Why heuristics and biases matter in diffusion and localisation

: the case of aid for trade in South American middle-income countries

Abstract

The spread of trade-related development assistance under the Aid for Trade (AfT) initiative to middle-income countries in South America, particularly to Colombia, Peru, and Bolivia, challenges traditional approaches to diffusion. Notably, AfT does not constitute a proven successful model, but it has been assessed on the value of its potential outcomes. Furthermore, the diffusion process has not led to similar replicas of the model initially directed to least developed countries (LDCs). Therefore, I address the question of why has the diffusion of AfT to MICs led to variations? This thesis contributes to the existing diffusion literature in the field of International Political Economy. Specifically, it investigates the role of cognitive approaches: heuristics and biases under uncertainty and across the three stages of the diffusion process: source selection, transmission, and adoption or localisation. It seeks to understand why variation rather than convergence occurred. Furthermore, it provides a pioneer examination of trade cooperation approaches in Colombia, Peru, and Bolivia, and their links to AfT diffusion. My research explores and compares pre-existing local trade cooperation ideas and the case studies’ involvement in AfT. First, it surveyed national development plans (NDPs) to identify local trade and cooperation ideas and norms. Second, it analysed free trade agreements (FTAs) with the United States and the European Union and the trade facilitation content of these documents. Third, it identified and analysed 229 AfT projects conducted between 2006 and 2014 in Colombia, Peru, and Bolivia. Additionally, it builds on the outcomes of 63 in-depth interviews carried out in London, Geneva, Paris, Washington, Bogota, Lima, and La Paz with key policy and decision-makers. My research findings reveal that the selected case studies’ trade and cooperation backgrounds, and the heuristics and biases that emerge from them (rational ecology) influence policymakers’ decision-making under uncertainty more than external pressures (coercion and competition). Furthermore, the findings confirm that localisation occurs only when foreign policy innovations develop congruence with local ideas and beliefs.