In 2011, the U.S. government spent more than $22 billion in non-military foreign aid while collecting $6.8 billion in taxes on imports from the world’s poorest countries. Ironically, the government spent $185 million in “trade and investment” aid while collecting 36 times that amount from tariffs on products from poor countries.
Does it make any sense for the government to send billions of dollars in aid to poor countries while maintaining high tariff walls that block their ability to do business with Americans?
A better option would be to eliminate tariffs on imports from developing countries. The government could offset the $6.8 billion revenue loss by cutting foreign aid by the same amount.
The value of such an approach is easily testable. The United States could pick a handful of countries that receive foreign aid, likeVietnamorBangladesh, and eliminate all trade barriers and foreign aid to those countries. (The average U.S. tariff on products from those countries in 2011 was 9 percent forVietnamand 15 percent forBangladesh, and each country received well over $100 million in aid.)
Then, four or five years later, we could see how these countries compare with others who received aid but faced trade barriers.
Want to bet on which group would do better?