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This Statement of Administration Policy provides the Administration's views
on S. 2334, the Foreign Operations, Export Financing, and Related Programs
Appropriations Bill, FY 1999, as reported by the Senate Appropriations
Committee. Your consideration of the Administration's views would be
appreciated.
The Administration appreciates efforts by the Committee to accommodate many
of the President's priorities within the limited 302(b) allocation
available, and commends the Committee for its support of key funding
priorities such as the International Monetary Fund (IMF). However, the
allocation is simply insufficient to make the necessary investments in
programs funded by this bill. As a result, a number of key programs are
seriously under-funded. To have an effective foreign policy, a strong
national security policy, and to promote continued economic prosperity, it
is essential that additional resources be made available to the
Subcommittee. In addition, there are a number of objectionable
restrictions on funding in the bill and a significant number of earmarks
that, combined with the reduced funding level, would seriously limit the
Administration's ability to conduct foreign policy. For these reasons, if
the bill were presented to the President in its current form, the
President's senior advisers would recommend that he veto the bill. We hope
to reach consensus on these issues as the bill moves forward.
This legislation is a critical element of America's national security
budget. At the dawn of a new century, America faces unique challenges and
unprecedented opportunities to strengthen our national security, enhance
our global leadership, extend the reach of our democratic values, and
deepen our own prosperity. The challenges we face are formidable. If this
bill in its current form were to become law, however, it would erode our
ability to promote critical American interests at home and abroad
effectively. The responsibility of safeguarding our national security and
exercising U.S. leadership cannot be secured within the resources available
to the Subcommittee. We urge the Congress to provide the resources needed
to keep America safe, strong, and prosperous.
The only way to achieve the appropriate investment level for the programs
funded through this bill is to offset discretionary spending by using
savings in other areas. The President's FY 1999 Budget proposes levels of
discretionary spending for FY 1999 that conform to the Bipartisan Budget
Agreement by making savings through user fees and certain mandatory
programs to help finance this spending. In the Transportation Equity Act,
Congress -- on a broad, bipartisan basis -- took similar action in
approving funding for surface transportation programs paid for with
mandatory offsets. In addition, this year, as in the past, such mandatory
offsets have been approved by the House and Senate in other appropriations
bills. We want to work with the Congress on mutually-agreeable mandatory
and other offsets that could be used to increase funding for high-priority
discretionary programs, including those funded by this bill.
International Monetary Fund
The Administration welcomes and commends the Committee's efforts to provide
funding for both the International Monetary Fund's (IMF's) New Arrangements
to Borrow and quota increase. The Administration believes that the
immediate approval of these requests is necessary to provide the IMF with
the resources it needs to protect the international financial system -- and
therefore the U.S. economy -- against the risk of new, escalating, or
spreading crises. As recent events, including the new stabilization
program for Russia, clearly demonstrate, the IMF's need for additional
resources grows more urgent by the day.
The Administration is concerned, however, with some of the provisions of
the Committee-reported bill as currently drafted. The Administration is in
agreement with many of the underlying objectives as policies that the
United States should vigorously promote at the IMF and looks forward to
working with the Congress to address these issues in a manner consistent
with our goals.
New Independent States
As recent events have indicated, the incomplete peaceful transition of the
New Independent States (NIS) to stable, market-based democracies is vital
to the U.S. national security. The Congress has shared this view and
provided considerable support for this program in the past. The current
political/economic situation in Russia highlights how great the stakes are
for the United States to continue to help Russia achieve this peaceful
transformation. The enormous economic potential of the Caspian Basin
represents great opportunities to advance our mutual goals. The
Administration commends the Committee for providing resources above the
House level. However, the cuts embodied in the Committee's funding level
for USAID assistance programs to the NIS would result in a funding level
that is $30 million below the FY 1998 level and $185 million below the
request.
These cuts would make it extremely difficult to push for market reforms and
support democratic forces across the region. Further, the prohibition on
all assistance to Russia -- not just the government -- pending
certification of termination of all nuclear reactor and ballistic missile
technology cooperation with Iran, is so rigid as to impede the
Administration's ability to ensure that termination. This would hold
programs designed to foster the private sector across Russia hostage to
Government policy in Moscow. In addition, the numerous country earmarks
would make it more difficult for the Administration to shift assistance to
take advantage of new opportunities such as the election of reform-minded
governments, peace agreements settling ethnic disputes, or helping leverage
reforms by coordination of our assistance with international financial
institutions. The Administration strongly favors repeal of continued
restrictions on U.S. assistance to Azerbaijan. These restrictions operate
as a disincentive to securing peace in the Caucasus, and they do not serve
U.S. national interests.
