Trade and Aid

The authors start by analysing the current understanding of how trade and aid work, and then examine a range of specific examples of how one has been used to support the other and how both developed countries and developing countries have found difficulty in reconciling the different approaches. Some of the worst apparent conflicts come from badly designed aid or trade policies,not from intrinsic inconsistency, and there is evidence that aid can be used to assist in trading more effectively than it has been in recent years, and that the resulting trade may be ‘good for development’. But their roles are too different to subordinate either entirely to the other, and for some of the major current aid recipients there are deeper issues, the inability to deliver the investment climate and leadership in institutional change that would be required for trade-based development to occur, as it did in earlier development successes. Trade and aid can be complementary, but they are not substitutes, and neither can replace effective national policy.