship, and needed capital. According to WTC Toronto, the MaRS project has become a leading model and helped establish Toronto as an innovation hub, with WTCs facilitating the entry of international tech companies to the city.

Local Business Organization and Networks

The engines of job creation, economic growth, and prosperity, local businesses of all sizes — particularly SMEs — are at the heart of competitive cities. Those cities able to connect investors directly into local business networks are demonstrating gains.

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The Netherlands Alliance, a partnership of nine World Trade Centers, presents an exceptionally robust example of facilitating local connections and providing direct business and trade support services. Close association with the VNO-NCW, a confederation of 115,000 companies in the Netherlands, provides direct links deep into the local business community and regional employers’ associations. The alliance and local partner networks are helping to drive inbound investment, with cities in the Netherlands among the highest performing. In fact, an analysis of city-level data from 2003 to 2017 of WTC cities in the Netherlands found that these cities attracted FDI at an average of nearly four times that of global FDI per capita.

Collaboration among local stakeholders is a major differentiating factor for attracting FDI.

Polling Question: Which of the following is the most significant driver of local growth and development?

46%

Collaborative network of local stakeholders

15%

Strong regional connectivity

15%

Abundance of human capital

12%

Quality of infrastructure

10%

Supportive local government

2%

Other

Even in the digital age, face-to-face, human connection remains invaluable to doing business.

Polling Question: Which local stakeholder is most important to work with to help achieve your goals?

66%

Business

32%

Government

2%

University / Education system

0%

Civil society (NGOs, Associations, Non-Profits, etc.)

0%

Other

Connecting Business on a Global Scale

Separated by geography, the WTCA network facilitates connections and working relationships among local industries, enabling businesses to share knowledge, address common market challenges, and advance sector interests internationally.

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Facing serious food security concerns and seeking insights from global industry partners, WTC Harbin spurred the broadest-spanning international collaboration of WTCs to date, resulting in a recently signed MoU bringing together WTCs across North and South America, Europe, Asia Pacific, and Africa with rich agriculturally focused expertise, business networks, and advanced technology to share knowledge, establish working relationships, and address evolving trade issues deeply affecting their local economies. While this MoU is specifically focused on agriculture, such a model could be adapted for other sectors as well.

Network Effects and Partnerships Particularly Critical for SMEs

SMEs represent the economic engines of local economies around the globe, fueling local growth and employment and constituting 50 to 60 percent of value added and 70 percent of jobs in the OECD. Still, the share of SMEs engaged in international trade is typically under 10 percent. Virtually all WTCs indicated that SME-targeted, trade-related support services are essential to help unlock this segment’s economic potential, but more capacity is needed.

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SMEs are local economic engines...
50-60% of value add in OECD countries
70% of jobs in OECD countries

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...but are behind on global engagement
10% or less share of SMEs internationally engaged

The recent ratcheting up of protectionist actions portends bumpier roads ahead. Those cities that are defining long-term plans based on each city’s unique resources, strengthening cooperation among key local stakeholders, and leveraging synergies between local and global networks are attracting higher levels of FDI and enhancing their overall competitiveness. Going forward, those cities that prepare for the risks around the corner and chart a path toward greater international integration will be positioned to gain ground.

The Full Report

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