Canada Merges Foreign Aid and Trade

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OTTAWA, Canada – Earlier this year, Canada established its new budget with a surprising announcement: it is beginning a merger between its international trade and foreign aid departments. The decision was received with a charged mixture of support and skepticism.

Support from the anti-bureaucrats
Much of the applause for the reform came from critics of the Canadian International Development Agency (CIDA) which has decried its opacity, bureaucracy, and inefficacy for years. Investigations by various research groups have found that Canada’s aid transparency is abysmal—ranked 23rd out of the top 30 donor countries— and that CIDA is bogged down in extensive documentation, and that aid projects can take up to 43 months to get approved. Clearly, some kind of streamlining reform was necessary.Beyond internal problems at CIDA, however, the Canadian government has suffered for years from conflict between CIDA and its Department of Foreign Affairs and International Trade (DFAIT). Situated on opposite sides of the Ottawa River, the agendas of the two agencies are famously at odds, or at least independent of each other. Forcing policy synergy between Canada’s two biggest foreign affairs arms just makes sense, supporters argue.

Skepticism from the anti-globalists
But many express doubt that the merger or “amalgamation” will ultimately make aid more effective. Combining non-profit, humanitarian interests with for-profit, industrial interests is counter-intuitive, and it could subordinate ethics to business. It could also turn many of the resource-poor nations that currently receive Canadian aid into “aid orphans” as the Canadian mining industry, its biggest profit-churning enterprise, directs aid away from them to develop the capacities of more mineral-rich nations.The Canadian Association of International Development Professionals (CAIDP) published a report in November last year urging lawmakers to not put “commercial objectives” over development goals. They argue that if current policy is any indicator of future trends, then Canadian-led global development will subside into an afterthought of Canadian trade.

The historical case for aid and trade
Despite the alarm accompanying the Canadian government’s announcement, there is, in fact, a precedent for merging aid and foreign affairs. In the 1990s, Denmark merged its CIDA-equivalent with its foreign affairs ministry; yet today it is one of the world’s leading aid-donating countries. Not only is Danish aid more effective than most, but the country actually exceeds the global standard of 0.7% of GNI allocated to aid. Canada and the U.S., with independent aid agencies, have not exceeded 0.4%.

The interaction between humanitarian aid and industry also has positive historical precedents. In the latter part of the twentieth century, the greatest part of Canada’s aid went to China, South Korea, India, and other Asian countries—which, today, have become Canada’s most important trading partners and aid donors themselves. Countries like Peru, in which Canada has established significant mining operations and which receives much of Canada’s aid, promise to obey a similar pattern.

As the debate over the amalgamation continues, policy-makers hope that it will raise the profile of humanitarian aid in government, emphasize Canada’s commitment to aid effectiveness and transparency, and ultimately align Canada’s short-term goals (trade) with its long-term ones (development). It remains to be seen how this merger will perform in the next few years.

– John Mahon

Sources: Devex, The Globe and Mail, North-South Institute
Photo: Marc F. Bellemare

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