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Best aid for Africa may be indirect; Managing Globalization

The International Herald Tribune

SECTION: FINANCE; Pg. 15

The International Herald Tribune’s global economics columnist, Daniel Altman, recently moderated an online discussion about foreign aid between readers and Jagdish Bhagwati, a leading trade theorist at Columbia University and senior fellow for international economics at the Council on Foreign Relations. Here are some of the questions and excerpts from his responses.

(The full text is available online.)

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I would like to know what you would think of development efforts directed at people who are ”getting by” but unable to establish a sturdy economic anchor in the areas where they live. Here, for instance, there are efforts to help indigenous groups grow Fair Trade coffee, but this hardly gets at the bulk of the population. Would not development efforts designed to help, say, small producers develop enterprises providing products that could be marketed locally as well as internationally be a good idea?

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Esther Buddenhagen, Mexico

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This is an excellent question. Supporting ”fair trade” coffee sounds fine, though I must express some distress over the epithet fair trade coffee because it implies that normal coffee (whose exports also increase earnings and prosperity in Mexico) constitutes unfair trade. But I must raise two issues. When you pay more for fair trade coffee than the going price for coffee, as part of your altruism, that is actually a subsidy. So, you really have to worry, as we development economists have long worried, that the subsidy may not actually reach the farmer. You may therefore decide, with full justification, that you would rather express your altruism for the poor in Mexico in other ways.

More generally, some non-governmental organizations increasingly want to freeze out (no pun intended) the coffees that are not fair trade, granting exclusive markets only to the fair trade coffee. That surely is inappropriate, given the fact that it is perfectly proper to direct your altruism in several alternative ways. Many developing countries are now alarmed over these tendencies, and by the fact that some non-governmental organizations ”blackmail” retail chains into excluding products that do not meet their demands (which are often not based on universally agreed, and ratified, norms) on how, say, coffee is grown or apparel is manufactured.

Finally, your suggestion that developmental assistance should be directed at encouraging small producers who can grow the way small producers often do, is a sound prescription that should be part of a sensible developmental strategy.

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Email: daltman@iht.com

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