Soon Congress is expected to approve roughly $13 billion in foreign aid, putting the United States in last place among industrialized nations when it comes to the country's share of the gross national product it spends on development assistance.
In absolute spending, we rank fourth -- behind Japan, France and Germany.
The saga of our involvement with foreign assistance is one of of diminishing commitment, from a high during the Marshall Plan era of the early '50s to today's low, in which we are spending 0.54 percent of our budget on foreign aid.
Reaching out to other countries is not simple altruism by a long shot, according to the Business Alliance for International Economic Development. It's good business, and the American public needs to have a much greater understanding of the important link between foreign assistance and our ability to develop and expand global markets to sustain our own economic health.
The business alliance is made up of four trade associations: the Alliance to Save Energy, the American Seed Trade Association, the Association for International Agriculture and Rural Development, and the Professional Services Council, which includes the big six accounting firms as well as private consultants to international agencies. The alliance issued a report this summer warning that while we skimp on foreign assistance, the three countries that are the biggest donors make large commitments with an eye toward encouraging future markets.
Japan, once one of the largest recipients of foreign aid, has turned into the most generous donor in the world -- and built its own economic muscle in the process.
"The most important point we are trying to make is that the future of our economy is strongly, inexorably, linked to the developing world and developing markets," says George Burrill, who heads an international consulting company and is chairman of the business alliance.
"We need people to understand that our foreign assistance program is a vital element of our ability to increase our visibility and our market share. This is something that has been overlooked. Our competition understands this."
In 1995, for example, Japan gave $14.5 billion in Official Development Assistance to other countries, spending that amounts to $106 per capita for each Japanese resident. That same year, the United States spent $7.4 billion (excluding military assistance), or $27 per capita. What is often overlooked is that 80 percent of the money the U.S. government spends on foreign assistance goes to buy goods and services from American sources right here at home that then are distributed worldwide.
In its report, the alliance put the U.S. return on foreign investments in perspective.
The United States spent slightly more than $30 billion in foreign assistance to Latin America from 1947 to 1995. "In 1996 alone, U.S. exports to the region totaled 2 1/2 times that amount."
Yet even with that impressive showing, we spend only 7 percent of our foreign aid and military assistance in Latin America, less than both Germany and Japan individually.
In the 1994-95 year, Japan spent 68.4 percent of its assistance in Asia. Emphasizing systemic infrastructure improvements, Japan has used aid to create more attractive investment environments, according to the alliance report. In other words, the Japanese government is using foreign aid to literally pave the way for its business segment.
"In example after example -- from the Philippines to China -- Japanese assistance projects preceded large-scale private ventures by Japanese firms." Japan used foreign aid money to enter the mobile phone market in Cambodia and now has much of the Asian market.
Businesses that take part in development efforts, Burrill says, are better positioned to make the most of future opportunities because they already have economic ties in the country.
Foreign aid also improves the business climate in another way, he says, by helping countries develop legal and accountability systems that enable private firms to invest more safely there later.
In Washington, House and Senate conferees are expected to hash out differences between their foreign aid packages during the next couple of weeks. The Senate has passed a total foreign aid package (including military assistance) of $13.2 billion, almost a billion dollars more than the House. The alliance estimates that we need to spend $18 billion a year if we want to regain our leadership role. Instead, we are closing programs in some 30 countries.
As Burrill puts it, all boats rise together. Put another way, if we don't pay, we won't be players.