Corollary To Aid TRADE WITH THE POORER COUNTRIES

Press, Volume CII, Issue 30275, 30 October 1963, Page 22

Corollary To Aid TRADE WITH THE POORER COUNTRIES

(By

“LYNCEUS"

of th« "EconomiM"]

(From the “Bconomis London, September 34. Does it make sense any longer for a government to give an account of its record in providing economic aid to undeveloped countries and to leave out what it is doing about buying more of those countries’ products? Can we any longer treat quite separately the capital and technical assistance that we give to the poor nations of the world and the income that we provide for them by importing more of their goods? These thoughts . are prompted by the latest official account of Britain’s aid effort, which has just been published under the title of i "Aid to Developing Countries.” In every other way it is an admirable document Taken together with the speech of the Chancellor of the Exchequer, who introduced it, this White Paper indicates strikingly how the provision of international aid is regarded nowadays by the British Government. The fact that economic aid ought to be given to the developing countries Is taken for granted. No longer the list of economic advantages that the developed countries themselves can expect to derive from helping to build up their export markets of tomorrow. No longer the reasoned recital of the moral obligations the rich countries to help raise the living standards of the poorer peoples "over the garden fence.”

Burden Of Advantage? Indeed, the Chancellor suggested an attitude to economic aid that was new and sophisticated. He wanted Britain’s aid effort to bring a new outlet and a new sense of purpose for Britain.” The burden of Britain’s add abroad—the volume of which has grown faster over the last five years than any other item of government expenditure of comparable size—should be regarded, he suggested, as a “source of inspiration in our efforts to expand out own economy and so increase the level of our aid achievement.” This attempt to turn a burden to advantage is the kind of approach that Britain needs in he r economic life today. , ~ e facts and figures, too tell a praiseworthy story. In the four years to 1962 Britain doubled the overseas aid she provided in all forms. Not only has the volume gone up; the terms have been eased, as they must be if aid on the present world scale—about £3OOO million a year

t” Intelligence Unit) altogether from the developed countries—is to continue, let alone be improved upon. For the time has come when the receiving countries, not just the donors, are asking themselves whether they can afford aid on this scale. The burden of interest payments. to say nothing of the repayment of principal, is imposing a very severe strain on their meagre resources. This problem has. of course, been recognised for some. The International Development Association was set up in 1960 to help solve it by providing loans which carry no interest charge at all, but simply an annual commission charge of i per cent. Similarly, Britain and other countries are reducing their interest rates, lengthening the repayment periods of loans, and granting periods of grace But even if interest charges are abolished altogether, loans still have to be repaid. Aid-receiving countries can repay them only by earning, foreign exchange through exports, unless they borrow more from Peter to pay back Paul Hence, they must find markets for their products, whether these are their traditional raw materials and food or the newer manufactures which foreign capital has helped them to produce. Their markets in either case must be to a large extent in the richer countries, but these countries have been reluctant to import cheap manufactures at the expense of their own producers. They are also conspicuously unsuccessful at maintaining or increasing the value of their imports of raw materials. Half The Job So what can the developing countries do? The ludicrous situation can easily arise where Indian manufactures, produced with, say, American capital and technical assistance, are piled high on the Indian quayside, prevented from entering the United States and other afluent communities by tariffs and quota controls.

Buying the exports of developing <-ountries has always had some notable advantages even over giving them capital assistance. The extra problems now posed by the sheer weight of aid reinforces those arguments. To devote prodigious efforts, as the industrial countries are now doing, to the provision of capital and technical assistance and ait the same time to neglect the problem of increasing the

export earnings of the developing countries is to do half the job very well and then stop. This is why Britain’s White Paper on aid is in the context of today disappointing, in spite of recording some admirable achievements. The question of increased trade with the struggling countries of the world is touched on, but that is all. It is a tricky subject and it would have been unrealistic to expect in this White Paper a full account of what Britain is trying to do in this field. But a demonstration that aid does not end when trading begins would have been very welcome.