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43–104 CC






MARCH 13, 1997

Printed for the use of the Committee on Internationnnnal Relations


BENJAMIN A. GILMAN, New York, Chairman
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HENRY J. HYDE, Illinois
CASS BALLENGER, North Carolina
EDWARD R. ROYCE, California
JAY KIM, California
TOM CAMPBELL, California
JON FOX, Pennsylvania
LINDSEY GRAHAM, South Carolina
ROY BLUNT, Missouri
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SAM GEJDENSON, Connecticut
TOM LANTOS, California
PAT DANNER, Missouri
WALTER CAPPS, California
BRAD SHERMAN, California
BOB CLEMENT, Tennessee

RICHARD J. GARON, Chief of Staff
MICHAEL H. VAN DUSEN, Democratic Chief of Staff
MARK KIRK, Counsel
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ALLISON KIERNAN, Staff Associate



    Mr. Howrad Kohr, Executive Director, American Israel Public Affairs Commission
    Mr. Andrew Manatos, President, National Coordinated Effort of Hellenes
    Father Sean McManus, President, Irish National Caucus, Inc.
    Mr. C. Payne Lucas, President, Africare
    Mr. Sy Taubenblatt, Senior Executive Representative, Bechtel Corp.
    Mr. Andrew Natsios, Exercutive Director, Relief and Development, World Vision
    Ms. Anna Stout, Executive Vice President, American League for Exports and Security Assistance
    Mr. Ted Carpenter, Vice President, CATO

Prepared statements:
Mr. Howard Kohr
Mr. Andrew Manatos
Father Sean McManus
Mr. C. Payne Lucas
Mr. Sy Taubenblatt
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Mr. Andrew Natsios
Chart of Federal awards received by World Vision
Ms. Anna Stout
Mr. Ted Carpenter
The President of the American-Turkish Council
Mr. Elliott Hall, Vice President (Washington staff) of Government Relations, Ford Motor Company
Letter of Mr. Tom Irvine to Mr. Elliott Hall, also of Ford Motor Company in Belfast, Ireland
Letter of Mr. Tom Irvine of Ford Motor Company in Belfast, Ireland to Chairman Benjamin A. Gilman
Mr. John Stovall, National Center for Food and Agricultural Policy
Mr. Christopher Hekimian, Government Affairs Director, Armenian National Committee of America
The Honorable Michael D. Barnes, former Member of Congress, on behalf of the U.S. Committee for UNDP
Mr. Harold Matteson, National Association of State Universities and Land-Grant Colleges
Mr. Eugene Rossides, on behalf of the American Hellenic Institute Public Affairs Committee Inc., The Hellenic American National Council, the Cyprus Federation of America Inc., The Pan Laconian Federation of U.S.S. and Canada, the Pan Cretan Association of America, and the Pan Karpathian Educational Progressive Association
Additional material submitted for the record:
Photos from the International Fund for Ireland
Explanation of photos from the International Fund for Ireland


House of Representatives,
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Committee on International Relations,
Washington, DC.
    The Committee met, pursuant to notice, at 9:37 a.m. in room 2172, Rayburn House Office Building, Washington, DC, Hon. Benjamin A. Gilman (chairman of the Committee) presiding.
    Chairman GILMAN. The Committee will come to order. Today we want to welcome one of the most distinguished panels of experts on the U.S. Foreign Assistance Program that this Committee has assembled in recent years.
    Ladies and gentlemen, while we enjoy a good working relationship with the Administration at times, and are happy to give the State Department and AID opportunities to defend their budget requests, it is our distinct pleasure to welcome you here today representing the private sector.
    You and your organizations represent the last and key part of the international relations triangle, formed by the Administration, by the Congress and the American people. No other nation in the world, certainly no other great power, gives such a strong role to private organizations and civic associations who organize themselves to strengthen our awareness and deepen our commitment to issues overseas. That has caused some problems for the bureaucrats at the State Department...
    But in the end, the American public's involvement and its support for our foreign policy brings new levels of idealism and American values to what otherwise would be a pure power-politics view of the world.
    Some of you here today are strong supporters of the current foreign assistance program. Others are less supportive of some spending in some of those programs. Nevertheless, I believe we are all united by one common idea; America's international leadership will be the key to making the 21st century a peaceful and a prosperous one.
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    Our Committee is on the verge of marking up legislation that will govern our foreign policy to the beginning of the 21st century and we are proceeding in a bipartisan manner. Earlier this week, the Administration formally requested a State Department authorization bill that I am certain Mr. Smith and Mr. Lantos will use to guide them in their work.
    Yesterday, the Administration formally provided comments on our draft foreign assistance bill and I understand few, if any, major objections were noted. Our staff informs us that nearly all of the concerns raised will be dealt with in the next draft of the bill. A few weeks ago, we began this process with testimony from our Secretary of State, Madeleine Albright. The testimony you are about to give will form the last stage of the consideration of the upcoming legislation before members of this Committee will be able to sit down and craft the final Chairman's mark.
    With some hard work ahead of us, we plan to present this mark of a State Department and Foreign Assistance bill, including U.N. arrears and reform to the Full Committee in early April.
    With that, I would like to recognize for an opening statement, any of our members. Mr. Rohrabacher.
    Mr. ROHRABACHER. Mr. Chairman, I would just like to thank you on behalf of the members of this Committee for your diligence in this very important issue. All of us being in the majority have three committee assignments or chairmanships that get in the way and you have been working so hard on this particular issue that I would just like to thank you in front of those assembled for the hard work that you are doing on this and that is all I would like to say, to let you know that this chairman is doing more work and taking more responsibility. I have been here 9 years and he is probably bearing a bigger share of the burden than any chairman I have seen. So thank you very much.
    Chairman GILMAN. Thank you, Mr. Rohrabacher. Mr. Bereuter.
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    Mr. BEREUTER. Thank you very much. I echo my colleague's compliments to you and I look forward to the testimony of the witnesses.
    Chairman GILMAN. Thank you. Any other gentlemen seeking recognition? If not, the gentlemen of our first panel, I will introduce you each in turn, but ask you to quickly summarize your statement if you would to try to keep it within a 5-minute period since we have so many panelists and incidentally we will be called to the floor on an important measure involving Mexico decertification during the course of the morning.
    Of course, your full statement will be included in the record. At the conclusion of our first panel's testimony, we will open for questions from members of the Committee. We will then move on to our second panel. I will note that we moved this hearing up to 9:30 in order to provide as much time as possible before our Mexican resolution is scheduled to come to the floor. Therefore, I would ask our members to also be brief.
    Our first witness is Howard Kohr, Executive Director of the American Israel Public Affairs Committee. I will note that Mr. Kohr's father escaped from the death camp at Dachau and immigrated to America. Mr. Kohr, you served your nation in the Pentagon before working for the National Jewish Coalition, the American Jewish Committee and Service now at the helm of AIPAC, a very important organization.
    I understand that the old Chinese curse, ''May you live in interesting times,'' applies certainly to Israel, to AIPAC and the current state of the Middle East peace process. We welcome you to our Committee and we welcome your testimony. You may proceed.
    Mr. KOHR. Thank you, Mr. Chairman. It is a privilege to be here before the Committee this morning. I wanted to take the time to introduce two of my colleagues, Brad Gordon and Ester Kurz, who are with me today.
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    I also wanted at the outset to express appreciation for the full funding of earmarked funds for Israel that are contained in your draft bill. We believe that this is a very good document that will provide a basis for your consideration as the process moves forward.
    We have always been supportive of the authorization process and we look forward to working with you in the coming weeks and months as the process moves ahead.
    This Committee has always understood the critical importance of a strong U.S.-Israel relationship for promoting U.S. interests in the Middle East, for Israel's survival and for Israel's ability and willingness to move ahead in the peace process.
    This is a critical time, and as you mentioned, Mr. Chairman, in the Middle East it is always an interesting time, but it is also a critical time for Israel, for American interests in the region and for the peace process.
    Once again, Israel will need the full support of this Committee as it has so often in the past as it continues to move forward in the region.
    At home, Israel is trying to change its economy in some very dramatic ways. It is trying to liberalize its economy, open it up to more free market enterprise and private investment. This is a tremendous challenge that the country is undertaking.
    At the same time, it continues to face threats to its security from terrorism, from the growing conventional weapons threat that is in the region and most ominously the spread of weapons of mass destruction.
    It is at this point in particular I want to take note of the fact there appears to be information that the Russians may be providing missile technology, to the Iranians. We hope that this is an issue that will gather your attention as well as that of the Administration to make sure that as we try to persuade the Russians to move forward with NATO expansion, that the issue of the transfer of technology, in particular missile technology, not be lost. Both of these issues need to be addressed.
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    In the peace process, the Government of Israel has demonstrated its commitment to moving forward along the path of its predecessors in the Oslo peace process. It has redeployed in Hebron which is a very significant step. Hebron is the second most important city to Jews, coming only after Jerusalem.
    It has released Palestinian terrorists. It has eased the closure that has existed in the territories and has been willing to redeploy from another 50 villages representing 200,000 people, an area that is three times the size of what had previously been under the control of the Palestinians. Now more than 90 percent of the Palestinian population will live under the authority of the Palestinian authority. All of this was done at great political risk to the Prime Minister and his governing coalition.
    Therefore, it has been surprising that the reaction from the Arab States and the Palestinians has been so dismissive and counterproductive. In particular, it has been troubling to see that Chairman Arafat has called for an international conference this weekend that excludes the Israelis and includes countries that the United States has expressly been trying to keep out of the process.
    The sole purpose of this conference, we believe, is to isolate and to pressure Israel into making further concessions in the peace process. This is not helpful to the peace process and we deeply regret that the United States has decided to attend this conference.
    It is particularly troubling from an administration that has been so supportive of Israel and the peace process and has understood that the central principle of moving forward in the peace process is direct negotiations between the parties, and it is that principle which we must get back to again if there is to be continued progress.
    Once again, Mr. Chairman, I want to thank you and members of this Committee for the tremendous leadership you have provided on behalf of Israel, Israel's security, U.S. interests and the peace process. We are going to need this leadership in the coming months and years as the difficult issues and the final status talks between Israel and her neighbors takes place. Thank you, very much.
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    [The prepared statement of Mr. Kohr appears in the appendix.]

    Chairman GILMAN. Thank you, Mr. Kohr. And I just would like to note that a number of us have joined together with the Speaker in objecting to the forthcoming appearance by our representative at the new Arab summit meeting. And we want you to know that we are certainly sympathetic to your views with regard to that.
    Also, I think our Committee joins with me in expressing our deep sorrow with regard to the loss of the Israeli school children at the Israeli-Jordan border where a Jordanian soldier opened fire. Apparently, he was mentally ill. At least the Jordanian Government has signified that. And we join in expressing our condolences to the Government of Israel.
    Our next witness is Andrew Manatos, president of the National Coordinated Effort of Helenes. We welcome Andy Manatos. Before joining his firm and opening up his firm of Manatos and Manatos, Andy served his nation as a high-level official in the Commerce Department. And like Mr. Kohr, Andy has worked closely with many members of our Committee and has helped raise our consciousness over issues in the Eastern Mediterranean, the illegal occupation of Cyprus and the need to improve relations with our key allies in Athens, among others.
    We now face challenges on the other side of Greece along its borders with Albania with some very bad news coming out of that area in the last couple of days.
    Welcome to our Committee, Mr. Manatos, and you may begin your testimony.
    Mr. MANATOS. Thank you, Mr. Chairman. I appreciate the opportunity to testify before you on behalf of a number of individuals and organizations across the United States.
    With respect to the specific provisions in this bill, we are pleased that President Clinton again requested the 10-to-7 ratio of military aid to Turkey and Greece, the $15 million for Cyprus, and we would hope that the Committee would maintain those, particularly the $15-million earmark. Aggressive use of that aid and the promise of far more aggressive use of that aid has us very concerned.
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    We note that the Committee in Fiscal Year 1996 and 1997 ended budget authority for military aid for Turkey and Greece and we would encourage the same to be done this year. Sending arms into that area only increases tensions and instability.
    We would also hope to see some legislative language on the endangered Ecumenical Patriarchate in Istanbul and the theological school at Halki.
    Mr. Chairman and Committee members, this year has been a very disturbing year for a number of Americans who follow issues in the eastern Mediterranean. Let me just list a few of the incidents that have occurred beginning in June 1995 when the Parliament of Turkey authorized a resolution authorizing war against Greece.
    The Prime Minister as you know threatened war against Greece. The KC135Rs that we provided to Turkey for use in the Eastern area were used instead against Greece. Turkey invaded the islet of Imea and it was the intervention of President of the United States and his Cabinet which stopped that invasion of the populated islet and the Turks then did occupy temporarily the unpopulated islet. They have claimed sovereignty over 1,000 Greek islets. They even went to the EU and petitioned the EU not to help its members defend their borders.
    And then as you know in August 1996, unfortunately, they paid to have 3,000 members of the Grey Wolves organization, the organization that attempted to assassinate the Pope, came to Cyprus, savagely beat to death a 24-year-old unarmed demonstrator and a few days later shot to death his unarmed cousin. Tansu Ciller flew to Cyprus endorsing these activities. Soon thereafter a 58-year-old man simply looking for snails was also executed.
    Just as an example of this very frightening increase in this aggression the last year, in 1995, Turkey overflew Greek territory with American planes illegally 73 times. In 1996, they overflew 538 times.
    And, Mr. Chairman, you should know that on January 21st, the Prime Minister of Turkey joined Turkey's President, Turkey's Foreign Minister and Turkey's Defense Minister saying there will be war. There will be a Turkish attack on Cyprus within the next 16 months.
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    We in the Greek-American community believe it is time for the world and the United States to come to the aid of Greece. Let me remind the Committee that Greece is one of only four nations in the entire world, beyond the British Empire, who has fought on the side of the United States in every war this century. One out of nine Greeks died in World War II giving their lives.
