Skip to main content
SpringerLink
Log in

Explaining a new foreign aid recipient: the European Union’s provision of aid to regional trade agreements, 1995–2013

  • Original Article
  • Published:
Journal of International Relations and Development Aims and scope Submit manuscript

Abstract

Intergovernmental organizations (IGOs) are increasingly recipients in the foreign aid budgets of donors. What explains the emergence of IGOs as recipients of foreign aid? While conventional wisdom suggests that foreign aid is primarily a foreign policy tool used by donor countries, I argue that aid allocated to IGOs is not explained through the lens of donor interests. Rather, it is the independent institutional design of the IGO aid recipient that makes them attractive recipients of aid which is intended to promote economic development, not donor state interests. Thus, aid to IGO recipients is explained on the basis of recipient development need and the independent institutional design of the IGO. Using original data on European Union aid allocations to a specific type of IGO, the regional trade agreement (RTA), this paper demonstrates that RTAs with more independent institutional designs and greater economic and/or trade need indeed receive more aid than their less independent, less needy peers. Further, these results hold even when controlling for donor interests and across multiple models/techniques. These results shed light on this emerging, new type of foreign aid recipient and argue for a need to re-evaluate the state-recipient focus of the aid allocation literature.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Fig. 1
Fig. 2
Fig. 3
Fig. 4
Fig. 5
Fig. 6

Similar content being viewed by others

Notes

  1. Unit fixed effects are not used as key independent variables have little over time variation. Nickell (1981) bias would likely also be a problem with the inclusion of both year and unit fixed effects as the tendency for fixed effects to bias coefficients downwards in panel data is often acute in such situations, especially given the relatively short time span of the data.

  2. See, for example: Apodaca and Stohl (1999), Blanton (2005), Cingranelli and Pasquarello (1985), Meernik et al (1998), Poe (1991, 1992), Poe and Meernik (1995). It should be noted, however, that some limited evidence that democracy and aid are linked exists. Neumayer (2003) finds a weak link between democracy and aid allocations from multilateral development banks and Rinsberg (2015) finds that donors may reward recipients undergoing democratic transitions with increased aid in the very short term following regime change.

  3. I thus follow many analyses of foreign aid by this measure. See for example: Bueno de Mesquita and Smith (2007, 2009, Peterson and Scott (2017), Scott and Carter (2017). Summary statistics for EUAid can be found in Table 5 in the Appendix. The value of EU Aid ranges from 0 to 4.183.

  4. A Fisher-type unit root test was performed to test for a unit root problem. The results rejected the null hypothesis that a unit root is present.

  5. All aid analysed comes from the EU itself and the independent budget of the European Commission. This five-year lead effectively imposes a five-year lag on all independent variables and performs the additional function of acting as a test for potential endogeneity of the aid relationship. I also include EU Aid on the right-hand side of the equation to account for first order serial autocorrelation and the fact that, generally speaking, aid given in year t-1 is highly predictive of aid given in year t. It is important to note that at no point do I analyse aggregate EU member state aid as a measure for EUAid; all aid in this study is allocated solely by the Commission and is completely separate from the individual aid budgets of the member states.

  6. This and all economic data are taken from the World Development Indicators 2012 data.

  7. EU Aid ranges from 0 to 4.183

References

  • Abbott, Kenneth W., and Duncan Snidal. 1998. Why States Act Through Formal International Organizations. Journal of Conflict Resolution 42 (1): 3–32.

    Google Scholar 

  • Acharya, Amitav. 2010. Asia in the ‘New American Moment’. essay published in CSIS PacNet Newsletter. 14 November 2010. http://www.eastasiaforum.org/tag/trans-pacific-partnership/.

  • Alesina, Alberto, and David Dollar. 2000. Who Gives Foreign Aid to Whom and Why? Journal of Economic Growth 5: 33–63.

    Google Scholar 

  • Apodaca, Clair, and Michael Stohl. 1999. United States Human Rights Policy and Foreign Assistance. International Studies Quarterly 43: 185–198.

    Google Scholar 

  • Arvin, B. Mak, and Torben Drewes. 2001. Are there biases in German bilateral aid allocations? Applied Economic Letters 8 (3): 173–177.

    Google Scholar 

  • Aydin, Aysegul. 2010. The Deterrent Effects of Economic Integration. Journal of Peace Research. 47 (5): 1–11.

    Google Scholar 

  • Baier, Scott L., Jeffrey H. Bergstrand, Peter Egger, and Patrick A. McLaughlin. 2008. Do Economic Integration Agreements Actually Work? Issues in Understanding the Causes and Consequences of the Growth of Regionalism. The World Economy. 31 (4): 461–497.

