What does the demise of USAID mean for Canada and Western allies?

The shuttering of the U.S. government’s marquee foreign aid agency — USAID — could have an enormous impact on Western allies and their ability to influence developing nations, a series of experts have warned.

It could also create a void that China would want to fill — the kind the Trump administration has been complaining about, most recently in Panama where the government had been poised to sign on to Beijing’s signature infrastructure campaign, known as the Belt and Road Initiative.

Over the last two weeks, dozens of senior USAID officials have been put on leave, thousands of contractors have been laid off and a freeze imposed on billions of dollars in humanitarian assistance to other countries.

Tech billionaire Elon Musk has described USAID as “a criminal organization” that will be shut down after senior officials refused to hand over classified data to the government efficiency agency set up by the new U.S. administration, which Musk is running.

Late Tuesday, USAID announced that almost all overseas staff — civil service and foreign service officers — would be put on paid leave effective Friday and that the repatriation of staff located outside of the United States would take place within a month.

With over $40 billion US in appropriations, USAID is considered the very definition of soft power, creating influence in developing countries where Washington needs partners. Created during the Cold War in 1961 by then-president John F. Kennedy, the agency was seen as a way to counter the influence of the Soviet Union.

Today, its supporters argue that its mission is to limit Chinese influence, especially in the Global South which has been flocking to join the belt and road plan.

The withdrawal of the United States would almost immediately put pressure on other countries such as Canada, which according to federal government estimates spent $15.5 billion — through 21 organizations — on humanitarian efforts 2022-23, to step into the void. Such a scenario would unfold against the political backdrop — in this country — of a Conservative pledge to slash foreign aid budgets after the next election.

But the actions of the Trump administration are already being felt, say experts.

“USAID has already disappeared from some landscapes, just by the very act of the executive order halting work on existing programs,” said Noam Unger, the director of the sustainable development and resilience initiative at the Center for Strategic and International Studies in Washington. 

Communities that benefit from health programs and food assistance are particularly feeling the impact, Unger said, adding the gravity of the cuts will only worsen with time.

“They will affect and tarnish U.S. standing, but they will also have implications over time for us — economic and national security, given transnational threats associated with under-development around the world, with conflict, with corruption, with trafficking of people and drugs,” he said.

Among the places where the aid freeze is being felt most keenly is Ukraine, where USAID has invested over $874 million US to sustain Ukraine’s economy during the war and to lay the groundwork for a strong and swift economic recovery at war’s end.

Rachel Beatty Riedl, a professor and the director of Cornell University’s Center on Global Democracy in Ithaca, N.Y., says the cost of the retreat in humanitarian obligations comes “with clear costs both at home and abroad.”

U.S. security, stability and prosperity have since the depths of the Cold War been tied to developmental advancements around the globe. 

“Undercutting long-established relationships with partner countries around the world weakens America’s diplomacy and ability to compete with other global powers such as Russia and China for critical resources, markets and geostrategic alliances against radical extremists or other threats to U.S. national interests,” she said in a statement.  

Riedl also questioned whether the administration’s move to dismantle USAID is legally possible without congressional approval.

Unger said from a geopolitical perspective the door is being opened to China to step in, if it has the economic capacity.

“If the U.S. essentially cedes the playing field or the battleground, if you will — with regard to soft power and economic influence in the form of foreign assistance and development finance — that is a void,” said Unger. “China and others would happily try to fill it.”

U.S. President Donald Trump, prior to his inauguration, would not rule out the use of military force in both Panama and Greenland to advance American interests.

USAID has been active in Panama for decades, but more recently in facilitating the implementation of justice system reforms. 

The country has also been aggressively courted by Beijing, where companies from mainland China and Hong Kong have acquired key port facilities. China’s national security laws can require companies, including Hong Kong companies, to assist the Chinese government in intelligence gathering and military operations.

In 2018, Panama decided to join China’s Belt and Road Initiative — a policy the government of that country has now signalled it is willing to end following a visit by newly minted Secretary of State Marco Rubio. 

The Panama Canal, constructed by the United States more than a century ago, has been fully owned by Panama since 1999.

Trump has complained about increasing Chinese influence on the strategic waterway.

Similarly, China has been interested in courting Greenland, the semi-autonomous Arctic island rich in rare-earth minerals.   

China has bought rare-earth mineral mines, opened a satellite ground and research station, attempted to bid on the construction and financing of a massive three-airport infrastructure project and attempted to purchase a deep-water port.

The United States has used soft power to either block or slow down each of the projects — something that could be hobbled going forward.

“I think over time, the [new] administration will try to explain in more coherent fashion its national security and foreign policy approaches,” said Unger.