IPD AI

Aid For Trade

03/01/2006
Working Paper

For several years, the governments of many developed countries have argued that “trade not aid” is the answer to the problems of the developing countries. The insincerity of their approach has been revealed in successive rounds of trade negotiations in which they have been reluctant to open their markets to poor countries. And more recently their claims have also been exposed as fundamentally inaccurate as liberalization fails to result in either export growth or development for the poorest countries.

This poor outcome is not the result of a Machiavellian plot to cheat the developing countries, but certainly the outcomes of trade deals are determined by real politik and the special interests in developing countries. The good intentions of trade negotiators get lost along the way. Developing countries face enormous challenges in expanding exports and greater adjustment costs and greater barriers to seizing new opportunities. The international trade regime has not provided a level playing field, and if we are to increase the chances of a development round leading to development, not only must there be a more level playing field, but there must also be aid to help developing countries.