    And during the holocaust, the Greeks in Greece distinguished themselves. The Orthodox Archbishop publicly defied and challenged the Nazis. Many people were rescued. And unlike most countries, even though Greece was starving and devastated, Jewish properties were held, maintained for the Jewish community. And now it is time for the civilized world to come to the assistance of Greece.
    Mr. Chairman, I could not have said it better than you said earlier about the role of this Committee in our country's public policy. And on the Cyprus settlement this year, 1997 and 1998, this Committee can play an incredibly important role and it is essential that you do.
    Turkish Cypriots and Greek Cypriots can live together. These accession talks, as Cyprus becomes part of EU, are going to make a settlement on Cyprus nearly a necessity. Turkey's threat of a coming war makes it a necessity.
    But to make the point that Greek Cypriots and Turkish Cypriots lived peacefully for thousands of years until the 1950's when the British pitted one community against the other, thousands lived together in London peacefully.
    And I wanted to demonstrate in closing my testimony, Mr. Chairman, with a personal example for the community. And if I could ask a gentleman in the first row to please stand, I would like to tell you just a little bit about him.
    His name is Costa Nicolau. He and his wife, Maria, live in this area. Costa's brother was taken alive with over 1,000 Greek Cypriots by the Turks at the time of the invasion 22 years ago. He is among the missing. His wife's father was killed by Turkish Cypriots. We are looking forward to the legislation on the missing to get those missing returned to their loved ones. We are looking forward to that happening.
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    But I think it is very important that Costa and his wife, Maria, both stand by this statement, that although these things happen they say that they, and other Greek Cypriots by the way say the same thing, that they and Turkish Cypriots can live together again with neither having anything to fear from the other.
    Thank you, Mr. Chairman.
    [The prepared statement of Mr. Manatos appears in the appendix.]

    Chairman GILMAN. Thank you, Mr. Manatos. We welcome Costa to our Committee and appreciate your comments, Mr. Manatos, in relation to the hope of bringing all parties together.
    And speaking of bringing all parties together, I would like to introduce our next panelist, Father Sean McManus, president of the Irish National Caucus. I do not think any man has done more to raise the level of our Congressional involvement in the Irish peace process of bringing parties together than Father Sean.
    Father Sean was born in County Fermanagh in Northern Ireland. He came to our nation and founded the Irish National Caucus located right here on Capitol Hill to help move the peace process forward and try to advance other important goals, especially the MacBride Fair Employment Principles to make certain there would be no discrimination in employment in Ireland.
    Father Sean, I see from your written statement on Ford Motor and other matters, that there is much work that needs to be done. We welcome you, Father Sean, and you may begin your testimony.
    Fr. MCMANUS. Thank you, Mr. Chairman. I appreciate the opportunity to testify before this Committee. My testimony deals with how U.S. foreign policy and U.S. assistance can impact Northern Ireland. I am going to make a 5-minute summary of my statement. I request that my prepared statement be entered into the hearing record.
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    Chairman GILMAN. Without objection.
    Fr. MCMANUS. The very thing the U.S. Congress must realize about Northern Ireland is that it is a sectarian State in which anti-Catholic discrimination is systematic, endemic and institutionalized. That is the basic reality of Northern Ireland.
    If the United States ignores that central truth about Northern Ireland, then the United States could find itself subsidizing anti-Catholic discrimination when it gives assistance to Northern Ireland if there are no special conditions and special principles attached.
    By all major social and economic indicators, Catholics are significantly worse off than Protestants in Northern Ireland. And this is particularly true when it comes to employment. According to the Fair Employment Commission of Northern Ireland, Catholic males are more than twice as likely to be unemployed as Protestant males, 2.2 to 1, and for females the ratio is 1.5 to 1.
    Now, over 20 years ago, the ratio of Catholic male unemployment to Protestant male unemployment was 2.5 to 1 and the female ratio was 1.8 to 1. So you see in the past 20 years there has been no significant change in the unemployment differential. And this we feel is striking proof that the much vaunted British Fair Employment laws are not effective. I want to give the Committee two quick examples of ongoing anti-Catholic discrimination in Northern Ireland.
    The first relates to the famous Ford Motor Company. Ford has a long record of anti-Catholic discrimination in Northern Ireland. Its bad record is particularly offensive because of the area in which it is located, West Belfast, which is 80-percent Catholic. And just last June, the Fair Employment Tribunal for the second time found Ford Motors in Belfast guilty of anti-Catholic discrimination and awarded the victim the highest-ever award given by the Fair Employment Commission, $62,000.
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    The claimant's barrister, the man who was representing the victim, said Ford was ''guilty of staggering deceit of proportions that I doubt has ever been seen on paper in any case before this tribunal.''
    The second example is a case of sectarian harassment and it is a particularly disturbing one because of the circumstances. A Catholic woman working for the Agricultural Department was the victim of sectarian harassment by the private secretary of the British Minister for Fair Employment, Baroness Denton. The harassment incident actually took place in the private office of the Baroness and the victim in this case was awarded $15,500.
    But then the victim herself was transferred upon the personal suggestion of Baroness Denton, in clear violation of the Fair Employment guidelines that state that if anyone is to be moved, then it should be the culprit and not the victim.
    At first Baroness Denton denied she was involved in the transfer, but then the Irish News, the local paper in Belfast, produced confidential documents proving that the Baroness was indeed involved. And the reason, Mr. Chairman, this is so terribly serious, is that Baroness Denton is the British Minister responsible for implementing Fair Employment laws in Northern Ireland.
    To say the least, this terrible episode does not instill confidence that the British Government is committed to Fair Employment laws in Northern Ireland. Irish Americans will now see that the Denton case is the best proof of the need for the MacBride Principles. Baroness Denton has proved our point.
    Now, Mr. Chairman, because of all of this, there has to be, therefore, some way for the United States to assist Northern Ireland, and we believe that assistance is very important, but there has to be some way to do this without subsidizing anti-Catholic discrimination. And that is why the Irish National Caucus in November, 1984 initiated and launched the MacBride Principles to be a code of conduct for U.S. aid to, and investment in, Northern Ireland.
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    I was very proud when this Committee last May voted by a vote of 32 to 8 to attach the MacBride Principles to the International Fund for Ireland, despite, I might add, opposition from the Administration. I sincerely hope that this time the Administration will not oppose the linking of the MacBride Principles to the International Fund. That linkage ensures that hard-earned taxpayer money will not be used to subsidize anti-Catholic discrimination or maintain the unsatisfactory status quo in Northern Ireland.
    Mr. Chairman, over the years, there has been a lot of concern that the U.S. contribution to the International Fund for Ireland was not being used properly. But in recent years under your leadership, Mr. Chairman, there has been a definite improvement.
    The International Fund for Ireland is now increasingly targeting areas and people of greater need. But there is still an urgent need to attach the MacBride Principles to the International Fund for Ireland. It is your way of assuring that the United States will not subsidize anti-Catholic discrimination in Northern Ireland.
    Thank you. And I wish all of you a happy St. Patrick's Day. Thank you.
    [The prepared statement of Fr. McManus appears in the appendix.]

    Chairman GILMAN. Thank you, Father Sean. And with that greeting, I am sure that we will not neglect those problems. Our next witness is C. Payne Lucas, president of Africare. C. Payne began his career in service to our nation in the Peace Corps based in Togo, West Africa over 34 years ago, and he does not quite look that old.
    Since then, C. Payne has built a wealth of experience in Africa, including the Presidential Hunger Award for outstanding achievement from President Reagan. C. Payne now serves at the helm of Africare, one of the premier organizations fostering development and closer ties between our nation and Africa.
    Some 15 years ago, C. Payne Lucas, the picture of Africa was not bright, with many countries in decline. The record since the late 1970's has been improving with some notable countries becoming stars of the development story in recent years. Welcome and we look forward to your testimony, C. Payne Lucas.
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    Mr. LUCAS. Thank you, Mr. Chairman for this opportunity to discuss Africa's place in U.S. foreign policy. Having just returned this week from 5 weeks in several West African nations, including Senegal, Mali, Guinea and Mauritania, I am anxious to share with you my renewed optimism that Africa is on the right track and that America support for reform and development in Africa remains crucial to this process.
    As you know, I have been working in Africa in the African arena for the past 36 years. I witnessed the final days of the colonial era when President Silvanis Olympia of Togo was assassinated and thrown over the wall of the American Embassy in Lomé the heady first days of independence, economic decline and disillusion of the 1980's, and now happily a resurgent Africa which is showing genuine signs of solid economic growth and political maturation.
    In 1985, I wrote in the Washington Post that Africa would rise above the economic dependency and political disarray that characterized much of the continent at that time. I believe events are demonstrating that my faith was not misplaced. African economies are growing on an average at 5 percent. More working democracies are taking root. Population growth is moderating. And in spite of continued conflict in several countries, there is greater peace and stability in most sections of Africa.
    Africans are largely responsible for making these things happen. But they know they cannot do it alone. They have understood since the dark days of the slave trade that they are locked into a larger international community. They know that no nation or people can isolate themselves from the flow of international forces. They understand this better perhaps than many Americans do.
    We need a strong, democratic and healthy Africa. Otherwise, we risk creating a political vacuum, an economic sinkhole and an environmental catastrophe which would ultimately affect the quality of life throughout the planet.
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    We need an economically viable Africa with which we can trade and in which we can invest. When I last checked, American exports to Africa exceeded those to the former Soviet Union. More than 80,000 American jobs are tied to these exports. We need a politically stable Africa, so that Africans and their friends can concentrate more on social and economic development and on better integrating Africa's enormous resources and food production, biodiversity and renewable energy, for instance, into a world economy.
    I know that it is difficult sometimes to wrap one's mind around such generalities and that African's realities are often obscured by myth and perception. It is the ''dark continent.'' It is the ''home of Tarzan.'' It is ebola fever. It is dangerous and remote and forbidding.
    If we are to account for African intelligently, however, in framing American foreign policy, we have to recognize once and for all that Africa is dangerous and forbidding only if we neglect it. Let us not forget what we said some years ago about Zaire, that we have clear national interest in continuing to help develop Africa.
    Foreign assistance remains an important component of any policy toward Africa which is based on creating durable conditions for economic expansion and democratization. Yet, when foreign aid, including military assistance, was driven by the cold war, we probably wasted enormous sums on poorly conceived projects and on supporting undemocratic governments.
    Conceding this does not imply, however, that foreign assistance is by definition wasteful. Over the past decade or so we have seen our aid shift from emphasis on large-scale infrastructure, balance of payments, and military support to child survival, institutional capacity building, economic reform, democratization and entrepreneurial development. We have been spending less, and I believe getting more bang for the buck in our development efforts.
    Having learned from our mistakes, it is almost shameful that we have not invested more in development strategies that really do work.
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    At the same time, our African friends have also learned to value foreign assistance more highly and to use it more effectively. It was perhaps inevitable that the American people and Congress would question the worth of foreign assistance in general and to Africa in particular. It may be that the cutbacks in foreign assistance have encouraged more realistic targeting of limited development funds.
    This is something that Africare and its staff sense without being able to prove the point quantitatively. If this is true, then we have to consider whether the time has come to begin ratcheting the assistance upwards again. Not to the old levels necessarily, but to levels which allow us and our African parties to make those hard lessons learned pay off.
    We know now that Americans support foreign assistance when it is explained that it represents a minuscule portion of the Federal budget. Americans are still only dimly aware, however, that foreign assistance carefully designed and aimed, pays for itself through job-creating exports and by making the world a safer place for all of us. If we are to maintain and strengthen our international development presence, and if we are to explain clearly to the American people why this is important, I strongly believe we need a free-standing visible agency of international development.
    You will recall, Mr. Chairman, that I participated in the merging of the Peace Corps into a broader volunteer agency in 1971. It very nearly killed the Peace Corps. It became lost in the bureaucratic forest and lost much of its public identity and support.
    Seven years later before this Committee, I urged that the Peace Corps be restored to its original status and thankfully it was.
    For much the same reason we should not tamper with AID's place within the international affairs structure. You say it has taken the lead (and I am one of its harshest critics) among Federal agencies and streamlining its operation. It is led for the most part by competent and committed people. It is the repository of a half century of development experience dating from the Marshall plan. It is, I think, a resource we cannot afford to lose. Likewise, we need to retain the Development Fund for Africa.
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    Did DFA give African aid levels public and congressional attention which in the long run should encourage long effective use of these funds? It is also a barometer that allows us to monitor our commitment to sustainable development on the African continent. USAID and its partners, African governments and PVOs like Africare, may be more accountable as a result for what they achieve. If the results warrant, aid to Africa should increase. If not, well, draw your own conclusion.
    Whatever we do, let us not defend aid to Africa merely in moral terms or as the decent thing to do. Let us provide as much assistance as we reasonably can because it is in our mutual interest. Africa needs our support if it is to continue the long and tortuous path of economic and political reform. And we need an Africa becoming more stable, viable and politically open with each new dawn.
    The result will be greatly expanded trade and investment opportunities which we must be prepared to develop in partnership with the Africans.
    Otherwise, we can expect the Japanese, the Malaysians, the Chinese and others to reap the fruits of our substantial past investment in Africa.
    And finally, I would like to remind this Committee that Africa has enormous potential. Africa retains 100 million hectares of still unutilized, cultivatable land as well as arable lands per capita. 700 million hectares of pasture land, water resources amounting to more than 4 trillion cubic meters of river water returning to the sea annually, of which 10 percent would irrigate 13 million hectares of land.
    In spite of its environmental problems, Africa boasts 220 million hectares of forest and woodland in the area of energy. Africa accounts for about one-quarter of the world's hydroelectric potential of which only 3 percent is being presently utilized. Other resources include 55 billion barrels of oil, some 6 trillion cubic meters of natural gas, 1.7 million tons of uranium and about 90 billion tons of coal. Thank you, Mr. Chairman.
