To Aid or Trade?

After environmental disasters, nations often rush to pledge relief aid. But how well-meaning are these donations? If countries were truly acting altruistically, they might also consider amending their trade policies, as Pakistani textile manufacturers argue in the Wall Street Journal.

In Pakistan, textiles are a major part of the economy. “The country's textile sector directly employs 3.5 million people, accounting for 40 percent of urban factory jobs,” writes the Journal. Overall, textile-product exports account for over half of Pakistan's total exports, so any restrictions placed on the sector have a significant impact on the entire economy.

As a result, the cost to Pakistani textile producers from U.S. barriers to trade is considerable, reports the Journal.

Abolishing American tariffs, which currently stand at an average 17 percent on cotton pants and shirts from Pakistan, would boost the nation's textile exports by $5 billion annually, government officials and factory owners estimate.

This sizable loss in income and the effect it has on the economy is integral to reforming Pakistan's economy. Neither the aid that Pakistan receives, in general, nor pledged aid in response to recent flooding, will be enough to lift Pakistan out of poverty, advocates say.

The recent flooding has profoundly impacted Pakistan and made this an opportune time to highlight grievances over the use of aid versus trade. Advocates for lowering trade tariffs are using the inflows of aid and heightened focus on rebuilding Pakistan’s soggy economy to show that most countries’ donations are inadequate.

The crux of their complaints is that the U.S and other donor nations could do far more to help countries such as Pakistan recover if they would stop restricting trade, allowing manufacturers and merchants to prosper and help the economy recover.

When put into perspective, using aid donations to signal support for development does ring a bit hollow, as these numbers cited by Global Issues demonstrate.

The total cost to developing countries of restrictions on textile imports into the developed world has been estimated to be some $50 billion a year. This is more or less equivalent to the total amount of annual development assistance provided by Northern governments to the Third World.

So, as the article continues on to say, “we take back with our left hand every cent we give with our right," a practice that has been understandably met with criticism in the developing world.

Surely the aid given to help ensure there is adequate food, water, and sanitation for flood victims doesn't go unappreciated. However, looking to the future — a necessary response to any disaster — some Pakistanis are calling on donor countries to reevaluate policy, not just pull out their pocketbooks.