Introduction:

There is an Egyptian proverb that says those who worry about demons will tend to run into them. Like much folk wisdom, it has solid psychological foundations; the likelihood of a problem rearing its head often appears to be exacerbated by constantly fretting about it. Ever since Hosni Mubarak stepped down as president of Egypt on February 11, 2011, the demon named “Now What?” has been keeping the Israeli government up at night. On August 18, it finally leapt up at them.

That day, a group of armed men attacked Israeli buses, as well as civilian and military vehicles north of Eilat, near the Egyptian border. Eight Israelis, both civilians and soldiers, were killed. The Israel Defense Forces (IDF) set off in hot pursuit, shooting at the attackers from a helicopter. The helicopter crew either failed to notice, or ignored, that they were shooting over the Egyptian side of the border. In the pursuit, three Egyptians— an officer and two enlisted men—were killed and another three later died of their wounds. Israeli minister of defense Ehud Barak, while blaming Palestinian groups for the assault, made comments to the effect that the attacks were largely Egypt’s fault as there had been a major security collapse in Egypt since the former regime had been ousted six months earlier.

The way matters unfolded over the next few days pointedly illustrated the answer to a question that had been asked repeatedly both by international media and the Israeli government since Hosni Mubarak’s ouster: What did Egypt’s January 25 Revolution mean for Israel? The simplest answer is that it is no longer business as usual. The relationship between Egypt and Israel has changed and both countries will have to navigate new waters carefully and wisely.

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Hillary Clinton isn’t often in the business of offering unsolicited advice to her Republican—or even Democratic—rivals in the presidential race. However, in a CNN interview with Alisyn Camerota on January 12, 2015, Hillary Clinton did just that. She did something quite taboo. She talked about the presidential transition.

Her comments did not flow from confidence that she would be elected president—a confidence she may indeed have. Her words came from experience, pragmatism and reality. They were words that did not simply reflect her own approach to a candidacy or a prospective administration. It was advice to everyone running for president about the right thing to do—not for themselves, but for the American public.

Clinton said:

I want to think hard—if I do get the nomination, right then and there—how we organize the White House, how we organize the Cabinet, what’s the legislative agenda. You know, the time between an election and an inauguration is short. You can’t wait. I mean, you can’t take anything for granted; you need to keep working as hard as you possibly can. But I think it’s important to start planning because we know what happens if you get behind in getting your agenda out, in getting your appointments made. You lose time, and you’re not doing the work the American people elected you to do.

Presidential candidates almost never speak of a transition until they are declared the president-elect in the late hours of the Tuesday following the first Monday in November. Candidates fear being accused of taking the election for granted, or “measuring the drapes.” They worry such planning will signal to voters an off-putting overconfidence.

Those fears may be legitimate, but acting on those concerns can be dangerous. If a voter believes a candidate should not prepare for a new administration until they are officially elected, that leaves the president-elect about 11 weeks to ready themselves for the busiest, most complicated, most important job in the world. In those 11 weeks, a president-elect would need to think not just about the 15 Cabinet secretaries who serve as the most visible political appointees in government, but literally hundreds and thousands of other posts. (One dirty little secret is that the President of the United States appoints over 3,000 people to his or her administration.)

Presidents have to think about the structure, order, and sequence of their legislative agenda. They need to communicate their intentions and plans to congressional leadership. They need to think about organizing a White House. The truth is from president to president, the White House looks the same from the outside, but is structured and functions dramatically differently on the inside. Presidents have myriad important decisions to make that will set the tone and agenda for the following four years and will affect every American in some way. Eleven weeks is not enough time. Clinton acknowledges this.

Clinton’s “bold” statement actually reflects a reality in American politics. As soon as an individual accepts his or her party’s presidential nomination, they are entitled to funding, office space, and government email and technology as part of the transition process. The Office of Personnel Management is involved, as is (of late) the Office of Presidential Personnel for the outgoing administration. The presidential transition is an essential part of democracy, policymaking, administration, and the continuity of government. Every four years, the government supports two transitions—one that comes to be and one that closes up shop.

In one way however, Hillary Clinton is entirely wrong. Waiting until you receive the nomination is too late to begin thinking about the transition. As I have written before, every presidential candidate should start thinking about a transition as soon as they announce their candidacy. They don’t need a full Cabinet chosen on Day 1 of the campaign, but they should designate one or two close advisers to organize for the process, begin considering names for posts, think through the types of policies to propose in the first 100 days, and begin what is one of the most complicated managerial tasks in the world.

Hillary Clinton is right “it is important to start planning,” and it’s also never too early to do so. I hope Clinton’s claim that one should start upon securing the nomination is a reflection of that fear of the “drape measuring” accusation. I hope she is planning her transition now. I hope Bernie Sanders and Ted Cruz and Donald Trump and John Kasich and everyone else is planning their transition right now. It’s essential. Clinton knows the challenges of setting up a White House and the complications that early disorganization can cause; she saw that dysfunction first hand in 1993. But most candidates have also worked in or around the White House or have been in politics long enough to know the importance of an effective transition. And candidates who haven’t, like Donald Trump and Carly Fiorina, should be more inclined to set up a transition early, as they have more managerial experience than anyone else in the race.