    Google Scholar 

  • Barnett, Michael, and Martha Finnemore. 2004. Rules for the World: International Organizations in Global Politics. Ithaca: Cornell University Press.

    Google Scholar 

  • Bauer, Michael, and Jorn Ege. 2016. Bureaucratic Autonomy of International Organizations’ Secretariats. Journal of European Public Policy. 23 (7): 1019–1037.

    Google Scholar 

  • Bearce, David H., et al. 2013. Has the New Aid for Trade Agenda Been Export Effective? Evidence on the Impact of US AfT Allocations, 1999–2008. International Studies Quarterly 57: 163–170.

    Google Scholar 

  • Berthelemy, Jean-Claude. 2006. Bilateral Donors’ Interest vs. Recipients’ Development Motives in Aid Allocation: Do All Donors Behave the Same? Review of Development Economics. 10 (2): 179–194.

    Google Scholar 

  • Bicchi, Federica. 2006. Our Size Fits All’: Normative Power, Europe, and the Mediterranean. Journal of European Public Policy. 13 (2): 286–303.

    Google Scholar 

  • Blanton, Shannon L. 2005. Foreign Policy in Transition: Human Rights, Democracy, and U.S. Arms Exports. International Studies Quarterly 49: 647–666.

    Google Scholar 

  • Boone, Peter. 1996. Politics and the Effectiveness of Foreign Aid. European Economic Review. 40 (2): 289–329.

    Google Scholar 

  • Bueno de Mesquita, Bruce, and Alastair Smith. 2007. Foreign Policy and Policy Concessions. Journal of Conflict Resolution 51 (2): 251–284.

    Google Scholar 

  • Bueno de Mesquita, Bruce, and Alastair Smith. 2009. A Political Economy of Aid. International Organization 63 (2): 309–340.

    Google Scholar 

  • Carrere, Celine. 2006. Revisiting the Effects of Regional Trade Agreements on Trade Flows with Proper Specification of the Gravity Model. European Economic Review. 50 (2): 223–247.

    Google Scholar 

  • Cernat, Lucien. 2001. Assessing Regional Trade Arrangements: Are South-South RTAs more Trade Diverting? Global Economy Quarterly. 2 (3): 1524–5861.

    Google Scholar 

  • Chayes, Abram, and Antonia H. Chayes. 1993. On Compliance. International Organization. 47 (2): 175–205.

    Google Scholar 

  • Cingranelli, David L., and Thomas E. Pasquarello. 1985. Human Rights Practices and the Distribution of US Foreign aid to Latin American Countries. American Journal of Political Science 3: 539–563.

    Google Scholar 

  • Dai, Xinyuan. 2002. Information Systems in Treaty Regimes. World Politics. 54 (4): 405–436.

    Google Scholar 

  • Dietrich, Simone. 2013. Bypass or Engage? Explaining Donor Delivery Tactics in Foreign Aid Allocation. International Studies Quarterly 57 (4): 698–712.

    Google Scholar 

  • Dollar, David. 1992. Outward-oriented Developing Economies Really Do Grow More Rapidly: Evidence from 95 LDCs, 1976-1985. Economic Development and Cultural Change 40 (3): 523–544.

    Google Scholar 

  • EuropeAid. 2012. Annual Report 2011. http://ec.europa.eu/europeaid/annual-report-2011-european-unions-development-and-external-assistance-policies-and-their_en. Accessed April 4, 2012.

  • European Community. 2008. RIP: Regional of Eastern and Southern Africa and the Indian Ocean. Regional Indicative Programme 2008–2013.

  • Fernandez, Raquel, and Jonathan Portes. 1998. Returns to Regionalism: An Analysis of Nontraditional Gains from Regional Trade Agreements. The World Bank Economic Review. 12 (2): 197–220.

    Google Scholar 

  • Fischer, S. 2000. Lunch Address Given at the conference on ‘Promoting Dialogue: Global Challenges and Global Institutions. Washington: American University.

    Google Scholar 

  • Flores, Renato. 1997. The Gains from Mercosul. Journal of Policy Modeling. 19 (1): 1018.

    Google Scholar 

  • Foroutan, Faezeh. 1998. Does Membership in a Regional Preferential Trade Arrangement Make a Country More or Less Protectionist? The World Economy. 21 (3): 305–335.

    Google Scholar 

  • Frankel, Jeffrey A., Ernesto Stein, and Shang-Jin Wei. 1997. Regional Trading Blocs in the World Economic System. Institute for International Economics: Washington D.C.

    Google Scholar 

  • Gamberoni, Elisa and Richard Newfarmer. (2009). Aid for Trade: Matching Potential Demand and Supply. World Bank Policy Research Working Paper. No. 4991.

