Think of creativity. This exercise can lead to something profoundly abstract as it is quite easy to float through the realms of imagination without restrictions. Now, consider creativity within the bounds of an anonymous street artist with a flair for clever social commentary. If you think of Banksy, it highlights the value of constraints in enhancing our understanding of an abstract concept. Similarly, constraints introduced by geographic boundaries are indispensable for administrative and political functioning. Yet, when studying the dynamics of globalized economies, such demarcations severely limit our understanding of trade, bringing out their arbitrary nature.
Globalization has transformed cities into clusters of industries that are specialized in the performance of specific economic activities that become inputs in globally dispersed value chains. Industries and as a consequence the geography they occupy are increasingly interconnected as the conception, manufacture, delivery and associated services of a product often traverses political borders1. Cities are usually more economically interconnected with each other than to smaller centres of population within their own sub-national unit of geography. In fact, even after considering reactionary trends in geopolitics such as re-shoring, decoupling and regionalization of supply chains, production is still granularly spread across multiple regions that offer inputs with a competitive parity in cost and quality2.
Yet, the advantages offered by these global value chains (GVCs) also bear risks. GVCs have to be evermore resilient as they are continually subjected to disruptions stemming from geopolitics, pandemics and climate change. A disruption caused in a single value chain can cause ripples across industries and borders, with shocks in strategically important industries and location causing even greater setbacks3. Efforts to optimize and ease the pressure on GVCs require a holistic comprehension of the dynamics and complexities underlying international trade networks. To do this, we need to think beyond arbitrary geographical boundaries to truly capture the spread of economic activities.
When we look beyond national borders, we come across other means of grouping geographies that offer an alternative approach to the study of economies. One such classification in North America is the St. Lawrence - Great Lakes region, a bi-national macro region encompassing two Canadian provinces (Quebec and Ontario) and eight US states (New York, Pennsylvania, Ohio, Michigan, Wisconsin, Indiana, Illinois and Minnesota), this region accounts for $7.9 trillion in GDP alone, making it the third largest economy in the world. The St. Lawrence River occupies a strategic geographic position making it a gateway between the Atlantic and the Great Lakes. The banks of the St. Lawrence and the subsequent Lake Ontario are home to Canada’s largest cities, propelling the country’s economic growth.
But more importantly, this classification opens up the study of the networks of interconnectedness that industries have both within and beyond this region. This shift in perspective allows for the perusal and realization of opportunities that are not only closer to home but also significantly more consequential in socio-economic terms. In a hotly contested world, complementary policy between two longtime allies that provides stimulus for economic activity from a GVC perspective would act as a powerful vector for economic development.
In summary, there is a need to change the unit of analysis when studying economies to improve the measure of its performance as the conventional approach falls short in capturing the underlying networks that exist and are needed for the successful performance of economic activities.
References
1. OECD (n.d.)
2. Jaax, Miroudot and van Lieshout (2023). Deglobalisation? The reorganisation of global value chains in a changing world. OECD Trade Policy Papers. OECD.
2. Cantore, Lavopa and Rodousakis (2023)