Trade Aid for Trade

I wrote this paper few years back arguing why the West should Trade Aid for Trade for an International Relations class. “Poverty and conflict are not unrelated,” have a read.           

With approximately one billion people, Africa is the second largest continent and home to the earliest human discoveries. The continent is so diverse in many ways. Former U.S. Secretary of State Edmund S. Muskie once said it best, “It is dangerous to generalize about Africa. It is a complex of diverse cultures and traditions, countries that are comparatively wealthy and countries that are desperately poor” (Muskie, 1989). Africa is famous for its infamous peripheral state and unmistakably identified with extreme poverty (Kegley, 2009). There are a lot of problems and failed policies in the way of African development, from the deadliest AIDS epidemic, internal political instability, droughts and child malnutrition.

This paper will mainly focus on economic problems and it will argue to prove that the idea and study of trade based policies will bring the needed development, rather than foreign aid based funds to eradicate the unprecedented poverty in Africa. This paper will also provide a solution proposal for the U.S foreign policy towards Africa. African nations need comprehensive trade reform policies, in exchange of the aid focused funds they receive from those industrialized nations of the world. Such revised policies will assist Africans drag themselves out from the current economic dependence of the core states.

It is true that, as Africa’s one of her own write, Nigerian author Chinua Achebe once wrote, “One shining act of bold, selfless leadership from the top, such as unambiguous refusal to be corrupt or to tolerate corruption at the fountain of authority, will radiate powerful sensations of well-being and pride through every nerve and artery of national life” (Albright, 7). Africa awaits her children to rise to Achebe’s optimism, but for now Africa begs at the door of industrialized nations for a long term scope of comprehensive strategic solutions, that focuses on bringing Africa from the dark shadows to the brighter path where the industrialized east and western countries travel. It seeks for leaders and their act of selfless leadership. Strategy that creates a win situation instead of distributed bargaining by international leaders. Of the many problems facing Africa few of them stand as great destruction in the way of Africa’s development and progress. These great notable obstacles on Africa’s economic progress are political instability, aid based funds and unfair trade and exploitation.

Political Instability

The UN under secretaries Nitin Desai once said, “Poverty and conflict are not unrelated,” (Kegley, 2009).  As it is stated above when there is poverty conflict rises and it is in fact inseparable as humans try to survive by whatever means. Africa has been torn apart from internal conflicts, such as deep rooted ethnic civil wars, dictatorial leadership, paramilitary operations and proxy wars. Within the past six years global south which is dominated by African nations accounts for 90% of the worlds casualties and 90% of the worlds inter-and intrastate conflicts. Africa’s turmoil has created a high political instability. It is indeed a major hold back for the continent’s development (Kegley, 2009). Africa faces problems of political and economic integrations issues. Ambassador Andrew Young to the UN once said, “The conventional wisdom is that political integration has to come first…” (Ambassador Young's African trip, 1977).

Africa is constantly at a crossroads of chaotic political scene. The lack of education, ethnic conflict, fight for power, guerilla warfare, dictatorial leaderships, limited resource competition, religious view, cultural and language barriers are few of the causes to Africa’s internal instability. Such re-occurring entropy has slowed the rate at which the continent could follow the rapid evolving industrialized world. A democratic influence of American leadership is crucial in order to construct a peaceful and stable environment. Stable and peaceful conditions in the continent would increase the confidence of foreign investors in Africa. The U.S has to show a persistent and reluctant democratic influence and help to protect the continent from other countries that interfere and escalade problematic situations within Africa.

Aid Based Funds

Ironic as it might be, aid based assistance is part of Africa’s big problems rather than its economic solution. Africa continues to face a constant extreme poverty draw back. The growth of a developing country depends not on aid but on its economic policies. Various studies found that, foreign aid has not raised poor countries economic growth.  (Burnside and Dollar, 2000).  Let it be clear though, it is not to say aid is always counterproductive. It is true that, aid comes in handy at times and save many lives, as Kenneth Hackett, Regional Director, sub-Sahara Africa, Catholic Relief Services describes his experience before the Subcommittee on Africa to the U.S Representatives Committee on Foreign Affairs; he shares about his visit in 1983 to the famine swiping African countries’ conditions.  The following paragraph, is evident of the fact that aid indeed could be undeniably life saver at times while providing prove aid is a short term solution.