To this end, I have a modest proposal. It probably won’t happen. It’s likely one that candidates would fear, and it would likely only be effective if everyone is on board. Every current presidential candidate should sign a pledge committing to two things. First, by February 1, 2016, they will designate at least one staffer, adviser or confidante as a transition director.  Second, they will not publicly criticize another candidate—of either party—for having a transition staffer or team in place. Call it a “Transition Truce.” But the reality is that such a pledge—and the actions behind it—are essential for a better functioning, better prepared, more effective administration, no matter who it is who swears the oath exactly one year from today.

       

Brachman says Ohio, with its very urban configuration, is a unique state with unique challenges.

       

       

       

       

       

       

       

       

Policy Brief #178

One of the strongest narratives in U.S. history has been the contribution made by talented, hard-working and entrepreneurial immigrants whose skills and knowledge created a prosperous new country. Yet today, the nation’s immigration priorities and outmoded visa system discourage skilled immigrants and hobble the technology-intensive employers who would hire them. These policies work against urgent national economic priorities, such as boosting economic vitality, achieving greater competitiveness in the global marketplace and renewing our innovation leadership.

In the long term, the nation needs comprehensive immigration reform. In the short term, policymakers should focus on reforms that are directly related to increasing the "brain gain" for the nation—creating new jobs and producing economic benefits—to produce tangible and achievable improvements in our immigration system.

	RECOMMENDATIONS
	Rebalance U.S. immigration policies to produce a "brain gain," with changes to visas that will allow employers to access workers with the scientific and technological skills they need to improve economic competitiveness, employment and innovation Tie immigration levels to national economic cycles to meet changing levels of need Use digital technologies to modernize the current visa system

Background

Immigrants are now one-tenth of the overall U.S. population—a situation that defies facile stereotyping. Immigrants have made significant contributions to American science and economic enterprise, most notably in the areas of high-tech and biotech.

• Immigrants’ productivity raises the U.S. Gross Domestic Product (GDP) by an estimated $37 billion per year
   
• More than a quarter of U.S. technology and engineering businesses launched between 1995 and 2005 had a foreign-born founder
   
• In Silicon Valley, more than half of new tech start-up companies were founded by foreignborn owners
   
• In 2005, companies founded by immigrants produced $52 billion in sales and employed 450,000 workers
   
• Nearly a quarter of the international patents filed from the United States in 2006 were based on the work of foreign-born individuals (more than half of whom received their highest degree from an American university)
   
• Economists calculate that, as a result of immigration, 90 percent of native-born Americans with at least a high-school diploma have seen wage gains
   
• Historically, immigrants have made outsize contributions to American science and technology, with Albert Einstein perhaps the leading example. One-third of all U.S. winners of Nobel prizes in medicine and physiology were born in other countries Far from "crowding out" native-born workers and depressing their wages, well-educated, entrepreneurial immigrants do much to create and support employment for Americans.

In order to fully reap the benefits of the worldwide talent market, U.S. immigration policy must be reoriented. Current policy is significantly—and negatively—affected by the unintended consequences of the 1965 Immigration and Nationality Act that made family unification its overarching goal. Although the law may have contributed to the high-tech boom by removing long-standing, country-specific quotas and expanding immigration from places with strong science and engineering education programs, its main effect was to enable immigrants to bring in family members, without regard for the new immigrants’ education, skill status or potential contributions to the economy.

Thus, in 2008, almost two-thirds of new legal permanent residents were family-sponsored and, over the past few years, the educational attainment of new immigrants has declined.

U.S. employers have a large, unmet demand for knowledge workers. They are eager to fill jobs with well-trained foreign workers and foreign graduates of U.S. universities—particularly those with degrees in the sciences, technology, engineering and mathematics—the "STEM" fields that continue to attract too few U.S.-born students. In 2008, the "Tapping America’s Potential" business coalition reported that the number of U.S. graduates in STEM had been stagnant for five years, and that number would have to nearly double by 2015 to meet demands.

Meanwhile, the United States is falling behind in the pace of innovation and international competitiveness. Evidence for the decline in innovation is the decreasing U.S. share of international patents. In 2009, for the first time in recent years, non-U.S. innovators earned more patents (around 96,000) than did Americans (93,000). Only a decade earlier, U.S. innovators were awarded almost 57 percent of all patents.

To date, Congress—for a variety of reasons, including partisanship—has stalled in addressing the problems of immigration and immigration policy. Unfortunately, this inaction extends to problems hampering the nation’s economy that, if remedied, could help the United States grow employment, pull out of the current recession more quickly and improve its position in the global economy.

Game-Changing Policy Reforms

Rebalance Fundamental Goals

The goals of U.S. immigration policy should be rebalanced to give priority to immigrants who have the education and talent to enhance America’s economic vitality, by stimulating innovation, job creation and global competitiveness. At the same time, it should decrease emphasis on family reunification (other than parents and children of U.S. citizens). Changing the composition of the immigration stream, even without increasing its size, would result in a "brain gain" for the United States.

Other countries, such as Canada, the United Kingdom and Australia, strategically craft immigration policy to attract skilled and unskilled workers, making the benefits easy to see and strengthening public support for immigration in the process. Canada, for example, explicitly targets foreign workers to fill positions for which there are not enough skilled Canadians. Applicants for admission to the country accumulate points based on their field of study, educational attainment and employment experience. Upon reaching the requisite number of points, the applicant is granted a visa. Some 36 percent of all Canadian immigrant visas are in the "skilled-worker" category, as opposed to only 6.5 percent in the United States.

