Leveraging State to State Engagement in a Flatter World
Special Representative for Global Intergovernmental Affairs
Good morning everybody and thank you, kindly, Marie for that very warm introduction.
I want to take a moment, to also thank Financial Executives International. Not just for inviting me to participate in the Washington policy conference, but for strengthening and emboldening the role of financial services—throughout the years, and throughout the world. Through interaction, information, responsible influence and integrity, FEI, and indeed, each and every one of the executives gathered in this room today, represent companies and organizations that have been at the forefront of engineering global business solutions for an increasingly globalized world.
Through networks of collaboration, you’ve also inspired new financial tools and mechanisms to deal with the increasingly complex challenges of a global economy during trying economic times.
These efforts have retooled the way the world does business—but even more fundamental than that, your global business operations have highlighted that the world is no longer practicing in old-world or traditional environments.
As Secretary of State Hillary Clinton has always said, and as the US has long maintained, our foreign policy relationships will always be nation to nation.
But the scope of what defines nation-to-nation conversations are shifting in the modern, more global, and more flattened economy—deeming city to city, and state to state dialogues just as critical to the larger context of a executing, implementing and achieving a nation’s overarching diplomatic goals.
So, just as Secretary Clinton engages in a conversation with the Foreign Minister of South Africa on issues of greenhouse pollutions, so too does our office host pivotal conversations on the matter, with the Mayor of Durban and the Premier of KwaZulu-Natal.
Ultimately, the agreements and points of collaboration between local government representatives are increasingly importance pieces of the puzzle, when national representatives are seeking to iron out far reaching agreements. And this trending dynamic is starting to cut across both public and private sector, applying whether you’re a country looking for fuel efficiency partnerships, or even if you’re a company looking to better understand green energy standards being implemented in areas where you manufacture.
So in this day and age, sweeping evolutions in technology have given more of the world a voice; and more corners of the world access to one another. No longer are global business leaders just paying attention to traditional high-density growth areas like Washington, DC, Silicon Valley, Brussels, Beijing or Dubai – so too must they look at prospective growth opportunities in the urbanization of Andhra Pradesh; the tech rich corridors of Alexandria, Virginia; the pharmaceutical sectors of New Jersey and Puerto Rico; and even the rapid energy sector growth in Moscow, Russia.
The rapid decentralization of growth, moving toward peripheral cities, or remote citizenries outside of major tourist destinations, is also having a rising impact on socio-economic policy.
In a single generation, revolutions in digital communications technology has enabled just about anyone to set up shop, recruit talent, and move their products—wherever there’s an Internet connection. This is expanding the ability for communities and business to grow outside the conventional major-city and urban-city development models, and empowering smaller and smaller businesses to thrive, in smaller and remote cities.
Even through the power of mobile devices, we now have the power to move shares of stock or read the latest news on the Eurozone debt crisis from the palms of our hand. Sure, in this room our BlackBerry’s may annoy our families at the dinner table from time to time—but as national wireless infrastructure grids become more and more of a priority for developing nations, telecommunication businesses are able to place phones in the hands of those who were once voiceless. And with that expanding high-speed infrastructure, those who once had never seen the mountain tops of the Himalayas, or the shimmering waves of the Pacific—are now able to communicate with those who were once foreign strangers; lend a micro-loan to a rural farmer; and even add Mark Zuckerberg as a ‘friend’ on Facebook.
Admittedly, the challenges of remaining competitive, as a business or a nation, in a more decentralized global economy seem to grow by the day – but so too do the 21st century opportunities they afford.
Many of the major business interests in this room used to include just a handful of key countries or trading partners in their development portfolio, but with the nexus of power and innovation moving beyond the state, and towards the provincial and local authorities, “subnational” clusters are indeed the 21st century laboratories that generate new political, social, and indeed economic solutions.
A recent report by the World Bank notes that the world could have as many as 10,000 cities with populations of 100,000 or more by 2025. Including more than 800 cities with a half-million residents. More surprising perhaps is that most of the world’s megacities, cities with populations of 10 million or more, will be located in the developing regions of the globe.
From a perspective of 21st century statecraft, these trends point to the necessity that nation states, and indeed the U.S. must aggressively cultivate subnational partnerships if we are to learn how to manage this rapidly spreading global growth, and learn how to sustain collaborative political, social and economic networks—in the face of these rising regional tides.
Interestingly, the process of globalization and decentralization, seem to influence and impact one another, skyrocketing the criticality of this much needed subnational engagement.