 In Ethiopia says Hackett, “tens of thousands of people are moving to main towns …in search of food…during my    visit…I talked with many of the women in the shelters in and around Mekelle in Tigray province” (Hackett, 1985, p. 48).  Hackett speaks about his experience interacting with those women facing despair, who walked for days “when they had absolutely nothing left to eat in their house or village” (Hackett, 1985, p. 48).  Families were separated and torn apart unwillingly, hopeless mothers in search of, a meal, a day having no control of their own destiny; mourn for the loss of their children and separation from their husbands.  Hackett continued his witness describing, “As I walked among this group, I found emaciated mothers, marasmic? children and great despair. In those long days in Mekelle, we found virtually the same levels of starvation as Ghana, about 7-10% of the children dying. Little hope and great despair.” (Hackett, 1985).

Although this is a quarter of century old the African conditions remain indifference today. Perhaps not in the same exact geographic locations; but in general the vivid extreme poverty that Africans face remains unchanged. I do not turn a deaf ear and a blind eye to these re-occurring extreme poverty situations and pretend to swiftly brush of the problem and argue that aid is not helpful but is part of the problem. I myself was born and raised few miles from “Mekelle” and actually lived in Mekelle the very city described above and was affected directly by the extreme poverty as was the whole region and huge part of the country. Even thought I was too young to realize it. I was back in my birth country Ethiopia this recent summer of 2008, and the poverty still exists at large. Just this fall the World Food Program (WFP) had appealed for $460 million funds to support approximately 10 million Ethiopians who are in need of food relief. (Kostova, 2008).

This is concrete evidence, that aid is a short term solution and in order to minimize or eradicate poverty and fair and modified trade, modernized agricultural cultivation, educating the people as well as other comprehensive policies ought to be implemented. In trying to reduce and paralyze the deep rooted poverty Africa faces as a continent, long-term focused solutions are needed as oppose to a short term hand to mouth feeding type of problem solving.

Unfair trade and exploitation

Africa’s third obstacle is the effects of industrialized nations’ unfair trade and exploitative relationship. The expansionism and colonial empire philosophies of the world have been destroyed.  Peripheral countries have achieved their independence, what remains the same is the zero-sum economic system relationship. These poor countries still have with the developed countries. Of course the industrial nations who have the upper hand in deciding and establishing the rules and regulations to their favored one way gain (Shannon, 1989). The rich countries devise a system that is most beneficial to them. In his book Shannon states,  “…from the colonial period, peripheral countries function primarily as sources of raw materials and agricultural commodities for the wealthy countries and serve as markets for the core’s manufactured goods” (Shannon, 1996). The outcome of this zero-sum and distributed bargaining type of economic systems, has sunk Africa deeper into an immense poverty and continued to exploit the continent’s resources.  Those problems above must be addressed and resolved simultaneously in an urgent time manner; to build a politically stable Africa, with a firm and steady economic growth.

 Africans and the international community whose committeemen are to reducing poverty in Africa must focus on the following three main problems; eliminating aid, trade aid for trade and reforming a comprehensive relative gain trade.

Eliminating aid dire

According to studies by Christopher Preble, Cato Institute’s director of foreign policy studies and Marian L. Tupy Policy Analyst, Center for Global Liberty and Prosperity,  “In recent decades, of each dollar given to Africa in aid, 80 cents were stolen by corrupt leaders and transferred back into Western bank accounts" (Preble and Tupy, 2005).  Corrupt leaders are estimated for $140 billion aid funds in the past 40 years. Leaving the citizen with a massive public debt they cannot afford to pay off. William R. Cline, senior fellow at the Institute for International Economics and the Center for Global Development, estimated a comprehensive trade would save the funding countries $141 billion per year and deliver the seeking countries with $87 billion a year. The average income per person has decreased by 11% today than it was about 50 years ago. We have seen the ineffectiveness of a continuing state-to-state geopolitical based aid and World Bank projects fail time after time. “In 2000, for example, the bipartisan Meltzer Commission found that the World Bank's aid projects failed 55 to 60 percent of the time….” (Preble, and Tupy, 2005).

