Trade+VS+Aid+-+Chaya

=Introduction= toc "Which is better?" The issue behind trade and aid has long been disputed in development economics and there are valid arguments for both which make matters a little more complicated. The cartoons on this page will illustrate mostly the misfortunes of The Poor Guy, i.e. not a specific developing nation in this country, but the scenes depicted here resembles the situation in most sub-Saharan African countries. It is recommended that you read the descriptions to get the flip side of the situation as well.



=Barriers to Support= toc

Trade rewards those who are able and willing to engage in trade. This involves a number of elements – as well as having the rights sorts and quantity of goods and services and being willing to sell at the desired price, a country may need to meet certain other criteria of a purchasing country. For example, that country may make demands in terms of corruption, human rights, political support at the United Nations, or any other of a large number of possible preconditions for a trading partnership. This will suit some countries in the developing world. But for others it will act as a bar to trade.

=Cost of Aid= toc

Aid is often seen as quite a patronizing concept, no matter how necessary it may be argued to be. It is, like most forms of charity, one party acknowledging its own superiority and aiding the other party not on merit but out of a sense of wanting to help. This can be deeply embarrassing for the receiving country and for its people; indeed this is often cited as one of the reasons why African countries are reluctant to take a full part in international affairs – partly because they feel that their silence or support has been “bought” with aid money.

A trading relationship would allow them to be much more equal partners in the international community

=Cost of Trade=

toc

Not all countries are able to trade successfully. Some countries lack the ability to trade, for example because they do not have the raw resources or materials in quantities that make their exports viable. In the absence of deep government coffers, they would be the first to fall were other countries to engage in a trade war to keep their exports out. So the basic assumption of the international trade argument – that trade is open equally to all countries – does not reflect the reality of the situation.

The opportunities for trade are severely limited because of barriers imposed by the international system. The international trade arena represents anything but a free market. Instead, tariffs, taxes, subsidies, regulations and other restrictions operate to disadvantage some countries. Because of their weaker bargaining and economic power, it is typically developing not developed countries that are on the losing end of this equation. The agricultural protectionism of the EU and USA, in particular, means that developing countries are unable to compete fairly.

Exposing fragile developing economies to free trade is very risky. There is a short term danger that a flood of cheap (because of developed world subsidies) imports will wreck local industries who are unable to compete fairly. In the longer term economies may become dangerously dependent upon "cash crops" or other commodities produced solely for export (e.g. rubber, coffee, cocoa, copper, zinc), rather than becoming self-sufficient.

=Back at Home=

toc

Trade allows a fair impression of the international order to be created. One of the problems of the current aid system is said to be that it creates an impression amongst receiving countries and their people that the west is a wealthy, free-handed donor which provides what seem like huge sums of money by local standards. The impression can also be that this is given without too much concern about corruption or indeed without moral judgement, since many of the people who administer aid may be seen as morally ambiguous collaborators within authoritarian regimes. This influences developing world expectations of the first world. As well as leading to a sense that there is some sort of right to aid, it can also distort values of openness, self-help and honesty.

=Equal Shares=

toc

Trade provides developing countries with an important basis for their own improvement. To gear up to be successful trading partners, developing countries often need to go through a number of key changes. As well as developing their own economy and their manufacturing or service sectors, they may need to build trade infrastructure in other ways. For example, increased trade would focus their attention on such things as good governance, the benefits of a broadly stable currency and internal security. Although such developments may come about as a facilitator for trade, in the best case scenario they may be seen as structural changes which will have a trickle-down benefit for the broader society in the underdeveloped country. On the other hand, aid can be distributed equally much easier than trade.

=Epilogue=

toc

It is quite clear the despite its inefficiencies, trade is a much better alternative at helping developing countries, well, develop. Although it is also equally important to note that for the trade to work, infrastructures are required and that is where aid comes into the picture. Aid helps developing country build the necessary infrastructures in order for a country to advance. Also, aid yields a much quicker result than trade, perfect for humanitarian projects which may not have the luxury of time. In short, through trade is the way to go in development, aid is also required for trade to work.

=See Also=

toc 21st Century Challenge's Collection of Various Conventions on Trade VS Aid: http://www.21stcenturychallenges.org/60-seconds/trade-vs-aid/ An Article on the Topic by Guardian: http://www.guardian.co.uk/business/2009/may/25/africa-entrepreneurs-charity

include component="comments" page="Trade VS Aid - Chaya" limit="15"