Territorial impacts of globalization on European

Regions (Tiger)

Van Hamme GillesIGEAT-ULB

AalborgESPON seminar, 13.06.2012

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The TIGER project

Lead partner : IGEAT-ULB

PartnersPp2 (UK): School of real estate and planning. University of ReadingPp3 (France): CNRS (mainly Université de Normandie) Pp4 (Italy): Dpto Studi Europei e Interculturali, Sapienza Università di Roma Pp5 (Sweden): Internationella Handelshögskolan i Jönköping ABPp6 (Bulgaria): Institute of Geography BAS

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The scales of globalization

1. Globalization can be defined by unprecedented intensity of flows and interdepedencies between territories across the world.

But NOT as undirected interconnections of territories across the world because distance and power relations (core vs periphery) remain decisive

2. Cities and macro-regions are the scales at which global processes operate

• Global cities are the places where global firms really operate;• The macro-regions are large areas of intense internal economic

relations.

However, the state remains a major actor and most of all the main regulatory level at national and international

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I. The macro-regional scale: Europe in the world

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1. The regionalization process : « natural economic regions »

The areas of intense trade relations (2008)

In Europe, the share of internal links are very high (ESPON):

- 84% in maritime links

- 86% of air connections;

- 70% of trade;

- 80% of FDI

- 40% of migrations (up to 64% when neighbourhood is included)

- 32% of cities links within APS networks

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2. Regionalization vs globalization

•Two simultaneous processes;•Europe is more and more open but remains a rather closed economy.

1968 1986 1996 2007 1968 1986 1996 2007

ASEAN 7,7 10,3 22,3 33,5 24,4 44,6 65,9 85,8CIS 0,0 0,0 13,0 11,4 2,0 8,0 29,2 40,8EU 11,9 27,3 30,5 42,4 8,8 14,6 14,1 20,6GCC 2,9 5,9 5,7 6,0 64,7 50,6 64,4 76,2MERCOSUR 1,0 1,4 3,1 4,2 11,7 13,5 12,4 22,6NAFTA 2,8 5,5 10,0 11,7 4,2 9,2 11,7 14,6

Average of all free trade areas 4,4 10,0 14,1 19,7 7,7 15,3 18,8 28,4

Internal trade as a share of GDP (%) External trade as a share of GDP (%)

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3. Europe as a major yet declining power

Share of in interregional trade

  1968 1988 1995 2009

Western Europe 29,4 24,2 23,5 21,2

Central and Eastern Europe (former USSR included) 5,3 4,1 4,8 7,7

Northern America and Mexico 19,8 19,4 18,1 13,8

Latin America 7,2 4,6 4,4 4,9

China 1,9 4,1 6,3 13,7

Southern Asia 2,3 1,7 1,7 3,2

Japan, Korea, Taïwan 9,0 16,9 17,1 12,1

1. The decline of old core powers

2. The rise of China but no spectacular rise from other « Bric ».

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It results in a shrinking geography of influence in the world

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However, Europe keeps a very high position in the international division of labour

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Europe as a major power

- 26.5% of interregional trade of services, (22% for NAFTA and 4% for China)

- 39% of outwards and 24% of inwards of interregional flows in FDI (NAFTA is 30% and 34%; China 10% and 1-2%)

- Western Europe concentrates 40% of the headquarters of the 500 biggest world firms, before Northern America and Japan, with respectively 33 and 15% in 2008

- The most attractive place for human flows Etc..

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4. Europe’s relations with the rest of the world

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5. Policy implications

Three main facts

1) Functional Europe goes beyond institutional borders but flows are unbalanced between core and peripheral extra-EU functional Europe;

2) But territories that matter for Europe are not necessariliy where Europe’s influence is the highest

3) Europe is increasingly opened but still a rather closed economy. large developed economies like the EU mainly rely on their own markets and producers, even in integrated global sectors such as the automotive industries

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Policy implications

Two major issues:

1. The openess vs protectionist debate

- Despite globalization, Europe is a strong continental and integrated economy that mainly rely on its own markets

- Openess is not territorially neutral because openness and vulnerability to global competitive pressures are unequal at regional level

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Policy implications

2. The neighbourhood policy

- “The Europe 2020 strategy is not only relevant inside the EU, it can also offer considerable potential to candidate countries and our neighbourhood and better help anchor their own reform efforts. Expanding the area where EU rules are applied, will create new opportunities for both the EU and its neighbours”

- in its relations with the neighbourhood, the EU focuses on strategic issues such as energy, security and immigration

- However, this is not part of a full development strategy for the neighbourhood though neighbouring countries do receive large shares of EU development aid

