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New foreign aid index says little about real support for developing countries

By Helen Hughes - posted Tuesday, 3 June 2003

Two American NGOs, the Centre for Global Development and the Carnegie Endowment for International Peace, have created an index of "commitment to development" to increase support for aid.

The index purports to show (Weekend AFR, May 10-11) Australia is the third worst contributor to development out of 21 industrial countries. "Shame on us", all good-hearted Australians are supposed to think.

But the index, instead of being an objective statement of the efforts industrial countries make to help developing countries, is a highly subjective compilation of six equally graded components.


This index measures aid as a percentage of GDP, but sleights of hand are used to denigrate major donors, notably Japan, which is the second-highest aid donor in the world.

The United States, which has contributed more aid than the next half-dozen donors since the Marshall Plan and which has recently stated it will increase its aid from nearly US$10 billion (A$15 billion) to US$15 billion a year by 2006, comes out as the second-worst performer after Japan in this index.

The trade component is egregiously wrong. The structure of the index hides the fact that while US$58 billion worth of annual aid flows to developing and transitional countries, the cost of developed countries' agricultural protectionism to those developing countries is US$201 billion.

So much for giving aid and trade the same weight. The EU is by far the highest contributor to this cost to developing countries but the EU countries' trade measures do not reflect this. The US is the largest importer of labour-intensive goods from developing countries and among the highest importer of those goods per capita. This does not do it much good on the index.

Australia has no agricultural protection, imports 40 per cent of its textiles, clothing and footwear with 80 per cent coming from developing countries, and that does not do us much good on the index either.

The index does not distinguish between investment in developing countries that funds protected industries which create monopolists, are a burden on the balance of payments and a net cost to developing countries; and investment in competitive industries that bring employment and income.


In migration the US does little better than Japan and not as well as Germany or Switzerland.

On peacekeeping, the US is a truly miserable performer.

The US "no-fly zone" to protect the Kurds from Saddam Hussein and intervention in Bosnia and Kosovo after the United Nations failed to act, are not included.

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Article edited by Ian Spooner.
If you'd like to be a volunteer editor too, click here.

This article first appeared in The Australian Financial Review on 20 May 2003.

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About the Author

Professor Helen Hughes AO is a senior fellow of the Centre for Independent Studies.

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