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    [The prepared statement of Mr. Lucas appears in the appendix.]

    Chairman GILMAN. Mr. Lucas. We appreciate your comments. I want to thank our panelists and we are going to get into our questions. And I am going to ask our panelists too if they could make their responses brief because we have a number of questions by our Committee.
    Mr. Kohr, you noted in your statement that the value of our aid to Israel has dropped by 30 percent since the mid-1980's. Could you further explain that?
    Mr. KOHR. Yes. Since 1985, the assistance to Israel has been sustained at $3 billion for which Israel is obviously very appreciative. Because it has been held constant, the value in real terms just through the erosion of inflation has had the impact which you have suggested, a 30-percent reduction in real terms.
    Chairman GILMAN. Thank you. With regard to some of the F–16 sales, recently there have been reports that the Clinton Administration is considering major arms sales to countries that still have to make peace with Israel. Which of these proposed sales most worries you and can you tell us why?
    Mr. KOHR. The concern as I mentioned in my testimony is the fact that convention weapons continue to pour into the region. One of the things that Israel has to maintain is its qualitative edge over its adversaries and combination of adversaries. And what concerns us is the sheer numbers, the sheer quantity as well as the quality of the systems that are going into the region now. And so I would hope that this Committee as well as the Administration would take a look at each sale on an individual basis to see how it impacts on the qualitative edge.
    Chairman GILMAN. Thank you, Mr. Kohr. In 1995, the Administration promised that it would end military aid to Turkey in fiscal year 1997. Last year the Administration reversed its course. Since the Administration's decision to renew aid, Turkey has threatened Cyprus while the Turkish ministers forge better ties with Iran and Libya. Could you comment on that change of pace?
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    Mr. KOHR. Yes, we think it is a disturbing development. If one simply tracks the path that the Government of Turkey has taken as we have continued to send this military aid there and to overlook Turkish wrongdoing, you will see there is a direct correlation, only it is a negative one. Turkey's heading in the opposite direction that we want them to. Therefore, we are as puzzled as you as to why they would want to maintain that policy.
    Chairman GILMAN. And Mr. Manatos, can you update us on the progress toward peace in Cyprus following Turkey military shooting of military demonstrators last year?
    Mr. MANATOS. Well, the activity is getting into high gear at this moment on the finding of Cyprus settlement. Frankly, in history we have never had a better set of players in place in this country and around the world and we may never have as good a set of players in place. Therefore, this is an opportunity, 1997 and 1998. And we are optimistic, but we are cautiously optimistic. At this point have been no real signs of breakthrough.
    Chairman GILMAN. Thank you. And Father McManus, is it fair for grantees who are not U.S. companies and might receive U.S. assistance in Northern Ireland through the IFI not to have to comply with the very same MacBride Principles that many American companies doing business there already voluntarily and successfully comply? And when we raise some of these issues with some of the British authorities, they indicated that there is a Fair Employment Act in the United Kingdom and why do we need the MacBride Principles? We welcome your comment.
    Fr. MCMANUS. Well, I think there is a desperate need for grantees who receive American money to comply with the MacBride Principles. Thirty-three major U.S. companies doing business in Northern Ireland today have already signed onto MacBride. And I know that in the next couple of years we will get about another 20. So I think it is not asking much.
    As regards the fair employment laws, I mentioned in my testimony that 20 years ago the unemployment differential between Protestant males and Catholic males was 2.5 to 1. Twenty years later, there is no significant change. It is now 2.2 to 1. So very clearly, British fair employment laws are not addressing the problem. And even when the laws are in place, as is indicated in the case of Baroness Denton, they are routinely ignored. Because what hope do we have of fair employment in Northern Ireland if the very British minister responsible for fair employment laws violates those laws?
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    Chairman GILMAN. Generally, what are your thoughts about the IFI at this point? Are they doing the right things and moving in the right direction?
    Fr. MCMANUS. Yes. We have been critical in the past and I think quite rightly, of the International Fund. But as I mentioned, thanks in great measure to you, Mr. Chairman, in the past several years the International Fund has started making definitive improvement. It is now targeting the people and the areas that are most disadvantaged and that surely should be one of the main reasons for the fund to help those who need it most.
    Chairman GILMAN. Thank you. With regard to the fund, I am going to ask unanimous consent that some photos of the IFI-supported projects in rural county Tyrone, Northern Ireland be included in the record of these proceedings. They were taken by the staff on a recent visit to Northern Ireland. They reflect some idea of how the monies are being utilized and the good job IFI is helping to maintain or create, especially in areas of severe disadvantage. I am going to ask my staff to distribute these photos for our members to take a look at them.
    One last question. Mr. Lucas, you noted from our draft legislation that we intend to authorize a separate fund for Africa and the African Development Foundation. Assuming that we have healthy funding levels, would Africare support such a proposal?
    Mr. LUCAS. There would be an army of strong supporters for that,
    Chairman GILMAN. Thank you. And again, we thank our panelists. And I am going to move on now to our colleagues who have some questions. Mr. Clement.
    Mr. CLEMENT. Thank you, Mr. Chairman. Mr. Kohr, since 1985, the foreign aid account has been steadily reduced. Earmarks take up an increasing portion of the overall budget. Should assistance to Israel and Egypt be continued to be earmarked and why?
    Mr. KOHR. Yes, Congressman. We believe that the earmarks need to continue. The earmarks continue to be a message of the commitment that the Congress makes, that the Congress will stand fast for the numbers that have been provided in the authorization and in the appropriation bill.
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    Mr. CLEMENT. And why?
    Mr. KOHR. I think part of it has to do with increasing pressure on the account. It sends a message of priority that the Congress deems that aid to Israel is a priority of the United States and therefore merits protection.
    Mr. CLEMENT. Father, I heard your comments a while ago about the unfair labor practices in your country. Does Ford Motor Company ask whether you are Catholic or Protestant when they employ people?
    Fr. MCMANUS. Well——
    Mr. CLEMENT. And should they?
    Fr. MCMANUS. In Northern Ireland because it is so small and everybody knows everybody, everybody knows what religion people are. Especially you can indicate by the name. So if there is a Sean McManus who went to the Blessed Sacrament School, it is likely that he is a Catholic and that is one way of finding out.
    Now, under British fair employment laws in the past several years, yes, companies must take account of and be able to give a religious breakdown which we welcome in fact. Because otherwise, employers could get away with saying ''Oh, we never ask. So we have no idea.'' But in fact they are supposed to know now.
    Ford is in an area of high unemployment that is 80 percent Catholic. When they opened up in 1964, Catholics in West Belfast thought, ''Well, my goodness at long last we are going to get a fair crack of the whip because this is an American company.'' And yet it has not worked out that way because every group in the past 30 years that has investigated Ford has indicted them for anti-Catholic discrimination, which is a very sad commentary on one of the top American companies.
    Mr. CLEMENT. But do you feel like we are making progress there or is it still as volatile as it has been in the past?
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    Fr. MCMANUS. Well, because of the pressure of the McBride campaign, there has been some progress. But we have still a long way to go. And Ford is continually being brought before the Fair Employment Commission. So I think we have a long way to go.
    In fact, it is so bad, we have tried our best to negotiate with Ford, but they would not listen. Finally, in 1986 Irish Americans declared a boycott against Ford. So we say ''Have you driven a Ford lately?'' Well, do not. Because you are discriminating against Catholics in Northern Ireland.
    Mr. CLEMENT. Mr. Lucas, I know we have had a lot of difficulties in Africa in a lot of different ways. One I wanted to ask you about dates all the way back to colonialism, about how the lines were drawn on the borders. Has this still caused problems today in people not being able to get along because of the borders? As well as, how can U.S. assistance be most relevant to the unfolding crisis of Zaire and the Great Lakes region generally?
    Mr. LUCAS. Well, I think your question about the colonial period is well taken. Many of the borders that were drawn are artificial borders and that is part of the problem that exists in Zaire because you have got pressure on the land in Central Africa and you have got Tutus in Zaire and you have got Hutus in Zaire. And these are people living, these are all the same people in many ways.
    But Africa, people are always talking about the Asian miracle. The reason that much of the things are not working in Africa is the whole question of the management of diversity, much of the same problem that we face to some extent here at home, but which offers great encouragement to Africans because we do seem to be able to solve our problems here.
    We now talk about Nigeria, for example. If we could get the Ibos, the Hausas and Yorubas to work together, we would have a democratic Nigeria and we would have a miracle in Nigeria.
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    The same problem is all over the continent. As I said to our chairman some years ago, there is really, in my estimation, no hope for Zaire unless we can get the G–7 plus together to talk about this part of Africa because anything else is piecemeal.
    You are talking about a country with 250 political parties the last time we looked, with hundreds of different racial groups, with eleven frontiers which is one-third the size of the United States with enormous natural resources.
    And while we all are here now, this is anti-Mobutu week and you can count me among them, but there are many of us who can take credit for helping to create Mr. Mobutu. And at the end of the day we have to get a better reading from our allies.
    Sometimes we are not talking on the same page. So unless we can get together the G–7 to rethink this part of Africa along with the OAU, the African continent offers enormous problems for us and I think for this Committee it should almost immediately start holding hearings again on Zaire because this is a major problem. When you are looking at the fact that much of the biodiversity in Zaire and the Cameroon, the future of our nation is tied to that. Many of the pharmaceutical products we need come from that part of the world.
    So this is a serious matter, I realize that we have got national interest in the Soviet Union. We have got it in Europe and other places. But at the end of the day, we better take Zaire seriously, but I do not think it is going to be resolved without the big powers becoming involved. And we have to learn to manage diversity in these African countries to get the racial groups together. And at the end of the day we should not be spending a dime in any African country that is not committed to good governance and democracy.
    Mr. CLEMENT. Thank you.
    Chairman GILMAN. The gentleman's time has expired. Mr. Campbell, and I am going to ask Mr. Bereuter if he will preside. I am being called to the floor.
    Mr. CAMPBELL [PRESIDING]. Thank you, Mr. Chairman. I would like to begin with a short statement and then direct a question to Mr. Kohr. But the short statement deals with Africa.
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    Mr. Lucas, you and your organization do excellent work. And my statement is focused on the compassionate side that you purposefully stepped aside from in your opening testimony. You made the argument on economics and development. But I do wish to just take a moment and stress that what happened in Rwanda is something that the world said never again. And yet it happened again.
    What happened in Rwanda was the massacre of almost one million people out of a population of seven million. Systematic with government support, with institutional support, sadly in some instances with church and clerical support, the massive amount of killing neighbor by neighbor led to the refugee crisis in Eastern Zaire, with the refugees moving out of Rwanda at the end of that particular episode.
    Those refugees are still on the move as the rebel activity in Eastern Zaire pushes them more and more over toward the West. Problems of cholera already brought the world's attention to Eastern Zaire and I personally believe another genocide is possible in Burundi and possible in the area contested in Eastern Zaire.
    This is not the fault of America, but I do believe if the United States had invested in assisting the regional powers, Uganda particularly which is willing to offer military assistance, Tanzania possibly as well and Kenya which we are trying to engage, to assist with the rapid deployment force much as what was eventually done in Liberia, it might have been beneficial in Rwanda. And I am hopeful that it might still be beneficial in preventing a recurrence in Eastern Zaire and in Burundi.
    And I look at the refugee camps and I know cholera, I know blindness of little children because they cannot get vitamins, could be prevented, could be prevented. Death, blindness, starvation could be prevented.
    Now, that is my statement. My question, I repeat it is not the fault of the United States. It is not the fault of the United States aid policy. But I direct my question to Mr. Kohr because in conscience when I look at recipients of U.S. aid, my conscience sees that we give $3 billion in economic and military aid to Israel.
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    I observe you are quite right in real terms because of inflation it has gone down. But in nominal terms it has stayed the same. Whereas in both nominal and in real terms our aid to subSaharan Africa has plummeted. I know there is a crisis right now in subSaharan Africa.
    So it may not sound like a friendly question, but it is actually intended to be a friendly question to give you a chance to make your case. And I notice I have got 2 minutes left which hopefully is at least something in perhaps you might answer this question for me that ranks my conscience. How can I vote not to diminish aid 1 percent to America's friend and ally, Israel, knowing that that 1 percent of $3 billion would increase Africare's assistance five-fold? Africare gets just under $6 million. How can I answer that conscience?
    Mr. KOHR. Well, Congressman, I think the answer starts with the premise that you have laid out, the fact that this is a great nation. The United States has responsibilities in many places in the world. It is also one of the reasons that we believe that the bill that you are considering now as well as the President's budget include higher numbers for the overall account.
    The United States must be able to maintain its relations and its concerns and its interests in the Middle East as well as in Africa. We need to be able to do both. And the objective here ought to be to find ways to take care of the problem in African that concerns all of us but at the same time making sure that we do not do harm in other parts of the world in U.S. interest. And I think that is the short answer to the question.
    Mr. CAMPBELL. I have just a minute left. So let me follow up to give Mr. Lucas a chance to speak to this issue since it was premised on my concern for Africa. But let me underline it is not Israel's fault. It is not America's fault. I just know the pot of money is shrinking.
    Mr. Lucas.
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    Mr. LUCAS. Mr. Chairman, I am not here to comment on what is going on in Israel, but I am here to comment on what is going on in Africa. At the end of the day, the problem with Africa is that we do not have a strong constituency for Africa in this country. And that is one reason why under the leadership of the Ford Foundation, the Carnegie Corporation and some others, that in 1999 we are going to have a U.S. National Summit on Africa an inclusive summit that invites not only just African-Americans but trade and investment groups, population groups, environmental groups to participate.
