Lately, Treasury Secretary Paul O’Neill has been traveling throughout Africa with rock singer Bono, an outspoken advocate of debt relief and increased foreign aid for Africa. Why O’Neill agreed to this silly tour is a mystery, since it was a virtual certainty that it would only result in increased pressure on the United States-meaning U.S. taxpayers-to increase foreign aid.
Predictably, Bono berated O’Neill for showing any degree of skepticism whatsoever that increased aid is the sole and exclusive cure for Africa’s problems. To be sure, a bit of food and medicine would indeed go a long way toward helping many of Africa’s sick and dying. But Bono and others like him are naive if they think that foreign aid alone is the answer to what ails Africa.
It is too easy for purely humanitarian aid to become a permanent lifeline. Once started, who is hard-hearted enough to cut it off, knowing that death for the recipient will be almost certain? Thus, one-time aid too often becomes everlasting.
Once the prospect of long-term relief is established, it sets in motion forces that virtually guarantee its necessity. For example, food aid to help countries through a temporary famine often drives farmers out of business. How can they sell their produce when wealthy Western countries, often overflowing with subsidy-driven agricultural surpluses, are giving it away for free?
Partly for this reason, most nations of Africa have become dependent on food imports, even though they were food exporters not too many years ago. Punitive domestic policies are to blame, as well. It is common throughout Africa for farmers to be forced to sell their production to marketing boards, which pay far less than the world price. This is just a kind of de facto tax that allows the government to reap most of the profit.
Not surprisingly, farmers don’t like paying this tax. Instead, they farm only for themselves, smuggle their produce elsewhere or simply cease farming altogether. Insecure property rights also discourage farming, as in Zimbabwe, where white farmers have had their land confiscated by the government for no other reason than that they are white. Moreover, rather than distribute this land to the landless, it is often given to friends of the ruling party for their personal enrichment.
Still, even with all the burdens placed on African agriculture, it remains an incredibly productive place to farm. Much of the land and climate are ideally suited to growing crops and livestock. Of all the places on Earth, Africa is the least likely to have a shortage of food based on its natural endowments. It is bad government and misguided foreign aid policies that mainly prevent Africa from being the world’s breadbasket.
If Western governments really wanted to do something to help Africa, the easiest thing they could do is open their markets to African products. The fact is that domestic subsidies and import tariffs prevent Africans from selling much of their agricultural output in Europe, North America and Japan. These nations, it seems, would rather tax their citizens and force them to pay higher prices for food than allow poor farmers in Africa to sell their produce in their countries.
This is an insane policy because it hurts domestic consumers as well as African farmers. By allowing African farmers simply to sell what they have produced in the West at market prices, consumers would have cheaper food and African farming would benefit, possibly obviating the need for aid.
A recent World Bank study found that full elimination of import tariffs in Europe, Canada, Japan and the United States would raise African exports by $2.5 billion per year. This is a trivial sum in the context of their economies, but it would lead to a major increase in growth for Africa. Most of the gain would come from opening the Japanese and European markets-precisely those countries most often critical of the United States for insufficient foreign-aid spending.
Of course, the United States could also do a lot more to allow in African goods, despite passage of the Africa Growth and Opportunity Act four years ago. Although most African goods enter the United States at low or no tariff, some of Africa’s best exports, such as ground nuts and tobacco, are still very heavily protected.
On the other hand, Africa could do far more to encourage trade within itself by lowering its own tariff barriers. Almost all African countries have import tariffs far above those in the West. Encouraging trade within Africa would do much to help that continent, even if Western nations continue to resist opening their markets further to African goods. O’Neill should tell Bono (and Congress) that trade, not aid, is the best way to help Africa.