Few phrases have exerted as much staying power—or done as much damage to development policy—as the tidy little mantra: “trade, not aid.” For decades, this slogan has captivated ideologues across the political spectrum, offering a deceptively simple prescription for growth. It has proved catchy, intuitive, and politically convenient—especially now, as international development institutions face funding cuts and closures.
But it has always been more seductive than sound.
With the U.S.-led reordering of global trade, the slogan now rings more hollow than ever. As rich countries turn inward, slashing foreign assistance in favor of defense and domestic priorities, some are wondering: What happens next? Many see an opportunity—if not an imperative—to rethink a vital but flawed international aid system.
At this arguably existential moment for global trade and development, it’s time to retire “trade, not aid” for good—not simply because it misdiagnoses the problem of underdevelopment, but because it distorts policymaking. Both aid and trade can contribute to development. But neither works when treated as a panacea.
As the world grapples with a seismic shift in U.S. trade policy, and as we bid the slogan good riddance, it’s worth tracing the illusions it spun—and the policy damage it enabled.
The phrase dates back to the early 1950s, apparently coined by American industrialist H.W. Prentis Jr. as a call to end postwar assistance to Europe. It resurfaced at the inaugural United Nations Conference on Trade and Development in 1964, where developing countries—backed by Argentine economist Raúl Prebisch—demanded a fairer global economic order. Prebisch argued that countries on the developing periphery faced structural disadvantages requiring preferential access to rich-country markets. At the same time, he presciently observed that “no fundamental solution can be expected from trade with the United States,” advocating internal reforms and South-South cooperation instead.
That nuance quickly vanished. In the following decades, policymakers reduced Prebisch’s ideas to import substitution industrialization—a strategy that encouraged domestic manufacturing behind protective tariffs. When that strategy faltered, in the wake of the 1970s oil shocks and the ensuing Latin American debt crisis, many saw its demise as proof that markets—not the state—should drive development. By the late 1980s, the Washington Consensus had enshrined trade liberalization as orthodoxy, elevating “trade, not aid” from bumper-sticker rhetoric to a central plank of U.S. foreign policy.
That logic underpinned much of the post-Cold War agenda. In 1993, President Bill Clinton declared that “trade pacts are more important than missiles.” President George W. Bush followed suit, saying in 2001, “The first place to start on the economic front is to make sure we have free and fair trade with the African continent.”
At the turn of the century, that vision materialized in the African Growth and Opportunity Act (AGOA). The AGOA gave eligible African countries duty-free access to U.S. markets for select goods while conditioning access on a shifting list of political and economic reforms. It was trade, not aid, as strategic engagement.
Yet the AGOA failed to significantly boost exports or spark broad-based growth. While some countries and sectors—especially textiles—benefited initially, others saw negligible gains. Underutilization may have played a role, but deeper analysis points to the structural limits of trade preferences. Basic commodities account for much of the export growth among eligible countries, while the preferences themselves often discouraged value addition or diversification beyond simple textiles. Even the early gains stalled amid rising competition from Asia, and the promise of long-term partnership wore thin.
Consider Lesotho, one of the biggest apparel exporters under the AGOA, which sends about 70 percent of its textiles to the United States. On April 2, it gained newfound notoriety when Washington hit it with a 50 percent tariff—the highest in the world—due to its trade surplus with the United States. A 90-day tariff pause offered temporary relief, but uncertainty lingers. So does the lesson: Trade preferences are only as dependable as the politics behind them.
In today’s environment of geopolitical fragmentation and supply chain fragility, the core promise of “trade, not aid”—that market access offers a singular path to prosperity—has unraveled. As the AGOA nears expiration in September, so too does the illusion it once upheld. Some African officials have warned that job losses and economic hardship could compound the effects of aid cuts should the agreement expire. Others, such as Kenyan Trade Minister Lee Kinyanjui, have remained upbeat, pointing to a competitive edge in textiles given the country’s 10 percent baseline tariff rate compared with harder-hit Asian rivals. In truth, the tariffs are a wake-up call: If the AGOA’s demise prompts policymakers to rethink trade’s limits, it may serve a valuable—if unintended—purpose.
Aid, too, carries a checkered legacy. Misaligned incentives, bureaucratic overreach, and a tendency to sideline local politics have often undermined its effectiveness. Anthropologist James Ferguson brought Lesotho to the fore in the 1990s in The Anti-Politics Machine, a landmark critique of how aid agencies glossed over political realities in favor of technocratic fixes. They cast Lesotho as an isolated, traditional society ripe for agricultural interventions—ignoring entrenched patronage networks and an economy long shaped by labor migration and remittances. The result wasn’t transformation but failure wrapped in expertise.
Such critiques remind today’s development practitioners about the risk of top-down approaches. While they need not abandon their aspirations, an ethical approach demands learning from the failures and false promises of aid.