An interesting by-product of this strategy—which is both clearly articulated and of obvious benefit to the national economy—is that Canadians see the benefits of the policy and, as a result, immigration is far less controversial than in the United States. In 2005 polling by The Gallup Organization, only 27 percent of Canadians wanted to decrease immigration, whereas 52 percent of U.S. citizens did. And, three times as many Canadians (20 percent) as Americans (seven percent) actually wanted to increase it.

An obvious place to begin the rebalancing process would be with the many foreign students who come to the United States for education in scientific and technology fields. They are familiar with our culture and speak English. Many would like to stay and build careers here. But, under current visa rules, most are sent home as soon as they graduate. A complete policy reversal is needed, with automatic green cards for foreign graduates of U.S. science and technology programs.

In fact, the United States should make it as easy as possible for these highly trained students to stay, since the expansion of job opportunities in India, China and other growth-oriented countries now offers them attractive options. Our current counterproductive policy, quite simply, puts the United States in the position of training our global competitors.

New York City mayor Michael Bloomberg, in a December 2009 Meet the Press interview, said about immigration: "We’re committing what I call national suicide. Somehow or other, after 9/11 we went from reaching out and trying to get the best and the brightest to come here, to trying to keep them out. In fact, we do the stupidest thing, we give them educations and then don’t give them green cards."

Universities collectively invest huge sums in the development of these students. In addition, research suggests that increasing the number of foreign graduate students would increase U.S. patent applications by an estimated 4.7 percent and grants of university patents by 5.3 percent.

Another strategic policy change would be for the federal government to take U.S. workforce and economic conditions into account when setting immigration levels and annual H-1B visa numbers for scientists and engineers. Such a flexible approach would reflect labor market needs, protect American workers’ jobs and wages, and dampen public concerns about employment losses during lean economic times.

Revamp the Antiquated Visa System

Increase the Number of Visas for Highly-skilled Workers

Today’s visa programs for high-skilled workers are not large enough to fill the numerical demand for such employees and are too short in duration. For example, H-1B visas for workers in "specialty occupations" are valid for a maximum of six years. Between fiscal years 2001 and 2004, the federal government increased the annual allocation of H-1B visas for scientists and engineers to 195,000. The rationale was that scientific innovators were so important for the country’s long-term economic development that the number set aside for those specialty professions needed to be high. Since 2004, that number has returned to its former level, 65,000—only a third of the peak, despite rapid technologic change in almost every field, such as information, medicine, energy and logistics.

Most of these visas are allocated within a few months of becoming available. Even in recessionplagued 2009, applications exceeded the supply of visas within three months. Almost half of the visa requests came from U.S. employers, most of them in high-tech industries. Clearly the demand for visas is greater than the supply, and a minimal step would be to raise the set-aside for high-skilled workers to the previous, 195,000 level.

Only a small percentage of aliens with student visas and aliens with H-1B visas are able to change directly to legal permanent resident status—about seven percent of each category, according to a study published in 2005—although about half of H-1B visa-holders eventually become legal permanent residents. Such an uncertain path is not conducive to career (or employment) planning in a competitive environment.

Several additional small programs support talented scientists and entrepreneurs. These, too, could be aligned with economic goals, expanded or more effectively promoted:

• The O-1 "genius" visa program allows the government to authorize visas for people with "extraordinary abilities in the arts, science, education, business, and sports." In 2008, around 45,000 genius visas were granted. The clear intent is to encourage talented people to migrate to America. However, the current program is too diffuse to have much impact on the level of scientific and technological innovation talent in the United States.
   
• The EB-5 visa program offers temporary visas to foreigners who invest at least $500,000 in the nation’s rural or "targeted employment areas" or at least $1,000,000 in other areas. If the investment creates at least ten jobs, the visa automatically becomes a permanent green card. The program is authorized by Congress to offer approximately 10,000 visas per year, but it is significantly underutilized—about 500 EB-5 visas a year were granted between 1992 and 2004. In 2009, 3,688 people did become legal permanent residents under the "employment creation (investors)" category, a number that includes spouses and children.

According to a March 2009 report from the Department of Homeland Security, the causes of the persistent underutilization of this program include "program instability, the changing economic environment, and more inviting immigrant investor programs offered by other countries." The report makes a number of recommendations designed to streamline program administration and encourages greater efforts to promote the program overseas.

Update the Visa System Infrastructure

Aside from questions about the number of visas allowed, the infrastructure for considering and granting visas needs a major upgrade. Currently, the U.S. visa process requires people seeking entry to provide paper copies of sometimes hard-to-obtain documents. Often these are lost in the system and must be submitted repeatedly. Obtaining a visa can take months and, in some cases, years. Implementation of the USA PATRIOT Act has slowed the process even further.

The visa system should adopt digital technology to reduce both errors and delays. Further, if the nation’s immigration policy moves toward a more credential-based approach, any new electronic processes should be designed to minimize the potential that false documents regarding an individual’s education and experience will be accepted.

Tie Immigration Levels to National Economic Indicators

To ease U.S.-born workers’ understandable worries about job competition from immigrants, Congress should tie overall annual levels of immigration to the unemployment rate and growth in the Gross Domestic Product. Immigration levels can be adjusted up or down depending on the level of economic conditions. These fluctuations should occur automatically, triggered by authoritative statistical reports.

