Easterly Highlights Parallelism Between Trade, Aid Principles

    Several international trade principles can help shed light on some of aid delivery’s most discussed do’s and don’ts, Bill Easterly has pointed out.

    The New York University professor shares some these trade principles and gives corresponding aid examples in an entry on the “Aid Watch” blog.

    First: Do not trade low value items with huge transport costs. This can be applied to arguments against the 1 million shirt project, Easterly says. He explains that no importer or exporter in “their right mind” would transport bulky low-value items over large distances.

    Second: Do not send or trade goods to regions where these goods are abundant. Easterly says:

    “Nobody exports food to a food-abundant region. Well nobody but US food aid, which ships food from Nebraska to the Horn of Africa, when there is plenty of food already in the region (it’s just badly distributed inside the region, which is what wise food aid could correct).”

    Third: Dumping or businessmen’s practice of charging lower prices abroad than they would domestically is illegal. It drives local producers out of business, Easterly explains.

    Fourth: Export goods intensive in abundant resources. Translated to aid delivery, Easterly explains that this principle suggests that “aid projects should be designed to maximize the use of abundant resources and minimize use of scarce resources.”

    Fifth: Trade is most beneficial when an item is cheap in the exporting country and expensive in the importing country. To demonstrate this in the context of aid delivery, Easterly uses antibiotics and antiretroviral drugs as example. He says:

    “Antibiotics can be cheaply made in rich countries but would be very expensive to produce in African countries, which is why aid projects that provide antibiotics cheaply make a lot of sense (actually private trade in antibiotics happens for the same reason, but doesn’t reach the poorest of the poor). Antiretroviral drugs, unfortunately, are expensive in the exporting country, so they are not as good an aid deal as antibiotics.”

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      Ivy Mungcal

      As former senior staff writer, Ivy Mungcal contributed to several Devex publications. Her focus is on breaking news, and in particular on global aid reform and trends in the United States, Europe, the Caribbean, and the Americas. Before joining Devex in 2009, Ivy produced specialized content for U.S. and U.K.-based business websites.