Middle East Assistance
The Administration welcomes the efforts of the Committee to work with us in
encouraging changes in traditional levels of assistance to countries in the
Middle East. We believe that Israel's initiative to reduce Economic
Support Fund (ESF) assistance provides an important basis on which to build
future assistance programs that meet our needs in the Middle East and
beyond. However, due to the very constrained funding levels for
international affairs programs, the Administration has proposed an
accelerated approach to the reduction of Israel's ESF. We would encourage
the Senate to give strong consideration to such an approach as the bill
proceeds through the process.
We are very concerned about the deletion of current authority to allow the
Palestine Liberation Organization (PLO) to maintain an office in
Washington, D.C. This would severely undermine our ability to facilitate
dialogue between Israel and the Palestinians at what is an extremely
sensitive juncture of the peace process.
Export-Import Bank
The Administration appreciates the Committee's effort to increase the
funding for the Export-Import Bank (Ex-Im Bank) substantially. The funding
increase represents a vote of confidence in the Bank's mission to sustain
U.S. jobs and exports that would not otherwise go forward. However, the
bill falls short of the level needed to meet anticipated U.S. exporter
demand in FY 1999.
The Administration is concerned with the language prohibiting disbursements
of Ex-Im Bank credits to programs or enterprises that are majority owned or
managed by State entities. The Administration wants to promote private
sector development in Russia and other NIS countries. The Administration
shares the Committee's goal of supporting private sector businesses in the
region and would like to work with the Committee to develop responses to
the difficult issue of how to work with governments in the transition
period from command to free markets. However, the proposed language would
imperil almost $4 billion in U.S. exports tied to current and probable
transactions, provoking substantial litigation and undermining the
credibility of Ex-Im Bank's financing support for U.S. exporters.
The Administration is strongly opposed to an amendment that may be offered
that would require the Ex-Im Bank to approve transactions that did not
conform to its environmental guidelines if a foreign government offered --
or indicated -- support for the transaction. This "least
common-denominator" amendment could effectively eliminate the guidelines,
as virtually every case involving the guidelines is potentially subject to
foreign competition. Both in the G-8 and the Organization for Economic
Cooperation and Development (OECD), the United States has made real
progress in getting other countries to take a serious look at the impact of
export credit financing on the environment. If the Ex-Im Bank's
environmental guidelines are eliminated due to this amendment, the United
States' leadership and credibility on these issues would be significantly
threatened and progress on these issues would be substantially hindered.
Nonproliferation, Anti-terrorism, Demining, and Related Programs (NADR)
The Administration is concerned with the $46 million, or 21 percent, cut to
the $216 million request for NADR, but greatly appreciates the Committee's
support for the Korean Peninsula Energy Development Organization.
Unfortunately, the NADR reduction undermines the multi-prong effort that
NADR supports to reduce the proliferation threat to U.S. national and
global security. Lack of funding for the Comprehensive Test Ban Treaty
(CTBT) Preparatory Commission would harm U.S. national security interests
as it would eviscerate planned improvements in our ability to monitor
nuclear testing worldwide. The recent Indian and Pakistani tests are a
stark reminder of the importance of this monitoring. As well, we would be
forced to reduce support for demining efforts, NIS science centers, and
other related activities. The Commission and its International Monitoring
System should be funded, regardless of ratification of the CTBT.
Global Environment Facility
The Administration is concerned with the refusal of the Committee to fully
fund the request for the Global Environment Facility (GEF), which is
helping to reduce long-term environmental risks that will affect all
Americans. The full $300 million request for GEF (of which $192.5 million
is for arrears) is needed to assure that GEF does not run out of resources
in FY 1999. Concerns that funding GEF would prejudge debate on the Kyoto
Climate Protocol are misplaced: the new replenishment agreement is funded
at the same level as the prior one, and GEF will continue with precisely
the same broad work program that it had prior to Kyoto. The GEF is among
the best vehicles that the U.S. has to encourage developing countries to
shoulder greater responsibility for protecting both the local and global
environment. Under the terms of the bipartisan Balanced Budget Act, the
Senate can fully fund the arrearage request without making reductions to
other programs funded in the bill. It is manifestly in our interests to
clear our arrears and keep GEF running, and the Administration strongly
urges the Senate to restore funding for this critical program.