Ugandan famous Journalist Andrew Mwenda in his “Let's take a new look at African aid” speech presentation to the Technology, Entertainment, Design (TED) conference attendees on Sep 2007, asks a provocative question, “Ladies and gentleman, can anyone of you tell me…any one that you know…who became rich by receiving charity?...holding a begging bowl and receiving arms?...does any one of you know a country that developed because of the kindness and the generosity of another?” (Mwenda, 2007).  Like Mwenda, Burnside and Dollar also found on their studies and advocate that one’s growth of economies developing does not arise from aid rather it depends to large extent on one’s own policies to achieve it. (Burnside and Dollar 2000)

Mwenda states that the western donors are characterizing the African problem the wrong way. In other words, their generous funding does not make much difference in Africa; because donors see Africa as a place of despair that needs poverty reduction rather than a challenge of hope and take on the challenge of creating wealth. The funds of the aid going to various aspects of the people including but not limited to medicine, peace keeping, schools, and hospitals might be helpful, but it does not create wealth that breeds wealth. Therefore aid is treating the symptoms and not curing the causes of the fundamental problems that exist in Africa. Wealth is a function of income, says Mwenda “…and income comes from you finding a profitable trading opportunity or a well paying job.” (Mwenda, 2007). Therefore the emphasis should be placed on wealth creating agents in the society, such as entrepreneurs, domestic and foreign investments and research institutions. Attaining solutions through aid funded money is not competent to neither eradicate poverty nor create wealth. Mwenda reminds his audience about some aid facts, “It is important to note, over the last 50 years, Africa has been receiving increasing aid from the international community…over $600 billion…and we are still told there is still a lot of poverty in Africa. Where have the aid gone?” (Mwenda, 2007). 

      Richard Kozul-Wright, an economist with the UN’s economic and social affairs department also says “In the 21^st century this is an unacceptable way of handling international development aid…” (Morris). African countries already had paid their donors back more than what they initially borrowed and yet they still owe those rich countries another $250 billion. (Morris). Africa needs help in solving the fundamental problems in order to achieve its economic independence.

Trade aid for trade

Africa can gain the much needed economic progress by focusing first and foremost trading aid for trade. In other words, the donating countries can provide the aid in a form of trade, investment, expertise and business partnerships. Teaching Africans help themselves, by building and creating wealth.  The African Development Bank Group (ADBG), World Trade Organization (WTO) and United Nations Economic Commission for Africa (UNECA) have laid a basic ground track of recommendation on their “Mobilizing Aid for Trade” focus on Africa report and recommendations. It commends the growing openness of regional and global economic integrations by many of the African regional organizations. The recommendations guide to foreign donors and African nations to utilize effectively and efficiently for a maximum and rapid growth of economics (Mobilizing Aid for Trade, 2007).

China launched a $1 billion equity investment fund to focus on African development, which is planning to increase and reach $5 billion “eventually”; and have no national investment quotas unlike most counties’ government assistance, which comes with quotas and interest rates. (China-Africa, 2008).  The U.S also created the Millennium Challenge Corporation (MCC).  The largest source of U.S funding for trade related programs; supporting many of the sub-Sahara countries that meet the eligibility requirements (Millennium challenge corporation, 2006). Those kinds of efforts and aid have far greater outcome than aid and loans. Aid simply funded to the hands of those nations’ government leaders who have ended up stealing it from the public that needs it the most (MCC, 2006).

Comprehensive relative gain trade

Although, it is imperative that trade agreements focus primarily on fair and balanced exchange of trade, it is also important to notice that “The periphery remains the primary location of coerced and highly exploited low-wage labor… exploitation reinforce the unequal exchange of peripheral products produced by low-wage labor for those of the core produced by high-wage labor” (Shannon 1989). The core countries buy the raw materials and resource for a low price from the peripheries and sell them back after manufacturing and producing them with a high-wage labor. These unequal exchange systems set by the industrialized nations to benefit them leaves the poor African countries with a massive “debt peonage” let alone to benefiting them, but rather leaves them falling into a debt of a high interest rates (Shannon, 1998).