It’s true that aid alone cannot make poor countries rich. But trade liberalization has done no better—and arguably faced less scrutiny. In the 1990s and early 2000s, economists championed open markets as necessary and sufficient for growth. The so-called East Asian miracle—a wave of rapid, export-led growth in eight East Asian countries—seemed to validate this logic. Yet many countries that embraced liberalization saw little transformation. When growth did occur, a narrow elite benefited.
To this day, “trade, not aid” remains one of development’s most persistent—and empty—slogans. Repeated by an ideologically diverse range of leaders and thinkers, including California Democrats and African heads of state, the slogan unsurprisingly surged in response to the latest foreign-aid cuts. Indeed, the opportunity that some see in foreign-aid cuts has long hinged on the idea that aid devilishly engenders dependency while trade virtuously empowers. But this rigidity—the reflexive embrace of trade as inherently positive and even an end in itself—helped fuel the current backlash against globalization.
The world needs to move beyond binaries. Aid and trade offer no silver bullets, but when paired effectively, they can reinforce each other.
Consider Costa Rica. Development cooperation enabled the creation of its top-ranked investment promotion agency—which, in turn, attracted major tech firms such as Intel and catalyzed an economic transformation. Elsewhere and more recently in Central America, cooperation with a solar service provider helped agribusinesses and companies such as Honduras’s DIELA—a growing supplier of electrical automotive parts for U.S. corporations such as General Motors—to dramatically reduce energy costs. Having cut its costs in half, DIELA now plans for a major expansion that will create jobs and bolster U.S. supply chains. Cooperation also helped streamline processes at a major seaport in Honduras, which cut shipping dispatch times in half and saved more than $15 million annually, including for U.S. exporters. Seeing these gains, reform-minded officials stepped up with investment aftercare services and a commitment to roll out the new system to all ports of entry—without foreign assistance.
These are not random acts of generosity or paternalistic gestures but a model of aid grounded in mutual interest and institutional strengthening. They also show how aid can lay the groundwork for trade by upgrading infrastructure, reducing friction, and improving regulatory systems.
The “Aid for Trade” initiative, run by the World Trade Organization (WTO), tried unsuccessfully to codify this idea, offering spin over substance. Economist Dani Rodrik, who tried to debunk “trade and aid” in 2005, has long cautioned that an overreliance on liberalization—a WTO hallmark—risks obscuring deeper structural problems, such as weak institutions and limited productive capabilities. Development success typically arises not from top-down aid, free trade, or rigid formulas but from experimentation, adaptation, and investments in domestic capabilities.
Today, the heyday of export-led industrialization is over. African and Latin American countries cannot hope to replicate the path of China or other manufacturing giants. Technology has made manufacturing more capital- and skill-intensive, limiting its potential to employ low-skilled workers. Services—especially digital and climate-related—are becoming more central to growth. The COVID-19 pandemic exposed global supply chain vulnerabilities. Climate change is reshaping demand and hitting commodity exporters hardest.
Policymakers should seize this industrial policy renaissance to reject stale binaries and pursue strategies that reflect today’s complexity. Rodrik and economist Joseph E. Stiglitz have proposed one such framework, rooted in the green transition and service-led growth. Developing nations should take heed and seek to bolster local innovation and regional integration, with less dependence on external demand for growth.
This opportunity serves U.S. national interests, too. Ensuring global stability, enhancing U.S. competitiveness, and countering authoritarian rivals all require more than abstract faith in markets. Development policy demands an “all of the above” approach: pragmatic, flexible, and collaborative.
That includes centering dignity and agency as practical decision-making principles, not abstract ideals. The historical failure to embody these principles has tarnished aid’s reputation. Too many development initiatives have been conceived as acts of charity, driven only by donor priorities, or wielded as tools of strategic leverage. This framing stripped individuals of meaningful agency and reinforced the very hierarchies development should seek to dismantle. The United States has sometimes stumbled here, delivering aid with an eye toward geopolitical returns—particularly during the Cold War or in fragile states—rather than fostering long-term, collaborative partnerships. Alternatively, a dignity-centered approach recognizes partner countries not as passive beneficiaries but as active political communities with their own aspirations, constraints, and expertise.
Americans hold mixed views of foreign aid, often overestimating its cost and misunderstanding its purpose. But when done well, aid is not charity—it’s an investment in shared security, strength, and prosperity. Call it cooperation, not aid. As former top U.S. health and defense officials have argued, cooperation remains essential to contain diseases before they become global threats and to address conflicts before they escalate. The case for economic development, though less frequently emphasized, proves no less compelling. Helping lower-income countries to build lasting prosperity can spur industrial growth, create meaningful jobs, ease migration pressures, and fortify the supply chains on which the United States increasingly depends.
If the United States wants meaningful engagement in Africa, Latin America, and beyond, it must move past rhetoric and discard outdated slogans, favoring strategies rooted in experimentation, local ownership, and mutual interest. That means prioritizing the transfer of know-how that fueled transformation in countries like Costa Rica and drives the growth of firms such as DIELA. It also means rejecting the false trade-versus-aid binary in favor of patient, principled cooperation.
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