Economic Support Fund
The Administration is concerned with the overall funding level for the
Economic Support Fund (ESF). At the Committee mark, the Fund would be cut
by 50 percent of the funds necessary to support economic and political
stability in Latin America, as well as other emerging democracies in Africa
and Asia. We strongly encourage the Senate to support a higher funding
level for the ESF as the bill moves forward.
Excessive conditions on aid to Haiti, even with a national security waiver,
would undercut our efforts to achieve a democratic, self-sustaining Haiti
with an honest, independent judiciary.
Peacekeeping Operations
The Committee has reduced the $83 million request for Peacekeeping
Operations (PKO) by 17 percent. PKO provides vital assistance and support
for many important national security and foreign policy activities,
including commitments in Bosnia and Haiti, conflicts in Africa, and
potential trouble spots such as in the Balkans. This reduction would limit
the President's ability to respond to these and other evolving events.
Central and Eastern Europe
The Administration appreciates the continued support of the Senate for our
efforts to achieve a lasting peace in the Balkans. The assistance programs
are essential to meet the goals of the Dayton agreement, including the
ability of refugees and displaced persons to return to their homes,
reintegration of multi-ethnic communities and institutions, and helping the
citizens of the region decide their futures through free and fair
elections. The 11-percent reduction to the request for assistance to
Bosnia is of concern because it would reduce our ability to react to
unforeseen problems or opportunities. This lack of flexibility could
impair our ability to reach the goals outlined above and, in turn, would
pose a potential problem in terms of reducing our troop levels, a goal
shared by the Administration and the Congress. Finally, restrictions in
the bill intended to prevent war criminals from benefitting from U.S.
assistance, though well-intentioned, would prove extremely difficult to
administer. We look forward to working with the Senate to make this
language more workable.
Additional reductions in the assistance program for the rest of the region
are problematic as well. These reductions come at a time when we are
working to phase out assistance. FY 1999 is planned to be the last year
for new funding in Lithuania, Poland, and Slovakia, and the year in which
we planned to begin capitalizing a joint public-private partnership to help
sustain democracy after U.S. bilateral assistance is phased out.
African Development Fund
The Administration is deeply concerned with the $150 million cut to the
request for the African Development Fund, which provides resources for the
poorest countries in SubSaharan Africa, including the entire request to
fund the annual commitment of $67 million and $83 million in arrears.
Funding the request is necessary to support the reform measures underway
for the past three years at the African Development Bank and Fund. The
Administration strongly urges the Senate to restore funding for this
critical program.
Community Adjustment and Investment Program
The Administration is very concerned with the Committee's failure to fund
the Community Adjustment and Investment Program (CAIP), a program initially
funded through the North American Development Bank, a multilateral
development bank. The CAIP was established to help communities affected by
adverse trade patterns associated with implementation of the North American
Free Trade Agreement. To date, the program has assisted in more than 120
loans in 20 States, leveraging private sector financing of over $70
million. The $37 million requested would significantly bolster CAIP's
ability to continue this work, as well as to support technical assistance,
grants, and micro-lending. The Administration strongly urges the Senate to
restore funding for this innovative program.
Asian Development Fund
The Administration appreciates the Committee's support for the Asian
Development Fund, reflected in the $187 million funding of arrears.
Nevertheless, the Committee's mark excludes the $100 million request to
fund our annual commitment to the Asian Development Fund; thus, it would
result in substantial net new arrears to the Fund. The Administration is
committed to clearing up current arrears and to avoiding the creation of
new arrears. The Asia Development Fund has played an important role in
addressing the Asian economic crisis. The Administration strongly urges
the Senate to fund the Administration's request of $150 million towards
arrears and $100 million towards the annual commitment.
Peace Corps
The Administration is deeply concerned with the $49 million cut to the
request for the Peace Corps. This reduction, to a level $5 million below
the FY 1998 funding level, would not only preclude the Peace Corps
initiative to fund 10,000 volunteers by the year 2000, but would require
the Peace Corps to reduce costs equivalent to closing six country programs
and reducing the number of volunteers by 500. The Administration strongly
encourages the Senate to support a higher funding level for the Peace
Corps.
Treasury Debt Restructuring
The $25 million funding level for international debt restructuring is
inadequate to finance anticipated debt restructuring for some of the
poorest countries in FY 1999, especially debt relief proposed under the
President's new Africa Initiative. The Administration's $72 million
request was made on the basis of debt reduction anticipated for up to 14
countries to receive debt relief through the Paris Club group of official
creditors or through the Africa Initiative's bilateral concessional debt
reduction component. If this $25 million funding level were enacted, the
Administration would be unable to provide debt relief to a number of
sub-Saharan African countries likely to be eligible under the Africa
Initiative.
