U.S. to Set Up $500-Million Trade Aid Fund

The United States said Tuesday that it will go on the offensive against rich nations that use aid to promote their own business interests in the developing world by setting up a $500-million fund to do just that.

The money will be split roughly evenly among Indonesia, Pakistan, the Philippines and Thailand to help U.S. companies win business in the telecommunications, transportation, power and construction equipment fields.

“It’s designed to fight fire with fire,” U.S. Export-Import Bank Vice Chairman Eugene Lawson told a news conference.

Lawson refused to single out any country for criticism but U.S. officials have said in the past that France and Japan were two of the biggest offenders.

Washington has long opposed the use of aid by industrial countries to help their businessmen win development projects, arguing that the practice distorts trade. But the use of so-called tied-aid credits has exploded in recent years as rich nations compete fiercely for business in the developing world.

Tied-aid credits reduce the cost of a project to a developing country by mixing aid with commercial credits.

The Agency for International Development will kick in $100 million to the pool, with the balance provided by the Export-Import Bank.

Lawson said the United States might be able to have half or more of the $500-million fund in place for use by the countries concerned by Sept. 30, the end of the government’s fiscal year.