Political Hurdles to Immigration Reform

U.S. news reporting on immigration focuses heavily on illegality and largely ignores the benefits of immigration. Sadly, important news organizations follow the tradition set in the 19th century, when many journalists railed against groups of newcomers, such as immigrants from Ireland and China. Immigration opponents’ unfavorable media narratives, often widely publicized, have a discernible impact on public opinion and affect policymaking. The economic, social, and cultural benefits of immigration are rarely reported.

The State of Public Opinion

Immigration does not rank high on Americans’ lists of the country’s most important problems. In 2008, only four percent of Americans (mostly people from Southwestern border states concerned about illegal entry) thought immigration was the country’s most important problem. Even during 2007’s acrimonious national debate about comprehensive reform, 60 percent of Americans believed new arrivals benefit the country. But public opinion can shift quickly, which makes politicians wary. Fifty-seven percent of voters in the November 2010 mid-term election considered immigration a "very important" issue, ranking it 7th and on a par with taxes and national security/war on terror, according to the Rasmussen report.

The Need for Reform Follow-Through

Administration and enforcement of immigration laws and visa programs are complex, in part because federal, state and local officials are involved in various aspects and are overseen by multiple federal agencies. Aligning the goals of these different entities to put an emphasis on the brain gain can help build support for policy improvements.

As the report of a 2009 Brookings Forum on Growth Through Innovation pointed out with regard to promoting innovation more broadly, "while the actions we need to take are clear and reasonably simple to outline, our political culture erects insurmountable barriers to long-term planning, funding and implementation."

Achieving an Improved Immigration Policy

It will be difficult to achieve comprehensive, coherent policy reform in the face of many competing goals and interest groups and in the current polarized political environment. The task is made more difficult by the divided authority over immigration matters within Congress, involving several committees and subcommittees with competing interests and different political dynamics. Individual members of Congress tend to focus on local concerns, forestalling consideration of broad, long-term national interests.

In the past, elected officials have overreacted to specific episodes of problems related to immigrants or anti-immigrant sentiments in developing policy, rather than taking into account long-term national economic priorities. Just as deleterious, stalemate and inaction have prevented needed reforms, despite a frustrating status quo for employers who need talented scientists and engineers, and who could hire many more Americans if they could fill key slots with skilled workers they cannot find in their local workforce.

A spectrum of experts has suggested creation of a broadly representative, independent federal immigration commission that could develop specific policies under parameters set by Congress. Proposals for such a body have the common themes of depoliticization, insulating members from parochial political pressures and relying on technical experts. Given past missteps and the current policy stalemate, it makes sense to consider such proposals seriously, in the hope that all aspects of immigration—especially those that affect U.S. economic vitality—receive the thoughtful attention they need.

Conclusion

The immigration policy reforms in this paper focus on those that would have swift and direct positive impact on the nation’s economy. Clearly, these are not the only reforms the system needs. A fairer, more comprehensive immigration policy also would:

• Develop more effective and cost-effective border control strategies
   
• Strengthen the electronic employment-eligibility ("e-verify") system and add an appeals process
   
• Improve the immigration courts system and the administration of immigration law
   
• Work harder to integrate immigrants into American life and teach them English and
   
• Create a path to citizenship for illegal immigrants with requirements that applicants learn English, pay back taxes, and pay fines.

Meanwhile, a number of the needed corrections to the system as it affects national economic goals, employment, innovation, and global competitiveness can be addressed, including:

• Tying visa and immigration levels to U.S. economic indicators, in order to assuage American workers’ concerns about threats to employment and wage levels
   
• Creation of an automatic green card for foreign graduates of U.S. science, technology, engineering, and mathematics educational programs and other steps to make staying in the United States a desirable option
   
• Expansion of visa programs (especially H-1B for highly skilled workers) and making more effective the O-1 and EB-5 visa programs and
   
• Creating a modern, electronic visa system.

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In 2013, China surpassed the European Union to become the Middle East and North Africa (MENA) region’s largest trading partner, and Chinese oil imports from the region rival those of the United States. Do China’s growing interests in the Middle East imply a greater commitment to the region’s security? How can China and regional governments reinforce these ties through greater diplomatic engagement?

In a new Policy Briefing, Chaoling Feng addresses the key choices facing Chinese and Middle East policymakers. She finds that China’s continued reliance on a framework of “non-intervention” is being challenged by the region’s divisive conflicts. Indeed, China’s economic interests face mounting risks when even maintaining “neutrality” can be perceived as taking a side. Furthermore, China’s case-by-case, bilateral engagement with MENA countries has hindered efforts to develop a broader diplomatic approach to the region.

Read "Embracing Interdependence: The Dynamics of China and the Middle East"

Feng argues that China and particularly the GCC states must work to further institutionalize their growing economic interdependence. China, drawing on its experiences in Africa and Latin America, should take a more holistic approach to engagement with the MENA region, while enhancing Chinese institutions for energy trading. GCC countries, for their part, should aim to facilitate bilateral investments in energy production and support China’s plans for Central and West Asian infrastructure development projects.

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Editor’s Note: During the Global Cities Initiative’s international forum in São Paulo, Bruce Katz delivered remarks on metropolitan areas and their potential to power national economies worldwide. The remarks were written by Katz and Julie Wagner.

