EXECUTIVE OFFICE OF THE PRESIDENT OFFICE OF MANAGEMENT AND BUDGET WASHINGTON, D.C. 20503

June 26, 2000
(Senate)

This Statement of Administration Policy provides the Administration's views on S. 2522, the Foreign Operations, Export Financing, and Related Programs Appropriations Bill, FY 2001, as reported by the Senate Appropriations Committee. Your consideration of the Administration's views would be appreciated.

The President has requested urgently needed supplemental funding to fight against drug production and trafficking in Colombia, to provide disaster assistance to victims of hurricanes and floods in the United States and abroad, to lift crippling debt burdens for the world's poorest countries, and to sustain our military and civilian operations in Kosovo and the region, thereby protecting military readiness. Funding for UN peacekeeping and other stabilization measures in Kosovo is especially important to the eventual successful withdrawal of U.S. troops. The House passed emergency supplemental legislation addressing some of these urgent needs on March 30th.

Regrettably, the President's supplemental request has moved slowly in the Senate and now appears to be bogged down by a number of controversial provisions. These include provisions that would severely hinder the Federal Government's pending tobacco litigation, significant cuts to key international programs, as well as a number of anti-environmental riders and other objectionable provisions. Moreover, the Senate has fragmented our consolidated request into separate bills, slowing the process dramatically and jeopardizing this urgently needed funding. If a bill containing such provisions listed above were presented to the President, the President's senior advisers would recommend that he veto the bill.

The President's FY 2001 Budget is based on a balanced approach that maintains fiscal discipline, eliminates the national debt, extends the solvency of Social Security and Medicare, provides for an appropriately sized tax cut, establishes a new voluntary Medicare prescription drug benefit, in the context of broader reforms, expands health care coverage to more families, and funds critical investments for our future. An essential element of this approach is ensuring adequate funding for discretionary programs. To this end, the President has proposed discretionary spending limits at levels that we believe are necessary to serve the American people.

Unfortunately, the FY 2001 congressional budget resolution provides inadequate resources for discretionary investments. We need realistic levels of funding for critical government functions that the American people expect their government to perform well, including education, national security, law enforcement, environmental protection, preservation of our global leadership, air safety, food safety, economic assistance for the less fortunate, research and technology, and the administration of Social Security and Medicare. Based on the inadequate budget resolution, this bill fails to address critical needs of the American people.

The Administration appreciates efforts by the Committee to accommodate certain of the President's priorities within the 302(b) allocation. However, the inadequacy of the 302(b) allocations has forced the Committee to make choices that are simply unacceptable. As a result, the Committee bill is more than $1.7 billion, or more than 11 percent, below the program level requested by the President. A bill funded at this level would be grossly inadequate to maintain America's leadership around the world. It would inevitably require reductions from previously enacted levels for programs managed by the Departments of State and the Treasury, the Agency for International Development, and others, as well as preclude funding for important new Presidential initiatives. In addition, the bill does not provide urgently needed FY 2000 supplemental funding to provide debt relief to the world's poorest countries for which the President has proposed an offset.

Finally, the bill contains numerous objectionable provisions and a substantial number of earmarks that would seriously limit the President's ability to conduct an effective foreign policy. If the Congress were to enact a bill that does not provide the resources necessary to conduct an effective foreign policy and resolve the significant language problems in the current bill, the President's senior advisers would have no choice but to recommend that he veto the bill.

FY 2001 FOREIGN OPERATIONS LANGUAGE AND FUNDING

Language Issues

As noted above, the bill has numerous objectionable earmarks and language provisions. The following items are particularly objectionable.

• Russia/Chechnya. The Administration shares the concern of the Committee over the Government of Russia's massive use of military force against civilians in Chechnya and continues to push for access for the Organization for Security and Cooperation in Europe (OSCE), the International Red Cross, and other observers to investigate possible abuses of human rights. However, the Committee's language cutting off all aid to the Government of Russia if progress is not made on this front would shut down threat reduction and infectious disease programs vital to U.S. national security interests. The Administration looks forward to working with the Congress to find a mutually acceptable way to ensure Russia's cooperation in this arena.

