There is much hand-wringing about the fate of the United States Agency for International Development (USAID) since President Donald Trump returned to office. The independent agency was established in 1961 by President John F. Kennedy as a means to counter Russian influence through U.S. development and aid programs. Since its inception, USAID has largely focused on disaster and poverty relief, technical cooperation on global issues, including the environment, U.S. bilateral interests, and socioeconomic development. Many of these programs are conducted in the Asia-Pacific region.
Increasingly, USAID has been criticized as outdated and inefficient, or accused of supporting transnational elites, money laundering, and funding a “censorship-industrial complex.” This includes scrutiny for using aid as a political weapon to force actions from other nations, accusation of wasteful spending on programs that are not in line with U.S. national interests, and “boomerang” aid funding practices, where awards based on inflated costs bounce back to the donor and awardee firm. The majority of USAID’s programs are delivered by private entities or NGOs, some of which are for profit. Some have questioned whether the selection of these contractors has been determined by political influence.
Despite all of the recent criticism of USAID, it is responsible for high-value programs, including emergency response assistance due to natural disasters and political unrest, support for the removal of unexploded ordnance, supplying medication and testing for HIV/AIDS, support for basic healthcare, and maternal and child health. These are lifesaving programs whose funding as well as technical support should continue – no matter what USAID’s fate is.
The United States spends 0.3 percent of its GDP on aid, even though USAID’s budget has nearly doubled since 2019. USAID has a workforce of 10,000, about two-thirds of whom are serving overseas. Funding for USAID is appropriated by the U.S. Congress based on administration requests. In 2024 USAID’s budget was $44 billion; just 12 percent of these funds go to local organizations in foreign countries, while the majority goes to international organizations and companies, most of which are based in the United States. This suggests USAID has high operational costs including salaries, benefits, overseas missions, training, security, and information technology.
It also suggests there may be collusion or corruption. Since early 2000, USAID programs have become increasingly reliant on contractors and grantees, which has resulted in a few D.C.-area for profit firms such as Chemonics International and Development Alternatives Inc receiving an outsized share of USAID spending. All of this needs to be investigated.
More importantly, the Trump administration needs to decide what to do with USAID. Secretary of State Marco Rubio has alluded to merging it into the Department of State. This has been done before in other countries, and we could learn a lot from looking at the experience and results.
Over the past decade and a half Australia, New Zealand, and Canada have integrated development aid into government agencies. In 2009, NZAID folded into the Ministry of Foreign Affairs and Trade (MFAT). In 2013 the Canadian International Development Agency (CIDA) was merged into Canada’s Department of Foreign Affairs. Shortly after AusAID was integrated into Australia’s Department of Foreign Affairs and Trade (DFAT). The goal in each of these mergers was to better align aid with foreign policy interests.
Australia’s decision to merge the country’s independent aid agency into the foreign affairs ministry was a surprise decision made and implemented two weeks into Prime Minister Tony Abbott’s term. It threw development aid programs and the thousands of international development professionals working on them into uncertainty and confusion. The decision was largely driven by the perception that AusAID aid programs had increasingly diverged from foreign policy and national interests. In addition, the rationale included the legitimate issue of changing aid in the face of developing countries moving from less developed to middle income.
In Canada, CIDA’s merger also sought to “closely link” policy with development aid. Merging CIDA into the Department of Foreign Affairs was also seen as meeting a more transactional approach toward aid by engaging the private sector in order to increase trade.
Whatever the motives, the abruptness of the amalgamation of both CIDA and AusAID announcements created drama and anxiety, similar to what we are seeing today in the United States.
There were early benefits from mergers in Australia, New Zealand, and Canada. In Australia it freed up US$20 billion of operational costs, allowing DFAT to redirect those funds toward international development over the next five years. In addition, the integration “forced DFAT to take back responsibility for the Pacific,” which had been previously relegated to AusAID. This resulted in establishing alternatives to aid such as The Pacific Australia Labor Mobility (PALM) program.
Post integration, New Zealand commissioners and ambassadors assigned to developing countries reported their roles were more effective, having had practical experience with aid.
Most of the downside from the mergers occurred early on. Following the mergers, aid expertise fell both in Australia and New Zealand as aid practitioners abandoned government jobs or took up other departmental roles, leaving aid programs to inexperienced country desks. This has since been rectified by both countries, but it was initially disruptive to programs.
In New Zealand, disruptions were less deep as the integration was more gradual. Initially a coherent aid division within the foreign ministry was maintained with a gradual shift toward a more integrated government agency model. Any U.S. merger should learn from this recent history and make sure USAID technical specialists working on high value programs transition to State Department bureaus in order to retain their expertise.
If Rubio moves forward with merging USAID operations into the State Department, he should prioritize preserving high-value lifesaving programs. Provisions need to be put in place so these programs – and the specialists who oversee them – are identified and rapidly transitioned into State as soon as practical. Restructuring State Department bureaus in order to incorporate USAID should also be prioritized.
If done right, integrating USAID into the State Department could establish a more efficient, seamless operational approach, moving from foreign policy to program planning to implementation to evaluation under one government agency. The experiences of the Australian, New Zealand, and Canadian amalgamations of their aid programs into their government agencies can offer guidance on how to best transition USAID into the State Department in order to minimize high-value program disruption.
