PERSPECTIVE ON CITIES : The Trick Is to Prosper, Not Pander : Technology, trade and skill centers bring success in the global marketplace without resorting to tax breaks

American cities are under siege. How will they survive with fewer federal funds from a budget-cutting Congress, less state aid from tax-cutting governors and greater global competition?

Large employers are now courted by cities, states and regions throughout the world and use this competition to win tax concessions.

But creating business subsidies weakens local finances and jeopardizes the future. This “race to the bottom” is the opposite of what cities and states need. Cities will succeed in the global economy to the extent that the businesses in them can operate better, learn more and develop better by being there than someplace else. That’s a matter of the quality of education, strength of industry support systems and desirability of community amenities--all factors generally given more weight in corporate site location decisions than taxes, according to numerous studies.

Cities prosper as world class centers of globally relevant skills. They can be:

* Thinkers: sources of technologies and ideas that create innovative industries of the future, like San Jose and Palo Alto, Greater Boston or Austin, Tex. Thinker cities rely on attracting the world’s best brainpower to colleges and universities, research labs or medical centers to dream up new concepts that can be moved quickly out of the lab into new ventures, with the help of discussion forums that connect ideas to entrepreneurs and venture capital to support start-ups. Regions relying on innovation create products that command a premium in world markets, bringing high-wage jobs and export potential.

* Makers: centers for high-quality manufacturing or processing. Makers look for a strong work ethic, abundant technical training in partnership with community colleges or school-to-work programs, reasonable costs and a communitywide focus on quality, like Spartanburg, S.C., in manufacturing or Omaha in telemarketing. Regions emphasizing quality of operations attract new domestic and international facilities bringing skilled jobs for the middle class.

* Traders: crossroads for international communication and export-import finance like San Francisco or Miami. Assets for traders include ports, air transportation and services, linguistic skills and cultural ties to trading partners and cosmopolitan amenities for international visitors. Trade centers emphasize and improve their professional and financial services while bringing international money to the region.

For all three strategies to work, regions need both magnets and glue. Magnets attract a flow of new people or new companies to renew and expand skills, broaden horizons and hold up a comparative mirror against world standards. Social glue brings people together to define the common good, create joint plans and identify strategies that benefit a wide range of organizations and people.

Leaders must transcend local rivalries: Manhattan vying with New Jersey towns less than a mile across a river, Fort Lauderdale competing with Miami or Los Angeles with Burbank. Unless neighboring cities and towns work together on strategies of regional importance, they risk imbalances that fuel tensions, such as Palo Alto paying for extra security for a World Cup soccer playoff at Stanford University while neighboring San Francisco got the bulk of hotel and restaurant revenues.

Some cities are developing regional visions to become international centers. Atlanta is using the Olympics as a community connections-builder to encourage long-term improvements in a city that has already worked to internationalize. Greater Seattle’s Chamber of Commerce hosts an annual out-of-town retreat at which 300 business people, civic leaders and elected officials create specific action plans; the focus this year is on how the “Silicon Forest” can be the next Silicon Valley. Philadelphia is tackling a regional strategy for international prominence that includes Camden, N.J.

Of course, cities and states can improve the business climate by making public services more efficient, streamlining regulation and working with utilities to make rates competitive. But those actions only level the playing field; they do not build distinctive assets that help create and retain jobs. A strategy based on globally relevant skills changes the game from a race to the bottom to a race to the top, to be the best place for growth businesses, if not necessarily the cheapest.