School Essays

Geography(Trade,not aid, is the key to development)

Trade, not aid is the key to development

Introduction

This is an essay is about aid against trade. I'll discuss whether aid or trade is more effective in development of a country, and the advantages and disadvantages of aid and trade. In my conclusion I'll voice my opinion on whether trade or aid is better for a developing country.

Trade and Aid in a nutshell

The big difference between aid and trade is that with trade, a LDC is constantly given resources and other materials to help the LDC. Richer countries yearly provide some 60 billion dollars in aid to poor countries. much of this money is for infrastructure projects like new roads and better communication system. With trade, hard-needed resources are traded with the LDC, which helps them build up their economy. Because of trade jobs are created for the inhabitants of the less developed countries. The wages provided by these jobs get spend in the local economy, causing a demand for local businesses and job opportunities for local residents. This is one of the main reasons i believe trade is the better choice when aiding a country in their development.

Aid

Aid in itself is not a bad thing. It becomes a serious problem if too much aid is given to a country. It may become depended on this aid, defeating the purpose of trying the help the country become independent. However, it can also be more effective than trade. Trade is for countries which are willing to trade, but also able to supply goods and services and to be able to sell them at the desired price. To be able to do this, a country may need to meet other criteria of a purchasing country. For example, that country may make demands in terms of corruption, human rights, political support at the United Nations, or any other terms for a trading partnership. This may not be a problem to some countries in the developing world, but it can act as a bar to trading to other LDC's. Those countries won't receive the redistribution of wealth that they claimed for. In this way, trade can distribute its benefit very unevenly across the country. In contrast to trade, aid is delivered personally, and can therefor be distributed way more evenly. Trade also depends on a solid infrastructure. Aid can be distributed for personal need, and not for the ability to compete with other countries in a marketing place. Many experts also believe that the growth of a developing country depends on aid. A strong infrastructure is necessary for a multinational company to decide where to place a factory or distribution facility. But private investors may refuse to lend funds for such public projects because of the financial weakness of a country's government. Therefore, aid might be the only way in which proper and needed improvements can be funded For example, $63 million of U.S. aid went to building roads in the southern Philippine island of Mindanao. This improvement of infrastructure later turned out to be a critical element in the development of the area's fishing industry. So in certain ways, aid is indeed a good thing.

Trade

An old Chinese saying goes:"Give a man a fish and you feed him for a day. Teach a man to fish and you feed him for a lifetime." This is the same as my way of thinking, because trade is a long term basis for international cooperation. The other partner is likely to represent an ongoing market for goods and services. So when an LDC has the ability to start trading with another country, it will likely transform into an ongoing trading partnership. This becomes a guarantee of income for the LDC, no matter whether the trading partner is doing well or bad economically at the moment. And the infrastructure of the LDC advances to be able to support the trade. In contrast, if the developed country goes through a bad economic time the aid budget it may be cut. Trade also provides jobs for the inhabitants of the less developed countries. Trade also allows development countries to maintain dignity, Because to receive the benefits of aid, The developing country needs to be actively working. And aid can be viewed as a form of charity where the developing country has to admit the superiority of the developed country. Trade also shows that the country can be independent, while aid may cause the LDC to be viewed as helpless. But more than that, it's so that the developing countries don't get depended on aid. Long-term food aid, for example, often brings local vegetable prices so low that it forces the farmers to abandon their fields and try to find work in the city. For example when U.S. U.N. troops entered Somalia in 1992, they brought so much food with them to feed the local population that Somali farmers were unable to sell their crops at a high enough price to make a profit. The next growing season, the fields remained unplanted which caused the country to become much more dependent on outsiders.

Aid for Trade

Aid for Trade is part of Official Development Aid(ODA), which goal is to improve countries' ability to trade. Many developing countries face supply-side and trade-related infrastructure obstacles, keeping them from participating in international trading. Because trade is a complex activity, Aid for Trade isn't easily defined. Some parts of it is technical assistance-helping countries develop trade strategies and negotiate more effectively. Infrastructure-Building roads, ports and telecommunication systems that connect local and global markets. Productive capacity-Investing in industries so countries can create more diversity in their exports and build on comparative advantages. And adjustment assistance-helping with the costs that come with tariff reductions, preference erosion, or declining terms of trade.Some examples of the challenges facing less developed countries to expand their trade include:

power generation in Burkina Faso are more than four times the cost in neighbouring Côte d'Ivoire-and ten times the cost in France.

it takes 116 days to move a container from the factory in the Central African Republic to the nearest port

In the Andean Community, trucks spend more than half of the total journey time at border crossings.

Aid for trade is targeted towards lowering transport costs, shortening queues at borders, simplifying controls and formalities, and thus increasing trade opportunities. Various sources have researched Aid for Trade and have stated that it has been effective in raising exports and improving the investment climate in some LMIC. Infrastructure investments were found to have the most effect. A 10% increase in Aid for Trade investment to trade-related infrastructure led to an average increase of 2.3%

Fair Trade

Fair trade helps farmers and workers in developing countries to achieve a better place in the supply chain, so they can live off the profit of their jobs and be able to invest in a efficient future. Fair trade is both a quality label and a worldwide movement. In the Netherlands Max Havelaar is the owner of the Fair Trade quality label, also known as the Max Havelaar quality label. In Asia, Africa and South-America, lot of small-scale farmers are in constant uncertainty about their income. In addition to that, they are at the mercy of ever-changing world market price, which often causes the income to be insufficient to feed their whole family. Without certainty they can't invest in their enterprise, their children's future and their society. This causes the poverty to remain. Fair Trade breaks this vicious circle by implementing standards which give the farmers the opportunities to develop themselves. Besides small-scale farmers, plantations for certain goods also qualify for the label: the standards of Fairtrade are then focused on better living circumstances for the workers. Plantation work characterizes itself with too low wages and bad work circumstances. The most vulnerable are workers without permanent contracts: seasonal workers and other temporary work forces. Albert Heijn, a Dutch supermarket(you can't go to the Netherlands without encountering one), has been importing vegetables, fruits and flowers from Africa for years. They do this for products which aren't alway obtainable in nearby areas. In 2007, Albert Heijn has, together with it's exporters, started the Albert Heijn Foundation. This foundation primarily invests in local projects on the areas of living, education and health.

Conclusion

I believe that countries benefit far more from trade than that they do from aid. Too often aid takes the form of large, unwell-planned projects that hardly improve a country's living standard. But with well-planned trading, the countries slowly ease into business, make a name for themselves, and start generating higher and higher incomes, allowing them, at last, to be an total independent country, with no needs for aid whatsoever. Fair trade improves this even further, by ensuring that the farmers and workers in less developed countries get fair prices for their products. Aid, however, isn't completely useless. With aid for trade, the aid is focused on improving trade in LDC's. This again proves that trading is better for a LDC. Trade allows a LDC to try and stand on equal footing with a developed country.