Photo: Policy Exchange
Aid & trade: toxic mix or magic bullet?
New aid-sceptic International Development Secretary Priti Patel MP has annoyed many in the aid NGOs with an article in the Daily Express which could be taken to mean that Britain’s large overseas aid budget should be used to encourage developing countries to sign trade agreements with post-Brexit Britain.
The concerns stem from the Tory record on tying aid to trade that goes back to the Pergau Dam affair over twenty years ago. Essentially, before DFID was created by the new Labour government in 1997, some British politicians were not above using aid as -not to put too fine a point on it – a bung. The worry is that Priti Patel, who is on record as opposing the generosity of Britain’s aid budget, might take us back to those days.
Such a populist move would certainly satisfy the Tory right, which might well be all the article was about. But it would be contrary to the OECD’s rules on what counts as official development assistance, and might breach UK law too. Worse than that, however, it would also truly be a waste of tax-payers’ money, because it’s by a long way one of the least effective ways to use the aid budget.
There is a much better way, and – let’s be charitable – maybe Priti Patel will take it. That would see DFID resources spent improving the ability of developing countries to trade.
Aid for trade, as it’s known, is a way of promoting economic activity that boosts growth, stimulates skills, and produces higher wages. Properly done, it helps developing countries move on from subsistence agriculture and extractive industries to value added manufacturing and higher value products.
Other aspects of aid for trade would make cross-border movement of goods easier, encourage trade between developing countries rather than merely north-south, and even go so far as to strengthen regional trading blocs so that multilateral trade deals are no longer such a one-sided affair with the rich nations able to out-negotiate poorer countries.
If that’s what Priti Patel has planned for DFID’s new emphasis on trade, unions in the UK and in our developing country partners will be enthusiastic supporters. But if we’re heading back to using aid as an inducement or a lubricant of more Pergau Dam affairs, then we will join others in the aid community in calling her out and exposing the long-term damage that would do to poorer countries and the British national interest.