Between Export Promotion and Poverty Reduction: The Foreign Economic Policy of Untying Official Development Assistance

492 Pages·2013·4.496 MB·English

by  Jan-Henrik Petermann (auth.)

Between Export Promotion
and Poverty Reduction
Jan-Henrik Petermann

Between Export
Promotion and Poverty
Reduction
The Foreign Economic
Policy of Untying Offi cial
Development Assistance
Jan-Henrik Petermann
Lahstedt, Germany
Dissertation Universität Hamburg, 2012

ISBN 978-3-658-00047-9 ISBN 978-3-658-00048-6 (eBook)
DOI 10.1007/978-3-658-00048-6
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Table of Contents

Figures and Tables ............................................................................................. 13
Abbreviations and Acronyms ............................................................................. 18
Preface ................................................................................................................ 25

1 Introduction ....................................................................................... 29

Part I Tied and Untied Development Assistance:
Economic, Political and Legal Dimensions ............................... 53

2 The Tying of Aid as a Contemporary Phenomenon
in Development Economics and Policy:
Some Key Definitions and Stylised Facts ......................................... 53
2.1 Terminological and Conceptual Issues:
on the Nature and Purpose of Tied and Untied Aid ..................... 53
2.1.1 Categories and Modalities of Official Aid Flows:
a Brief Discussion of Major Analytical Concepts
in International Development Finance ................................ 54
2.2 What Is Aid Tying? Outlining Donors’ Strategies
between Domestic Export Promotion
and International Poverty Reduction ........................................... 58
2.2.1 Forms of Tying: the Composition of National
Aid Budgets ......................................................................... 58
2.2.2 Motivations of Tying: Economic Calculation
and Political Interest ............................................................ 63
2.3 Initial Findings and Descriptive Trends:
the Aggregate Evolution of Bilateral Untying Behaviour
in OECD Countries since the Late 1970s .................................... 66
2.4 Philosophical and Methodological Foundations:
Problematising the Contested Subject-matter
of International Aid and Trade Relations ..................................... 75
6 Table of Contents(cid:561)
2.4.1 Ideas, Norms and Interests in Global Development Policy:
a Framework of Ontological and Epistemological
Cross-combinations ............................................................. 75
2.4.2 Metatheoretical Assumptions:
Taking the Multidisciplinary Character
of Modern Development Studies Seriously ......................... 82
2.5 Summary ...................................................................................... 85

3 Causes and Consequences of Aid Tying:
a Survey of Theoretical Arguments and Empirical Results
from Institutional Economics, Foreign Policy Analysis
and Development Theory .................................................................. 89
3.1 The Allocative View: Determinants of National
Tying Behaviour in Domestic Political Systems ......................... 89
3.1.1 Development Policy as a Struggle for Influence
among Rival Interest Groups: the Role of Domestic
Stakeholders in Shaping Allocative Decision-making ........ 90
3.1.1.1 Competing Interests among Strategic Groups:
Debating the Particular Preferences
of Voters, Lobbies, Bureaucrats and Politicians ............ 90
3.1.1.2 Competing Interests within the Aid Bureaucracy:
on the Significance of Agenda-setting Powers
and Principal-agent Relationships ................................. 94
3.1.2 Development Policy as Foreign Policy:
Strategic Interests, Commercial Incentives
and the Impact of Civilian Power ........................................ 97
3.1.2.1 Rationalist-Materialist Explanations of International
Aid Relations: Behavioural Hypotheses
for ‘Power States’ and ‘Trading States’ ......................... 98
3.1.2.2 Ideational Explanations of International Aid
Relations: ‘Civilian States’ and the Externalisation
of Norm-based Political Identities ............................... 101
3.2 The Distributive View: Reasons for and against
Untying Bilateral Aid ................................................................ 104
3.2.1 Distorting Effects of Tied Aid in Recipient Countries:
a Critical Appraisal of Recent Research in the Field
of Aid-related Procurement ............................................... 105
3.2.1.1 Quantitative Aspects: Increased Prices,
Reduced Quantities and the Ambiguities
of Estimating Net Changes in National Welfare .......... 105
Table of Contents 7
3.2.1.2 Qualitative Aspects: a Bias towards
Capital Intensity, Developmental Inefficiency
and External Dependence ............................................ 110
3.2.2 Direct, Indirect and ‘Feedback’ Effects of Tied Aid
on the Economic and Political Situation
of Donor Countries ............................................................ 113
3.2.2.1 Short-term Aspects: Limited Gains for Individual
Companies and Industrial Sectors ............................... 113
3.2.2.2 Long-term Aspects: International Competitiveness
and Political Patronage ................................................ 115
3.3 Summary .................................................................................... 118