    Africa needs a constituency. The fact that we are appropriating approximately $700 million for 52 countries and 800 million people is really quite sad. At the end of the day, the members of this body and other people really have to take a look at this.
    And you have to remember that if Africa is so bad, why in the history of the Peace Corps which is 98 percent white, why did we have the highest re-enlistment ratio in Africa than any other place in the world? These people are committed. They admire what we do in this country. They try to do everything like us, but at the end of the day we do not have a constituency.
    Look at the people in this room. I turned around a few minutes ago and I saw three African Americans, two of whom I brought to the meeting room. So you want to know why we have got only this kind of money? It is because we do not have a constituency and it needs to end. And I could share more feeling with you with the death and destruction in Rwanda and the Great Lakes region, it is shameful not only on the part of us but on the part of the entire world. Until we change that constituency until the composition of this room changes behind me, those numbers are going to stay the same.
    Mr. CAMPBELL. Thank you.
    Mr. BEREUTER [PRESIDING]. The time of the gentleman has expired and I am next on the list since we have no Democratic members here at the moment. I am going to use my time to make three comments.
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    First, Mr. Campbell has courageously brought up a subject that troubles almost every Member of Congress. Prime Minister Netanyahu hinted during his joint address before Congress that the economic aid to Israel might end one day. Israel is a very important ally of the United States. It has a strong constituency in this country.
    But I think the pro-Israel groups need to relieve the pressure on Members of Congress. They need to come in next year and say we are suggesting, given the budget pressures and demand for foreign aid elsewhere something like a 5-percent reduction would be appropriate.
    You ought to say to the Congress this is what we want you to do. Because Members understand that the aid that goes to Egypt and Israel being earmarked in a declining foreign aid budget means an absolute reduction for the rest of the world.
    Second, I wanted to say to Mr. Manatos, thank you very much for your testimony. I admire your optimism. I hope it is well-founded that we might finally have the right kind of people in place in Cyprus and outside of Cyprus focusing on the peace process.
    But I know when I visited in February 1995, I talked to the British Commander and he has sons in his unit of fathers who have served there, to show you how long this peace process has gone on, just peace enforcement. And I am concerned because the leaders who knew each other before the split in Cyprus are now older men and women and they are dying off. And the contact just has not been there for the years for the younger Cypriots who might be the best hope for peace in that region.
    I think both Greece and Israel need to stop exacerbating the problem in Cyprus and both countries are guilty of that.
    I also say that Cypriots really need to know that some of us at least understand the huge amount of money laundering that is going in from money from Russia and other parts of the former Soviet Union that is taking place in Cyprus today.
    And when the American people to understand how huge that is, they will be very upset that the Cypriot Government, maybe it is both, de facto government, are at least not bringing down the kind of regulation and law enforcement that is necessary to stop that huge operation. The rape of Russia's resources is being assisted by what is happening in Cyprus.
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    And third, I would like to say to Mr. Payne, I watched my colleague here, Mr. Wolpe, lead the effort to establish the African development fund and he had bipartisan support in that endeavor. And I thought it gave the Administration at that time and subsequently the kind of flexibility it needed to use what resources we could devote to Africa to the best advantage.
    And so a number of Members here last year tried several ways, including this Member, bipartisanly to get that African development fund reauthorized. And we advanced the legislation finally alone since that seemed to be our only opportunity to get it reauthorized. And we ran into a dead end in the other body.
    So I would hope that maybe you and your supporters for the African Development Fund are well equipped to take the message we need to visit with our colleagues in the other body as well. Because this Committee and I believe this House of Representatives will advance the authorization to reauthorize the African Development Fund, either as a part of our overall bill or alone, again because it was a good tool and it needs to be reinvigorated and reauthorized.
    So I would like to have your assistance and commitment to help us with the other body during the 105th Congress. I thank you gentlemen for listening. And I had good questions, I hope, for you, at least some. But I thought maybe I might use my time to speak directly to you. The staff reminds me I said Greece and Israel and I should have said Greece and Turkey. I beg your pardon. Correct the record, please.
    Mr. KOHR. Thank you.
    Mr. BEREUTER. Next on the list, Mr. King would be next, next Member in attendance now.
    Mr. KING. Thank you, Mr. Bereuter. Mr. Kohr, I have a question for you. Could you give some details beyond your testimony to the extent to which Iran is still involved in the Middle East as far as funding Hezbollah and other movements?
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    Mr. KOHR. Yes, I think some, Congressman. It is a source of significant concern that Iran continues to fund radical groups throughout the Middle East and beyond the Middle East into parts of Central Asia as well. Virtually all of the groups, Hezbollah, Islamic Jihad, to give two prominent examples, get their funding from Iran, but they get assistance from other nations as well.
    This is one of the problems that we face, the fact that Iran is fomenting terrorism as well as seeking to acquire weapons of mass destruction. Both of these threaten obviously Israel in the region, but also other American allies and U.S. interests.
    This is something that the world community needs to pay attention to. We have sanctions that this body has passed last year that need to be enforced on the part of the United States and hopefully we encourage our allies to endorse sanctions against Iran as well to slow down their ability to both foment terrorism and to fund these groups as well as to acquire weapons of mass destruction.
    Mr. KING. Thank you, Mr. Kohr. Father McManus, I have two questions. You mentioned Ford Motor Company and the finding of sectarian discrimination against Ford Motor Company. It is my recollection, maybe you could clarify me on this, that Mr. William Kelly of Ford, who is actually in their international division, actually could have had some involvement in this case. Now, he had been tipped off by Ford officials in Belfast several years ago that Mr. Irvine who was the victim here was known as an ''active Catholic''.
    Fr. MCMANUS. Yes, Congressman. That makes it all the more serious. The Fair Employment Commission in adjudicating the case determined that Ford's description of Irvine as ''an active Catholic'' was code language for anti-Catholic discrimination.
    The really sad thing is that Ford years ago, as you suggested, in Belfast wrote to Mr. Kelly who is handling the whole issue of Ford and McBride, and in that letter to Mr. Kelly described Irvine as an ''active Catholic''. Now, what did Mr. Kelly do about this? Did he expose it? Did he chastise them? He never said a word which means that Ford's world headquarters conspired in the anti-Catholic discrimination against Mr. Irvine. It is particularly serious.
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    Mr. KING. Was that the same Mr. Kelly who testified against the MacBride Principles?
    Fr. MCMANUS. The one and only. He has campaigned against the MacBride Principles all over this country and he testified before a State hearing in Chicago and opposed the Illinois law of adopting MacBride, which in fact he failed to achieve because Illinois did pass MacBride.
    Mr. KING. One further question on the issue of Baroness Denton and the firing of the person who was the victim of sectarian harassment. What is the position of the Secretary of State for Northern Ireland, Mr. Mayhew? Has he addressed this issue?
    Fr. MCMANUS. Well, he made a statement expressing full confidence in Baroness Denton, which, of course, makes our problem all the more serious. Because not only has the Minister responsible for employment practiced unfair employment, but she has been supported in that practice by the highest British official in Northern Ireland, the person who runs Northern Ireland for the British Government.
    Mr. KING. Under the rules and procedures pertaining to Northern Ireland, is there any avenue of recourse against Baroness Denton?
    Fr. MCMANUS. Not really. The British Government announced that there was going to be an investigation into this thing. One of the problems in Northern Ireland is that abuses exist for a long, long time. And because of pressure, the British Government finally says it is appointing a commission and we have 100 years of that type of activity. But the commission usually indulges in a coverup and nothing really happens.
    The particular person, Maurice Hayes, who has been appointed to be the chairman of the investigation, I have respect for that individual. But I am not full of confidence that this investigation will lead to any serious improvement. It is significant, Congressman, that Mr. Seamus Mallon who is the deputy leader of the SDLP, he has negotiated with Baroness Denton on this issue, but finally was forced to call for her resignation. So it has reached that serious level.
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    Mr. KING. Thank you, Father. Thank you, Mr. Chairman.
    Mr. BEREUTER. The time of the gentleman has expired. The gentleman from Missouri, Mr. Blunt, is next recognized.
    Mr. BLUNT. Thank you, Mr. Chairman. I have a couple of questions. Mr. Kohr, regarding the foreign aid budget, I wonder if you have any comments about the Chairman's comments or any particular sense of real hardship that has been created as our aid to Israel has been gliding down while in other cases it has been plummeting down. But in Israel, it has been gliding down where the real dollars stayed the same, but the effective dollar has kind of decreased. Has that really created a problem and did the Prime Minister when he was here and made those comments to Congress really anticipate that at some time Israel would be able to stand without the kind of aid that they have had in the past?
    Mr. KOHR. Congressman, I would like to respond to that by saying the Prime Minister did come before the Congress and stated very clearly that at some time during his first term that he would submit a request for reduction in ESF, the economic support funds for Israel and that is what he meant.
    However, in the meantime obviously, the aid remains important both in terms of its real value, in terms of its ability to purchase weapons necessary for Israel's defense which is where the bulk of the foreign military assistance goes as well as the ESF which goes to repay loans which were undertaken during the Camp David accords. These were military loans as well.
    The need for the assistance remains because other neighbors in the neighborhood, Israel's neighbors, continue to amass massive amounts of spending on their military programs themselves as I mentioned earlier in my testimony. Virtually all the other neighbors in the region are acquiring significant amounts of new conventional weapons, whether it be sophisticated aircraft, missile systems, et cetera.
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    As part of the commitment the United States has made to Israel over the years is a commitment to maintain Israel's qualitative edge. And as part of that, this assistance is very vital.
    In addition to that, it is critical particularly at this moment in time in the peace process when all of Israel's adversaries in these negotiations look to see the connection between the United States and Israel and the strength of that connection which is symbolized in the granting of the assistance that takes place.
    A diminution of that assistance that is not voluntary in nature sends a very negative message to everyone in that part of the world about the U.S. commitment to Israel. And therefore, I am confident that the Government of Israel will, as the Prime Minister has said publicly before his first term is up, come forward with a plan of reduction for the ESF component of the assistance.
    Mr. BLUNT. I guess the other side of the equation, Mr. Lucas has talked about this as it related to Africa and the potential for economic growth and investment in trade, do you have any information on things that are happening in Israel to continue to enhance our trade there? I know the free trade agreement is in place. The government has said they are going to be doing things to encourage more purchase of American goods. Do you want to comment on that?
    Mr. KOHR. Yes, Israel was the first country that signed a free trade agreement with United States. It is committed to free market principles. The government has taken some rather dramatic steps already and instituted the largest budget cuts that have ever been instituted in Israel in order to get the government more and more out of the free market.
    It is about to privatize the banks as well as other industries there in hopes of once again liberalizing the economy, creating greater market forces within Israel and making the country more productive and therefore making it easier to move away from ESF in the future.
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    Mr. BLUNT. Mr. Manatos, are there any activities between Greece and Turkey that you would consider positive right now that are happening to try to alleviate some of the concerns that have been mentioned?
    Mr. MANATOS. Well, it is a difficult time for such activities. As I mentioned, Turkey is literally threatening war, saying we are going to attack within the next 16 months, saying that islands which all maps of everyone have said was Greece for decades and decades really are not and they should be ours.
    However, within that context, the United States is trying to generate some activity. And there are some economic efforts in the Balkans which are bringing in both Greeks and Turks which shows some promise. But frankly, the Cyprus issue, as Assistant Secretary Holbrooke said, is the Gordian knot.
    Let me make a technical correction. Something was said that shows there may be some misunderstanding on this. All of the U.N. resolutions for all of these 22 years, all of the American expressions, all of the EU expressions, are directed toward Turkey and Turkey getting its occupation army out of Cyprus and not toward Greece. So that is what the problem is on Cyprus.
    If that is solved, I think there are some opportunities—I think the cooperation between Greece and Turkey you are going to see skyrocket. As individuals, Greeks and Turks get along extremely well. Interestingly, if you go to Paris or the other world capitals, you will find that who are the personal friends of the Greek diplomats when they are going out socially? The Turkish diplomats. As people, these people get along well. As governments there is some real work that needs to be done.
    Mr. BLUNT. Thank you. Thank you, Mr. Chairman.
    Mr. BEREUTER. The gentleman's time has expired. The gentleman from New York, Mr. Houghton, is recognized for 5 minutes.
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    Mr. HOUGHTON. Thank you, Mr. Chairman. Gentlemen, good to be with you today. Thank you for coming here. I just have one question and that is for C. Payne Lucas. There are lots of different issues. There are defense issues. There are humanitarian. There are health. There are religious. All things in Africa. But one of the things that I feel strongly about is that I do not think many of the African countries are helping themselves and helping us to help them.
    Let me give you an example. Many representatives from different African countries, some of which I have not visited, come into my office and talk about private investment. And obviously, long-term, that is what is going to increase the economy and produce jobs.
    But there is nothing I can put my hands on. I do not know what the government policies are. I do not know how the schooling is. I have no idea what wage factors are. I do not know how the utilities are.
    There is nothing I can say if I were still in business to my board of directors that this is a good place to put money. We have got money to invest. Why would I want to go into Zaire? Why would I want to go into Zambia? Why should I go into Malawi? There is nothing there for us to be able to help the people that we want to help.
    Mr. LUCAS. Two things, Congressman Houghton. Two things we are doing. We have now created a Corporate Council on Africa which is a serious institution. We have been engaged in trade missions to Africa. We see some wonderful things happening there under David Miller. And this is an opportunity that we never had before.
    We had to go to the Department of Commerce and struggle through all that bureaucracy. But now we are beginning to use our own talent here and those Africans who are truly interested in trade investment to make things happen.
    The other thing is that we have a grant from the Ford Foundation to strengthen the capacity of African ambassadors and diplomats to function in this country. We are trying to convince more and more of our diplomats that at the end of the day what is really going to be the thing that will help Africa is foreign trade and investment. We see that happening already in South Africa. We are seeing it happen in Botswana.
