Andreas Whittam Smith: London as seen by the French and the Americans

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Among world cities, London is edging ahead. Measure it from a French point of view. Until now, for instance, London has never been a place that presidential candidates would visit in order to meet large numbers of voters. But last week Nicholas Sarkozy came to London specifically for that purpose.

He addressed a thousand French people in a hall in the City of London. In fact London has become the seventh largest French conurbation in terms of its French population (200,000 to 300,000), on a level with, say, Rouen, Lille or Perpignan.

Now compare London with New York. For each of them their major industry is financial services. They have always been competitors. But according to a report published last month by the Mayor of New York, Michael Bloomberg, London is "rapidly gaining ground".

The result is that the sizes of their financial services workforces have become almost identical, with 328,000 jobs in New York as compared with 318,000 jobs in London. Moreover, London's financial workforce has been growing, while New York City's is static. Failing to take this development seriously, wrote Mr Bloomberg, "would be devastating both for New York City and the entire nation".

In terms of quality of life, there is at present nothing to choose between London, New York and Paris. They each have their strengths and weaknesses, though London is the most expensive. However, if London is becoming more successful as a place from which to conduct business and other professional activities, then it may also in time gain in quality of life.

London's big advantage is that it has become better than either New York or Paris in recruiting talented people. New York suffers from the problem that American immigration policies, still heavily influenced by terrorism concerns, are making it harder for non-US citizens to move to the United States for education and employment. Talent is being stopped at the frontier, so to speak.

France has the opposite difficulty. Talent is leaving to catch the next Eurostar to London. The price of property may be higher than it is in Paris, the cost of transport more expensive and the health system less effective, but at least there are jobs to be had. And members of French ethnic groups who move to Britain find further advantages. They think we are less racist than our neighbours across the Channel.

The Bloomberg report is a careful analysis of London's strengths, written with the hope that New York can catch up. This is the Americans' way. As soon as something starts to go wrong, they seek to identify the problem. Then they fix it.

So it is with the Mayor of New York's study. After discussing talent pools, the document turns to legal arrangements where it finds that London has a strong competitive advantage. It describes American law as expensive and unpredictable. Partly this is because Americans have a greater propensity to litigate. This can be dangerous to the health of a financial centre since the mere threat of litigation can drive firms into bankruptcy as a result of the consequent abrupt loss of trust At the same time the American legal system is more complex than the British system with its large number of enforcement agencies and its dual system of Federal and state jurisdictions.

The Bloomberg report also finds that Britain's regulatory arrangements are more suited to a modern financial centre than is the American model. The British system is more adept at dealing with the sheer pace of innovation and product development. It has a single regulator, the Financial Services Authority, rather than many separate bodies. It has a more open dialogue with practitioners than is possible in New York. And it always trying to reduce the number of its rules, and replace them with general principles. Just 194 words suffice to describe the FSA's 11 core beliefs.

Can the Americans and the French make good such deficiencies as they have, and can we refrain from damaging or dismantling what works well? On the last consideration I am optimistic. The Chancellor of the Exchequer, Gordon Brown, is clear about the need to foster the City. It is often forgotten that at the same time as he gave the Bank of England its freedom, he created the single regulator, the FSA. Both have been equal successes.

On the other hand, I believe that the Americans will ease their visa restrictions in due course. And they will reform their regulatory system What needs to be done is well understood. The recent election of a Democratic Congress is an advantage. There is no easy cure for frantic litigiousness, however. We can maintain our advantage in legal systems.

As to the flow of young French people come to work in London, many of them in financial services, M. Sarkozy gave a fascinating speech. He told his listeners that they had contributed to the dynamism of London and given it a vitality which Paris needs. He reminded them of their distinguished predecessors who had lived in London, from Voltaire to de Gaulle. He charmed and flattered them.

Of course. He is running for President. But nonetheless, had I been one of them, I might well have thought that if this impressive man wins and does half what he promises, then I shall return. Such is the interplay of the world's great cities, rivals yet sharing more than divides them.