4 Theoretical Framework: Contending Approaches to the Study
of Bilateral Aid Relations in the Post-Cold War
International System ........................................................................ 121
4.1 ‘Donor Interest’ Models of Development Assistance:
Foreign Aid as an Instrument to Increase
the Political Influence and Economic Welfare
of Industrialised Countries ......................................................... 122
4.1.1 Modified Neorealism and the Goal of Maximising
National Influence in a Context of International
Anarchy ............................................................................. 122
4.1.2 Commercial Liberalism and the Goal of Maximising
National Welfare in a Context of Economic
Interdependence ................................................................ 127
4.2 ‘Recipient Need’ Models of Development Assistance:
Foreign Aid as an Instrument to Advance Ideas of Ethical
Foreign Policy and ‘Good International Citizenship’ ................ 132
4.2.1 Rational Constructivism and the Goal of Promoting
Fundamental Rights in a Context of Structural
Instability .......................................................................... 132
4.2.2 Entitlement Theory and the Goal of Combating
Extreme Poverty in a Context of Human Need ................. 138
4.3 Summary: Locating Competing Theories with Regard
to Their Ontological and Epistemological Claims ..................... 144
8 Table of Contents(cid:561)
Part II The Prospects of Untying Aid in the 21st Century:
Liberalising National Development Programmes
in the US, Canada, France, Japan and the UK ...................... 147

5 Between Systemic Pressures and Domestic Preferences:
Explaining the Shifting Aid Allocations of OECD Donors
on an Aggregate Level .................................................................... 147
5.1 A Quantitative View on OECD-wide Untying Policies,
1979-2004: Operationalisation, Data Selection
and Construction of Hypotheses (Level I) ................................. 148
5.2 A Preliminary Test: How ‘Ethical’ Is the Overall
Untying Record of OECD Member States vis-à-vis
the Least Developed Countries? ................................................ 167
5.2.1 Regression Analysis (I.I): Predicting Ratios
of Untied Aid to LDCs ...................................................... 167
5.2.2 Regression Analysis (I.II): Predicting Volumes
of Untied Aid to LDCs ...................................................... 182
5.3 An Extended Sample of Aid Recipients: Do Only the
Least Developed Countries Benefit from Policy Shifts
Undertaken by OECD Donors? ................................................. 188
5.3.1 Regression Analysis (I.III): Predicting Ratios
of Untied Aid to New Regional Powers ............................ 190
5.3.2 Regression Analysis (I.IV): Predicting Volumes
of Untied Aid to New Regional Powers ............................ 196
5.4 Complementing the Aggregate Picture from a Qualitative
Perspective: Untying Aid and the OECD Debate on the
Causes and Consequences of Tied Procurement
and Associated Export Financing, 1969-2004 ........................... 202
5.4.1 The OECD’s Leverage over International
Developmental Outcomes: Investigating a Transnational
Debate on Trade-related Development Aid ....................... 211
5.4.1.1 Issue Definition and Initiation of Reform Proposals ... 212
5.4.1.2 Agenda-setting and Pre-assessment of Policy Aims .... 214
5.4.1.3 Optimisation of Policy Alternatives
and Estimation of Consequences ................................. 217
5.4.1.4 Policy Formulation and Programme Design ................ 219
5.4.1.5 Policy Implementation ................................................. 221
5.4.1.6 Policy Evaluation and Reformulation
of Original Policy Mandate ......................................... 223
5.4.2 Interpretation of Supplementary Qualitative Results ........ 227
Table of Contents 9
5.5 Complementing the Aggregate Picture from a Quantitative
Perspective: To What Extent Have Individual OECD Donors
Applied Untying Policies in a Coherent Manner? ..................... 231
5.5.1 An Analysis of Variance of Homogeneous
Donor Groups: Small-group Configuration ....................... 234
5.5.2 An Analysis of Variance of Homogeneous
Donor Groups: Large-group Configuration ....................... 236
5.6 Summary .................................................................................... 241

