Enabling Aid, Trade, and Development

August 8, 2013 By Zach Silberman

There has been a lot of talk lately about the relationship between development and trade, just as the United States is stepping up new trade initiatives across the Atlantic and the Pacific Oceans.  The announcement of the Trade Africa initiative during President Obama’s recent trip to Africa and calls to renew the African Growth and Opportunity Act (AGOA) next year have also put the benefits of trade with sub-Saharan Africa front and center, which holds 7 out of the fastest 10 growing economies. With so many opportunities for trade across the world, policymakers have recognized that the old dichotomy of “trade vs. aid” no longer works.  In today’s world, it’s “aid AND trade,” focusing on promoting economic growth and reducing poverty around the world, while creating jobs here at home.

“Trade and investment are a key part for our development policy,” said U.S. Trade Representative Michael Froman at this year’s USGLC annual conference.  He went on to say that “when we think strategically about development policy, we look for force multipliers, cost effective initiatives that can have an outsized impact on economic growth.  Clearly, trade and investment are force multipliers.”  Yet trade is only possible where there is an enabling environment for investment.  And that occurs when countries build and strengthen rule of law and governance – key goals of foreign assistance agencies like USAID, USTDA, OPIC, and the Export-Import Bank.


Infographic by the U.S. Chamber of Commerce

On the home front, trade and exports support millions of American jobs, with 1 in every 3 manufacturing jobs depending on exports, and 1 in 3 acres of American farms planted to help feed hungry people outside our borders.  In the past, trade agreements like the U.S.-Colombia Free Trade Agreement have provided economic opportunities for individuals that were once dealing with the horrors of poverty and the drug wars.  However, those opportunities are built on the work of foreign assistance that helps governments create the mechanisms that will enable sound investment.

Take the Trans-Pacific Partnership (TTP), which seeks to help developing countries like Vietnam.  A decade ago, Vietnam may not have been even considered for the TTP.  However, in recent years, our development efforts helped ready Vietnam to become part of the global marketplace.  Look at what USAID did with its Support for Trade Acceleration Project, which allowed for an increase of 700% in U.S. exports to Vietnam.  The TTP will be able to help Vietnam gain market access for goods and services from the United States and help the country support an economic reform agenda, while also supporting more American jobs here at home.  Most importantly, according to the Peterson Institute for International Economics, Vietnam is expected to receive the largest percentage gains from the TTP, which will allow it to “become a much-expanded manufacturing hub in textile, garment, and other industries.”

Look across the Atlantic and you’ll find policymakers at work on the Transatlantic Trade and Investment Partnership (TTIP).  Much of the news surrounding this deal spotlights how interdependent the American and European economies have become.  The mutual economic benefit could be substantial, considering that the European-U.S. economic relationship makes up over 50% of global GDP in terms of value and 41% in terms of purchasing power. Plus, as European countries continue to face significant challenges in their recovery from the financial crisis, improving their economies will also “reduce political turbulence and consequently increase global stability,” according to the American Security Project.  We’ve seen this before, as U.S. development assistance, such as USAID’s two decades of work in the region, helped Eastern Europe integrate, recover, and grow after the end of the Cold War.

Rounding out the global trade tour is Africa.  With so much potential for increased trade in Africa, it is easy to understand why President Obama announced the Trade Africa initiative during his recent trip to the continent.  The initiative will focus on increasing trade ties and enhancing economic opportunities for the East African Community.  Designed to increase cooperation between the public and private sector, U.S. foreign assistance agencies will have a role in encouraging U.S. businesses to promote trade missions and business-to-business collaboration.  And with AGOA’s renewal on the horizon, it’s important to point out that this bipartisan effort to expand trade and investment in sub-Saharan Africa has already helped create over 350,000 direct jobs and 1 million indirect jobs in Africa, as well as 100,000 jobs in the United States over this period of time.

As trade continues to be a hot topic in the developing world, the impact trade can have on sustainable development underscores the impact of the International Affairs Budget.  Think what the future could hold for security and economic interests in the developing world if we continue to enhance global trade opportunities.  If we can harness the connections between trade and development as a force multiplier, it would be a “win-win’ for everyone.