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    And so we are trying to get them to understand that we have got to have the economic reform that American investors are not going to put money in country X without political and economic stability. We are trying to get them to understand that when our investors arrive they do not want to spend hours struggling through airports and getting visas and waiting to see the Minister of Finance and whatnot and at the end of the day nothing is accomplished.
    We can change that. We see it happening in South Africa, Namibia, Botswana, the Ivory Coast and other places. This is a change that before was not possible. And we have to remember many of our African diplomats, not all, but many of our African diplomats are engaging in diplomacy for the first time.
    So that is why the Ford Foundation made this grant to us available in which we are bringing these diplomats together with Members of the Congress, members of the Administration, and members of the private sector to lay down the conditions under which American companies are prepared to invest and earn a decent profit.
    Mr. HOUGHTON. I think that is helpful, but I have not seen it yet. If somebody comes into my office and says we would be very interested in having you help us in terms of investment in our country because it is a wonderful country. It is a beautiful country. They are wonderful people. They work very hard. And in many of these countries I have visited and I know that is true.
    But for me as a Congressman, one of 435, to suggest that a company in my district, I mean, I am not going to invest myself, but a company in the district, I have got to have something tangible to show them. And as a matter of fact, I think there is an opportunity for some of the strong countries in the continent of Africa to be able to do something. No other country does this. But there is a real opportunity because you are betting on the calm. And that is what most businesses are interested in.
    Mr. LUCAS. I am accepting that challenge.
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    Mr. HOUGHTON. OK. Good. Thank you.
    Mr. BEREUTER. The gentleman's time is expired. The gentleman from Illinois, Mr. Manzullo, is recognized.
    Mr. MANZULLO. Thank you. I just had a couple of observations, really not any questions. In the annual authorization and appropriations, Members of Congress, particularly the majority party, have been placed in a very difficult position on this year's State Department bill.
    And I just want to be very frank on it as many, including myself, do not believe we owe the United Nations one dime. That in fact the United Nations owes the United States $3 billion for defense things that we have done on behalf of the United Nations for which we have not been reimbursed.
    And I think it is extremely important that we continue to separate, as we have done in the past, the State Department authorization bill from foreign assistance. I think it is very important that we keep the separation of those two fields because I do not want to be placed in the position of voting against foreign assistance because it is somehow tied into a payment of U.N. arrearages.
    The second problem that I have, and I am going to be very forthright, I have always voted for foreign assistance. But we have a nation that is now $5.3 trillion in debt and every group that comes before this Committee talks about we need more money, more money, more money.
    And I think it would behoove those that are making the request, and obviously my words are addressed to the Administration, that the position that the majority party took last year is that if the request was at or below the level of the prior year, then we would be prone to go ahead and vote for it, representing, yes, it is a cut, but it is also an opportunity for the American people to keep more of their hard-earned dollars.
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    So I would just be very cautious when we are talking about investments that the American family is trying to make, such as an investment in their homes, in their quality of lives, in their children's college education. And it is very difficult to sell back home, first of all, the foreign assistance program, and second of all, to sell back home any increase in it.
    I have traditionally stated and I will again, that it is more beneficial to buy the peace than it is to fight the war, and that is what justifies the enormous amount of aid that we have given to Israel. Let us say $3 billion is a very small amount of money compared to the $240 or $250 billion appropriation to the Department of Defense. And with that money, Israel really is stabilizing the Middle East.
    There is no question about it. That $3 billion will not build one carrier for the United States. And that money goes a long, long way in the stability of that area.
    But I would just caution as we are in fiscal restraints that I think the Administration should be very careful in asking Members of Congress to spend more money this year than last year. Just a comment.
    Mr. BEREUTER. Thank you, Mr. Manzullo. Now we will call on in order of appearance. Mr. Smith, the gentleman from New Jersey is recognized.
    Mr. SMITH. Thank you, very much, Mr. Chairman. And I regret I did not hear your oral presentations. I was testifying myself before the Appropriations Committee regarding Lakehurst, the Naval Air Warfare Center in my district. So I apologize. But I looked through some of the testimony while my other colleagues were asking questions and a couple of questions spring to mind, Mr. Lucas, that I would like to ask you.
    First of all, let me assure you that there has been a visual incidence. Republicans took control with regards to human rights issues globally, but also with regard to Africa. My Subcommittee on International Operations and Human Rights held the first hearings ever and we did it jointly with the African Subcommittee on slavery in Mauritania and slavery in the Sudan on religious persecution, particularly in the South of Sudan where as you know it is an absolute abomination, where children are being literally stolen from their parents and forced Islamitization is taking place.
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    We had hearings on Nigeria and when we saw at the end of the year even when the Congress was out of session that there was this rush to judgment that somehow the Zairean crisis has abated when many of the refugees' organizations were telling us and the other NGO's that it had done anything but, there were a lot of missing people, a lot of people who were at grave risk of starvation and death due to disease.
    We held a hearing and we tried to mobilize not only the Congress but the Administration to recalculate their figures and not declare victory because victory had been secured.
    Last year when we did our markup, I offered a number of amendments dealing with child survival, which all passed after a rather rigorous debate in this Committee, to earmark money for that very important endeavor.
    And also in working, and I got some of this data from the World Health Organization, to target tropical diseases because I happen to believe that they get short shrift and they are especially in Africa not only disfiguring in some of its manifestations but also like river blindness and some of these other atrocious diseases render a person almost incapable of fending for themselves in those difficult economies. We also had hearings on religious persecution like I said, country-specific as well as continent-specific.
    So I want you to know that there is a vigilance going on here and we are very concerned about Africa and doing it right. I happen to believe that foreign aid and humanitarian aid is absolutely essential, but it has to be the right foreign aid.
    Just yesterday in this hearing room we had a hearing on refugees. I am very much chagrined and upset that there are some in Congress and especially some in the White House who will continually ratchet down the number of refugees that would be allowed to come to this country. Right now they account for about 8 percent of all those who come into the United States each year. That number will go down.
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    I think we should stay at the traditional 100,000 or so rather than the 75,000 as proposed. When the immigration bill was up last year, I offered the amendment to get rid of the cap which would have ratcheted it down to 50,000. We are in a world awash with refugees and that goes for all of the nations that have difficulties.
    It is not the time to be closing our doors, whether it be China, Africa, and there are too few refugees, frankly, coming from Africa. Too few slots for those who for religious persecution reasons or others do not find safe haven here.
    So I wanted to assure you that there is a tremendous concern. It is bipartisan. And we will in this Congress I hope do even more, especially on issues like tropical diseases. They just do not get the kind of attention and they are the silent killer, maimer and debilitator that is out there. And you know from your work with Africare just how important they are. So I wanted to ensure you of that and perhaps you might want to respond on the tropical disease issues.
    And before you do, because my time will run out quickly, Mr. Kohr, we held the first hearing on the PLA. You know, traditionally the human rights issues are only raised as it relates to countries. And Amnesty and others have always raised issues about every country of the world including Israel. But when the PLA got an authority as it did to be a country or at least a government, we held a hearing when we began receiving a number of complaints about human rights abuses committed by the PLA. And you might want to comment on that issue if you so desire. Because we heard things that were very, very troubling, even about the ombudsman who are speaking out, Palestinians who are speaking out about torture and incarcerations that were totally unjustified. Mr. Lucas, did you want to comment?
    Mr. BEREUTER. The gentleman's time is expired. We are very late on time. So I would ask the witnesses to keep their responses short please. Thank you.
    Mr. LUCAS. A very quick comment. First, let me just applaud the Congress for their initiative on child survival. It is one of the great stories of this body, what they did in this whole field.
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    The second thing is that CDC in its work in tropical medicine in Africa in smallpox and whatnot is another impressive story.
    The third thing is that we have to be reminded that we have invested a lot of money in Africa, Angola. There are 135 million people in Southern Africa. Those are enormous opportunities in this global economy for our people. And you have got to remember that one out of every seven jobs in this country is a result of foreign trade and foreign investment. So we have to look forward, not so much with congressional money but with trade and investment.
    The third thing is the Congress has had some impact over the last several years in Mauritania. Well, I just came back from Mauritania and time and again the American ambassador, the Mauritanian Government and others were saying get the Congress to come out here and see the slavery because it has ended officially, and there may be some pockets of it.
    I think we have to accept that challenge. I may have been brain-washed there, but a third of the Cabinet there were black people. I came away from there feeling that democracy was on the move there.
    It is an inportant country, in spite of what they did in the Gulf War—I thought they voted wrongly—but this is a country that has borders with Morocco, Algeria, Senegal and Mali, a big country the size of Texas and I think we and others need to be on top of that situation. I think we ought to send a codel out there to take a look at this issue of slavery.
    Mr. KOHR. Congressman Smith, I thought your hearing was a very important hearing because the key to peace and stability, particularly with the Palestinians, is first, that the Palestinians adhere to the commitments they made on the White House lawn and the continued vigilance of Congress and in this regard.
    The second thing is Palestinian adherence to democratic rule and due process. These kinds of things that we hope for in that part of the world are key to the region's future stability and the security of the peace process itself, and can only be done over a long period of time. It is best if there are democratic institutions, not only in Israel, but in the neighborhood as well.
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    Mr. BEREUTER. Thank you. The gentleman from Ohio, Mr. Chabot, will have the final questions.
    Mr. CHABOT. Thank you, Mr. Chairman. I will be very brief. I want to apologize to the witnesses. Unfortunately, the first thing you find around this place is that you have about eight things going on at the same time. I will read and take in all the testimony that you provided in writing to us.
    And I just wanted to ask Mr. Lucas, I am serving my second term on the African Subcommittee. I find it very interesting. To kind of reiterate what Mr. Houghton said is perhaps the discouraging nature of some of the things that we see in Nigeria and some of the countries where there has been a considerable amount of corruption.
    And one wonders quite frankly if a lot of the aid ever gets through to the people that you are really intending to help. Unfortunately, I think that sometimes you do prop up people who are corrupt and some U.S. dollars are sometimes used to do that and the money sometimes is counterproductive. And I think that we should always try to keep that, not cut out aid completely but at least minimize it as much as possible.
    Would you like to comment on that view? I mean, some people think that a tremendous amount of our money, our foreign aid money, ultimately does prop up the folks who are corrupt and I personally believe that some of it does and we want to minimize that as much as possible. But what can we do in that area to keep that from happening?
    Mr. LUCAS. Well, one, I think corruption in Africa is at an all time low. And, you know, it was not invented on the African continent. I think one of the ways we get at this is that under DFA we are monitoring our system very closely.
    One is in the case of Nigeria. We virtually have no foreign assistance to Nigeria except for child survival and I think river blindness. My concern is in countries like Nigeria that we do not punish the people for the regime. I think with what is happening there that we may wind up giving Nigeria hell, but the people who have suffered from river blindness or need help in child survival who believe in democracy have nothing to say about that.
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    But on balance given that a democratization process that is taking place in Africa, the amount of corruption in Africa is at an all time low. When you take out Zaire and Nigeria and what is going on in Liberia and the Sudan, on balance you have over 50 countries in Africa doing very well.
    I do not want to sound self-serving, but I do think that private volunteer organizations like Africare working with AID ought to be administering more of the funds because there you can have additional accountability.
    But I think at the end of the day most people would argue that for assistance in Africa now with transparency, with democratization, with privatization the day of the kind of corruption that we have heard about is over. Because there is a new breed of people taking over in Africa, people who have been trained in our universities, people who are not afraid to speak the truth, where a free press is emerging.
    This is a fact—one revolution in the world has gone on in the Soviet Union but there has been a hell of a revolution that has gone on in Africa which this body never should take advantage of.
    Mr. CHABOT. I would like to think that what you are saying is accurate to the extent the days of corruption and the waste, et cetera, are over. I do not know if the facts really that we have seen come back from any countries, I think that should be our goal. I do not think we are anywhere near that now.
    Mr. LUCAS. It has not been eliminated. That is why when the Africans say, Mr. Lucas, will you explain the savings and loan scandal to me, I have a very difficult time explaining it. But I say to the Africans at least in America we can afford it.
    You see one of the biggest pieces of corruption that ever took place in the world did not take place in the Philippines, and did not take place in Nigeria. It took place in America. And we have to be reminded every day of our lives that in State and local government corruption is taking place in contracts and conflicts of interest and what have you.
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    I am not trying to excuse Africa, but I am saying there have been radical changes in this continent and we are getting a better bang for our buck than ever. We will never eliminate it, but I can assure you that the Africans now know that we are not going to spend our money in places where it is going into someone's pocket or into someone's Mercedes.
    Mr. CHABOT. Thank you, Mr. Chairman. I yield back the balance of my time.
    Mr. BEREUTER. The time of the gentleman has expired. As a member of the Banking Committee I have to say at least as far as we know the corruption was not in the government. In fact, the government made whole the account holders in our savings institutions to pay for the private sector corruption.
    The gentleman from South Carolina was here and he was standing by the wall. So he is entitled to a question. I recognize him for that purpose.
    Mr. SANFORD. Thank you for doing so. I apologize for getting here late. I have one very general question that you all may have already addressed. In which case just tell me so and we will call it quits at that. If you have not addressed it though, I would be curious in that some people have suggested that the strength of the Marshall Plan, for instance, in terms of a foreign aid package if you want to call it that came into finite aid. And that some people have suggested that all forms of permanent aid or structural aid build the very dependency that we are trying to get away from. I would be curious to know your thoughts on that.
    Mr. BEREUTER. Briefly please for that philosophical question.
    Mr. MANATOS. I can make some remarks with regard to aid to Greece and Turkey. It is not the case there. As a matter of fact, our testimony supports zeroing out American military aid to Turkey and Greece. The purpose the aid goes to Greece largely is to defend itself against our arms in Turkish hands.