  • Gartzke, Erik, Timothy Nordstrom and Charles Boehmer. n.d. Disaggregating International Organizations. Unpublished paper.

  • Gray, Julia, and Johnathan B. Slapin. 2009. How effective are preferential trade agreements? Ask the experts. Review of International Organizations. 7 (3): 309–333.

    Google Scholar 

  • Haftel, Yoram Z. 2007. Designing For Peace: Regional Integration Arrangements, Institutional Variation, and Militarized Inter-State Disputes. International Organization. 61 (1): 217–237.

    Google Scholar 

  • Haftel, Yoram Z., and Alexander Thompson. 2006. The Independence of International Organizations: Concept and Applications. Journal of Conflict Resolution 50 (2): 253–275.

    Google Scholar 

  • Hawkins, Darren G et al, eds. 2006. Delegation and Agency in International Organizations. London: Cambridge University Press.

  • Heckman, J.J. 1976. The Common Structure of Statistical Models of Truncation, Sample Selection, and Limited Dependent Variables and a Sample Estimator for Such Models. Annals of Economic and Social Measurement. 5: 475–492.

    Google Scholar 

  • Heckman, J.J. 1979. Sample Selection Bias as a Specification Error. Econometrica 47: 153–161.

    Google Scholar 

  • Hitchens, Harold L. 1968. Influences on the Congressional Decision to Pass the Marshall Plan. The Western Political Quarterly. 21 (1): 51–68.

    Google Scholar 

  • Hooghe, Lisbet and Gary Marks. 2012. The Authority of International Organizations. Unpublished paper.

  • Koremenos, Barbara. 2008. When What and Why Do States Choose to Delegate? Law and Contemporary Problems. 71: 151–192.

    Google Scholar 

  • Krueger, Anne. 1998. Trade Creation and Trade Diversion Under NAFTA. NBER Working Paper 7429.

  • Lancaster, Carol. 2007. Foreign Aid: Diplomacy, Development, Domestic Politics. Chicago: University of Chicago Press.

    Google Scholar 

  • Lebovic, James H., and Erik Voeten. 2006. The Politics of Shame: The condemnation of country human rights practices in the UNHCR. International Studies Quarterly 50 (4): 861–888.

    Google Scholar 

  • Lebovic, James H., and Erik Voeten. 2009. The Cost of Shame: International Organizations and Foreign Aid in the Punishing of Human Rights Violators. Journal of Peace Research. 46 (1): 79–97.

    Google Scholar 

  • Lumsdaine, David H. 1993. Moral Vision in International Politics. Princeton: Princeton University Press.

    Google Scholar 

  • Makki, Shiva, and Agapi Somwaru. 2004. Impact of Foreign Direct Investment and Trade on Economic Growth: Evidence from Developing Countries. American Journal of Agricultural Economics 86 (3): 795–801.

    Google Scholar 

  • Martin, Lisa L. 2006. Distribution, Information, and Delegation to International Organizations: The Case of IMF Conditionality. In Delegation and Agency in International Organizations, ed. Darren G. Hawkins. Cambridge: Cambridge University Press.

    Google Scholar 

  • Martin, Lisa L., and Beth Simmons. 1998. Theories and Empirical Studies of International Institutions. International Organization. 52 (4): 729–757.

    Google Scholar 

  • Meernik, James, Eric L. Krueger, and Steven C. Poe. 1998. Testing Models of U.S. Foreign Policy: Foreign Aid During and After the Cold War. Journal of Politics 60: 63–85.

    Google Scholar 

  • Milner, Helen V. 2006. Why Multilateralism? Foreign aid and domestic principal-agent problems. In Delegation and Agency in International Organizations, ed. Darren G. Hawkins. Cambridge: Cambridge University Press.

    Google Scholar 

  • Neumayer, Eric. 2003. The Determinants of Aid Allocation by Regional Multilateral Development Banks and United Nations Agencies. International Studies Quarterly 47 (1): 101–122.

    Google Scholar 

  • Nickell, Stephen. 1981. Biases in Dynamic Models with Fixed Effects. Econometrica. 49 (6): 1417–1426.

    Google Scholar 

  • OECD. 2006. Aid for Trade: Making it Effective. http://www.oecd.org/trade/aft/37198197.pdf. Accessed 21 Oct 2013.

  • Peterson, Timothy, and James M. Scott. 2017. The Democracy Aid Calculus: Regimes, Political Opponents, and the Allocation of US Democracy Assistance, 1975–2009. International Interactions. https://doi.org/10.1080/03050629.2017.1339701.

    Article  Google Scholar 

  • Pevehouse, Jon C. 2002. With A Little Help from My Friends? Regional Organizations and the Consolidation of Democracy. American Journal of Political Science. 46 (3): 611–626.

