Diplomacy, Trade and Aid: Searching for "Synergies"

In the 2013/14 budget, the Minister of Finance made a surprise announcement: the decision to merge CIDA with the (renamed) Department of Foreign Affairs, Trade and Development. A sensible move? If the intent is to link CIDA projects to Canadian resource developments overseas, probably no. If the intent is to respond to widespread criticism of CIDA’s past performance – by the Auditor General among others – probably yes. In a seemingly unrelated event, in April 2013 a garment factory collapsed near Dhaka killing over 1100. This event highlighted the poor level of governance exercised by the government of Bangladesh over safety standards. There is a prominent Canadian connection to this tragedy. Loblaw Companies Ltd. buys most of its Joe Fresh stock from Bangladesh – and some items came from the collapsed factory. Major importers in Europe and North America have decided the status quo is no longer viable. Loblaw has joined other major importers in accepting financial and supervisory responsibility for factory remediation. This is a major, if belated, exercise in corporate social responsibility. Bangladesh has for decades been a “country of focus” for Canadian aid. Beyond that fact, the link between these two decisions is the problem of “weak governance” in many low-income countries, Bangladesh included. How can aid be made to work in countries with weak governance? How can firms engage in trade with such countries in a responsible way? The Commentary discusses several tactics for more effective aid delivery and the potential for corporate social responsibility in a context of weak host country governance. The potential for a “win-win” outcome from Canadian investment in developing countries is much greater in the manufacturing than the resource sector. The Commentary also includes an Appendix on recent trends in development economics.