    Mr. KOHR. And also, part of our question and answer and testimony has to do with prospectively taking a look at Israel's ESF. The Prime Minister has indicated in his own comments, that before the end of his first term he would submit a plan to move away from ESF. As I said, the critical nature of that decision is that this be a voluntary decision.
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    Mr. SANFORD. So you would disagree, basically what I am hearing is that you all to a greater or lesser extent disagree with that premise, that finite aid is good aid. Long-term aid is bad aid.
    Mr. KOHR. No, not necessarily. In the case of Israel, the United States has provided assistance that I think has proven to be in American interest, has sustained Israel's security and viability, and as well, has allowed Israel to put its economy together. Not that it has to be permanent. It has been a significant feature now for almost 20 years.
    Mr. LUCAS. I would like to make one comment. First of all, I think we have to be clear this morning that we have 52 countries in Africa and we have $700 million worth of aid for 800 million people. Now, that, when we get down to it, is not a hell of a lot of aid.
    But one thing I do want to make a point about here, is that we cannot expect the private American companies to build roads and education systems in Africa. I think the Africans have come to the conclusion (this Congress not withstanding) that the future of the continent is in their hands and the future of the continent is in trade and investment.
    While we need the DFA in the long term, what we need to do is create an environment in which the kind of commerce and investment that is going on in some parts of Africa can take place in the rest of the continent. And then the Africans will be able to get some other people in the world some foreign assistance. Potential is there and $700 million a year is not going to revolutionize Africa, but it is going to keep some of those people alive at the moment that Congressman Campbell spoke about earlier.
    Mr. BEREUTER. Father McManus.
    Fr. MCMANUS. Congressman, I would just mention that it is only $20 million that is given a year to Northern Ireland and to the border countries. And of course that is obviously a very modest sum. We think that is very important for it to continue as long as it is attached to the MacBride Principles as I testified during my statement.
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    Mr. BEREUTER. Thank you, very much, gentlemen. Thank you for your testimony for your effort in coming today to be witnesses. We appreciate it very much.
    Fr. MCMANUS. Thank you.
    Mr. BEREUTER. This panel is dismissed. We will now call the second panel and I will give you short biographical information about these panelists. I would ask unanimous consent that my earlier reference to exacerbation of two countries which mentioned Greece and Israel inadvertently be stricken and subsequent references be stricken, and in fact indicate what I intended, which was Greece and Turkey. Without objection, so ordered.
    The witnesses before us today are first of all Sy Taubenblatt, senior executive representative of the Bechtel Enterprises, Inc. We will next hear from him. He served his country in senior posts at AID as foreign service officer for many years before joining Bechtel Enterprises. Since 1983, he has performed a key role between trade and export agencies of the Federal Government and one of America's largest and most experienced exporters.
    The next person will be Andrew Natsios, vice president of World Vision, the largest international American humanitarian organization. Before joining World Vision, he served his country as assistant administrator for AID, most notably in charge of relief operations that saved millions in Somalia.
    Third is Ms. Anna Stout, executive vice president of the American League for Exports and Security Assistance, Inc. Before joining the League, she served in many high-level positions in the Pentagon and most recently with the defense security assistance agency.
    And finally, Mr. Ted Carpenter, vice president of the CATO Institute. Dr. Carpenter has written extensively on international cooperation and development issues. His recent work and written testimony before us offers a disturbing analysis of the conventional wisdom regarding the development assistance program and foreign aid in general.
    Gentlemen, lady, we will make your entire statements a part of the records. We are quite late as you know and I appreciate your patience. I would ask that you try to summarize your statement in about 5 minutes each. And I wanted to note that unfortunately I would be leaving, but I will be turning over the chair soon to Mr. Manzullo, the gentleman from Illinois.
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    Mr. Taubenblatt, would you proceed?
    Mr. TAUBENBLATT. Thank you, Mr. Chairman and members of the Committee. I am pleased to be here this morning to give my perspective on the importance of OPIC, the Overseas Private Investment Corporation, and TDA, U.S. Trade and Development Agency, not only to the competitiveness of American companies in world markets, but also to American foreign policy.
    Mr. Chairman and members of the Committee, your initiative to reauthorize both OPIC and TDA is absolutely vital: vital to the competitiveness of American companies abroad, vital to America's trade posture and our economic growth and vital to the strength of American foreign policy in today's world.
    America's economic strength depends on exports. Last year, our $846 billion in exports accounted for about 11 percent of our total economic output. Some 12 million American jobs are directly tied to these exports. Even more significant, one-third of our annual economic growth over the past 4 years has come from the steady increase in our exports. One-fourth of the net new jobs during this period, high value-added jobs, high wage jobs, have come from export growth.
    For the sake of America's future economic strength, we must keep our exports growing. Our foreign competitors recognize that their economic survival depends upon exporting technology, equipment and services to their strategic markets.
    American companies need to invest in order to export. Investment requires financing which in turn requires loan guarantees and insurance. For American companies seeking to penetrate these markets, OPIC financing and political risk insurance are vital when private finance and insurance are not available on acceptable terms or sometimes not available at all. Without OPIC, it would not be possible for American companies to establish and maintain an export presence in many of these markets.
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    In the 25 years since the Nixon Administration and the Congress created OPIC, the agency has compiled a solid record of success. OPIC has financed and insured $107 billion in investments. These investments are generating $52 billion in American exports, made by American workers in this country and sold into markets that OPIC supported. Investment has opened up. These exports in turn have created 225,000 jobs here at home, for American workers.
    As infrastructure sectors continue to privatize in the emerging markets, OPIC programs will play a growing and important role in positioning American companies in their investment and exports to these markets. The World Bank estimates that one-fifth of total investment in the developing world over the next decade will be devoted to basic infrastructure such as power plants, telecommunication systems, transportation networks, water supply and waste water disposal systems.
    Investments estimated at $1 trillion in Asia and $500 billion in Latin America give you some indication of what those numbers look like over the coming decade. Huge amounts of capital equipment and associated engineering services will be required and represent major opportunities for American companies, for investment and exports. OPIC programs will be critical in capturing these markets.
    Equally important, OPIC supports U.S. foreign policy objectives. As foreign aid has steadily diminished, OPIC has become an agency of choice in providing economic assistance to priority companies around the world. In Russia and the NIS, Eastern Europe, Southern Africa, and other hot spots, OPIC has been a catalyst for attracting private capital to improve economic conditions and to foster private markets.
    OPIC operates without cost to the American taxpayer. In every one of its 25 years of operation, OPIC has generated revenues through user fees that have exceeded its costs. This surplus has been deposited in the U.S. Treasury and now totals $2.7 billion. They serve as a reserve fund to protect the taxpayer. I understand that OPIC has never once had to use these reserves; any losses have been paid out of that year's income. Through prudent risk management, OPIC has kept its loan loss ratio to about 2 percent. We understand that that number may have been declined to about 1 percent, which compares very favorably to commercial insurance companies and commercial banks.
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    In short, OPIC has proven the link between investing overseas and our ability to increase exports and create jobs for our workers, while operating in a financially sound manner.
    Mr. MANZULLO. Mr. Taubenblatt, your 5 minutes has expired. I will give you 1 minute for TDA.
    Mr. TAUBENBLATT. TDA contributes to our exports in a different way. By providing a small amount of seed money for the feasibility studies, orientation visits, and procurement planning, TDA provides a strong incentive to other governments to pick American companies, not just for the initial engineering design, but more important, for the follow-on construction, equipment supply and project management.
    I have included for the record an example of how a TDA grant to the Ministry of Environment in Venezuela has generated $36 million contract for Bechtel and considerable exports for American companies including some small companies.
    I also want to mention that when you compare what TDA does in terms of its $40 million budget and look at the Japanese budget for studies and the like, Japan provides about $220 million for that purpose.
    Let me just summarize since my time is short, Mr. Chairman and members of the Committee. OPIC and TDA programs are not, let me repeat not corporate welfare, but support American exports and jobs and the welfare of the American worker. OPIC and TDA provide a two-for-one return. They help American companies compete and win in the world marketplace and they are important tools for American foreign policy. Reauthorizing these agencies is in our economic interest and our foreign policy interest. For these reasons, I urge that the Committee move to forward legislation to extend the authorizations of both these organizations.
    Thank you very much, Mr. Chairman, for the opportunity.
    [The prepared statement of Mr. Taubenblatt appears in the appendix.]
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    Mr. MANZULLO [PRESIDING]. I am going to be very mean up here and insist that you stay within your 5 minutes. So when the yellow light comes on you have got 1 minute. When the red light comes on, the gavel comes down. And if I could turn off your microphone, I would do that. But we have got to get this completed.
    Our next witness is Mr. Natsios. The floor is yours for 5 minutes.
    Mr. NATSIOS. Thank you, Mr. Chairman. And thank you for the opportunity for World Vision to present its views on the foreign aid authorization and on reforms and the method of delivery of foreign assistance.
    We believe American leadership in the world is more critical now than at any time in the recent past because the cold war has been won and the consolidation of democratic capitalism around the world is at a critical juncture.
    We in World Vision believe that the foreign affairs budget should be increased and that funds cut from development programs over the last 2 years should be restored. Beyond a simple funding increase, the way in which foreign assistance is carried out should be reformed. We need to give new prominence to those institutions which continue to engage the American people with the rest of the world.
    American PVOs, or Private Volunteer Organizations, such as World Vision, serve as a link between the American public and the foreign affairs institutions in Washington such as this Committee. Increasingly our donors who support World Vision and other PVO's travel to developing countries to obtain first-hand information about relief and development programs which they support.
    1.3 million American families have made financial contributions to World Vision over the past 5 years. Half a million American families and church leaders receive our magazine bimonthly which opens a window to the developing world for our donors and supporters.
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    We are a faith-based NGO which has been around for 47 years with its roots largely in the evangelical Christian community in the United States which claims the loyalty of perhaps 25 percent of the American people.
    All this is to say that World Vision like other PVO's has grassroots support in the United States and provides a window for our people to see outside our borders.
    Private voluntary organizations add balance and perspective to the provision of foreign assistance by the United States. World Vision in 1996 received 84 percent of its funding from private sources while 16 percent came from the U.N. agencies, the World Bank, AID and the State Department.
    So while we welcome a renewed partnership with the U.S. Government in international programming, we are not dependent on it for the bulk of our resources. World Vision like other PVO's provides private resources to match government dollars so that public funding goes much further than it would if a profit-making company were to manage the same grant. PVO's giving shows that the public will support with private donations public sector programs.
    In 1995, Vice President Gore announced in Copenhagen the Administration's support for the work of PVO's. He stated that a minimum of 40 percent of the bilateral aid, should be channeled through citizen-supported private voluntary organizations by the year 2000. While we welcome this commitment, we do hope the rhetoric will be matched by action.
    For example, in 1996, about 7 percent, $22 million, of the $300 million Congress earmarked for child survival programming in the developing world went through citizen-supported non-profit PVO's implemented at the community-based level.
    American PVO's also contribute significant private funding to child survival programs. We actually were running these programs before AID initiated them back in the 1950's and 1960's. In 1996, PVO's received about $22 million, but we put $7 million of our private funding to match that. And there are many World Vision private child survival projects which receive no government funding at all.
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    Despite the success of PVO's in the field, the percentage provided through PVO's to these programs has been shrinking over the years even though there has been substantial increases in overall funding.
    World Vision supports the reforms proposed in the parts of the draft foreign aid authorization bill which we have seen which abolishes the International Development Cooperation Agency and draws a direct reporting line from the administrator of aid to the Secretary of State.
    However, we do not support other proposals which would eviscerate AID's relief and development programming by subordinating them to the shorter term political objectives of the State Department, however much we may agree in some cases with those objectives. There is an inherent conflict between the shorter-term objectives of the State Department which could be counted for a year or two versus the longer-term requirements of development assistance which take 5 or 10 years. Fully merging AID into State will only change the bureaucratic location of the conflict. It will not eliminate the tension. The foreign service offices who run State are skilled in politics and diplomacy, while in AID they are skilled in managerial and technical skills. They are different sets of disciplines. We need both of them. If you merge one into the other, you will lose those managerial and technical disciplines.
    I know there is a lot of frustration in the State Department with AID in terms of short-term programming after an emergency is over. And I have proposed in my testimony ways of dealing with that, but I have run out of time.
    Thank you, Mr. Chairman.
    [The prepared statement of Mr. Natsios appears in the appendix.]

    Mr. MANZULLO. Ms. Stout, do you want to go ahead? There is a vote in progress and the goal here is that we will get your testimony done. And by the time you are done, Mr. Campbell will be back here so we can keep the continuity going.
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    Ms. STOUT. Absolutely. I have been around this Committee for quite a long time. So I know how these things work.
    Mr. MANZULLO. Thank you.
    Ms. STOUT. I appreciate very much the invitation to appear before this Committee. I represent an association of companies which share a common interest in the promotion of American exports. ALESA actively supports government policies which encourage or facilitate the export of defense-related goods and services, where such exports are consistent with the security interests of the United States.
    The Chairman and I have been fighting for an adequate budget for foreign aid for many years and therefore know only too well that the program has hit rock bottom. The trend in the Congress over the years has been to nibble away at the program until we have reached the point in which we now find ourselves. There is really no more fat in the program. Any additional cuts will affect bone and marrow. Therefore, we strongly support the President's request of $19.45 billion for international affairs. The foreign operations component of this request is $13.3 billion, a slight increase over Fiscal Year 1997.
    This small outlay of money enables the United States to maintain bilateral relationships with our allies who are not in a position to fully fund their own defense needs, needs which are vital to U.S. security interests as well as their own. International assistance is a cost-effective means of projecting American power abroad which prevents or resolves international conflicts without the risks and costs of using military force. Whatever the cost of international assistance, it is always cheaper than U.S. military intervention.
