Wed, Jul 20, 2005 - Page 9 News List

Trade is more important than `uncertain' aid

If the advanced countries of the world are really interested in helping poorer nations, they should open their markets to the textiles, agricultural products and commodities those countries can produce

By Richard Haass

The recent G8 meeting in Scotland, as well as concerts and celebrity activism, has put a spotlight on the amount of international assistance reaching the countries and peoples of Africa. This is understandable in light of the continent's persistent poverty, seemingly endless conflicts, and the prevalence of HIV-AIDS and other infectious diseases.

If properly targeted and conditioned on reforms, international aid can make a positive difference.

But aid is no panacea. The fact that so many problems persist despite tens of billions of dollars of assistance and years of effort is a sad reminder that aid can allow governments to undertake foolish investments that accomplish little, or can easily be siphoned off by corrupt officials. Moreover, aid is inherently uncertain, leaving Africans at the mercy of outside forces beyond their control.

Another problem with the emphasis on aid (in addition to the near impossibility of accurately measuring the scale of the flows from all sources) is that the political effort to increase it absorbs attention that would be better spent on a more powerful instrument of economic development: trade.

Trade is the all-but-forgotten weapon in the battle against poverty, but it can provide more help to the poor than aid can. If rich countries -- in particular, the US, the 25 members of the EU and Japan -- really want to help poor people, they will open their markets to what poor countries produce, especially textiles, apparel, agricultural products and commodities.

Phasing out tariffs and import quotas for poor countries' exports -- and phasing out subsidies for their own producers of agricultural products -- would have a dramatic effect on the lives of hundreds of millions of people in Africa and elsewhere. Private businesses would develop, jobs would be created and incomes would rise.

Moreover, trade benefits the world in many other ways, providing a major boost to the advanced economies of the world. One recent study estimates that incomes in the US alone could rise by US$500 billion a year if global trade were to become truly free. Similarly, incomes around the world would rise significantly from liberalizing more global trade in both goods and services.

Trade is also an engine of political and economic reform. What countries must do to join the WTO is precisely what they must do to become productive and democratic: Accept the rule of law, reduce corruption, and become open, accountable, and transparent. At the same time, increased trade can help create and sustain a middle class -- precisely the social group that often stands at the forefront of movements for democratic reform.

Trade has a strategic benefit as well, for it gives countries a stake in good relations with one another and in maintaining order and stability. A China that trades extensively with the US and its Asian neighbors will think twice before it pursues any policy that would place those relationships at risk. Likewise, trade between India and Pakistan could contribute to the normalization of ties between these long-estranged neighbors.

But if the case for expanding world trade is compelling, the prospects for actually doing so are clouded, owing to a simple but nonetheless fundamental political reality: Those who gain from trade, which is almost everyone, are not always aware of it. The benefits of freer trade, such as job creation, lower inflation, and greater consumer choice, are often invisible or only partly visible.

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