The Metropolitan Future of Brazil and the United States
(This presentation is also available in Portuguese)

Good morning everyone.  It is a pleasure to be back in Sao Paulo with JP Morgan Chase, our partner in the Global Cities Initiative.  I am grateful for their support and leadership.

I first want to thank Governor Alckmin and Mayor-elect Haddad for their participation today and we fully welcome the opportunity to work with both of them and the city and state in the coming months and years.

This has been an extraordinary week for our delegation of mayors and business, civic, and university leaders from 10 major American cities and metropolitan areas.

We have seen firsthand the proud history and infectious energy and vibrancy of this great city and macro-metropolis.  We are grateful to Luiz Felipe D’Avila and the Centre for Public Leadership for co-sponsoring this forum today. We also owe a debt to others who have hosted and guided us this week—the State of Sao Paulo, particularly the State Secretariat for Metropolitan Development, Insper, the Commercial Association of Santos and the Port of Santos and the Brazil-U.S. Business Council, and the U.S. Embassy and Ambassador Shannon.

As Aod said at the outset, São Paulo is the first stop outside the United States in our five year Global Cities Initiative.  That is a deliberate choice.   The relationship between the United States and Brazil is a critical one.  Despite barriers, the economic and social ties between our two countries are strong and growing stronger.  Trade is booming.  Investment is up.  Tourism and business travel have never been higher.  And the recent state visits by presidents Obama and Rousseff send a clear signal that this is a partnership of the highest order. 

Yet there is hard work to do in both our countries. The U.S. and Brazil are undergoing major economic transitions. By global standards, both of us under-perform on exports, far trailing other countries.  The U.S. is shifting slowly back towards a more productive, sustainable economy after our worst downturn in 80 years; Brazil is moving forward towards a more open, outward looking economy.

Against this complex backdrop, our delegation comes bearing a simple proposition. The answers to national challenges lie, in great part, below the national level.

We live in a century where cities and metropolitan areas are driving national economies and the global economy. The U.S. and Brazil have 84 and 85 percent of our respective populations living in our cities and metropolitan areas … and these communities generate 91 percent of the GDP in the U.S. and 88 percent of the GDP in Brazil.  There is, in essence, no American or Brazilian—or German or Chinese—economy; rather our national economies represent networks of powerful city and metropolitan economies.

 Today, I will make three main points.

As the world urbanizes, cities and metropolitan areas have emerged as the engines of national economies.

As our economies globalize, cities and metropolitan areas act as the centers of international trade and investment.

To prosper today, cities and metropolitan areas need to drive their economic destiny.  In our federal republic, where power is shared across national, state and local governments, that requires new thinking about who does what. 

But, first things first; we cannot put forward a metropolitan playbook without first understanding what a metropolis is.  And the best way to do that is from the ground up.

On the right side of the screen you see the São Paulo metropolis, 20 million strong, 10^th most populous in the world.

On the left side of the screen you see Chicago, Mayor Daley’s hometown, with a population of 9.5 million, 26^th largest in the world.

Both of these metro areas cluster around core cities but cover large land masses and encompass multiple jurisdictions.

The São Paulo metro is more than 8,000 square kilometers in size, with more than half of your population living in the city proper and the remainder residing in 38 other municipalities.  

Chicago is close to 19,000 square kilometers in size with one third of the population living in the central city and the remainder spread across, incredibly, three states, 14 counties encompassing hundreds of separate municipalities and townships.

The assets São Paulo and Chicago need to compete nationally and globally are spread across their regions:

Clusters of workers;

Key colleges and universities;

Major hospitals and health care facilities;

A network of urban green space; and

The infrastructure—roads, rail and transit and airports—needed to move people, and freight

In other words, metro areas are the natural, organic geographies of the economy, clustered around central cities for sure, but also benefitting from the assets offered by satellite cities and suburban, exurban and rural areas.   

With that background, let me start with an irrefutable observation: cities and metropolitan areas are the 21^st century engines of national economies.

Since 1950, the world’s urban population has more than quadrupled in size.  Now sized at 3.6 billion people, it is expected to surpass 5 billion by 2030.

In 1950, 29 percent of the world’s population lived in cities and their metropolitan areas.  By 2009, the share surpassed 50 percent. By 2030, urban settlements will harbor more than 60 percent of the world’s population.

In many respects, the world is becoming more like us.  The United States and Brazil are two of the most highly urbanized countries with city and metro concentrations surpassing those of both mature economies in Germany, Britain, and Spain and emerging economies like China, India, and South Africa.  

Cities and metros do not just house people; they power economies.  Today Brookings released our annual Global Metro Monitor that tracks the economic performance of the world’s top 300 largest metropolitan economies.

Incredibly, we find that these metropolitan areas house a little under one fifth of global population but generate nearly half its total output.  Put simply: Metros around the world punch way above their weight.

Why are they so powerful? 

Because they cluster and connect firms, large and small, with ports and airports, transport and energy infrastructure, and a broad range of supportive institutions that supply skilled labor, advanced research and customized capital.    And when that happens, productivity improves, entrepreneurship rises, employment and wages increase.   

The dominance of metros holds true for both our countries, which house 13 and 76 of the top 300 global metros, respectively.

Your thirteen top metropolitan areas are home to one third of Brazil’s population, concentrate half of Brazil’s manufacturing output and your population with college education and account for 56 percent of national GDP and 63 percent of financial services output.

