Global Communications: Opportunities for Trade and Aid

In fiscal year 1995, the United States will spend approximately $12.6 billion for international development and security assistance. Foreign assistance has encountered increasing resistance recently due to the uneven record of previous programs; the rise of former recipients as major US competitors; a questioning of the rationale for foreign aid in light of the Soviet Union’s collapse, as well as more general concerns about the size of government and government spending.

To ensure that foreign assistance programs serve the interests of the United States as well as those of developing countries, some policy-makers are seeking to link aid policies more closely to national trade objectives. For example, the Peace, Prosperity, and Democracy Act (1994), introduced by the Clinton Administration in the 103rd Congress, would provide US businesses with greater support to establish markets in countries receiving US aid. The Trade for Aid Bill—first introduced in the 102nd Congress and subsequently revised and reintroduced in 1993—goes even further, making aid in some cases contingent on trade. This bill not only limits the amount of foreign aid that can be provided in the form of cash transfers; it also requires that more funding be directed at capital projects, which generally have greater payoffs for American business.

Communication and information technologies are particularly well suited to serve both foreign aid and trade goals. These technologies are critically important to today’s knowledge-based global economy. Not only are they the networked infrastructure on which global businesses will increasingly depend; they also constitute one of the fastest growing sectors of world trade and investment. One way of fostering such outcomes is to develop foreign aid programs which incorporate telecommunications components.

The Importance of US Foreign Aid

The euphoria that accompanied the demise of the Soviet Union and the Communist regimes in Eastern Europe has waned. Instead of signaling a new era of greater peace and security, these events were a prelude to the collapse of the social order in some countries where authoritarian regimes were replaced by ethnic conflict and civil war.

Nor do the deteriorating social and economic conditions in many Third World countries bode well for a better future. Over the past three decades, income disparity around the world has doubled. The richest 20 percent of the world’s population have an income that is 150 times that of the poorest 20 percent. ¹ Nearly 35 percent of the world’s adult population is illiterate and infant mortality rates continue to hover at 114 deaths per 1,000 live births. ²

Economic progress in many developing countries is far from adequate to address these problems. In sub-Saharan Africa, where these problems are worst, only marginal improvements in per capita income and consumption are anticipated, even under the most positive growth scenarios. ³ Assuming a less favorable global economic environment, a number of Latin American and Asian countries will also experience difficult times. Continued unrest in the Soviet Union and eastern Europe could make economic growth problematic in this region as well.

As the United States faces these challenges, it may find that foreign aid is often its best recourse, when conceived of as a long-term preventative measure. International negotiation is not as relevant to these types of problems as it is to boundary disputes and disarmament agreements. The United States cannot routinely resort to economic sanctions and armed intervention, nor is withdrawing into isolationism realistic. Such an approach would entail a number of opportunity costs. If the problems persisted, the United States would be faced with far more serious threats as well as less favorable options for dealing with them. ⁴

An isolationist policy also might have costs in terms of trade opportunities. These are bound to increase as developing countries now drive worldwide economic growth. The 16 largest developing economies are expected to grow at an average annual rate of 6 percent, twice that of the mature economies of North America, Japan, and Europe. ⁵ Many newly industrialized countries are now competing not only on the basis of their products. Increasingly, they are promoting their own model...