GaWC Research Bulletin 355

(A)

Building the World Trade Routes of States in C21st Globalization

K. Pain^*

Introduction - Cities, states and globalization

This paper takes a city-centred approach to the subject of globalization and competitiveness. Analysis of the ‘world city network' since the year 2000 (Taylor 2001, 2004, Taylor et al. 2009), provides empirical evidence of a distinct global shift in territorial connectivity to the world service economy produced by cities, bearing out the predictions of a number of late twentieth century writers (for example Dicken 1986). The latter economic activity performed by ‘advanced producer service' firms operating at a global scale, has come to be recognized as having major importance for the prosperity of whole countries in the twenty first century, giving rise to concern on the part of states for the global competitiveness of their cities.

However there is a dilemma because, as Manuel Castells (1996) anticipated more than a decade ago, while world systems of governance relate to the territorial spaces and structures of states, world systems of the advanced service economy are being mobilized in a borderless space that relates to the global relations of cities. Studies by the Globalization and World Cities (GaWC) research group are addressing this dichotomy by two means.

First, emergent geographies and densities of the world city network which are generated by multiple service firms working through world-wide office networks, have been measured and mapped by GaWC in three census periods – 2000, 2001 and 2008 (the latter data collection exercise in the first half of 2008, before the onset of the world economic recession, was conducted in collaboration with the Global Urban Competitiveness Project at the Chinese Academy of Social Sciences (CASS), Beijing). This has made possible current major analysis (supported by the UK Economic and Social Research Council) of changes in the world city network during the last ten years.

Second, alongside this global quantitative analysis, GaWC complementary qualitative research has explored the practices of advanced producer services which constitute and produce the global city process and construct the world city network. In-depth interviews with senior network actors representing firms headquartered world-wide, have allowed the dynamics of the world city network and the roles of specific cities in this, to be considered in depth (Beaverstock, et al. 2001, Taylor et al. 2003, Hall and Pain 2006).

The purpose of this paper is to consider key issues of relevance for states and their contemporary world trade routes - globalizing cities - based on a decade of GaWC city-centric world research.

Trading in the advanced service economy

In order to do business on a global scale, advanced producer services firms studied by GaWC, must be active and competitive in all major world markets. Their core activity is servicing transnational corporates cross-border, et sequitur firms require a world-wide presence. Increasing global markets competition means they must be present in places through which they can access international markets and skills; these are places which have come to be regarded as ‘global cities'.

These basic principles underpinned Sassen's (1991) global city thesis which extended Friedmann's (1986) ‘world city' analysis to draw attention to the new specialized economic role of a small group of world cities as global “service centres” (1991). As Sassen identified, mutually constitutive processes of dispersion and centralization of service activity have arisen in the latter part of the twentieth century because the scale and scope of world-wide business operations necessitates the co-location of high-complexity global functions in specialized international hubs.

In spite of continuing developments in information and communication technologies (ICTs) which allow virtualization and almost instantaneous 24 hours world trading, paradoxically, the role of such hubs is being reinforced. New technologies have facilitated a blizzard of world flows of information and finance creating complexity and demand for knowledge specialization. The latter work requires the input of skills that are in short supply globally but which are concentrated and transferred in global cities. Hence centralities within the world economic system are being maintained and reinforced by global service production (Pain and Hall 2006a, b, c; Pain 2007).

GaWC-CASS world city network analysis is revealing dynamic changes in the global equilibrium generated by this (city) centralizing process to be discussed in this paper.

2000-08 comparative world city network analysis indicates that the late twentieth century hierarchy of global service centres dominated by New York, London and Tokyo in Sassen's (1991) analysis, is reordering and to an extent flattening. As service markets have extended and deepened in different world territories in the first decade of the twenty first century, more cities have become important nodes for global interaction and flows in advanced producer service networks. As set out in Taylor's World City Network publication (2004), the interactional space of the contemporary global, network economy, is now unequivocally a space of relations between many cities.

Service geographies and global cities

World city network analysis sheds light on the geographies of changes in city interrelations by measuring the service network connectivity conferred on many individual cities by firms and their offices. Resultant overall ‘global network connectivity' of cities (GNC) arises from decisions on the location of offices and network functions made by the sum of global firms surveyed by GaWC. Headquarter offices are the most important nodes for strategic global decision-making functions and transactions whereas offices (and cities) with national and sub-national functions have fewer cross-border interactions. Because cost reduction is essential in global-scale operations, offices are strategically located according to their network roles, hence business network practices confer different roles, and degrees of global connectivity, on different cities.