Along with creating a comprehensive relative gain trade policies, helping and promoting regional economic integrations within Africa have also shown to be significantly advantageous. Such as the new deal between the three regional organizations Southern African Development Community (SADC), the East African Community (EAC) and the Common Market for Eastern and Southern Africa (COMESA) their agreement to create a free trade zone signed in Kampala, Ugandan looks promising (B.B.C, 2008).  All these regional economic integrations have been successful.  For example; if we take a look at the East African Community (EAC), that was officially created in 2001 is a “trade bloc” regional organization consisting of five East African nations Kenya, Tanzania, Uganda, Rwanda and Burundi. In its young age, this organization had been a great success.  The main aim of the organization is to establish a strong regional cooperation in development, commerce, technology, tourism and so on. Its future plans include cooperated integrated plans political matters such as defense, security, international affairs and judicial matters (Katembo, 2008).

African Growth and Opportunity Act (AGOA) is another success comprehensive trade agreement between the U.S and African nations. African Trade Increased 115 percent since AGOA's establishment. AGOA helps Africans use the power of trade to grow their economies and reduce poverty. U.S. Trade Representative (USTR) Rob Portman said in a statement issued with a report. It supports those politically and economically straggling countries. And “As these countries open their economies and increase their capacity to trade, opportunities are also arising for American exports to Africa." Portman added that aid for trade helps developing those African countries participate more fully in the global trading system.  Thus the U.S is committed $199 million to trade capacity building activities in sub-Saharan Africa last year alone. 37of the 48 sub-Saharan African countries are eligible for benefits under AGOA, are allowed duty-free access to the U.S. market for virtually all products. Since its inception in 2000, AGOA it has helped increase the U.S. Two-way trade with sub-Saharan Africa by 115 percent and U.S. total exports to sub-Saharan Africa rose 22 percent. From one year to the next this trade have benefited both countries and shown a great deal of percentage increase to both sides (The United States Trade Representative, 2008).

United States Representative Byron Dorgan of North Dakota on a house hearing said, “There is an opportunity, I think, for us to look at countries that are cash poor, but desperately need our food,…in exchange from those countries strategic material they posses….Zaire cobalt; Algeria mercury; Zambia copper; and Liberia rubber…could exchange for wheat, corn cheese, and so on…good sense for expanding our trade opportunities (Food Crisis in Africa 1983). Africa needs a fair trade not this type of distributed bargaining style of trade, and the U.S have to be an example in its leadership and the way we conduct business with those poor countries in order to lead other industrial nations by example.

Three reasons why a strong U.S- Africa relationship is important

Market

U.S secretary of state, Edmund S. Muskie addressed before the African-American Historical and Cultural Society and the World Affairs Council of Northern California in San Francisco, on December 4, 1980 stated that “a first undeniable reality is that African nations are deeply important to the United States. We not only want, we need good relations with them.  African nations are increasingly important to us economically, both as markets and as sources of critical materials” (Muskie, 1980). Africa is a rich in resources and with a technologically developed system and an educated manpower, it have a lot to offer from unused arable land for modernized agriculture, jewelry, minerals, oil, labor, forest, tourism and so on. Africa awaits for an exploration that is efficient and discoveries of all its resources.

In 2006, African oil output was 467 million tons of oil and 80% of is exported to the U.S. consumes only 33 percent (China-Africa, 2008). The AGOA has been great for the U.S by creating new opportunities for export and investments. Since its creation in 2001 it has been a great success to both sides. The duty free of more than 6,000 items that can enter the U.S is one of the concrete advantages for the African countries as well as American input, leadership and American joint venture partnerships. Among many, AGOA’s two-way trade includes raw materials, preserved fish, Cotton, flower, jewelry; apparel and oil are few of the items that the U.S imports from the sub-Sahara countries. The trade agreement has almost tripled reaching $44.2 billion for the sub-Saharan countries and double compared for the U.S. (The U.S.T.R, 2008).

