exports (Stiglitz, 2010). Infrastructure, also called 'internal trade barrier', is the priority for all the countries to conduct international businesses. Under the AFT project, the low income countries have attached a greater importance on infrastructure. Based on the AFT research, the amount of money they invested in infrastructure was USD 8 billion, accounting for 60% of the total money they received (WTO, 2009). Another typical example is the AFT's 'The Phnom Penh-Ho Chi Minh City Highway' project, which aims to enhance the economic connections among Cambodia, China, Lao PDR, Myanmar, Thailand and Viet Nam by improving the physical links, which focus on transport corridors, power interconnection systems and telecommunications networks. The outcome was fruitful: the transportation cost was estimated to have dropped at least 10% for passenger cars and 15% for buses and trucks. Moreover, the total value of trade passing through the Cambodia-Viet Nam border increased by about 41% per year between 2003 and 2006 (WTO, 2009).
The second reason for aid is a complement for trade is that aid can 'redistribute the gains from trade', promoting fairness among the world (Stiglitz, 2010). This would help establish a more favourable environment for trade in the world. Obviously, the status between two countries when conducting trade is not equal, the comparatively powerful country or the 'big country' would take a more beneficial stance in which they can greatly influence the final trade prices or terms. If this continues, the small countries' terms of trade would be deteriorated. Under such circumstances, aid could perform as a complement of trade to remedy this problem through an artificial and well-purposed redistribution of resources or profits. Furthermore, once the recipient countries' economic situation gets repaired, they would enhance their economic ties with the original donor countries. That would be beneficial for both of the countries' development in the long run.
a negotiating side payment- rich countries offer aid as a sweetener to keep developing countries at the bargaining table
negative aspects 消极方面
The first one is that it may encourage 'rent seeking' behaviour or government corruption. Bribes, taxes, cuts, appropriations, all of these would impose a negative impact on resources distribution, which is essential in promoting a country's comparative advantage, a decisive factor in formulating trade policies. The World Bank reported that the chances for malfeasances have been greatly increased due to the rapid growth of foreign currencies, which were mainly through concessional flows (World Bank, 1989). Also as Klitgaard described, foreign aid in Africa has constituted even more than 50% of government revenue in the 30 most aid-dependent countries in 1970-1990. However, the study by Griffin demonstrated that the macroeconomic effects of aid during that period were so ambiguous (Svensson, 1998).
The second common effect of foreign aid that may undermine trade is 'Dutch Disease', which originally means the negative effects come along with the increasing exports of natural resources, such as oil or natural gas. Broadly speaking, this terminology also refers to other forms of obtains similar to the discovery of natural resources, such as remittance or foreign aid. Basically, mo matter what kind of aid it is, more foreign aid means more foreign currency
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