• Kosovo Burdensharing. The Administration shares the Committee's goal of ensuring that our allies carry the lion's share of the burden of the costs of reconstruction and recovery in Kosovo. However, the Committee's formula making any U.S. obligations contingent on certification that U.S. contributions do not exceed 15 percent of total obligations and expenditures by all donors is problematic. This approach would cede U.S. sovereignty to foreign nations by handcuffing our contributions to their contributions and it would call U.S. credibility and commitments into question. We have been pressing our European allies vigorously on moving rapidly on their pledges of assistance, and our allies have responded. Making our assistance contingent upon the actions of the international community, however, would hinder our ability to influence events on the ground. We need to move quickly to construct democratic institutions, revive the economy, and reestablish public security, reducing the burden on our troops and the rest of the Kosovo Force (KFOR).

• Early Disbursement for Egypt. The Committee has not included language requested by the President to permit early disbursement of the planned FY 2001 Foreign Military Financing (FMF) outlays for Egypt. The proposed language responds to a House Appropriations Committee report, which calls on the Administration to develop mechanisms that will make our assistance to Egypt more flexible and effective, and a Senate resolution urging the Administration to provide Egypt access to an interest bearing account. The Administration developed a proposal that reflects concerns expressed by the Committee during last year's budget process and meets, we believe, the previously stated congressional objectives.

• Constitutional concerns. Several provisions included in the Senate Committee bill, including sections 514, 565(b), and 584(b)(1), purport to direct the vote of United States representatives to international financial bodies. Section 565(g)(3) also purports to infringe upon the President's authority over diplomatic negotiations. These provisions raise serious constitutional concerns regarding the responsibility of the President to formulate the position of the United States in international fora. As such these provisions will be construed as precatory.

Section 576 "Kyoto Protocol," which purports to prohibit implementation of the Kyoto Protocol is unnecessary, as the Administration has no intention of implementing the Protocol prior to ratification. To the extent that these provisions could be read to prevent the United States from negotiating with foreign governments, it would be inconsistent with the President's Constitutional authority.

Section 6101(a)(2), provides that "[t]he Secretary of State shall consult with internationally recognized human rights organizations regarding the Government of Colombia's progress in meeting conditions" relating to human rights. In order to avoid constitutional concerns regarding the President's sole negotiating authority we would not read this provision to mandate such consultations to the extent that the President determines that such consultations would interfere with his diplomatic initiatives.

Finally, in order to avoid intrusion into the President's negotiation power and his ability to maintain the confidentiality of sensitive diplomatic negotiations, we would not interpret sections 567 or 6104(a) as requiring the President to disclose either the contents of diplomatic communication or specific plans for particular negotiations in the future.

Funding Issues

As noted above, the Committee bill does not provide sufficient funding for a range of programs.

• International Debt Reduction. The Committee bill cuts the Administration's request of $262 million for debt reduction programs by $187 million, or 71 percent and, as discussed below, also does not fund the supplemental request. Funding at this low level would stall debt relief under the enhanced Heavily Indebted Poor Countries (HIPC) Initiative. In particular, the lack of sufficient resources, and authorization, to provide a U.S. contribution to the HIPC Trust Fund would mean that there would be insufficient resources to provide debt relief to many of the poorest reforming countries in Latin America and Africa, in part because other bilateral donors will base their future contributions to the HIPC Trust Fund on a substantial U.S. contribution. This provision is especially troubling in light of the strong, bipartisan action earlier this year by the Senate Foreign Relations Committee to authorize the full Administration request. Funding at this level would also significantly limit the ability of the United States to encourage countries to invest in their tropical forests through innovative debt treatment mechanisms under the Tropical Forest Conservation Act (TFCA). Furthermore, it does not provide the advance appropriations requested for multilateral and bilateral debt relief in FY 2002 and FY 2003, respectively.

