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. Last Updated: 07/27/2016

Aid, Trade and Financial Scams

By meeting in an idyllic retreat in the Canadian Rockies, leaders of the Group of Eight may succeed in avoiding the critics of globalization. But they will hardly get away from the question of global poverty. Confronting Africa's appalling economic distress is at the top of their agenda.

One of the great tests for globalization will be its inclusiveness -- what it does to improve the plight of the terribly poor in developing countries. Sept. 11 has pushed the question even more to the fore, as is evident in the 50 percent increase in foreign aid -- reaching a level of $15 billion in three years -- proposed by the Bush administration in March.

But the debate is often upside down, with critics of globalization contending that it causes poverty. On the contrary, globalization -- in the form of expanded trade and investment -- offers the most significant means for reducing poverty. Foreign aid can play a very important role in relieving hardship and helping poor countries improve health, education and national infrastructure. It can also help build legal and lending institutions, making it possible for the poor to participate in market economies and poor countries to participate in the global economy.

It is trade, however, that is the primary engine for economic development. The best proof is from some nations in Asia. Four decades ago, Asian countries were among the poorest in the world. They varied widely in their political systems, but the common theme among the economically successful countries was their engagement with the world trading system. The results have been extraordinary. In 1960 South Korea was as poor as India. Today its per capita income is 20 times higher than India's.

In the last decade, India has also moved to participate more actively in the world economy through trade. Within India, this engagement has stimulated growth rates, and now India is on its way to becoming a force in the world economy. It's hard to imagine the Internet as we know it without India and Indian technologists.

Singapore provides an even more dramatic example. In the late 1960's, it was so poor that its very survival was problematic. Today its per capita income is higher than Britain's.

For developing countries to benefit from trade, the first requirement is better access to markets in developed countries and increased flows of investment. That was the message of the developing countries that was lost in the din of the World Trade Organization meeting in Seattle in 1999.

What would expanding trade mean for poorer nations? Sub-Saharan Africa, hit by falling commodity prices, poorly governed and unable to attract even much domestic investment, missed out on the manufacturing-led trade boom of the late 20th century. But if it were simply to regain the share of the world's non-oil exports that it held in 1980, it would have earned $161 billion in 2000 -- not the $69 billion it actually earned.

Industrialized countries need to reduce barriers to imports from the poorest countries, a principle that has been increasingly recognized by the United States and the European Union. But it's a principle that needs to be put into practice.

For expanded market access to work, it must be accompanied by adjustment mechanisms in the industrial countries for workers that are adversely affected. But it would be a great error to think that giving poorer countries a share of global trade means a loss for the industrial countries.

In the 1990s, world trade, U.S. imports and U.S. exports all doubled. In that same decade, 17 million new jobs, on a net basis, were created in the United States. By any calculation, that's a pretty good deal, and one well worth remembering in these troubled economic times.

Daniel Yergin is co-author of "The Commanding Heights: The Battle for the World Economy." He contributed this comment to The New York Times.