Faster and cheaper international communications has allowed local experiences to be heard around the world, which means local decision makers are able to use experiences from varying regions to shape their own local policies.
Whether it’s the Mayor of New York City, or the Mayor of Chicago, the interlinking processes of subnational exchanges has the potential to influence local civic decision makers to consider alternatives to the way they do business, creating a market opening for all companies in all regions of the world. And this creates immense opportunities for companies like those represented in this room, because the more subnational partnerships are fused together and groomed, the more market demand those regions would have for your particular services. Moreover, if your services are thriving in one corner of the world, city-to-city engagement, only raises the prospects that your companies will be pitched as the gold-standard leaders by which other public institutions should be engaged in a partnership with.
By President Obama and Secretary Clinton making subnational engagements a priority of this Administration, we’ve been catalyzing our states and our cities to engage with governors and mayors all over the world—advancing the probability and potency of those very public-private partnerships.
Not only does this offer stronger, and more personalized cultural exchanges—a new contour of 21st century statecraft and & diplomacy under this Administration—but it also allows those civic leaders around the world to share ideas about local governance and learn from each other. The greater understanding among localities about how cities are managed, or how business is done, creates new relationships between their staff and their citizens, while encouraging new linkages among the private sector in a way never seen before on the world stage.
Conversations that end up pointing how to best deliver goods and services in the new global environment, how to manage housing challenges, how best to battle crime, and how to evenly distribute social benefits—not only give smaller cities motivation to adapt and improve their processes, but they simultaneously give thought to which private entities are best equipped to help in the delivery of these social efforts. Which means that subnational engagements, while on its surface may seem to be a facet of political partnering, also help spur business growth.
But let me be clear. These efforts, while principal pillars of 21st century American diplomacy—are not just about imposing the will of one country onto another; nor is it about boasting particular nations and their cities, as the pioneers of global best practices in urban management.
In fact, I submit to you today that the next great chapters of economic growth will include cities in America, China, Brazil or India and the 10,000 others on the rise. Cities that encourage innovation, topple barriers for small business, and harness the power of regional economic development to establish regional clusters of growth.
As a recent Economist entry stated: cities rather than states are becoming the islands of governance on which the future world order will be built.
Which is why the clarion call for subnational engagement that Secretary Clinton has led, stems from the fact that it can empower us to help each other trade better, invest better, create better jobs, educate our children better, and solve the problems we all share. This new world is not — and will not be — one global village, so much as a network of different ones, supporting our collective ends.
Taken together, the advent of global hubs and megacities forces us to rethink whether state sovereignty or economic might is the new prerequisite for participating in successful global diplomacy. The answer is of course both, which exponentially expands the opportunities that financial service organizations, such as yours, have to begin servicing these growing and largely untapped markets.
As subnational engagements increasingly provide a level playing field by which cities, powerful or weak, large and small can interact—so too does the mere physical expansion of peripheral cities afford hefty economic opportunity in many regions of the world.
Goldman Sachs’ global economics team, for example, recently released a report about rapidly developing nations stating that, the number of people with an annual income over a threshold of $3,000, will double in number within three years and reach 800 million people within a decade.
This predicts a massive rise in the size of the middle class in these nations, in areas of the world that for far too long have been overlooked for lacking a strong middle class.
Moreover, in 2025, it is estimated that the number of people in Brazil, Russia, India and China earning over $15,000 may reach over 200 million. Ultimately indicating that a huge pickup in demand will not be restricted to basic goods but impact higher-priced goods as well.
So with developing nations rapidly expanding in wealth; and the smaller cities, rapidly leveraging innovation to expand business opportunity, more and more subnational entities will quickly be assuming roles as fixtures that the global economy must inevitable pay attention to.
And that’s exactly why codifying subnational relationships is of utmost importance:
Many of these cities on the rise will be experiencing a rapid transfer of wealth, and with that, a rapid expansion of urban development. Managing that influx of capital, making astute investments with that capital, and understanding how to meet utility demands for everything from electricity to irrigation—will all be unique challenges for these cities to deal with.
Subnational conversations will help establish a dialogue that will transfer knowledge among parts of the world already well versed in managing these rapidly expanding demands. Moreover, this peer-to-peer engagement on a city level will offer inclusive growth, because cities will actively pursue other areas of the world whose resources and demographics mirror theirs, in order to apply best practices in a way that most effectively meets the nuanced cultural demands of a particular region of the world.
