Developing Countries Need Trade ,Not Aid.

Submitted to:ISBR Faculty

Submitted by:Yash Bodane

TRADE V/S AIDDeveloping countries are the ones where economy is in the growing stage. In these countries people are in need of products and services and the demand is increasing day by day. And in the era of globalization, purchasing power of people has increased so any new product or service launched will be in high demand in developing nations.

Aid has often come with a price of its own for the developing nations:Aid is often wasted on conditions that the recipient must use overpriced goods and services from donor countries.

Moreover in a nation like India where there is a huge population with different cultures the demand s also vary a lot. So any big firm whether its automobile sector or electronic sector will certainly have consumers lined up for there products to get sold.

Most aid does not actually go to the poorest who would need it the most

Hence trade is certainly necessary not only for enhancing development of these countries but also for increasing the living standards of people. Not only that the firms will also get an extremely good market to invest which will also enhance there trade and increase profit levels.

Aid amounts are dwarfed by rich country protectionism that denies market access for poor country products, while rich nations use aid as a lever to open poor country markets to their products Because if a country is given aid the country will never grow, it will never become a self dependent country it always need to beg before the other countries for their needs and after all it will still remain as developing country.

Trade Benefits to Developing Countries1.Trade can help boost development

and reduce poverty by generating growth through increased

commercial opportunities and investment, as

well as broadening the productive base

through private sector development.2. Trade enhances competitiveness

by helping developing countries

reduce the cost of inputs, acquire finance

through investments, increase the value

added of their products and move up the

global value chain

3. Trade encourages innovation by facilitating exchange of know-how,

technology and investment in research

and development, including through

foreign direct investment.

4. Trade facilitates export diversification

by allowing developing countries to access new markets and new

materials which open up new production

possibilities

5. Trade openness expands business opportunities for local companies

by opening up new markets, removing unnecessary barriers and making it

easier for them to export.

6. Trade creates employment opportunities

by boosting economic sectors that create stable jobs and usually higher incomes, thus improving

Livelihoods.

Well, There is a big debate on the topic “Developing countries need trade, not aid.” Before coming on a harsh decision, Firstly, lets see the inflow and outflow, and benefits of global trade of the top 5 developing nations:- China, India, Russia, Brazil and Indonesia.Trade is better because that makes a country realize and explore its own potential, it gives the country a sort of Independence which every country seeks. It brings a developing country and a developed country closer, it abridges the gap between them, which thereby results in an healthy and peaceful relation.

Trade also contributes to economic development, and other countries learn to value you.

32

28055

71

191093

FDI In Top 5 Develop-ing Countries ($ Bil-

lions)

India China RussiaBrazil Indonesia Others

Official Development Assistance (ODA)Official development

assistance (ODA) is a term coined by the Development Assistance Committee (DAC) of the Organization for Economic Co-operation and Development (OECD) to measure aid. The DAC first used the term in 1969. It is widely used as an indicator of international aid flow. It includes some loans. Net official development assistance (ODA) per capita consists of disbursements of loans made on concessional terms (net of repayments of principal) and grants by official agencies of the members of the Development Assistance Committee (DAC), by multilateral institutions, and by non-DAC countries to promote economic development and welfare in countries and territories in the DAC list of ODA recipients.

In international relations, aid (also known as international aid, overseas aid, or foreign aid) is – from the perspective of governments – a voluntary transfer of resources from one country to another. Aid may be given by individuals, private organizations, or governments. Standards delimiting exactly the kinds of transfers that count as aid vary. Types of provided to the unprivileged:1. Emergency Aid2. Development Aid

As shown in the map, The top 5 countries donating foreign aid are well-developed and full fledged in various other trade activities.

Statistical studies have produced widely differing assessments of the correlation between aid and economic growth, and no firm consensus has emerged to suggest that foreign aid generally does boost growth. Some studies find a positive correlation, but others find either no correlation or a negative correlation.

Think of it from other perspective. If you ask someone for help(aid) he will be ready to help you once or twice or thrice and then ultimately he will say no to you. Similarly we a developing country can not go to other countries for help always. However if they provide us with some sort of TRADE, then we will not be that much dependent on other countries and it will also help us rise globally and financially.

Final View:

Trade is opportunity for growth. Liberates economy. It Earns on Assets, and will make developers self sufficient and pave way to explore their potential. Developing countries definitely needs trade from the neighboring and other developed countries. This helps in increasing the economic conditions and it develops a good bondage between them. trade is most essential parameter for a developing country. If we become familiar with the trade of super power then in future we can develop ourselves by our own and if we inclined towards aid. If today we hanker after developed countries for aid somehow in the coming future we would be dominated by them.

In the end concerning the developing countries like India, China, Brazil these nations need both trade and aid in fair amount. Trade has huge limitations based on the availability of resources and skilled workforce. And it would take a long time to generate profit from trade and again all such profit is vulnerable to function in the market. So trade alone can’t help a nation progress. The aid is equally necessary, aid for health, military aid and infrastructure supplements like growth of any developing nation which they could not afford from the revenue alone.

Thank You.