U.S. Agency for International Development (USAID) Development
Assistance
While the Administration appreciates the Committee's provision (after
permitted transfers) of an amount for USAID Development Assistance very
close to the President's request, we are concerned about the multitude of
earmarks, which would make it difficult to fully fund the shared assistance
priorities of the President and Congress in regions such as Africa and
Latin America. In particular, while the Administration is committed to
helping Indonesia through its current economic crisis, we are concerned
that the Committee's earmark for Indonesia, by reducing the President's
flexibility, may actually impede our efforts to respond most effectively to
the changing nature of the Asian economic crisis. The Administration is
concerned about new onerous language related to climate change, including
additional procedural requirements and the omission of existing language
that provides "notwithstanding" authority for activities intended to reduce
global greenhouse gas emissions.
International Narcotics Control
The Administration is deeply concerned about the $53 million reduction to
the $275 million request for International Narcotics Control. Such a
reduction would negatively impact country programs, especially in the
Andean region, that are aimed at reducing the supply of cocaine. The
reduction would force the redirection of available resources to cocaine
producing countries at the expense of heroin reduction efforts in Southeast
Asia.
International Organizations and Programs
The Committee bill reduces the request for International Organizations and
Programs by $44 million, which would limit significantly U.S. ability to
participate and support a number of international organizations,
particularly those involved with global environmental activities.
U.S. Agency for International Development (USAID) Operating Expenses
The Administration appreciates the Committee's effort to provide a small
increase above the FY 1998 enacted level for USAID Operating Expenses.
However, we are concerned that this level will not allow USAID to complete
the Year 2000 conversion and implement other necessary management
improvements while implementing the President's initiatives in Africa and
Latin America and effectively managing its ongoing programs, including
congressional priorities in areas such as infectious diseases and child
survival. Therefore, we urge the Senate to provide additional funding for
USAID Operating Expenses.
U.S. Agency for International Development (USAID) Operating Expenses:
Inspector General
The Administration appreciates the Committee's effort to provide a small
increase above the FY 1998 enacted level for Operating Expenses for the
Office of the USAID Inspector General. However, we are concerned that this
level will not provide sufficient funding to allow the Inspector General to
carry out fully his increased audit responsibilities under the GPRA and
GMRA while also responding to the increased costs of providing security for
USAID in the Ronald Reagan Building. Therefore, we urge the Senate to
provide additional funding for the USAID Inspector General.
U.S. Agency for International Development (USAID) Credit Programs
The Administration is concerned that the Committee has reduced the
requested subsidy amount for the Urban Environment (UE) credit program and
has not provided transfer authority for USAID's Development Credit
Authority (DCA). As the Congress and the Administration agreed in the FY
1998 appropriations legislation, USAID has taken substantial steps towards
developing the capacity to manage both its existing and future credit
portfolios. We urge the Senate to restore the transfer authority for the
DCA and increase funding for the UE program. Failure to do so would limit
the ability of USAID to use credit to promote development in urban areas
and to encourage the development of needed private sector financial
mechanisms.
Overseas Private Investment Corporation
The Administration is pleased the Committee has provided full program
funding for the Overseas Private Investment Corporation (OPIC). However,
we are concerned with the provision of the bill that would withhold
one-half of the agency's administrative budget. The Administration is
working closely with the Committee to resolve any outstanding issues and
notes that withholding funds would impede the agency's efforts to support
American business and promote U.S. foreign policy.
African Development Foundation
The Committee has reduced the $14 million request for the African
Development Foundation (ADF) by 43 percent. Through its grants program,
ADF supports community-based, self-help initiatives in Africa. This
reduction would severely limit the ability of the Foundation to respond to
the development needs at the grassroots level in Africa. The
Administration urges the Senate to fund this program at the requested
level.
Year 2000 Conversion
The need to conform with Year 2000 (Y2K) conversion requirements mandates
the additional investments in information technology and credit management
that are included in the requests for USAID Operating Expenses, Peace
Corps, and the other agencies funded in this bill. It is essential to make
Y2K funding available quickly and flexibly. We appreciate the action of
the Senate Appropriations Committee to provide an emergency fund in the
Treasury/General Government bill for such purposes. We urge Congress to
leave as much as possible of the reserve unallocated so that funds are
available to address emerging needs.
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