More trade, not aid

The move by developed countries to offer a $500-million aid package to the least developed countries (LDCs) in the on-going bargaining in the Doha round talks is not as simple as it seems. Nor is it just aimed at providing technical assistance for capacity building. India has viewed the "aid for trade" package as a bid to buy out support of the LDCs, especially the large block of African countries. In fact, it could also be viewed as an attempt to create a wedge between the LDCs and the other developing countries. As such, it can potentially isolate the relatively faster growing developing economies like India, China, Brazil and others which have been spearheading the fight for safeguarding the developing countries' interests, drawing strength from the solid support they enjoy from these poor countries. What is all the more worrisome is the possible impact this bait can have on the LDCs. Such spoon-feeding can perpetuate these countries' dependence on foreign assistance to meet their domestic needs, rather than help them to acquire capacity to trade in the global market. India has learnt similar lessons from externally assisted programmes like the US PL 480 project, which supplied free or cheap foodgrains to feed our millions. These supplies kept the domestic prices down, serving as a disincentive for farmers to raise production. The Green Revolution could take place only when the domestic farm sector was freed from such external pressures.

Unfortunately, the first reaction from the LDCs to the aid-for-trade proposal does not indicate this realisation on their part. These countries have, of course, criticised and, in a way, turned down this package but for different and misplaced reasons. They have dubbed the package as inadequate, indirectly hinting at the need to step up the proposed assistance amount.

However, the silver lining in this case is that voices have already begun to be raised at the WTO and other global platforms against the desirability of such sinister offers. The most forthright among these voices is of Australia, which has minced no words to assert that trade is more valuable to the poor countries than aid. The logic is simple and starkly clear. Trade spurs business investment, generates employment, and opens up other economic opportunities. All these are essentially routes to poverty alleviation. There is no dearth of instances that bear out the hypothesis that greater participation in foreign trade and investment leads to accelerated economic growth. Thus, the global community needs to wake up to this reality and concentrate on measures aimed at associating the poorer countries in the active global business rather than doling out such aid packages.