This Statement of Administration Policy provides the Administration's
views on H.R. 2159, the Foreign Operations, Export Financing, and Related
Programs Appropriations Bill, FY 1998, as reported by the House
While the Administration is deeply concerned about funding reductions
made by the Committee, we do not oppose House passage of the Committee
bill. The Administration would strongly oppose any amendments that would
further reduce the funding provided or that would restrict the President in
carrying out U.S. foreign policy.
The Administration is deeply concerned about the insufficient overall
funding level provided by the Committee bill. Assuming funding at
requested levels for International Affairs (function 150) programs outside
the jurisdiction of the Foreign Operations Subcommittee, the bill is more
than $700 million below the amount that is consistent with the total for
function 150 programs provided by the Bipartisan Budget Agreement
(excluding arrears payments). This reduction would seriously undercut U.S.
leadership abroad in achieving foreign policy objectives that will
significantly benefit the American people.
The Bipartisan Budget Agreement specifically details agreed-upon
levels of spending for function 150, and this legislation clearly fails to
comply with the agreement. The overall Committee level is unacceptable to
the Administration and cannot be made acceptable within the current House
602(b) allocation. While the Administration is not actively opposing
passage of this bill by the House, we will strongly urge that funding be
restored to the budget request level in conference. Should the conference
version of this bill contain the reduction proposed by the Committee, the
Secretary of State, the Secretary of the Treasury, and the National
Security Advisor would recommend that the President veto the bill.
The Committee's $598 million reduction to the Administration's $1.5
billion request for multilateral development banks (MDBs) would cause a
severe disruption in U.S. participation in several institutions. These
institutions are playing a vital role in assisting the growth of the
world's poorest countries, particularly in Africa, and addressing serious
international environmental problems. In cutting $284 million from
contributions scheduled to be made to three institutions in FY 1998, the
Committee bill would add to the $862 million in arrears the United States
now owes to the MDBs. Also, the bill fails to provide the requested $315
million to pay a portion of the arrears even though the Bipartisan Budget
Agreement would permit the Committee's 602(b) level for the Foreign
Operations Subcommittee to be increased by that amount. By deepening the
arrears crisis, these actions would undermine U.S. credibility, policy
influence, and international economic leadership.
Multilateral Bank Funding for the Poorest Countries. More than
two-thirds of the total MDB reduction is accounted for by cuts in the
scheduled FY 1998 payment to the International Development Association
(IDA) and the failure to provide the proposed arrears payment to IDA.
IDA's lending will support the adoption of market-oriented economic reforms
to revitalize the economies of many countries in Africa and elsewhere. The
reductions could cause a collapse in funding arrangements agreed upon with
other donor countries covering the next two years, and they would
completely undercut progress made in allowing U.S. firms to participate in
projects financed by a special IDA fund, an action urged by the Congress.
The poorest countries of Africa and Asia would also be adversely affected
by the 50 percent cut in funding for the African Development Fund and the
denial of arrears payments to the Asian Development Fund. Major reforms in
the management of the African fund, including new senior managers and a 20
percent staff reduction, call for a clear show of U.S. support.
Global Environment Facility (GEF). The Administration's $100
million request for the Global Environment Facility has been cut by
two-thirds. The GEF supports efforts of developing countries in areas such
as biodiversity, rainforest preservation, and the reduction of ocean
pollution and greenhouse gas emissions. At the upcoming Kyoto conference,
U.S. efforts to encourage an assumption of greater responsibility to reduce
emissions by these developing countries would be threatened by this action.
New Arrangements to Borrow (NAB). The bill contains no
authorization for the New Arrangements to Borrow, a set of emergency credit
lines for use by the IMF in the event of serious threats to global
financial stability. The NAB was conceived in response to calls from many
quarters, including key voices in Congress, for greater multilateral
resources to combat systematic shocks after the 1995 Mexico peso crisis.
The NAB is a vital tool for the safeguarding of international financial
stability, and it will not be established without U.S. participation.
Willingness to support the NAB represents a clear test of U.S. financial
and political leadership in the post-Cold War world. The requested U.S.
participation of $3.5 billion has no outlay impact, and, therefore, no
impact on the deficit. Moreover, the Bipartisan Budget Agreement provides
for the necessary adjustments to budget authority caps for the NAB to
accomplish this important action.