• Nonproliferation, Anti-terrorism, Demining, and Related Programs . The Senate Committee bill cuts the Administration's request of $311.5 million by $96.5 million, or 31 percent. In particular, the Committee has cut $20 million from the $55 million request for the Korean Peninsula Energy Development Organization (KEDO), leaving insufficient funds to purchase necessary shipments of fuel oil, which we are required to provide under the 1995 Agreed Framework. The Committee's recommendation of $20 million for Science Centers in Russia, Ukraine, and Kazakhstan is $25 million, or 56 percent, below the Administration's request and $39 million less than the $59 million provided in FY 2000. This massive reduction would result in less support for scientists with expertise in weapons of mass production, thus increasing the risk they will work with rogue states. The Committee zeroes out the $38 million requested for a new anti-terrorism and security training center and imposes large reductions in Export Control Assistance, the Comprehensive Test Ban Treaty (CTBT) Preparatory Commission, the Terrorist Interdiction Program, and the important new small arms destruction program, all of which would severely hinder programs to help reduce the threat of proliferation and terrorism.

• Peacekeeping Operations. The bill cuts the Administration's request of $134 million by $49 million, or 37 percent, which would seriously jeopardize our peacekeeping efforts around the world, forcing dramatic cuts to programs such as the U.S. component of the civilian police contingent in East Timor, support for regional peacekeeping initiatives in Africa, and our efforts to train African militaries for peacekeeping operations. Such a reduction would additionally leave us without the means to pay our fair share of Organization for Security and Cooperation in Europe (OSCE) mission assessment for elections and governance programs directly supporting the peace processes in Bosnia and Kosovo.

• Multilateral Development Banks (MDBs). The bill cuts the Administration's request of $1.354 billion by $326 million, or 24 percent. This cut would result in an increase of $159 million, or 35 percent, in arrears -- to a total of over $600 million, continuing to reverse the progress made in the FY 1998 and FY 1999 appropriations towards meeting our past-due obligations to these institutions. The impact of lower funding and, in turn, additional arrears has implications for all the MDBs, and in some cases, threatens new operations in the near term. Of specific concern are the proposed cuts to the International Development Association (IDA) ($85.6 million, or 10 percent) and the Global Environment Facility (GEF) ($125.6 million, or 72 percent). These cuts, combined with significant reductions in overall MDB funding, would limit the institutions' ability to achieve U.S. priorities, such as well-targeted support for the poorest, and would undermine our ability to exercise leadership and leverage in these institutions.

• International Narcotics Control and Law Enforcement. The bill cuts the Administration's request of $312 million by $92 million, or 29 percent, which would reduce this funding to pre-1999 levels. This would force the State Department to scale back many small programs, such as Caribbean counter-drug initiatives, that had been expanded in accord with congressional direction and funding increases. Taken together with the fact that the bill does not provide the requested $256 million in Plan Colombia funds for FY 2001, this funding cut could represent a large step backward in America's ability to stop drugs at their source. At this critical time, it is important for the United States to maintain its worldwide effort to reduce the plague of drugs on our society.

• Assistance to the Independent States. The bill cuts the Administration's request of $830 million by $55 million, or seven percent. These funding reductions are exacerbated by earmarks that restrict the Administration's flexibility to respond to unforeseen needs. While many of the earmarks are for programs or levels that the Administration and the Committee both support, the combination of earmarks and lower-than-requested funding would hurt our ability to insure that scarce funds go where they will do the most good.

• Economic Support Fund (ESF). The bill cuts the Administration's request of $2.313 billion by $93 million, or four percent. When combined with the Middle East and various other earmarks, this would result in a 22-percent cut to other crucial foreign policy programs, including Indonesia and Nigeria, two of the four countries that the Secretary of State has identified as key transition democracies. In addition, such a cut would have an adverse impact upon regional programs, particularly in Africa, and upon human rights and democracy programs worldwide.

