August 17, 2016

UK aid should help Britain trade

UK aid should help Britain trade

Chris Everett argues the international development budget should be used to develop a series of proposals to support emerging markets trade with the UK.

Liam Fox’s trade brief is perhaps the most exciting of any current minister. Tasked with securing the faith, investment, and openness of markets from America to Australia, the good doctor will shape both British economic and foreign policy for years to come.

The majority of Fox’s remit will be to secure free trade agreements beyond the WTO’s “Most Favoured Nation” rule, and to plant the seed of British influence within trading blocs such as ASEAN and Mercosur. Yet with such a variety of states and regional groups to cut deals with, Fox’s options need to take on a more diverse form than simply reciprocal trade agreements.

One example of going beyond free trade is combining elements of Priti Patel’s considerable foreign aid budget (~£12.2 billion) with a policy to bolster markets for British goods and, more particularly, services. UK law restricts foreign aid only to be used for the purpose of reducing poverty – though thankfully the Department of International Development keeps this definition strikingly broad. Causes of poverty (such as lack of education, underdeveloped infrastructure, and appalling medical conditions) are also within the remit of the foreign aid budget.

It would not be an illogical leap for Fox and his supporters to argue that a lack of free trade – or worst, a glut of regulation – can also cause poverty and harm development. Certainly organisations such as the IMF and WTO would argue this was the cause.

With this argument in mind, Fox should develop a series of proposals to support emerging markets to develop and trade with the UK. In particular Fox should look at tackling the “credit gap” for smaller companies within these markets. Closing this gap – caused by companies in poorer countries unable to access significant credit – means more business for Britain at each stage. It means more lending and investment for British banks, trusts, and funds; more companies able to afford Britain’s hi-tech goods; more diverse suppliers for British retailers to choose from.

Take Africa. Many of the poorer countries on the continent lack sufficient credit checking bureaus, which has an effect on slowing local private investment. I propose that Fox establish a pan-African credit risk assessor, designed for use by British and local banks, using DfID’s considerable resources to support a more enhanced, uniform system of checks that can also incorporate relationship banking where credit histories are totally unavailable (a common problem for SME owners in Africa’s less developed states).

This approach lacks the unwelcome market intervention of a government run bank (which could further harm Africa’s nascent financial sector) while providing an information hub for British and local businesses to help them with their investment decisions. In the spirit of Brexit, it will even allow smaller firms to make international lending decisions without costly risk consultancies, while ensuring a degree of uniform (and ideally limited) financial regulation across the continent.

Fox and Patel, two veteran right-wing free marketers, should grasp the opportunity in front of them to simultaneously generate trade and alleviate poverty, all while steering clear of costly investment decisions. In post-Brexit British development policy, there is no reason aid cannot equal trade.

5.00 avg. rating (96% score) - 3 votes
Chris Everett
Chris Everett
Chris Everett is a reporter for Guido Fawkes, specialising in data journalism, politics, and foreign affairs. He has an MSc in International Public Policy from UCL, and has previously been involved in both Conservative and Liberal Democrat politics. In his spare time he enjoys reading Middle English, golf, and watching cult cinema.
  • Dacorum

    Definition of foreign aid – taking resources from the poor and ill of our country and giving to the rich elite in poor countries.

    It is absurd that we should be borrowing £12.1 billion in order to give it away in foreign aid when we still have a massive budget deficit and essential services like the NHS and care for the elderly are having to be cut to pay for that. It is not as though foreign aid is spent wisely or well.

    We should cut the foreign aid budget substantially and spend the rest far more sensibly. Spending money promoting birth control is probably the best contribution we can make to cutting poverty and want in poor countries as only by cutting population growth can there be sustainable development in countries where, for example, water and fuel are in short supply.

    Whilst I would like to see foreign aid budget slashed, I would however like to see the disaster aid budget element increased so that if a natural disaster should strike, then we would be able to offer substantial financial assistance in rebuilding which will not only help those most in need but also help to build trade contacts with those countries. We should also ensure that the disaster aid budget element, like the entire aid budget, goes where it should go and not into the pockets of corrupt officials.

  • nonoplease

    Aid should be diverted to help those who have suffered the most from the UK’s insane immigration policy.
    So, those girls in Rotherham and elsewhere should get a million each.
    Remaining money can be used to build gallows to deal with those who decided to “rub the Right’s nose in diversity and render their arguments out of date.”

  • gildedtumbril

    To hell with Africa, the more you ‘help’ the worse it gets. Has no one not noticed?

  • Fido Gawks

    Trade and aid should also have a moral dimension… free trade for states that proactively support freedom of expression, female access to work and education (and driving Saudi), and states that reject torture, death penalty (yes, you America), and states that are rife with corruption and breach international law (including the law of the sea, China).
    Britain should produce a moral ranking system based on objective moral standards that support human civilisation, and set tariffs accordingly; but also get involved with helping countries – particularly commonwealth countries – improve… If the Commonwealth is to mean anything it should be seen as the path to civilisation, liberty, and prosperity for what are some of the poorest, but potentially wealthiest countries in the world: Burma; South Africa; Guyana; Fiji; Scotland; Belize… the list is long, and in every continent. Britain can do some good in the world by providing leadership for these non-aligned states, and unshackling itself from US and EU foreign policy imperatives.

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