Bilateral Economic Assistance
Assistance for the New Independent States of the Former Soviet
Union. The Committee's mark of $625 million for the New Independent
States (NIS), nearly one-third below the request, would cripple the
President's Partnership for Freedom initiative. The initiative is intended
to promote democratic and market reform at the regional and grassroots
level, where it has the greatest impact. Cutting aid in this fashion
would, in particular, damage our national interest in supporting economic
reform in Russia at a time when reform is moving ahead. The initiative
would also make available increased resources for two key areas, Central
Asia and the Caucasus, that are of great geopolitical and commercial
importance to the United States. For all NIS countries, the initiative
supports economic growth and private enterprise, building on the
macroeconomic progress these countries have achieved.
Economic Support Fund (ESF). The Administration is concerned
that the Committee mark reduces ESF by $78 million below the President's
request. The Committee has recommended that Egypt and Israel receive full
funding and has established a separate ESF account for Ireland. Thus, $385
million would remain available to meet requests totaling $463 million.
Important country and regional programs such as the Middle East Development
Bank, Cyprus, Haiti, Jordan, Lebanon, and the Human Rights and Democracy
Fund would have to be reduced, thereby undermining U.S. economic and
political foreign policy interests. In addition, the Committee bill would
limit ESF to Turkey to a level below the President's request.
Export and Investment Assistance
Overseas Private Investment Corporation (OPIC). The
Administration strongly supports the reauthorization of the Overseas
Private Investment Corporation and the full appropriations request. We
recognize that authorization action is pending, which led the Committee not
to provide the requested $60 million for OPIC's credit programs. We look
forward to working with the Appropriations and Authorization Committees to
address each Committee's concerns.
In addition, the bill cuts requested amounts for other important
programs: the Trade and Development Agency, debt restructuring, AID
operating expenses, foreign military financing loans, peacekeeping
operations, and voluntary contributions to international organizations and
programs. The bill also does not include the President's request to allow
up to $10 million in available development assistance funds for a new
development credit authority, nor the requested $7 million for a
contribution to the Enhanced Structural Adjustment Facility of the
International Monetary Fund.
Support for Needed Flexibility. While deeply concerned with
the funding reduction, the Administration strongly commends the Committee
for continuing its policy of great restraint in imposing funding earmarks.
The Committee's recognition that flexibility is needed for the conduct of
effective diplomacy in situations of rapid political and economic change is
most welcome. Beyond limiting earmarks, the Committee has also generally
avoided imposing foreign policy strictures that would micro-manage
diplomatic activity. This is another commendable aspect of the bill.
Three exceptions to this trend must be noted, however.
Restrictions on Aid to Russia. The Administration strongly
opposes restrictions on assistance to Russia. The vast majority of our aid
to that country does not go to its government, but instead supports
reformers at the grassroots level and is critical to Russia's democratic
transformation. It would be a mistake to suspend this aid, which is so
clearly in the U.S. national interest. Meanwhile, the limited technical
assistance we provide to the Russian Government is targeted to key areas,
such as tax reform, that are of great concern to U.S. investors in Russia.
Suspension of these programs would undercut our efforts to support the
American business community there.
Restrictions on Aid to Ukraine. The Administration recognizes
and shares the serious concerns Congress has about Ukraine's lack of
progress in developing the necessary economic and legal institutions
required to enable U.S. investors to overcome the serious problems they
confront and the pervasive corruption that exists there. We have
repeatedly raised these issues with senior Ukrainian government officials
and have suspended some aid to the Ukraine due to lack of progress in
implementing reforms. However, the Administration also opposes the
restrictions on assistance to Ukraine contained in the bill. Ukraine is a
country of great geopolitical importance whose continued independence the
U.S. strongly supports. New restrictions on aid to Ukraine would remove
the flexibility the Administration needs to respond quickly when conditions
Restrictions on Aid to Haiti. The Administration has strongly
encouraged economic and public sector reform in Haiti. However, the
Administration opposes new restrictions on assistance, which condition its
provision on privatization of three public enterprises. Such an approach
puts at risk American interests in Haiti by conditioning assistance on a
process that neither the Haitian Government nor the U.S. entirely control.
The Administration will work to eliminate these three restrictive
provisions in subsequent stages of the appropriations process.
Infringement on Executive Authority. Several sections of the
bill would require the United States to use its "voice and vote" to take
particular positions in international organizations. The Constitution,
however, commits to the President the responsibility for formulating the
position of the United States in international fora. Therefore, these
sections would, if enacted, be construed as advisory.