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Seizing the Opportunities of Global Urbanization: The New Frontier in America's International Economic Policy

To take advantage of the rapid urbanization underway in the world's largest emerging economies, we must add a major new dimension to U.S. international economic policy.

The number of people living in cities around the world is predicted to grow by more than 2.5 billion over the next 40 years -- mostly in emerging nations such as China, India, Brazil, Indonesia and Mexico. Much of this growth will be in places that were small towns or modestly-sized cities only a few years ago. Many of these localities, often termed "second- and third-tier" cities, are on the way to becoming larger than New York or Los Angeles.

Booming cities, and the provinces and states in which they are located, are driving forces in economic growth today. Consequently, they constitute the new frontier in America's international economic policy. That policy will not be successful in the 21st century unless it fully connects with them. They are powerful centers of innovation, hubs for business development, leaders in increased citizen involvement in governance, and keys to the world's environmental future, as they craft new building codes, systems of urban transportation, and ways to satisfy growing power needs. How well they satisfy the basic requirements of the tens of millions of people flocking in from rural areas, and accommodate those searching for jobs, will have a profound impact on future political, economic, and social stability in their countries.

America's international economic policy -- the combined effort of our embassies, consulates and agencies in Washington -- is increasingly seeking ways to engage with the political and business leaders of these growing metropolises. We cannot focus only on national capitals or a few traditional business or financial hubs. We need to know more about rapidly rising cities often distant from national capitals or traditional business centers. So U.S. officials in our embassies and consulates are prioritizing efforts to develop close ties with key policy makers and businesses in these cities, and their states and provinces, to identify new opportunities for, and to better support, American businesses there.

With this new emphasis, and new dimension to our policy, U.S. officials are in an excellent position to help American companies navigate the changing urban landscape. For many cities, a top priority is infrastructure -- energy efficient buildings, airports, power generation and transmission, ports and telecommunications. American firms have enormous expertise in these areas, which represent huge business opportunities.

Growing cities and provinces are also competing vigorously to attract investment in order to generate jobs. To do so they will need to exhibit superior performance in protecting intellectual property and ensuring that investment rules are fair, transparent, and non-discriminatory. American officials are actively encouraging such changes, which in turn will strengthen opportunities for U.S. companies. And as cities gain economic power, they will gain political power, and thus will be in a stronger position to influence policy in their nations' capitals. So their good economic practices could in time become good national practices. In addition, many of today's local leaders eventually will be tomorrow's national leaders, so it is good to get to know them now. For example, a large portion of the new leadership of China previously held high-level provincial jobs. And Mexican President Enrique Peña Nieto previously served as governor of the state of Mexico.

The dramatic acceleration in urbanization in Asia, Africa, and Latin America is a relatively new phenomenon, but the momentum is likely to continue for some time. Last fall, Foreign Policy Magazine and the McKinsey Global Institute published the results of a study on the world's 75 "most dynamic" cities -- based on GDP and population growth. On the list were four in Brazil, three in India, two in Turkey, and a staggering 29 in China. The list of Chinese cities ranged from well-known urban centers like Shanghai, Beijing, and Chongqing to less well-known cities like Tangshan, Xuzhou, and Changzhou.

To better understand this urbanization phenomenon, I make a point of visiting "second and third-tier cities" when I travel to emerging countries. On my last trip to China, I went to Hefei (#58 on the list, with a current population of 3.4 million people) and Nanjing (#15, with a population of 7.2 million).

In both cities, I engaged provincial and municipal officials on our "bread and butter" bilateral economic issues, including: trade and investment promotion, intellectual property rights protection, energy and environment cooperation. In Hefei, I also visited one of our "Eco-Partnerships" -- a venture between the Hefei University of Science and Technology and the Ohio State University. This partnership is developing electric vehicle technologies to address environmental and clean-energy concerns. In 2011, I traveled to Chengdu (#16, with 7.7 million people) to discuss ways its businesses could strengthen trade and investment ties with the United States.

In India, I recently visited two rapidly growing cities -- Chennai and Agra. In the past year, many Chief Ministers and trade delegations from Indian states have visited the United States. During the Third U.S.-India Strategic Dialogue, both sides agreed that a "Conversation Between Cities" should take place in 2013 to address "urban challenges and solutions in the 21st century." So we anticipate more interaction. The future of the U.S.-India economic relationship increasingly will be driven by mayors, chief ministers, governors and their teams.

The State Department is playing a key role in this new effort to enlarge the multi-level, sub-national dimension of our international economic policy. Our embassies have been organizing outreach teams to provinces/states and cities in China, India, Brazil and other countries. In Brazil, the State Department and Mission Brazil are collaborating with local leaders on economic, cultural, and educational initiatives through the U.S.-Brazil Memorandum of Understanding to Support State and Local Cooperation signed in April 2012, and through Port and Sister City Agreements, as well as a host of U.S. governor-led trade missions. In advance of the 2014 World cup and 2016 Olympic and Paraolympic Games in Brazil, our countries signed a bilateral MOU on cooperation to support the organization of major global sporting events that created the framework for enhanced cooperation and exchange of best practices. In addition to economic development and tourism, our expanding relationship with new levels of engagement look to promote initiatives involving public health; youth development and the promotion of justice, citizenship and human rights.

But we know that the most dynamic part of this effort will not come from Washington. It will be the intensified interaction between America's cities and states and counterparts in emerging countries. To facilitate this, we are putting more state and local government leaders, as well as businesses in their areas, directly in touch with Ambassadors and Embassy country teams. Our "Direct Line to American Business," provides conference calls with American Ambassadors and country teams for U.S. business to discuss conditions and opportunities in emerging markets. And to strengthen U.S.-China sub-national cooperation, we launched the U.S.-China Governors Forum in 2011.

America's states and cities are the source of enormous economic creativity. Innovative efforts are underway at state and local levels to improve education, attract investment, modernize infrastructure, promote exports, and foster innovation. Mayors and governors are a key, and increasingly significant, force in this nation's international economic policy. With continued strong growth in foreign markets, they are intensifying their efforts to capitalize on opportunities afforded by globalization.

As the world's "most dynamic" cities seek to manage their own urban growth, American state and local officials have much to offer. Our mayors can share their experiences in urban design, clean energy projects, Smart Grids, codes for energy efficient buildings, transportation safety, and innovative environmental solutions. Many already participate in the C40, a global initiative led by Mayor Bloomberg to curb carbon emission. Mayors and governors also lead numerous delegations of top business and community leaders, who have expertise in such areas as infrastructure development, building and running advanced medical care facilities, and creating quality education programs for growing numbers of urban residents. They are great salespeople for companies in their localities that want to export and vigorously promote the advantages their cities and states offer for foreign investment.

Our local officials also are supporting research and innovation hubs where foreign businesses can locate and develop new businesses. And they are strengthening the export potential of their regions, and their attractiveness for foreign investment, by upgrading the capacity of junior colleges, community colleges, and universities to equip students with 21st Century skills. For many foreign investors, the availability of skilled workers is key to their investment decisions.

Booming urbanization abroad provides enormous opportunities for American business. Our embassies and consulates, and officials in Washington, are proactively facilitating the commercial outreach efforts of U.S. companies to rapidly growing cities, states and provinces. And we in the State Department, along with our colleagues in the Commerce Department and other agencies, are working with our mayors and governors as they seek to establish new economic relationships with these same entities to boost exports and attract more investment. These efforts will not only strengthen the American economy, they will also broaden and deepen ties between these countries and the United States.

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