American trade helps Africans more than aid

The sanctimonious Danes and Swedes are OK on aid but lousy on trade - the Americans are the opposite

Trade not aid" should be the Big Idea embedded in George Bush's brain as he tours Africa, for that is where the US, and indeed Britain, can help most. President Bush's visit coincides with the publication of the new United Nations Human Development Report, which paints, as usual, a disturbing picture of our divided world.

On the one hand, the developed countries continue to advance not just in their GDP per head, but also in their levels of education, health and the other measures of human development. On the other, many developing countries - not all, of course - have continued to slip backwards. They are not just getting poorer, but they also face declining life expectancy, periodic famine and widening gaps in wealth and economic opportunity.

If the report is disturbing, it is also hugely helpful in focusing attention on what might be done to improve the human condition. The report embodies two bright ideas. The original idea behind it was to invent a measure of human development that took into account wealth but also allowed for the fact that measures like GDP per head give a flawed indication of welfare. So the human development index also takes into account such measures as education, health, gender and equality.

The result is that, in the developed world, Norway, Iceland and Sweden come top, above the US and Japan, which, despite their higher GDP per head, are ninth and 10th. (The UK is 13th, a little ahead of France and Germany.)

If Scandinavia tops the league, sub-Saharan Africa is at the bottom, with Niger, Burkina Faso and Mali only just above Sierra Leone. Sierra Leone comes bottom or close to the bottom on almost every indicator, with a GDP per head of only $470 and life expectancy at birth of just 34.5 years. Burkina Faso, however, has a more reasonable GDP per head of $1,120 - yet scores much lower than Kenya or the Congo, which, while poorer, have greater life expectancy and better education. So it is not just about money.

The second bright idea came in 2000, when the UN made its Millennium Declaration. This declaration was refined into a commitment by world leaders to meet 18 specific targets for human development by 2015. These included halving the number of people on an income of less than $1 a day, offering every child primary education, combating Aids and malaria, dealing with debt problems and opening up international trade, particularly for the very poorest.

Fine words, you might think, but what is the point of some UN declaration when world leaders in the EU and the US follow policies such as subsidies for their farmers or trade barriers that shut out the exports of the poorest countries? In fact, just about the entire developed world is guilty. The EU subsidy for each of its cows - $913 - is greater than the average income per head of a sub-Saharan African - $490. The Japanese subsidy is $2,700 per cow, just a touch below the average income per head of India.

The US, understandably, takes a huge amount of stick for the low proportion of GDP that it spends on aid - only 0.11 per cent of GDP against a UN target of 1 per cent. This leads to the charge that America is not serious about economic support for Africa.

But there are quite reasonable objections to the entire aid-driven approach to economic development. Lending money to poor countries to fund large infrastructure projects that are not needed, but which create a lot of business for Western consultants and contractors, merely loads a country with debts it cannot hope to repay.

A more disturbing statistic than the low proportion of GDP going in aid, surely, is the low proportion of imports from developing countries, in particular the very poorest. Here the fascinating thing is that the tally of villains and heroes is rather different from the popular notion. On this measure the US does rather well, with 46 per cent of its imports coming from developing countries and 0.8 per cent from the least developed. For the UK, the proportions are a rather less impressive 19 per cent and 0.4 per cent. France, villain of the EU common agricultural policy, does rather well on the import front, buying $236m worth from the very poorest. Japan, with its subsidised cows, does not buy a huge amount from the very poorest but it does get nearly 60 per cent of its imports from developing countries as a whole; with imports of more than $20bn, it is second only to the US on this front.

Conversely, some of the worst offenders on trade are countries that score rather well on the aid league. The only country to spend more than 1 per cent of GDP on aid is Denmark. Great - but Denmark only gets 10 per cent of its imports from developing countries and a mere 0.3 per cent from the poorest. In 2001 it imported just $12m of produce from these countries. Sweden does even worse. Yes, it gives 0.81 per cent of GDP in aid, but it also buys only 10 per cent of its imports from developing countries and a mere 0.2 per cent from the poorest, just $10m worth.

My point here is not to attack the sanctimonious Danes and the Swedes for being OK on aid but lousy on trade - or to praise the self-serving Americans for the opposite mix of vices and virtues. Rather, it is to make the point that what matters is that the rich developed world needs to engage at lots of different levels with the poor, less-developed world. Trade is enormously important but so, too, is interchange of human capital. There is a money story and there is an intellectual capital story.

The money story is that emigrants' remittances are the largest or second-largest source of foreign income for several Latin American countries, including Cuba. The US is castigated for its trade embargo on Cuba, and I would say rightly so; but the fact remains that it supplies more hard currency to Cuba than any other country. And the good thing about emigrants' remittances is that the money, unlike too much formal aid, does not lead to corruption and is well spent. If people spend their own money, they do not build dams that aren't needed.

There is also a human capital story - for allowing people from less developed countries to have reasonable access to more developed ones almost certainly helps to build wealth in both places. Algeria gains greatly, and not just in remittances, from its relationship with France. But so does France.

Here, surely, should be the main message of the Human Development Report, a message that is slightly different from the blurb of the report itself. It writes of "a compact among nations to end human poverty". There is nothing wrong with that. But it should also, I suggest, be "a compact among people to end human poverty".

I don't have huge confidence in the ability of national politicians in either the rich or poor worlds to do much about poverty; the same goes for international bureaucrats. But at a much more practical level, we can try to buy more goods from the very poorest countries. Maybe we can go on holiday to less developed countries. Maybe we would want to support smaller charities that operate in difficult areas. Maybe our schools and universities should try to increase the numbers of people from such areas.

This is not the stuff of grand political speeches about "saving Africa" or whatever. It is about being helpful in small practical ways. It is the millions of acts by ordinary people that will eventually make a difference.