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The Future of Asia: Forces of Change and Potential Surprises – Supplementary Report

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The Rise of ‘Para-Diplomacy’: The Implications of Increasing Sub-national Relations on Trade and Diplomacy

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What is it?
Why it is important?

What is it?

As globalization intensifies, so has competition between regions. Region-specific economic advantages have required political and institutional changes. Para-diplomacy, or sub-national foreign relations, is on the rise. In early October 2013, the British Minister of State and the Foreign and Commonwealth Office came to Brazil to sign an agreement establishing “formal bilateral relations” with São Paulo, Latin America’s wealthiest state. In late March 2013, the U.S. signed a similar agreement — the first time that the U.S. State Department forged direct relations with a subnational government in the southern hemisphere. Canada, France, Germany and a handful of other countries in Europe and Asia will soon sign their own agreements with São Paulo.

With rising urbanization, some cities, states/provinces and regions have economies the size of countries. For example, the German state of Baden-Württemberg has become an international technological hub for sustainable development and one of the most prosperous regions in Europe. Likewise, Guangdong is a significant economy in its own right. According to the OECD, Guangdong is a significant contributor to China’s overall output and export success, and is a key destination for foreign direct investment. Within Guangdong, much of the provincial domestic product of US$665 billions concentrated within the Pearl River Delta. The growth of Guangdong has resulted, in part, from the freedom to pursue initiatives on the international stage set in place during the reforms of the 1980s.

With the strengthening of local power, the world’s major cities and states/provinces have adopted international policies previously reserved for national governments and mustered resources to ensure the protection of their interests abroad. With globalization, these subnational governments can no longer fulfil their constitutional responsibilities in education, sanitation, economic development, transportation, the environment, and other areas, without interacting with the world. These local authorities rely on the international flow of capital, knowledge, and people to successfully implement their governmental programs. Instead, para­diplomacy empowers local governments and states/provinces to deal with the international dimensions of these issues on their own. There are early signs of economic para-diplomacy emerging in India. States like Gujarat and Punjab conduct international investor summits and cross-border trade.

Why is it important?

The rise of para-diplomacy has potential impacts on the foreign relations between countries as well as trade patterns. Today, many private intelligence firms, think tanks and NGOs have better access to quality sources than diplomats do. Several countries have begun modernising their diplomatic corps and functions to meet growing economic and social demands as a result of globalization and free market reforms. Some countries including Germany, Singapore and the U.S. have reconfigured their missions abroad, turning them into business and investment centres.

The broader consequence of this phenomenon is that it may force people to think beyond clearly defined countries and “nation building” towards integrating a rapidly urbanising world population directly into regional and international markets. Existing bilateral and multilateral institutions, forums and agreements may also be undermined or at least require significant adaptation.


  1. Tavares, R. “Foreign Policy Goes Local: How Globalization Made São Paulo into a Diplomatic Power.” Foreign Affairs. October 2013. http://www.foreignaffairs.com/articles/140091/rodrigo-tavares/foreign-policy-goes-local(link is external)
  2. Ibid.
  3. Ibid.
  4. “The State of Baden-Wuerttemberg.” The Climate Group. http://www.theclimategroup.org/who-we-are/our-members/the-state-of-baden-wuerttemberg(link is external)
  5. OECD Territorial Reviews: Guangdong, China. OECD. 2010. http://www.keepeek.com/Digital-Asset-Management/oecd/urban-rural-and-regional-development/oecd-territorial-reviews-guangdong-china-2010_9789264090088-en#page1(link is external)
  6. Ibid.
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Policy Horizons Canada, also referred to as Policy Horizons, is an organization within the federal public service that conducts strategic foresight on cross-cutting issues that informs public servants today about the possible public policy implications over the next 10-15 years.

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