When the locations and functions of offices for all global service networks are computed, the geography of the world city network, and changes its equilibrium, can be analyzed and mapped. Places in the world which are gaining more global network connectivity than others, are being chosen by more global firms as necessary operational bases through which to do cross-border business. But active interactions and flows between cities do not simply occur by means of information, advice and finance traversing terrestrial space via information and communication technologies and physical movement of people.

Trans-national and trans-continental business between cities also takes place within global cities because these are the places where firms that are headquartered world-wide, and their international workforce, are present in large numbers. According to senior service network executives, it is the co-presence and proximity of these specialized and senior actors in global cities that allows transnational exchanges of the highest value to occur. This happens through a mix of formal and informal, face-to-face and virtual encounters in global cities.

A multitude of cross-border and global decision-making and transactions are therefore happening in the same (one) place in global cities. The volume of this localized, inter-city activity conferred by advanced services is impossible to measure quantitatively but it clearly conflates the ‘global network connectivity' measured in world city network analysis.

Global cities and states

Global cities are therefore vitally important for the competitiveness of states in a minimum of two ways. Firstly, they are the places that are sites for trans national APS network structures which allow information and business to pass into, through and between cities and countries. Secondly, they are the places where inter national transactions and innovations which add value to other primary and secondary economic sectors, are occurring.

It is therefore essential for states to pay due attention to the external relations that define their cities because globalizing cities act both as hubs and as nodes for high-value new economy activity which is also value-adding. They can be said to be the ‘corridors' and ‘gateways' of the global service economy which are the new world trade routes of states in contemporary globalization (Pain 2010a). Changes in the world city network are therefore a vital matter for states.

Some key issues for states that follow from 2000-08 world city network comparative analysis are next considered.

Cities in the World City Network

Table 1 shows the results of GaWC comparative analysis of global network connectivity (GNC) (Derudder et al. 2009) for 307 cities between the 2000 and 2008 census dates, focusing on the ‘top twenty' cities in the world.

Table 1: ‘Top 20' most connected cities in the WCN in 2000 and 2008. Source: Derudder et al. 2010.

London, New York, and Hong Kong remain the most connected cities in the world city network (Hong Kong's higher global network connectivity compared to Tokyo reflects the latter's weighting towards banking and financial services). Although New York and London have switched their number one / number two rankings, their global connectivity is more equivalent in 2008 (New York 100,00 and London 99,32). compared to 2000 (London 100,00 and New York 97,10). More generally, the global city hierarchy of connectivity is tightening up.

But the most significant change shown by the analysis is the West-East world shift of global network connectivity. This is evidence of the rise of the Asia Pacific economic region in general, and especially of Chinese global cities Shanghai, and Beijing. These two cities have risen from connectivity rankings in the global ‘top forty' to rankings in the global ‘top ten' (Shanghai rank 8 / Beijing rank 10) in less than one decade - this striking world performance is evident in Figure 1.

Figure 1: Absolute GNC change for 132 cities. Source: Derudder et al. 2010. Key: Appendix A.

As discussed by Pain (2009a and b) and demonstrated by Derudder et al. (2009), it is the cities of countries emerging from what has been termed the ‘semi-periphery' of the pre-globalization world economic system (Martin 1990, Peschard 2005) that have made the most substantial gains in global connectivity (Moscow for example has risen from rank 37 to 12 between 2000 and 2008). In contrast, longstanding capitalist North American cities have all fallen out of the ‘top ten' apart from New York. The significant point of interest about China is that it has been the biggest winner of global service economy connectivity (Figure 1) yet this has not been at the expense of its politics (Doucet 2010). China's political-economy distinction is not unimportant when considering future geometries of the world city network discussed later.

States in the World City Network

Figure 2 presents a non-geographical visualization of the relations of states in the world city network in 2008. It is based on their global network connectivity ranking compared to that in 2000 and illustrates the centralizing impacts conferred by globalizing cities on whole countries. A spring embedding algorithm has been used to show equilibria in the world city network in 2008. More globally connected cities in the world city network are attracted to each other whilst less connected cities are repelled, but by grouping cities together according to their nation state, territorial boundaries, centralities of the network can be seen for countries.