    International assistance is key to supporting U.S. overseas military operations. By supporting our friends in their efforts to defend themselves, we strengthen our relations with them, and as in the case of the Gulf War, our allies were strong partners due to many years of U.S. support for their national defense. U.S. interests abroad are strengthened when Congress supports the Economic Support Fund, Foreign Military Financing and International Military Education Training.
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    As the President stated in his State of the Union Address, ''If America is to continue to lead the world, we here who lead America simply must find the will to pay our way.'' We could not agree more with the President's sentiment. It is in the best interests of our country to increase funding for international affairs for reasons of leadership and security.
    Last year at this time, a nationwide poll reported that nearly six in ten Americans incorrectly believed that the government spends more on foreign aid than on Medicare. And when asked to guess, they estimated that 26 percent of the Federal budget is designated for foreign aid. We in industry are partially to blame because we have failed to educate our employees as well as the American people. We must inform them that their jobs depend on U.S. leadership around the world and that foreign aid translates into millions of jobs in the United States.
    The money appropriated for security assistance to our friends and allies must be spent here in the United States. The Commerce Department estimates that 22,800 man-years of employment are generated per $1 billion in income from the defense industry and another 17,000 man-years of indirect employment in surrounding communities is generated for each $1 billion in exports. Our competitors around the world understand this.
    Britain's Minister for Defense Procurement announced on January 31st of this year that London's 1996 export figures showed a banner year for the U.K. defense industry, with more than 5 billion pounds worth of exports representing a 25 percent share of the world defense market. He also stated that 360,000 U.K. jobs are directly dependent on these export sales. The British understand the importance of defense exports.
    Chairman Gilman has been very helpful and assisted us in passage of a number of initiatives in the past few years which enable us to project U.S. leadership and security around the world.
    For example (I am trying to summarize this real quick so my light does not go off), he enabled countries to improve their national defense without seeking U.S. subsidies. It is a program called the Defense Export Loan Guarantee Program. The Chairman was also very helpful in providing the support for an expanded waiver for research and development recoupment charges.
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    I now would like to ask for the help of this Committee. The defense industry needs your support in pressing the Clinton Administration to lift the nearly 20-year-old ban on the sale of arms to Latin America. The policy was imposed by President Carter to punish Latin American dictatorships for human rights violations, but it is out of date today and has locked U.S. industry out of Chile, Peru and other Latin American nations.
    Another issue that we need your help on and that is to——
    Mr. MANZULLO. There is a vote going on. I am going to recess this for a few minutes. And as soon as Congressman Campbell comes back, he will proceed with your testimony. So while I attend my constitutional duties, this Committee stands in recess.
    Mr. CAMPBELL [PRESIDING]. The Committee will resume. I am informed that Ms. Stout was just in the process of finishing. So perhaps you could do so in a minute or so.
    Ms. STOUT. Oh, thank you. Thank you, Mr. Chairman. I was asking for some help on the sale of arms to Latin America, trying to get the policy changed. Also asking the Chairman to help us to reduce the tensions in the southeast corner of Europe. I raise the issue because the situation has impacted on arms transfers to both countries, Greece and Turkey, and will prove costly to our bilateral relations and negatively effect many U.S. companies.
    Finally, I would just like to say a word of caution if I may. There have been a number of attempts by the Congress in the past 2 years to impose a code of conduct on the U.S. arms transfers which would create a democratic litmus test.
    Under the proposed legislation, the U.S. Government would be restricted from providing or selling arms to countries that do not adhere to international human rights standards or whose governments are not freely chosen by their citizens.
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    Industry believes that the current arms transfer review process provided for by the AECA has worked quite well. The executive branch includes a number of factors in its determination including issues such as human rights, regional stability and proliferation concerns.
    Therefore, the code of conduct if enacted would mean the Congress would have to pass a law each year to enable the arms transfers of any kind to large numbers of countries who would be subject to congressional debate as to whether they were deemed worthy to receive U.S. equipment and encourage them to purchase defense equipment from our competitors.
    I would never be so bold as to tell you what amount of money is necessary to ensure that the U.S. presence and leadership around the world is maintained. However, we do believe that at the present time. The United States must take a more active role in foreign affairs and in order to do that the Congress must increase spending for the 159 account.
    Thank you, Mr. Chairman.
    [The prepared statement of Ms. Stout appears in the appendix.]

    Mr. CAMPBELL. Thank you, Ms. Stout. And an admirable performance under stressed time conditions. Our last witness is Dr. Ted Carpenter, Ph.D. from the University of Texas, vice president of CATO.
    We are pleased you are here, Dr. Carpenter.
    Mr. CARPENTER. Mr. Chairman, thank you for the opportunity to appear before the Committee to discuss the topic of foreign assistance and U.S. foreign policy.
    It is distressing that the Administration has requested increased funding for the State Department and the Agency for International Development. Poverty, famine and violence continue to blight our planet, but the understandable desire to do something about those problems should not become an excuse to maintain the failed policies of the past. That is especially true of the foreign aid budget.
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    For nearly half a century, the policy of foreign aid has been tried and found wanting. There is no evidence whatsoever of correlation between foreign aid to developing countries and the subsequent economic growth rates of those countries. Indeed there is mounting evidence that aid programs have been counterproductive.
    Other justifications for preserving, to say nothing of expanding such expenditures, are no more compelling. The latest favored rationale, that aid programs are needed to prevent humanitarian crises, like those that engulfed Somalia and Rwanda, ignores the fact that both countries received extensive amounts of aid in the decades below their political implosion.
    Between 1971 and 1994, Rwanda received $4.5 billion in foreign assistance, a sum that amounted to nearly 20 percent of the country's gross domestic product. Somalia received $8 billion. In fact, nearly every country that has suffered internal catastrophe collected abundant outside transfers from a variety of sources beforehand.
    Similarly weak are arguments that larger State Department and USAID expenditures are needed to preserve America's influence in the world and neutralize threats to our security. It is puzzling that at the very time great power threats have ebbed and the relevance of Third World quarrels to America is more obscure than ever, the State Department wants to spend more money. True, some of the funds spent in recent years have gone to open embassies in the new countries that have arisen out of the ashes of the former Soviet Union and Yugoslavia.
    However, America has no pressing need for a large diplomatic presence in many of those States. There is no reason other than international vanity to believe that Washington must be heavily represented everywhere in the world irrespective of the importance of its interests at stake. With the advent of rapid modes of transportation and communications, much of the work that has traditionally been performed by embassy and counselor staffs can be done from Washington.
    In a devastating published critique of State Department operations, retired foreign service officer, Charles Schmitz, has confirmed that he and his colleagues spent an appalling amount of their time on make-work, paper-shuffling projects. The State Department does not need more financial resources. It needs to use the financial resources it now has more intelligently and efficiently.
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    It is also bureaucratic conceit to equate America's influence with the level of State Department and AID funding. A nation with a nearly $8 trillion economy, by far the most capable military forces and enormous cultural and ideological appeal based on its commitment to the values of limited government and individual rights will not lack influence in world affairs.
    The largest cuts in the Administration's proposed budget should apply to foreign aid expenditures. Since World War II, the United States has spent nearly $1 trillion, measured in 1997 dollars, on bilateral and multilateral aid. The result is debt dependency and poverty throughout much of the Third World. Even many advocates of foreign aid acknowledge that the results have been unimpressive.
    The Administration, of course, is promising better management. But that cannot save programs that are inherently flawed. Decades of experience demonstrate that international government-to-government financial transfers do not yield self-sustaining economic growth in poor countries.
    Virtually every Third World State has received significant amounts of foreign aid. Yet, the majority have ended up stagnating economically. Indeed, many nations have been losing ground. Fully 70 developing countries are poorer today than they were in 1980. Some 43 are worse off than they were in 1970. Many of the biggest recipients of foreign assistance, such as Bangladesh, Egypt, India, Sudan and Tanzania have been among the globe's worst economic performers.
    Government-to-government assistance helps preserve bad regimes by increasing the resources at their disposal. And aid can even inhibit the commitment of reform by more responsible governments.
    Mr. CAMPBELL. About 15 seconds left.
    Mr. CARPENTER. I would simply add that the attempt of the Administration to put old wine into new bottles, to offer new justifications for yesterday's failed programs will not work. Foreign assistance has consistently failed to deliver self-sustaining economic growth or prevent poor societies from collapsing into chaos. New aid flows will yield no better results.
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    Congress should say no to proponents of more aid, whether in the form of old or new programs.
    [The prepared statement of Mr. Carpenter appears in the appendix.]

    Mr. CAMPBELL. Thank you, Dr. Carpenter. I will comment on the questioning. Mr. Taubenblatt, I have the highest regard for Bechtel as you might know. I have the privilege of knowing many members of your management and board, one of whom is our esteemed colleague, George Schultz.
    Now, one of his colleagues at the Hoover Institution is Milton Friedman. And Milton Friedman wrote an article about the OPIC question last year at the time that we were proposing increasing the commitment to OPIC. And Dr. Friedman's arguments as I recall them are roughly these, and I would invite your response to them.
    I believe he argued that if the market was allocating credit, then there would be no need for an OPIC. And if the market is not allocating credit, that is for a good reason. Namely, that the country into which the credit was directed had not established itself as credible by institutions, for example, for such investment.
    So that OPIC was at best superfluous and at worst counterproductive. I think I am doing Dr. Friedman fair justice in saying this is what his argument was. I wonder if you might take a moment and tell me why you agree or disagree. I suspect you disagree, but tell me your views.
    Mr. TAUBENBLATT. Well, I think if this was a world where American companies compete and financial institutions compete on a level ball field, then I believe Dr. Friedman is probably right.
    But unfortunately, we as a company who seek financing have to compete with other companies internationally, foreign companies, that basically can access credit from programs such as their export credit agencies, such as their OPIC-type organizations. And consequently, if we do not get the support from OPIC or EXIM Bank, clearly we are going to lose the markets.
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    Mr. CAMPBELL. I have the argument. Thank you. And it is one that I have heard as well. Not to put you on the spot, but the logical result of that would be if we get the other countries to agree not to do the same so that there was not a comparative disadvantage, then your analysis of it, would it not follow that we could then dispense with OPIC on our side?
    Mr. TAUBENBLATT. Well, I believe there is another factor, Mr. Chairman. When you look at particularly OPIC political risk insurance and what is OPIC doing? I mean, they are basically taking risks which U.S. companies, commercial companies, cannot take; risks such as expropriation, risks like civil strife, risks like inconvertibility. These are not commercial risks.
    And clearly, if we want as a matter of foreign policy to encourage U.S. companies to go abroad in countries that are developing that still have some of these risks, I believe the U.S. Government has to support those programs.
    Mr. CAMPBELL. Though I think if Dr. Friedman were here he would respond by saying exactly why those countries need to get their act together so that the market will invest. Political risk is a problem only in countries without adequate institutions. Well, he is not here. So thank you for giving me your best response.
    I would like to direct a question to Dr. Carpenter. I take your points, but I do put into a special category disaster relief once the disaster has happened. I think the burden of your remarks is maybe we could have done things that might have helped had that not occurred. But once it occurs, if we are speaking, for example, of cholera in the refugee camps in Goma, Zaire which I visited, cholera is there. Thank God now it is eradicated by the United States and foreign countries' assistance.
    Or similarly if we could have invested in the assistance of a rapid deployment force, the Ugandans are willing to give troops. We would give assistance with money to train them. It might have prevented the genocide from which came the exodus. Your comments on those points.
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    Mr. CARPENTER. Mr. Chairman, I would agree with you. And I do not object to emergency humanitarian aid. I think that is an appropriate expression of our values. But it is also true that the overwhelming majority of our foreign aid expenditures are not for those purposes. They are so-called developmental aid expenditures and security aid. And that is where I think we need to make our major cutbacks. In terms of——
    Mr. CAMPBELL. If I might interrupt for just a moment, you have answered my question. I want to give Mr. Natsios a chance to comment on that same issue and then my questioning is done.
    Mr. NATSIOS. Well, first I would comment that since I ran the disaster relief program of the Bush Administration, there seemed to be an overwhelming amount of evidence of foreign development assistance. However, Dr. Carpenter has not been terribly critical of the malfocus on the development issue.
    The World Bank did a study of the Asia giants and found that there was a common set of things that happened in those countries. They all invested in primary education. They invested in infrastructure like roads and ports and electricity, electrification. You cannot have factories without these sorts of infrastructure things that go along with them.
    And most of them also invested a lot of time and money with the help of AID and the World Bank and other donor countries in land reform. The Taiwanese will say that is one of the principle reasons they have had such prosperity.
    Mr. CAMPBELL. I am going to ask you to finish now too because I do not want to go over since I am going to be tough on the other members. My colleague from Ohio, Mr. Chabot.
    Mr. CHABOT. Thank you, Mr. Chairman. I want to thank all the witnesses for coming here today and giving their testimony, all of that I heard I thought was very good. I would like to direct my first question to Mr. Carpenter. Mr. Carpenter, you had mentioned you thought, I believe it was since World War II, that we spent basically a trillion dollars in foreign aid in 1997 dollars. What percentage of that would you say has either been wasted or at worst counterproductive? In other words, the dollars that we spent did more harm than good. What is your feeling about that?
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    Mr. CARPENTER. It is a little difficult to put an exact figure on waste, but we have funded industrial projects that had no economic viability, white elephant projects that now litter Asia, Africa and Latin America.
    We have in the past funded such brilliant schemes as agricultural marketing boards whereby governments of developing countries would purchase the crops of farmers, always at substantially below market prices, then sell the crops on the open market for the global market price and pocket the difference. Not surprisingly that has had a devastating effect on the economic situation in those countries.
    Certainly, funding regimes like that of Mr. Mobutu in Zaire and Ferdinand Marcos in the Philippines did nothing except enrich Swiss bank accounts. It did no good for the populations of those countries. Quite the contrary. It undermined their development. It undermined their chances for prosperity.