Moreover, these points of communication aid private businesses better access to compete for bids and contracts in these new market, from the very point of inception, because if we’re increasing dialogue about the regional needs of communities, we’re also boosting the dialogue about what financial institutions, building contractors, agricultural providers, and other required private entities, are best suited to meet regional public needs.
So again, codifying subnational relationships not only promotes a deeper cultural exchange among nations – better advancing principals of the openness, freedom, transparency and fairness in economic growth; but also opens the door on brand new bids for development, that all of your organizations can start taking advantage of.
These opportunities are especially valuable businesses such as yours because it gives your organizations the chance to shape the best-practices of these newly thriving cities from the ground-up. That unique level of bottom-up influence, once communicated throughout the world via subnational conversations, increasingly allows a small enterprise in Iowa to communicate to a small, budding enterprise in Rangoon—and discuss what worked and didn’t work for them, and what companies, whether it be Bechtel or Raytheon, helped actualize those efforts.
But of course any of these strategic relationships that the US plays a role in, and that our office advocates for, must be governed by basic principles that support the long-term, high impact and inclusive growth, for the localities involved.
First, US seeks an open platform, one that allows for participation from around the world, in order to maximize opportunities for entrepreneurs, investors, workers, and consumers everywhere.
Openness has been an attribute consistent with U.S. economic policy for many administrations and it reflects our shared belief that an open system invites the most growth.
Second, US seeks a free platform, one that includes as few barriers to trade and investment as possible. In recent years, we have made strong progress together toward removing tariffs and other so-called border barriers. But let’s face it: Numerous non-tariff barriers remain.
Third, we seek a transparent platform in which the so-called rules of the road are developed in consultation with all stakeholders and known to everyone, no matter their connections or country of origin. In the absence of transparency, corruption flourishes; regulations can be applied arbitrarily, small business owners may discover that some rules change without warning or apply to them but not to others. None of this is good for competition or for sustaining the trust and confidence that is necessary for trade and investment in a global economy.
Finally, we seek subnational engagement grounded in fairness. The United States is looking for a level playing field, an environment in which businesses rise or fall based on honest competition rather than government manipulation.
Respect for these pillars of our strategic partnerships, is precisely why the United States has launched thriving bilateral agreements in countries such as China andIndia, enhancing our global competitiveness; increasing our exchange of cultural capital, and adapting to the global decentralization that has accelerated much of these two countries’ growth.
U.S.-China and U.S.-India ties are richer and more extensive than ever before. After the President, and Ambassador Gary Locke, then the Secretary of Commerce, led historic trade delegations to the regions—bilateral cooperation and dialogue has moved well beyond traditional diplomacy unlike we’ve ever seen before, rapidly expanding into the fields of economic, environmental, educational and commercial engagement,
To further broaden and deepen our bilateral relationship, we need to engage and bring into play the skills and energies of partners beyond our central and federal governments.
Leaders in U.S. states, Indian provinces and Chinese localities are among those helping to shape, and draw benefit from, a positive, cooperative and comprehensive set of relationships. And increasingly these leaders are recognizing that economic prowess and 21st century statecraft doesn’t begin or end at the border’s reach—instead these locale-to-locale relations are vital to improving our mutual understanding of this flatter world, and our independent understanding of our unique economies.
On the U.S. side, governors and mayors have continued to lead international trade delegations while their state and city governments work with local businesses to promote investments, exports and jobs in their home states.
Moreover, since education in the United States is primarily the responsibility of state governments, subnational relationships are another way that we’re able to work with public and private universities in other countries abroad, to attract foreign exchange students, promote the teaching of foreign languages, and encourage students to study overseas.
Municipal governments, in conjunction with private organizations, have pioneered efforts in the United States to combat climate change and protect the environment through local ordinances, recycling programs, and other initiatives to protect the environment.
Similarly through a subnational dialogue, China and India’s provincial and municipal governments have separately started working with local partners to establish relationships between native and foreign hospitals, and other public service providers.
Local officials on the ground in China are now responsible for ensuring that environmental regulations are properly enforced. And through ongoing subnational dialogues, provinces there are increasingly approving foreign investment transactions below a certain value, with many provincial leaders taking the lead from their central governments by aggressively working to make their respective regions an attractive investment vehicle in and of themselves.
For example, as part of the U.S. – India Strategic Dialogue, the U.S. Trade and Development Agency announced two grants that will lay the ground work for a Smart Grid pilot project in the greater Delhi area and help to establish new solar grid-connected power plants in the states of Karnataka and West Bengal using U.S. based technology.