These metros range from Sao Paulo, 11^th largest economy in the world, to Baixada Santista, 295^th largest.    

Eleven of your metro areas are state or national capitals; this state is home to three of the 13 large metro areas.

Metro São Paulo takes its place among the world’s most populous and economically powerful metros.

You are home to one tenth of Brazil’s population, account for one-fifth of Brazil’s GDP and generate 57 percent of the GDP of this state.

For America’s part, our top 76 metros form the real heart of the U.S. economy. 

Housing 61 percent of our population, they concentrate a majority of our manufacturing output, gather our most educated people, and generate more than 68 percent of our national GDP.

They also make an outsized contribution on financial services and the production of patents. 

In the U.S., the top 76 metros range from New York, L.A., and Chicago to less well known communities like Allentown, Little Rock, and Harrisburg.

This leads to my second point: as economies globalize, cities and metropolitan areas act as the centers of international trade and investment.

Metros and trade are inextricably linked, and have been for millennia.   The Silk Road that connected Asia, Europe, the Middle East, and Northern Africa.   The Hanseatic League that grew from Hamburg and Lubeck to include 170 cities that monopolized trade in Northern Europe between the 13^th and 15^th centuries.  The great Italian city-states of Venice, Pisa, Genoa, and Amalfi.   

These historic networks offer essential lessons:

As a recent Brookings report concluded:

“Trade is essential to metros—it is how they grow their economies. And metros are essential to trade—they provide the specialization and market access that facilitates exchange among producers and consumers.” 

The top Brazilian and U.S. metros are our nations’ logistical hubs, concentrating the movement of goods and people by sea and by air.  In Brazil, 61 percent of foreign waterborne trade, measured by tonnage, passes through the seaports of the top metros; in the United States the equivalent share is over 66 percent. Passenger travel is even more concentrated; in both countries, close to 82 percent of international air travel passes through the airports of the top metropolitan areas.

Significantly, the top cities and metros in both our countries are magnets for foreign direct investment, particularly “greenfield FDI” where foreign entities invest in new facilities or expansions of existing facilities rather than just purchase domestic companies. 

From 2003 through September 2012, Brazil’s 13 accounted for 77 percent of greenfield FDI projects in Brazil and 59 percent of the jobs created through this key growth vehicle.  The top 76 U.S. metros also accounted for 77 percent of Greenfield FDI projects and 70 percent of the jobs created.

Brazil’s 13 are responsible for a third of all national goods exports; the share is substantially higher for the top U.S. metros.  Brookings research on U.S. exports shows that our top U.S. metros dominate the trade in manufacturing and services … and, given their edge in sectors like chemicals, consulting and computers, are on the front lines of commerce with China, Brazil, and India. 

In sum, our research has shown the collective centrality of our top cities and metros to the trading position of our nations. 

Yet metro economies do not exist in the aggregate; they have distinctive starting points and vary considerably in their trading prowess and intensity.  What makes São Paulo special on the global stage—your distinctive offer, your special investment potential—is different from what defines and drives Rio or Curitiba or Salvador.

São Paulo is Brazil’s premier global metropolis and the numbers reflect that.  Your metro houses 10 percent of Brazil’s population but:

• Your airports handle 26 percent of all passenger traffic in Brazil and 33 percent of all air cargo.
• Your macro metro neighbor, Santos, which we visited yesterday, is the busiest container port in South America and 43rd in the world.
• You are Brazil’s largest metropolitan exporter, producing 27 percent of all metropolitan exports of goods

• And from 2003-2011 you received 19 percent of all greenfield FDI in Brazil … in fact, more FDI than New York, LA, Chicago, Houston and San Francisco combined.

You trade with the world’s most prosperous cities, in the United States and elsewhere, but in particular ways given your distinctive industry clusters and sectors.

Given your substantial concentration in financial services (with 19 of the 25 top international banks present and the world’s third largest financial exchange), you interact naturally with New York and Miami in the U.S., London, Madrid, and Frankfurt in Europe and Shanghai, Tokyo and Hong Kong in Asia.

Despite the outward movement of industry, you still serve as Brazil’s main global platform for advanced manufacturing sectors like automotive, linking you closely with Detroit in the U.S., Milan and Stuttgart in Europe, and Nagoya in Japan.

The shape and structure of your economy puts São Paulo in an exclusive club of “global cities,” a definition drawn in the 1990s when the process of trade, investment, and globalization was seen as empowering a few command and control finance metros of the world.

But today, our notions of “globalizing cities” are more expansive, recognizing that all cities are fueled, to different degrees, by global investment and connected, in distinctive ways, via global commerce and exchange, global product and labor supply chains. 

The energy cluster in Rio finds common interest with the energy cluster in Houston through investments by Exxon Mobil, Chevron and Petrobras … and then further with energy firms in Amsterdam, Dar es Salaam, and Bogota.

Campinas’ hi-tech sector naturally links with the hi-tech cluster in San Jose’s Silicon Valley via elite universities, advanced R&D institutions, and global tech giants like IBM, Hewlett-Packard and Dell … and then further with tech clusters in Tokyo, Bangalore and Dublin.

As headquarters of Embraer, São Jose  dos Campos links via supply chains to Palm Bay, Florida, Harbin, China and Lisbon, Portugal.

In short, a new global map is being drawn in the world, not of nation to nation trade but of metro to metro exchange.