• U.S. Export-Import Bank. The bill cuts the Administration's request of $963 million for program resources by $195 million, or 20 percent, which would reduce the Export-Import Bank's ability to support U.S. exports by 17 percent ($2.6 billion) from the FY 2000 enacted level and by 20 percent ($3.2 billion) from the President's FY 2001 request. Lower export levels translate directly into lower employment opportunities for U.S. workers and lower revenues for U.S. companies. The requested level is necessary to help the Export-Import Bank pay for the higher cost of international lending caused by higher risk levels resulting from the international financial crisis and represents only a modest increase over the Bank's capacity for FY 2000. The Committee's mark, therefore, represents a de facto reduction in the Bank's capacity to support U.S. exports when compared to the FY 2000 enacted level.

• Peace Corps. The bill cuts the Administration's request of $275 million by $55 million, or 20 percent, which would force the Peace Corps to reduce the number of new volunteers by 1,250, effectively reducing the total number of incoming Peace Corps volunteers by 16 percent, to a level not seen since FY 1987. The Peace Corps would also likely be required to close up to 11 Peace Corps posts. A reduction of this magnitude is in stark contrast to the overwhelming bipartisan support shown for the Peace Corps program and would reverse progress toward the 10,000 volunteer level mandated by Congress.

• U.S. Agency for International Development (USAID). The bill cuts the Administration's request for development assistance and health programs of $2.124 billion by $172 million, or eight percent. Although in the aggregate these programs are increased above the FY 2000 operating year budget level, the large number of directives and earmarks proposed by the Committee for the Development Assistance account, including $100 million in funding for the basic education program -- heretofore appropriated under the Child Survival and Disease Programs account -- would effectively cut other discretionary Development Assistance by almost 19 percent compared to the current year. A cut of this magnitude would severely restrict USAID's ability to support a variety of programs aimed at helping poor countries develop economically, cope with environmental degradation, and support fragile democracies. For example, at the Committee's funding level, it would be impossible to fully fund the Administration's requests for increased assistance to preserve biodiversity in tropical forests and to promote clean energy technology without cutting deeply into these other activities.

While the Administration appreciates the Committee's increase for international family planning funding to no less than $425 million, we urge the Senate to provide the full request of $541 million, including $484 million to be budgeted from AID's Development Assistance accounts and $57 million requested from other accounts.

The Committee's decision to increase funding significantly for tuberculosis and malaria, among other things, would result in a 29-percent decrease in funds for other child survival and infectious disease programs compared to the current year. Such reductions would restrict appropriate responses to needs in child survival, other infectious diseases, and development of effective health systems in recipient countries. Although the Administration appreciates the Committee's increase in global HIV/AIDS funding, to $225 million, we urge the Senate to provide the full request of $244 million, thereby demonstrating strong bipartisan support for the fight against this deadly disease.

The bill cuts the Administration's request of $520 million for USAID Operating Expenses by $10 million, or two percent. Since much of the Agency's operating costs are fixed, including the cost of replacing USAID's computerized operating system in FY 2001, the proposed cut would force the Agency to delay planned replacement of financial and procurement system, and engage in yet another round of staff reductions.

Finally, the omission of transfer authority for USAID's Development Credit Program would impede the Agency's ability to mobilize local private capital for development purposes, including microenterprises in the countries in which it works. The proposed 50-percent cut in USAID's credit administrative expenses would likewise impede the Agency's ability to carry out newly implemented credit reforms and effectively oversee its current $14 billion portfolio and would be a further drain on USAID Operating Expenses.

• Inter-American Foundation (IAF). The bill would terminate funding for an agency that has effectively promoted U.S. development interests by fostering self-help poverty reduction programs and democratic practice at the grassroots level in Latin America and the Caribbean. The IAF has successfully addressed its management issues and set in motion a system to vet all grants with American Embassies to prevent any unintended funding of groups with views antithetical to peaceful, market-oriented, democratic development.

