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World Trade Centers Association Report Highlights City-Resiliency Strategies, Indicates that Trade and Investment Damage May be More Extensive than Predicted
Original data analysis and in-depth-interviews reveal the perils facing global growth prospects, underlying opportunities and practitioners’ views on how to navigate both
June 12, 2019 – Today The World Trade Centers Association (WTCA), of which World Trade Center Moscow is a member, unveiled its second annual Trade and Investment Report (www.WTCAReports.org), conducted in partnership with FP Analytics. The report details (see below) the key factors that enable cities to remain resilient as dramatic shifts in trade-and-investment policies intensify economic competition. Moreover, on-the-ground insights from interviews with WTCA members around the world reveal that the damage being caused to global trade and investment may be worse than is currently captured by traditional indicators.
Global trade grew 3 percent in 2018, but tariffs and other causes of uncertainty have already led the World Trade Organization to reduce its growth forecasts for 2019 from 3.7 percent to 2.6 percent. The reality could be worse if trade and investment are being artificially buoyed by companies trying to get ahead of impending tariffs or navigate around other barriers. WTCA members reported a surge in trade over the past year as businesses sought to lock in costs before Brexit, and before the trade tensions between the United States and China escalate further.
“Economic uncertainty has created a ‘new normal’ which businesses and organizations are being forced to confront,” said FP Analytics Managing Director Claire Casey. “This year’s report illuminates the underlying causes driving this economic upheaval as well as provides successful strategies to combat this new instability.”
How can cities survive fluctuations in the global economy and foster growth? Analysis of city-level economic data from the past five years found that cities that outperform their countries during economic downturns have a consistent set of traits. Regardless of their location or size, these cities all have relatively diversified economies, strong service sectors, educated populations, high shares of foreign citizens, and robust transport infrastructure. And they have defied the odds by attracting investment under adverse circumstances: Their FDI as a percentage of GDP was twice as high on average as that of nonresilient cities.
“The 2019 WTCA Trade and Investment Report shows that cities and businesses are being forced to consider new investment strategies and trade opportunities in a time where the global economy is in a state of near-constant flux,” said WTCA Chief Executive Officer (CEO) Scott Ferguson. “However, cities are well positioned to act as centers of economic stability and growth during shifting policy changes and uncertain global economic circumstances.”
The report was launched in Metz, France, alongside a panel discussion of its findings. WTCA CEO Scott Ferguson; Rolf Alter, Senior Fellow at the Hertie School of Governance in Berlin, and former Director of Public Governance at the Organisation for Economic Cooperation and Development; Rani Dabrai, Director of World Trade Center Dublin; and Bruce Nairne of Nairne Limited, a private-sector consultancy, shared their perspectives on the report and the challenges and opportunities for business in the current environment.
“Cities are where policies and people meet,” remarked Alter. He continued, “We are living in the Metropolitan century, and this report is rich with examples of what works to ensure a city’s resiliency in what is certainly a time of fundamental change. The practitioner’s point-of-view detailed by WTCA members here is insightful and important.”
The key findings:
Below we highlight the main findings of this year’s report: In the face of rising global economic and geopolitical uncertainty and slowing economic growth, businesses are confronting new risks and complexity in decision-making that threaten to add costs to their operations, undermine competitiveness, or even render them obsolete. At the same time, political forces and structural shifts in the global economy are also creating new trade and investment opportunities for those able to effectively navigate the changing tides.
The 2019 Trade and Investment Report, produced by FP Analytics in collaboration with the World Trade Centers Association (WTCA), illuminates the major drivers of uncertainty, key factors that have enabled cities’ resilience, and strategies for navigating the “new normal.”
This study is a product of original city-level data analysis, surveys, and interviews with business leaders from around the world, leveraging the WTCA’s network of more than 300 cities, representing more than 35% of global GDP and nearly 1.24 billion people.
The key findings of the report:
• Uncertainty is the New Normal: 83% of business leaders surveyed believe that global economic uncertainty will stay at current elevated levels or get worse in the coming year. 1
• Escalating Trade & Geopolitical Tensions Dominate Concerns: Escalating trade tensions pose the greatest risk to the global economic outlook, according to 54% of business leaders, while 28% believe geopolitical conflicts represent the greatest risk. 2
• Investment Slowing, Intensifying Competition: With global foreign direct investment (FDI) slowing 27% over the last year, according to the OECD3, global business leaders interviewed underscored intensifying competition for limited FDI and cities’ need for a clear vision, supporting policy frameworks, effective public-private dialogue, talent, and quality of life in order to compete.
• Uncertainty & Volatility Reorienting Trade & Investment: Business leaders identified U.S.-China trade tensions and Brexit as leading forces shifting investment to locations perceived to be lower-risk and reorienting trading relationships, with long-term implications for industry and supply chains.
What Works? Characteristics of Resilient Cities
Diving deep into city-level data from the past five years, FP Analytics found that resilient cities, defined as those that outperform their countries during economic downturns, possess a consistent set of characteristics:4
• Diversified Economies: The top 25% most economically diversified cities on average decelerated 11% less than their respective countries, while those in the bottom quarter decelerated 4% more.5,6
• Strong Service Sectors: Resilient cities on average saw the share of services in GDP grow by 3.3% over the last five years—more than double the pace of non-resilient cities.