    Google Scholar 

  • Pinto-Duschinsky, Michael. 1991. Foreign Political Aid: The German Political Foundations and Their US Counterparts. International Affairs. 67 (1): 33–63.

    Google Scholar 

  • Poe, Steven C. 1991. Human rights and the allocation of US military assistance. Journal of Peace Research. 28: 205–216.

    Google Scholar 

  • Poe, Steven C. 1992. Human rights and economic aid allocation under Ronald Reagan and Jimmy Carter. American Journal of Political Science. 36: 147–167.

    Google Scholar 

  • Poe, Steven C., and James Meernik. 1995. US Military Aid in the 1980 s: A Global Analysis. Journal of Peace Research. 32: 399–411.

    Google Scholar 

  • Rinsberg, Bernhard. 2015. Foreign Aid Responses to Political Liberalization. World Development 75: 46–61.

    Google Scholar 

  • Riviera-Arriaga, E. 2005. Assessing Foreign Aid Efforts for Coastal Management in Latin America and the Caribbean Regions. Ocean and Coastal Management 48 (9): 693–720.

    Google Scholar 

  • Rodriguez, Francisco, and Dani Rodrik. 2000. Trade Policy and Economic Growth: A Skeptic’s Guide to the Cross-National Evidence. NBER Macroeconomics Annual 2000 (15): 261–338.

    Google Scholar 

  • Sachs, Jeffrey, and Andrew Warner. 1995. Economic Reform and the Process of Global Integration. Brookings Papers on Economic Activity. 1995 (1): 1–118.

    Google Scholar 

  • Schiff, Maurice. 1997. Small is Beautiful: Preferential Trade Agreements and the Impact of Country Size, Market Share, and Smuggling. Journal of Economic Integration 12 (3): 359–387.

    Google Scholar 

  • Schimmelfennig, Frank. 2009. Europeanization beyond Europe. Living Reviews in European Governance 4 (3): 1–22.

    Google Scholar 

  • Schraeder, Peter J., Steven W. Hook, and Bruce Taylor. 1998. Clarifying the Foreign Aid Puzzle: A Comparison of American, Japanese, French, and Swedish Aid Flows. World Politics. 50 (2): 294–323.

    Google Scholar 

  • Scott, James M., and Ralph G. Carter. 2017. Distributing Dollars for Democracy: Changing Foreign Policy Contexts and the Determinants of US Democracy Aid, 1975–2010. Journal of International Relations and Development. https://doi.org/10.1057/s41268-017-0118-9.

    Article  Google Scholar 

  • Stiglitz, Joseph E. 2000. Capital Market Liberalization, Economic Growth, and Instability. World Development 28 (6): 1075–1086.

    Google Scholar 

  • Stiglitz, Joseph E. and Andrew Charlton. 2006. Aid for Trade: A Report for the Commonwealth Secretariat. Unpublished paper.

  • Stone, Diane. 2004. Transfer Agents and Global Networks in the ‘Transnationalization’ of Policy. Journal of European Public Policy. 11 (4): 545–566.

    Google Scholar 

  • Svensson, Jakob. 2000. Foreign Aid and Rent-Seeking. Journal of International Economics. 51: 437–461.

    Google Scholar 

  • Thompson, Alexander. 2006. Coercion Through IOs” The Security Council and the Logic of Information Transmission. International Organization. 60: 1–34.

    Google Scholar 

  • Vicard, Vincent. 2011. Determinants of Successful Regional Trade Agreements. Economics Letters. 111 (3): 188–190.

    Google Scholar 

  • Viner, Jacob. 1950. The Customs Union Issue. New York: Carnegie Endowment for International Peace.

    Google Scholar 

  • Whalley, John. 1998. Why Do Countries Seek Regional Trade Agreements? In The Regionalization of the World Economy, ed. Jeffrey A. Frankel. Chicago: University of Chicago Press.

    Google Scholar 

  • Yeats, Alexander J. 1998. Does Mercosur’s Trade Performance Raise Concerns about the Effects of Regional Trade Arrangements? World Bank Economic Review. 12 (1): 1–28.

    Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Texas Christian University, TCU Box 297021, Fort Worth, TX, 76129, USA

    Brandy Jolliff Scott

Authors
  1. Brandy Jolliff Scott
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Brandy Jolliff Scott.

Appendix

Appendix

See Figs. 3, 4, 5 and 6, Table 5.

Rights and permissions

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Jolliff Scott, B. Explaining a new foreign aid recipient: the European Union’s provision of aid to regional trade agreements, 1995–2013. J Int Relat Dev 23, 701–727 (2020). https://doi.org/10.1057/s41268-018-0163-z

Download citation

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1057/s41268-018-0163-z

Keyword

Search

Navigation