African Growth and Opportunity Act Offers New Opportunity to End Aid vs. Trade Debate

July 24, 2015 By Will Davis

President Obama recently signed the renewal of the African Growth and Opportunity Act (AGOA) into law. This critical bill was championed by Speaker John Boehner and Representatives Ed Royce and Karen Bass in the House, and Senators Bob Corker and Chris Coons in the Senate. The AGOA renewal ensures that developing nations in sub-Saharan Africa maintain strong trade links with the United States.

As we think about how America engages across the globe, the aid versus trade debate is outdated. In today’s world, aid and trade can and must work together.

I’m reminded by what our USGLC board co-chair, Bill Lane of Caterpillar, recently shared at our State Leaders Summit: “Over half of our exports right now – and we export more than we ever have – go to countries that were aid recipients 20 or 30 years ago. Chile, Peru, Colombia, Indonesia, South Africa, these are our big markets today.”

Of course American aid meets humanitarian needs, but it is also a key building block to promote the rule of law, fight corruption, strengthen local institutions, and help fledgling economies grow. Such investments prime the pump, creating a climate that is attractive for foreign direct investment.

If American businesses are going to make an investment in a developing country, they need the stability and certainty that they are going to get a return. A corrupt or fragile state is not a place where businesses want to invest. The risk is too high. America’s diplomats and foreign assistance programs are the force-multipliers overseas that help create the necessary stability.

This isn’t simply a hypothetical. The history of our nation’s foreign assistance programs supports the synergy of aid and trade. Eleven of our top 15 trading partners today were once recipients of U.S. foreign aid, including South Korea.

After the Korean War, U.S. assistance was instrumental in making South Korea what it is today: one of America’s most important allies in the region and our sixth largest trading partner in the world. The legacy of that U.S. aid stretches further still, as South Korea now provides its own foreign assistance to spur growth in developing countries.

Another example – In the early 2000s, Columbia was on the verge of being overrun by powerful drug lords, and was crippled by a long-running domestic insurgency. Recognizing Colombia’s need, and Colombia’s promise, the U.S. did the right thing, and the smart thing. Over a number of years U.S. administrations of both parties invested $8.6 billion in economic, humanitarian and military assistance. By 2011, with the help of U.S. aid, the kingpins were in check and trade between the U.S. and Colombia had tripled to $12 billion per year.

As we look toward our nation’s increased engagement with Africa, we welcome legislation like the AGOA reauthorization – smart government officials and smart investors see the synergy between aid and trade. Initiatives like AGOA prove the old “trade vs. aid” debate to be a thing of the past. Such programs create growth and opportunity not just in Africa, but back here in the U.S. as well.

Photo Source: USAID / CC