That leads to my final point: To prosper in the global economy today, metros need to drive their global economic destiny.

We have a three part playbook:

The playbook starts at home, with cities innovating locally to exploit their distinctive competitive advantages in the global economy.

In the U.S., cities and metropolitan areas are acting with intentionality in the aftermath of the Great Recession to devise and implement what we call “metropolitan business plans.”  The purpose: build on their distinctive competitive advantages in the traded sectors of the economy, given the crippling effect on housing and consumption.

The elements of business planning are fairly simple and straightforward

Each metropolis does a market assessment of their unique economic profile and potential … what goods and services they trade, which nations they trade with, where trade trends are likely to head given market dynamics here and abroad. 

Armed with this information, metros then set goals and objectives that build on their distinct advantages, devise strategies to meet those goals and establish metrics to gauge progress.

All these efforts are undertaken by a consortium of corporate, government, university and civic institutions that cut across jurisdictions, sectors, and disciplines and “collaborate to compete” globally.

Let me give you an example of how these business plans are helping cities and their metros grow jobs and restructure their economies.

Los Angeles, represented here by Mayor Antonio Villaragoisa, has devised an ambitious plan to grow exports by identifying and proactively supporting export ready firms in leading trade sectors like aerospace, computers, professional services, and film and television.  The L.A. system of trade is moving from a story of fragmentation, where no clear institution defines or drives decision-making, to a reality of coordination and collaboration, responsiveness and flexibility under one Los Angeles Regional Export Council.  The result: More firms will export more goods and services to more places producing more and better jobs.

We believe business planning holds great potential for São Paulo and other Brazilian metros.   Obviously, fixing the basics is a critical first step for economic growth: safe streets, quality schools, efficient transport and sound governance.  But a business plan might focus on increasing foreign direct investment in infrastructure necessary to reduce congestion, improve mobility, and enhance accessibility to jobs. 

The key is not what you focus on … but to decide your focus based on evidence and in a collaborative manner and then to hold yourself accountable through continuous assessment and measurement. 

Having innovated locally, cities must network globally—creating and stewarding close relationships with trading partners in both mature economies and rising nations.

The new global reality is leading to intricate networks of trading cities which grow together by linking together and learning together.

These networks obviously start with firms and ports that do business with each other.  

But, over time, networks extend to supporting institutions—governments, universities, business associations—that provide support for companies at the leading edge of metropolitan economies.

The city of Houston and the city of São Paulo, for example, executed a formal agreement earlier this year that commits each city to increase commercial relations, intensify scientific and technological connections, and facilitate information to tackle shared challenges.

Enterprise Florida, the principal export and investment organization in that state, opened an office in São Paulo in 2011 to help Florida companies expand trade.  APEX-Brasil, Enterprise Florida’s Brazilian counterpart, has its only U.S. location in Miami’s free trade zone.  There it executes projects like providing clean and renewable fuels to IndyCar, the American based auto racing body. 

The Ohio State University and the University of São Paulo have partnered to support the exchange of students and collaborative research.  Areas of recent focus: natural and mathematical sciences, medicine, and teacher training.  In 2014 Ohio State anticipates opening its third “Global Gateways” office in the world in São Paulo to further capitalize on these linkages.

Here is the simple message: We can see a network of trading cities emerging right here in São Paulo and it is a future characterized by multi-layered relationships across multiple dimensions and disciplines, interests and institutions. 

Finally, having innovated at home and networked globally, cities and metros must advocate nationally for federal and state policies and practices that will support metro growth.

Metros are engines, but they do NOT act alone.

Only national governments can set the rules of the road: enhancing access to foreign markets, enforcing trade agreements, opening up borders to immigrants and protecting intellectual property.  They can also help match domestic firms with potential global customers, provide export promotion support, and commit resources to modernizing logistics hubs.

As the world evolves as a network of trading cities, it is only natural that cities become more articulate and aggressive about the support they need from higher levels of government. 

In the United States, cities have found a receptive partner in the Obama Administration.  Key federal agencies—the International Trade Administration, the Ex-Im Bank, the Small Business Administration—have been central partners in guiding business plans with a particular focus on boosting exports.

Similar alliances could be built here.  As part of the Global Cities Initiative, the ESADE Business School mapped the trading system in São Paulo.  Their research clearly shows the central role of your federal and state governments in advancing the internationalization of your economy.  True success will come when these higher level entities align closely with your distinct assets and advantages.

Going forward, the advocacy of cities must extend beyond accessing the export promotion and finance programs of federal and state governments.  They must get to the heart of the matter.

The United States has had a North American Free Trade Agreement in place for 20 years with our partners, Mexico and Canada.

We have recently concluded important Free Trade Agreements with Colombia, Panama, and Korea.

President Obama was in Southeast Asia this month discussing the possibilities of a Trans-Pacific Partnership.

The 2011 Agreement on Trade and Economic Cooperation signed by President Obama and President Rousseff provides a platform to build on.

As they have expressed, we need a new vision for our Hemisphere … and for our two countries.

We are both growing with healthy demographics.

We both have an enormous pool of natural assets.

We both have a shared imperative to reorient our economies.

Empowered with the right policies, enabled with the right frameworks, we have the potential to grow together this century, powered by our major population and economic centers.

So that’s our playbook:

Innovate locally.  Network globally. Advocate nationally.

Let me end where I began. 

