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Canadian Budget Cuts Ripple Overseas

TORONTO, Apr 12 2012 (IPS) - The Canadian development community is concerned that the government’s international assistance commitment to poor nations is waning in the interest of fiscal responsibility and that Ottawa instead prefers to forge ties with middle-income nations for commercial purposes.

Ahead of the United Nations’ 2015 deadline to achieve the Millennium Development Goals, the federal government’s 2012 budget cuts represent a “big slap in the face” to the world’s poor and to Canadians who view themselves as playing a strong role in international development, said Fraser Reilly-King, the policy analyst for aid and international cooperation at the Canadian Council for International Cooperation (CCIC) in Ottawa.

In its defence, the Canadian International Development Agency (CIDA) argued that the 2012 federal budget will continue the government’s commitment to make international assistance “focused, effective, accountable and transparent”, according to Scott Cantin, CIDA’s manager of media relations and public affairs.

Canadian tax dollars will still deliver “value for money” and be directed into the agency’s three thematic sectors – sustainable economic growth, food security, children and youth, and humanitarian assistance, Cantin wrote in an e-mail, adding that more details on the plan’s implementation will be released in the coming weeks.

Ottawa’s International Assistance Envelope (IAE) will decline between fiscal years 2011-12 to 2014-15 by 7.6 percent and reach 4.9 billion dollars in 2015-16, according to an analysis by the CCIC. During the next few years, Canada will have reduced its Official Development Assistance (ODA) or aid by nearly 1.2 billion dollars.

The IAE is comprised of about 90 percent ODA, but debt relief and refugee costs outside this envelope also constitute aid, the CCIC noted.

In a continuing era of national austerity, many government departments are incurring spending decreases of between five and 10 percent, Reilly-King told IPS.

Yet, his organisation’s examination of CIDA’s share of the international assistance envelope shows that the agency “seems to be taking a much higher hit” than other departments delivering aid money such as Finance Canada or the Department of Foreign Affairs and International Trade, he said.

Over the next few fiscal years, CIDA will lose a total of 319.2 million dollars compared to Foreign Affairs’ reductions of 29.1 million, according to the budget.

“With these cuts, Canada to some extent, is taking itself out of the equation,” Reilly-King argued.

Although quality aid delivery is critical, the volume of money is also important, he added. Without such obligations, Canada risks being regarded as not “much of a player at international meetings” compared with the United Kingdom, South Korea and Australia, which will exercise greater influence over development issues in line with their pledge to increase aid budgets, he warned.

Given CIDA’s declining resources, he doubts the development agency will still invest in small programs beyond its 20 countries of focus and may even narrow its commitment to 15 nations.

The bulk of assistance is now channeled to Bolivia, Colombia, Haiti, Honduras, Peru, Afghanistan, Bangladesh, the Caribbean Regional Program, Indonesia, Pakistan, Vietnam, Ukraine, West Bank and Gaza, Ethiopia, Ghana, Mali, Mozambique, Senegal, Sudan and South Sudan, and Tanzania.

As it is, the government changed its international development focus countries in 2009, replacing “several poor African countries” with “middle-income Latin American countries” with which Canada was negotiating free trade agreements, Stephen Brown, an associate professor of political science at the University of Ottawa, told IPS.

Should Ottawa slash the number of focus countries, it will be quite indicative of the government’s priorities regarding foreign affairs and trade, Reilly-King added. International Cooperation Minister Bev Oda has indicated that “she doesn’t see much difference between Canada’s foreign affairs and trade policy and its development policy,” he said.

Curbing government expenditure, particularly international assistance, is “an ideological project” to be viewed as an alignment with Canadian extractive industries, Brown said.

There is a school of thought that Canadian mining companies operating overseas pay taxes which the local government can then direct toward fighting poverty, noted Brown, who specialises in the intersection of the policies and practices of rich countries and international actors with the politics of poor nations.

Yet, he contended, there is no “clear, direct link” between trade and development in this case, as mining can introduce other problems like environmental damage and human rights abuses.

Ottawa’s gravitation toward trade was apparent in the budget speech. Finance Minister Jim Flaherty announced the “most ambitious trade expansion plan in Canadian history”. Flaherty said the government has signed new trade agreements with nine countries since 2006 and is negotiating many more, including those with Thailand and Japan.

In some quarters, the government’s 2012 budgetary moves are not too unsettling.

“If people are telling you that cutting back on foreign aid is going to harm international development, they’re just wrong,” said Fred McMahon, who focuses on economic freedom, globalisation and mining in his Toronto-based position of vice president of international research at the Fraser Institute think tank.

However, McMahon conceded, he is not referring to aid for humanitarian disasters but funding for development projects overseas.

For anyone who cares about poverty reduction, the media debate on foreign aid is often frustrating, he told IPS, adding that the arguments are based on how much is spent, with almost no discussion of whether these actions truly help.

Research indicates that foreign aid sent to developing countries, particularly in African nations with bad governance structures, is harmful because it may be used by local governments to reward elites or build police forces, he noted.

Trade, on the other hand, is “marvelously effective” in bolstering incomes, freedoms and democracy, McMahon said. Trade openness, sound money (low inflation) and sensible fiscal policy are most effective in increasing economic growth, with aid a positive force only for nations with these attributes, he said.

For the most part, he argued, the act of doling out money to the Global South mainly serves to make Westerners “feel better” about themselves.

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