Trade versus Aid in ASEAN-Australian Economic Relations

Abstract

Judging from the amount of attention they receive from diplomats and politicians, possible changes in the protection policies of the in dustrialized countries are seen by governments of the less developed countries (LDCs) as being of major economic importance for them. For example, at the July 1984 meeting of ASEAN Foreign Ministers in Jakarta, considerable effort was expended in criticizing the protectionist policies of the United States, the EEC, Japan, Australia, and others. The United States Secre tary of State responded by saying that the LDCs tend to be even more protectionist than the rich countries, but the impression remained that the industrialized countries' protection is not only very harmful to the economic interests of LDCs. but also directed in a discriminatory manner against LDC exports, vis-a-vis the exports of richer countries. Systematic studies of the economic gains that LDCs could expect to receive from reduced protection in the rich countries (or, conversely, of the cost to the LDCs of increased protection in the rich countries) have been very rare, but information of this sort is important for the negotiating strategies of LDC governments. In negotiations between governments and groups of governments, bargains are constantly being ^nck which amount to trading off changes in particular industrial countries' protection of some commodities against changes in foreign aid, changes in LDC protection, and so forth. Nego tiators for the LDCs need some conception of the relative economic values to their countries of the policy adjustments being discussed, but. although there is no shortage of strong opinions about the issues involved, economic analysis lags far behind the practical information require ments of policy-makers. The general climate of opinion seems to be that the potential gains to the LDCs from reduced rich country protection tend to be more important than the gains which might be received from adjustments in foreign aid. Even groups whose primary concern is with the foreign aid of the ricn countries reflect this presumption. For example, the report of a distinguished committee appointed by the Australian Government to review Australia's foreign aid programme (the Jackson Committee) comments (p. 12) that: