June 14, 1995

New Study Reports That Foreign Aid Creates U.S. Jobs

WASHINGTON, D.C., While Congress considers slashing U.S. aid to developing countries, a study released today by a leading international research center shows that foreign aid creates U.S. jobs by expanding overseas markets. Agriculture aid, which helps strengthen the farm-dominated economies in many developing countries, actually increases the amounts of food and other products that those countries buy from export markets, said the report by the International Food Policy Research Institute (IFPRI).

Increases in U.S. total exports to developing countries between 1990 and 1993 created more than 1.1 million new U.S. jobs, IFPRI reported. According to the study, each dollar invested in agricultural research in developing countries increases their imports of additional goods and services by more than $4, thus expanding the world export market. "Foreign aid that develops foreign markets is not a giveaway, but an investment in the donor country's prosperity," said IFPRI Director General, Per Pinstrup-Andersen. "Developing countries make up the largest potential market in the world. Research has conclusively shown that countries whose economies are growing import more goods and services. Anything we do to enhance economic growth in developing countries comes back in the form of new export markets and more jobs." Pinstrup-Andersen coauthored the report, Foreign Assistance to Agriculture: A Win-Win Proposition, with IFPRI researchers Mattias Lundberg and James L. Garrett. The report was released today at an international conference in Washington, D.C., A 2020 Vision for Food, Agriculture, and the Environment. The conference was cosponsored by IFPRI and the National Geographic Society with more than 500 participants attending from 50 countries to share research and solutions for preventing hunger while protecting the environment to the year 2020.

The report concludes that foreign aid can expand export earnings and employment in donor countries if the assistance is targeted to activities such as agricultural research that promote income growth in rural areas of developing countries. "If support for agricultural research for developing countries were increased by $100 million, this would create $400 million in additional exports that could be captured by the U.S.," said coauthor Mattias Lundberg. "This is an important opportunity for the U.S. as it seeks to bolster its economy in an increasingly international marketplace."

Although foreign aid amounts to less than 1 percent of the federal budget, Congress is considering cuts of up to 25 percent in international assistance programs. Support for agricultural research for developing countries is among the areas being considered for cuts. "Some U.S. farmers and producer associations have mistakenly believed that agricultural aid to developing countries would cause U.S. farmers to lose export markets," said coauthor James Garrett. "In fact, just the opposite is true. Agricultural imports actually increase in developing countries when their own agriculture sector grows." According to the IFPRI study, of the more than $4 gained in additional exports from $1 invested in agricultural research, $1.06 is gained in additional agricultural exports, of which 45 cents is in cereal exports. "Far from generating competition for U.S. producers, agriculture aid can actually generate profits and jobs," said Garrett.

Developing countries are a significant force behind the expansion in world trade, and exports to them are becoming increasingly important to the U.S. economy, state the authors. During the 1990s, imports by developing countries have increased by more than 5 percent annually. More than 40 percent of all U.S. exports and half of U.S. agricultural exports are sold to developing countries. The $197 billion in yearly exports to developing countries accounts for about 4 million U.S. jobs. Economic growth in developing countries, supported by agricultural development assistance from the U.S. government, has been a boon to U.S. farmers. Previous analyses found that a mere 1 percent annual increase for 5 years in the growth of developing-country economies enhanced U.S. feedgrain exports by 4.7 percent, wheat exports by 3.5 percent, and soybean exports by 2.8 percent.

"Job growth in this country will be threatened if economies in developing countries fail to grow," said Pinstrup-Andersen. "Development aid for agriculture in general and agricultural research in particular is a win-win proposition. It helps developing countries grow while creating export markets for donor countries."

IFPRI was established in 1975 to identify and analyze policies for meeting food needs of the developing world. IFPRI is one of 16 international research organizations supported by the Consultative Group on International Agricultural Research, an informal association of some 40 countries, international and regional organizations, and foundations whose mission is to contribute to sustainable improvements in agricultural productivity.