“The United States Helps Poor Countries in Many Ways Besides Foreign Aid.”
True. The United States helps provide security around the world by keeping sea lanes open for commerce, providing peacekeeping forces, and airlifting supplies during emergencies, as evidenced by the U.S. military’s valuable role in tsunami relief efforts. U.S. trade and investment also accelerate growth and development. In addition, U.S. firms develop technologies such as medicines and the Internet that low-income countries can use at a fraction of the cost of creating them.

Still, though the United States is one of the most open markets in the world, it imposes tough restrictions on poor countries. In fact, some analysts estimate that U.S. trade barriers inhibit growth in low-income countries much more than U.S. aid helps. Contrast the $350 million pledged in tsunami relief to the $1.8 billion in duties on imports collected from Indonesia, Sri Lanka, Thailand, and India in 2004.

The United States collected almost as much in import duties in 2004 from Bangladesh ($314 million) as from France ($350 million), despite importing 14 times as much from France. In addition, U.S. agricultural subsidies undermine the incomes of poor farmers around the world. 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/FOREIGN POLICY Commitment to Development Index—which ranks 21 rich countries on how their aid, trade, investment, migration, environment, security, and technology policies help poor countries—the 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, it’s 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 trade—or, more accurately, aid without the creation of a robust private sector—cannot stimulate long-term growth and development.

But simply lowering trade barriers and opening markets is often insufficient. Many poor countries just don’t have the resources to build the roads, train the teachers, and buy the medicines necessary to increase worker productivity and compete in global markets. Some of the greatest development success stories of the last 40 years have relied on a combination of trade and aid. South Korea created millions of jobs by exporting its products around the world while receiving nearly $100 per person (in today’s dollars) in annual aid between 1955 and1972. Botswana’s rapid expansion of diamond exports and exceptionally good governance made it the world’s fastest growing economy between 1965 and 1995, during which time it received annual aid flows averaging $127 per person. By contrast, annual assistance to sub-Saharan Africa today averages about $28 per person—not nearly enough to build a foundation for sustained growth and development.