Title: Think Again: U.S. Foreign Aid – Foreign Policy
Headings: Think Again: U.S. Foreign Aid
Think Again
Think Again: U.S. Foreign Aid
Shortly after a tsunami swept through the Indian Ocean last December, a U.N. official complained that the West was stingy with its relief donations. Stung by this criticism, the Bush administration increased its financial pledge tenfold overnightwhile loudly asserting that the United States actually led the global pack in foreign aid. Is the worlds wealthiest country a scrooge or a savior?

Content: Economist William Cline estimates that elimination of trade barriers by rich countries could inject $100 billion annually into the economies of developing countries. In the most recent ranking of the Center for Global Development/Commitment to Development Indexwhich ranks 21 rich countries on how their aid, trade, investment, migration, environment, security, and technology policies help poor countriesthe United States places seventh. U.S. policies toward the poorest countries are not the worst in the world as some suggest, but there is clearly ample room for improvement. The Key to Development in Low-Income Countries Is Trade, not Aid. Actually, its both. Trade is an enormously powerful engine for development, especially trade in manufactured goods (less so for commodities). Countries that export labor-intensive, manufactured goods to the rest of the world generally experience faster economic growth and less poverty because such exports help create jobs, improve worker skills and productivity, and upgrade local technologies. Aid without tradeor, more accurately, aid without the creation of a robust private sectorcannot stimulate long-term growth and development. But simply lowering trade barriers and opening markets is often insufficient. Many poor countries just dont have the resources to build the roads, train the teachers, and buy the medicines necessary to increase worker productivity and compete in global markets.