• International Organizations and Programs (IO&P). The bill cuts the Administration's request of $357 million by $16 million, or five percent. This would force sizable cuts of nearly 20 percent to unearmarked but important democracy and environmental programs such as the Organization of American States (OAS) Fund for Strengthening Democracy and Montreal Protocol Fund for the Protection of the Ozone Layer. The Administration appreciates the Committee's support for the Global Alliance for Vaccines Initiative (GAVI) (funded in the USAID Global Health account).

• African Development Foundation (ADF). The bill cuts the Administration's request of $16 million by $1.6 million, or 10 percent. While the Administration appreciates the Committee's efforts to support the ADF, the Committee's funding level of $14.4 million falls short of the amount necessary for the ADF to implement new HIV/AIDS prevention strategies in all ADF projects and launch a major program in Nigeria.

• Migration and Refugee Assistance (MRA). The bill cuts the Administration's request of $658 million by $43.2 million, or seven percent. This level would be insufficient to fund anticipated refugee admissions, humanitarian protection and assistance programs, and the administration of these programs at an acceptable level. In particular, this cut would have an adverse impact on the Up to Standards initiative, which is designed to bring refugee assistance programs in Africa up to a life sustaining level, and programs for Palestinian refugees administered by the United Nations Relief and Works Agency (UNRWA). The reduction would also have a severe impact on the refugee admissions program, requiring reductions of 5,000 to 10,000 admissions from the request level. We are also troubled by the congressional notification requirement for all U.S. contributions to the United Nations High Commissioner for Refugees (UNHCR), which could severely jeopardize the health and well-being of refugees and conflict victims by limiting our flexibility to respond to refugee situations in a timely manner.

• Trade and Development Agency (TDA). The bill cuts the Administration's request of $54 million by $8 million, or 15 percent. The Administration believes that the full request would enable TDA to continue its support in developing export opportunities. In recent years, the growing demand worldwide for TDA assistance has stretched its existing resources to conduct its programs effectively.

• Foreign Military Financing (FMF). The bill cuts the Administration's request of $3.538 billion by $19 million, or one percent. After taking into account funding levels for vital Middle East programs, the reduction is a 13-percent decrease in funding for the rest of the world. When combined with the Committee's $22 million in earmarks in the bill, this reduction would decrease our ability to strengthen capabilities and vital ties with the militaries of new NATO nations (Poland, Hungary, and the Czech Republic) and the nations of South-East Europe. This reduction would also jeopardize our support for the Philippines as they engage in efforts to ensure stability in the region, and hamper our efforts to support building the peacekeeping capabilities of African nations where peace is so fragile in so many places.

FY 2000 SUPPLEMENTAL APPROPRIATIONS CONTAINED IN THIS BILL

The Administration opposes the three-bill approach taken by the Senate regarding supplemental funding for critical domestic and foreign policy needs. Our specific concerns with these portions of the supplemental legislation attached to the Military Construction and Foreign Operations bills are described below. We want to work with the Congress to ensure that supplemental funding is enacted quickly and that urgent needs are met.

Kosovo and Southeast Europe

The Administration strongly opposes the lack of funding for any of the requests relating to vital U.S. interests in the Balkan region including: $107 million requested for critical United Nations (UN) peacekeeping operations ($91 million for Kosovo, $16 million for East Timor); $195 million in SEED funds, of which $93 million would contribute to stabilizing Kosovo; and, $285 million for the security and operational needs of Americans carrying out these programs. The $35 million in requested funding for the Foreign Military Financing Program and the International Military Education and Training, both of which were supported by the House supplemental, will enhance our efforts and ability to assist military reform and reorientation in important nations in the Baltic region and southern Europe.