Figure 2: GaWC ‘Mappa Mundi' 2008. Source: Vinciguerra et al. 2010. Key: Appendix B city codes.

Although many different images can be outcomes of the application of this technique, the US is always positioned at the centre of the graph, distanced from all other countries. This shows that the total connectivity of US cities to cities in the rest of the world, gives it a ‘centre of the world' position in terms of global service networks (Vinciguerra et al. 2010). Other countries that are less globally connected by the sum of their cities are repelled to the outer sphere of the image but cities with the highest connectivity in each country are pushing towards the centre and thus appear ‘coastal' in their country grouping, as in the case of Hong Kong, Beijing and Shanghai.

Although the USA occupyies a central position in the pre-financial crisis world city network, New York's coastal position in its country grouping reflects its very high global connectivity compared to other US cities – it is only New York that gives the USA its world mappa mundi centrality. Other ‘top ten' global cities are having the same effect within their countries, thus providing a gateway role for their states in the corridors of the world city network. Notably and uniquely, China has three ‘top ten' cities which are providing this gateway function.

Building World City Network trade routes

Global city users are bringing into states, through gateway cities, flows of knowledge which allow innovation to occur within cities and which also add value to other sectors of economic production. For example, the dramatic increase in the global network connectivity of Shanghai and Sydney during the past decade is likely to reflect the growing volume of trade between China and Australia as Chinese state ‘open door' policy has taken hold (Pain 2008a).

Trade in manufactured products from China to Australia and primary products especially natural resources (86% of Australia's exports to China, Smith 2009), from Australia to China, requires an input from transnational financial, accounting, legal and other advanced producer services. Longer distance flows of commodities in ‘global production networks' (Hess and Yeung 2006) must be articulated by service providers that are interlinked in transcontinental, city-based networks. Marketing, branding, design, advertising and logistics services for example, create the added-value for this global trade. Thus there are interdependencies between the development of high-value global city functions and the competitiveness of wider national economies. This has special importance for rapidly developing countries which have a high proportion of employment in what have been seen as lower value economic sectors (Pain 2008b, 2009).

What is particularly interesting in the Chinese case is that, unusually, three of its major cities are now caught up in economic globalization and top-ranking world city network connectivity to a similar degree. This capacity is not simply due to the physical extent of China's territory. Other large countries, the US and Russia for instance, are each supporting just one ‘top ten' global city. China's global development potential has undoubtedly been unleashed with a bang since the introduction of open door policy (Lin 2005), however this is also true of ex-communist Eastern European countries which are connecting to the global economy through one city.

A key distinction in the Chinese case, has been strong and effective state support for global city agglomeration. Coupled with high national capital reserves, national policy promoting global city development has allowed a surge of flows to be enacted in selected Chinese cities. An important question for the future is the potential to grow complementary global city roles and functions in other cities of China. If successful, this would put China in central place in the world city network ‘mappa mundi' (Figure 2), in line with the fabled ancient association between its name (‘Middle Kingdom'), its polities, and the ‘axis mundi'.

Managing World City Network trade routes

As Doucet (2010) has suggested, China and Europe are apparently developing in opposite ways from a political economy perspective, and this has important consequences for globalizing cities and countries (Pain 2010b).

State control of land and investment in China are allowing strategic development objectives to be pursued, which engage actively with the gateway role of global cities. In contrast, the resources and role of the state in Europe are being ‘rolled back', in part due to economic recession (which is more structural in nature than the short-term world recession associated with the financial crisis), and in part due to the ‘roll out' of neo-liberalism (Peck and Tickell 2002). In spite of now prevalent public-private partnerships, there is increasing reliance on private finance from global flows of capital to fund city development and essential infrastructure (Lizieri 2009, Knox and Pain 2010).

The large-scale 2003-06 study of North West European global cities and their ‘mega-city regions' in the Interreg IIIB ‘Polynet' study (Hall and Pain 2006) revealed a governance deficit for the management of emergent European global spaces of flows. These spaces are the subject of the recently launched Europe-wide ESPON 2013 (European Spatial Observation Network) ‘Tiger' study.

In the UK, where London kick-started the late nineteen eighties global city ‘Big Bang', emergence of all-party support for ‘the new localism' during the past decade is likely to deepen the divergence between territorial spaces of governance and global spaces of flows. ‘Localism' is intended to devolve power to the lowest level of decision-making - local people and communities - and policy to be enacted following the May 2010 UK national general election, will take the devolution process a stage further (and out of alignment with European Union regional policy initiatives).

