Paper by Rosie Hayward, Peter Klimek, and Asjad Naqvi

Talk by Rosie Hayward (ASCII)

Both the US and the EU have been significant contributors to official development aid. However, there is increasing political pressure in many countries, including the US, to reduce future aid disbursements.

By conducting a system-wide association study between trade flows across the full range of products and all aid purposes, including aid that would be considered untied, humanitarian, and typically non-trade related, we aim to understand potentially harmful impacts of trade, as well as how donor countries may strategically use their aid disbursements as soft power instruments.

Using comprehensive, standardised, and official data from the OECD’s Creditor Reporting System and global bilateral trade data, we identify strong and persistent correlations for specific sets of traded products and aid purposes. In particular, these correlations include strong signals between food and biodiversity aid for both the US and the EU.

However, for precious metals, ores, and mineral resources, aid approaches may differ, with aid for social infrastructure and governance standing out for the US and emergency, health, and conflict-related aid standing out for the EU.

Our results highlight how trade is connected to human and environmental crises and suggest that a major cessation of US aid flows would likely result in a substantial reduction in attempts to mitigate the environmental and health impacts of the US’s food and precious metals imports.

Furthermore, they highlight the sensitive relationship between aid, minerals, and conflict and the humanitarian and environmental risks of the removal of aid in this area.

For the EU, filling the vacuum left by the US may be seen as an opportunity to reduce its supply chain vulnerabilities in line with its strategic interests.

However, a further opportunity to assess the current relationship between aid and trade, and how to fairly and effectively distribute aid, also arises.