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II. European territories in the global economy

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1. European regions in the global economy

Openess rate of European regions/nations to global trade (share of extra-EU trade to GDP) :

Regions are unequally open to global economy

It varies from 0.1% (Corsica) to 31% in Flanders

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European regions in the global economy

• The geography of the relations of European regions

European regions have differentiated relations with the rest of the world (hence different interests for the different parts of the world):

- West-European profile (Blue)

- Global profiles (pink; green)

- neighbourhood profile: red and orange

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European regions in the global economy

Functional and sectoral specializations of regions and vulnerability

Different types are distinguished :

- Gateway cities

- low vulnerability area specialized in medium/high functions

- high vulnerability areas specialized in low functions;

- « In between » areas

- low participation to the global economy

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2. European cities in the global economy : advanced services

•A shift to Asia at global level

•The good and stable position of European cities, beside London and Paris

Advanced Producer Services Financial Services

Rank city connected to

London London dyad index (APS)

city connected to London

London dyad index (FS)

1 New York 100.00 New York 100.00

2 Hong Kong 80.30 Hong Kong 98.72

3 Paris 78.34 Singapore 85.92

4 Singapore 71.29 Tokyo 82.45

5 Tokyo 68.92 Shanghai 77.88

6 Shanghai 65.40 Sydney 77.70

7 Beijing 64.82 Paris 77.51

8 Sydney 62.10 Beijing 70.57

9 Milan 60.83 Madrid 70.02

10 Madrid 58.46 Milan 65.81

11 Brussels 58.06 Seoul 65.63

12 Moscow 56.67 Toronto 65.45

13 Frankfurt 53.21 Taipei 60.51

14 Toronto 52.63 Frankfurt 59.23

15 Seoul 50.66 Mumbai 58.87

16 Chicago 50.26 Zurich 58.32

17 Mumbai 49.22 Brussels 54.48

18 Warsaw 47.26 Dublin 54.30

19 Amsterdam 47.14 Amsterdam 54.11

20 Zurich 46.79 Moscow 54.11

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European cities in the global economy : Cities’ functional specialization

The position and and networksThe position and specialization of European cities in different types of functions and networks

- Most global cities have diversified functions (advanced services, airports, stock exchanges, real estate)

- Except port gateways;

- small and medium cities are more specialized

A scale rather than functional specialization of cities

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European cities in the global economy : Cities’ geographical specialization

Like regions, cities have differentiated relations with the rest of the world:

- Global cities have the more global profile (red and brown)

- we distinguish different neighbourhood profiles (eastwards in blue, southwards)

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Position of cities in global networks and competitiveness

•Neither in the US nor in the EU, we found a relationship between cities connectivity and economic performances after 2000

European Union USA

GDP per

inhabitant

2008

Growth of GDP,

2000-08

Growth of GDP per inhabitant

2001-08 N

GDP per inhabitant

2008

Growth of GDP,

2000-08

Growth of GDP per inhabitant 2001-08

N

Standardized Connectivity

2000 - -0,038 -0,004 167 - -0.125 -0.001 99

Standardized Connectivity

2008

0,597**

- - 171 0,565** - - 99

Gross connectivity

2008

0,592**

- - 171 0,596** - - 99

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3. Policy implications

1) European territories are unequally open to external global competitive pressure

2) The position of territories in the international division of labour and within integrated value chains may explain unequal vulnerability to global economic competition in both the service and manufacturing economies.

3) No simple relationship between territorial economic competitiveness and position in the global economy

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Policy implications

Policy alternatives are:

1. To invest mainly in the global cities, which are the gateways of globalization, in order to improve Europe’s position in the world.

“Metropolitan areas play an important role in sustaining the EU’s global competitiveness” (EC, 2011).

However:1. The link between economic growth and city connectivity/size cannot be

clearly established by empirical evidence; 2. The idea that the wealth of major European and national cities will

benefit non metropolitan territories is not empirically proven;3. The impact of public investments toward the most developed areas of

the EU can be questioned since, by definition, it will concentrate in cities endowed with developed infrastructures ;

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Policy implications

2. Or, by putting the emphasis on territorial cohesion, should the EU instead persist in a redistributive regional policy aiming at providing conditions for better performance in less developed regions?

Combining an opened up Europe with a shift toward major cities as a motor of growth in EU regional policy raises the issue of vulnerability of different types of regions toward globalization, in particular:

1. The high vulnerable areas specialized in low functions2. The “in between areas” facing increasing internal and external

competition because of higher labour cost though unable to move up in the value chains (with no control on value chains) this is typically what non metropolitan Mediterranean regions are facing now and central-Eastern Europe could face in a near future.