    Mr. CAMPBELL. Could you cite some more specific examples in which U.S. foreign aid programs might have actually reduced the incentive of governments in the recipient countries to adopt needed economic reforms?
    Mr. CARPENTER. Interestingly enough, one of the examples is what was cited this morning, the aid to Egypt and Israel. We had a great deal of discussion about the effect on Israel. There have been a number of scholars who are staunch friends of Israel, including Steve Hanke from Johns Hopkins University and Alvin Rabushka from the Hoover Institution, who have contended that our aid to Israel seriously delayed the incentive for the kind of domestic economic reforms that, finally, the Netanyahu Government is adopting. In Egypt the effect apparently has been even more devastating. The Mubarak Government has used that money basically as a slush fund to avoid making the hard decisions. And now, very belatedly it is adopting economic reforms, but it is facing a radical Islamic opposition that has the ability to appeal to those who are afflicted by mass unemployment. And I am afraid the reforms may be too little too late to save that government.
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    Mr. CAMPBELL. Would you if you were controlling our budget cycle here, would you eliminate foreign aid entirely or would you gradually phase it out or what would you do?
    Mr. CARPENTER. I do not think it is possible to eliminate it cold turkey. Too many recipient societies have factored AID funds into their own budgets. They are dependent on it. We have provided the financial narcotic. We really cannot just cut it off immediately.
    But what I would suggest is that we not initiate any new commitments, and that we begin to phase out existing commitments with due notice to all the recipient governments over the next 3 to 5 years. And I think that would be an important step toward encouraging the kind of positive economic changes domestically in those societies that represent the only reliable recipe for growth and prosperity.
    Mr. CAMPBELL. And my final question. You had said that the State Department does not need more financial resources, but that it needs to spend its existing resources more intelligently and more efficiently. In what ways do you suggest that the State Department should do that?
    Mr. CARPENTER. There are a variety of ways, but one important initiative would be to stop having foreign service personnel gathering information that can be obtained easily in the private sector and in fact can be obtained for little or no cost of the Internet.
    Mr. Schmitz in his rather detailed study offers a number of other suggestions. We could even go to things such as regional embassies in certain parts of the world. Take the Baltic Republics, for example. We have embassies in all three countries. The Baltic States combined occupy a space about the size of the State of Georgia. I think it would be feasible to have one embassy that dealt with affairs in all three countries. It is a matter of prestige, nothing more than that, to insist on embassies everywhere.
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    Mr. CAMPBELL. I thank the witness and I thank the Chairman.
    Mr. MANZULLO [PRESIDING]. Mr. Carpenter, first I want to apologize for not having the opportunity to listen to your testimony. When I got back, I started to look at your testimony and went through your curriculum vitae and you have been pretty busy with a pen. I am quite impressed with the number of articles that you have written. As I have gone through your testimony, I see that you have centered on foreign aid.
    But I would like just to make a couple of comments with regard to OPIC. I am one of the most conservative Members of Congress. I wear that badge very proudly. The National Taxpayers Union showed that only 15 Members of Congress are more conservative than I. I would like to be No. 1 because I am very tight and very frugal.
    I would just say whatever you can do to encourage the Administration to keep requests for this year at or under last year's, the more likelihood that there will be a favorable passage of the bills, because we are very much concerned with people asking for more money and I am not about to ask my constituents to throw more money into the pot. So I would just caution you that whatever influence you have and whatever Administration officials are left here in the room, just watch it because this is a very conservative Congress.
    Let me make a statement here about OPIC. I have studied this trade issue for the past 4 years since I have been a Member of Congress. The district I represent is one of the most exporting in the nation. Somewhere between a quarter and a half of all Illinois exports come from the 16th Congressional District. We have over 1,500 manufacturing facilities. We have the No. 1 county in dairy, the No. 1 county in hay, the No. 2 county in tourism. The fastest two growing counties in the State of Illinois are in the district that I represent. It is Len Martin's old district. It stretches across the top of the State of Illinois.
    And I am concerned that there are some that like to come up with a checklist called corporate welfare, and one of the prime targets is OPIC. The cry comes up, ''Why can we not privatize this?'' Well, that is good if you can find somebody interested in taking it over. There is nobody interested in the political risk insurance. There is nobody interested in insuring against currency inconvertibility. These are the types of exotic loans that are necessary and guarantees that are necessary in order for American industry to have a fair chance abroad.
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    As I have gone through OPIC's figures, even if you take out the interest that is earned on the bonds that are used for the guarantees, OPIC still nets to the American people $110 million a year. This is a money-making enterprise. In all the years that it has been in operation, it has never cost the American people one dime.
    I frequently host in my office delegations from Chambers of Commerce. I think we just probably had three or four in the past couple of weeks. They all carry the same message that the Europeans have certain and distinct advantages. And those are that it is not a partnership. It is not leveraging of loans or helping with loans in those countries. Sometimes it is actual government participation in their industries.
    So in the ideal world, the United States would not have to have OPIC or EXIM or TDA. But this is not an ideal world. This is a world where our nation tries to adhere to the extent possible to free enterprise principles and it is consistent in light of the Commerce clause, in light of trying to be a player and trying to stay on the inside of world trade that we continue to work with OPIC.
    If I could indulge my brothers here that are left for another couple of minutes. Tom, unless you had another round. Steve, did you have another round here that you wanted to ask? I would just generally ask for a comment on that. That may only involve the two of you. Mr. Taubenblatt, do you want to comment on that?
    Mr. TAUBENBLATT. Mr. Chairman, I do not believe I could have said it any better. OPIC is very supportive as I stated in my testimony as far as U.S. exports go. It is a program that stimulates other private investment coming forward.
    I will give you an example. In a recent transaction in the Philippines to which Bechtel, Intergen and Ogden were parties to a power plant, OPIC's political risk insurance of $100 million brought forth $216 million of commercial bank financing. And that is an example of what OPIC does.
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    Now, it is true that there are transactions where some commercial banks are willing to come in for some risk, but not total risk. In order to make a project happen, in order to make a financing complete, OPIC provides support through its political risk insurance and political coverage, and we and commercial banks take commercial risk. This is what makes projects happen and this is how American exports and American jobs take place.
    Mr. CARPENTER. I would like to make just a brief comment, and I hate to end on a discordant note. But I thought that the comments that Congressman Campbell made relating the views of Milton Friedman were very much to the point.
    It was said that industry cannot get these guarantees on acceptable terms. Well, that is, of course, the key point. What are acceptable terms? I would very much like to get a credit card at an interest rate of 3 or 4 percent, but that is not the market rate. The market rate is anywhere from 14 to 20 percent, depending on risk factors.
    If investment guarantees cannot be obtained in the private sector at any price, then I think that Dr. Friedman's other point is very apropos. It is giving a message about the extreme level of risk in the investment climate of a particular country. And I do not believe the taxpayers should be put at risk to handle that kind of situation.
    It is always very easy to spend other people's money. Mr. Chairman, if you would give me your credit card, preferably an American Express card without a preset limit, and I promised to return it to you at the end of the day, you would be amazed at how much of your money I could spend. But I tend to be much more prudent with my own money. And I think we ought to ask corporate America to take on that same kind of responsibility.
    Mr. MANZULLO. But is not risk based upon experience, Mr. Carpenter?
    Mr. CARPENTER. Only in part. I mean, we make judgments about risk factors with every investment that is made. No one has a crystal ball to determine the exact risk factor with any investment. If we want to invest in the stock market, purchases of a particular stock, you do not know for certain how that is going to turn out.
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    Mr. MANZULLO. Let me throw this out, and Tom, if you want to put on your professorial hat and join in a three-way or seven-way, please be free to do that. When you look at so-called benefits to corporations, some people are saying, well, the ability to deduct advertising expenses is corporate welfare. The ability to force small businesses now to expense up to, I believe it is $17,500 a year as opposed to $10,000 a year, is corporate welfare. The ability for a 501-C3 to carry on activity is corporate welfare.
    I am just saying that there is a mantra out there and I did not hear you use it, Mr. Carpenter. And I am not saying that that is the case. But I am very much concerned that there will be hostility that has been aimed toward Americans trying to do business overseas.
    Even domestically we have a built-in unfairness on the sole proprietor who cannot deduct 100 percent of his health and accident insurance unless that person decides to incorporate, own all the shares, be the only employee. In which case that person can deduct 100 percent of health and accident insurance. And I think that is a disgrace that we have that type of a disparity going on.
    But what concerns me about things like OPIC is that, as Mr. Taubenblatt stated, on terms acceptable to him, and you can join in, Mr. Taubenblatt, probably means terms whereby the company can be engaged profitably. Otherwise, it would not be engaged at all. Would that be a correct interpretation, Mr. Taubenblatt?
    Mr. TAUBENBLATT. I believe it is a fair characterization because let us face it, American companies are in business for profit purposes. But let me say something about the risk side of OPIC.
    Clearly the record to date has not shown that OPIC has been a risk to the American taxpayer. We go back 25 years. We have seen the numbers. There is a large reserve fund in the U.S. Treasury. The evidence that OPIC is a risk is not there.
    Mr. MANZULLO. Congressman Campbell.
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    Mr. CAMPBELL. Mr. Chairman, only because you baited me by saying professorial. I am going to have to prove you right.
    Just two quick comments. Thank you by the way. It is a useful and interesting dialog. Thank you for giving me the chance to participate in it.
    Two things. First, somebody has got to do the risk assessment, OPIC does risk assessment. They do not just say OK to everybody.
    Now, with that premise, do you trust the market who does risk assessment commercially because their own money is at risk? Or do you think the government has a better fix on that?
    Now, there is an argument the government does have a better fix on that because they have maybe access to CIA and other confidential information. I would like to hear that in open testimony. I do not believe that is the defense OPIC would give.
    So somebody has got to do the risk. And the Chairman pointed out, well, is not risk based on history, experience? Yes, it is based upon experience. And so we are going to have to say, well, it is our first loan in this newly developing country, but our experience in similar situations was. And on that basis we will not offer insurance. Or on this basis we will offer insurance only at a premium. Exactly what the commercial market would do.
    So I am still searching for the difference in kind. I thought Mr. Taubenblatt gave the best answer at the very start, and you were out of the room. And that is, this is really unfair to you but I think it gets to the heart of it. Other countries do it. And if that is the answer, then I think we ought to work toward getting other countries to stop doing it. Because I do not see the difference in kind that the commercial market could do.
    Second, again, because you are kind enough to invite my comment, it is true OPIC has not cost the taxpayer a dime yet, but the conservative that you are, Mr. Chairman, would be worried about exposure. And I came to Congress in 1988. The savings and loan disaster had just happened. And at hearings in the Banking Committee, I am guessing a year before that somebody would have said FSLIC has never cost the American taxpayer anything.
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    But the huge exposure was there and I think you have got to say there is an exposure there. There is a huge unfunded exposure, by the way, for unfunded pension benefits. We know from testimony that there is $2 billion in the Treasury to cover, but I am sure without the witnesses contradicting me, that the exposure is more than $2 billion. So that is the risk. Thanks for giving me the chance to speak.
    Mr. CHABOT. I will be very brief. I would just like to associate myself with the comments of the gentleman from California, the professorial comments from Mr. Campbell. Your views about OPIC are mine exactly. Thank you.
    Mr. MANZULLO. Let me transfer the thought on this to EXIM because these are very similar situations where EXIM is sale-oriented and OPIC is project-oriented.
    To look at this in a vacuum, to look at it from the outside, to say it does not make sense to have these types of organizations. Well, let me give you a real-life example of what is happening with the Three Gorges project in China.
    Caterpillar has for some time been trying to get $300 million in loan guarantees from EXIM in order to be competitive, in order to have their bids accepted by the Chinese Government. This is necessary for business.
    And because of a conglomeration of reasons, including the Chinese alligator, EXIM United States did not get involved. And the Chinese are building this project. It is the largest public works project in the world. Nothing on this scale has ever been built before. It is a hydroelectric dam. The yearly equivalent of coal would be a coal train 5,000 miles long. And you can imagine what that would do to the environment.
    So the Chinese Government put out requests for proposals, I believe it was last fall, to several countries. The United States was excluded. And we have been continuously excluded from that market. And the reason that the Americans are not involved in that is that other foreign countries provide favorable financing mechanisms so their companies can compete. This is an issue of competition.
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    So the denial to Caterpillar of EXIM financing had the effect of saying, ''Well, if you cannot compete on your own, you cannot compete on your own.'' But that is just a window as to what can happen around the world unless we have these types of facilitating organizations so the United States can compete.
    And sure, water does seek its own level. But what happens when the water glass of a foreign country has a weight in the bottom that displaces water so that they start out with an unfair advantage?
    And perhaps the most astute answer to say why these organizations should exist is not that other countries do it, but that America has to do it in order to be competitive.
    You take companies such as Caterpillar that literally draw upon thousands of smaller companies for the purpose of building exports across the country. I am very much concerned that we have to take a look at EXIM, TDA, and OPIC. And TDA is a unique little organization. They go in there and draw plans which can only be met by American specifications. It is interesting. As a rule, it is tailer-made.
    And the reason that the government is involved in that is that to many foreign countries, unless there is a level of participation at the level of official government action, then the people representing the United States would not have that level of apparent sophistication in the eyes of the people with whom we wish to do business. So it is also a political thing.
    Unless anybody else has a response to our statement here, I think I am going to wind it up. And I want to thank you for coming. Thank you for the opportunity to share with us. Thank you for your patience in sitting through at least one roll call vote.
    And I am going to ask for unanimous consent from members to submit questions within 5 days. In other words, if a question is sent to you, if you could respond to it within a reasonable period of time to be made part of the record. And this meeting is adjourned.
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    [Whereupon, at 12:17 p.m., the Committee was adjourned.]