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By: Ugne Saltenyte

Urban exports can be seen both as a factor in a city’s economic growth and an indicator of its stage of urban development. Generally, expanding export activities contribute to the economic advancement of urban economies. Different profiles of exported goods and services in developing and developed metropolises also affect wealth disparities of local consumer across world’s cities.

Top 10 Exporting Cities, 2012

Source: Euromonitor International

Over the last decade, developing countries’ share of total world exports oversaw an increase. In 2012, Abu Dhabi, Shanghai and Guangzhou also emerged as the world’s export powerhouses, achieving the highest absolute value of exported goods and services, which was primarily driven by lower manufacturing costs and abundance of natural resources. In fact, the exports of developing cities are usually dominated by a rather narrow industrial focus and specialisation in low-order goods and services, which adds relatively little to the affluence of local citizens.

Meanwhile, developed metropolises demonstrate more economic maturity and focus on more high-value than high-volume oriented exports. New York, London, Toronto and Los Angeles take pride in creating high value-added tradable services (business services, including financial intermediation, research and development, as well as commercial services) as well as more efficient wealth distribution among local citizens.

Large Exports does not Necessarily Lead to more Affluent Consumers

The picture looks somewhat different when analysing the wealth generation effects of local export activities. In terms of value of per capita exports and per capita annual disposable household income, advanced cities such as Copenhagen, Sydney, Houston and Toronto emerge ahead of such export-oriented developing cities as Shanghai and Guangzhou. Meanwhile, Abu Dhabi benefits from world commodity price developments, which have boosted its export value.

Per Capita Exports vs Per Capita Income in Top 10 Exporting Cities, 2012

Source: Euromonitor International

Greater consumer affluence in developed cities is primarily driven by the prevalence of high-order products and services. For example, Toronto is considered the third largest financial centre in North America, with the whole business services sector accounting for 41% of Toronto’s total GDP in 2012. Exports of information and telecommunication services in Sydney account for 50% of Australia’s total ICT exports. In the face of high oil prices and greater competition from exporters in the developing world, developed cities are enhancing their competitiveness by improving their energy efficiency and continuing to shift towards the stronger expansion of services exports.

Meanwhile, developing cities like Shanghai, Guangzhou, Minsk and Ho Chi Minh City, although being strong exporters, lagged behind in terms of per capita income generation in 2012. Despite a relatively fair performance in per capita export value terms, developing cities are often dominated by industries dependent on cheap labour, which tend to lock in the wealth generation effect of export activities for their local citizens.

Stepping up the Global Value Chain

Given their urban export profile and wealth distribution among local citizens, developing cities are unlikely to catch up with advanced cities by focusing solely on low cost production. Indeed, East Asian economies have already begun moving towards more technological and skill-intensive exports. The pace of gravitation towards service-oriented economies will determine the scope of future consumer affluence development in such cities as Shanghai or Guangzhou. Investing in the skills and education of the local labour force will also be of great importance in order to attract foreign direct investment, both as an export platform for multinational companies of high-order goods and services and significant emerging cities.

 

 

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