6 Between Export Promotion and Poverty Reduction:
Understanding the Selective Untying of Aid within the Political
and Socioeconomic Contexts of Single OECD Donor Countries .... 245
6.1 National Differences in Procurement Regimes and Aid
Debates: the US, Canada, France, Japan and the UK
as ‘Crucial Cases’ ...................................................................... 246
6.2 A Quantitative View on Donor-specific Untying Policies,
1979-2004: Prevalence of OECD Conformity versus
Emergence of Nationally Distinct Norms and Preferences
(Level II) .................................................................................... 257
6.2.1 Regression Analysis (II.I): Predicting Volumes
of Untied Aid in the United States .................................... 257
6.2.2 Regression Analysis (II.II): Predicting Volumes
of Untied Aid in Canada .................................................... 260
6.2.3 Regression Analysis (II.III): Predicting Volumes
of Untied Aid in France ..................................................... 263
6.2.4 Regression Analysis (II.IV): Predicting Volumes
of Untied Aid in Japan ...................................................... 266
6.2.5 Regression Analysis (II.V): Predicting Volumes
of Untied Aid in the United Kingdom ............................... 269
6.3 A Qualitative View on Donor-specific Untying Policies,
1948-2008: Refining and Deepening the Initial Hypotheses
for Domestic Inquiry.................................................................. 272
6.4 Why are US, Canadian, French, Japanese and UK Untying
Policies Different? The Domestic Sources and Strategic
Transformations of Bilateral Aid and Trade Relations
with the Less Developed World ................................................. 282
6.4.1 The United States: Still a ‘Cold Warrior with
Economic Interests’? ......................................................... 282
6.4.1.1 Historical Peculiarities and Substantive Evolution
of US Foreign Aid and Trade Relations ...................... 282
10 Table of Contents(cid:561)
6.4.1.2 Institutional Context, Administrative Structures
and the Aid Policy-making System ............................. 293
6.4.1.3 Procedural Coordination and Implementation
of Trade-related Aid Policies ....................................... 300
6.4.2 Canada: from ‘Aid Paradoxes’ to Revamped Liberal
Internationalism ................................................................. 305
6.4.2.1 Historical Peculiarities and Substantive Evolution
of Canada’s Foreign Aid and Trade Relations ............. 305
6.4.2.2 Institutional Context, Administrative Structures
and the Aid Policy-making System ............................. 311
6.4.2.3 Procedural Coordination and Implementation
of Trade-related Aid Policies ....................................... 314
6.4.3 France: Putting Development at the Service
of ‘Priority Solidarity Zones’ ............................................ 317
6.4.3.1 Historical Peculiarities and Substantive Evolution
of France’s Foreign Aid and Trade Relations .............. 317
6.4.3.2 Institutional Context, Administrative Structures
and the Aid Policy-making System ............................. 324
6.4.3.3 Procedural Coordination and Implementation
of Trade-related Aid Policies ....................................... 330
6.4.4 Japan: a Power in Trade and Aid, a Power through
Trade and Aid .................................................................... 335
6.4.4.1 Historical Peculiarities and Substantive Evolution
of Japan’s Foreign Aid and Trade Relations ................ 335
6.4.4.2 Institutional Context, Administrative Structures
and the Aid Policy-making System ............................. 344
6.4.4.3 Procedural Coordination and Implementation
of Trade-related Aid Policies ....................................... 353
6.4.5 The United Kingdom: Global Poverty Reduction
and Enhanced Aid Efficiency as Core Elements
of ‘Good International Citizenship’ .................................. 357
6.4.5.1 Historical Peculiarities and Substantive Evolution
of UK Foreign Aid and Trade Relations ...................... 357
6.4.5.2 Institutional Context, Administrative Structures
and the Aid Policy-making System ............................. 366
6.4.5.3 Procedural Coordination and Implementation
of Trade-related Aid Policies ....................................... 372
6.5 Summary .................................................................................... 376