Aid & development, explained.
Signage is removed from the US Agency for International Development at its headquarters in Washington DC (Kayla Bartkowski/Getty Images)
Australia’s interests won’t be served by letting vital multilateral anchors of the “rules-based order” wither, decay and collapse.
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How Australia should respond to the implosion of US aidHow Australia should respond to the implosion of US aid
International aid efforts are in chaos as the Trump administration moves to brazenly dismantle the United States’ foreign aid program and reshape whatever is left in its own image. America’s foreign aid has been almost entirely frozen and its independent aid agency virtually shuttered.
The story is chaotic and unpredictable, as with all things Trumpian. Notionally, the freeze is to review programs for alignment with Trump administration priorities. However, the profound antipathy towards foreign aid of Donald Trump and billionaire first-bro Elon Musk who has led this effort suggests the world should brace for potentially deep aid cuts to follow.
This will have worrisome global impacts that are not only an affront to the values of most Australians but also our strategic interests. The United States is the world’s largest bilateral donor, though proportionately not most generous, providing US$65 billion in assistance last year. Many vulnerable lives will unnecessarily be lost while the West’s autocratic opponents celebrate the self-sabotage of US soft power.
As America disengages from global development, Australia will need to help pick up the pieces. But doing so will require confronting a myriad of tough questions.
Australian aid projects jointly funded with the United States will be most directly affected, including strategic infrastructure projects in the Pacific such as undersea cables aimed at combatting China’s influence. Yet the “China factor” may not be enough to sway the Trump administration or minimise costly delays. Australia will either need to argue the case for these or fill the gap.
The United States has also been the leading donor in Australia’s region in key areas including civil society support, health, and humanitarian assistance. Many organisations partnering with Australia will be affected. The most important implication though is to raise questions about relative priorities. For instance, America is the largest donor supporting civil society organisations in Southeast Asia, where democracy and civic space are in retreat. Yet Australia’s own support is currently modest, despite some recent increase.
Australia, and others, will also need to ask big questions about how the world addresses global public goods such as preventing pandemics and combatting climate change. Part of this will require the Australian government looking beyond its current narrow focus on its immediate region. For instance, the United States provided some US$2.4 billion to combat the Ebola outbreak in West Africa and help avoid a pandemic. Australia provided US$26 million. On climate change, the Trump administration is likely to dramatically reduce or eliminate US funding.
This brings us to multilateral institutions, likely to be one of the biggest casualties. The Trump administration has frozen its support to UN agencies including the World Food Program and UNICEF. Outright cuts seem likely. It has withdrawn from the World Health Organisation. Other multilateral institutions that are particularly crucial partners for Australia might also come under pressure such as the World Bank. Trump might renege on the US$4 billion pledge made by Biden last year to the bank’s concessional financing arm, which is vital to its work in the Pacific. Some in Trump’s orbit want to withdraw from the bank entirely.
Australia needs to ask itself what it is willing to do to prevent a dramatic weakening of key multilateral institutions. This will require revisiting existing assumptions. In recent years, the government has favoured bilateral over multilateral modes of aid delivery as part of efforts to compete with China for strategic influence. But Australia’s strategic interests won’t be served by letting vital multilateral anchors of the “rules-based order” that we claim to uphold wither, decay and collapse. Nor in allowing China to accuse the West of hypocrisy in allowing this to happen or simply leaving these institutions primed as vectors for China’s influence.
Watching the Trump administration blunder away the strategic value of America’s aid program so spectacularly, Australia can learn a valuable lesson: do the opposite.
The Trump administration’s disengagement on aid also threatens a damaging gap in global leadership. Historically, the United States has played the key role in rallying international coalitions for global development efforts. Critical upcoming summits, including the COP30 climate summit in Brazil and the Financing for Development Conference in Spain, could struggle to have any meaning, leaving contentious issues such as climate finance gaps, inadequate debt relief, and stalling global development to fester and erode the legitimacy of the rules-based order that Australia defends.
Australia cannot replace the United States. Australia can however do its part, working with a coalition of others – stepping up Australia’s aid budget (which remains smaller than America’s as a share of national income), carefully directing more of its aid to underfunded priorities and multilateral institutions as the gaps become clearer, and investing a lot more of Australia’s diplomatic capital in working with others to deliver the international leadership and cooperation the world needs.
The scale of the challenge and the complexity of trade-offs involved – existing vs new priorities, regional vs global focus, bilateral vs multilateral aid – will depend on what the Trump administration ultimately does in dismantling US foreign assistance. The outlook is not promising. The debate needs to start now.
Australia has its own sorry history of slashing aid and abolishing its independent aid agency last decade. But in watching the Trump administration blunder away the strategic value of America’s aid program so spectacularly, Australia can learn a valuable lesson: do the opposite.
About the authors
Roland Rajah
Roland Rajah is Lead Economist and Director of the Indo-Pacific Development Centre at the Lowy Institute, focusing on economic development challenges across Southeast Asia, the Pacific Islands, and South Asia. His research spans macroeconomics, aid and development finance, geoeconomics, and regional integration.
Grace Stanhope
Grace Stanhope is a former Research Fellow in the Indo-Pacific Development Centre at the Lowy Institute, working on the Southeast Asia Aid Map. Her work focused on tracking and analysing foreign aid and development finance flows to Southeast Asia.
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