Trade, Finance, and Economic Development

Local and regional administrations – collectively called sub-state governments – have always taken part in maintaining the economic well-being within their borders. Such economic development activities were traditionally thought of as ‘low politics;’ however, the increasing globalization in the post-war world brought sub-state governments in direct contact with the global market. Driven by economic pressures and new opportunities, municipalities and regions became more active internationally. Today, economic paradiplomacy is a staple of modern sub-state governance and includes policies designed to promote international trade, attract foreign direct investment, and grow tourism. These can range from more budget-friendly activities, such as online promotions, to more substantive ones, including participating in trade missions and establishing permanent representations abroad. The widespread adoption of economic paradiplomacy since the 1980s has not only expanded the number of actors involved in economic development but has also influenced intergovernmental relations. States often consider sub-state economic development a welcome addition to their international economic efforts. This alignment in goals – strictly confined to the economic sphere – often leads to cooperation between the sub-state and central governments, both domestically and internationally. In contrast, economic paradiplomacy also creates greater sub-state competition for international opportunities and resources. It is common for sub-state governments to fight for investments by offering increasingly favorable conditions to corporations or by enticing existing businesses to move from one locality to another.