• Facilitate Movement:
o Resilient cities experienced an average 44% growth in the annual number of airport passengers over the last five years, double the pace of non-resilient cities.7
o Resilient cities experienced nearly 12 times the growth in the annual number of public transit passengers over the last five years, compared to non-resilient cities.8
• Educated Populations: The college-educated (or higher) population of resilient cities is, on average, 8.6% larger than that of non-resilient cities.9
• Stock of Foreign Citizens: On average, foreign citizens represent 11.6% of resilient cities’ populations, one-quarter higher than that of non-resilient cities.10
• Investing in Resilience Factors Pays Off: Resilient cities are FDI magnets and on average have FDI as a percentage of GDP twice as high as non-resilient cities.11
How Cities Are Navigating Uncertainty
• City-to-City Diplomacy More Important Than Ever: With political turmoil fracturing longheld political or economic relationships, city leaders are engaging in international diplomacy to deepen economic ties, demonstrate credibility, and instill confidence with old and new trading partners.
• Cities Identifying Ways to Capitalize on the Disruption: Cities are looking for opportunities to leverage geography, language, political ties, and other strengths to seize new trade and investment opportunities—for example Monterrey, Mexico, in the midst of rising U.S.-China trade tensions.
• Innovative Industries Essential to Cities’ Resilience & Future Growth: Without exception, business leaders consider economic orientation toward innovative, high-tech industries and clusters a major competitiveness and resilience strategy—with support for small- and medium-sized enterprises (SMEs) and entrepreneurs vital for economic transformation.
• Competition for FDI & Global Tech Mobility Make Local Ecosystem Crucial: Progressive vision; collaboration among public, private, and local stakeholders; and strategy alignment aimed at attracting and retaining investment has never been more important to attracting FDI.
• SMEs Small, but Agile: While global uncertainty is arguably most daunting for SMEs, these businesses are, in fact, among the most agile and able to adapt quickly to the evolving economic environment and capitalize on changing conditions—but they are in need of support.
• Knowledge, Preparedness, and Agility Key to Navigating Uncertainty: Through issue-specific education and briefings, trade training, and partnership, WTCs are enabling businesses to more effectively assess complex risks, game-out scenarios, and capitalize on new opportunities emerging from the disruption.
Quote from the report:
Smart City Moscow:
“Moscow’s investments in infrastructure have proved essential to its long-term strength and resilience, and the city is employing “smart” technologies for more efficient urban development. As major companies move to Moscow, the city is using tax revenue to build intelligent traffic control systems and improve the roads and metro, according to Aleksei Savrasov of WTC Moscow.
The local government has invested in a Smart City Lab with 100 manufacturers and training programs, to integrate city services more efficiently through innovation in transport and mobility, smart buildings, public utilities, and public security. Last year Moscow created a smart technology district where it will test, assess, and deploy new technologies to make the city more efficient and better able to adapt to change”
Video of the Report Presentation: (https://vimeo.com/341798419)
About the WTCA 2019 Trade and Investment Report
This study, conducted in partnership with FP Analytics and 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. Cities with a WTCA member constitute more than 35% of global GDP and are home to nearly 1.24 billion people. Capturing insights from this unique global network of World Trade Centers in more than 325 cities, 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 and World Trade Centers are navigating this “new normal,” building global connections to drive local growth.
About World Trade Centers Association
The World Trade Centers Association (WTCA) is a network of more than 325 highly connected, mutually supporting businesses and organizations in nearly 100 countries. As the owner of the “World Trade Center” and “WTC” trademarks, the WTCA licenses exclusive rights to these brands for Members to use in conjunction with their independently-owned, iconic properties, facilities and trade services offerings. Through a robust portfolio of events, programming and resources that it offers its Members, the goal of the WTCA is to help local economies thrive by encouraging and facilitating trade and investment across the globe through Member engagement. To learn more visit www.wtca.org.
WTC Moscow Smart-city publications and events (Russian):
1. FP Analytics polling of WTCA Members and business leaders April 8, 2019.
2. FP Analytics polling of WTCA members and business leaders April 8, 2019.
3. “FDI in Figures: April 2019,” April 29, 2019, Organisation for Economic Co-operation and Development.
4. Resilient cities are defined as those that decelerated less than their respective country or continued to grow in the face of a country-level downturn in at least one year of the last five years. Of the 234 cities for which data was available, 166 were found to be resilient cities and 59 non-resilient. Nine cities were located in countries that did not have a deceleration and/or had the same deceleration as the country during each of the five years and thus were not included in this specific analysis.
5. Over the last five years, non-resilient cities have also become more concentrated, seeing their HHI values rise by 1.2% on average, three times as much as resilient cities, which experienced virtually no change in their concentration.
6. Sample covers 174 instances over 2014 to 2018 where a city faced a decline in national GDP growth. Data sourced from Euromonitor International.
7. FP Analytics Analysis: Sample covers 202 cities over 2014 to 2018 with data sourced from Euromonitor International.
8. FP Analytics Analysis: Sample covers 64 cities over 2014 to 2018 for which data were available from Euromonitor International.
9. FP Analytics Analysis: Sample covers 75 cities over 2014 to 2018 for which data were available from Euromonitor International.
10. FP Analytics Analysis: Sample covers 126 cities over 2014 to 2018 for which data were available from Euromonitor International.
11. FP Analytics Analysis: Based on a sample of 214 cities from 2014 to 2018 for which data were available from Euromonitor International and fDi Markets.