The removal of the regional tier of UK spatial and economic government will leave the joining-up of policy across local authority boundaries, dependent upon cooperation between local interests. ‘Regional' government will be left in-tact for the London metropolitan area but the London Mayor will be dependent on the cooperation of local authorities (and their community interests) in planning for the functionally interconnected London global ‘mega-city region'.

The 2008 GaWC ‘mappa mundi' (Figure 2) illustrates the connectivity that global cities are introducing to countries in a shifting world city network. In this context, joined-up, state, strategic spatial and economic planning that attends to multi-scale, inter-city relations (from global to sub-national) seems necessary for national economies to be globally competitive.

Conclusion - China in future World City Network construction

Predictions of the ‘end of geography' in a ‘network society' have thus far proved incorrect. In practice, there has been a change in the scale of world social and economic organization from the scale of the nation state to the network scale of globalizing cities. National economies are now highly dependent on the flows that pass through global cities but, in order to sustain these flow spaces, the international functions and constitution of cities must be supported by strategically informed regulatory regimes and infrastructure investments that look across cities at intra- and extra-territorial scales. This requires cross-boundary approaches that emulate advanced producer service flow spaces which do not stop at jurisdictional borders.

REFERENCES

Beaverstock, J.V., Hoyler, M., Pain K., Taylor, P.J., 2001, Comparing London and Frankfurt as World Cities: a relational study of contemporary urban change, Anglo-German Foundation for the Study of Industrial Society, London

Castells, M., 1996, The Information Age: Economy, Society and Culture, Vol. I: The Rise of the Network Society, Blackwell, Oxford

Derudder, B., Taylor, P.J., Ni, P., De Vos, A., Hoyler, M., Hanssens, H., Bassens, D., Huang, J., Witlox, F., Yang, X., 2009, Pathways of Change: Shifting connectivities in the world city network, 2000-2008, forthcoming in Urban Studies, 2010, 47, http://www.lboro.ac.uk/gawc/rb/rb310.htm

Dicken, P., 1986, Global Shift: Industrial Change in a Turbulent World, Paul Chapman, London

Doucet, P., 2010, 1950-2050: Sunset and Sunrise over the Eurasian Continent, in Kunzmann, K.R., Schmid, W.A., Koll-Schretzenmayr, M., (eds.), China and Europe – The implications of the rise of China for European space, Routledge, London/New York, pp. 256-270

Friedmann, J., 1986, The World City Hypothesis, Development and Change, vol.17, 69–84, reprinted in: Knox, P., Taylor, P.J., 1995, (Eds) World Cities in a World System, pp 317–331, Cambridge University Press, New York

Hall, P.J., Pain, K., 2006, (Eds), The Polycentric Metropolis: Learning from mega-city regions in Europe, Earthscan, London

Hess, M., Yeung, H., 2006, Whither global production networks in economic geography? Environment and Planning A, 38, 1193-1204

Knox, P., Pain, K., 2010, International Homogeneity in Architecture and Urban Development?” Special issue on International Real Estate Markets, Globalized Real Estate Industry, Informationen zur Raumentwicklung (IzR), in press, forthcoming

Lin, G.C.S., 2005, Service industries and transformation of city-regions in globalizing China: New testing ground for theoretical reconstruction, in Daniels, P.W., Ho, K.C., Hutton, T.A. (Eds) Service Industries and Asia Pacific Cities: New development trajectories, pp. 283-300. Routledge, New York

Lizieri, C., 2009, Towers of Capital, Blackwell, Oxford

Martin, W.G., 1990, Semi-peripheral States in the World Economy. Greenwood, New York

Pain, K., Hall, P., 2006a, Firms and Places: Inside the Mega-City Regions, in The Polycentric Metropolis: Learning from Mega-City Regions in Europe, Hall, P. and Pain, K., Eathscan, London, 2006, pp 91-103

Pain, K., Hall, P., 2006b, Flows and relationships: Internal and External Linkages, in The Polycentric Metropolis: Learning from Mega-City Regions in Europe, Hall, P., Pain, K., Earthscan, London, pp 104-112