Communist China’s expanding influence in Africa

China’s rapidly expanding influence is another reason why the U.S needs to not only maintain but expand its influence in the economic and political aspects of the continent. The Chinese government has a wide spectrum of cooperation with African nations for a variety of development.   At the current rate China’s expansion strategies across Africa seems unmatchable by any other nation from its infrastructure, urban development, road construction, two-way trade, building ports, railways and various investments. China’s two way trade has dramatically increased jumping from a 10.6 billion in 2000 to $73.57 billion in 2007, and its investment increased from about $1 billion to $10 billion in 2007. China mainly imports from the African nations are energy such as oil and various raw materials. Robert Zoellick, president of the World Bank, was impress the Chinese leading role that he went on to say “China’s investment in Africa’s infrastructure is good for Africa and…The World Bank is willing to take China as a partner in a joint effort to alleviate poverty in Africa” (China-Africa, 2008).

Finally With the rapid terrorism on the rise around the world, helping Africans reach and create a stable and peaceful Africa that is politically and economically strong as well as protecting it from foreign interferences, is not only important the security and well being of Africans and all peaceful individual citizens of the world.  As the world have witnessed inhuman like attacks from various radial terrorist some of in which those attacks occurred in various U.S embassies in Africa.  Terrorists’ activities and attempts have seen a great deal of increase; most notably in the failed state of Somalia (Dagne, 2002).  Starving humans will do anything and that is why I argue the U.S foreign policy towards Africa continue to build an active and strong relationship, educating and empowering the poor continent of Africa; that continues to seek the U.S.’s presence, relative economic gain and leadership influence.

As controversial as President George W. Bush might have been in the past eight years of his presidency, he has initiated, established and implemented various successful programs between the U.S and Africa.  He has been active, even though U.S occupation of Iraq has distracted President Bush’s administration away from such as the war in Liberia, the U.S still continues to aid African countries against fight on terror; especially, with the horn African countries where Al-Qaeda and other radicals Muslims try to establish safe haven (Hills, 2006).

For all the reasons mentioned above and more, Africa has been getting aid from international donors yet the poverty has not decreased let alone eradicated. That should serve as the evident reason why any plan to help Africa eradicate poverty must focus on a long term goals by a means of teaching Africans to create wealth instead of depend on the aid from the Western industrialized nations.  In the words of Father of Taoism, Chinese Lao Tzu, "Give a man a fish, feed him for a day. Teach a man to fish, feed him for a lifetime”.

Works Cited

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B.B.C (2008). African free trade zone is agreed: 10/10/2008, from http://news.bbc.co.uk/2/hi/business/7684903.stm

Burnside. C and Dollar. D. The American Economic Review, Vol. 90, No. 4 (Sep., 2000), pp. 847-868.

China-Africa Seeking Equality. (2008, May 15). Beijing Review, Retrieved November 19, 2008,    .rom Academic Search Complete database. https://libproxy.library.unt.edu:9443/login?url=http://search.ebscohost.com/login.aspx?direct=true&db=a9h&AN=32138670&site=ehost-live&scope=site

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Katembo, B. (2008, May). Pan Africanism and Development: The East African Community Model. Journal of Pan African Studies, 2(4), 107-116. Retrieved November 21, 2008, from Academic earch complete database. https://libproxy.library.unt.edu:9443/login?url=http://search.ebscohost.com/login.aspx?dir……..ect=true&db=a9h&AN=32926376&site=ehost-live&scope=site

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Millennium challenge corporation (2006). 11/15/2008, from http://www.mcc.gov/about/reports/annual/mcc-annualreport-2006.pdf

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Mwenda, A. (2007). Let's Take a New Look at African Aid: TED.Com. Filmed Jun 2007; Posted Sep 2007 11/14/2008 from http://www.ted.com/index.php/talks/andrew_mwenda_takes_a_new_look_at_africa.html

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Ambassador Young's African trip: Hearing before the Subcommittee the Subcommittee on African Affairs of the Committee on Foreign Relations United States Senate, 95^th cong., 1^st Sess., (1977)

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