More aid = More trade

Development assistance may boost Canadian exports to aid recipient countries, a study by the Canadian International Development Platform suggests.

The study, described as a first attempt to “measure the elasticity of Canadian exports to aid,” studied countries that received Canadian official development assistance between 1989 and 2015.

The average return over that period on a dollar of gross official development assistance was between $1.10 and $1.19 in exports, the report says. “In addition to the core moral and humanitarian purpose of aid, an added benefit over time may be that the same investment has the effect of boosting Canadian exports to aid recipient countries.”

While the researchers state that the main purpose of foreign aid should continue to be poverty reduction, this aid leads to “an effect that is additional and complementary to the core moral and humanitarian imperative that is and should continue to be the main driver behind Canada’s foreign aid.” About 98.5 per cent of Canadian aid is not tied. Aid is considered “tied” when a condition for its disbursement to a partner country is that the proceeds can only be used to buy goods and services from the donor country providing the assistance.

The study authors argue that Canada has opportunities to improve the linkage between trade and development strategies. This is true both in areas where Canada currently is strong, such as agriculture and agri-food, as well as “high tech, high-value-added and ‘sunrise’ sectors” such as clean technologies. ◆

As printed in The Marketplace – Jan-Feb 2018


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