Pain, K., Hall, P., 2006c, People and Places: Interrelating the Space of Flows and the Space of Places, in The Polycentric Metropolis: Learning from Mega-City Regions in Europe, Hall, P. and Pain, K., Earthscan, London, 2006, pp 113-121

Pain, K., 2007, City of London Global Village: Understanding the Square Mile in a Post-Industrial World Economy, in The Geo-Politics of the City, Barber, S., European Research Forum, London, pp 19-38

Pain, K., 2008a, Urban Regions and Economic Development, in Johnson, C., Hu, R., Abedin, S., (Eds), Connecting Cities: Urban Regions, pp 20-47. Metropolis Congress 2008, Sydney, Australia

Pain, K., 2008b, Looking for the ‘core in knowledge globalization: The need for a new research agenda, GaWC Research Bulletin 286, http://www.lboro.ac.uk/gawc/rb/rb286.html

Pain, K., 2009, Outsourcing and offshoring in business services - New dynamics, new territorial opportunities? Regions, (274), 11-13

Pain, K., 2010a, New Worlds for Old? 21^st Century Gateways and Corridors: Reflections on a European spatial perspective, International Journal of Urban & Regional Research, forthcoming 2010

Pain, K., 2010b, Review of “ China and Europe – The implications of the rise of China for European space ” by Klaus R. Kunzmann, Willy A. Schmid and Martina Koll-Schretzenmayr, 2009, (eds.), London/New York, Routledge, Raumforschung und Raumordnung, forthcoming

Peck, J. Tickell, A., 2002, “Neoliberalizing Space”, in Brenner, N., Theodore, N., (Eds) Spaces of Neoliberalism. Urban Restructuring in North America and Western Europe, Blackwell, Oxford, pp. 33-57

Peschard, K., 2005, Re-thinking the Semi-Periphery – Some Conceptual Issues. http://www.ualberta.ca/GLOBALISM/pdf/semi-periphery.lnk.pdf (accessed 01.08.2008)

Sassen, S., 1991, The Global City: New York, London, Tokyo. Princeton University Press, Princeton

Smith, R.C., 2009, Australia and the Rise of China: Strategic and Policy Implications, Wilson Center Australian Scholar Asia Program, 16^th June 2009

Taylor, P. J., 2001, Specification of the World City Network, Geographical Analysis, 33, pp. 181-194

Taylor P.J., 2004, World City Network: A Global Urban Analysis, Routledge, London

Taylor P.J., Beaverstock J., Cook G., Pandit N., Pain H., Greenwood H., 2003, Financial Services Clustering and its significance for London, Corporation of London, London

Taylor, P. J., Ni, P., Derudder, B., Hoyler, M., Huang, J., Lu, F., Pain, K., Witlox, F., Yang, X., Bassens, D., Shen, W., 2009, Measuring the World City Network: New Developments and Results, GaWC Research Bulletin 300, http://www.lboro.ac.uk/gawc/rb/rb300.html

Vinciguerra, S., Taylor, P.J., Hoyler, M., Pain, K., 2010, Contemporary Mappa Mundi: American Exceptionalism in the World City Network, Environment and Planning A, forthcoming

APPENDIX A: List of Abbreviations

APPENDIX B: Key: City Codes

AMS Amsterdam, ATH Athens, ATL Atlanta, AUK Auckland, BA Buenos Aires, BAN Bangkok, BAR Barcelona, BEJ Beijing, BOG Bogota, BUD Budapest, BRU Brussels, CAR Caracas, CHI Chicago, DBL Dublin, FRA Frankfurt, HK Hong Kong, IST Istanbul, JAK Jakarta, JOH Johannesburg, KAR Karachi, KL Kuala Lumpur, LA Los Angeles, LIS Lisbon, LON London, MAD Madrid, MEL Melbourne, MEX Mexico City, MIL Milan, MNL Manila, MOS Moscow, MUB Mumbai, ND New Delhi, NY New York, PAR Paris, PRA Prague, ROM Rome, SGP Singapore, SAN Santiago, SEO Seoul, SF San Francisco, SHA Shanghai, SP São Paulo, STO Stockholm, SYD Sydney, TOK Tokyo, TOR Toronto, TPE Taipei, VIE Vienna, WAR Warsaw, WDC Washington DC, ZUR Zurich

NOTE

^* Kathy Pain, School of Real Estate & Planning, The University of Reading, email: k.pain@reading.ac.uk