Moreover, to build on this momentum and continue sustaining such growth, India declared it will spend $1 trillion over five years on infrastructure services with over $100 billion from foreign direct investment. U.S. businesses are poised to develop India’s infrastructure and the U.S. Government will help them along the way, bolstering not only US competitiveness in these markets, but also modernizing India along the way.
While just one example of what is possible through subnational engagement, the U.S.-India partnership has flourished to span the entire range of human endeavor.
An indispensable example of what’s possible with trade and investment between two countries creating new levels of mutual prosperity and security. As one of India’s leading trade partners and direct investors, the United States is committed to continuously strengthening ties through new opportunities for engagement.
So as is exemplified in these case-studies, mutual opportunities of growth in subnational agreements creates a vortex of opportunity for U.S. business growth, jobs growth, and industry growth. Fueled by the expansion of a 300 million person middle class…a whole range of American companies and products – from communications equipment to automotive manufacturing – have expanding markets in South Asia. In the State of Kolkata, Pepsi is using advanced U.S. technology to recycle more clean water than it consumes for its production facilities and to enable its Indian partners to keep fresh food longer using cold storage technology.
Thus, this new era of global, flatter partnership, is in essence a sort of innovative, yet increasingly symbiotic relationship—a two-way street where global actors are important for each other in basic ways – to stimulate the creation of jobs and economic growth in both countries, while also exploring new technological possibilities.
It’s on display in India, it’s been on display with China since signing a subnational MOU with them earlier in the year; it’s on display at the international conferences with mayors; and it’s on display at global conferences discussing the need to green our communities.
In a 21st century world, there are no shortages of great partnerships, nor a shortage of great ideas when we shore up our collective will to address the most human of challenges we face.
But part of understanding and leveraging that effectively means that we need to build upon these subnational agreements; build greater understandings than we’re even able to conceive of now; and forge a nexus of community and business – development and technology – to be the intersection where we begin paying attention, start learning from, and start investing in.
Many of you have in-depth knowledge of the communities and cultures in which you work. You have greater latitude to experiment with different approaches, and the flexibility and adaptability to try out these different approaches. We know that the challenges we face cannot be solved with a one-size-fits-all approach. Your giving reflects that reality.
But by combining our strengths, governments and philanthropies, we can more than double our impact, to this subnational end. And the multiplier effect continues if we add businesses, NGOs, universities and entrepreneurs. That’s the power of partnership at its best – allowing us to achieve so much more together than we could apart.
That’s why we can all take a page out of Secretary Clinton’s playbook, and start engaging your state and local officials right away, creating new opportunity.
First, you can be a convener, bringing together people from across regions and sectors to work together on issues of common interest. Partner with your state and local officials to take advantage of the opportunities around the world in identifying how your businesses can be of help to community needs.
Second, you can be a catalyst – launching new projects, actively seeking new solutions, providing vital training and technical assistance to facilitate additional projects to those without training. And asking for and expecting best practices from all your interactions with government foreign and domestic.
Third, you can be a collaborator, working closely with you and other partners to plan and implement projects – avoiding duplication, learning from each other, maximizing our impact by looking for best practices.
FEI and all of you today are certainly no strangers to proactively finding new ways to collaboratively innovate—but today I am specifically here to ask you collaborate with the State Department on this new generation of public-private partnerships. One that’s indicative of a global economy, a flatter world, and a new vision of cities on the rise.
Together, we will expand current partnerships and embark on new ones. We will embrace collaboration and become more receptive to the ideas and approaches that you will bring to us.
And we want to deploy the full range of tools available, which includes you—your efforts, and your leadership in engaging on this most human and most local of levels, is what is at the heart of what we call smart power. Smart power is really the way of combining everything and everyone at our disposal to achieve the results we seek.
The real power of relationships that you are building here today lays in the ability to leverage local knowledge about the individual communities you are in, their particular needs, and what each can offer with the opportunities that an ever-globalizing world is opening up for all of us.
That is why it is important to build coalitions that include the private sector, government, and civil society. Conferences like this is one are the model vehicles to begin work.
Everywhere I travel, I meet people not just looking to us, but asking us for leadership. This is a source of strength, a point of pride, and a great opportunity. So I thank you, but in order to continue that on, and remain the hallmark leaders in the world that define us; we must encourage you to adopt and establish a credible set of subnational relationships.
I thank you for understanding what we must do and why the inclusion of sudnational leaders assists to broaden and deepen our bilateral relationships