From the beginning of time, cities have been centers of commerce, formed along the roads and routes of trade. 

And so it is today.

The cities of our nations are powering our nations.

They are giving physical shape to the globalizing economy, seamlessly integrating the exchange of people, goods, services, energy, capital, ideas, and culture.

The promise of the Global Cities Initiative broadly is to capture and channel this energy into lasting, sustained networks and partnerships.

Our pledge as we leave here today is to work with you, partner with you, and ensure that the United States and Brazil bind together not just as two nations but as living, vibrant, powerful networks of trading cities and metropolitan areas.

      

       

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Crisis seems to be the byword for Brazil today: political crisis, economic crisis, corruption crisis. Even the 2016 Rio Olympics seem to teeter on the edge of failure, according to the governor of the state of Rio de Janeiro. Yet despite the steady drum beat of grim news, Brazil is more than likely to resume its upward trajectory within a few years. Its present economic and political troubles mask a number of positives: the strength of its democracy and a new found willingness to fight corruption at all costs. With the correct policies in place, its economy will recover in due course. The impeachment process against Dilma Rousseff will soon be over, one way or the other. The present troubles are merely a temporary detour on Brazil’s long quest to achieve major power status and a consequential role in the international system. In a world in turmoil, where geopolitical tensions are on the rise and the fabric of international politics is stressed by events such as Brexit, we should not lose sight of Brazil’s history of and potential for contributing to sustaining the liberal international order.

Brazil’s aspirations for greatness

Brazil has long aspired to grandeza (greatness) both at home and abroad. As its first ambassador to Washington, Joaquim Nabuco (1905-1910) once said, “Brazil has always been conscious of its size, and it has been governed by a prophetic sense with regard to its future.” As we document in our new book, Brazil has reached for major power status at least four times in the past 100 years: participating as a co-belligerent with the Allies in World War One and seeking a permanent seat on the Council of the League of Nations thereafter; joining the Allies in World War II and aspiring to a permanent seat on the United Nations Security Council (UNSC) in 1945; mastering nuclear technology beginning in the 1970s, including launching a covert military program (now terminated) to build a nuclear explosive device; and most recently, beginning with the presidency of Luiz Inácio Lula da Silva (2003-2011), seeking to become a leader in multilateral institutions, including actively campaigning for a permanent seat on the UNSC.

A decade ago, many Brazilians believed that this time their country was poised to secure its position as a major power. As the seventh largest economy in the world with the 10th largest defense budget and significant soft power, Brazilian leaders such as Lula saw their country as being “in the mix” of major powers who, while not able to make the international order alone, could very well shape its evolution through uncertain times together with other major powers. Certainly, they no longer saw Brazil as one of the middle or small powers, the “order takers” in the international system.

Brazil saw a new opportunity to emerge as a major power in the advent of a relatively stable and peaceful post-Cold War geopolitical order, the decade-long commodity boom that supercharged its economy after 2002, and the rise of the BRICS (Brazil, Russia, India, China, and South Africa). Between 2002 and 2013, Brazil’s virtuous trifecta—democratic consolidation, rapid economic growth, and reduced inequality—was a boon to its soft power. This combination was highly attractive to many in the developing world, contributing to Brazil’s claim to leadership on the international stage as a bridge between the global South and the great powers. International peace and stability particularly favored Brazil’s predilection for deploying soft power rather than hard power. And in the BRICS, Brazil saw an opportunity to work together with other emerging powers critical of the present international order to advance its agenda for reformed global institutions.

Rethinking Brazil’s approach to global influence

Brazil’s bridge-building strategy was effective in advancing its national interests in multilateral forums, most recently on global internet governance and global climate change. But the BRICS dimension of Brazil’s strategy detracted from its ability to influence the world’s great democracies. The BRICS identity associated Brazil with authoritarian powers—China and Russia—that were viewed by the United States and its allies, at best, as unhelpful critics and, at worst, as deliberate saboteurs of the present order. This undermined Brazil’s credibility with Washington and other leading democracies, and hindered its ability to advance its preferred policies on everything from nonproliferation to the reform of global economic institutions to the debate on humanitarian intervention. In retrospect, working more closely with other emerging democracies that seek reform of the international order, such as through the India-Brazil-South Africa association known as IBSA, would have more clearly signaled Brazil’s constructive intentions while still preserving its critical posture.

Today, the opportunities that powered Brazil’s most recent rise—post-Cold War geopolitical stability and a massive commodity boom—are receding, replaced by a more fractious and dangerous international system. Despite troubles at home, it is not too early for Brazil’s leaders to think anew about how to strengthen national capabilities and deploy them strategically to address this new environment. This includes fortifying domestic institutions, both to address the present crisis but also to restore the luster of Brazil’s soft power. It means bolstering Brazil’s hard power capabilities once the economy improves and deploying them in ways that contribute to its soft power, for example by taking on additional responsibility for leading critical international peacekeeping operations as it has in Haiti. It means thinking carefully about how to signal to the democratic great powers Brazil’s commitment to a strengthened liberal international order, even as it holds onto its own principles and works towards reform of multilateral institutions. And eventually, as Brazil completes its recovery, it means contributing more substantially to the costs of maintaining its preferred global order. A Brazil that achieves all this will be well positioned to have a positive global impact, continuing to be a strong (if sometimes critical) partner for the United States in shaping the international order.