Failure to provide this funding would sabotage U.S. efforts to gain greater burden sharing by our European allies on economic reconstruction, and put at risk the eventual, successful withdrawal of more than 10,000 U.S. troops. SEED programs constitute the major component of our "exit strategy." Not to provide these funds would be penny-wise and pound-foolish and would undercut our leverage in the multilateral effort to restore peace and democracy in the region. It would also prevent our efforts to carry out the ongoing stabilization process and endanger hard-won progress that has been made to date. Furthermore, continued delay in providing peacekeeping funds would only cause us to accumulate new arrears to the UN and undercut our efforts to reform the UN and reduce our assessment rates.

Heavily Indebted Poor Countries (HIPC) Debt Forgiveness Initiative

The bill fails to provide any of the fully offset $210 million supplemental that the President has requested for a contribution to the HIPC Trust Fund, which helps to finance multilateral participation in the Initiative. Without a significant U.S. contribution to the Trust Fund in FY 2000, other donors are unlikely to make additional contributions, and countries that would otherwise be eligible for HIPC debt reduction in FY 2000 will not receive it. In particular, the lack of a U.S. contribution is likely to prevent Bolivia and other eligible Latin American countries from receiving HIPC debt treatment. We urge the Senate in the strongest terms to reconsider its decision not to help reform-minded developing countries focus their internal resources on health, education, and other social sector investments that will reduce poverty for millions of the world's poorest people.

Plan Colombia

The Administration commends the Committee's support for the governments of Colombia and other countries in the region in their fight against drug traffickers and would oppose efforts to reduce this funding. However, the Administration has a number of concerns with the Committee's proposed treatment of funding for Plan Colombia.

Plan Colombia is a comprehensive approach to combating drug production in the region and requires the sustained effort delineated in the Administration's proposal. Under that proposal, funding was requested through both Defense and State Department accounts. The Committee splits this comprehensive approach by addressing needs in the Military Construction bill and the Foreign Operations appropriations bill. This bifurcation is not a sensible way to address an integrated plan.

Setting aside that basic issue, the Administration appreciates the Committee's consideration of the funding requests, particularly in the Military Construction bill for the construction of essential Forward Operating Locations in Ecuador, Curacao, and Aruba. However, we have serious concerns with several funding issues and problematic provisions in both the Military Construction bill and the Foreign Operations bill. The problematic provisions in the Foreign Operations bill include the absence of FY 2001 funding, restrictions on Colombia funding, many cumbersome reporting requirements, and the substitution of Huey II for Blackhawk helicopters, which would greatly hinder the implementation of the Plan.

In particular, the Administration strongly opposes the limitations in the Foreign Operations bill on support for Plan Colombia. This provision, which would forbid the use of funds not appropriated in the FY 2001 Military Construction or Foreign Operations appropriations bills from being used to support Plan Colombia, absent a Presidential request and congressional approval, is very onerous. This language could halt all ongoing counter-drug programs, air traffic surveillance activities, routine military training, intelligence collection activities, basic human needs and development work, agricultural development, and U.S. Customs programs linked to the Andean region, including those funded from appropriations already enacted into law. This amendment also places an extremely restrictive cap on the number of personnel who can operate in Colombia, leaving far too little flexibility to carry out essential training, development programs, and Plan Colombia oversight as needed.

The substitution of the 60 Huey II helicopters for the 30 Blackhawk helicopters is also objectionable. The Huey II helicopters are significantly less capable than Blackhawks, with slower speeds, smaller capacity, and less range. In addition, it would take twice as many Huey IIs as Blackhawks to fulfill the same mission, which means twice as many helicopter pilots would need to be trained, and twice the amount of infrastructure, such as hangar space, would be required.

Mozambique Relief and Reconstruction

The Administration has requested $200 million in emergency funding for Mozambique and the region. The Foreign Operations bill provides $25 million, which is utterly inadequate to meet the massive reconstruction needs in Mozambique and other affected countries. We urge the Senate to provide the additional emergency supplemental resources to help Mozambique and the other countries of the region continue their democratic and economic progress.

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